Va. Alcoholic Beverage Control Auth. v. Zero Links Mkts., Inc.

78 Va.App. 261

890 S.E.2d 832

VIRGINIA ALCOHOLIC BEVERAGE CONTROL AUTHORITY v. ZERO LINKS MARKETS, INC., t/a VinoShipper.com

Record No. 0973-22-2

Court of Appeals of Virginia, Richmond.

August 15, 2023

Maureen E. Mshar, Associate Legal Counsel (Rachel L. Yates, Associate Legal Counsel; Virginia Alcoholic Beverage Control Authority, on briefs), for appellant.

Mark C. Shuford (Sean O'Leary; The Shuford Law Group, LLC; O'Leary Law and Policy Group, LLC, on briefs), for appellee.

Amici Curiae: Virginia Wine Wholesalers Association and Virginia Beer Wholesalers Association ( Kevin R. McNally, Richmond; Moira J. O'Brien; Marston & McNally, P.C., on brief), for appellant.

Present: Judges Raphael, White and Senior Judge Petty

OPINION BY JUDGE STUART A. RAPHAEL

The Alcoholic Beverage Control (ABC) Act regulates the manufacture, sale, and distribution of alcoholic beverages in Virginia. The Act requires a "separate license" from the Virginia Alcoholic Beverage Control Authority (Authority) for "each separate place of business." Code § 4.1-203(A). The Act defines the term "place" as "the real estate, together with any buildings or other improvements thereon ... at which the manufacture, bottling, distribution, use or sale of alcoholic beverages shall be performed." Code § 4.1-100.

Appellee Zero Links Markets, Inc., trading as VinoShipper.com (VinoShipper), obtained a Virginia ABC license to sell and ship wine to Virginia customers from VinoShipper's business address in Windsor, California. After customers buy wine on its website, however, VinoShipper delegates to various wineries across the country the business of selecting and boxing the wine, labeling the package, and tendering the shipment to the common carrier for delivery to the customer in Virginia. Adopting the findings of the hearing officer, the ABC Board concluded that VinoShipper was shipping wine from unlicensed locations in violation of Code § 4.1-203(A). The ABC Board temporarily suspended VinoShipper's license but stayed the suspension pending VinoShipper's appeal to the circuit court. On appeal, the circuit court reversed the Board's order.

The Authority appealed that ruling, and we now reverse. We hold that the Board correctly applied the ABC Act in concluding that the requirement in Code § 4.1-203(A) for a "separate license ... for each separate place of business" applies to the locations where the wineries under contract with VinoShipper select, package, label, and ship the wine on VinoShipper's behalf to its Virginia customers. Those locations are VinoShipper's "place[s] of business," id. , at which essential aspects of the sale and shipment of alcoholic beverages are performed. No statutory exception excuses VinoShipper from the separate-license-for-each-place-of-business requirement, such as Code § 4.1-209.1(F) ’s exemption allowing wine shippers to delegate shipping functions to Board-licensed "fulfillment warehouse[s]." The ABC Board thus committed no error of law in rendering its decision.

BACKGROUND

A. The ABC Board's regulatory power

Virginia's regulation of intoxicating beverages has a long and rich history that predates independence. As early as 1668, the General Assembly directed the commissioners of each county court to allow no more than two drinking establishments per locality. 2 William Waller Hening, Statutes at Large; Being a Collection of All the Laws of Virginia, from the First Session of the Legislature 268-69 (1823) (Act IX, About Ordinaries (1668)). The preamble recited concern about "the excessive number of ordinaryes and tipling houses ... found to be full of mischeif ... by cherishing idlenes and debaucheryes," with "loose and carelesse persons ... neglecting their callings [and] mispend[ing] their times in drunkennesse." Id. at 268. ¹ Persons operating ordinaries or tippling houses without a "lycence" were to be fined 2,000 pounds of tobacco. Id. at 269. ²

Over the next two centuries, the General Assembly regularly updated and revised the license requirements for such establishments, vesting discretion in county and corporation courts to determine the fitness of each licensee. See Ex parte Yeager , 52 Va. (11 Gratt.) 655, 658-62 (1854) (surveying Virginia's licensing laws from 1668 ³ through 1849). The Court in Yeager found that this long statutory history reflected the legislature's "fears ... that the morals of the people might sustain injury from the granting of too many licenses." Id. at 662.

