all right our second case for this morning is let them off enterprises against governor bruce around  sort of get to the bottom line here why isn't this case just about your client's inability as an out of state business to get a clause complaint is specifically addressed to your question about the fact that they can't they are not eligible for a license they cannot get a license to participate on the same basis as in state residents what does it take to be a resident suppose they incorporated a subsidiary in illinois and  you know or are they just bought some land and opened and what does it take to be a resident i don't actually know what it would take to qualify as a resident that's not clearly defined but that argument was raised in the original granholm case because that was the new york scheme in order to gain the right to ship to new york residence you have to establish some creative says you're going to present right and the supreme court said no that's too much of a burden particularly when you can then multiply that out to fifty different states so i have a different your argument that if your clients could get a license to sell wine in illinois they would agree to buy any wine they were shipping  residence only from licensed illinois distributors and wholesalers is that your argument and let me just interrupt that was exactly the question i was going to ask because it's not clear to me even if you were to prevail at the tir three level and obtain the right to ship to illinois customers and you've said you're willing to be licensed and pay taxes in order to fit in i think it tear to you would have to get all your wine just as judge rovner just said from illinois distributors well that's not necessarily the case for two reasons one is that illinois itself its prior  l that was repealed in two thousand and seven had a reciprocity licensing arrangement that is if illinois itself did not previously require that an out of state retailer obtain all of it wine from my licensed illinois wholesale i understand that it doesn't matter and you're not attacking the distribution level point i thought well the second thing is that what this really is is an argument if it's if substitutes a second kind of discrimination against interstate commerce for a first contact that is and there's no wholesaler involved in this case to determine whether a licensed wholesaler can be a wholesaler with an illinois license or has to be a wholesaler physically located in illinois with a wholesaler license sorry are you telling me that you're taking a one step at a time approach and if you can prevail with respect to spend minatory alleged discriminatory treatment of retailers we'll see if you can live with that or if you need bring another lawsuit about the wholesalers well first of all the first thing would happen is would go back to the state of illinois through their legislature or their liquor control commission to decide how to regulate interstates interstate shipments from retailers and we don't know the answer to that the second one is that what a lot of this boils down to is if there's a finding that the ban on the discriminatory ban on retailer shipping violates the commerce clause for example or the privilege communities clause step two is can they justify the ban and i would characterize if the argument is you have to buy all of your wine from unlicensed wholesaler in illinois then that that is a justification for excluding retailers because as you point out as currently  written the out of state retailer would probably not be able to purchase most of their wine from an illinois license wholesaler but i would point out that with consolidation wholesalers there  appear to be licensed in more than one state that's correct your honor there are at least two other matter might it might be possible that if you were in indiana retailers such as your client who could somehow get a license to retail in illinois maybe you would have to use only those brokers that also had an illinois license but maybe they have an indiana license to that they might they might very well and it and it is also completely plausible that the state of  that a wholesaler licensed in indiana now facing an avenue to the illinois market which is much bigger than indiana's would itself applied for a license in the case proceeding because the the standard is are is there no set of facts that would allow a judgment in our favor and i think that there is and that would be that the state is on able to justify the rule the exclusion of out of state retailers from the market because of the whole sale or licensing requirement your client is also prohibited from providing liquor at a wedding or or a bank wait in illinois even though someone with an off premises license  in illinois can do that in other words the problem is really that you cannot get it in illinois license not that you cannot ship to illinois purchasers right i'm back where i was because i'm just i'm really trying to figure this out what the statute the statute says and the liquor control commission says that it has to do with a ban on shipping you know are you thinking that there are actually a variety of ways that one functions at the retail level one of them may be shipping one of them may be in  premises sales one of them may be off premises sales and right at the moment you'd be happy to solve the shipping problem that that is correct that the location of this particular business and the interest of the consumer plaintive has to do with the internet ordering and shipping market this is a new one and these regulations a lot of them banning the the internet market have eliminated the old traditional requirements of the you know you go to the liquor store and you show your id and you do it face