Opinion ID: 2630537
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Heading: The Core Principles of the Twenty-first Amendment

Text: Although RCW 19.126's exemption of in-state wine producers violates the commerce clause, we must examine the exemption in light of the State's ability to regulate the importation of alcoholic beverages under the Twenty-first Amendment. If state regulation of interstate commerce involving alcoholic beverages sufficiently implicates core principles of the Twenty-first Amendment, the regulation survives constitutional review, despite any commerce clause violation. Stated another way, even where a statute violates the commerce clause, it may be constitutional if the State is acting within its authority under the Twenty-first Amendment. Bacchus Imps., Ltd. v. Dias, 468 U.S. 263, 275-76, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984). The Twenty-first Amendment repealed Prohibition, but protected states' ability to prohibit or regulate the importation of alcoholic beverages into their jurisdictions. Section 2 of the amendment, entitled, Transportation of Liquor into `Dry' States, provides in its entirety that [t]he transportation or importation into any states, 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. In early cases, the United States Supreme Court held that the amendment sanctions the right of a State to legislate concerning intoxicating liquors brought from without, unfettered by the Commerce Clause. Ziffrin, Inc. v. Reeves, 308 U.S. 132, 138, 60 S.Ct. 163, 84 L.Ed. 128 (1939). The Court has more recently qualified this holding, stating, [t]o draw a conclusion ... that the Twenty-first Amendment has somehow operated to `repeal' the Commerce Clause wherever regulation of intoxicating liquors is concerned would ... be an absurd oversimplification. Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 331-32, 84 S.Ct. 1293, 12 L.Ed.2d 350 (1964). [T]he Federal Government retains some Commerce Clause authority over liquor. Cal. Retail Liquor Dealers Ass'n. v. Midcal Aluminum, Inc., 445 U.S. 97, 108, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). Because the commerce clause and the Twenty-first Amendment are parts of the same constitution, each must be considered in the light of the other, and in the context of the issues and interests at stake in any concrete case. Hostetter, 377 U.S. at 332, 84 S.Ct. 1293. The proper inquiry, then, is whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail. Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984). In the context of the present case, the issue is whether the core principles of the Twenty-first Amendment are sufficiently implicated by RCW 19.126's exemption of in-state wine suppliers to outweigh the dormant commerce clause violation. Despite a lack of absolute certainty about the intended principles embodied by the Twenty-first Amendment, at least some of its core principles are promoting temperance, ensuring orderly market conditions, and raising revenue. North Dakota v. United States, 495 U.S. 423, 432, 110 S.Ct. 1986, 109 L.Ed.2d 420 (1990). The parties dispute the proper scope of this inquiry. The Distributors maintain we must look to whether the statute as a whole furthers a core concern of the Twenty-first Amendment. The Suppliers argue we must instead limit our analysis to whether the discriminatory clause furthers a core concern of the Twenty-first Amendment. Although the United States Supreme Court has not resolved this specific issue, cases from other jurisdictions are instructive. In Kendall-Jackson Winery, Ltd. v. Branson , a federal district court case from Illinois, out-of-state wine suppliers challenged the Illinois Wine and Spirits Industry Fair Dealing Act (Fair Dealing Act). Kendall-Jackson Winery, Ltd. v. Branson, 82 F.Supp.2d 844, 866 (N.D.Ill.2000). That Fair Dealing Act, like RCW 19.126, required out-of-state wine suppliers to not cancel exclusive distribution agreements without notice and good cause, but exempted in-state wineries from its requirements. Kendall-Jackson, 82 F.Supp.2d at 850. Similar to our analysis of RCW 19.126, the Kendall-Jackson court determined that the Illinois Fair Dealing Act facially discriminated against out-of-state wine makers. Also, similar to the present case, the defendants could not articulate a legitimate local purpose served by the discrimination that could not be furthered by nondiscriminatory means. The court concluded the Fair Dealing Act thus violated the dormant commerce clause. Kendall-Jackson, 82 F.Supp.2d at 864. The Kendall-Jackson court then examined whether the in-state winery exemption nonetheless survived under the Twenty-first Amendment by furthering one of the amendment's core concernspromoting temperance, collecting revenue, or controlling the traffic of alcoholic beverages within the state's borders. The court agreed that the Fair Dealing Act, as a whole, furthered the three-tier distribution system, and thus the control of the traffic of alcoholic beverages. Nevertheless, the court limited its Twenty-first Amendment inquiry to the exemption of in-state wine producers. It determined that because the in-state winery exemption could not be justified by any Twenty-first