### INTHE UNI TED S TATESCOU RT OFAPPEALS FORTHE FIFTH CIRCU IT

N o. 08- 10146 SI ESTA VI LLAGE M ARK ET LLC, d o i ngb us i ne s s a s SI ESTA M ARK ET; KEN TRAVI S ; KEN GALL I NGER; M AUREEN GALL I NGER; DR ROBE RT BROCKI E P l ai n t i f fs–C ross - A pp el l ees v. JO H N T ST E E N , JR , C om m i ss i onerof t he Texas A l c oholi cB eve r age C om m i ss i on; G A I L M A D D E N , C om m i ss i onerof t he Texas A l c oholi cB eve r age C o m m is s io n ; J O S E C U E VA S , J R , C o m m is s io n e ro f th e T e x a s A lc o h o lic Bev e r ag e Com m i s s i o n D efen da n t s – C ross - A pp el l an t s W I N E C O U N TR Y G I FT B ASK ET S. CO M ; K & L W I N E M ER CH AN TS; B E V E R A GE S & MOR E I NC ; D AV I D L T A P P ; R ON A L D L P A R R I S H; J E F F R E YR D AV IS P l ai n t i f fs – A pp el l an t s- C ross A pp el l ees v. A LL E N ST E E N , i n hi s of f i c i alc apac i t y as adm i ni st r at orof t he Texas A l cohol i c B everage C om m i ssi on D efen da n t– A pp el l ee- C ross Appe l l ant GLAZ ER S W HOL ES AL E DR UG C OMPA NY , I NC; R EP UBL I C BE VE RA GE CO M P ANY United States Court of App eals Fifth Circuit 

### F I L E D Janua ry 26, 2010 Cha rl es R. F ulb ru g e II I Clerk Case: 08-10146 Document: 00511012977 Page: 1 Date Filed: 01/26/2010N o. 08- 10146

2 Interven or D efen da n t s – A pp el l eesC ross -A p p ell a n ts A p p ea lf

rom the U n i tedS tates D i stri ct C ou rt f or t h e N ort h ern D i st ri ctof T exas B ef ore JO L LY , P R A D O , an d S O U T H W IC K , C i rcui tJu dg es . L esl i e H . Sou t h w i ck, C i rcui tJu dg e: T h i s ca se p ri m a ri l y co n cern s a T ex a s l a w tha t all ow s alcoh ol retail ers to shi p t o t he doo r of t hei rl oc alc ons um er s. O ut - of

- Texas w i ne r et ai l er s c l ai m t hat t he dor m antC om m er c e Cl ause r equi r es t hey be given a suppos edly r ec i pro c al r ig h t t o m a k e d ir e c t s h ip m e n ts to a n yT e x a s co n s u m e r . T h e d is tr ic t c o u r t p a r tly ac c e pt e d t he i ra r gum e nt . W e ho l d t hatt he s t at ut e s do no tr un a foulo f t he d orm a n t C om m erce C l a u se. W e VA C A T E a n dR E M A N D f or en try of j u d gm en t. FAC T UALA ND L EG ALB AC KGR OUND Th er e we r e s e v e r a lp a r t i e s t o t hi s c a s e , b utt he yc a n b e g r o up e de as i l y. O ne pl ai nt i f

f, Si es t a V i l l age M ar ketLL C , w ho i s a F l or i da w i ne r et ai l er , has d is m is s e dits a p p e a l. A n o th e r , W in e C o u n tr yG ift B a s k e ts .co m , is aC a lifo r n ia w i ne r e t ail e r . W i ne Coun t ry’ s app e l l at e b r i e f de s c r ibe s t he pl ai nt i f fs , pr e s e nt a n d p a s t, a s “a g r o u p o f o u t-o f-s ta te w in e re ta ile r s a n dT e x a s w in e co n s u m e r s .” W e re fe rto th e p la in tiffs co lle c tiv e lya s “W in e C o u n tr y .” S u i tw as fil ed by S i est a V i l l age an d a few T exas w i n e consum ers on M arch 31, 200 6, i n t h e D al l as D ivi si on of t h e U . S . D i st rict C ou rtf or t h e N ort h ern D i st ri ctof

T exas. Anea rly i den t i calsui tw as f i l ed by W i n e C ou n t ry, t w o ot h er C a l i forn i aretail ers, a n da few n a m ed T ex a s con su m ers inthe F ort W orth D ivi si on . Th e sui t s w ere consol i da t ed i n t h e D al l as D ivi si on . Th e w i n e ret ai l ers l ocat ed ou t si de of

T exas w i sh to shi p w i n e di rect l y t o T exas consu m ers. Case: 08-10146 Document: 00511012977 Page: 2 Date Filed: 01/26/2010N o. 08- 10146

3 D e fe n d a n ts a r e A lle n S te e n , th e A d m i n i s t r a to ro f th e T e x a s A lc o h o lic B eve r age C om m i ss i on, and t hre e Com m i ss i on m em ber s sue d i n t hei rof f i c i al c a p a c itie s . T h e ye n fo r c e th e T e x a s A lc o h o licB e v e r a g e C o d e (“T A B C ”). W e w ill r e fe rto th e v a r io u s D e fe n d a n ts a s “t h e S ta te ” o r“T e x a s .” T w o T exas al cohol i c beverage w h ol esal ers i n t ervened . Th ese c om pa n i es are G l azer W h ol esal e D rug C om pa n y, I n c. , an d R epu bl i c B everage C o. As do m an y ot he rSt at e s , Te xa s ha s at hr e e - t i e rs ys t e m f o rr e gul at i ng sa l es o f a l coh oli c be ve ra ge s. T h e firstt ier is th e p rod u cer, w h o m u st selli ts produ ctt o t h e second-t i er, w h i ch i s a S t ate- l i censed w h ol esal er. Th e w h ol esal er di st ribu t es t h e produ ctt o t h e t h ird tier , consi st i n g of State- l i censed retai l ers. Cons um e r s pur c has e f ro m t he r e t ail e r s . “ [ S] t r i c ts e pa r at i o n b e t w e e n t he m anu fa c t uri ng, w hol es al i ng, and r et ai l i ng l eve l s”of t he al c oholi cbe ver age in d u s tr ym u s t b e m a in ta in e d . T EX . A L CO . B EV . C ODE § 6 .0 3 (i). T h e ch a lle n g e dT e x a s la w s fa ll in to th r e e p r in c ip a l ca te g o r ie s . A lm o s t a ll t h e rel evan tprovi si on s app l y t o al coholgen eral l y, thou gh the com pl ai n ti s f rom com pa n i es w h ose c om m erci ali n t eresti s s ol el y i n w i n e. Fi r st , s om e l aw s al l ow i ndivi dual s t o b r i ng al c oholi cbe ver ages i nt o Texas f o rt hei r ow n us e , kno w n a s a“ pe r s o nali m po r te xc e pt i o n, ” b utl i m i tt he quantit y. The di st r i ctc our thel d t hatt hi s di r ec t - purc hase r es t r i c t i on w as unc o ns t i t ut i o nali n pa r t . “Tex as c anno tpr o hibitc on sum e r s f r o m pur c has i ng wi n e f r o m o u t - o f

- s t a t e r e t a i l e r s wh o c o m p l ywi t h t he Co d e a n dT ABC r e g u la tio n s ,” th e d is tr ic t c o u r t h e ld . S i est a V i l l . Mkt. v. Perr

y , 530 F. S upp. 2d 8 4 8 , 86 8 ( N . D . T ex . 20 0 8 ). Itord ere dT ex a s to all ow o u t-o f-s ta te retail ers to r e c e ive T e xa s - i s s ue d r e t ail e rpe r m i t s . The r e f o r e , a ny c o ns um e rw ho b o ugh t w i ne f r o m a n o ut - o f

- s t at e ho l de ro f aTe xa s p erm i tw ou l d no tb e s ubj e c tt o t he qu an t i t y l i m i tw h en en t eri n g t h e S t ate w i t h the beverag es, t h ou gh t h e l i m i tf or im p o rtin gw o u lda p p ly to th e sa m e p e rs o n ’ s e x ce ss ive p u rc h a s e s fro m ou t-ofst ate r et ai l ers t h at di d n otha ve T exas perm i t s. Case: 08-10146 Document: 00511012977 Page: 3 Date Filed: 01/26/2010N o. 08- 10146

