In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 17-2495

LEBAMOFF ENTERPRISES, INC., et al.,

Plaintiffs-Appellants,

v.

BRUCE V. RAUNER, et al.,

Defendants-Appellees,

and

WINE & SPIRITS DISTRIBUTORS OF ILLINOIS,

Intervening Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 16 C 8607 — Samuel Der-Yeghiayan, Judge.

____________________

ARGUED FEBRUARY 16, 2018 — DECIDED NOVEMBER 28, 2018

____________________

Before WOOD, Chief Judge, and KANNE and ROVNER, Circuit 

Judges.
2 No. 17-2495

WOOD, Chief Judge. The Twenty-first Amendment to the 

U.S. Constitution brought Prohibition to an end with a compromise: section 1 repeals the Eighteenth Amendment, but 

section 2 hands some power back to the states insofar as it forbids the “transportation or importation” of liquor into a state 

in violation of that state’s law. This post-Prohibition compromise gives the states greater leeway to regulate alcoholic beverages than they enjoy with respect to any other product. But 

the Supreme Court has decided that this leeway is not boundless. Drawing lines that are sometimes difficult to follow, it 

has decreed that states may not infringe upon other provisions of the Constitution under the guise of exercising their 

Twenty-first Amendment powers.

In recent years, there has been considerable litigation over 

the proper boundary between lawful exercise of Twenty-first 

Amendment powers and unlawful economic protectionism. 

Indeed, the Supreme Court now has before it a case posing 

the question whether the Twenty-first Amendment permits 

states to regulate liquor sales by limiting retail and wholesale 

licenses to persons or entities that have resided within the 

state for a specified time. See Tennessee Wine & Spirits Retailers 

Ass’n v. Byrd, No. 18-96, cert. granted, 2018 WL 3496882 (Sept. 

27, 2018).

It is quite possible that the Court’s disposition of Tennessee 

Wine will affect the issue now before us. But the question in 

that case differs from the one now before us, and these differences often matter to the analysis. Our case involves the ability of companies to ship alcoholic beverages to consumers in 

Illinois; it does not directly address licensure for retail or 

wholesale establishments. Illinois allows retailers with an in-
No. 17-2495 3

state physical presence to ship alcoholic beverages to consumers anywhere within Illinois. The state refuses, however, to 

give out-of-state businesses the opportunity even to apply for 

a similar shipping license. The plaintiffs argue that this difference in treatment violates the Commerce Clause and Privileges and Immunities Clause of the Constitution. Illinois responds that these restrictions fall within its reserved powers 

under the Twenty-first Amendment and in any event are necessary to protect its legitimate interests in the health and wellbeing of Illinois residents. The district court accepted Illinois’s 

reasoning and dismissed the case with prejudice. We conclude that it was too quick to do so in the face of material contested issues about the necessity for and justifications behind 

the Illinois statute. We therefore reverse, but with the caveat 

that there are other aspects of the Illinois law—not before us 

at present—that will be difficult for plaintiffs to surmount if 

Tennessee Wine does not come out in their favor.

I

The Illinois Liquor Control Act of 1934, 235 ILCS 5/1-1, et 

seq., subject to some exceptions not pertinent here, requires 

any person who sells or transports alcohol in the state to obtain a license from the Illinois Liquor Control Commission. 

235 ILCS 5/2-1. Like most states, Illinois divides merchants

into three tiers. Licensed producers (tier 1) sell to licensed distributors (tier 2), who then sell to licensed retailers (tier 3), 

who in turn sell to consumers. Each tier is heavily regulated. 

Various specialized licenses are available on all three tiers of 

the system, and many of those licenses are exclusive, meaning 

that they preclude the holder from obtaining different types 

of licenses within the system. See 235 ILCS 5/5-1. The strict 

separation between license holders on each tier of the system 
4 No. 17-2495

was originally seen as part of a broader set of rules preventing 

so-called tied houses, which were vertically integrated organizations. See Federal Alcohol Admin. Act, sec. 5(b), 27 U.S.C. 

