Supreme Court Justices Question Residency Rules for Liquor Store Owners

(Bloomberg) -- U.S. Supreme Court justices expressed doubts about a Tennessee law that imposes residency requirements on people seeking to run liquor stores, taking up a rare test of the 1933 constitutional amendment that repealed Prohibition.

Tennessee requires people to live in the state for two years to get a retail liquor license and for 10 years to get a license renewed.

Justice Brett Kavanaugh was among the skeptics at Wednesday’s argument, saying the text of the 21st Amendment "does not support" rules designed to protect local liquor retailers from out-of-state competition.

But Justice Neil Gorsuch was more supportive of the Tennessee measure, saying arguments against the law eventually could force states to allow "the Amazon of liquor."

The law is being challenged by a couple who bought a liquor store after moving to the state to care for their disabled daughter and by a company affiliated with the Total Wine chain. Their lawyer, Carter Phillips, told the justices that the measure was "rank discrimination" against out-of-state businesspeople, violating a different part of the Constitution.

Critics say Tennessee’s requirements are the nation’s strictest. An initial license lasts only a year, so anyone seeking to maintain a business long term would also have to meet the 10-year requirement for renewals. The rules apply to the directors, officers and shareholders of businesses that own stores.

‘Virtually Complete Control’

The Tennessee Wine and Spirits Association, which represents competing retailers and is defending the law, says the 21st Amendment overrides the usual protections for interstate commerce. The trade group’s lawyer, Shay Dvoretzky, said the 21st Amendment gives states "virtually complete control" over alcohol distribution within their borders.

The 21st Amendment lets states ban or regulate "the transportation or importation" of alcoholic beverages into a state "for delivery or use therein."

The case is unusual in that Tennessee is neither currently enforcing its rules nor taking part in the Supreme Court clash. The case made it into court only when the liquor trade group threatened to sue if the state issued a license to Total Wine for a proposed store in Nashville.

More than 30 states are urging the high court to back the Tennessee rules. Supporters say more than 20 states have some residency requirements for liquor sales.

The Supreme Court hasn’t addressed the reach of the 21st Amendment since a 2005 ruling said states can’t bar out-of-state wineries from shipping directly to customers. A 5-4 majority said the 21st Amendment didn’t authorize that sort of discrimination.

A federal appeals court struck down the Tennessee law as violating the so-called dormant commerce clause, a judge-made doctrine that says states can’t discriminate against interstate commerce unless authorized by Congress.

The case is Tennessee Wine and Spirits v. Blair, 18-96.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo, Justin Blum

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