Family Winemakers Sues Massachusetts to Overturn Law Limiting Direct Wine Sales by Winery Size; Many Small Wineries Forced to Choose One Sales Approach
The lawsuit asserts that Section 19F replaces Massachusetts laws that this 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 limits 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 fall solely upon out-of-state wineries, whereas Massachusetts wineries continue to enjoy unfettered access to the Massachusetts market.
“discriminates against interstate commerce by denying out-of-state wineries the same shipping rights that Massachusetts wineries do possess. Such discrimination violates the 'nondiscrimination principle of the Commerce Clause' and faces a 'virtually per se rule of invalidity' according to Granholm.”
The filing coincides with Constitution Day and serves as a reminder that the basic principles that formed this nation are what bind the union together. "Freedom to conduct commerce across state boundaries without undue restrictions was a fundamental principle of the framers of the Constitution," noted Kenneth W. Starr, former Solicitor General and an attorney with Kirkland & Ellis. Starr coordinated the legal victory in Granholm v Heald.
Tracy Genesen, an attorney with Kirkland & Ellis, argues that the new Massachusetts statute "discriminates against interstate commerce by denying out-of-state wineries the same shipping rights that Massachusetts wineries do possess. Such discrimination violates the 'nondiscrimination principle of the Commerce Clause' and faces a 'virtually per se rule of invalidity' according to Granholm."
The lawsuit seeks to overturn the 30,000-gallon production limit. A winery cannot sell directly to Massachusetts's consumers if it produces more than 30,000 gallons (about 12,600 cases) annually and sells any wine through a distributor in Massachusetts. Essentially, the law discriminates against producers above this limit since wineries with lower production levels can sell directly to Massachusetts's adult residents and at the wholesale level. Those above 30,000 gallons must give up their distribution relationships for 6 months in order to sell direct. Wineries would have to leave the market for half a year and, without being able to self distribute to retail licensees forego existing placements in restaurants and wine shops.
Family Winemakers of California is a statewide trade association representing over 740 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.