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1. Facts

1.1. Parties

1.1.1. FAMILY WINEMAKERS OF CALIFORNIA Family Winemakers of California is a trade association representing over 450 wineries and supporting businesses in California. It was founded in 1990.

1.1.2. Eddie J. JENKINS Jenkins acted in the official capacity as Chairman of the Massachusetts Alcoholic Beverages Control Commission

1.2. What Happened

1.2.1. Massachusetts passed a regulation allowing small winemakers to access multiple distribution channels in the state while limiting large winemakers to either the wholesale or direct-to-consumer channel.

1.2.2. The regulation defined wineries that produce more than 30,000 gallons of wine as "large" wineries.

1.2.3. All of the winemakers within the state of Massachusetts fall under the small category while 98% of all wine sold in the US from outside the state originates from wineries that fall under the large category

1.3. Procedural History

1.3.1. Out-of-state wineries challenged the Massachusetts statute which controlled distribution as a violation of the Commerce Clause and Twenty-First Amendment.

1.3.2. District court issued an injunction to enjoin the enforcement of the statute .

1.3.3. State officials appealed

2. Issue Before the Court

2.1. Whether the 2006 law altered the competitive balance to favor wineries from Massachusetts over out-of-state wineries by design.

3. Rule of Law

3.1. Prohibition Backround

3.1.1. The Twenty-first Amendment does not protect state alcohol laws that explicitly favor in-state over out-of-state interests from invalidation under the Commerce Clause.

3.2. Commerce Clause

3.2.1. The Commerce Clause prevents states from creating protectionist barriers to interstate trade.

3.2.2. Plaintiffs bear the initial burden of proving violations of the commerce clause.

4. Application

4.1. Arguments

4.1.1. The separation of wineries that produce more than 30,000 gallons from smaller ones is intended to discriminate against out-of-state wine producers.

4.1.2. The preferential treatment to “small” wineries is actually preferential treatment to Massachusetts wineries.

4.1.3. Laws that favor in-state commercial interests over out-of-state competitors have long been subject to invalidation

4.1.4. Courts can enact regulations that the Commerce Clause would otherwise forbid only when Congress clearly allows for it.

4.2. Tests

4.2.1. Is the effect of a state regulation to cause local goods to constitute a larger share?

4.2.2. Does the state regulation confer a clear competitive advantage to local businesses?

5. Conclusion

5.1. The court considered whether the 2006 law does alter the the competitive balance to favor wineries from Massachusetts over out-of-state wineries by design.

5.2. The judgement of the district court was affirmed and the injunction remained.

5.3. The conclusion is supported by the fats of the case which showed that the law was enacted to favor local companies in violation of the Commerce Clause

6. Impact

6.1. Deere & Company v. State Supreme Court of New Hampshire

6.1.1. Manufacturers challenged a state law defining farm equipment as motor vehicles. “The state bears the burden of showinglegitimate local purposes and the lack of non-discriminatory alternatives, and discriminatory state laws rarely satisfy this exacting standard.”

6.2. American Fuels & Petrochemical Manufacturers Ass'n v. Corey

6.2.1. The court dismissed claims challenging that California's Low Carbon Fuel Standard discriminated against out-of-state refiners in violation of the Commerce Clause. Family Winemakers of California v. Jenkins was cited as a case where state laws are struck down when they have an “impermissible discriminatory effect.” The Massachusetts law conferred an undisputed benefit on ‘small’ wineries and an undisputed burden on ‘medium’ or ‘large’ wineries.’”

6.3. Wal-Mart Puerto Rico, Inc. v. Zaragoza-Gomez

6.3.1. Wal-Mart brought action alleging that Puerto Rico's corporate alternative minimum tax (AMT) violated dormant Commerce Clause, Federal Relations Act, and Equal Protection Clause. The United States District Court enjoined enforcement of tax, and Puerto Rico appealed. The court affirmed the decision. Family Winemakers of California v. Jenkins was cited: AMT demonstrate that it is unconstitutionally discriminatory. Whether or not the AMT is one component in a broader tax scheme, the AMT nonetheless applies only to interjurisdictional transfers within a corporate family. The resulting “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter” is discriminatory. Family Winemakers of Cal. v. Jenkins

7. Why Business Professionals Care

7.1. Precedents for exceptions to the Commerce Clause which is meant to enforce trade across state lines would have a negative impact on economic growth in this country.   It would allow for states to adopt protectionist policies.

7.2. Businesses selling wine across state lines must deal with differing regulations across all fifty states. State regulations which constitute barriers to out-of-state commerce make it more burdensome to do business in that state.

8. Business Practices Influenced by the ruling

8.1. In January of 2015, a law went into effect allowing direct shipping of wine to consumers in Massachusetts.

8.2. There are now dozens of wineries that can ship direct to consumers in Massachusetts.