to face and you have to carry it home yourself and there's a one can ship directly then you already have to solve the i d problem and signature problem and these supposedly consumer protection measures that the states had use and the illinois has done that through something called its direct shipper permit which allow which you have to apply for if you're an out of state winery and then it allows you to do that again the out of state wineries are shipping wine into illinois which has never touched the hands of an illinois wholesaler so there's no reason to think that that is a critical constitutional element of the case and well they did it because they did it after granholm right because going because grant but they the same argument could have been made in granholm that there were other aspects of the state's regulatory system that had to do with more than just shipping and that were implicated and indeed post granholm states have gone various ways about whether they impose case limits to massachusetts and arizona case in which they impose that they make only some smaller wineries eligible some have licenses some have reciprocity lose some have no license at all so states that mean the whole point of the twenty first amendment it seems to me was to give states the prohibited local sellers from making internet or mail orders are you know discrimination hear your voice cut out is it your argument that there would be no discrimination here there certainly would be no facial discrimination and whether there would be discriminatory effect there been two cases that litigated that and that and the court said no if the in fact they're cited and relied on heavily by by the state the arnolds wine case in new york and the wine country gift baskets case out of texas the fifth circuit both of those were states that in fact did just what you suggest and one of them did it in the middle of the lawsuit changed its law to take away the state wide shipping and internet ordering privileges of in state businesses in assoon as it did that the court said nope there's no longer any discrimination you're mixing apples and oranges the you know once but in here illinois does allow it's it's in state retailers to take remote orders and engage in common carrier fed ex type shipping so but yes i agree if they took that away i think the discrimination go away that's it's hard for me to see how frivolous and uni's anything but an add on i think it is if one has two grounds for the same argument want to search both grounds privileges and you know you have to get to the owner for privileges and immunities and you've got i don't know i'm not sure they don't the owner does separately appear in the complaint and file and write and separately ask because it mean it it first of all it is possible for example that in we're talking motion to dismiss which means is there any avenue that gets to to a favorable verdict i can easily imagine illinois in would say we can make a case that we don't want the big interstate international machinable retailers coming in and swarming the market because the way we want to structure our market is mom and pop shops there are states arizona did that with wineries when they could still do that you're saying and i understand you to be saying that as long as there's no distinction drawn based on state residents or citizenship a state can do whatever it wants to we can say every last bottle of wine purchased in the state of illinois has to be bought from you know a bricks and mortar retailer that's right it's just that illinois trying to have it both ways they're trying to argument an opinion is written in the context of the factual case before it so the fact that granholm only talks about products and producers they never say only products and producers and in fact they say quite explicitly possibly at the next stage of summary judgment justify excluding non resident retailers the the big box stores but might not be able to justify excluding know but he already has fifteen stores he can open a new business called lebanon off illinois himself personally if allowed to do that and so the an attempt to exclude it was an individual from opening a new business is a separate question from whether his existing business is being harmed or discriminated against in its ability to do interstate co with the state's three tiered distribution and court and requirements but it's very hard for me to see how they're being treated equally when illinois will not allow a nonresident retailer  to perform these functions it's a very explicit discrimination it is not i mean so it's always here in hammond indiana and you know you're a retailer and you would like to ship some wine to your customer in chicago you could practically walk it over there and yet you're forbidden from doing so because of this illinois law you're forbidden from from doing so primarily because as level of state i opening argument they do not want to receive their alcohol from the in state distributors of the distribution judy that is the presiding eisley the discrimination that we're worried about and we have to decide how broadly to read gran because the states tried this at the producer level and we're told you know if you're letting the in state wineries ship you've got to let the out of state wineries ship and i would say if you're letting the in state retailers shi you should you should be required and they've conceded with appropriate licensing and tax payments and all the rest you should allow the out of state retailers to ship the recipient doesn't know whether the return address you know says illinois or whether it says indiana doesn't care at least as far as you could look at it i think first perhaps i can walk the court through illinois residency