§ 205(b). (This law reflected broader hostility to vertical arrangements that has since been abandoned by the Supreme 

Court. See, e.g., Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 

551 U.S. 877 (2007).)

The Illinois statute bars anyone from shipping or transporting “any alcoholic liquor from a point outside this State 

to a person in this State who does not hold a manufacturer’s, 

distributor’s, importing distributor’s, or non-resident dealer’s 

license issued by the Liquor Control Commission.” 235 ILCS 

5/6-29.1(b). Put more simply, subject to certain exceptions, 

any alcohol shipped to Illinois must go through a distributor 

on the second tier of the three-tier system. Additionally, the 

out-of-state shipper must itself be licensed in Illinois. See 235 

ILCS 5/2-1; Ill. Admin. Code tit. 11, § 100.480(a) (“[N]o person 

shall import alcoholic liquor into this State for a non-personal 

or commercial use without first obtaining a license to import 

issued by the Commission.”). These restrictions ensure that 

all liquor sold to consumers at tier three is first funneled

through the top two tiers. See Granholm v. Heald, 544 U.S. 460, 

489 (2005).

Licensees at the third tier—retail—must have a physical 

location in Illinois. 235 ILCS 5/6-2(a)(1); see also 235 ILCS 5/6-

29.1(b) (prohibiting “the shipping or transportation of any alcoholic liquor from a point outside this State to a person in 

this State” who does not hold a valid Illinois license). A retailer’s license allows “the licensee to sell and offer for sale at 

retail, only in the premises specified in the license, alcoholic 

liquor for use or consumption, but not for resale in any form.” 
No. 17-2495 5

235 ILCS 5/5-1(d). Section 5-1(d) provides that “[n]othing in 

Public Act 95-634 [now codified at section 6-29.1(b)] shall 

deny, limit, remove, or restrict the ability of a holder of a retailer’s license to transfer, deliver, or ship alcoholic liquor to 

the purchaser for use or consumption subject to any applicable local law or ordinance.” 235 ILCS 5/5-1(d) (emphasis 

added). In other words, Illinois-licensed retailers may ship to 

customers statewide, unless local law stands in the way. 

Taken as a whole, Illinois’s laws establish the difference in 

treatment that is at issue in this suit: in-state retailers can obtain a license to ship products to Illinois consumers, but outof-state retailers cannot, for the simple reason that they are 

out-of-state and so by definition do not satisfy the physicalpresence requirement.

The plaintiffs filed this suit in 2016, contending that the Illinois statutory scheme violates both the Commerce Clause 

and Privileges and Immunities Clause by discriminating 

against out-of-state economic interests. Two of them—Lebamoff Enterprises and its co-owner Joseph Doust—operate a 

wine store in Fort Wayne, Indiana. Lebamoff says that it 

would obtain a license to make direct shipments to Illinois 

residents if it were allowed to do so. The third plaintiff, Irwin 

Berkley, is an Illinois resident who is a regular purchaser of 

fine wine; he complains that his access to rare wines is curbed 

by the Illinois statutory scheme. Without traveling outside of 

the state, he is limited to whatever the Illinois retailers can 

send him. Consumers are often forced to travel to New York 

or California in order to obtain access to the full panoply of 

wines available from specialized retailers. 

The state defendants promptly moved to dismiss. The district court viewed the complaint as a challenge to Illinois’s 
6 No. 17-2495

three-tier system writ large and granted the motion, dismissing the case with prejudice. The plaintiffs now appeal both the 

district court’s decision dismissing the case and its denial of 

leave to amend the complaint. Because the only valid basis for 

the district court’s denial of leave to amend was futility, we 

consider both decisions de novo, Runnion ex rel. Runnion v. Girl 

Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 524 (7th Cir. 

2015). 

II

We start with the relation between the Commerce Clause 

and the Twenty-first Amendment. The Commerce Clause 

grants Congress the power to “regulate Commerce ... among 

the several States.” U.S. CONST. Art. 1, § 8, cl. 3. The positive 

grant of power implies that “state laws violate the Commerce 

Clause if they mandate ‘differential treatment of in-state and 

out-of-state economic interests that benefits the former and 

burdens the latter.’” Granholm, 544 U.S. at 472 (quoting Ore. 

Waste Sys., Inc. v. Dep’t of Envtl. Quality of Ore., 511 U.S. 93, 99 

(1994)). Laws that directly discriminate against interstate 

commerce are “generally struck down ... without further inquiry,” while those that only indirectly affect interstate commerce are subject to a balancing test. Lebamoff Enters., Inc. v. 

Huskey, 666 F.3d 455, 460 (7th Cir. 2012) (quoting Granholm, 

544 U.S. at 487). The plaintiffs argue that the Illinois law falls 

into the former camp and thus must be struck down out of 

hand.

