B-21 Wines, Inc. v. Bauer

36 F.4th 214

B-21 WINES, INC.; Justin Hammer; Bob Kunkle; Mike Rash; Lila Rash, Plaintiffs – Appellants,

v.Hank BAUER, Chair, North Carolina Alcoholic Beverage Control Commission, Defendant – Appellee,andJoshua Stein, Attorney General of North Carolina, Defendant.

Center for Alcohol Policy ; North Carolina Association of ABC Boards; American Beverage Licensees ; NC Beer & Wine Wholesalers Association; Wine & Spirits Wholesalers of America, Incorporated, Amici Supporting Appellee.

No. 21-1906

United States Court of Appeals, Fourth Circuit.

Argued: March 9, 2022

Decided: June 1, 2022

ARGUED: James A. Tanford, EPSTEIN COHEN SEIF AND PORTER, LLP, Bloomington, Indiana, for Appellants. Ryan Y. Park, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for Appellee. ON BRIEF: Robert D. Epstein, James E. Porter, EPSTEIN COHEN SEIF AND PORTER, LLP, Indianapolis, Indiana; William C. Trosch, CONRAD TROSCH & KEMMY, P.A., Charlotte, North Carolina, for Appellants. Joshua H. Stein, Attorney General, Zachary W. Ezor, Solicitor General Fellow, Jeffrey B. Welty, Special Deputy Attorney General, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for Appellee. Jon Carr, JORDAN PRICE, Raleigh, North Carolina, for Amicus North Carolina Association of ABC Boards. John C. Neiman, Jr., Brandt P. Hill, MAYNARD COOPER & GALE P.C., Birmingham, Alabama, for Amici The Center for Alcohol Policy and the North Carolina Association of ABC Boards. Jo Moak, Jacob Hegeman, WINE & SPIRITS WHOLESALERS OF AMERICA, INC., Washington, D.C.; Kris Gardner, THARRINGTON SMITH LLP, Raleigh, North Carolina; Frederick R. Yarger, Teresa G. Akkara, WHEELER TRIGG O'DONNELL LLP, Denver, Colorado, for Amici Wine & Spirits Wholesalers of America, Inc., American Beverage Licensees, and North Carolina Beer & Wine Wholesalers Association.

Before WILKINSON, KING, and QUATTLEBAUM, Circuit Judges.

Affirmed by published opinion. Judge King wrote the majority opinion, in which Judge Quattlebaum joined. Judge Wilkinson wrote a dissenting opinion.

KING, Circuit Judge:

Plaintiffs B-21 Wines, Inc., a Florida-based wine retailer, plus its owner and three North Carolina residents, initiated this 42 U.S.C. § 1983 action in the Western District of North Carolina, challenging a North Carolina alcoholic beverage control regime as unconstitutional. More specifically, the Plaintiffs allege that North Carolina's regime, which prohibits out-of-state retailers — but not in-state retailers — from shipping wine directly to consumers in North Carolina (the "Retail Wine Importation Bar"), contravenes the Constitution's dormant Commerce Clause. The Plaintiffs sought declaratory and injunctive relief and named the Chair of the North Carolina Alcoholic Beverage Control Commission as a defendant, in his official capacity only (hereinafter, the "N.C. Commission").¹

After entertaining competing cross-motions for summary judgment, the district court awarded summary judgment to the N.C. Commission, ruling that the Twenty-first Amendment authorizes the Retail Wine Importation Bar. See B-21 Wines, Inc. v. Guy , (W.D.N.C. 2021), ECF No. 43 (the "Opinion").² The Plaintiffs challenge that ruling by way of this appeal. As explained herein, we are satisfied that — even though the Retail Wine Importation Bar discriminates against interstate commerce — it is authorized by Section 2 of the Twenty-first Amendment. In the circumstances, we affirm the district court.

I.

A.

Plaintiff B-21 Wines is a wine retailer from Florida that sells wine by way of online transactions. B-21 Wines and its Florida resident owner, plaintiff Justin Hammer, seek to sell and ship wine to North Carolina consumers. Plaintiffs Bob Kunkle, Mike Rash, and Lila Rash are North Carolina residents who desire to purchase wine from out-of-state retailers such as B-21 Wines, and seek to have the wine shipped directly to them. North Carolina, however, has made it unlawful "for any person who is an out-of-state retail[er]" to ship any "alcoholic beverage" — a term that includes wine — directly to North Carolina consumers. See N.C. Gen. Stat. § 18B-102.1(a). Additionally, North Carolina prohibits its residents from "hav[ing] any alcoholic beverage mailed or shipped to [them] from outside this State." Id. § 18B-109(a).

