Byrd v. Tenn. Wine & Spirits Retailers Ass'n

883 F.3d 608

Clayton BYRD, in his official capacity as Executive Director of the Tennessee Alcoholic Beverage Commission ; Tennessee Fine Wines and Spirits, LLC, dba Total Wine Spirits Beer & More ; Affluere Investments, Inc., dba Kimbrough Fine Wine & Spirits, Plaintiffs-Appellees,

v.TENNESSEE WINE AND SPIRITS RETAILERS ASSOCIATION, Defendant - Appellant.

No. 17-5552

United States Court of Appeals, Sixth Circuit.

Argued: November 30, 2017

Decided and Filed: February 21, 2018

ARGUED: Richard L. Colbert, KAY GRIFFIN, PLLC, Nashville, Tennessee, for Appellant. William J. Murphy, ZUCKERMAN SPAEDER LLP, Baltimore, Maryland, for Appellee Tennessee Fine Wines and Spirits. Keith C. Dennen, FARRIS BOBANGO, PLC, Nashville, Tennessee, for Appellee Affluere Investments. ON BRIEF: Richard L. Colbert, John J. Griffin, Jr., Nina M. Eiler, KAY GRIFFIN, PLLC, Nashville, Tennessee, for Appellant. William J. Murphy, ZUCKERMAN SPAEDER LLP, Baltimore, Maryland, Edward M. Yarbrough, W. Justin Adams, BONE MCALLESTER NORTON PLLC, Nashville, Tennessee, for Appellee Tennessee Fine Wines and Spirits. Keith C. Dennen, FARRIS BOBANGO, PLC, Nashville, Tennessee, for Appellee Affluere Investments. Sarah K. Campbell, OFFICE OF THE TENNESSEE ATTORNEY GENERAL, Nashville, Tennessee, for Appellee Clayton Byrd.

Before: DAUGHTREY, MOORE, and SUTTON, Circuit Judges.

MOORE, J., delivered the opinion of the court in which DAUGHTREY, J., joined, and SUTTON, J., joined in part. SUTTON, J. (pp. 628–36), delivered a separate opinion concurring in part and dissenting in part.

Defendant-Appellant Tennessee Wine and Spirits Retailers Association ("Association") appeals the district court's order granting summary judgment regarding § 57-3-204(b) of Tennessee Code Annotated. Under § 57-3-204(b), to receive a retailer-alcoholic-beverages license, a person, corporation, or firm needs to be a Tennessee resident for at least two years, and to renew a license, there is a ten-year requirement. After examination, the district court determined that these durational-residency requirements violate the dormant Commerce Clause.

For the reasons discussed below, we AFFIRM the district court's judgment declaring § 57-3-204(b)(2)(A), (3)(A)–(B), and (3)(D) in violation of the dormant Commerce Clause and SEVER those provisions from the Tennessee statute.

I. BACKGROUND

In Tennessee, the distribution of alcoholic beverages occurs through a "three-tier system." Jelovsek v. Bredesen , 545 F.3d 431, 433 (6th Cir. 2008). "The Tennessee Alcoholic Beverage Commission ('TABC') issues separate classes of licenses to manufacturers and distillers, wholesalers, and liquor retailers." Id. at 433–34 (citing Tenn. Code Ann. § 57-3-201 ). "Manufacturers are limited to selling to wholesalers; wholesalers may sell to retailers, or in some cases other wholesalers; consumers are required to buy only from retailers." Id. at 434 (citing Tenn. Code Ann. § 404(b)–(d) ).

A license from the TABC is required to sell "alcoholic spirituous beverages, including beer and malt beverages." Tenn. Code Ann. § 57-3-204(a). However, to obtain a license, an individual must have "been a bona fide resident of [Tennessee] during the two-year period immediately preceding the date upon which application is made to the commission." Id. § 57-3-204(b)(2)(A). Additionally, the statute imposes a ten-year residency requirement to renew the license. Id.

A corporation faces similar barriers, and it cannot receive a license "if any officer, director or stockholder owning any capital stock in the corporation, would be ineligible to receive a retailer's license for any reason specified in subdivision (b)(2)." Id. § 57-3-204(b)(3)(A). Moreover, "[a]ll of [a corporation's] capital stock must be owned by individuals who are residents of [Tennessee] and either have been residents of the state for the two (2) years immediately preceding the date application is made to the commission or," for renewal, "has at any time been a resident of [Tennessee] for at least ten (10) consecutive years." Id. § 57-3-204(b)(3)(B).

Two entities—Plaintiff-Appellee Tennessee Fine Wines and Spirits, LLC, d/b/a Total Wine Spirits Beer & More, and Plaintiff-Appellee Affluere Investments, Inc., d/b/a/ Kimbrough Fine Wine & Spirits—did not satisfy these barriers prior to applying for retail licenses. As of November 2016, Fine Wines's principal address and Affluere's principal address were outside of Tennessee. R. 23-2 (Resp. Ex. 2) (Page ID #133); R. 23-3 (Resp. Ex. 3) (Page ID #134). And Fine Wines's members are not Tennessee residents. R. 55-1 (Mot. Summ. J. Ex. 1 ¶ 5) (Page ID #298). Therefore, the TABC deferred voting on these applications. Id. ¶¶ 13, 15 (Page ID #299); R. 1-1 (Compl. ¶ 15) (Page ID #7); R. 1-2 (Affluere Answer ¶ 15) (Page ID #38).