The evident problem with their argument is that this is not 

a pure Commerce Clause case. It also involves the Twentyfirst Amendment, which qualifies the Commerce Clause. Section 2 of the Twenty-first Amendment states that “[t]he trans-
No. 17-2495 7

portation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.” U.S. CONST. amend. XXI, § 2. While early cases suggested that the Twenty-first Amendment “pro tanto ‘repealed’” the Commerce Clause with respect to liquor, the Supreme Court has since rejected that theory as “patently bizarre and ... demonstrably incorrect.” Hostetter v. Idlewild Bon 

Voyage Liquor Corp., 377 U.S. 324, 332 (1964). Instead, “[l]ike 

other provisions of the Constitution,” the Twenty-first 

Amendment and the Commerce Clause “must be considered 

in the light of the other, and in the context of the issues and 

interests at stake in any concrete case.” Id. In the decades since

Hostetter, courts have tried to reconcile these constitutional 

commands through a two-step inquiry: (1) does the state law 

violate the Commerce Clause, and if so (2) does the Twentyfirst Amendment save the otherwise impermissible law? Lebamoff Enters., 666 F.3d at 460.

A

The Commerce Clause analysis in this case is straightforward. Illinois allows in-state retailers to obtain a license to 

ship their products anywhere in the state; it prohibits out-ofstate retailers from obtaining an analogous license. Twentyfirst Amendment considerations aside, this is precisely the 

sort of discrimination against out-of-state economic interests 

that is typically “struck down ... without further inquiry.” 

Granholm, 544 U.S. at 487 (quoting Brown-Forman Distillers 

Corp. v. New York State Liquor Auth., 476 U.S. 573, 579 (1986); 

see also City of Philadelphia v. New Jersey, 437 U.S. 617, 624 

(1978) (“The clearest example of such legislation is a law that 
8 No. 17-2495

overtly blocks the flow of interstate commerce at a State’s borders.”). The Supreme Court has “viewed with particular suspicion state statutes requiring business operations to be performed in the home State that could more efficiently be performed elsewhere.” Granholm, 544 U.S. at 475 (quoting Pike v. 

Bruce Church, Inc., 397 U.S. 137, 145 (1970)).

Illinois defends its statutory scheme on several grounds. 

First, it argues that its law does not facially discriminate 

against out-of-state retailers because the “provisions impose 

delivery and shipment restrictions on all retailers and the alcoholic liquors that they sell.” In effect, Illinois argues that because all retailers are barred from shipping from out-of-state, 

the provision does not discriminate against out-of-state retailers. For example, a retailer with locations in both Illinois and 

Indiana could not ship wine to an Illinois customer from the 

Indiana location. But one cannot define the problem away so 

facilely. On its face, Illinois law distinguishes between in-state 

and out-of-state parties for purposes of the right to ship to Illinois residents. This case is therefore not like Baude v. Heath, 

538 F.3d 608 (7th Cir. 2008), where pursuant to the “face-toface” clause any customer who wanted direct shipments of 

wine from any winery in or out of Indiana was subject to the 

same visitation regime. We found no discrimination in that 

system, and thus upheld that part of the state’s law. 

That cannot be said about the part of Illinois’s system under attack here. Even assuming (counterfactually) that section 

6-29.1(b)’s shipping ban is facially even-handed, we must still 

contend with section 6-2 and 5-1(d), whose licensing requirements are not so benign. 235 ILCS 5/5-1, 5/6-2. Limiting licenses to in-state storefronts might make sense if all sales had 

to be on an in-person basis. The great majority of out-of-state 
No. 17-2495 9

retailers would have no use for such a license, and the failure 

of the state to offer it would raise no eyebrows. But once the

license allows a store to ship product anywhere within the 

state, refusing to extend that privilege to out-of-state businesses is facially discriminatory.

B

The question is thus whether the Twenty-first Amendment 

saves Illinois’s law. Despite the seemingly broad language of 

the Amendment, the Supreme Court has indicated that its 

protection is more limited than meets the eye. In 1984, the 

Court invalidated a Hawaii law exempting two local spirits 

from taxation. Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984). 

State laws “enacted to combat the perceived evils of an unrestricted traffic in liquor” are worthy of deference, the Court 

said, but “laws that constitute mere economic protectionism” 

are not. Id. at 276. The Bacchus Court thought that “the tax violates a central tenet of the Commerce Clause but is not supported by any clear concern of the Twenty-first Amendment.” 

