Supreme Court Decides Tennessee Wine and Spirits Retailers Association v. Thomas

On June 26, 2019, the Supreme Court decided Tennessee Wine and Spirits Retailers Association v. Thomas, No. 18–96, holding that Tennessee’s two-year residency requirement for individuals and businesses seeking to obtain liquor licenses violates the Commerce Clause and is not saved by § 2 of the Twenty-First Amendment.

This case arose when two companies applied for licenses to own and operate liquor stores in Tennessee. Under Tennessee law, the Tennessee Alcoholic Beverage Commission was precluded from granting the licenses unless the applicants had been “bona fide residents” of the state for two years. Neither applicant satisfied this durational residency requirement. Yet, the Commission recommended approving the applications. It backed down, however, when Tennessee Wine and Spirits Retailers Association (the Association)—a local trade group—threatened suit. The Commission’s executive director then filed a declaratory judgment action to determine the residency requirement’s constitutional. The district court held that it violates the Constitution. The state declined to appeal, but the Association took the case to the Sixth Circuit, which affirmed (over a dissent).

The Supreme Court affirmed. All parties agreed that Tennessee’s residency requirement would be barred by the dormant Commerce Clause if it applied to any commodity other than alcohol. To save the law, the Association argued that the broad language of § 2 of the Twenty-First Amendment authorizes states to proscribe the sale of alcohol by certain individuals. The Court rejected that position.

First, the Court note that the Association’s interpretation would “trump any irreconcilable provision of the original Constitution, the Bill of Rights, the Fourteenth Amendment, and every other constitutional provision predating ratification of the Twenty-first Amendment in 1933.” But that conflicts with the Supreme Court’s consistent reading of § 2 in light of “the basic structure of federal-state alcohol regulatory authority that prevailed prior to the adoption of the Eighteenth Amendment.”

Examining that history, the Supreme Court found that, by “the late 19th Century,” however, “the Court was firmly of the view that the Commerce Clause by its own force restricts state regulation of interstate commerce.” Within that framework, state regulation must have a “bona fide relation to protecting the public health, the public morals, or the public safety, and could not encroach upon Congress’s power to regulate commerce among the several States.” When Congress acted, it generally sought to balance dry- and wet-states’ respective rights during the burgeoning temperance movement but did not “purport to authorize States to enact protectionist measures.” Section 2 of the Twenty-First Amendment tracks this legislation and so works in a similar manner. Thus, it “grants States latitude with respect to regulation of alcohol” but does not authorize them to “violate the nondiscriminatory principle that was a central feature of the regulatory regime that the provision was meant to constitutionalize.”

Here, Tennessee’s two-year residency requirement “discriminates on its face against nonresidents.” Because it bears “at best [only] a highly attenuated relationship to public health or safety,” it can’t be justified as a legitimate state interest that can’t be furthered by non-discriminatory means. Indeed, the Association’s “public health and safety” argument was “implausible on its face.” Tennessee can investigate liquor-license applicants with relative ease no matter where the applicants live. The “predominant effect of the 2-year residency requirement,” the Court concluded, “is simply to protect the Association’s members from out-of-state competition.” As a result, it “violates the Commerce Clause and is not saved by the Twenty-first Amendment.”

Justice Alito delivered the opinion for the Court, joined by Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, Kagan, and Kavanaugh. Justice Gorsuch filed a dissenting opinion, joined by Justice Thomas.