Although the statutes cre ate some specialpermits for retailers selling only wine, the 1 statutes allowinglocal delivery applyto retailers selling only wine and also to full-service pack a ge store permithol ders . T EX . AL CO . B EV . C ODE §§ 22 .03(a); 24 .03. 4 S eco n d , an dat th e h ea rt of this case , som e of the l a w s all ow i n -st a te r et ai l er s t o de l iveral c o ho licb e v e r a g e s t othei rc ust om er s w i t hi n des i gnat ed l oc al a r e a s, bu t f

orb i dou t- of- state re tail ers from de l ive ri n g o r sh i p p i n g a l coh o lic beverag es t o cust om ers an yw h ere i n T exas. R et ai l ers m ay u se c om m on carr i ers 1 l i censed u n der t h e T A B C , w h i ch i n cl u de su ch com pa n i es as F e deralE xp ress . Jus tb e f o r e s um m ar y j udg m e ntm o t i o ns w e r e f i l e d i n t he c o ns o l i da t e d s ui t s , t he Texas l egi sl at ure am ended t he pri or l aw w hi c h had al l ow ed hol der s of pac kage st ore perm i t s orw i n e- on l y pa ckag e st ore perm i t s t o shi p thei r beverages s ta te w id e . T EX . A L CO . B EV . C ODE § 2 2 .03 (V e rn o n 2 0 0 6 ) ( a m e n d e dS e p t. 1 , 2 0 0 7 ). The am e ndm e ntdr e w i n t he b o unda r i e s o f t he a rea of pe r m i s s ibl e s hi pm e nt f rom t h e enti re Stat e t o basi cal l y t h e coun t y i n w h i ch the ret ai l er has a st ore. I d. §§ 22. 03 & 24. 03 (V e rn o n 2 009 ) . Th e di st ri ctcourthel d that t h e st atutes d iscr im in a te da g a in st W in e C o u n trya n dg ra n te dre li e f. T h i rd, t h e sui t cha l l en ged requ i rem en t s t h at t h e hol ders of T A B C ret ai l er perm i t s h a v e b een T exas ci t i zens f or one year. Th e deci si on i n an earl i er c ase decl ared those pro v ision s u n co n stitu tion a l i n so f ar as th ey ap pl i ed to w h ol esal ers. S . Wi n e & S

pir i t s of T ex. v. S t een , 4 86 F. Supp . 2 d 6 26 , 6 33 (W . D . Te x. 2 00 7) . The di st r i c tc our ti n t he pr es entc as e dec l ar ed t he r equi r em ent s uncons t i t ut i onalas ap pl i e d t o r e t ail e r s . The St at e do e s no ta ppe alt he v o i di ng o f t he r e qui rem e nt an d ad vi sed t h e di st ri ctcourtt h at itw i l lnot enf orce t h e cit i zensh i p rule. T h e parti es agreed o n a p rel i m i n ary i nj u n ct i on bl ocki n g en f orcem en tof c e r t ai n pr o vi s i o ns f

o rt he dur at i o n of

t he l awsuit . On s um m ar y j udg m e nt , t he d is tr ic t c o u r t d e c la r e dtw e n ty -th r e e T A B C p r o v is io n s to b e u n c o n s tit u tio n a l. S ies taV

ill . Mk t. , 530 F. Supp. 2d at873. Case: 08-10146 Document: 00511012977 Page: 4 Date Filed: 01/26/2010N o. 08- 10146

Th e Secon d C ircuitf

oun d itoperationallyab surdf orout- of -s tateret ailer s to purch a se 2 inventory from in-statewholesalers, haveitdelivered to the retail er si n s ome fa shion, then ship pe d b ackto in -s tatecon su mers . Arnold ’s W ines, Inc. v. Boy le, 571 F.3 d 18 5, 1 92 n.3 (2d Cir. 2009). Wine Country alsofoundthe requirem ent tobe disp iriting. 5 T h e di st ri ctcourtdi d n ot , how eve r, p rovi de the rem edyW i n e C ou n t ry w a n te d . T h e cou rt de ci d ed tha t othe r p rov i sion s of t h e T A B C , tho u gh cl ea rly regulat i n g on l y i n - st ate r et ai l ers , sh o u l d be ap pl i ed to ou t - of

- st ate r et ai l ers. T h u s, W i n e C ou n t ry ha d a ri gh tto m ak e d i rectsh i pm en t s t o T exas consu m ers, bu titw as r e quir e d t o o bt ai n aTe xa s r e t ail e rpe r m i ta nd p ur c has e a l lw i ne shi pped t o Texas c ons um er s f r om Texas

- l i c ens ed w hol es al er s. Such a “vi c t or y” w a s, if n ot p yr rh i c, ap p a ren tly o f n o b en efi t. 2 W i n e C ou n try’ s d i ssa ti sfacti on i s ev i d en t f rom the fa ct it w a s th e first to a p p ea l , the reb y b eco m i n g th e A p p ell a n t de sp i te the ge n era lsu cces s of its ar gum e nt s . I tc l ai m e d e r r o ri n t he r e m e dy . The St at e cr o s s - ap pe al e d t o a r gue t h at i t s st atutes do not vi ol ate t h e dorm an t C om m erce C l au se. Si est a V i l l age, t he nam ed pl ai nt i f

f i n one o f

t he t w o c ons ol i dat ed c as es , i ni t i al l y w as an A p p e lla n t b u t h a s s in c e d is m is s e dits a p p e a l. DI S CUS S I ON The gr anto f

am o t i o n f

o r s um m ar y j udg m e nt i s r e vi e w e d de no vo . Pas ant v. Ja ckson Nat’

lL if e I n s. Co. , 5 2 F .3d 9 4 , 9 6 (5t h C ir. 1 9 9 5 ). Sum m ar y j udg m e nt i s a ppr o pr i at e w he n t he r e i s no g e nuine i s s ue o f m at e r i alfac ta nd the m o vi ng p a r tyis e n tit le dto ju d g m e n t a s am a tt e ro f la w . F e d . R . C iv . P . 5 6 (c )(2 ). T h i s a p p e a la l mo s te x c l u s iv e l yc o n c e r n s q u e s t i o n s o f l a w. W i ne Count y c o nvi nc e d t he di s t r i c tc o ur tt hatnum e r o us TAB C pr o vi s i o ns vi o l at e d t he do r m ant C om m e r c e Cl aus e . W i ne Count r y’ s a r gum e nt s a s t he A p p e ll an tcenteron the rem edyi m posedby the di st ri ctcourt . B ecau se w e set as i de t he i nval i dat i on o f t he s t at ut or y pr ovi si ons , i ss ues abo utt he r em edi al Case: 08-10146 Document: 00511012977 Page: 5 Date Filed: 01/26/2010N o. 08- 10146

6 r e l i e f i m pl e m e nt i ng t he i nva l i da t i o n be c o m e m o o t . W e t hus do no tdi s c us s W i ne C ount r y’ s ar gum ent s on t he r em edy. T h e S t a t e o f T e x a s a s C r o s s -A p p e ll a n td o e s n o t c o n t e s t t h e d is t r ic tc o u r t ’s i nval i dat i on o f

t he r equi r em entt hatr et ai l er s es t abl i sh Texas r es i denc y. That par tof t he j udgm entw as noti ncl uded i n any not i c e of appealan d ther ef

or e has n otbeen broug h tt o us f or r eversalor af

f i rm an ce. T exas vigorousl y does contestt h e hol di n g t h at th e dorm an tC om m erce Cl aus e i nt e r fe r ed w i t h w h atTe xa s c o ns i de r s t o b e ar i ghtg r ant e d b y t he T w en t y- f

i rstA m en dm en tt o favor i n - st ate r et ai l ers i n som e res pects . T ex a s also a rg u es th a t t h e d i rect sh i p p i n g law s a re justif i ed byl eg i ti m a te s ta te in te r e s ts . Ita lle g e s v a lidlo c a l p u b licin te r e s ts e x is t a n dt h e la w h a s o n ly i nc i de nt ale f

