Court Opinion

ID: 4527477
Source: CourtListenerOpinion
Date Created: 2020-04-21 18:00:30.119925+00
Date Added: 2024-06-11T12:18:09.643995
License: Public Domain

RECOMMENDED FOR PUBLICATION
                               Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                      File Name: 20a0119p.06

                   UNITED STATES COURT OF APPEALS
                                 FOR THE SIXTH CIRCUIT

 LEBAMOFF ENTERPRISES INC.; JOSEPH DOUST; JACK              ┐
 STRIDE; JACK SCHULZ; RICHARD DONOVAN,                      │
                               Plaintiffs-Appellees,        │
                                                            │
                                                            │
        v.                                                   >        Nos. 18-2199/2200
                                                            │
                                                            │
 GRETCHEN WHITMER; DANA NESSEL; PAT GAGLIARDI,              │
                 Defendants-Appellants (18-2199),           │
                                                            │
 MICHIGAN BEER & WINE WHOLESALERS ASSOCIATION,              │
                                                            │
          Intervenor Defendant-Appellant (18-2200).
                                                            ┘

                         Appeal from the United States District Court
                        for the Eastern District of Michigan at Detroit.
                    No. 2:17-cv-10191—Arthur J. Tarnow, District Judge.

                                   Argued: March 12, 2020

                              Decided and Filed: April 21, 2020

               Before: SUTTON, McKEAGUE, and DONALD, Circuit Judges.
                                _________________

                                           COUNSEL

ARGUED: Mark G. Sands, MICHIGAN DEPARTMENT OF ATTORNEY GENERAL,
Lansing, Michigan, for State of Michigan Appellants. Deborah A. Skakel, BLANK ROME LLP,
New York, New York, for Intervening Appellants. James A. Tanford, EPSTEIN, COHEN, SEIF
& PORTER, LLP, Indianapolis, Indiana, for Appellees. ON BRIEF: Mark G. Sands, Melinda
A. Leonard, Donald S. McGehee, MICHIGAN DEPARTMENT OF ATTORNEY GENERAL,
Lansing, Michigan, for State of Michigan Appellants. Deborah A. Skakel, BLANK ROME LLP,
New York, New York, Curtis R. Hadley, Anthony S. Kogut, WILLINGHAM & COTÉ, P.C.,
East Lansing, Michigan, for Intervening Appellants. James A. Tanford, Robert D. Epstein,
EPSTEIN, COHEN, SEIF & PORTER, LLP, Indianapolis, Indiana, for Appellees. John C.
Neiman, Jr., MAYNARD COOPER & GALE P.C., Birmingham, Alabama, Sean O’Leary,
O’LEARY LAW AND POLICY GROUP, LLC, Elmhurst, Illinois, Deanne E. Maynard,
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MORRISON & FOERSTER LLP, Washington, D.C., Scott A. Keller, BAKER BOTTS LLP,
Washington, D.C., for Amici Curiae.

        SUTTON, J., delivered the opinion of the court in which McKEAGUE and DONALD,
JJ., joined. McKEAGUE, J. (pp. 17–20), delivered a separate concurring opinion in which
DONALD, J., joined.
                                       _________________

                                            OPINION
                                       _________________

       SUTTON, Circuit Judge. The parties agree that the Twenty-first Amendment allows
Michigan to distribute alcohol within its borders solely through a three-tier system, one
composed of producers, wholesalers, and retailers. And the parties agree that Michigan may
impose all manner of regulations on its wholesalers (e.g., that they be in the State, adhere to
minimum prices, and decline to offer volume discounts) as well as on its retailers (e.g., that they
be present in the State, sell only within the State, and comply with health-and-safety rules).
What separates the parties is whether Michigan may permit its retailers to offer at-home
deliveries within the State while denying the same option to an Indiana retailer who does not
have a Michigan retail license. Because the Twenty-first Amendment permits Michigan to treat
in-state retailers (who operate within the three-tier system) differently from out-of-state retailers
(who do not), we uphold the law.

                                                 I.

       Some history is in order. Before Prohibition, alcohol producers typically sold their beer
and liquor through “tied-house” saloons.       They set up saloonkeepers with a building and
equipment in exchange for promises to sell only their drinks and to meet minimum sales goals.
The system efficiently brought alcohol to market, keeping prices low and choices aplenty. But
not all efficient markets are useful markets. You can have too much of a good thing. Excessive
alcohol consumption came with costs for individuals and the public—addiction, crime, violence,
and family troubles among them. As “absentee owners,” the producers in the tied-house system
rarely had to come to grips with these costs: They “knew nothing and cared nothing about the
community.” Raymond B. Fosdick & Albert L. Scott, Toward Liquor Control 33 (Ctr. for
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Alcohol Policy 2011) (1933). When this market structure approached its peak, the Supreme
Court remarked that “[t]he statistics of every state show a greater amount of crime and misery
attributable to the use of ardent spirits obtained at these retail liquor saloons than to any other
source.” Crowley v. Christensen, 137 U.S. 86, 91 (1890).