requirements not might help shed some light on how the three tier system exactly work so at the producer and manufacturer level operators and manufacturers or nonresident dealers get a license from illinois they then ship to importing distributors or distributors the alcohol must actually touch base in the warehouse in illinois before it is shipped to in state retailers the state then can inspect that alcohol and then after that point the alcohol stays in the state it's not going back and forth across states as you know it was addressed in arnold wine and was discussed earlier it goes from the license distributor to the in state retailer now for in somebody tells you if you get a direct shipment from the winery that little itty bitty winery in california you can get a direct shipment from them that's correct and if you're not taking base and anywhere house and going through an expensive series of holes this is pure protectionism right this was written into the twenty first amendment because that was the price of repealing prohibition  the supreme court has moved beyond that to say you know a state can have very streets they could be driving the state of illinois could say there's got to be any alcohol sold here at all and we would not have a case because the twenty first amendment permits illinois to do that but that's not the choice illinois has made and so it's not as i read granholm if the state is going to allow in state people to do something it has to allow out of state people to do it as well that with respect that is not how i read granholm if you look at granholm there are many indications that there is a difference between the producer level and the other levels at issue in the three tier system for example we know that both granholm and north dakota stated that it is permissible for a state to require retailers to get all of their alcohol from in state wholesalers so right there right after the producer level you have an in state requirement that has been up held by the supreme court but that is shown was not the issue before the court and granholm that's correct and so the question is if you have a retailer with the equivalent of the out of you know call it an out of state retailer license you know illinois could probably come up with something like that  to make sure that they were paying and so forth and that there was perhaps reciprocal health and safety measures hard to see why you know indiana's permitting its residents to drink polluted water and workers illinois isn't  certain so i just don't see how you can push granholm into holding about discrimination in the lower two levels of the three tier system as opposed to simply saying there's going to be some form of regulation of each of these tears well in granholm as well a couple of points about granholm first michigan did happen in state retailer requirement that the court did specifically note in granholm and yet said that the three tier system unclear unquestionably illegitimate and also that a state couldn't mandate that the alcohol would go through that three tier system but where did they say it's ok to run the three tier system particularly two years two and three in a way that discriminates against out of state persons that's the part i mean it's one thing to say you have three tiers it's just another thing to say you can be discriminatory so we are not arguing that retailers are somehow exempt from claims of discrimination post granholm and i think an example might help here the way that the illinois system is currently written it prohibits all retailers from importing from an out of state source or from shipping from an out of state source directly to a consumer and this is a very important regulation for illinois because it has been a problem to have retailers from out of state not only shipping directly to consumers but shipping other retailers because they have lower taxes in other states so all all retailers are barred from receiving any alcohol you know from a non license and state distributor or you know there are some other peer exceptions as well so let it you know i mean the tax point is one that could be addressed in the kind of license you could have an equalization provision in there and i guess one of the reasons that i get worried about this case particularly the shipping dimension is that this is the world this point i know people who will never step inside a bricks and mortar store they get all their groceries on you know amazon they go through whole foods now at this point they get their liquor shipped directly they literally do not walk into stores so what illinois is trying to do is put a huge damper on modern commerce i disagree with that respectfully but i think that also you know going back to my hypothetical earlier there would be discrimination for example if a retailer in illinois were allowed to import from another retailer so you have a nationwide or regional chain and they were allowed to ship alcohol back and forth but that's not and that's retailers trying to do this retailers just trying to ship directly to the customer just as the illinois retailers can right now ship directly to the customer yes and all indications from granholm and from the court that have interpreted granholm the second circuit and the fifth circuit have have looked at this question and have said that the three tier system can reach we can require an in state presen for the wholesaler level and for the distributor level because that's how the three tier system works alright so to answer this question for me how easy would it be or how impossible would it be for a level mobs just to open up a chicago store so it actually would not be very difficult so in in the liquor act if you are a sole proprietor you need to be a resident of