fe c t s o n i nt e r s t at e c o m m e r c e . I t s po l i c y j us t i f i c at i o ns i nc l ude t he St at e’ s need t o a c c es s r et ai ls i t es f ori nspec t i on and enf or c em ent , w hi c h ca n u n cover il l egal act ivi t i es – s peci f i cal l y regardi n g al coholor m ore general l y such as fo r m on ey l au n deri n g – an d the S t ate’ s goal s of prom ot i n g t em peran ce, i n suri n g t ax col l ect i on s, an d assu ri n g t h e separati on betw een t h e t h ree t i ers. W e do n otreach t h e pol i cy j u st i f i cat i on s, as our revers ali s f or ot h er r eason s. Th e l as ts ec t i on i n t he Texas br i ef ex pl ai ns it s em br ac e o f the r em edy t hat W i n e C ou n t ry rej ect s. Th ere i s no n eed to revi ew t h ose argum en t s. W e d i s c u s s o n l yt h e c r o s s - a p p e a la r g u me n t s p r e s e n t e db yT e x a s . F i r s t , we w i l le xa m i ne cl osely t he U ni t e d St at e s Supr e m e Cour to pi ni o n t hats po ke s tr o n g lya n ds u p p o r tiv e lya b o u t th e t h r e e -tie rs y s te m fo rd is tr ib u tio n o f a lc o h o l. W e th e n lo o ka t w h a t t h r e e s u b s e q u e n to p in io n s fr o m o th e rco u r ts h a v e s a id a b o u ti t . W e t h e n b r i e f l yr e v i e w t h e d i s t r i c tc o u r t ’ s d e c i s i o n , a n df i n a l l ywe a p p l y o u r an a l ys i s to i t. A . T h e t h ree - t i er syst em andG r a n h o lm I nt o xi c at i ng l i quo ri s the o nl y c o ns um e rpr o duc ti de nt i f i e d i n t he C o n s tit u tio n . O n lyits re g u la tio n b yS ta te s is g iv e n e x p lic it w a r r a n t. Case: 08-10146 Document: 00511012977 Page: 6 Date Filed: 01/26/2010N o. 08- 10146

7 T h e tr an sport ati on or i m portat i on i n t o an y st ate, t errit ory, or possessi on of

t h e U n ited States f or del ivery or use t h erei n of i nt oxi c at i ng l i quor s, i n vi ol at i on o f t he l aw s t her eo f, i s her eby pr o hibit e d. U . S. C ONST . a m e nd. XX I , § 2 . The g o al s o f “ pr om o t i ng t e m pe r anc e , e ns ur i ng orderl y m arket c on di t i on s, an d r ai si n g revenu e” are m ett h rough regul ati on of th e p r o d u c tio n a n d d is tr ib u tio n o f a lc o h o licb e v e r a g e s . Nort h D ak ot a v. Un i t ed S t ate s, 4 9 5 U .S . 4 2 3 , 4 3 2 (19 9 0 ) (p lu ra lityop in ion ). T h e u n d e rs ta n d in gof a St at e ’ s po w e runde rt he T w e nt y- f i r s tA m e ndm e ntm ayhave c hang e d s i nc e t he 19 33 r at i f

i c at i o n, butw e ne e d no tr e vi e w s e ve nt y- f ive y e ar s o f

hi s t o r y. I ns t e ad , w e r e l y pr i m ar i l y o n t he l at e s tSupr e m e Cour te xp l ana t i o n. T h e b a s i cp o i n tT e x a s ma k e s o n a p p e a li s t h a tt h e t h r e e - t i e rs y s t e m a l l o ws certa i n k i n d s of disti n cti on s an dpartic ul arly all ow s di sti ncti ons be t w ee n i n- st a te and out - o f

- s t at e r e t ail e r s . Fur t he r , a l l o w i ng Tex as - l i c e ns e d r e t ail e r s t o m ak e th eir sale s in c erta i n w a ys , n a m ely, byde l ive ry , an dpr oh ib i ti n g o u t- of- state r e t ail e r s f

r o m do i ng any t hi ng ata l l , i s s ai d t o b e a ut ho r i z e d b y c o nt r o l l i ng i n terp reta ti on s of t h e T w en ty-f i rst A m en d m en t. W e s t ar tw he r e Te xa s ur ge s us t o s t ar t , a nd wher e t he di s t r i c tc o ur tdi d, by e xam i ni ng t he m os tr ec entSuprem e Courtdi sc uss i on o f t he i nt er pl ay betw een a State’ s authori t y t o regul ate al coholan d the dorm an tC om m erce C la u s e . S eeG ra n h o lm v. Hea ld , 544 U . S. 460 ( 2005) . The Cour tr e af f i r m e d t he p ri n ci p l e th a t, de sp i te w h a t m ig h t a p p ea r to be ab solu te au th ority gra n tedto S ta te s b yth e T w e n ty -fir s t A m e n d m e n t t o re g u la te a lc o h o l, th e a n tidi scr i m i n ati on pri n ci pl es of the d orm an tC om m erce C l au se non et h el ess pl ace som e res t ri ct i on s on t h e States . T h e C o ur ts a i dt h a t“i n a l lb u tt h e n a r r o we s tc i r c u ms t a n c e s , s t a t e l a ws violate th e C om m erce C l a u se if th ey m a n d a te ‘ d i ff ere n ti a l trea tm en t of i n -st a te ando ut - o f

- s t at e e c o no m i ci nt e r e s t s t hatben ef i t s t he f

o r m e ra nd b ur de ns t he Case: 08-10146 Document: 00511012977 Page: 7 Date Filed: 01/26/2010N o. 08- 10146

8 l a tter. ’” Id . at472 ( quot i ng O re. W ast e Sys. , I

n c. v. D ep’

tof E n vt l . Q u ali ty of

O re. , 5 1 1 U . S . 93 , 99 ( 1 9 9 4 )) . “ S tate law s th a t d i scrim i n a te ag a i n st i n tersta te c om m er c e fac e ‘ a vir t ual l y per s e ru l e of i n va l i d i ty. ’” Id . at4 76 ( quo t i ng Ph ila d elp h ia v. New Jersey , 4 3 7 U .S . 6 1 7 , 6 2 4 (1 9 7 8 )). T h e G r a n h o l m Co u r ti n v a l i d a t e dt wo S t a t e s ’“ d i r e c ts h i p p i n g” l a ws all o w i ng i n- s t at e w i ne r i e s t o s hi p wi ne t he y pr o duc e d d i r e c t l y t o c o ns um e r s , b ut barri n g ou t - of

- st ate w i n eri es f rom doi n g t h e sam e. Itf ou n d the “ di scr i m i n ator y ch aract er” of

M i chi gan ’ s prohibi t i on “ obvious, ” as t h at Stat e’ s l aw s prohibi t ed a n ys h ip m e n t fr o m o u t-o f-s ta te w in e r ie s , w h il e a ll ow in gin -s ta te w in e r ie s to s h ip a fte ro b ta in in gap e r m it. Id . at4 73 . N e w Yor k’ s s c he m e w as m o r e c o m pl i c at e d, a ll ow i n g ou t - of

- st ate w i n eri es t o shi p to i n - st ate c on sum ers i f t h e w i n eri es e s t a b li s h e dap h y s ic a l p r e s e n c e in th e S t a t e a n db e c a m e p a r to f N e w Y o r k ’s t h ree- t i er di st ribu t i on syst em . Th e C ou rtn on et h el ess f ou n d N ew Y ork’ s r u l es d i scrim i n a tory , n oti n g th a t t h e ru l es clea rl y g a ve “pre feren ti a lterm s” t o in-state w i ne r i e s , w hi c h q uali f i e d f o ras i m pl e rpe r m i t , di d nothave t o par t i c i pa t e i n t he t hr e e - t i e rs y s t e m , a n dc o u l ds h i p wi n e d i r e c t l yf r o m t h e s i t e o f

i t s p r o d u c t i o n. Id . at 474 . B ot h States ’l aw s, t h en , dealtw i t h produ cers . A t least as t o produ cers , t h e C ou rthel d that t h e “A m en dm en tdoes not sup ersede ot h er pro v isi on s of t h e C on st i t u t i on an d, i n parti cul ar, does not d is p la c e th e ru le th a t S ta te s m a y n o t g iv e ad is c r im in a to r yp r e fe r e n c e to th e ir ow n pr od u cers . ” Id . a t 4 8 6 . O n ce f i n di n g t h e l aw s di scr i m i n ator y, t h e C ou rtexam i n ed w h et h er t h ey mi g h tb e s a v e db yat e n e to f t h e d o r ma n tC o mm e r c e C l a u s e t h a te x e mp t s l a ws t hat “ ‘ advance [] a l egit i m at e l oc al purpos e t hat c annot be adequat ely se rved by rea son a b l e n on d i scrim i n a toryaltern a tive s. ’” I d. at 489 ( qu o t i ngN

e w E n ergy Co. of I n d . v. L i m ba ch , 486 U .S . 2 6 9 , 2 78 (1988)) . O btai n i n g such an exem pti on requ i re s t h e “ cl earestshow i n g” t h at th e l aw i s t h e onl y ad equ ate m ean s of s e rv in gth e S t a t e ’s le g itim a te p u r p o s e . Id . at490 ( quot i ng C &A Carbon e, I n c. Case: 08-10146 Document: 00511012977 Page: 8 Date Filed: 01/26/2010N o. 08- 10146