       Extreme problems sometimes prompt extreme solutions.                With ratification of the
Eighteenth Amendment, the American people chose national prohibition as the way to address
these problems. This experiment solved some problems but generated others. With ratification
of the Twenty-first Amendment, the people brought this thirteen-year trial to a close. While
Prohibition prompted a significant expansion of the federal government’s role in law
enforcement, see generally Lisa McGirr, The War on Alcohol: Prohibition and the Rise of the
American State (2015), its demise returned control over alcohol regulation to the States.
Section 2 of the Twenty-first Amendment delegates to each State the choice whether to permit
sales of alcohol within its borders and, if so, on what terms and in what way. Some States
initially kept a ban on alcohol in place. Others permitted it through highly regulated markets to
prevent the problems associated with tied-house saloons from resurfacing. To tighten the reins,
States developed “three-tier” systems for alcohol distribution. Tenn. Wine & Spirits Retailers
Ass’n v. Thomas, 139 S. Ct. 2449, 2463 n.7 (2019). To this day, most States retain three-tier
systems. Count Michigan as one of them.

       In a three-tier system, the State forbids alcohol producers (the first tier) to sell directly to
retailers or consumers. To access the market, producers must sell to wholesalers located within
the State (the second tier). After that, in-state wholesalers sell exclusively to in-state retailers
(the third tier), who make final sales to consumers. To avoid the tied-house system’s “absentee
owner” problem, businesses at each tier must be independently owned, and no one may operate
more than one tier. See Mich. Comp. Laws § 436.1603(4), (13). States also restrict cooperation
and joint marketing efforts that have similar effects.

       Wholesalers play a key role in three-tier systems. Typically few in number and often
state-owned, they are the in-state path through which all alcohol passes before reaching
consumers. That allows States, if they wish, to control the amount of alcohol sold through price
controls, taxation, and other regulations. Michigan, for example, imposes minimum prices and
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prohibits wholesalers from offering volume discounts or selling on credit.           See, e.g., id.
§ 436.2013. When it comes to liquor (though not wine and beer), the State is the wholesaler in
Michigan. See id. § 436.1231.

        Michigan is not the strictest State when it comes to alcohol distribution. Take Utah. For
all alcoholic products save light beer, the State is the sole importer and main retailer, making it
essentially a two-tier system. See Utah Code Ann. §§ 32B-2-202, 204, 501; id. § 32B-7-202.

        Whether in Michigan, Utah, or elsewhere, this is not Adam Smith’s idea of an efficient
market. Then again, efficiency is not the goal of the Twenty-first Amendment, whether in the
form of easy-to-get alcohol or easy-to-pay-for alcohol. The Amendment gave each State the
choice whether to allow any alcohol to be sold within its borders, to allow alcohol to be sold
through a market heavily regulated by the visible hand of the State, or to allow alcohol to be sold
with little regulation at all.

        Against this backdrop, Michigan recently amended its Liquor Control Code. The law
allows in-state retailers to deliver directly to consumers using state-licensed “third party
facilitators” or common carriers like FedEx or UPS. 2016 Mich. Pub. Acts 520, § 203(3), (15).

        In response, Lebamoff Enterprises, a wine retailer based in Fort Wayne, Indiana, along
with several Michigan wine consumers filed this lawsuit. They allege that the new law violates
the Commerce Clause and the Privileges and Immunities Clause. The Michigan Beer & Wine
Wholesalers Association intervened as a defendant.

        Both sides moved for summary judgment. The court ruled for the claimants. In choosing
a remedy for the violation, the court extended delivery rights to out-of-state retailers rather than
returning matters to the no-delivery status quo. Michigan obtained a stay pending appeal.

                                                     II.

                                                     A.

        Resolution of this case turns on the accordion-like interplay of two provisions of the
United States Constitution. One is the Commerce Clause, which gives Congress the power “[t]o
regulate Commerce . . . among the several States.” U.S. Const. art. I, § 8, cl. 3. The Clause
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grants Congress power to preempt or permit state laws that interfere with interstate commerce,
and it impliedly “prohibits state laws,” as determined by the federal courts, “that unduly restrict
interstate commerce.” Tenn. Wine & Spirits, 139 S. Ct. at 2459. Under the implied prohibition,
if a state law discriminates against “out-of-state goods or nonresident economic actors,” it may
survive only if tailored to advance a legitimate state purpose. Id. at 2461.

       The other provision is the Twenty-first Amendment. While the Commerce Clause grants
Congress power to eliminate state laws that discriminate against interstate commerce, the
Twenty-first Amendment grants the States the power to regulate commerce with respect to
alcohol. Section 2 of the Amendment bars “[t]he transportation 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.” U.S. Const. amend. XXI, § 2. The section gives the States broad
latitude to regulate the distribution of alcohol within their borders. See North Dakota v. United
States, 495 U.S. 423, 432–33 (1990) (plurality opinion); see also id. at 447–48 (Scalia, J.,
concurring in the judgment). Indeed, had Congress (as opposed to the people through the
ratification process) enacted this exact law, it is doubtful there would be any role for the federal
courts to play. When faced with a dormant Commerce Clause challenge to an alcohol regulation,
as a result, we apply a “different” test. Tenn. Wine & Spirits, 139 S. Ct. at 2474. Rather than
skeptical review, we ask whether the law “can be justified as a public health or safety measure or
on some other legitimate nonprotectionist ground.” Id. But if the “predominant effect of the law
is protectionism,” rather than the promotion of legitimate state interests, the Twenty-first
Amendment does not “shield[]” it. Id.

       At the outset, it’s worth acknowledging that case law authorizes several features of
Michigan’s system for regulating the distribution of alcohol within its borders.

