Jean-Paul Weg. v. Graziano

1

JEAN-PAUL WEG., LLC, d/b/a THE WINE CELLARAGE and LARS NEUBOHN, Plaintiffs, v. JAMES GRAZIANO, Director of the New Jersey Division of Alcoholic Beverage Control, and MATTHEW J. PLATKIN, Attorney General of New Jersey, Defendants, and FEDWAY ASSOCIATES, INC., ALLIED BEVERAGE GROUP, INC., OPICI FAMILY DISTRIBUTING and NEW JERSEY LIQUOR STORE ALLIANCE, Intervenors-Defendants.

Civil Action No. 19-14716 (JXN) (LDW)

United States District Court, D. New Jersey

August 22, 2023

OPINION

JULIEN XAVIER NEALS UNITED STATES DISTRICT JUDGE

This matter comes before the Court on four motions for summary judgment filed pursuant to Federal Rule of Civil Procedure 56 and Local Civil Rule 56.1: (1) Plaintiffs Jean-Paul Weg LLC, d/b/a The Wine Cellarage (“The Wine Cellarage”) and Lars Neubohn's (“Neubohn”) (collectively “Plaintiffs”) motion for summary judgment (ECF No. 102); (2) Intervenor-Defendants Allied Beverage, Group Inc. (“Allied”) and Opici Family Distributing's (collectively, the “Allied Defendants”) opposition to Plaintiffs' motion for summary judgment and cross-motion for summary judgment (ECF Nos. 110-11); (3) Intervenor-Defendant Fedway Associates Inc.'s (“Fedway”) opposition to Plaintiffs' motion for summary judgment and cross-motion for summary judgment (ECF No. 112); and (4) Defendants James Graziano and Matthew J. Platkin's (together, the “State Defendants”) opposition to Plaintiffs' motion for summary judgment and cross-motion for summary judgment (ECF No. 114). Intervenor-Defendant New Jersey Liquor Store Alliance (“New Jersey Liquor”) filed opposition to Plaintiffs' motion for summary judgment and joined in the State Defendants' cross-motion, as well as Allied Defendants' and Fedway's (together, the “Wholesaler Defendants”) cross-motions for summary judgment (ECF No. 113). Plaintiffs filed a combined response/reply brief (ECF No. 121). The State Defendants and Wholesaler Defendants (together, the “Defendants”) filed replies (ECF Nos. 131-33). Jurisdiction is proper pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1343(a)(3). Venue is proper pursuant to 28 U.S.C. § 1391.

The Court has carefully considered the parties' submissions and decides the matter without oral argument under Federal Rule of Civil Procedure 78(b) and Local Civil Rule 78.1(b). For the reasons set forth below, Plaintiffs' motion for summary judgment (ECF No. 102) is DENIED , Allied Defendants' cross-motion for summary judgment (ECF Nos. 110-11) is DENIED as moot, Fedway's cross-motion for summary judgment (ECF No. 112) is DENIED as moot, the State Defendants' cross-motion for summary judgment (ECF No. 114) is GRANTED, and Plaintiffs' Commerce Clause claim (Count One) against the State Defendants is DISMISSED with prejudice. The Court does not award costs, expenses, or attorneys' fees to any party.

I.BACKGROUND AND PROCEDURAL HISTORY^[1]

This is a 42 U.S.C. § 1983 civil rights action. Plaintiffs allege that New Jersey's statutes and regulations governing the sale and distribution of alcoholic beverages commonly referred to as New Jersey's three-tier system (the “New Jersey System”), is unconstitutional because it “discriminates against wine retailers located outside New Jersey who are engaged in interstate commerce[.]” Plaintiffs' Third Amended Complaint (ECF No. 83) (the “Amended Complaint”), at p. 2. In Count One^[2] of the Amended Complaint, Plaintiffs allege that the New Jersey System “and related rules, practices, and regulations as applied[,] . . . prohibit out-of-state wine retailer[s] like The Wine Cellarage from taking telephone and internet wine orders from New Jersey consumers” and “sell[ing], ship[ping], and deliver[ing] wine” directly to consumers “from their premises located out of the state.” Am. Compl., at pp. 1-2. Plaintiffs seek a declaratory judgment that the New Jersey System is “unconstitutional as a violation of the Commerce Clause of the United States Constitution[,]” and an injunction prohibiting the State Defendants from enforcing the New Jersey System against out-of-state wine retailers like Plaintiffs, among other relief. Id. at pp. 7-8. New Jersey Liquor and Defendants claim that the New Jersey System is both constitutional and enforceable. See, gen., N.J. Liquor's Br.; Defs.' Brs. The relevant facts follow.

Plaintiff Neubohn is “the president of Vindemia, Inc. [(“Vindemia”)], which is the sole member of” The Wine Cellarage. State Defendants' Responsive Statement of Undisputed Material Facts and Counterstatement of Undisputed Material Facts (ECF No. 114-2) (the “SDRSOF”)^[3] ¶ 1; Plaintiffs' Responsive Statement of Undisputed Material Facts to State Defendants (ECF No. 121-2) (the “PRSOFSD”) ¶ 1. Vindemia “holds a warehouse permit from the New York State Liquor Authority” that “allows Vindemia to operate a warehouse for the storage of alcoholic beverages in New York.” SDRSOF ¶ 2; PRSOFSD ¶ 2. The Wine Cellarage “holds a package store license from the New York State Liquor Authority” that grants The Wine Cellarage “the right to sell alcoholic beverages direct to consumers for off-site consumption.” SDRSOF ¶ 3; PRSOFSD ¶ 3.

