Last week, the Sixth Circuit upheld the statutory authority of Michigan’s recent amendment to its Liquor Control Code, which allows only in-state retailers to deliver liquor directly to consumers using state-licensed “third party facilitators.” This decision is a big victory for in-state liquor retailers, as it prevents them from being undercut by out-of-state businesses who want to bypass the state’s three-tier distribution system.
In Lebamoff Enterprises, Inc. v. Whitmer, issued April 21, 2020 (Docket Nos. 18-2199/2200), after Michigan amended its Liquor Control Code to limit the delivery of liquor to in-state retailers, Plaintiffs, a wine retailer based in Fort Wayne, Indiana, as well as several Michigan wine consumers, filed suit. They alleged that the state’s new law violated both the Commerce Clause and the Privileges and Immunities Clause.
In holding that Michigan was able to limit delivery options to in-state retailers, the Sixth Circuit held that even if Michigan and Indiana retailers were considered similarly situated under the Commerce Clause, Plaintiffs’ claim overlooks the Twenty-first Amendment. Under the Twenty-first Amendment, Commerce Clause challenges to alcohol regulation are subject to a different test, which asks only whether the law “can be justified as a public health or safety measure or on some other legitimate nonprotectionist ground.”
Under this test, the Sixth Circuit held that Michigan’s law promotes plenty of legitimate state interests, such as controlling the distribution of alcohol. This means that states have “virtually complete control over whether to permit importation or sale of liquor and how to structure the[ir] liquor distribution system[s].” Therefore, the Sixth Circuit held that there was nothing unusual or invalid about Michigan’s three-tier system, nor was there anything unusual about prohibiting out-of-state deliveries that circumvent this system.
With regards to Plaintiffs’ Privileges and Immunities argument, the Sixth Circuit quickly rejected this claim, holding that the Court had long ago rejected the idea that the right to sell alcohol was a privilege or immunity. Additionally, the Privileges and Immunities Clause concerns discrimination based on state citizenship or residency. However, Michigan’s law does not discriminate on that basis. In fact, over 1,800 non-residents have gotten Michigan retail licenses. Therefore, the Sixth Circuit held that there was nothing prohibiting Indiana retailers, like Lebamoff Enterprises, from doing the same.
A link to the opinion can be found here: https://law.justia.com/cases/federal/appellate-courts/ca6/18-2199/18-2199-2020-04-21.html.