       The courts have frequently said that the Twenty-first Amendment permits a three-tier
system of alcohol distribution, and the Commerce Clause does not impliedly prohibit it. Nothing
stops States, the Court has explained, from “funnel[ing] sales through the three-tier system,” a
practice that is “unquestionably legitimate.” Granholm v. Heald, 544 U.S. 460, 489 (2005)
(quotation omitted); see Tenn. Wine & Spirits, 139 S. Ct. at 2471–72; Cal. Retail Liquor Dealers
Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 110 (1980). Granholm, a case from Michigan, left
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no drama about the issue: “States can mandate a three-tier distribution scheme in the exercise of
their authority under the Twenty-first Amendment.” 544 U.S. at 466. We have echoed the point:
A State’s “decision to adhere to a three-tier distribution system is immune from direct challenge
on Commerce Clause grounds.” Jelovsek v. Bredesen, 545 F.3d 431, 436 (6th Cir. 2008); see
Byrd v. Tenn. Wine & Spirits Retailers Ass’n, 883 F.3d 608, 616, 623 (6th Cir. 2018).

       The courts also have permitted States to regulate wholesalers (the second tier) as a way to
control the volume of alcohol sold in a State and the terms on which it is sold. See North
Dakota, 495 U.S. at 432–33 (plurality opinion); see also id. at 447–48 (Scalia, J., concurring in
the judgment); Bridenbaugh v. Freeman-Wilson, 227 F.3d 848, 853–54 (7th Cir. 2000); S. Wine
& Spirits of Am., Inc. v. Div. of Alcohol & Tobacco Control, 731 F.3d 799, 810–11 (8th Cir.
2013). The Michigan system shows how this works. The State is the wholesaler for liquor, and
it sells at an inflated price through state-authorized distribution agents. See Mich. Comp. Laws
§§ 436.1231, 1233. As for private wholesalers of beer and wine, Michigan imposes many
restrictions: minimum prices, no sales on credit, no volume discounts. See id. §§ 436.2013,
1609a(5); Mich. Admin. Code R. 436.1726(4). The State also regulates retail prices indirectly.
It heavily taxes wholesalers, prohibits consignment sales, and restricts the terms on which
wholesalers may buy from producers. See Mich. Comp. Laws §§ 436.1301, 1409(2). To avoid
the “tied-house” problem, Michigan prohibits wholesalers from giving anything of value to
retailers, and it prohibits them from having a financial interest in any producer, retailer, or other
wholesaler. See id. § 436.1603; Mich. Admin. Code R. 436.1651(3), 1735. To enforce these
rules, Michigan requires wholesalers to post and hold their prices (to ensure uniformity across
retailers and compliance with the pricing restrictions) and to keep records of all sales ready for
random inspection. Mich. Admin. Code R. 436.1726.

       The federal courts also have permitted States, like Michigan, to require retailers to be
physically based in the State. Byrd, 883 F.3d at 622–623 & n.8; Cooper v. Tex. Alcoholic
Beverage Comm’n, 820 F.3d 730, 743 (5th Cir. 2016). The Michigan licensing process for
retailers ensures no violations of “tied-house” rules and no suspect sources of capital. To ensure
compliance with its many regulations, the Commission conducts random inspections, over
18,000 in 2016 alone, and sting operations. Retailers also must comply with rules governing
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their physical layout, storage of alcohol, recordkeeping, advertisements, and employee training.
Mich. Admin. Code R. 436.1007, 1023, 1025, 1309–25, 1501–33.

                                                 B.

         All of this leaves a narrow question. If Michigan may have a three-tier system that
requires all alcohol sales to run through its in-state wholesalers, and if it may require retailers to
locate within the State, may it limit the delivery options created by the new law to in-state
retailers? The answer is yes.

         “[A]ny notion of discrimination assumes a comparison of substantially similar entities.”
Gen. Motors Corp. v. Tracy, 519 U.S. 278, 298 (1997). That is not clear when it comes to a
comparison between Michigan retailers and Indiana retailers like Lebamoff. True, they both sell
the same product to consumers. True also, retailers in Northern Indiana and Southern Michigan
presumably compete with each other for those consumers. But they operate in distinct regulatory
environments, the most notable distinction being that Michigan-based retailers may purchase
only from Michigan wholesalers and must operate within its three-tier system and comply with
its other regulations. That may affect whether the kind of discrimination targeted by the dormant
Commerce Clause is afoot. See Wine Country Gift Baskets.com v. Steen, 612 F.3d 809, 820 (5th
Cir. 2010) (upholding a similar statute on this ground). But we need not decide the case on this
basis.

         Even if Indiana and Michigan retailers count as similarly situated under the dormant
Commerce Clause, Lebamoff’s claim overlooks the restless specter of the Twenty-first
Amendment. Due to the Amendment, Commerce Clause challenges to alcohol regulation face a
“different” test. Tenn. Wine & Spirits, 139 S. Ct. at 2474. We ask only whether the law “can be
justified as a public health or safety measure or on some other legitimate nonprotectionist
ground.” Id.

         Michigan’s law promotes plenty of legitimate state interests, and any limits on a free
market of alcohol distribution flow from the kinds of traditional regulations that characterize this
market, not state protectionism. The States, the Court has explained, have legitimate interests in
“promoting temperance and controlling the distribution of [alcohol].” North Dakota, 495 U.S. at
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433, 438–39 (plurality opinion); see id. at 447–48 (Scalia, J., concurring in the judgment);
Granholm, 544 U.S. at 484; Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 276 (1984); cf. 44
Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 504–07 (1996). To promote these interests,
States have “virtually complete control over whether to permit importation or sale of liquor and
how to structure the[ir] liquor distribution system[s].” Granholm, 544 U.S. at 488; see North
Dakota, 495 U.S. at 424 (plurality opinion); Midcal Aluminum, 445 U.S. at 110.