The Wine Cellarage “is a New York limited liability company that operates a wine retail store in Bronx, New York, that is owned and operated by” Neubohn. Plaintiffs' Statement of Undisputed Material Facts (ECF No. 102-2) (the “PSOF”) ¶ 1; Wholesaler Defendants' Responsive Statement of Undisputed Facts (ECF No. 112-5) (the “WDRSOF”) ¶ 1; New Jersey Liquor's Responsive Statement of Undisputed Material Facts (ECF No, 113-1) (the “NJLRSOF”) ¶ 1; SDRSOF ¶ 1. The “Wine Cellarage has a brick-and-mortar store in Bronx, New York, where customers can go to purchase wine.” SDRSOF ¶ 4; PRSOFSD ¶ 4. The “Wine Cellarage does not have any stores outside of New York.” SDRSOF ¶ 4; PRSOFSD ¶ 4. The “Wine Cellarage is required to have a premises in New York for licensure.” SDRSOF ¶ 5; Ex. B of Kimberley M. Wilson's December 6, 2021, Certification (ECF No. 114-3) (the “Wilson Decl.”), Neubohn's Feb. 23, 2021, deposition transcript as Corporate Designee of The Wine Cellarage (ECF No. 114-5) (the “Neubohn Dep.”), at ¶ 40:13-17. About 20% of The Wine Cellarage's wine inventory is “purchase[d] from private wine collections” and 80% from New York licensed wholesalers. SDRSOF ¶¶ 9-11; PRSOFSD ¶¶ 9-11.

The Wine Cellarage “engages in internet wine sales and has customers” throughout the United States, including at least one from New Jersey. PSOF ¶ 2; WDRSOF ¶ 2; NJLRSOF ¶ 2; SDRSOF ¶ 2. In New Jersey, customers “either pick up their wine purchases at The Wine Cellarage or the wine purchases are shipped to the customer through an intermediary shipper” called 24/7. SDRSOF ¶¶ 18-19, 21; PRSOFSD ¶¶ 18-19, 21. The Wine Cellarage's “use of an intermediary shipper” is described as a “work around” when “shipping wine across state lines.” SDRSOF ¶ 20; PRSOFSD ¶ 20 (internal quotations omitted). Neither The Wine Cellarage nor Vindemia pay New Jersey sales taxes, or “New Jersey alcohol beverage tax on wine sales delivered via an intermediary shipper.” SDRSOF ¶¶ 22, 25; PRSOFSD ¶¶ 22, 25. Additionally, neither pay “use tax[es]” on wine sales delivered by intermediary shippers. SDRSOF ¶¶ 23-24; PRSOFSD ¶¶ 23-24.

To prevent selling alcohol to minors, The Wine Cellarage “(i) ask[s] customers to represent at sign-up what their age is . . . and (ii) any shipment that The Wine Cellarage sends out by common carrier ‘goes out as an adult signature.'” SDRSOF ¶ 32; PRSOFSD ¶ 32. If customers appear in person and “look to be of age,” Plaintiffs do not “card them” or ask the customer to provide identification. SDRSOF ¶ 34; Neubohn Dep., at ¶ 91:4-8, T100:24-T101:11. Indeed, The Wine Cellarage's employees do “not ask for identification” when a “customer looks well into their adult age[.]” SDRSOF ¶ 35; PRSOFSD ¶ 35. According to Neubohn, The Wine Cellarage “sell[s] a pretty expensive product . . . so [minors attempting to purchase alcohol] hasn't been a problem . . . because kids aren't buying what we're selling.” Neubohn Dep., at ¶ 101:12-18.

Reportedly, “[f]orty-five states allow some form of direct-to-consumer wine shipping.” PSOF ¶ 26; WDRSOF ¶ 26; NJLRSOF ¶ 26; SDRSOF ¶ 26. At least 14 jurisdictions allow retailers to ship directly to consumers. PSOF ¶ 26; WDRSOF ¶ 26; NJLRSOF ¶ 26; SDRSOF ¶ 26. “Most regulate those shipments by requiring the shipper to obtain a direct-shipping permit, limit the amount of wine they ship, remit taxes, consent to jurisdiction and audits, label packages as containing alcohol, and use a state-approved carrier who verified age on delivery.” PSOF ¶ 26; WDRSOF ¶ 26; NJLRSOF ¶ 26; SDRSOF ¶ 26.

The New Jersey System encompasses a wide-ranging licensing regime related to the sale, consumption, and distribution of alcoholic beverages, which does not allow an unlicensed out-of-state wine retailer to sell or deliver wine directly to New Jersey consumers. SDRSOF ¶ 60; PRSOFSD ¶ 60. The New Jersey System requires that potential licensees obtain: (1) a “plenary retail consumption license” that permits retailers to sell alcoholic beverages “by the glass” on “a licensed premise” and “sell alcoholic beverages in original containers for consumption off the licensed premises[;]” or (2) a “plenary retail distribution license” that is intended for “a package or retail liquor store” to sell alcoholic beverages “in original containers for ‘off-premises consumption.'” SDRSOF ¶¶ 47, 49; Ex. F of Wilson Decl., Tia Johnson's June 8, 2021, deposition transcript (ECF No. 114-7) (the “Johnson Dep.”), at ¶ 7:11-14, T7:18-21, T7:25-8:1.

Plenary retail distribution licenses also allow licensees to sell alcoholic beverages online and “ship it by common carrier . . . without the customer appearing in person at the store.” PSOF ¶ 6; ...