- Homepage for the Wine Industry

Courtwatch: Tennessee's retailers petition U.S. Supreme Court over law imposing residency requirements on out-of-state retailers and wholesalers

Trade association argues residency requirements ensure alcohol retailers know "their community and are invested in its welfare."
by Kerana Todorov
August 27, 2018

Tennessee’s alcohol retailers’ association may battle Total Wine & More before the U.S. Supreme Court over a state law that imposes residency requirements on out-of-state retailers and wholesalers.

A lower court in February sided with Total Wine & More when it concluded a Tennessee law requiring retailers and wholesalers to reside in The Volunteer State for at least two years was discriminatory.

The dispute began in 2016 when Maryland-based Total Wine & More applied for a liquor application to operate stores in Tennessee.

The case that could be argued before the U.S. Supreme Court centers on the 21st Amendment and the dormant Commerce clause, which prohibits discrimination.

The US Court of Appeals for the Sixth Circuit declared the residency requirements unconstitutional under the dormant Clause, according to court records.

The Tennessee Wine and Spirits Retailers Association in July petitioned the U.S. Supreme Court to review the US. Court of Appeals’ ruling. In its brief, the trade association argued the state law is legal under the 21st amendment and the dormant Commerce Clause. Similar residential requirements are in place in at least 21 states, according to court filings.

Respondents include Clayton Byrd, executive director at the Tennessee Alcoholic Beverage Commission, the agency that regulates liquor licenses; Affluere Investments Inc., which operates as Kimbrough Fine Wine & Spirits; and Total Wine & More – or Total Wine Spirits Beer & More.

In 2005, the U.S. Supreme Court ruled states had to apply the same rules for all wine shipments that are sold directly to customers. States could not discriminate against out-of-state wine shipments. The ruling, known as the Granholm decision, has spurred direct-to-consumer sales in the United States.

The Tennessee Wine and Spirits Retailers Association, which represents about 600 retailers, claimed in court records the 2005 U.S. Supreme Court decision pertained to producers of alcoholic beverages, not wholesalers or retailers.

The trade association argued the residency requirements ensure alcohol retailers know “their community and are invested in its welfare.”

“In other words, ‘(t)he only way to know a community to live there.’,” according to the brief the attorneys for Tennessee Wine and Spirits Retailers Association filed with the U.S. Supreme Court on July 20.

But Total Wine & More praised the Court of Appeals’ decision and concluded the U.S. Supreme Court should deny the request to take on the case.

The Attorney General of Tennessee twice has found the residency statute violated the Dormant Caluse and could not be enforced, according to the brief filed by Total Wine & More’s attorney, William J. Murphy of Zuckerman Spaeder LLP of Baltimore.

On average, the U.S. Supreme Court takes about six weeks to act once a petition has been filed, according to the U.S. Supreme Court public information specialist.

In the meantime, both Total Wine & More and Kimbrough Fine Wine & Spirits have obtained liquor licenses in Tennessee.

In June, Total Wine & More opened a 30,000 square-foot store in Knoxville, Tenn. The store offers beers, wine and spirits “at competitive prices not previously seen in Tennessee.” All the employees reside in Tennessee, the attorneys for Total Wine stated.

Kimbrough operates a store in Memphis, Tenn.

Copyright© 1994-2021 by Wine Communications Group. All Rights Reserved. Copyright protection extends to all written material, graphics, backgrounds and layouts. None of this material may be reproduced for any reason without written permission of the Publisher. Wine Business Insider, Wine Business Monthly, Grower & Cellar News and Wine Market News are all trademarks of Wine Communications Group and will be protected to the fullest extent of the law.