9 v . C la r k s t o wn , 511 U . S . 383 , 393 ( 1 9 9 4 )). T h e States cl ai m ed tw o pu rposes – p r e v e n tio n o f u n d e r a g e d r in k in ga n dt h e n e e dfo rta x e s . Id . at 489 . Th e C ou rt f ou n d that nei t h er had suf f i ci en tevi den t i ary sup port t o save t h ose S t ates’l aw s. Id . at490- 92. W e do not di sc uss t hi s poi nt bec ause w e de t er m i ne t hatt he Texas pr o vi s i o ns a r e c o ns t i t ut i o nala nd d o no tne e d t o b e s av e d. A de c i s i o n b y t hi s c o ur tf o r e s had o w e d G ra n h o lm . I n i t , we s t r u c kd o wn Tex as l aws t hata l l o w e d Te xa s w i ne r i e s t o shi p di r e c t l y t o c o ns um e r s a nd t hus byp ass goi n g f

i rstt o a w h ol es al e r , b utthe s el aw s prohibi t ed ou t - of

- st ate w i n eri es fr o m d o in gth e s a m e . D i ckers on v. B ailey , 3 3 6 F .3d 3 8 8 , 4 0 6 -7 (5t h C ir. 2 0 0 3 ). T h e T exas l egi sl ature respond ed to D i ckers on b y au t h ori zi n g w i n eri es w h erever l o c at e d t o s hi p d i r e c t l y t o T exas c o ns um e r s o nc e t he y w e r e i s s ue d t he a p p r o p r ia te p e r m it. T EX . A L CO . B EV . C ODE § § 5 4 .0 1 -.1 2 . W e d i sa gr ee w i th W i n e C ou n try th a t D i ckers onan sw ers t oda y’ s questi on s. Thatpr e c e de nt , as di d G ra n h o lm , c o n c e r n e dw in e r ie s , i.e . , t he pr o duc e r s o f t he produ cttravel i n g i n com m erce. Th e produ cers i n a t h ree- t i er s yst em of t en are n otl ocat ed i n t h e State i n w h i ch the sal es oc cur. Th e t radi t i on alt h ree- t i er s y s te m , se e n a s o n e th a t fu n n e ls th e p r o d u c t, G ra n h o lm , 544 U . S. at489, has an open i n g at th e t op av ai l able t o al l . Th e w h ol esal ers an d ret ai l ers, th o u g h , are of t en requi red by a S t ate’ s l aw t o be w i t h i n t h at S t ate. T h e di st i n ct i on i s s een in T e x a s la w . Ita llo w s w in e r ie s th e m s e lv e s , lo c a te dfo r e x a m p le in C a lifo r n ia o rF lo r id aa s a r e th e re ta ile rp la in tiffs , to s h ip d ir e c tlyto T e x a s co n s u m e r s . Tex as a r gue s t hatt he f o l l o w i ng l ang uag e i n G r a n h o l m c e r t i f i e s t he c o n s t i t u t i o n a l i t yo f

t h e t h r e e - t i e rs y s t e m t h a tmo s tS t a t e s u s e , a n di s t h e l e ns t hr o ughw hi c h t he c o nc e pto f di s c r i m i nati o n ne e ds t o b e s e e n: T h e S tates a rg u e th a t an y d ecisi on i n va l i d a ti n g t h e ir d i rect-sh i p m en t l a w s w ou l d ca l l i n to q u estion the con sti tu ti on a l i ty of t he t hre e- t i ers ys t em . Thi s doe s notf ol l ow f r om ourhol di ng. “T h e T w en ty-f

i rst A m en d m en t gr a n ts th e S tates v i rtu a l l y co m p l ete controlover w h et h er t o perm i t i m portat i on or sal e of l i qu or and how Case: 08-10146 Document: 00511012977 Page: 9 Date Filed: 01/26/2010N o. 08- 10146

A fourth deci sio n analyzing Granholm was rec ently rele ased, butwe find nothing in 3 itto aff ect our re a soning . F am il y Wi nem akers of

C al. v. J enk ins, No. 0 9-11 69, 201 0 WL 118 387 , at*5 -15 (1st Cir. J an. 14, 201 0) (state law granting di s trib ut ion rights to “small” winerie s w a s hel d todis criminateinf avorof in -s tatewinerie s, allof whomwere“ small”) . 10 to s tru ctu re th e li q u or d i strib u ti on sys tem . ” Cal. R et ailL i qu or D ealersA ssn. v. Mi d calA l u m i n u m , I n c. , 4 4 5 U .S . 9 7 , 1 1 0 (1 9 8 0 ). A S t ate w h i ch chooses t o ban the sal e an d consu m pti on of al cohol a lto g e th e rco u ldb a rits im p o r ta tio n ; a n d , a s o u rh is to r ys h o w s , it w ou l d h ave to do so t o m ak e i t s law s ef fect ive. Stat es m ay als o as s um e dir e c tc o nt r o lo f l i quo rdi s t r ibut i o n t hr o ughs t at e - r un out l et s orf

unn els al es t hro ugh t he t hre e- t i ers ys t em . W e have p r e v io u s lyre c o g n iz e dth a t t h e th r e e - t i e rs y s te m its e lf is “u n q u estion a b l y legiti m a te. ” Nort h D a k o tav. Un i t ed S t ate s , 495 U .S . a t 4 3 2 ; se e a lso id . at 44 7 ( S ca l i a , J., con cu rringi n j u d gm en t) (“T h e T w en ty-f

i rst A m en d m en t . . . em p ow ers N orth D a k ota to r e q u i r e t h a ta l ll i q u o rs o l dfo ru s e i n t h e S t a t e b e p u r c h a s e df r o m a li censed i n - st ate w h ol esal er” ) . Stat e pol i ci es are pro t e c t e d un de rthe T w en t y- f

i rstA m e n dm en tw h en t h ey t reatl i qu or produ ced out of s ta te th e s a m e a s its d o m e s tic e q u iv a le n t. T h e in s ta n t c a s e s , in contrast , i n volve st rai gh t f orw ard att em pts t o di scr i m i n ate i n favor of l ocalprodu cers . I d. at 488
- 89 (c i t ati on s re form att ed). Th at l an gu age m ay be d icta . If s o , it is c om pel l i ng d icta . W h at w e m ak e of t h at l an gu age, an d i t s ab il ity t o prot ect t h ese Tex a s s t atutes f rom W i n e C ou n t ry’ s dorm an tC om m erce C l au se argu m en t s, i s t h e nex tpart of our an al ysi s. B . O th e rCo u r ts ’ G r a n h o l m a n a lys is G ra n h o lm d e a lt sp e cifica llyw ith s t a t e la w s tr e a tin gin -sta te a n dou t-ofst ate produ cers of

al coholdi f

fere n tl y. Th i s present ap pea li n volves ret ai l ers. S i n ce G ra n h o lm , otherdeci si ons f r om outs i de t hi s C i r c ui thave addre ss ed t hat p r e c e d e n t’s a p p lic a b ilityto re ta ile r s w h o w is h to s h ip w in e in to o th e rS ta te s . W e w i l ldiscu ss th e th ree tha t are th e m ost relev a n t. 3 In th e earli est d ecisi on , som e V i rg i n i a con su m ers an d afe w o u t-of- state w i ner i es c hal l enged a V i r gi n i a s tatu t e thatl i m i t ed t he am ountof al c oholt hat con su m ers co u l dpe rson a l l y ca rryi n to the S tate for the i r ow n u s e . B r oo ks v. Case: 08-10146 Document: 00511012977 Page: 10 Date Filed: 01/26/2010N o. 08- 10146

