Court Opinion

ID: 844412
Source: CourtListenerOpinion
Date Created: 2013-03-01 22:49:56.560242+00
Date Added: 2024-06-11T15:37:08.392513
License: Public Domain

Order                                                                     Michigan Supreme Court
                                                                                Lansing, Michigan

  November 29, 2006                                                                Clifford W. Taylor,
                                                                                            Chief Justice

  126121                                                                          Michael F. Cavanagh
                                                                                  Elizabeth A. Weaver
                                                                                         Marilyn Kelly
  NATIONAL WINE & SPIRITS, INC., 	                                                  Maura D. Corrigan
  NWS MICHIGAN, INC., and                                                         Robert P. Young, Jr.
  NATIONAL WINE & SPIRITS, L.L.C.,                                                Stephen J. Markman,
                                                                                                 Justices
           Plaintiffs-Appellants,
  v        	                                             SC: 126121
                                                         COA: 243524
                                                         Ingham CC: 02-000013-CZ
  STATE OF MICHIGAN, 

            Defendant-Appellee,

  and
  MICHIGAN BEER & WINE
  WHOLESALERS ASSOCIATION, 

           Intervening Defendant-Appellee. 

  _________________________________________/

        On order of the Court, leave to appeal having been granted and the case having
  been briefed and argued by counsel, the order of January 20, 2006 which granted leave to
  appeal is VACATED and leave to appeal is DENIED because we are no longer
  persuaded the questions presented should be reviewed by this Court.

        CAVANAGH, J., dissents and states as follows:

         I respectfully disagree with the majority’s determination that leave to appeal was
  improvidently granted in this case. The issues are jurisprudentially significant and far-
  reaching. I further note that this Court heard oral argument on the application and then
  chose to issue an order granting leave to appeal and requiring full briefing and oral
  argument. After considering arguments on the issues twice, I believe that this Court
  should issue an opinion on the merits of the issues presented.

        KELLY, J., joins the statement of CAVANAGH, J.

        WEAVER, J., dissents and states as follows:
                                                                                          2

       I dissent from the majority’s decision that leave to appeal was improvidently
granted. I would remand this case to the Court of Appeals for reconsideration in light of
Granholm v Heald, 544 US 460 (2005).

       The statute at issue, MCL 436.1205(3),1 while perhaps not unconstitutional on its
face, as applied, forever prohibits an out-of-state business from operating as both an
authorized distribution agent of spirits and as a distributor of wine. Michigan distributors
of wine in operation before September 24, 1996, on the other hand, were permitted to
also become authorized distribution agents of spirits (ADAs). As a result, § 205(3)
precludes out-of-state distributors from achieving the benefits of a combined cost
economy.2

       In addition, § 205(3) prohibits any distributors established after September 24,
1996, from selling or distributing a brand of wine in an area where an established
distributor has already been assigned or authorized to sell that particular brand of wine.3

       1
           Section 205(3), in pertinent part, is set forth below:
               After September 24, 1996, an authorized distribution agent or an
       applicant to become an authorized distribution agent who directly or
       indirectly becomes licensed subsequently as a wholesaler shall not be
       appointed to sell a brand of wine in a county or part of a county for which a
       wholesaler has been appointed to sell that brand under an agreement
       required by this act. A wholesaler who directly or indirectly becomes an
       authorized distribution agent shall not sell or be appointed to sell a brand of
       wine to a retailer in a county or part of a county for which another
       wholesaler has been appointed to sell that brand under an agreement
       required by this act, unless that wholesaler was appointed to sell and was
       actively selling that brand to retailers in that county or part of that county
       prior to September 24, 1996, or unless the sale and appointment is the result
       of an acquisition, purchase, or merger with the existing wholesaler who was
       selling that brand to a retailer in that county or part of that county prior to
       September 24, 1996.
       2
        For example, when a Michigan distributor operating as both an ADA of spirits
and as a wine distributor delivers spirits and wine to retailers on the same truck, it can
lower its delivery costs. However, under § 205(3), out-of-state distributors cannot
conserve costs by loading wine and spirits on the same truck.
       3
         Before September 24, 1996, Michigan wine distributors were not prohibited from
“dualing,” a concept whereby a wine distributor could compete with other distributors in
a particular area and sell the same competing brands of wine. After September 24, 1996,
only those wine distributors established in Michigan before that date could continue
“dualing.”
                                                                                          3

Thus, those Michigan distributors established before 1996 enjoy the competitive
advantage of being able to sell certain brands exclusively, and to also act as authorized
distribution agents of both spirits and wine.