Id. The Court later invalidated state laws that effectively required producers to fix prices based on the prices offered in 

other states. Brown-Forman, 476 U.S. 573; Healy v. Beer Inst., 491 

U.S. 324 (1989). Expanding on an increasingly common 

theme, the Court said that it was troubled by the lack of a 

“neutral justification for this patent discrimination.” Id. at 341.

We read these cases to dictate that the Twenty-first Amendment can save an otherwise discriminatory regulation only if 

it “is demonstrably justified by a valid factor unrelated to economic protectionism.” Id. at 340–41.

The Supreme Court returned to the issue in 2005 in

Granholm. There it invalidated state laws that drew a distinc-
10 No. 17-2495

tion between in-state and out-of-state winemakers by allowing the in-state group to ship directly to consumers (bypassing wholesalers and retailers) but requiring the out-of-staters 

to sell through the typical three-tier system. The present case 

requires us to deconstruct Granholm and see what light it may 

shed on the Illinois law. The state points to dicta in Granholm 

stating that the Court has “previously recognized that the 

three-tier system itself is ‘unquestionably legitimate.’” 

Granholm, 544 U.S. at 489 (quoting North Dakota v. United 

States, 495 U.S. 423, 432 (1990) (plurality)). 

Illinois infers from this language that any legal challenge 

threatening any application of the three-tier system must fail 

because of the Twenty-first Amendment. The state sees in 

Granholm a rule according to which the Commerce Clause

protects out-of-state producers, but not retailers or wholesalers. The plaintiffs contend that Granholm did no such thing. 

Even taking the Twenty-first Amendment into account, they 

reason, in-state presence requirements are almost always forbidden. See id. at 474–75. Granholm is not to the contrary, they 

say, because the case before the Court was limited to producers (i.e. wineries). The Court did not draw the distinction the 

state proposes between producers, on the one side, and 

wholesalers and retailers, on the other side, for the simple reason that it had no occasion to do so. 

Given the financial stakes, it is unsurprising that the parties before us are not the first to grapple over the content of 

the law after Granholm. Courts have split over the best reading. Some see Granholm as establishing a rule immunizing the 

three-tier system from constitutional attack so long as it does 

not discriminate between in-state and out-of-state producers or 
No. 17-2495 11

products. The idea is that the Twenty-first Amendment overrides the Commerce Clause and permits states to treat in-state 

retailers and wholesalers differently from their out-of-state 

equivalents. Arnold’s Wines, Inc. v. Boyle, 571 F.3d 185, 190–91 

(2d Cir. 2009); Brooks v. Vassar, 462 F.3d 341, 352 (4th Cir. 2006) 

(Niemeyer, J., writing only for himself)); Southern Wine & Spirits of Am., Inc. v. Division of Alcohol & Tobacco Control, 731 F.3d 

799, 809–10 (8th Cir. 2013). More courts have read Granholm 

simply to reaffirm a general non-discrimination principle, although the principle may carry greater or lesser weight at different tiers of a three-tier system. Brooks, 462 F.3d at 354;

Cooper v. Tex. Alcoholic Beverage Comm’n, 820 F.3d 730, 743 (5th 

Cir. 2016); Byrd v. Tenn. Wine & Spirits Retailers Assoc., 883 F.3d 

608, 618 (6th Cir. 2018); Siesta Vill. Mkt., LLC v. Granholm, 596 

F. Supp. 2d 1035, 1039 (E.D. Mich. 2008); Peoples Super Liquor 

Stores, Inc. v. Jenkins, 432 F. Supp. 2d 200, 221 (D. Mass. 2006).

Finally, one judge understands Granholm to preclude any

Twenty-first Amendment protection for state laws that otherwise violate the dormant Commerce Clause. Brooks, 462 F.3d 

at 361 (Goodwin, J., concurring in part and dissenting in part).

Illinois, like the Second and Eighth Circuits, focuses on a 

paragraph in Granholm in which the Court concludes that 

“[s]tate policies are protected under the Twenty-first Amendment when they treat liquor produced out of state the same 

as its domestic equivalent.” 544 U.S. at 489. This, along with 

the Court’s comment that the three-tier system is “unquestionably legitimate,” id., means (Illinois asserts) that 

Granholm’s nondiscrimination principle is limited to discrimination against producers. 