Ju d ge Nie m eyer wrot e f or th e c ourt , b ut a s e c o n d j u d ge c o ncurre d o nly in the 4 ju dgment withrespect tothis part of the opinion , whilethe third ju dgeonthe paneldissented from that part. This reasoning presumablyh as limitedprecedentialeffect in that Circuit. 11 Vas s ar , 4 62 F. 3d3 41 , 3 49 ( 4t h Ci r . 2 00 6) . The pl ai nt i f fs ’t he o r y w as t hatt he provi si on w as u n constit u t i on albecau se c on sum ers coul d p u rchase an un l i m i t ed am ou n tof

w i n e f rom i n - st ate s ou rces bu tonl y l i m i t ed am ou n t s out- of

- st ate f or th e irp e r s o n a l im p o r ta tio n in to V ir g in ia . T h e op i n i on f

or th e cou rt he ld t h a t p la i n tiffs’eff ort to com p a re in-state r e ta ile r s to o u t-o f-s ta te r e t a i l e r s a n dth e n a lle g e th e yw e r e tr e a te dd iffe r e n tly w a s fu n d a m e n ta llyach a lle n g e to th e th r e e -tie r s y s te m its e lf. B r oo ks , 462 F. 3d at 352 ( N i em eyer, J. ) . B ecau se t h e S u prem e C ou rt h ad describedt h e t h ree- t i er 4 sy st em as “ unqu es t i onably l egit i m at e, ” the c our thel d t he V i r gi ni a s t at ut es t o b e c o n s tit u tio n a llys o u n d . I d. ( quot i ng G ra n h o lm , 5 1 1 U .S . a t 4 8 9 ). In an ot h er deci si on , t h ere w ere c h al l en ges t o N ew Y ork st atutes t h at are anal ogo us t o thos e her e. N ew Y or k l aw per m i t t ed an i n- st at e a l c oholi cbe ver age r e t ai l er to de l ive rdir e c t l y t o c o ns um e r s ’r e s i de nc e s i n N e w Yor k, us i ng t he r et ai l er ’ s vehi c l es orby usi ng vehi c l es of a t r anspo r t at i on c om pany l i c ens ed by th e S ta te ’ s l i q u o ra u th o r ity ; o u t-o f-s ta te re ta ile r s d idn o t h a v e co m p a r a b le r ig h ts . A rn o ld ’

s Win es , In c. v. B oy le , 571 F. 3d 185, 188 ( 2d C i r . 2009) . T h e Se co n d C i rcui tst art ed w i t h a rec ogn i t i on t h at th e T w en t y- f i rst A m en dm en tdoe s n o t au t h ori ze al lal coholregul ati on . A n y di scr i m i n ati on b e tw e e n in -s ta te a n do u t-o f-s ta te a lc o h o l p r o d u c ts o rp r o d u c e r s m u s t r e a s o n a b ly f urt hera l egit i m at e s t at e i nt er es t“t ha t ca n n otadeq uat ely be s erved by rea son a b l e n on d i scrim i n a torya l tern a tive s. ” Id . a t 1 8 9 (cita tion om itted ). The court’ s f ocus on “produ ct s orp rodu cers ” is the centraldeba t e: how m u ch f u rt h er, i f at al l , beyon d p rodu ct s and produ cers do t h e an t i

- di scr i m i n ati on pri n ci pl es go? T h e Secon d C i rcui th el d produ ct s an d produ cers a re the l i m i t . Itdescribed pla in t i f fs’argu m en t s as s i m pl i st i c ana l ogi es t o t h e G ra n h o lm

- i den t i f i ed Case: 08-10146 Document: 00511012977 Page: 11 Date Filed: 01/26/2010N o. 08- 10146

12 d i scrim i n a ti on . AS tate’ s m a k i n g d i sti n cti on s am on g in -st a te an dou t- of- state r e t ail e r s , a nd e ve n r e quir i ng w ho l e s al e r s a nd r e t ail e r s t o b e pr e s e nti n a nd l i censed b yN e w Y o rk, w ere f u n da m en t alcom pon en t s of t h e t h ree- t i er s yst em aut ho r i z e d i n G r a n h o l m. Id . at190. T h e cou rt con cl u d ed tha t th e N ew Y ork l a w s p erm i tti n g o n l y in -st a te ret ai l ers t o shi p d i rect l y t o consum ers w ere i n “ st ark con t rast” t o t h e l aw s s t ruck do w n i n G ra n h o lm , w h i ch “c reat ed speci f i c except i on s t o t h e st ates’t h ree- t i er sy stem s fa vo ri n g in -st a te p rod u cers . ” Id . at 19 1. I t f o und t hatt he pr o duc t i o nr e l at e d d i s c r i m i nat i o n i nvo lve d i n G r a n h o l m “w a s e x a c tlyt h e t y p e o f e c o n o m ic pr o t e c t i o n i s tp o l i c yt h e Co m m e r c e Cl a u s e s o u g h tt o f o r e s t a l l , a n dwh e r e t he G ra n h o lm C ou rt dre w the l i n e.” Id . The l i ne dr awn byt he c o ur tw as b e t w e e n t he b r o ads t at e po w e r s und e rt he T w en t y- f

i rstA m en dm en t“t o regul ate th e t ran sport ati on , s al e , a nd u s eo f a l cohol w i th i n t hei rbo r der s, ” and any “ at t em pt s t o di sc r i m i nat e i n favorof l oc al p rod u cts an dpr od u cers . ” I d. It h e ldN e w Y o r k ’ s la w s w e r e e v e n h a n d e din th e ir c ont r olof

“i m por t at i on an d d i st r ibut i on o f l i quorw i t hi n t he s t at e, ” and t hat m a d e th e d o r m a n t C o m m e r c e C la u s e a ll b u t ir r e le v a n t. Id . at192. I n t h e t h i r dc a s e , t h e c o u r tc o n s i d e r e daMi c h i g a n l a w a u t h o r i z i n gs o me i n - st ate r et ai l ers t o shi p w i n e di rect l y t o consum ers, w h i l e out- of

- st ate r et ai l ers w ith o u t a p h y s ic a l p r e s e n c e in M ic h ig a n co u ldn o t. Si e s t a V i l l . Mkt . , LL Cv. G ra n h o lm , 596 F. Supp. 2d 1 035, 1037- 38 ( E . D . M i c h. 2008) . Th e M i c hi gan court l i m i t ed t h e eff

ectof t h e Su prem e C ou rt ’ s G r a n h o l m de c i s i o n: “W hi l e t he [ Gr a nh o l m v. ] Heald c our tdi d s t at e thatthe t hre e- t i ers ys t em w as an ap propri ate use of st ate pow er, itd i d n otapp rove of a syst em t h at di scr i m i n ates a g a i n st ou t- of- state in teres ts. ” Id . a t1 0 3 9 . T h e c o u r tf o u n dt h a t“r e g ul at i o ns c r e at [i ng] a n e xt r a bur de n o n o ut - o f

- s t at e w i ne r e t ail e r s ” w e r e no ts av e d b y t he T w e n ty -fir s t A m e n d m e n t. Id . T h e cou rt a l so he l d i t to b e i n su ff i ci en t th a t ou to f-s ta te re ta ile r s co u ldc o m p lyw ith M ic h ig a n la w b ye s ta b lis h in galo c a tio n in Case: 08-10146 Document: 00511012977 Page: 12 Date Filed: 01/26/2010N o. 08- 10146

