Summary of a Recent
Judicial Development in
Agritourism

Kentucky Statute Requiring In-Person Purchase of
Out-Of-State Wine Declared Unconstitutional

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Cherry Hill Vineyards v. Lilly, 553 F.3d 423, 2008 WL 5396257 (6th Cir. 2008), the Sixth Circuit Court of Appeals held that age verification upon delivery of wine ordered from out of state was a reasonable nondiscriminatory alternative to requiring in-person purchase of out-of-state wine, and thus invalidated the in-person purchase requirements of KRS §§ 243.155.

Background

After a Kentucky statute prohibiting direct shipments to consumers by out-of-state small farm wineries was declared unconstitutional, an out-of-state winery and individual wine consumers challenged the amended statute, alleging that it continued to violate the Commerce Clause. Id. at *1. The amended statutory scheme allowed a small farm winery to ship its wine to a Kentucky customer only if the wine was purchased by the customer in person at the winery. Id. at *2. After in-state wine wholesalers intervened on behalf of the state, the district court granted partial summary judgment to the plaintiffs, holding that the in-person purchase requirement discriminated against interstate commerce by limiting the ability of out-of-state small farm wineries to sell and ship wine to Kentucky consumers, and the intervenors appealed. Id.

Arguments

Plaintiffs argued that the statutes discriminated against out-of-state wineries in practical effect because they presented an economic barrier that benefited in-state wineries and burdened out-of-state wineries by making it financially infeasible for out-of-state wineries to sell directly to Kentucky residents. Id. at *7.

The defendant-intervenors argued that the in-person requirement was motivated by Kentucky's extensive problems with underage drinking, and therefore advanced a legitimate local purpose that could not be adequately served by reasonable nondiscriminatory alternatives. Id. at *8.

Analysis and Holdings

After determining that the intervenors had standing to appeal, the court considered the constitutionality of the Kentucky statutes. Id. at *5-6. The court explained that to determine whether a statute violates the Commerce Clause, it must first determine whether the statute discriminates against interstate commerce, either by discriminating on its face, by having a discriminatory purpose, or by discriminating in practical effect. Id. at *6. If the statute is found to be discriminatory, it is virtually per se invalid, unless the state can demonstrate that it "advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives." Id. at *7.

The court agreed with the plaintiffs' contention that the in-person requirement made it economically infeasible for most consumers to purchase wine from out-of-state small farm wineries, and that in-state small wineries benefited from reduced competition from out-of-state wineries, and thus concluded that the plaintiffs had met their burden of proving discrimination against interstate commerce. Id. at *8. In considering the defendant-intervenors' claim that the statutory scheme served the legitimate local purpose of curbing underage drinking, the court agreed with the Supreme Court's reasoning in its response to an almost identical argument, in which it found "little evidence that the purchase of wine over the Internet by minors is a problem," and noted that wine is not the alcoholic beverage of choice among youth. Id. Moreover, the Supreme Court had pointed out that requiring age-verification upon delivery of wine would be a less restrictive alternative. Id. Therefore, having determined that a reasonable, non-discriminatory alternative existed, the court affirmed the district court's order nullifying the unconstitutional statute. Id. at *10.

The case was decided on December 24, 2008.