When the Association, which represents Tennessee's business owners, discovered that Fine Wines and Affluere had pending applications, it informed the TABC that litigation was likely. R. 1-1 (Compl. ¶¶ 2, 16, 17) (Page ID #5, 8); R. 80 (Ass'n Am. Answer ¶¶ 2, 16, 17) (Page ID #495, 498). Because of these conflicts, Tennessee's Attorney General filed this action in the Chancery Court for Davidson County, on behalf of Plaintiff-Appellee Clayton Byrd, the Executive Director of the TABC, to obtain a declaratory judgment construing the constitutionality of the durational-residency requirements. R. 1-1 (Compl. at 1) (Page ID #4). The Defendant Association removed the case to the United States District Court for the Middle District of Tennessee.¹

The district court determined that the durational-residency requirements are unconstitutional. See Byrd v. Tenn. Wine & Spirits Retailers Ass'n , 259 F.Supp.3d 785, 797–98 (M.D. Tenn. 2017). Based on the statutory language, the district court found that the durational-residency requirements are facially discriminatory. See id. at 790. And although the Twenty-first Amendment does give Tennessee power to regulate alcoholic beverages, the district court "agree[d] with the Fifth Circuit that 'state regulations of the retailer and wholesaler tiers are not immune from Commerce Clause scrutiny just because they do not discriminate against out-of-state liquor.' " Id. at 790, 793 (quoting Cooper v. Tex. Alcoholic Beverage Comm'n (Cooper II) , 820 F.3d 730, 743 (5th Cir.), cert. denied sub nom. Tex. Package Stores Ass'n, Inc. v. Fine Wine & Spirits of N. Tex., LLC , ––– U.S. ––––, 137 S.Ct. 494, 196 L.Ed.2d 404 (2016) ). Additionally, nondiscriminatory alternatives could achieve the durational-residency requirements' purposes—citizen health and alcohol regulation. Id. at 796–97. The district court therefore determined that Tennessee's durational-residency requirements violate the dormant Commerce Clause and granted Fine Wines's motion for summary judgment. Id. at 797–98.

II. DISCUSSION

We review de novo a district court's decision to grant summary judgment, Lenscrafters, Inc. v. Robinson , 403 F.3d 798, 802 (6th Cir. 2005), and we also review de novo a district court's determination of the constitutionality of a state statute, Cmtys. for Equity v. Mich. High Sch. Athletic Ass'n , 459 F.3d 676, 680 (6th Cir. 2006). Granting summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). For this determination, we review all facts in a light that is most favorable to, and draw all reasonable inferences in favor of, the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

A. The Twenty-first Amendment Does Not Immunize Tennessee's Durational-Residency Requirements

Under the Supreme Court's governing standard, Tennessee's interests in the durational-residency requirements are not closely related to its power under the Twenty-first Amendment. Therefore, the Twenty-first Amendment does not immunize Tennessee's durational-residency requirements from scrutiny under the dormant Commerce Clause.

1. Tennessee's Durational-Residency Requirements in Light of Granholm and Bacchus

Section 2 of the U.S. Constitution's Twenty-first Amendment states that "[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, is hereby prohibited." U.S. Const. amend XXI, § 2. Pursuant to the Twenty-first Amendment, a state has the power to regulate the distribution of alcoholic beverages into the state or within its borders.

"Initially, the Supreme Court afforded the states nearly limitless power to regulate alcohol under the [Twenty-first Amendment]." Heald v. Engler , 342 F.3d 517, 522 (6th Cir. 2003), aff'd sub nom. Granholm v. Heald , 544 U.S. 460, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005). However, "as early as the 1960s, the Supreme Court signaled a break with this line of reasoning."² Id. And in 1984, the Supr eme Court reiterated in Bacchus Imports, Ltd. v. Dias , 468 U.S. 263, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984), that the Commerce Clause limits a state's power under the Twenty-first Amendment. Heald , 342 F.3d at 523.

In Bacchus , the Supreme Court noted that "[i]t is by now clear that the [Twenty-first] Amendment did not entirely remove state regulation of alcoholic beverages from the ambit of the Commerce Clause." 468 U.S. at 275, 104 S.Ct. 3049. "To draw a conclusion that the Twenty-first Amendment has somehow operated to 'repeal' the Commerce Clause wherever regulation of intoxicating liquors is concerned would ... be an absurd oversimplification." Id. (quoting Hostetter v. Idlewild Bon Voyage Liquor Corp. , 377 U.S. 324, 331–32, 84 S.Ct. 1293, 12 L.Ed.2d 350 (1964) ). The Supreme Court stated that "both the Twenty-first Amendment and the Commerce Clause are parts of the same Constitution and each must be considered in light of the other and in the context of the issues and interests at stake in any concrete...