       Consistent with these decisions, several lower courts have permitted the States to prohibit
out-of-state direct deliveries as a valid exercise of their Twenty-first Amendment authority.

       The Seventh Circuit got the ball rolling. In an opinion by Judge Easterbrook, the court
upheld an Indiana statute that prohibited direct alcohol deliveries from out of state but allowed
in-state retailers and wholesalers to “deliver directly to consumers’ homes.” Bridenbaugh,
227 F.3d at 853–854. The Twenty-first Amendment, he explained, necessarily authorizes some
discrimination, as any regulation of the “transportation or importation into any state,”
U.S. Const. amend. XXI, § 2, necessarily protects local sellers by “leav[ing] intrastate commerce
unaffected,” Bridenbaugh, 227 F.3d at 853. And the Amendment’s historical backdrop confirms
that, at the very least, it authorized bans on direct deliveries from out of state. Id. at 851–53.
All in all, the court concluded, Indiana’s delivery ban was not functionally discriminatory at all.
It simply “channel[ed]” all alcohol, from within the State and outside of it, through in-state
distributors to facilitate state taxation and regulation, “precisely” what the Twenty-first
Amendment was for. Id. at 854. In view of the Seventh Circuit’s decision to uphold the Indiana
law, consider the inequities that would arise if we invalidated the Michigan law. It would mean
that Indiana retailers could make direct deliveries within Michigan, but Michigan retailers could
not do the same in Indiana. That’s no way to run a railroad—or manage cross-border trade.

       The Second Circuit upheld a similar law. It permitted in-state retailers to deliver to
customers’ homes (through their own vehicles or trucking companies) but barred out-of-state
retailers from doing the same. Arnold’s Wines, Inc. v. Boyle, 571 F.3d 185, 187, 191 (2d Cir.
2009). Banning direct deliveries from out-of-state, the court reasoned, was necessary to ensure
“all liquor sold within” the state passed through in-state wholesalers. Id. at 186. And state
control of the wholesalers, it added, promoted “core” Twenty-first Amendment interests by
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“promoting temperance [and] ensuring orderly market conditions.” Id. at 188, 191 (quotation
omitted).   The court rejected the claim that the law amounted to a cover for economic
protectionism and held that Granholm confirmed its validity. Id. at 191.

       The Fifth Circuit upheld a Texas statute that allowed local delivery by in-state retailers
but prohibited deliveries from outside the State. Steen, 612 F.3d at 812. It upheld the law for
much the same reasons as the courts that went before it: Differential treatment of out-of-state
deliveries was necessary to preserve the three-tier system and the regulatory objectives it served.
Id. at 819–20. Nor did in-state delivery privileges undermine this rationale. Like “carry[ing] the
beverages to a customer’s vehicle parked in [a retailer’s] lot, or across the street,” in-state
deliveries were a “a constitutionally benign incident” of a three-tier a system. Id. at 819, 820.

       As these opinions suggest, there is nothing unusual about the three-tier system, about
prohibiting direct deliveries from out of state to avoid it, or about allowing in-state retailers to
deliver alcohol within the State. Opening up the State to direct deliveries from out-of-state
retailers necessarily means opening it up to alcohol that passes through out-of-state wholesalers
or for that matter no wholesaler at all. See Arnold’s Wines, 571 F.3d at 185 n.3. That effectively
eliminates the role of Michigan’s wholesalers. If successful, Lebamoff’s challenge would create
a sizeable hole in the three-tier system. Michigan imposes heavy taxes on all alcohol products at
the wholesale level. Mich. Comp. Laws § 436.1233(1). And the State itself is the wholesaler for
all liquor products, prompting higher prices than a free market would bear. Id. That leaves too
much room for out-of-state retailers to undercut local prices and to escape the State’s interests in
limiting consumption.

       There’s ample reason to think Indiana retailers like Lebamoff would do just that.
While Michigan and Indiana both have three-tier systems, they regulate them differently.
Unlike Michigan, Indiana permits wholesalers to sell to retailers below cost, with volume
discounts, on credit, and with no minimum prices. See id. § 436.1609a(5); Mich. Admin. Code
R. 436.1055. Nor would it end there. Lebamoff itself identifies close to 2,000 retailers who
could use direct deliveries if allowed. That is just the beginning. Once out-of-state delivery
opens, the least regulated (and thus the cheapest) alcohol will win. That’s good news for people
who like a drink or two. But it’s not great news for the people responsible for dealing with those
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who have trouble stopping. In the absence of delivery restrictions, there is a “substantial” risk
that out-of-state alcohol will get “diver[ted] into the retail market[,] . . . disrupti[ng] the [alcohol]
distribution system” and increasing alcohol consumption.            North Dakota, 495 U.S. at 433
(plurality opinion).

        The alert reader may wonder if Michigan can respond to this problem by controlling
prices set by out-of-state wholesalers and producers. No, it may not. The extraterritoriality
doctrine, also rooted in the dormant Commerce Clause, bars state laws that have the “practical
effect” of controlling commerce outside their borders. Healy v. Beer Inst., 491 U.S. 324, 336
(1989); see Am. Beverage Ass’n v. Snyder, 735 F.3d 362, 377 (6th Cir. 2013) (Sutton, J.,
concurring). Although Michigan may regulate the business relationship and prices between in-
state wholesalers and retailers, it may not do the same for out-of-state wholesalers and retailers.
See Healy, 491 U.S. at 337–38.