An appeal to the SixthC ircuit was apparentlymooted by an intervening change in the 5 Michiganst atute s b ein gch allenged . 13 th e S ta te . T h e “p r o h ib itiv e ” e x p e n s e o f o p e n in gp h y s ic a l s to r e s in m u ltip le S ta te s g a v e a c le a r a d v a n ta g e to in -s ta te re ta ile r s . Id . at 1040 (c i t i ng G ra n h o lm , 544 U . S . at 474
- 75). A ccor di n gl y, t h e courtst ruck d ow n t h e M i chi gan l aw s. 5 C . T h e D i st ri ctCou rt ’

s I n t erpre t ati on T h e d is tr ic t c o u r t h e r e co n s id e r e dth e T e x a s “P e r s o n a l Im p o r t E x c e p tio n ,” w h i ch au t h ori zes i n divi du al s t o i m port al coholf or t h ei r ow n use. O n e sec t i on p r o h ib its im p o r ta tio n u n le s s a u th o r iz e d . T EX . A LCO . B EV . C ODE§1 07. 05. That sect i on is then m ad e inap pl i cabl e to T exas resi den t s w h o i m port f or personaluse n otm ore t h an one qu artof li q u or, one ga l l on of w i n e, or t w en t y- f

ou r t w elveo u n c e b o tt le s o f b e e r . Id . §1 07. 07. T her e i s no di r ec tl i m i ton how m uch c an be pur c has e d, o nl y o n ho w m uc h c an be i m po r t e d. T h e se p rov i si on s w ere hel d byt h e di st ri ctcourtt o di scr i m i n ate agai n st o ut - o f

- s t at e r e t ail e r s b e c aus e t he y “ pr o hibitc us t o m e r s f r o m pur c has i ng w i ne fr o m o u t -o f-s ta te re ta ile r s ” in u n lim ite dq u a n tit ie s . S ie s taV ill. Mk t., 5 3 0 F. S u pp . 2d at 868. Th e rem edyw as t o a ll o w ou t - of

- st ate r et ai l ers t o app l y f or T exas ret ai lperm i t s, even w i t h ou tt h e ret ai l ers’open i n g a l ocat i on i n t h e State. A ny r et ai l erw i t h a T exas perm i tan d m aki ng s al es atl oc at i ons out si de o f Texas cou l d n ot b e l i m i t ed i n sal es vo l um es w hen t hos e li m i t s do notappl y t o Texas perm i thol ders m ak i n g sal es i n si de T exas. T h e di st ri ctcourtal so hel d that t h e T exas loc a l s h i pp i n g ri gh t s t o w ere di sc r i m i nat or y. The c our thel d t he r el evantques t i on t o b e w het hert her e w as di scr i m i n ati on “ w i t h res pect t o acces s t o in -sta te m a rk ets , ” and t he r e c o ul d b e no excepti on f

or d e m i n i m i s le v e ls o f d is c r im in a tio n . I d. a t 8 6 4 (e m p h a s is in ori gi n al). T h e d i sabi l i t y i m posedon ou t - of

- st ate r et ai l ers w as not a “ m ere practi calconsequ en ce” of l ocat i on , as itm i gh tbe i f T exas p erm i t t ed on l y overth e -c o u n te rs a l e s o f a lc o h o l. S in c e T e x a s a llo w e din -s ta te re ta ile r s to s h ip Case: 08-10146 Document: 00511012977 Page: 13 Date Filed: 01/26/2010N o. 08- 10146

14 al cohol , t h ere w as no p ract i calreason w h y ou t - of

- st ate ret ai l ers coul d n otal so. Id . at 865
- 66. Sh i pp i n g w as t h e key, becau se s h i pp i n g w as as easi l y don e f rom o ut s i de t he St at e a s f r o m w i t hi n. H av i ng f

o und t he Te xa s l aws di s cri m i n at o r y, t he c o ur tt ur ne d t o t he qu est i on of

w h et h er t h e State coul d sh ow leg iti m a t e l ocalpu rposes, not o b ta in a b le b yn o n d is c r im in a to r ya lte r n a tiv e s , t o ju s tifyt h e d is c r im in a tio n . W e do n otul t i m ately reach that ana l ysi s, so w e do n otsum m ari ze i there. D . D o rm a n t Co m m er ceC la u seA n a lys is W e f i rstan al yze t h e provi si on s t h at al l ow an i n - st ate r et ai l er t o del iver w i t h i n i t s coun t y bu t bars an ou t - of

- st ate ret ai l er f rom shi pp i n g i n to T e x a s. Texas ar gues t hatdi st i ngui shi ng bet w ee n re t ai l er s i n t hi s w ay i s a f und am ent al p a r t o f th e co n s tit u tio n a l th r e e -tie rs y s te m , w h ic h is “u n q u e s tio n a b ly l eg i ti m a te. ” G ra n h o lm , 544 U . S. at488- 89. T o t h e contrary, W i n e C ou n t ry f ocuses on the G r a n h o l m pr o hibit i o n o n a st ate’ s l i qu or l aw s di scr i m i n ati n g aga i n stout- of

- st ate i n t erest s. W i n e C ou n t ry ackno w l e dg e s t hatt he Cour tl i m i t e d it s ho l di ng t o di s c r i m i nat i o n b e ne f i t t i ng al coholon the ba si s of i t s i n - st ate produ ct i on st atus, bu tW i n e C ou n t ry argues th a tm ak es s en se as th at w as t h e G ra n h o lm di s put e . Te xa s a r gue s t he G r a n h o l m fail ur e t o m e nt i o n r e t ail e r s w as s i gnif i c ant , as di s t i nc t i o ns fav o r i ng i n - s t a t e r e t a i l e r s a r e i n h e r e n t l yp a r to f t h e t h r e e - t i e rs y s t e m. W e first n ote w h a t i s n ot i n i ss u e . T h e d i scrim i n a ti on tha t G ra n h o lm i nva l i da t e d w as a St at e ’ s all o w i ng i t s w i ne r i e s t o s hi p d i r e c t l y t o c o ns um e r s b ut p ro h ib iti n gou t-of-s ta te w in e rie s f rom doi n gso . T e x a s g ra n ts in -sta te a n dou t-ofs ta te w in e r ie s th e s a m e rig h ts . T EX . A L CO . B EV . C ODE §§ 54. 01- 54. 12. S u ch dis cri m i n ati on – am on g produ cers – i s n ot t h e qu est i on t oda y. W h en an al yzi n g w h at el se i s i n vali d u n der t h e S u prem e C ou rt ’ s G ra n h o lm r eas oni ng, w e f i n d d i rect i on i n a source f or som e of the C ou rt ’ s l an gu age. Th e C ou rtqu ot ed a 19 86 p recedent t h at “ a com p re h e n sive s yst em f or t h e di st ribu t i on of l i qu or Case: 08-10146 Document: 00511012977 Page: 14 Date Filed: 01/26/2010N o. 08- 10146

Wine Countryatoral argu ment empha size d a provisionof Texas law allowing Texas 6 retailer s to receive directship mentsf ro m Texa s winerie s, b ypa ssin gthe wholes aler tier . See T EX . AL CO . B EV . C ODE § 110 .053 . This provi sionis not onthe list of those enj oined by the di strictcourtan d isnotasubj ect of thisapp eal. Siesta Vi ll Mk t .. , 5 3 0F . Supp . 2 d at 8 5 1 . 15 w i th i n [N orth D a k ota ’ s] b ord ers” w a s “u n q u estion a b l y l eg i ti m a te. ” G ra n h o lm , 544 U . S. at489 ( quot i ng Nort h D ak ot a v. Un i t ed S t ate s , 495 U . S . 423, 432 (1 9 8 6 )). N o r th D a k o ta e m p lo y e dath r e e -tie rs y s te m s im ila rto th a t in T e x a s , in w h i ch prod u cers sellt o st ate- l i cense d w h ol esal ers, w h o sellt o st ate- l i censed r e t a ile r s . No r th D a k o ta, 49 5 U . S. a t4 28 . Tha ts o r to f s ys t e m ha s b e e n g iven c o ns t i t ut i o nala ppr o va l . The di s c r i m i nati o n t hatw o ul d b e q ue s t i o nab l e , t he n, is th a t w h ich is n o t in h e re n t inth e th re e -tiersy ste m itse lf. If G ra n h o lm ’s l e git i m i z i ng o f

t he t i e r s i s t o have m eani ng, i tm us ta tl e as tm e an t hat . The le giti m i zing i s th u s a ca ve a t to th e st a tem en t th a t th e C om m erce C l a u s e is v iola te dif

