7th Circuit Issues Lebamoff Opinion
As you likely have read in the trade press already, on Wednesday, November 28, 2018, the US Court of Appeals for the Seventh Circuit issued its opinion in Lebamoff v. Rauner. The opinion adds three judges of the Seventh Circuit to the collection of legal minds rejecting the notion that the dormant Commerce Clause non-discrimination principles applied by the Supreme Court in Bacchus (1984) and Granholm (2005) should be limited to laws discriminating against producers and products.
Like other cases brought by Lebamoff and its legal team, this case involves a challenge to state laws that prohibit direct-to-consumer wine shipments by out-of-state retailers. Illinois, like many states, permits in-state retailers to deliver wine directly to Illinois consumers located anywhere in the state. The law, however, denies that same privilege to out-of-state retailers. This distinction, according to the plaintiffs, amounts to discrimination against out-of-state economic interests in violation of the Constitution’s dormant Commerce Clause.
The Seventh Circuit opinion rejects the reading of Granholm, embraced by the Second and Eighth Circuits, that the Supreme Court drew an implicit distinction between laws discriminating against producers and products (not permitted) and laws affecting the wholesale- or retail-tiers (immune from Commerce Clause scrutiny). Reading Granholm in its totality, the Seventh Circuit finds such an implied bright-line rule unlikely. Moreover, drawing on the Brown-Forman (1986) and Healy (1989) cases, the Seventh Circuit notes that prior Supreme Court opinions have applied dormant Commerce Clause principles to laws that did not regulate producers or products.
The Seventh Circuit, of course, recognized that its opinion could be substantially affected by the Tennessee Wine & Spirits Retailers Ass’n v. Byrd case now pending before the Supreme Court. Moreover, the Seventh Circuit’s discussion of issues upon remand suggests a number of potential distinguishing facts that could alter the outcome of the case. Nevertheless, should the Supreme Court affirm the Sixth Circuit’s Byrd decision, the state of Illinois will have a hard time defending the discriminatory treatment challenged in Lebamoff.