Southern Loses Appeal in Missouri Residency Case


September 25, 2013


Southern Loses Appeal in Missouri Residency Case

Dear Client:

This just in. The 8th Circuit has upheld a lower court decision (see WSD 05-30-2012) that threw out Southern Wine and Spirits' attempt to overthrow Missouri's residency requirement. The 8th Circuit dismissed Southern's Commerce Clause and Equal Protection challenges to Missouri law, agreeing with Missouri district judge Nanette Laughrey and the 2nd, 4th and 5th Circuits that Granholm v. Heald only applies to alcohol producers.

The 8th Circuit says this: "States have discretion to establish their own versions of the three-tier system, and Granholm itself announced the unquestionable legitimacy of the three-tier system in a case involving two different versions of that system from New York and Michigan."

Furthermore, the state has demonstrated rational reasons for its residency law - namely that it is in Missouri's interest to ensure that liquor wholesalers are publicly accountable. In fact, the Missouri law included a "purpose clause," which states that the residency requirement is necessary to promote responsible consumption, prevent underage drinking, and maintain an orderly marketplace.

In all, the court determined that the state had rational reasons for the laws it passed and concluded that "the Division has established a sufficient basis for its residency requirement, which is meaningfully tied to the 'aim of the Twenty-first Amendment'… to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use."

At this point Southern can still appeal to the Supreme Court. So we wait.

WHERE TEXAS FITS IN. And like the lower Missouri district court, the 8th Circuit noted that a 5th Circuit decision (Cooper v. McBeath) that invalidated wholesaler residency requirements in Texas back in 2005 doesn't apply because it predated Granholm. Could Texas possibly revisit that decision in the future now that it's in disagreement with other circuit courts? Note that Southern has yet to enter Texas, although president Wayne Chaplin says they are eager to do so (see WSD 06-03-2013). He told WSD this: "We do currently have a wholesale permit, and would love the opportunity to enter Texas because it is such an important market for our national account customers…but we will need to find the right opportunity--with supplier support--for our entry." But that's another story for another day.

You can read the 8th Circuit court opinion for yourself here, courtesy of Alcohol Law Review.

Until tomorrow, Emily

"Defeat is not bitter unless you swallow it."
-- Joe Clark

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