Litigation Summaries

Massachusetts Ruling Overturns Cap Law
Click here to read the text of the ruling.

November 19, 2008

Family Winemakers hails decision to overturn
Massachusetts wine shipping permit cap law
Small wineries won't have to choose one sales approach

Sacramento, California—Massachusetts wine consumers were the winners in today's court ruling by Judge Rya Zobel that allows wineries of all production sizes to ship directly to adult residents. The decision in amily Winemakers of California v. Jenkins enjoined the state from enforcing its law that prohibits wineries producing more than 30,000 gallons from shipping if they have wholesaler agreements. “Consumers and wineries have waited a long two years for this day," said Jim Gullett, chair of Family Winemakers of California (FWC) and owner of Vino Noceto in Plymouth, California. "This was a long, thorough and expensive process, but we're gratified the court acknowledges that post-Granholm discriminatory laws like production caps cannot pass legal muster."

Small producers convinced the court that Massachusetts' Section 19F violates the Commerce Clause of the U.S. Constitution. The challenged statute replaced Massachusetts’s laws that this same court previously declared to be unconstitutional with a subtler but equally unconstitutional form of discrimination. Rather than limiting wine shipping rights through express residency requirements, Section 19F limited wine shipping rights based on wineries’ total annual production of wine and existing relationships with Massachusetts-licensed wholesalers. In purpose and effect, the limits imposed by these capacity caps fell solely upon out-of-state wineries, since Massachusetts’s wineries continued to enjoy unfettered access to the Massachusetts market. "We are one national market, but the Massachusetts law was blatantly discriminatory. It aimed to protect Bay State wineries, but prevented Massachusetts consumers from having access to the whole market,” said Paul Kronenberg, FWC President. “State laws that protect and perpetuate wholesaler monopolies at the expense of wineries seeking market opportunities and consumers seeking a wider choice in wine, run counter to the concept of free trade within the nation.” Judge Zobel wrote that “The legitimacy of the three-tier system cannot provide succor to a statute which allows exceptions to that system which benefit in-state interests.”

The decision is another in a growing string of cases that wrestle with laws designed to frustrate a common national economic union. “Freedom to conduct commerce across state boundaries without undue restrictions was a fundamental principle of the framers of the Constitution,” notes Kenneth W. Starr, former Solicitor General and an attorney with Kirkland & Ellis. Almost a quarter century ago the court wrote in Bacchus Imports that, "It has long been the law that States may not 'build up their domestic commerce by means of unequal and oppressive burdens upon the industry and business of other States,'" wrote Starr in the plaintiffs summary judgment motion. Starr coordinated the landmark legal victory in Granholm v Heald, and oversaw the strategy in Family Winemakers of California v Jenkins.

Tracy Genesen, lead attorney with Kirkland & Ellis on the case, argued that the court was correct in invalidating economic protectionism. "The decision tracks Granholm, since 'allowing States to discriminate against out-of-state wine invites a multiplication of preferential trade areas destructive of the very purpose of the Commerce Clause,'" stated Genesen.

Barring an appeal wineries across the country will be able to apply for a direct shipping permit from Massachusetts once the state's Alcoholic Beverage Control Commission complies with the court's ruling.

Family Winemakers of California is a statewide trade association representing over 730 small and growing wineries, vineyards and supporting businesses. It was founded in 1991 to advocate the rights and interests of its members to freely produce, market and sell their products, and to preserved the broad diversity of the California wine industry. The association played a significant role in funding and pursuing direct shipping relief through the courts that resulted in the Granholm decision.