Supreme Court ends state discrimination against new resident liquor businesses

June 26, 2019 | By DAVID DEERSON
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Can a state prohibit new residents from doing business in the alcoholic beverage industry? In a 7-2 opinion in Tennessee Wine & Spirits Retailers Association v. Thomas, today the Supreme Court answered with a resounding “no way.” The Court affirmed that states may not discriminate on the basis of state residence, and that protectionism is not a legitimate state aim in the regulation of alcohol.

The Supreme Court’s ruling represents a special win for our friends at the Institute for Justice. And PLF was happy to contribute to the case with our amicus brief.

Before today’s ruling, Tennessee refused to issue a retail liquor permit to anyone who has not resided in the state for at least two years. In most contexts, this would be an open-and-shut case: States can’t discriminate against out-of-state citizens, nor can they deny benefits to new residents. But when it comes to booze, the law is a little loopier.

The Twenty-First Amendment ended alcohol prohibition in the United States. But some states wanted to remain dry. They worried that it would be impossible to prevent the flow of alcohol into their borders without offending the Commerce Clause, which typically prevents states from interfering in the national economy. To address their concerns, the Twenty-First Amendment included a clause reaffirming states’ authority to regulate alcohol as they see fit.

But just because states retain regulatory power over alcohol doesn’t mean they are free to violate other basic constitutional tenets. It would be laughably unconstitutional, for example, if Tennessee tried to limit retail liquor permits to people of a certain race or gender. It’s just as unconstitutional to discriminate on the basis of residency.

Tennessee claimed that the two-year residency requirement was necessary to promote responsible sale and consumption. The Court saw right through this, noting that the regulation was “ill-suited” to that end. The Court apparently understood that the “predominant effect” of the law “is protectionism, not the protection of public health or safety.” And, as it noted, the Twenty-First Amendment does not “give States a free hand to restrict the importation of alcohol for purely protectionist purposes.”

The Supreme Court has previously noted that our Constitution “was framed upon the theory that the peoples of the several states must sink or swim together, and that in the long run prosperity and salvation are in union and not division.” That’s why there are a multitude of constitutional provisions designed to ensure that Americans are treated equally throughout the nation, and that individual states cannot discriminate against new transplants or non-residents.

Nevertheless, state governments remain tempted to grant their native residents special benefits and privileges—to the detriment of out-of-staters and the recently relocated. That temptation was reflected and realized in Tennessee’s protectionist alcohol policies. But as the Court noted in its opinion today, “protectionism, we have stressed, is not” a legitimate State interest in the regulation of alcohol.

State-level protectionism of this sort was the canary in the coal mine under the Articles of Confederation, highlighting the fatal flaws in our earliest implementation of federalism. As the Court noted, “removing state trade barriers was a principal reason for the adoption of the Constitution.”

Our brief explored that history, and analyzed the various interlocking constitutional provisions designed to ensure that Americans are treated like Americans, regardless of whence they came or where they’ve landed.

The Supreme Court got the message. States cannot discriminate against Americans on the basis of residency, not even when it comes to booze: that’s a key principle underlying and pervading our constitutional structure, and it’s a big part of what makes the United States “united.”