illinois if you are not no one associations be residents of illinois the corporation just needs to be registered in illinois and then as long as the municipality can essentially bless the liquor license the state will grant it so whether or not  no one in the enterprise has to become a resident of illinois there's no durational residency requirement as there wasn't cooper or in the southern wine case in the eighth circuit and you know in fact different municipalities have different occurred i mean it's not in the public record but i know for a fact that has occurred so it is not an onerous burden like some of these other states where they require you know in the eighth circuit for in state wholesalers the court upheld i think it was all of the officers all of the directors and a supermajority of the shareholders had to be missouri residents this is not that type of a case there just needs to be some in state present so that the alcohol once it comes in the state through a licensed distributor stays in the state goes to a illinois much different than many most groups i don't know the answer to that i do know that it's a dual licensing state and some other states have that and some jobs they run it all through the state and so you know in addition to kind of challenging the three tier system this is also in a fact a challenge to the municipal regulations as well you know if if they were to succeed not only would you take away the state control but you would take away the fact that you have a local liquor commission you have a sheriff you have a mayor who can also direct ship can they say you can't do it even though it's ok under illinois law i have not seen any examples of that and i'm not sure i don't want to speculate and also to just to give a sense of scope here right now illinois has licensed fourteen hundred twenty two wineries under the direct winery shippers license and illinois alone there are twenty three thousand retail licenses so you apply that to fifty states i mean it is much more alcohol that it may involve some shuffling of where the wind comes from but i it's hard for me to believe that there would suddenly be some game lucia wine from outside the state if this were to happen then there would be price competition which would be a whole different thing there would be if you there would certainly be different price competition depending upon how illinois is structured you know the kind of wineries in illinois see the import virtually  and named wine and put their own labels on it and sell it i don't know the answer to that question and i don't know how how wineries are regulated in that fashion but the in state wineries are treated the same as the i mean i think the key here as came up earlier is that the plaintiffs are not wanting to comply with the distribution system they would like to take the wind that they have gotten from indiana sources and ship it to illinois residents i mean all throughout the brain i think they would concede i'd only that they don't want to comply with it because they think it violates the commerce clause and the day ought to have the right to ship to people in a different state that would completely alter the distribution system that the supreme court has that is unquestionably legitimate and i understand that in that case that wasn't the producer level but you also cannot ignore all the indications in that decision stating that the three tier system was unquestionably that all taking their direction from the supreme court this is the way that the states have set up their license of and their licensing scheme and i'd also like to point out that the second circuit and the fifth circuit did address nearly identical laws that the second circuit case did not have a local requirement as council stated all that it stated is that you're not shipping it through common carriers you need to have a license to vehicle shipping the alcohol so in new york you can ship statewide arnold wind cases directly on point and the court read the granholm decision in the way that the state reads it here likewise the texas case also concluded that the three tier system was unquestionably legitimate you also have the eighth circuit although on the in state wholesaler side reaching the same conclusion every court every circuit court has looked at this issue has reached the same conclusion and an idea i guess i still want to push back and say i'm not sure that they've been facing quite this same question where one of the levels of the three tier system the state is drawing a distin based on the residency or citizenship of the other party and not simply saying you have to get the appropriate license to participate at this two year that two year of our system in new york and in texas they were there were in state presence requirements that was the exact same situation with respect to the in state vs out of state now counsel says that because you know in illinois you allow common carriers to ship across the state whereas in new york you have to have a license to be a called by the commission that that makes all the difference but it doesn't it's the same exact requirements in state versus out of state out of state retailers cannot ship to consumers in il in illinois or into new york sorry it does not matter if they have a license or not that is prohibited in the court upheld it in arnold's winds same thing for the fifth circuit no out of state retailer can ship from a point outside of texas to a consumer in texas and the court upheld that as well you go to the eighth circuit as i discussed earlier there are very very strenuous and onerous residency requirements there you know out of state wholesaler can participate in the market because there is a similar system although ours is not as onerous as