First Circuit Strikes Down Massachusetts Wine Shipping Law Under Commerce Clause

The First Circuit Court of Appeals has upheld an injunction against the enforcement of a Massachusetts law that regulated wine shipments in a manner that changed “the competitive balance between in-state and out-of-state wineries in a way that benefits Massachusetts wineries and significantly burdens out-of-state wineries.” Family Winemakers of Cal. v. Jenkins, No. 09-1169 (1st Cir., decided January 14, 2010).

The statute at issue gave small wineries (those producing 30,000 gallons or less of grape wine annually) the most options for selling to consumers, either by direct shipment or through wholesalers and retailers. According to the court, most Massachusetts wineries are small wineries. Large wineries could sell either through wholesalers or by applying for a special license to ship directly to consumers; they could not do both. Apparently, Massachusetts has no large wineries. A group of California wineries and Massachusetts residents challenged the law, claiming it violated the Commerce Clause by effectively giving Massachusetts wineries a competitive advantage and thus discriminating against interstate commerce. The district court agreed and enjoined the law’s enforcement.

The state appealed, and the First Circuit determined that, while the law was neutral on its face, “the effect of its particular gallonage cap” was discriminatory and the legislature intended to discriminate against out-of-state wineries. The court also determined that the Twenty-First Amendment, which gives states certain limited authority to regulate the transportation, importation and use of alcohol within their borders regardless of effects on interstate commerce, does not protect facially neutral laws from invalidation under the Commerce Clause.