Siesta Village Market, LLC v. Granholm, 06-CV-13041.

596 F.Supp.2d 1035

SIESTA VILLAGE MARKET, LLC, Joseph L. Chess and Terry Fowler, Plaintiffs, v. Jennifer GRANHOLM, Michael Cox, Defendants.

Civil Action No. 06-CV-13041.

United States District Court, E.D. Michigan, Southern Division.

September 30, 2008.

COPYRIGHT MATERIAL OMITTED

David D. Whitaker, David Whitaker Assoc., Detroit, MI, James A. Tanford, Indiana University School of Law, Bloomington, IN, Robert D. Epstein, Epstein & Frisch, Indianapolis, IN, for Plaintiffs.

Gerald A. Whalen, MI Dept. of Attorney General, Lansing, MI, Howard E. Goldberg, Darnelle Dickerson, Michigan Liquor Control Commission, Farmington, MI, Anthony S. Kogut, Willingham & Cote, East Lansing, MI, for Defendants.

MEMORANDUM OPINION AND ORDER RE: PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT, DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT, MOTION TO STRIKE SUPPLEMENTAL BRIEF, and DEFENDANTS' JOINT MOTION FOR RECONSIDERATION

DENISE PAGE HOOD, District Judge.

I. BACKGROUND

This matter is before the Court on both Plaintiffs Siesta Village Market, L.L.C., Joseph Chess and Terry Fowler's Motion for Summary Judgment and the Joint Motion for Summary Judgment filed by Defendant Jennifer Granholm, Michael Cox, Chairperson Nida Samona (the "State") and Intervening Defendants Michigan Beer and Wine Wholesalers Association. Both sides filed a series of responses and replies to the Summary Judgment Motions. A hearing on the matter was held on September 28, 2007. On October 12, 2007, 2007 WL 2984127, the Court entered an Order denying Defendants' Motion to Dismiss filed September 7 and October 2, 2006. On October 21, 2007, Defendants filed a Motion for Reconsideration of the Court's October 12, 2007 Order.

II. FACTS

Plaintiff Siesta Village Market, LLC ("Siesta Village") is a Florida-based retailer of alcoholic beverages. Plaintiffs Joseph L. Chess and Terry Fowler are both Michigan residents who claim they have not been able to obtain their choice of wine from Michigan retailers, either because the retailer has run out of a particular type of wine or does not carry the particular brand. (Plaintiffs' Mot. for Summary Judgment at 8, 9.) Plaintiffs claim that Michigan laws prohibiting out-of-state retailers from shipping directly to Michigan consumers, unless they maintain a location in the state and become part of Michigan's three-tier system for distributing wine, violates the Commerce Clause and goes against the Supreme Court's recent decision regarding some of the same Michigan laws in Granholm v. Heald, 544 U.S. 460, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005).

Michigan has a three-tier system for regulating the sale of wine. The first tier is made up of wineries that are the producers and suppliers of wine. (Defendants' Mot. for Summary Judgment at 11.) Both in-state and out-of-state wineries sell their products only to licensed in-state wholesalers. M.C.L.A. §§ 436.1305, 436.1403. Michigan wholesalers sell these alcoholic beverages to Michigan retailers who in turn sell to consumers through means including direct shipment. M.C.L.A. §§ 436.1113(7), 436.1607(1), 436.1111(5), 436.1203(2)-(4). An exception in the three-tier system allows in-state wineries to ship directly to consumers, sidestepping the three-tier system. M.C.L.A. § 436.1113(9). In Heald, the Supreme Court held that it was discriminatory for the State to only allow in-state wineries the option to ship directly to consumers and mandated that out-of-state wineries must also be allowed to ship directly to consumers, and sidestep the three-tier system. Heald, 544 U.S. at 493, 125 S.Ct. 1885.

While Heald addressed the first level of alcohol distributors, the current case deals with the third tier in the system-the retailers. Michigan retailers can sell to consumers for off-premises consumption once they are licensed as a "specially designated merchant" or "SDM." M.C.L.A. § 436.1537(1)(d). This license also allows Michigan retailers to ship wine directly to consumers. M.C.L.A. § 436.1111(7). Out-of-state retailers have the option of obtaining an SDM license, but only if they open a location in Michigan and become part of the three-tier system, obtaining their wine only from licensed Michigan wholesalers. M.C.L.A. §§ 436.1203, 436.1901. Essentially, this means that maintaining a physical presence in Michigan is the only way for out-of-state retailers to gain direct access to Michigan consumers. Plaintiffs claim that this differential treatment violates the Commerce Clause. (Plaintiffs' Mot. for Summary Judgment at 5.)

