Family Winemakers of California v. Jenkins, 592 F.3d 1 (2010)

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Family Winemakers of California v. Jenkins, 592 F.3d 1 (2010) by Mind Map: Family Winemakers of California v. Jenkins, 592 F.3d 1 (2010)

1. Issue: In the 2006, the State of Massachusetts established a law, 19F, allowing only small wineries who produce 30,000 gallons a year of wine or less to purchase a license allowing them to sell in three ways: direct shipping, wholesaler, and retail. Larger wineries were required to purchase a license that only allowed them to sell to Massachusetts consumers or rely upon wholesalers. In 2010, a group of CA winemakers claimed that 19F was in violation of the Commerce Clause and was intended to illegally benefit Mass. winemakers (there are no Winemakers in Mass that produce more than 30,000 per year). Mass. defended themselves by stating the 21st Amendment grants immunity to the Commerce Clause. In 2010, the First Circuit Court of Appeals decided that 19F did indeed violate the Commerce Clause because of the limit to gallons of wine per year.

1.1. Impact of Decision: almost immediately, in 2011's case Coors Brewing Company v Mendez-Torres, Coors claimed that Puerto Rico was implementing unfair laws on large alcohol companies and favoring small business. US Court of Appeals dismissed the case. It appears that, while CA Winemakers sets an important precedent, US courts are not ready yet to support further arguments against laws protecting small businesses in the alcohol industry.

1.2. Why should business care? This is an important decision since it sets a legal precedent supporting the Commerce Clause and "big business" in the alcohol industry. It could potentially create huge shifts in the way interstate alcohol is sold. However, it appears US Courts are not ready to uphold this decision and small business still has an advantage.

1.3. Change in business practice (two examples): Large alcohol companies are using CA Winemakers as legal precedent and are bringing their cases against US states citing discriminatory practices. Large alcohol companies are likely expanding their interstate distribution capabilities under the protection of the Commerce Clause.

2. Facts:

2.1. The alcohol industry has a three tiered sales system that is shaped like an hour glass

2.1.1. At the top are the producers

2.1.2. In the middle are the distributors, causing the bottle neck effect

2.1.3. At the bottom are the thousands of licensed retailers

2.2. In 2006, the State of Massachusetts enacted 19F restricting large wine producers in sales options while de-regulating small producers of wines, which includes the majority of Mass. winemakers.

2.2.1. This incentived small businesses in MA while de-incentivizing big business throughout the state. Big wineries could not distribute directly to the consumer AND retailers, they had to choose one or the other.

2.2.2. 30,000 gallons of grape wine produced per year demarcated small business from large business.

2.2.2.1. No MA winery produced more than 30,000 a year

3. Rule

3.1. The Commerce Clause

3.1.1. The Commerce Clause prevents different states creating protective trade barriers and discriminating against businesses outside state boundaries.

3.2. The Twenty First Amendment

3.2.1. Repeals the 18th Amendment to the Constitution and suggests that state alcohol rights take precedence over Federal Government.

4. Application

4.1. MA law 19F did what it was supposed to do, which was protect and promote small business against large wine producers.

4.1.1. MA stated that its law did not discriminate against either party; it was simply meant to be a form of regulation

4.1.2. MA also stated that the Twenty First Amendment immunizes state laws from the Commerce Clause

4.1.3. However, the Twenty First Amendment does not immunize states from the Commerce Clause as was found in Granholm v. Heald, 1885.

5. Conclusion

5.1. The US Court of Appeals held that 19F did indeed violate the Commerce Clause because the 30,000 gallon limit per year did discriminate and change the competitive balance between out of state business and in state business