Amendment core concerns, the Illinois Fair Dealing Act was unconstitutional. Kendall-Jackson, 82 F.Supp.2d at 866-67. We adopt the Kendall-Jackson approach because we find it in accord with the United States Supreme Court's requirement that the commerce clause and the Twenty-first Amendment be analyzed in light of one another and that the interests served by the economic discrimination be closely related to the powers reserved to the states by the Twenty-first Amendment. Hostetter, 377 U.S. at 332, 84 S.Ct. 1293; Capital Cities Cable, Inc., 467 U.S. at 714, 104 S.Ct. 2694. Under this approach, we must analyze the specific statutory provision in question. The Distributors argue that RCW 19.126 is exempt from being struck down on commerce clause grounds by the Twenty-first Amendment because the statute's general purpose is to regulate the importation of beer and wine into Washington, which furthers legitimate Twenty-first Amendment goals. Br. of Appellant/Alaska at 12; Br. of Appellant/Mt. Hood at 21. We understand the Distributors' argument, and acknowledge that the stated general purpose of RCW 19.126 is to achieve fair, efficient, and competitive distribution of [alcoholic] beverages. RCW 19.126.010(1). These purposes further the Twenty-first Amendment concern of ensuring orderly market conditions, but the purposes of RCW 19.126 as a whole have no bearing on our analysis because under the Kendall-Jackson approach, we narrow our focus to the discriminatory clause. The Distributors cite a federal district court case from Florida for support of their position, Bainbridge v. Bush, 148 F.Supp.2d 1306 (M.D.Fla.2001), which the Eleventh Circuit later vacated in part. Bainbridge v. Turner, 311 F.3d 1104 (11th Cir.2002). We find further support for adopting the Kendall-Jackson approach in the Eleventh Circuit's correction of the district court's reasoning. In Bainbridge, the district court was presented with whether Florida's prohibition against out-of-state wineries selling directly to in-state consumers met a core concern of the Twenty-first Amendment. The district court ruled that even though the Florida statutory scheme may have protectionist overtones, the statute survived because invalidation would hinder the State's ability to collect tax revenue. Bainbridge, 148 F.Supp.2d at 1313. This approach is similar to the one the Distributors advocate in the present case because it focuses on the constitutionality of the statutory scheme as a whole instead of on the protectionist clause. The Eleventh Circuit refocused the issue onto whether the difference in treatment between in-state and out-of-state wine suppliersnot the scheme as a wholemet a core concern of the Twenty-first Amendment. Bainbridge, 311 F.3d at 1115. The appellate court held that [b]efore the State can successfully raise the Twenty-first Amendment as a shield, it must show that its statutory scheme is necessary to effectuate the proffered core concern in a way that justifies treating out-of-state firms differently from in-state firms.... Bainbridge, 311 F.3d at 1115. The approach we adopt here also requires a Twenty-first Amendment justification for treating in-state and out-of-state wine producers differently. Other state and federal court decisions also support a narrow examination of the protectionist statutory language when analyzing a commerce clause violation in light of the Twenty-first Amendment. Heublein, Inc. v. Dep't of Alcoholic Beverage Control, 237 Va. 192, 376 S.E.2d 77, 80 (Va.1989) (an exemption of in-state wineries from its regulatory scheme does not serve any legitimate Twenty-first Amendment interests); accord TFWS, Inc. v. Schaefer, 242 F.3d 198, 212 (4th Cir.2001) (a state must demonstrate that its liquor regulatory policies directly serve the interests it proffers under the Twenty-first Amendment. (emphasis added)); Cooper v. McBeath, 11 F.3d 547, 555 (5th Cir.1994) (a statutory barrier against nonresidents for mixed-beverage was not shielded by the Twenty-first Amendment). We therefore hold that when a statute discriminates against interstate commerce in violation of the commerce clause, the discriminatory clause, not the statute as a whole, must be justified by core concerns of the Twenty-first Amendment in order to survive. The proper inquiry in the present case is not whether RCW 19.126 as a whole advances legitimate Twenty-first Amendment goals, but whether the exemption of in-state suppliers from the statute's requirements furthers those legitimate goals. Because the Distributors raised the Twenty-first Amendment justification for the protection of in-state wineries, they had the burden of demonstrating that the economic protection of in-state wineries was constitutional because it furthered a core Twenty-first Amendment concern. They have not offered any legitimate Twenty-first Amendment justifications for the exemption of in-state wine suppliers, and we can find none. The justifications they raise would be equally served by treating in-state and out-of-state wine suppliers equally. Because the exemption of in-state wine suppliers from RCW 19.126 violates the commerce clause and is not sheltered by the Twenty-first Amendment, we hold it is unconstitutional.