We are not persuaded. The interpretation of Granholm for 

which Illinois argues fails to read the Court’s statements in 
12 No. 17-2495

light of the opinion as a whole. See Ind. Petroleum Marketers & 

Convenience Store Ass’n v. Cook, 808 F.3d 318, 321–22 (7th Cir. 

2015) (noting that several passages of Granholm “cannot be 

read in isolation”). At the start of Part III.C of its opinion, the 

Court extracts three principles from its Twenty-first Amendment case law: (1) the Amendment does not save state laws 

that violate other provisions of the Constitution (i.e. clauses 

other than the Commerce Clause), (2) the Amendment “does 

not abrogate Congress’ Commerce Clause powers with regard to liquor,” and (3) “state regulation of alcohol is limited 

by the nondiscrimination principle of the Commerce Clause.” 

Granholm, 544 U.S. at 486–87. In the next two paragraphs, the 

Court rejects an invitation to overrule the third principle or 

limit it to the facts of Bacchus. Id. at 487–88. Only after this extended discussion of its prior cases does the Court comment

that “the three-tier system itself is unquestionably legitimate,” Id. at 489 (internal quotation marks omitted), in a paragraph fending off concerns about the potential breadth of its 

ruling.

None of this addresses the propriety of singling out the 

producer tier for special treatment. It follows a passage announcing three general principles from prior case law and declining to limit those principles to the facts of those earlier 

cases. We will not assume that the Supreme Court, without 

saying so directly, announced a new bright-line rule creating 

different constitutional treatment for the producer tier, on the 

one hand, and the lower two tiers, on the other. Indeed, such 

a rule would be inconsistent with the general principles the 

Court had just set out. A strict limitation of the Commerce 

Clause to the producer tier is difficult to square with Healy

and Brown-Forman, both of which the Court read as helping 
No. 17-2495 13

to establish the “nondiscrimination principle of the Commerce Clause” with respect to state regulation of alcohol. 

Granholm, 544 U.S. at 487. Healy involved importers and shippers, not just producers, 491 U.S. at 327–31, and Brown-Forman 

states that “[e]conomic protectionism is not limited to attempts to convey advantages on local merchants; it may include attempts to give local consumers an advantage over 

consumers in other States.” 476 U.S. at 580. Read together, 

Healy, Brown-Forman, and Granholm actually contradict a producers-only rule. “A fair reading of this passage leads to one 

conclusion: the Supreme Court discussed the relationship between the dormant Commerce Clause and the Twenty-first 

Amendment in the context of ‘producers’ simply because 

Granholm involved statutes addressing that step in the threetier system.” Byrd, 883 F.3d at 621.

There are also serious problems with reading Granholm to 

protect against discrimination only in the parts of the threetier system that are not “inherent” or “integral” to its existence. Prime among them are the fuzziness and impracticality

of such a line. “There is no archetypal three-tier system from 

which the ‘integral’ or ‘inherent’ elements of that system may 

be gleaned.” Southern Wine & Spirits of Am., 731 F.3d at 810. 

States successfully have implemented varying regulatory 

schemes. Missouri, for example, has four tiers; the usual three, 

plus one for “solicitors.” Id. at 802. And how are we supposed 

to decide which parts of Illinois’s scheme are “integral”? We 

count 30 categories of licenses and permits in section 5-1 

alone. Is an airplane license subject to constitutional challenge 

while an ordinary retail license is not? See 235 ILCS 5/5-1. 

Even setting aside the administrative problems posed by this 

approach, there is no reason to think that the Twenty-first 

Amendment accords privileged status to only one form of 
14 No. 17-2495

state liquor regulation. The Amendment gives states the 

power to structure their liquor distribution systems; it does 

not give states that adopt one structure over another outsized 

deference.

The better understanding of Granholm is that it simply reaffirmed the position first announced in Bacchus. As the 

Fourth Circuit summarized, “these cases stand for the proposition that a State’s regulation of the transportation, importation, and use of alcoholic beverages in the State is protected 

by the Twenty-first Amendment, but economic protectionism 

is not ... .” Brooks, 462 F.3d at 354. To be sure, the Supreme 

Court reaffirmed in Granholm that most aspects of the threetier system pass constitutional muster. Among other things, 

the state can require licenses at each tier of the system or route 

liquor through wholesalers “to promote temperance or to 

carry out any other purpose of the Twenty-first Amendment.” 