        That Michigan permits direct deliveries by in-state retailers does not alter this conclusion.
These retailers all live with the bitter and sweet of Michigan’s three-tier system—the bitter of
being able to buy only from Michigan wholesalers (and the price and volume regulations that go
with it) and the sweet of being subject only to intrastate competition. Permitting these retailers
to deliver directly to consumers is nothing new. Michigan has long allowed retailers to use third-
party delivery to serve customers who live in areas “surrounded by water and inaccessible by
motor vehicle.” Mich. Comp. Laws § 436.1203(13); 2008 Mich. Pub. Acts 474, § 203(12).
More recently, Michigan has allowed retailers to deliver alcohol using their own employees.
Mich. Comp. Laws § 436.1203(14).            One could imagine other examples—say, permitting
retailer’s employees to bring the customers’ goods to their cars or permitting drive-through
liquor stores. New delivery options are simply new ways of allowing the heavily regulated third
tier to do business. Anyone who wishes to join them can get a Michigan license and face the
regulations that come with it. Lebamoff seizes the sweet and wants to take a pass on the bitter.

        The text and history of the Twenty-first Amendment support this conclusion. Recall that
the text grants the States authority over the “importation” of alcohol into their borders.
U.S. Const. amend. XXI, § 2.        This suggests state power is “at its apex” when regulating
importation, as the challenged Michigan statute does. See Tenn. Wine & Spirits, 139 S. Ct. at
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2471. The historical backdrop confirms as much. Section 2’s text tracks the pre-Prohibition
Webb-Kenyon Act, “suggest[ing] that § 2 was meant to have a similar meaning.” Id. at 2467.
The Webb-Kenyon Act “fix[ed] [a] hole” in state regulatory authority that permitted out-of-state
producers to evade state regulations by delivering directly to state residents.          Id. at 2466.
Lebamoff’s lawsuit is nothing less than an effort to re-create that hole. Allowing States to
“channel” alcohol sales through in-state wholesalers is “precisely what § 2 is for.” Bridenbaugh,
227 F.3d at 854.

                                                  C.

       Lebamoff challenges this conclusion in several ways, each unconvincing. It argues that
ordinary dormant Commerce Clause analysis applies (false) and that the Twenty-first
Amendment is not a complete defense (true). What the Twenty-first Amendment purports to
give, it is true, the dormant Commerce Clause sometimes takes away. To respect the States’
authority to regulate “importation” slights the dormant Commerce Clause’s efforts to halt
barriers to free commerce. There is no way around the problem. “[E]very statute limiting
importation leaves intrastate commerce unaffected. If that were the sort of discrimination that
lies outside state power, then § 2 would be a dead letter.” Id. at 853. That’s why a “different”
dormant Commerce Clause test applies to alcohol regulations. Tenn. Wine & Spirits, 139 S. Ct.
at 2474. The Twenty-first Amendment “gives the States regulatory authority that they would not
otherwise enjoy.” Id.

       Lebamoff tries to minimize the State’s interest in preserving a three-tier system,
criticizing the costs it imposes. But Michigan could not maintain a three-tier system, and the
public-health interests the system promotes, without barring direct deliveries from outside its
borders. No amount of additional money through spending appropriations or “rais[ed] license
fees,” Appellee Br. 28, could change that reality.

       Lebamoff is skeptical of other potential justifications for Michigan’s law: preventing
sales to minors, facilitating tax collection, and ensuring safe products. Granholm rejected many
of these justifications in the context of direct-delivery restrictions, it is true. 544 U.S. at 491–92.
There is room for skepticism, we agree, over whether Michigan’s delivery restrictions prevent
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sales to minors in any material way. Concurring Op. at 3. But even if Michigan could protect
minors and ensure retailer accountability in other ways, there is no other way it could preserve
the regulatory control provided by the three-tier system.

       Granholm’s holding does not change this calculus.            It concerned a discriminatory
exception to a three-tier system. Granholm, 544 U.S. at 466. In-state wineries could avoid in-
state wholesalers and retailers and thus deliver directly to consumers, while out-of-state wineries
could not. That was the “explicit discrimination” in Granholm, not delivery privileges by
themselves. Id. at 467. Lower courts have characterized Granholm in exactly this way and
rejected challenges like Lebamoff’s. See, e.g., Arnold’s Wines, 571 F.3d at 190–91 (upholding
state law that permitted in-state, but not out-of-state, retailers to deliver alcohol to consumers’
homes); Steen, 612 F.3d at 818–19 (same). There is no appellate decision to the contrary.

       Lebamoff suggests that a state senator’s statement conveys a discriminatory motive.
Here is the statement: “[Michigan retailers] currently cannot [deliver wine] legally. And they
are under tremendous disadvantage, competitive disadvantage, with out-of-state entities that are
doing it illegally right now. So this is a bill to help out our constituents, our local businesses to
be more competitive in the marketplace.” Dec. 8, 2016, MacGregor Statement on S.B. 1088 at
40:50–41:16,    https://www.house.mi.gov/SharedVideo/PlayVideoArchive.html?video=COMM-
120816.mp4. As the senator said elsewhere, however, the amendment’s purpose was not to give
Michigan businesses an advantage but to “level[] the playing field.” Id. at 40:15. Even if one
legislator’s voice offered a meaningful insight into a collective body’s objectives (doubtful), the
statement in context shows only the legitimate goal of evening the playing field.