       It is undisputed that before September 24, 1996, only Michigan businesses were
licensed as wine wholesalers in the State of Michigan. Consequently, when § 205(3) was
enacted, only existing Michigan wine distributors retained the benefit of distributing all
the wine brands they sold as before September 24, 1996. Conversely, no out-of-state
wine distributor could achieve the same benefit, nor could any out-of-state distributor
ever enjoy the cost savings of becoming a distributor of both wine and spirits.

        The United States Supreme Court’s decision in Granholm had not been released at
the time the Court of Appeals decided this case. Had the Court of Appeals had the
benefit of the United States Supreme Court’s ruling in Granholm, it may very well have
concluded that the burden on interstate commerce imposed by § 205(3) outweighs the
state’s objective in preserving the existing three-tier alcohol distribution system.4 As the
United States Supreme Court noted in Granholm, protectionist state legislation that

       4
        The traditional Commerce Clause test was discussed by the United States
Supreme Court in Brown-Forman Distillers Corp v New York State Liquor Auth, 476 US
573, 578-579 (1986):

               This Court has adopted what amounts to a two-tiered approach to
       analyzing state economic regulation under the Commerce Clause. When a
       state statute directly regulates or discriminates against interstate commerce,
       or when its effect is to favor in-state economic interests over out-of-state
       interests, we have generally struck down the statute without further inquiry.
       See, e. g., Philadelphia v. New Jersey, 437 U.S. 617, 98 S. Ct. 2531, 57 L.
       Ed. 2d 475 (1978); Shafer v. Farmers Grain Co., 268 U.S. 189, 45 S. Ct.
       481, 69 L.Ed. 909 (1925); Edgar v. MITE Corp., 457 U.S. 624, 640-643,
       102 S. Ct. 2629, 73 L. Ed. 2d 269 (1982) (plurality opinion). When,
       however, a statute has only indirect effects on interstate commerce and
       regulates evenhandedly, we have examined whether the State's interest is
       legitimate and whether the burden on interstate commerce clearly exceeds
       the local benefits. Pike v. Bruce Church, Inc., 397 U.S 137, 142, 90 S. Ct.
       844, 25 L. Ed. 2d 174 (1970). We have also recognized that there is no
       clear line separating the category of state regulation that is virtually per se
       invalid under the Commerce Clause, and the category subject to the Pike v.
       Bruce Church balancing approach. In either situation the critical
       consideration is the overall effect of the statute on both local and interstate
       activity. See Raymond Motor Transportation, Inc. v. Rice, 434 U.S. 429,
       440-441, 98 S. Ct. 787, 54 L. Ed. 2d 664 (1978).
                                                                                                               4

provides a competitive advantage to intrastate commerce is subject to attack under the
Commerce Clause:

             Time and again this Court has held that, in all but the narrowest
      circumstances, 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.” Oregon Waste Systems, Inc. v.
      Department of Environmental Quality of Ore., 511 U.S. 93, 99, 114 S. Ct.
      1345, 128 L. Ed. 2d 13 (1994). See also New Energy Co. of Ind. v.
      Limbach, 486 U.S. 269, 274, 108 S. Ct. 1803, 100 L. Ed. 2d 302 (1988).
      This rule is essential to the foundations of the Union. The mere fact of
      nonresidence should not foreclose a producer in one State from access to
      markets in other States. H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S.
      525, 539, 69 S. Ct. 657, 93 L. Ed. 865 (1949). States may not enact laws
      that burden out-of-state producers or shippers simply to give a competitive
      advantage to in-state businesses. This mandate “reflect[s] a central concern
      of the Framers that was an immediate reason for calling the Constitutional
      Convention: the conviction that in order to succeed, the new Union would
      have to avoid the tendencies toward economic Balkanization that had
      plagued relations among the Colonies and later among the States under the
      Articles of Confederation.” Hughes v. Oklahoma, 441 U.S. 322, 325-326,
      99 S. Ct. 1727, 60 L. Ed. 2d 250 (1979). [Granholm at 472.]
       Given the constitutional implications posed by the application of § 205(3), and
given the United States Supreme Court’s mandate against differential treatment of out-of-
state economic interests, a remand to the Court of Appeals for reconsideration in light of
Granholm would be the most judicious resolution of this case.

                         I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the
                   foregoing is a true and complete copy of the order entered at the direction of the Court.
                         November 29, 2006                   _________________________________________
       s1121                                                                 Clerk