Bacchus, 468 U.S. at 276. But when the state creates exceptions 

to the system or modifies the rights that come with licenses in 

the system, those modifications must not offend the Commerce Clause (or any other constitutional provision). By allowing statewide shipments, Illinois has signaled that it is not 

quite so concerned about face-to-face sales. At the same time, 

it has made its retailer licenses attractive to out-of-state businesses while barring those businesses from obtaining a license

solely on the basis of state residency. 

Granholm’s acceptance of the three-tier system as a general 

matter does not say anything about these aspects of Illinois’s 

regulatory choice. We must thus examine “whether the interests implicated by a state regulation are so closely related to 

the powers reserved by the Twenty-first Amendment that the 
No. 17-2495 15

regulation may prevail, notwithstanding that its requirements directly conflict with express federal policies.” Byrd, 

883 F.3d at 614 (quoting Bacchus, 468 U.S. at 275–76).

The district court did not conduct this inquiry because it 

took the plaintiffs’ challenge to be one to the three-tier system 

as a whole. This was error. It should have asked whether Illinois has justified requiring an in-state presence for retailers 

now that it allows state-wide mail-order sales. (We note that 

distance from the store is not a promising theory: downtown 

Chicago, in northeastern Illinois, is 370 miles from Cairo, in 

far southern Illinois, while it is just 24 miles from downtown 

Hammond, Indiana.) Perhaps Illinois can show that the differential treatment is necessitated by permissible Twenty-first 

Amendment interests, but this sort of inquiry is ill-suited for 

the motion to dismiss stage. The consolidated cases in 

Granholm were both decided after summary judgment, 544 

U.S. at 470–72, and the Illinois statute itself shows why evidence is crucial to evaluate the constitutionality of the statute.

The interstate shipment provision decries “direct marketing” 

of liquor as a “serious threat” not only to the health of state 

residents, but also “to the economy of this State.” 235 ILCS 

5/6-29.1(b). The first reason touches the core of the Twentyfirst Amendment, while the second smacks of protectionism. 

Interestingly, Illinois previously allowed out-of-state wine retailers to make sales by shipment. See 235 ILCS 5/6-29 (1991), 

amended by Ill. Legis. Serv. P.A. 95-634 (eff. June 1, 2008) (affording reciprocal wine shipment privileges). Illinois must 

show why its restrictions are necessary to further the first objective, and not just the second.

Illinois argues that any factual development is a fool’s errand, because lifting the in-state presence requirement and 
16 No. 17-2495

out-of-state shipment ban would not give the plaintiffs any 

real relief. The reason this is so, according to the state, is that 

it would be impossible for a hypothetical out-of-state licensed 

retailer to comply with other aspects of the regulatory 

scheme. In particular, it says, as long as Illinois is entitled to 

insist that retailers authorized to sell in Illinois must buy all 

their stock from Illinois wholesalers, the out-of-state retailers 

would gain exactly nothing by winning this suit. They would 

simply be blocked from the market at a different stage. The 

Second Circuit found a similar practical impossibility argument persuasive when addressing a similar New York law.

Arnold’s Wines, 571 F.3d at 192 n.3. But just as we part from 

the Second Circuit’s analysis of Granholm as limited to producers, we do the same on this point. First, the legality of 

those restrictions is contestable, as the Supreme Court’s grant 

of review in Tennessee Wines illustrates. Second, it is not clear 

that the other regulatory hurdles facing out-of-state retailers

favor the state’s position. If Illinois can limit the dangers of 

mail-order sales through other requirements, why does it 

need to discriminate against interstate commerce and flatly 

bar out-of-state retailers from obtaining a license?

It is too early in this case to provide definitive answers to 

those questions. All we can say is that the record is not developed enough at this point to allow us to say definitively that 

there is no possibility of effective relief. We are reluctant to 

short-circuit the adversary process on such a central point. 

Perhaps some out-of-state retailers could still find a way to 

comply and compete on equal terms with Illinois retailers, or 

perhaps they could not; these issues have not been developed 

properly. Nor do we consider the question about the compatibility of these remaining barriers with the Commerce Clause 
No. 17-2495 17

and the Twenty-first Amendment to be properly before us at 

this time.

