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Supreme Court strikes down Tennessee liquor sale residency law

June 26, 2019

The Supreme Court of the United States on Wednesday struck down a Tennessee law that makes it hard for outsiders to break into the state’s liquor sales market. The ruling also could have implications for Indiana’s liquor distribution laws.

The court voted 7-2 in ruling that a state requirement that someone live in Tennessee for two years to be eligible for a license to sell liquor violates the Constitution.

The outcome was a victory for a family that moved to Tennessee because of their daughter’s disability and a national chain with nearly 200 liquor stores in 23 states.

The case pitted the authority given to states to regulate alcohol sales in the 21st Amendment that repealed Prohibition in the United States against the constitutional principle that only Congress, not the states, can regulate interstate commerce.

Justice Samuel Alito wrote in his opinion for the court that states have considerable power to regulate the sale of alcohol, but they can’t discriminate against out-of-state interests. The predominant effect of the residency requirement is to protect Tennessee liquor sellers “from out-of-state competition,” he wrote.

In dissent with Justice Clarence Thomas, Justice Neil Gorsuch wrote that the 21st Amendment left the regulation of alcohol to the states.

The case began when the Tennessee Wine and Spirits Retailers Association opposed the issuance of licenses to Doug and Mary Ketchum, who moved to Tennessee from Utah, and the national chain Total Wine Spirits Beer & More for a store in Knoxville, Tennessee.

The Ketchums operate Kimbrough Wines & Spirits in Memphis. Their 34-year-old daughter, Stacie, has cerebral palsy and suffered serious respiratory problems in Utah.

There were two provisions in play initially — two years of residency before obtaining a license and 10 years in Tennessee before a liquor license can be renewed.

Both residency provisions were struck down by lower courts, and the retailers’ association dropped its defense of the longer requirement.

The case was closely watched by Indiana alcohol attorneys, some of whom said they believed a Supreme Court ruling could bring clarity to laws that can be ambiguous.

For instance, Indiana Code section 7.1-3-21-5 requires at least 60 percent common stock of a corporate applicant for a retailer’s or wholesaler’s permit be owned by residents who have lived in the state for at least five years. But the Indiana Attorney General’s office, even as it sided with Tennessee in this case, concluded in an advisory opinion that Indiana’s statute violated the Commerce Clause because it discriminated between in-state and out-of-state economic interests.

Before the U.S. Supreme Court, retailers argued that having people in the state for two years made it easier for authorities to do background checks and seize a liquor seller’s financial assets if necessary.

Indiana was among 35 states and the District of Columbia that backed the retailers’ association, but Tennessee had essentially stopped defending the residency requirements.

Arguments in the case took place in January on the 100th anniversary of ratification of Prohibition, the constitutional ban on the manufacture and sale of alcohol in the United States. Prohibition ended in 1933.

The case is Tennessee Wine and Spirits Retailers Association v. Thomas, 18-96.

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