Great Beer, Good Intentions, Bad Law: The Unconstitutionality of New York’s Farm Brewery License

INTRODUCTIONThe tension between state legislation and the Commerce Clause is deeply rooted in United States' legal history.1 As is true in life as well as law, alcohol's involvement has made the situation both more interesting and more contentious.2 Because the Twenty-first Amendment constitutionalized state-level alcohol regulation, the tension between states' robust alcohol regulatory schemes and the Commerce Clause's proscription of state-level regulation of national commerce has been particularly sharp.3As this battle over regulatory control of the alcohol industry has raged in the courts, American brewing has undergone an explosive revolution spurred by the advent of craft.4 A "craft brewery" is defined by its traditional, small, and independent nature: it must primarily brew with traditional ingredients using traditional techniques, must produce less than six million barrels of beer per year, and must not be more than twenty-five percent owned or controlled by a non-craft brewery.5 Approximately 2,768 craft breweries operated for some or all of 2013 (the highest total number at least since the 1880s), and in that same year the craft brewing industry grew 17.2% by volume. 6 Consequently, states have dipped into their reservoirs of legislative imagination to construct ways to encourage the development of this booming sector of the economy while maintaining their regulatory control.7 The results are mixed.8One regulatory development has come in the form of a "farm brewery license."9 This license is both much cheaper than its traditional counterpart, and affords more flexible privileges in exchange for sourcing ingredients from farmers within the state.10 For example, in order to promote its brewery-related agricultural sectors, New York's law requires that farm brewers source 20% of their hops and barley from within the state for the first five years after the law's enactment, then 60%, then eventually 90% after twenty years.11 As of June 2, 2014, thirty-five farm breweries operate in New York, which includes twenty-two established in 2013 alone.12Yet here familiar Commerce Clause jurisprudence sounds again: if out-ofstate hop and barley farmers wish to sell to these new brewers, they will face significant hurdles.13 Likewise, if these brewers source more than the approved quantity of out-of-state ingredients, they violate their license.14 Moreover, if New York's agricultural infrastructure cannot fully handle the increased demand, problems will abound.15This Note argues that although New York and other states deserve praise for attempting to accommodate the art and industry of craft beer, they must do so constitutionally.16 Furthermore, this Note argues that protectionism is contrary both to the spirit of entrepreneurship and to the spirit of the craft beer revolution.17 Part I provides the historical backdrop on which this battle is fought.18 It examines the role of the dormant Commerce Clause, the function of the Twenty-first Amendment, and the tension between these provisions as altered in 2005 by the U.S. Supreme Court in Granholm v. Heald.19 Part II focuses on New York's farm brewery law and compares it to the distribution laws that the Supreme Court struck down in Granholm.20 Part III argues that New York's farm brewery license violates the dormant Commerce Clause and cannot be saved by the Twenty-first Amendment.21 Finally, it suggests that states should instead pursue simple deregulation as a way to foster craft breweries constitutionally.22I. THE COMMERCE CLAUSE, STATE REGULATION, AND ALCOHOL: A STORY OF TENSIONThe Commerce Clause is a primary font of congressional power.23 By way of over two centuries of changing economic landscapes and expansive judicial interpretation, it has produced a vast federal legislative and regulatory framework.24 This federal regulatory framework often and inevitably conflicts with state regulatory schemes.25 The resulting tension is particularly evident with regard to alcohol regulation because the Twenty-first Amendment constitutionalizes state-level regulation of the alcohol industry. …