       Nor does Michigan’s past treatment of direct deliveries upset this conclusion. Before the
2017 amendment, Michigan permitted out-of-state retailers to deliver alcohol using their own
vehicles and employees. 2008 Mich. Pub. Acts 474, § 203(11). Even that narrow exception was
adopted grudgingly. Michigan originally had a scheme much like the present one: prohibiting
out-of-state deliveries and permitting in-state retailers to make them in limited circumstances.
But a federal district court, purportedly relying on Granholm, found that scheme violated the
dormant Commerce Clause. Siesta Vill. Mkt., LLC v. Granholm, 596 F. Supp. 2d 1035, 1037–38
(E.D. Mich. 2008). Rather than test this conclusion on appeal, Michigan amended the law,
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ending all direct deliveries and permitting a generally-applicable employee-delivery exception.
2008 Mich. Pub. Acts 474, § 203(11). About a decade later, concerned with increasing problems
related to cross-border deliveries and reassured by a growing lower court consensus,
see Arnold’s Wines, Inc., 571 F.3d at 190–91; Steen, 612 F.3d at 818–19, Michigan enacted the
2017 amendment. There’s nothing wrong with that.

         What of the consumer plaintiffs, the Michigan wine purchasers who cannot buy the types
of wine they want without inconvenience? The record for one suggests these concerns may be
exaggerated. Wine wholesalers have their own profit incentive to carry enough brands to meet
consumer demand and answer requests for more. And wine consumers have yet another avenue:
the more than 1,200 wineries excepted from the law as long as they make no more than a
minimal volume of direct deliveries. Perhaps for these reasons, there are over 44,000 brands of
wine available in Michigan, the vast majority of them from out-of-state producers. To be sure,
some brands are not available. But the extent of the State’s responsibility for that gap is not
clear.   Some winemakers may seek higher margins by selling exclusively at “high-end”
restaurants or at their own vineyards, and others may lack the capacity to produce enough wine
for wide distribution. R. 34-3 at 3–5. As Lebamoff’s expert admits, fewer than 50,000 of the
roughly 200,000 wines sold in the country are available nationwide. That’s not Michigan’s fault.

         Even so, it’s likely the case that some wine producers do not sell to Michigan wholesalers
due to these regulatory costs. Some rare wines, for example, apparently are available only
through specialty retailers located primarily in California, New York, New Jersey, and Chicago.
Concurring Op. at 1. But some reduction in consumer choice, it seems to us, flows ineluctably
from a three-tier system. The purpose of the system, for better or worse, is to make it harder to
sell alcohol by requiring it to pass through regulated in-state wholesalers. Those middlemen
unsurprisingly impose added costs, sometimes choice-limiting costs. Still, it’s worth noting that
Michigan has loosened some regulations to increase choice. That was the point of allowing
limited direct deliveries by out-of-state wine producers. Perhaps more amendments are in order.
Broadening product options seems far afield from the tied-saloon system that the three-tier
system was designed to replace. The internet has widened that gap. Today “[w]e live in a global
economy and we shop in virtual marketplaces for everything from luxuries to necessities.” Id. at
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2. But the Twenty-first Amendment leaves these considerations to the people of Michigan, not
to federal judges.

                                                  D.

       Also unavailing is Lebamoff’s claim that the law violates the Privileges and Immunities
Clause of Article IV of the United States Constitution. “The Citizens of each State,” the Clause
says, “shall be entitled to all Privileges and Immunities of Citizens in the several States.” U.S.
Const., art. IV, § 2, cl. 1. The point of the Clause is to “plac[e] the citizens of each State upon
the same footing with citizens of other States, so far as the advantages resulting from citizenship
in those States are concerned.” McBurney v. Young, 569 U.S. 221, 228 (2013) (quotation
omitted).

       Long ago, the Court rejected the idea that the right to sell alcohol was a privilege or
immunity under the similarly-worded Fourteenth Amendment. U.S. Const. amend. XIV, § 1, cl.
2. “There is no inherent right in a citizen to thus sell intoxicating liquors by retail. It is not a
privilege of a citizen of the state or of a citizen of the United States.” Crowley, 137 U.S. at 91;
see Mugler v. Kansas, 123 U.S. 623, 657, 675 (1887); Bartemeyer v. Iowa, 85 U.S. (18 Wall.)
129, 132, 135 (1874). The words of the Twenty-first Amendment, ratified long after 1868, show
that a State may prohibit sales of alcohol if it wishes.

       On top of that, the Clause concerns discrimination based on state citizenship or residency,
see McBurney, 569 U.S. at 228, and Michigan’s law does not discriminate on that basis.
Residents of Indiana are on “the same footing” as residents of Michigan. Id. To sell alcohol in
Michigan, they simply have to play by the Michigan rules—just as they have to do in Indiana.
So far, over 1,800 non-residents have gotten Michigan retail licenses. Lebamoff can do the
same. There is no residency requirement, only the requirement that it set up a store within the
State—a physical presence requirement that the U.S. Supreme Court and our court permit.
See Tenn. Wine & Spirits, 139 S. Ct. at 2475; Byrd, 883 F.3d at 622–623 & n.8.