A half-century later, Virginia's Constitution of 1902 granted the General Assembly "full power to enact local option or dispensary laws, or any other laws controlling, regulating, or prohibiting the manufacture or sale of intoxicating liquors." Va. Const. art. IV, § 62 (1902). For another 14 years, the General Assembly continued to require manufacturers, wholesalers, and retail sellers of alcoholic beverages to obtain liquor licenses from local courts. ⁴

But public opinion soon turned against the sale of intoxicating beverages. In 1914, the General Assembly authorized a referendum on statewide prohibition, which passed with nearly 60% of the vote. Robert A. Hohner, Prohibition Comes to Virginia: The Referendum of 1914 , 75 Va. Mag. Hist. & Biography 473, 487 & n.78 (1967) ("an overwhelming majority"). In 1916, the General Assembly banned the manufacture, transport, and sale of alcoholic beverages in the Commonwealth. 1916 Va. Acts ch. 146, § 3. In 1918, Virginia became the first State to ratify the Eighteenth Amendment to the United States Constitution. See 1918 Va. Acts ch. 428; Ratification of the Prohibition Amendment , S. Doc. No. 66-169, at 2 (1919). The Eighteenth Amendment was fully ratified in 1919, prohibiting nationwide "the manufacture, sale or transportation of intoxicating liquors ... for beverage purposes." Amendment to the Constitution, 1919 , 40 Stat. 1941 (1919).

The Twenty-first Amendment, ratified in 1933, repealed the Eighteenth Amendment and, in doing so, established an independent source of constitutional authority for States to regulate the sale and distribution of alcoholic beverages. U.S. Const. amend. XXI. Section 2 provided 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." Id. , § 2 (emphasis added). Section 2 "was meant to ‘constitutionaliz[e]’ the basic understanding of the extent of the States’ power to regulate alcohol that prevailed before Prohibition."

Tenn. Wine & Spirits Retailers Ass'n v. Thomas , ––– U.S. ––––, ––––, 139 S. Ct. 2449, 2467, 204 L.Ed.2d 801 (2019) (alteration in original). "The aim ... was to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use." Granholm v. Heald , 544 U.S. 460, 484, 125 S.Ct. 1885, 1902, 161 L.Ed.2d 796 (2005).

The United States Supreme Court has held that Section 2 "grants the States virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system." Id. at 488, 125 S.Ct. at 1905 (quoting Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc. , 445 U.S. 97, 110, 100 S.Ct. 937, 945-46, 63 L.Ed.2d 233 (1980) ). "It gives each State leeway in choosing the alcohol-related public health and safety measures that its citizens find desirable." Tenn. Wine , ––– U.S. at ––––, 139 S. Ct. at 2457. ⁵

At a referendum in October 1933, Virginia voters opposed statewide prohibition but favored enacting a plan of liquor control. See 1933-34 Va. Acts Extra Sess. ch. 4; S. Doc. No. 5, Liquor Control: Report of the Committee appointed under authority of an Act approved August 29, 1933 , at 1 (1934). In March 1934, the General Assembly established the Virginia Alcoholic Beverage Control Board to regulate the alcoholic-beverage market in Virginia. See 1933-34 Va. Acts Extra Sess. ch. 94, § 3.

From the outset, the regulatory model created a "three-tier distribution system," generally requiring "[s]eparate licenses ... for producers, wholesalers, and retailers." Granholm , 544 U.S. at 466, 125 S.Ct. at 1892. ⁶ For instance, the 1934 law prohibited vertical integration among market participants, forbidding a "manufacturer, bottler, or wholesaler of alcoholic beverages" from obtaining a retailer's license. 1933-34 Va. Acts Extra Sess. ch. 94, § 21. The current version of Virginia's ABC Act generally maintains that three-tier system for the stated purpose of "prevent[ing] suppliers from dominating local markets through vertical integration and to prevent excessive sales of alcoholic beverages caused by overly aggressive marketing techniques." Code § 4.1-215(C).

To administer this complex regulatory system, the ABC Act grants the ABC Board "plenary power to prescribe and enforce regulations and conditions under which alcoholic beverages are possessed, sold, transported, distributed, and delivered, so as to prevent any corrupt, incompetent, dishonest, or unprincipled practices and to promote the health, safety, welfare, convenience, and prosperity of the people of the Commonwealth." Code § 4.1-101(A). Exercising that plenary authority, the Board administers a litany of different types of liquor licenses, including licenses to "distilleries, wineries, farm wineries, breweries, and bottlers of alcoholic beverages; wholesalers, wholesale salesmen and retailers of wine and beer; beer and wine importers; and certain warehouses." 3 VAC 5 (Summary).

This case involves a wine-shipper's license, which authorizes the licensee to "sell and ship not more than two cases of wine per month ... to any person in Virginia to whom alcoholic beverages may be lawfully sold." Code § 4.1-209.1(A). A wine-shipper's license is a kind of retailer's license, enabling the licensee to ship wine directly to the consumer, rather than to a wholesaler. See Code § 4.1-206.3(F)(1). The General...