sta te law a u th o riz e s “ d if fe r e n tia l tre a tm e n t of in -sta te a n dou t-ofs ta te e c o n o m i c i n te r e s ts th a t b e n e fits th e fo r m e ra n db u r d e n s th e la tt e r .” G ra n h o lm , 5 4 4 U .S . a t 4 7 2 (i n te rn a l qu o ta tion m a rk s a n dcita tion om itted ). T h eref ore, t h e f

ou n da t i on on w h i ch w e bu i l d i s t h at T exas m ay h ave a t hr e e - t i e rs ys t e m . Tha ts yst em aut ho r i z e s r e t ail e r s w i t h l o c at i o ns w i t hi n t he S t ate t o acqu i re Tex as perm i t s if t h eym eetcer t ai n el i gibi l i t y requ i rem en t s. T h ose r et ai l ers m u stpu rchase t h ei r a lco h ol i c beverages f rom T exas- l i censed w hol es al er s, w ho i n t urn purc hase f r om pr od uce r s. Each t i eri s aut hor i ze d by T exas l aw a n d a pp roved byt h e T w en t y- f i rstA m en dm en t– so s ays G ra n h o lm – to do w h at produ cers , w h ol esal ers, an d ret ai l ers do. 6 W i ne C ount r y argues thatthe t hre e t i er s have t um bl ed be c ause Texas has perm i t t ed ret ai l ers t o m ak e hom e del iveri es w i t h i n a confin e d ran ge. A tl east i n part, t h i s m u stbe an argu m en tt h at Texa s r et ai l ers are bei n g al l ow ed to act i n w a y s t h a t a r e u n a c c e p t a b l e f o rr e t a i l e r s i n ac o n s t i t u t i o n a l l ys o u n ds y s t e m. T h e d e fe c t is o n e o f d is c r im in a tio n : T e x a s re ta ile r s a r e d o in gw h a t ar e ta ile rin Case: 08-10146 Document: 00511012977 Page: 15 Date Filed: 01/26/2010N o. 08- 10146

16 C al i f orni a or Flor i da ph ysi cal l y an d p ract i cal l y can d o, w h i ch i s to u se a l i censed shi pp er t o del iver t o a T exas consu m er, bu tl egally can n otdo. To ad dr e s s t he a r gum e nt , i tw o ul d b e us e f ult o kno w w hats pe c i f i ca c t i o ns al l ege dl y c ause d t he r et ai l er s t o s t op be i ng G ra n h o lm

- appro ved, t r adi t i onal t h i r d- t i e r r e t ail e r s . I f Tex as all o w e d a r e t ail e r t o c ar r y t he be ve r ag e s t o a custom er’ s vehi cl e park ed i n i t s l ot , or acros s th e st reet , w ou l d that be a pro bl em ? I f

a r et ai l er ’ s ow n del iver y t r ucks t r avel ed t o the c ust om er , i s t hat di scr i m i nat i o n? Doe s di s c r i m i nat i o n no tb e gi n unt i lar e t ail e rus e s al i c en sed shi pper ? Rel evantt o the ans w er , Texas has notdef ended o n t he b a sis t hat r e t ail e r s a r e j us tpe r m i t t e d to se rve t he i rus uall o c alm ar ke t s i n e nhan c e d, c ust om er - f

r i endl y w ays . I ndeed, ator alar gum ent , t he Texas Sol i c i t orG ener al sai d that t h e geograp h i call i m i t s t o l ocaldel iveri es w e re irr e l evan t . Th e pri or st at e- w i de de l iver y ve r si on o f t he pr ovi si on w oul d be c ons t i t ut i onalunder t hat argu m en t . W e need not and do n otreach t h e broader defi n i t i on ali ssue. I n a nalyz i ng “ r e t ail i ng”f o r Tw e nt y- f

ir s tAm e ndm e ntpur po s e s , w e f i nd a us e f ulw ar ni ng i n c o nc ur r i ng Jud ge Cal ab r e s i ’ s o bs e rva t i o ns i n A r n o ld ’s Wi n es . H e f ou n d a tensi o n b e tw een t h e ori gi n al(l i kely) m ean i n g of t h e T w en t y- f

i rst A m en dm en ta n d t h e current i n t erpret ati on , a chan ge l argel y t h e res u l tof Su prem e C o ur tr e ac t i o n t o t he c hangi ng e c o no m i ca nd s o c i alw o r l d s i nc e t he a d o p tio n o f th e A m e n d m e n t. A rnold’ s Wi n es , 5 7 1 F .3 da t 1 9 8 -2 0 1 (C a la b r e s i, J ., c o nc ur r i ng) . H e a l s o c o nc l ude d t hatunc e r t ai nt y e xi s t e d a bo utt he dir e c t i o n t he S u p rem e C ou rt w i l ltak e w i th i ts de ve l op i n g in terp reta ti on of th e A m en d m en t. Yethe a gr e e d t hatthe m aj o r i t y ap pl i e d t he b estu n der s t and i ng o f i t s c ur r e nt m e ani ng. The b e s tund e r s t and i ng i s a l s o w hatw e s e e k. W e pu l lback fr om an y ef f ortt o defi n e t h e reach of a tr ad i t i on alt h ree- t i er ret ai l er. I n st ead , w e res olve w h et h er w h at Texa s h a s a ll ow ed h ere i s s o sub st an t i al l y di f

ferent f rom w h at r et ai l i n g m u sti n cl u de as n ott o be t h i rd- t i er re ta il in ga t a ll . B e ca u se of G ra n h o lm a n di t s a p p r o v a lo f t h r e e - t i e rs y s t e ms , we Case: 08-10146 Document: 00511012977 Page: 16 Date Filed: 01/26/2010N o. 08- 10146

17 kno w t hatTe xa s m aya ut ho r i z e i t s in- st ate , pe r m i t - ho l di ng r e t ail e r s t o m ak e sa l es and m ay pr ohib i t o ut - of

- st at e r et ai l er s f r om doi ng t he s am e. Such an aut ho r i z at i o n t he r e f o r e i s no tdi s c r i m i nat i o n i n G ra n h o lm term s. T h e ri gh t s of r e t ail e r s a tam i ni m um w o ul d i nc l ude m ak i ng o ve r - t he

- c o unt e rs al e s . W i ne C ou n t ry’ s argum en ti m pl i es t h at i s w h ere G r a n h o l m- ap pr o ve d ret ail i ng e nds and w her e the pot ent i alf ordi sc r i m i nat i on be gin s. W e di sa gr ee . Texas has a dj u stedi ts con trols ov er re tail ers b y a l l ow i n g a l coh oli c b e v e r a ge sales to cu stom ers o th er th a n th ose w h o w a l kin to a s tore. S til l , s a l es a re b ein g m a d e to pro xi m at e c ons um er s, nott ho se d i stantt o the s t or e. Ret ai l er s ar e a c t i ng as r e ta ile r s a n dm a k in gw h a t c o n c e p tu a llya r e lo c a l d e liv e r ie s . O u r r e a dof G ra n h o lm i s t h at th e T w en t y- f i rstA m en dm en t st i l lgives each St at e q ui t e b r o addi s c r e t i o n t o r e gul at e a l c o ho l i cb e ver ag e s . The do r m ant C om m erce C l a u se a p p l i es, b u t it ap p l i es d i ff ere n tly th a n i t do es to p rod u cts w h ose r egul at i on i s notaut hor i ze d by as pec i f i cc ons t i t ut i onalam endm en t. R e g u la tin ga lc o h o licb e v e r a g e re ta ilin gis la r g e lyaS ta te ’ s p r e r o g a tiv e . G ra n h o lm proh ib it ed d i scr i m i n ati on againstout- of

- st ate prod u ct s or prod u cers . Tex as ha s not t ri pp ed over t h at bar by al l ow i n g i n - st ate ret ailer d e liv e r ie s . Y e t it a ls o h a s n o t d is c r im in a te da m o n gre ta ile r s . W in e C o u n tr yis n otsi m i l arl y si t u ated t o T exas ret ai l ers an d c an n ot m ak e a l ogi calargu m en tof d is c r im in a tio n . T h e illo g icis s h o w n b yt h e fa c t th a t th e r e m e d yb e in gs o u g h t in t h i s c ase – al l ow i n g ou t - of