       Lebamoff offers no good reason to depart from these principles or to treat this claim in a
different way from the dormant Commerce Clause claim. To its credit, Lebamoff admits that
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“[n]o prior case in this or any other circuit” has found a state regulation of alcohol violated the
Privileges and Immunities Clause. Appellee Br. 54. We see no good reason to be the first.

                                                III.

       Even if the district court had been right in deciding that the law violated the dormant
Commerce Clause, it bears adding, the court chose the wrong remedy. Rather than altering
Michigan’s alcohol distribution system by extending delivery rights to out-of-state retailers, it
should have returned things to the pre-2017 status quo.

       At stake was whether to invalidate a new law or extend the prior law’s reach. In
answering that question, we ask what the legislature would have preferred had it known of the
constitutional problem, see Murphy v. NCAA, 138 S. Ct. 1461, 1482 (2018), doing our best to
“limit the solution to the problem,” Ayotte v. Planned Parenthood of N. New Eng., 546 U.S. 320,
328–29 (2006). The imperative is not to “rewrite a statute and give it an effect altogether
different from that sought by the measure viewed as a whole.” Murphy, 138 S. Ct. at 1482
(quotation omitted).

       Look no further than the text of this law for guidance. “If any provision of this act is
found to be unconstitutional,” it says, “the offending provision shall be severed and shall not
affect the remaining portions of the act.” Mich. Comp. Laws § 436.1925. The 2017 amendment
created the alleged discrimination by granting delivery privileges only to in-state retailers. The
severability clause in no uncertain terms says that we should invalidate that provision and leave
the rest of the statute—and the rest of the three-tier system—intact.

       Another clue points in the same direction. A statutory purpose of the provision at issue,
§ 436.1203, is to “maintain strong, stable, and effective regulation by having beer and wine sold
by retailers consumed in this state [] pass[] through the 3-tier distribution system established
under this act.” Id. § 436.1203(2)(b). How could obliterating that system be consistent with this
provision? Any other approach amounts to wholesale surgery, not statutory interpretation.
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       The district court’s solution was to strike the amendment and parts of the original statute.
The court held the 2017 amendment unconstitutional “insofar as” it precluded direct delivery “in
conjunction with [Mich. Comp. Laws] Section 436.1607.” R. 43 at 20. Section 1607 provides
that only in-state retailers can get delivery licenses, and it was not part of the 2017 amendment.
It was enacted over a decade earlier. See 2008 Mich. Pub. Acts 218, § 607(1). The court had no
basis for touching § 1607 in view of the severability clause.

       Some cases, it is true, suggest courts may remedy discrimination by extending benefits
rather than retracting them. See, e.g., Heckler v. Matthews, 465 U.S. 728, 733 (1984); Cherry
Hill Vineyards, LLC v. Lilly, 553 F.3d 423, 435 (6th Cir. 2008). But that is a rule of thumb for
approximating the “touchstone” of the severability question: legislative intent as captured by the
words of the statute. Ayotte, 546 U.S. at 330. Today’s severability clause clearly conveys the
Michigan legislature’s intent, and it distinguishes our case from the one on which Lebamoff most
heavily leans: Cherry Hill, 553 F.3d at 435. Another of Lebamoff’s supposedly favorable cases
notes the imperative of following “the intent of the legislature” by “consider[ing] the degree of
potential disruption of the statutory scheme that would occur by extension as opposed to
abrogation.”   Heckler, 465 U.S. at 739 n.5 (quotation omitted).         The district court’s two-
paragraph analysis on this score reveals no consideration or appreciation of that disruption.

       We reverse and remand for proceedings consistent with this opinion.
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                                      _________________

                                       CONCURRENCE
                                      _________________

       McKEAGUE, Circuit Judge, concurring.

       I ultimately agree that Michigan has presented enough evidence, which the plaintiffs have
not sufficiently refuted, to show its in-state retailer requirement serves the public
health. Tennessee Wine and Spirits Retailers Ass’n v. Thomas, 139 S. Ct. 2449, 2474 (2019).

       However, what I believe is the crux of this case is the online shipping component.
That Michigan prohibits out-of-state retailers from selling wine online and shipping directly to
consumers—but permits wineries and in-state retailers to do so—adds two distinct wrinkles into
an otherwise protected three-tier system. First, it asks us to conduct a reexamination of
regulations that impede internet commerce generally, given the “‘far-reaching systemic and
structural changes in the economy’ and ‘many other societal dimensions’ caused by the Cyber
Age.” South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2097 (2018) (quoting Direct Mktg. Ass’n
v. Brohl, 135 S. Ct. 1124, 1135 (2015) (Kennedy, J., concurring)). Second, it weakens the
public health justifications—thus strengthening the dormant Commerce Clause challenge in this
case—but not enough to change the result.

       Let’s look at it from the perspective of a consumer. The Michigan consumers in this
appeal all have varying reasons for buying wine online. Some purchase wine online due to time
restraints. Others purchase wine online because the wine they desire is available only online.
This is especially true when it comes to imported wine. For example, from 2012 to 2016,
511,437 different wines were approved for sale in the United States. Of those, 65% were of
imported origin. And while consumers in most states, including Michigan, may purchase wine
directly from wineries across the country, imported wine may only be purchased from retailers
within their state and may not be shipped directly from the producer located out of the country or
from retailers located outside the state of Michigan. Unsurprisingly, a number of specialty wines
are housed only at specialty retailers located primarily in California, New York, New Jersey, and
Chicago. So, as evidenced, there’s a market for buying wine online, especially from retailers.
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       But Michigan allows only in-state retailers access to this online market. Only in-state
retailers that hold a specially designated merchant license may ship wine directly to
consumers. Mich. Comp. Laws § 436.1203(3), (15).

