Eighth Circuit Upholds Alcohol Wholesalers’ Residency Requirement in Missouri
The Eighth Circuit Court of Appeals has found constitutional Missouri’s four-tier alcohol distribution system which includes a residency requirement for wholesalers, which comprise the third tier. S. Wine & Spirits of Am., Inc. v. Div. of Alcohol & Tobacco Control, No. 12-2502 (8th Cir., decided September 25, 2013). According to the court, the decision required it to examine the “current state of the relationship between the dormant Commerce Clause and the Twenty-First Amendment.” The former forbids discrimination against out-ofstate residents, while the latter gives states “certain prerogatives particular to the regulation of alcohol.”
Missouri law requires those seeking a wholesaler license to be incorporated
under the state’s laws, with all officers and directors “qualified legal voters
and taxpaying citizens of the county . . . in which they reside” and “bona fide
residents” of Missouri for at least three years. Resident shareholders must own
at least 60 percent of all the financial interest in the business. The company
challenging the law is incorporated in Missouri, but it is a wholly owned
subsidiary of a Florida corporation, owned for the most part by four Florida
residents who hold 97 percent of the parent company’s voting shares. The court
dismissed out of hand the company’s argument that the residency requirement
was “mere economic protectionism,” because the company had not raised
the issue before the district court and based it on a 1940s newspaper article
quoting a single state legislator. In the court’s view, not only was the argument
waived, but “Newspaper articles are ‘rank hearsay.’”
Drawing guidance from Granholm v. Heald, 544 U.S. 460 (2005), as the U.S.
Supreme Court’s most recent pronouncement on the intersection of the
Commerce Clause and 21st Amendment, the court determined that Missouri’s
tiered system is “unquestionably legitimate” and subject to deferential
scrutiny. According to the court, the state established a sufficient basis for the
residency requirement, which has a rational basis.
Issue 498
