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Direct Shipping: Texas Judge Says Granholm Applies to Retailers

Date: 01/15/08

Decision Likely to be appealed--Texas could force out-of-state-retailers to buy from Texas wholesalers

In a 58-page decision, a Texas judge has ruled that retailers have the same protection from discrimination with regard to consumer-direct shipping that wineries do. Judge Sidney Fitzwater of the U.S. District Court for the Northern District of Texas ruled that laws precluding out-of-state wine retailers from selling and shipping wine to Texas consumers are unconstitutional.

The judge also shot down familiar arguments about protecting minors, and arguments about tax collection, and the like.

"It's a sweeping decision rejecting the argument that Granholm (the 2005 Supreme Court Ruling on consumer-direct wine shipping) does not apply to retailers," Specialty Wine Retailers Association Executive Director Tom Wark said. "Retailers may not be discriminated against if a state is going to give its own in-state retailers the right to ship."

In an unusual and unprecedented move, however, the judge wrote that the State of Texas has the option to force out-of-state-retailers to purchase wine from Texas wholesalers. "Texas can constitutionally require that wine sold and shipped to Texas consumers be purchased from a Texas licensed wholesaler," Fitzwater declared.

"Imagine if Texas allowed out-of-state retailers to buy from its wholesalers," said Wark. "All of a sudden a Texas retailer could buy from wholesalers in a whole bunch of states. I don't think that's what Texas wholesalers want."

"Not only is it illegal under California law and other state's law, but I believe it's illegal under Texas law," Wark said. "We won on everything but there's that little unfortunate part the judge got wrong. I feel sorry for Lou Bright (who heads the Texas ABC). How is he going to implement this?"

It appears that under this decision, a state can either allow direct shipping from both in state and out of state retailers--or shut down all shipping from retailers to consumers---whether it involves in-state or out-of-state-retailers. The decision may additionally affect lawsuits on the retailer shipping issue in New York and Michigan. In New York, a court recently ruled that Granholm does not apply to retailers and the case is before an appellate court. In Michigan, a preliminary court decision ruled that Granholm applies to retailers.

"This is really about the consumer," Wark said, "a step toward consumers across the country being able to purchase what they want. It will lead to lower prices for wine, more access to wine, and for states to be able to collect more taxes."

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