       A consumer looking to buy wine for a special occasion can go online, research different
varieties of wine, read reviews from aficionados, and select a bottle or two for purchase, only to
be told at checkout: “Sorry, you live in Michigan.” What a frustration that must be considering
this is how we all buy things nowadays. We live in a global economy and we shop in virtual
marketplaces for everything from luxuries to necessities. And we now rely even more on online
shopping in the recent pandemic.

       Obviously, this case involves wine and therefore the Twenty First Amendment
complicates things. But does that mean a state’s regulation of virtual marketplaces for wine
should be seen as simply an extension of its existing three-tier scheme, or as an exception to the
scheme warranting judicial rethinking? In some ways, as the lead opinion notes, in-state online
sales are analogous to brick-and-mortar wine merchants carrying cases of wine to customers’
cars. See also Wine Country Gift Baskets.com v. Steen, 612 F.3d 809, 820 (5th Cir. 2010)
(viewing “local deliveries as a constitutionally benign incident of an acceptable three-tier
system”). But that analogy loses force when viewed in context of the ubiquity of online sales.
Michigan’s direct retailer-to-consumer shipping law isn’t just a “local delivery.” It allows for
wide range shipping, even through use of a simple “mobile application.” Mich. Comp. Laws
§ 436.1203(15). It’s a whole new market; a market that early twentieth century state legislatures
didn’t anticipate when crafting the three-tier systems the Supreme Court has since approved.
So I’m not so sure that the in-state retailer requirement is just a coda to Michigan’s three-tier
regulations. A state that opens up direct online shipping to consumers presents the “changing
economic and social” circumstances that may call for a different balance between the dormant
Commerce Clause and the Twenty First Amendment. Steen, 612 F.3d at 819 (citing Arnold’s
Wines, Inc. v. Boyle, 571 F.3d 185, 198–201 (2d Cir. 2009) (Calabresi, J., concurring)). But until
a different balance is struck, we are bound by the Supreme Court’s protection of a traditional
three-tier system.
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       And with the existing balance now, Michigan’s position prevails.                 Michigan’s
amendment permitting only in-state retailers to ship directly to consumers must have a public
health justification on its own. Because Michigan chose to allow in-state retailers to ship
wine directly to consumers, it “must do so on evenhanded terms.” Granholm, 544 U.S. at 493.
If not evenhanded, Michigan must present sufficient evidence to show a public health
justification. Id.; Tennessee Wine, 139 S. Ct. at 2474.

       While the online shipping component of Michigan’s regulations weakens its public health
rationales, Michigan can still show that the in-state retailer requirement protects public health.
But to their credit, the plaintiffs offer persuasive counterarguments.

       Start with the flaws in Michigan’s public health rationales. Take for example Michigan’s
argument that the in-state requirement allows it to monitor the sale of alcohol to
underage individuals. Michigan argues that in the five years before the conclusion of discovery
in this case, there had been 3,125 violations for sales to minors uncovered by sting operations
involving a minor decoy. Opening up online sales to out-of-state retailers, the argument goes,
would make a bad situation worse.

       But the fact that in-state retailers can sell online cuts against this rationale. If Michigan
thinks there is such a risk of underage sales in the state, why expand that risk by allowing online
sales? True, the common carrier delivering alcohol to the consumer’s door must be licensed by
Michigan and check the consumer’s identification and age at the time of delivery. Mich. Comp.
Laws § 436.1203(3), (15). For this to happen, though, it’s not necessary that the retailer be
in-state. Michigan has already proven that. Out-of-state wineries can ship directly to consumers,
and Michigan requires consumer identification and age verification.              Id. § 436.1203(4).
So Michigan’s shot itself in the foot.     Its own evidence tends to show “nondiscriminatory
alternatives” could sufficiently further its interests. Tennessee Wine, 139 S. Ct. at 2474.

       However, in the end, Michigan prevails in its justifications. The tricky part is that
Michigan can largely rely on what has already been found to inherently protect public health.
For example, requiring retailers to be in-state to sell online allows Michigan to “monitor the
stores’ operations through on-site inspections.”          Tennessee Wine, 139 S. Ct. at 2475.
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For retailers that don’t comply with the law, this allows Michigan to revoke licenses (and even
recall all products), and this has already been found to “provide[] strong incentives not to sell
alcohol in a way that threatens public health or safety.” Id. (citing Granholm, 544 U.S. at 490)
(internal quotation marks omitted).      In 2016, Michigan conducted 18,039 on-site physical
inspections and related contacts at retail establishments for licensing and enforcement purposes.
And these inspections “routinely uncover evidence of violations of the Code and administrative
rules.” Moreover, whether online sales are an extension to traditional three-tier systems or not
(which, again, I question), there are the other baked-in public health justifications that flow from
such systems, like promoting temperance. Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 276
(1984). The plaintiffs here have not produced sufficient countervailing evidence showing that
these public health concerns are “mere speculation” or “unsupported assertions,” or that the
“predominant effect” of the in-state retailer requirement is not the protection of public health.
Tennessee Wine, 139 S. Ct. at 2474.

       With these reservations, I concur.