missouri and they said you look at granholm and all of the indications coming out of granholm is that this type of system is not discriminatory because it is or it's just that i would beg to differ and just say it's discrimination that may be inherent there they're saying in the twenty first and then the second circuit does see a nondiscrimination principle in license at the retail level to me it doesn't answer what's going to happen about the source of supply they can they can use or still the middle tier so to speak you know if they're doing it one step at a time or if they're brokers that are licensed in several states including illinois and they're willing to work through those brokers maybe dotson's problem it's a little early to solve that problem i will note though that granholm did discuss of reciprocity system and said that that would actually likely  unconstitutional because it would create a low level trade war among the states so if you're looking at other regimes that that could occur you know the the reciprocal nature of licenses under granholm you know when it was discussing new york's law you know it would likely not be constitutional and likewise if you're talking about having a licensed illinois distributor and then shipping you know say to an indiana retailer and back to an illinois consumer the court in our north winds the second circuit case also addressed that in footnote three and said that that would lead to an absurd operational result or would be virtually impossible so all of these other options have been considered by the courts and you know this really is the the best way that the states have had seemed to solve this problem and other than you know completely eliminating the distributor tier and the three tier system itself you have to have the alcohol you have to have all retailers being treated the same if you have a retailer who  able to avoid this three tier system then they're getting preferential treatment over that in state rates photos that that's your that's the argument your opponents say it's a red herring they say they're not asking for different treatment they recognize they've got to pay illinois level taxes on things they recognize if there are i don't know let's say there's some limit on the percentage of alcohol that can be in the wind no more than fourteen percent or something like that you know fortified wines they would have to comply with that i mean there are all kinds of requirements and so i don't think they envision this is anything but get rid of the discriminatory thing but make it the same otherwise but it couldn't be the same otherwise because you have the license to strip it or aspect well that always helps them buy from a licensed distributor i don't see i don't see where this case is about that it is about that w suppose that goes more of the level of scrutiny in terms of whether or not there is a reasonable alternative and you know as the court said in footnote three in arnold's wine that would not be a reasonable alternative you know the state here has made findings that it wants to restrict how much shipment is going directly to consumers in section twenty nine of the liquor control access text at dash twenty but there's no limit on how much wine and in state tailor can ship to consumers you could be getting three cases a day three hundred sixty five days a year if you were have you why can't you guess you could but that one has been through the control that was so in other words has nothing to do with consumption it has everything to do with protection of the tax base and also protectionism of illinois companies but it really doesn't have anything to do with public health or anything else it does the state legislature did make m i just would remind the court that the second ten fifth circuit cases involved non discriminatory laws it's not the the new york case instate whiner instate retailers had to deliver in their own vehicles the plaintiff was from florida in that case and could not deliver in his own vehicle and only ask for the remedy of of in a during the co case it was not a discriminator case not in several pages of quite strong dictum the second circuit which i would point out had just been referred by the supreme court granholm reach sort of the same conclusion and was took a very strong position that even if it had been discriminatory they probably would have declared unconstitutional i mean up held they were not part of the wreck right now but you know and the the fifth circuit case the same it was not a discriminatory law at texas retailers were only allowed to deliver within their own local areas so none of these cases are any direct precedent and in all of them what was going on it is essentially these arguments by the state that for example it needs to inspect wanny when it comes to rest at a wholesaler what are they inspected for these are questions of fact that ask is in fact the come to rest at a wholesaler location that justifies the wholesaler requirement the in state wholesale appointment well i it it could that interest be certain what is the interest could it be served by nondiscriminatory and that's a question series funds to the state's argument that it would actually be quite easy for your client to establish an illinois presence and solve this problem that stroke this is really such a promising market why not because granted constitutionally granholm says that's not a fair requirement because of the added expense and because the commerce clause particularly addresses of machinable market if they have to do that in every single of the fifty states to which they want to just to distribute it makes it financially impossible and the that the supreme court fought that was significant enough to devote a paragraph to it