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ALERT: Supreme Court Strikes Down Tennessee Residency Requirements in Alcohol Licensing

NewsIn a move sure to have a profound effect on state regulation of alcohol sales and distribution, the United States Supreme Court has issued an opinion in Tennessee Wine and Spirits Retailers Assn. v. Thomas that strikes down Tennessee’s two-year in-state residency requirement for initial applicants for state liquor licenses.

The businesses at issue in this case had applied for retail licenses to operate liquor stores in Tennessee, but state law required a minimum residency of two years for applicants, which the applicants could not satisfy.  Interestingly, the Tennessee Alcoholic Beverage Commission (TABC) declined to enforce this requirement, based upon opinion from the state attorney general which found it to be unconstitutional. The Tennessee Wine and Spirits Retailers Association, a trade association of in-state liquor stores, however, sued TABC to prevent it from issuing the licenses, result in appeals eventually resolved by in this opinion.

While the long-term implications aren’t yet fully clear, this opinion builds upon the 2005 U.S. Supreme Court ruling in Granholm v. Heald, which struck down New York and  Michigan laws that allowed in-state wineries to ship directly to consumers while prohibiting the same actions by out-of-state wineries. Today the U.S. Supreme Court took a direct look at state regulation allowable under the 21st Amendment through the lens of interstate commerce, and came down firmly in favor of federal court’s ability to review and limit state alcohol regulations.  Although states are ceded broad authority under the 21st Amendment to regulate alcohol within their borders, they cannot create a facially neutral law that provides an advantage to in-state entities over out-of-state entities. The opinion also provides the answer to the question of whether the Supreme Court would limit review of state alcohol regulation only to laws concerning alcohol producers, and the answer is decidedly “no”.  Regulation concerning distributors, wholesalers and retailers are squarely within the federal court’s purview. 

Keep checking back for more analysis and implications on the outcome of this case.

Stephen G. Amato is a Member of McBrayer law. Mr. Amato focuses his practice in the areas of hospitality law, civil litigation, employment law, and administrative law, and is located in the firm's Lexington office. He can be reached at samato@mcbrayerfirm.com or 
(859) 231-8780, ext. 1104. 
We take a team approach to deliver effective counsel to all our clients, so other attorneys in the firm may perform these services as well.

This article does not constitute legal advice.

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