Today, the Supreme Court struck down on a Tennessee regulation that requires residency of two years for applicants applying for an in-state retail alcohol license. In a 7-2 decision, the Court reasoned that, while the 21st Amendment extends states the right to regulate sales of alcohol within state border, there are limitations under the Constitution. The Court ruled that the requirement unlawfully discriminated against non-residents and that a “highly attenuated” relationship to public health or safety was not satisfied. The residency requirement violates the Commerce Clause and is not saved by the Twenty-First Amendment. For more information, see Supreme Court Strikes Down Tennessee Alcohol-License Regulations. See full decision here.
To paint some color on the provision at issue, Tennessee law requires — once the Tennessee retail license is issued — the retailer live in the state for at least 10 consecutive years to renew the license. Without fault, this meant that in order to apply for the license, the retailer would have to live in Tennessee for well over the two years. The current regulation applies to officers, directors, and stockholders.
Tennessee is certainly not the only state with residency requirements for licenses. Some states require that a certain percentage of officers, directors, or stockholders of a business entity be residents of the state. Other states go further and require that all officers, directors, or stockholders be residents of the state. While not found in all state alcohol beverage codes, these restrictions can apply to the retail tier, wholesale tier, and manufacturer tier. It is hopeful that the ruling issued by the Supreme Court will not be limited just to the retail tier, as the law can be written to extent to the other two tiers of the alcohol beverage industry.
Understandably, the results of this case heard before the Supreme Court in 2018 were much awaited by the industry due to its potential impact on the industry. It is also the first strongly-related alcohol beverage case that the Court has heard since Granholm.
For more information on wine or alcohol law, please contact Lindsey Zahn.
DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.