By contrast, North Carolina's in-state retailers may ship wine directly to consumers in the State. In that regard, North Carolina generally allows those wine retailers to ship their product "in closed containers to individual purchasers inside and outside the State." See N.C. Gen. Stat. § 18B-1001(4). To ship wine directly to consumers, retailers are required to obtain permits, id. § 18B-304, and such permits may be issued only to retail locations owned or managed by a North Carolina resident and having in-state physical premises that are made available for inspection, id. §§ 18B-900(a)(2), -502. Additionally, qualifying retailers must purchase their wine from an in-state wholesaler. Id. § 18B-1006(h).

North Carolina thus prohibits out-of-state retailers — by way of the Retail Wine Importation Bar — from shipping wine directly to the State's consumers. On the other hand, North Carolina allows its in-state retailers to do so. The constitutionality of that statutory distinction is at issue in this appeal.

B.

The differential treatment that North Carolina applies to in-state and out-of-state retailers with respect to wine shipping is part of the Old North State's larger regime of alcoholic beverage control. Like many other states, North Carolina has decided to regulate alcoholic beverages by routing them through a system of three distinct "tiers." A typical "three-tier system" separates the producers, the wholesalers, and the retailers, consistent with the public interest aim of promoting responsible consumption of alcoholic beverages. An important feature of a typical three-tier system is "to prohibit a member of one tier from having a financial interest in a member of a higher or lower tier." See Sarasota Wine Mkt., LLC v. Schmitt , 987 F.3d 1171, 1176 (8th Cir. 2021), cert. denied , ––– U.S. ––––, 142 S. Ct. 335, 211 L.Ed.2d 178 (2021). In North Carolina, the first tier of the three-tier system relates to the alcoholic beverage producers — such as wineries, breweries, and distilleries. See N.C. Gen. Stat. §§ 18B-1101, -1104, -1105. The system's second tier relates to the alcoholic beverage wholesalers, who purchase such beverages from producers and sell them to retailers. Id. §§ 18B-1107, -1109. And the third tier is for the alcoholic beverage retailers — such as bars, restaurants, and other businesses, which sell such beverages directly to consumers. Id. § 18B-1001.

Most alcoholic beverages in North Carolina pass through each of the three tiers before they reach consumers. North Carolina, however, has created limited exceptions to its three-tier system. One such exception applies to a specific class of alcoholic beverage producers — that is, the wineries. North Carolina authorizes both in-state and out-of-state wineries to obtain wine-shipper permits and to ship their product directly to consumers, thus bypassing the wholesaler and retailer tiers. See N.C. Gen. Stat. § 18B-1001.1. But that exception applies only to the wine producers and does not pertain to the wine retailers. The wine retailers are treated differently with respect to wine shipping privileges, based on whether they are in-state or out-of-state retailers. In sum, in North Carolina, the privilege of direct wine shipping is available to in-state wine producers, out-of-state wine producers, and in-state wine retailers — but not to out-of-state wine retailers.

The basic framework of the three-tier system has been in place for the better part of a century. Multiple states have adopted the system, primarily to promote public health and prevent alcohol abuse problems caused by so-called "tied-house" saloons that existed prior to Prohibition. Back then, the alcoholic beverage producers paid to establish saloons and, in exchange, the saloonkeepers agreed to sell only their backers' alcohol and to meet strict sales quotas. See Tenn. Wine & Spirits Retailers Ass'n v. Thomas , ––– U.S. ––––, 139 S. Ct. 2449, 2463 & n.7, 204 L.Ed.2d 801 (2019). Because those producers served only as "absentee" owners, they "knew nothing and cared nothing" about the resulting social ills. See J.A. 281 (citing Raymond B. Fosdick & Albert L. Scott, Toward Liquor Control 33 (Ctr. for Alcohol Pol'y 2011) (1933)).³ The "tied-houses" thus led to widespread alcohol abuse, which caused "a greater amount of crime and misery" than "any other source." See Crowley v. Christensen , 137 U.S. 86, 91, 11 S.Ct. 13, 34 L.Ed. 620 (1890).

In 1908, to address the social problems brought about by the "tied-houses," North Carolina prohibited alcoholic beverage sales statewide. This was more than a decade before the Eighteenth Amendment — ratified in 1919 — imposed Prohibition and banned nationwide the manufacture, sale, and transportation of alcoholic beverages. And although Prohibition technically resolved the "tied-house" issue, it led to a myriad of other social problems. As a result, the Eighteenth Amendment was repealed only 14 years later — in 1933 — by Section 1 of the Twenty-first Amendment. To garner support for the repeal of Prohibition, the drafters of the Twenty-first Amendment included Section 2 therein, which affords every state the option of banning alcoholic beverages completely if it chooses to do so. Section 2 provides, in haec verba , as follows:

The 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, is hereby prohibited.

See U.S. Const. amend. XXI, § 2.

After the Twenty-first Amendment returned the authority to regulate "intoxicating liquors" to the states, North Carolina appointed a commission in 1935 to study the issues related to alcoholic beverage control....