- st ate r et ai l ers to shi p an yw h ere i n T exas becau se lo c a l r e tail ers ca n de l ive r w i th i n the i r cou n ti es –w ou l dgra n t ou t- of- state r e ta ile r s d r a m a tic a llyg r e a te rrig h ts th a n T e x a s o n e s . W i n e C ou n t ry argu es t h at T exas h as creat ed t h e n eed f or th a t ou tsized r em edy t hro ugh i t s di sc r i m i nat i on, an d T exas can eli m i nat e l oc alunfai r nes s by br o ad e ni ng t he r i ght s gr ant e d i t s o w n r e t ail e r s . The pr o bl e m w i t h t he a r gum e nt i s t h at iti gn ores t h e T w en t y- f i rstA m en dm en t . W h en an al yzi n g w h et h er a St ate ’ s a l c o ho l i cb e ve r ag e r e gul at i o n di s c r i m i nat e s und e rt he do r m ant Case: 08-10146 Document: 00511012977 Page: 17 Date Filed: 01/26/2010N o. 08- 10146

Michigan has subsequentlyrepeale d this provi sionand banned all direct shipment 7 by retailers, perhaps in respon se to the ruling of the di strict court in Siesta Vi ll. Mk t. , 596 F. Supp . 2 d 1 0 3 5 . See M I CH . C O MP . LAW S ANN . § 4 3 6 .1 2 0 3 (2) (a men d. eff. March3 1 , 2 0 0 9)) . See, e.g. , C O LO . R EV . S TAT . ANN . § 1 2 -4 7 -4 0 7 (3) & § 4 0 8 (3); FLA . S TAT . ANN . § 5 6 1 .5 7 (1 ); 8 235 I LL . C O MP . S TAT . ANN . § 5/5 -1 (d); I ND . C O D E ANN . § 7.1-3 -9-9; I O W A AD M IN . C O D E r. 1 85- 1 7 .1 (1 ); M E . R EV . S TAT . ANN . tit. 2 8 -A, § 2 0 7 7 (2) & (3); M D . C O D E ANN . art. 2B , § 2 -3 0 1 (b)( 1 ); MAS S . G EN . LAW S ANN . ch . 13 8 , § 2 2 ; M I NN . R. 751 5.05 80; N.J. AD M IN . C O D E § 1 3:2-2 0.3; N. Y. C O MP . C OD ES R. & R E GS . tit . 9, § 67. 1; 02- 040- 016 R.I. C O D E R . § 4 (1 0). 18 C om m er c e Cl ause , a begi nni ng pre m i sei s t hatw hol es al er s and re t ai l er s m ay be requ i red t o be w i t h i n t h e State. S t art i n g at t h at poi n t , w e see n o di scr i m i n ati on in th e T e x a s la w . W e view l oc aldeliver i es as a c ons t i t ut i onal l y be ni gn i nci dentof an ac c e pt ab l e t hr e e - t i e r syst e m . Tha tv i e w i s c o ns i s t e ntw i t h t he unq ue s t i o ni ng r e fe r e nc e b y t he S u pre m e Cour ti n G r a n h o l m t o aM i c hi gan s t at ut e t hat au t h ori zed ret ai l ers t o m ak e hom e del ive ri es un der cer t ai n condit i on s. G ra n h o lm , 5 4 4 U .S . a t 4 6 9 . AS t a t e ’ s g r a n tin gth is a u th o r ityto re ta ile r s is 7 n ei t h er recent n or u n i qu e. T exas h as perm i t t ed di rect del ivery an d ca rr ier s h ip m e n t b yin -s ta te re ta ile r s a t le a s t s in c e 1 9 7 7 . T EX . A L CO . B EV . C ODE § 2 2. 03 (V er non 2006, adopt ed Sept . 1, 1977) . Som e o t herSt at es al soal l ow deliver y by i n - st ate r et a i l ers. AState’ s r i gh tt o au t h ori ze a vari et y of ret ai lpract i ces f

or 8 al c oholi cbe ver ages f r ee of dor m antC om m er c e Cl ause bar r i er s m ay notbe l i m i t l ess. Y etitseem s t o us t h at i m pl em en t i n g consu m er- f ri en dl y practi ces f

or in -s ta te re ta ilin go f th e s e p r o d u c ts o fte n h a s m o r e to d o w ith c h a n g in ge c o n o m ic r e a litie s th a n w ith th e C o n s tit u tio n . W e h ol d t h at th e l i m i t ed ri gh t s Tex as ha s given i t s s t ate- l i censed retai l ers t o m ak e del iveri es do not t ran sgress t h e dorm an tC om m erce C l au se. W e no w t urn br i ef l y t o the s epar at e pr ovi si ons r egar di ng per so nal i m porti n g. A s m en t i on ed befor e, T exas h as pl aced a l i m i ton the qu an t i t y of al c o ho l i cb e ve r ag e s t hata n i ndivi dua lca n pur c has e out - o f

- s t at e and t he n b r i ng in to T e x a s . T EX . A L CO . B EV . C ODE § § 1 0 7 .0 5 (a ) & 1 0 7 .0 7 (a ). P r e lim in a r ily , it Case: 08-10146 Document: 00511012977 Page: 18 Date Filed: 01/26/2010N o. 08- 10146

19 shou l d n otbe ove rlo o k e d tha tT exas did not, i n deed can n ot , l i m i tt h e nu m ber o f a l c o ho l i cb e ve r ag e s c o ns um e r s m ayb u y at an ou t - o f

- s t at e r e t ail e r . Any pu rchase l i m i t s w ou l d h ave to c om e f rom th e ot h er Stat e’ s l aw s. Th e barri er T e x a s im p o s e s is a t it s b o r d e r . W e concl u de that t h e inc i de nt alef fecton f orei gn ret ai lsal es r esul t i n g f rom l i m i t s on quant i t i es t o b e b r oughti nt o Texas i s atw or stan ac c ept abl e b al anci ng. T h e i n t erest s of

T exas co n sum ers i n pu rchasi n g al cohol i c beverages outsi de of Tex as a r e r e c o gni z e d, b utt he St at e v ali dly i ns i s t s t hatt he v as tm aj o r i t y o f t he al cohol i c beverages consum ed i n T exas be obtai n ed throug h i t s o w n ret ai l ers. I n e f fe c t , Tex as has gr ant e d a l i m i t e d e xc e pt i o n t o t he t hr e e - t i e r s ys t e m . W e f i nd n o co n s tit u tio n a l d e fe c t. S ee B rooks, 4 6 2 F .3 da t 3 5 3 -5 4 (s im ila rp r o v i s i o n in V irg in ialaw u p h e lda g a in st d o rm a n t C o m m e rc e C la u se ch a ll e n g e ). CO NCL US I ON W e revers e t h e di st ri ctcourt ’ s hol di n g t h at th e persona li m port excepti on a u th o riz e db yT e x a s A lco h o li c B e v e ra g e C o d e se ctio n s 10 7 .05 (a ) an d1 0 7 .07 (a ), h as an y defec tun der t h e dorm an tC om m erce C l au se. W e a ls o re v e r s e th e d is tr ic t c o u r t’s in v a li d a t i o n o f p r o v is io n s th a t o n ly ret ai l ers w i t h a ph ysi calpresence w i t h i n t h e State coul d d el iver t o consum ers in th e S ta te . T h e p r o v is io n s a s lis te db yth e d is tr ic t c o u r t a r e T e x a s A lc o h o lic B eve r age C ode s ec t i ons 6. 01, 11. 01, 22. 01, 22. 03, 24. 01, 24. 03, 37. 01, 37. 03, 3 7 .0 3 , 4 1 .0 1 , 4 3 .0 4 , 5 4 .1 2 , a n d1 0 7 .0 7 (f). Co n s e q u e n t ly , inth o s er e s p e c t s t he d i s t r i c tc o ur t ’ s j ud g m e nti s VAC AT ED . W e RE M AN D f

o re nt r y o f

j udg m e ntc o ns i s t e ntw i t h t hi s o pi ni o n. Case: 08-10146 Document: 00511012977 Page: 19 Date Filed: 01/26/2010