Aside from the Second Circuit, which relied on the producer-exception reading of Granholm, no circuit has addressed a statute allowing in-state retailers to make direct 

shipments to consumers throughout the state while prohibiting out-of-state retailers from doing so. The Fifth Circuit has 

upheld a statute allowing retailers to make local deliveries as 

“a constitutionally benign incident of an acceptable three-tier 

system.” Wine Country Gift Baskets.com v. Steen, 612 F.3d 809, 

820 (5th Cir. 2010). But local deliveries are different in kind 

from state-wide deliveries through a carrier. The former delivery scheme is logically tied to an in-state presence (how else 

would the deliveries be accomplished locally?), while the latter form of delivery makes an in-state presence unnecessary.

Cf. Granholm, 544 U.S. at 475 (noting the “suspicion” accorded 

to state laws requiring in-state presence for operations “more 

efficiently ... performed elsewhere”) (quoting Pike, 397 U.S. 15 

145). The Eighth Circuit upheld a wholesaler residency requirement, but in that case the plaintiff’s “protectionist-intent 

argument” was waived. Southern Wine & Spirits of Am., 731 

F.3d at 807. By contrast, this case involves state-wide deliveries and a statute that frankly admits some degree of protectionist intent. On remand, the parties can further explain how 

these differences in Illinois law should weigh on the scales.

The plaintiffs have successfully alleged a violation of the 

dormant Commerce Clause, and on the pleadings the Twentyfirst Amendment does not bar their challenge. The Commerce 

Clause claim should therefore not have been dismissed.
18 No. 17-2495

III

The plaintiffs also argue that Illinois’s scheme violates the

Privileges and Immunities Clause. That clause provides that 

“The Citizens of each State shall be entitled to all Privileges 

and Immunities of Citizens in the several States,” U.S. CONST. 

art. IV, § 2, cl. 1. It protects those privileges and immunities 

that are “fundamental,” meaning that it does not categorically 

prevent states from using state citizenship or residency as a 

distinguishing factor. McBurney v. Young, 569 U.S. 221, 226 

(2013). Before Prohibition and its repeal, the Supreme Court 

held in several cases that state laws regulating, or even prohibiting, liquor sales did not violate the Fourteenth Amendment’s Privileges or Immunities Clause. See, e.g., Crowley v. 

Christensen, 137 U.S. 86, 91 (1890); Mugler v. Kansas, 123 U.S. 

623, 657 (1887). The ground shifted, however, with the passage of the Twenty-first Amendment. There is scant precedent 

considering the interaction of the Privileges and Immunities 

Clause and the Twenty-first Amendment. What we do know 

is that “state laws that violate other provisions of the Constitution are not saved by the Twenty-first Amendment.” 

Granholm, 544 U.S. at 486–87 (cataloging cases applying the 

First Amendment, Establishment Clause, Equal Protection 

Clause, Due Process Clause, and Import-Export Clause to liquor regulations). Although we are dubious that the plaintiffs 

can overcome the Court’s consistent narrow view of the Fourteenth Amendment’s Privileges or Immunities Clause, see the 

Slaughter-House Cases, 83 U.S. 36, 74–75 (1872), they should 

have the opportunity to try. 

Before leaving this subject, we note that even if a fundamental privilege or immunity is burdened, the state can justify differential treatment if “(i) there is a substantial reason 
No. 17-2495 19

for the difference in treatment; and (ii) the discrimination 

practiced against nonresidents bears a substantial relationship to the State’s objective.” Id. at 284. This balancing test 

would allow for Twenty-first Amendment considerations to 

be brought to bear, but just as with the Commerce Clause 

claim, it is premature to balance these interests at this early 

stage in the litigation. And there is one more important difference from the Commerce Clause analysis: corporations are 

not protected by the Privileges and Immunities Clause. Paul 

v. Virginia, 75 U.S. 168, 180–81 (1868). Doust is a co-owner of 

Lebamoff Enterprises, and it is unclear on this record whether 

he conducts any business individually, or if all of it is conducted through the corporate form. If it is the latter, his Privileges and Immunities Clause theory may be doomed to fail, 

but a definitive answer must await further development of the 

record.

IV

The plaintiffs have stated a claim that Illinois’s refusal to 

license retailers without an in-state presence violates the 

Commerce Clause and Privileges and Immunities Clause. Because both their initial complaint and proposed amended 

complaint met that bar, we do not separately reach the question whether leave to amend should have been granted. The 

judgment of the district court is REVERSED and the case is 

REMANDED for further proceedings consistent with this opinion.