The State argues in its Motion for Summary Judgment that the three-tier system is legitimate under Heald and allowing out-of-state retailers to sidestep the three-tier system and ship directly to Michigan consumers would interfere with the state's interest in regulating the sale of alcohol under the Twenty First Amendment of the United States Constitution. (Defendants' Mot. for Summary Judgment at 1.) The State asserts that the three-tier system allows it to more effectively oversee the sale of alcohol by making certain, among other things, that all taxes are collected and accounted for, underage drinking laws are complied with, and labeling laws are enforced. (Defendants' Mot. for Summary Judgment at 5, 6.) The State also claims that the current system of wine distribution allows it to conduct random on-site inspections of wholesalers to ensure that the wine they are selling to retailers complies with laws before it hits the market and is available to Michigan consumers. Id.

III. STANDARD OF REVIEW

Under Fed.R.Civ.P. 56, summary judgment is to be entered if the moving party demonstrates that there is no genuine issue as to any material fact. This means that the evidence is such that a reasonable jury could find only for the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party has "the burden of showing the absence of a genuine issue as to any material fact." Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); see also Lenz v. Erdmann Corp., 773 F.2d 62 (6th Cir. 1985). To avoid a summary judgment motion, the nonmoving party must show some evidence of a disputed fact. Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (citations omitted). The non-moving party fails to show a genuine issue of material fact if it cannot establish the existence of an element essential to that party's case on which it will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In other words, the non-movant "must produce evidence that would be sufficient to require submission to the jury of the dispute over the fact." Mathieu v. Chun, 828 F.Supp. 495, 497 (E.D.Mich. 1993) (citations omitted). In resolving a summary judgment motion, the Court must view the evidence in the light most favorable to the non-moving party. See Duchon v. Cajon Co., 791 F.2d 43, 46 (6th Cir.1986); Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319 (6th Cir.1983).

IV. APPLICABLE LAW & ANALYSIS

A. The Twenty First Amendment

The Commerce Clause "encompasses an implicit or `dormant' limitation on the authority of the States to enact legislation affecting interstate commerce." Healy v. The Beer Institute Inc., 491 U.S. 324, 326 n. 1, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989) (citations omitted). Defendants claim that the Twenty First Amendment protects their right to enact legislation regulating alcohol that comes into the State. (Defendants' Mot. for Summary Judgment at 23.) The portion of the Twenty First Amendment that Defendants rely on states that "the transportation or importation into any State ... for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." U.S. Const. Amend. XXI, § 2. The Supreme Court has held that this section of the Twenty First Amendment does not give states "the authority to pass non-uniform laws in order to discriminate against out-of-state goods." Heald, 544 U.S. at 484-85, 125 S.Ct. 1885. In fact, a state's authority under the Amendment does not abrogate Congress' Commerce Clause power and liquor regulations cannot escape Commerce Clause scrutiny. Id. at 487, 125 S.Ct. 1885.

Based on this analysis, the State's argument that the Twenty First Amendment gives it the authority to regulate alcohol coming into the state and that the three-tier system it has designed for regulatory purposes is appropriate is flawed. While the Heald court did state that the three-tier system was an appropriate use of state power, it did not approve of a system that discriminates against out-of-state interests. The Supreme Court made clear in Heald that a state's power under the Twenty First Amendment is not above the Commerce Clause nondiscrimination requirement. In the present case, in-state retailers gain the privilege of shipping directly to Michigan consumers simply upon obtaining an SDM license. Out-of-state retailers, on the other hand, only have access to Michigan consumers if they open a location in Michigan, become part of the three-tier system, and obtain an SDM license. State regulations such as this are not authorized by the Twenty First Amendment if the regulations create an extra burden on out-of-state wine retailers because the Commerce Clause is implicated. Defendant's Twenty First Amendment argument, alone, without an analysis of whether the Commerce Clause is implicated, has been rejected by the Supreme Court in Heald.

B. Commerce Clause

Since the Twenty First Amendment alone does not necessarily protect the State's actions here, a dormant Commerce Clause analysis is necessary to determine the nature and validity of the statutes in question. Under a dormant Commerce Clause analysis, state laws violate the Commerce Clause if they mandate "differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter." Oregon Waste Systems,...