Stage Set for Challenge to Massachusetts Wine Direct Shipping Ban

Business Wire,  July 11, 2008  

• E-mail
• Print
• Link

Coalition for Free Trade Scheduled for July 29 Oral Argument in Case Brought by the Family Winemakers of California

SAN FRANCISCO -- A ban that prevents Massachusetts wine lovers from purchasing their favorite wines will get its day in court July 29, as attorneys for the Coalition for Free Trade represent the 700+ winery-member trade association and plaintiff Family Winemakers of California.

The oral argument is set for July 29, 2:30 p.m., in Courtroom 12, 5th floor, 1 Courthouse Way, Boston. The hearing is open to the public although seating is limited. The plaintiffs' memorandum in support of their motion for summary judgment is available at www.coalitionforfreetrade.

Family Winemakers of California v. Jenkins challenges the state's ban on shipments from wineries and wine companies producing an aggregate of more than 30,000 gallons (about 12,600, 12-bottle cases, considered a small winery). The law does not affect any in-state wineries - which all produce less than the 30,000 gallons - but affects thousands of America's 6,000 wineries, representing 98% of wine in interstate commerce, according to the filing.

"The law creates a discriminatory, two-tier scheme that forces wineries producing more than 30,000 gallons to decide whether they sell through an in-state wholesaler or directly to in-state consumers, but imposes no such limitation on in-state wineries," said Tracy Genesen, legal counsel to Coalition for Free Trade and partner of Kirkland & Ellis, representing the plaintiffs.

"While the U.S. Supreme Court ruled in 2005 that states cannot discriminate against a winery based on its location, the U.S. District Court of Massachusetts will decide if states can discriminate based on a winery's production size," Genesen added. The motion was written by Ms. Genesen as well as Kirkland & Ellis attorneys Kenneth W. Starr, Elizabeth Locke and Micah Osgood. Gerald Caruso of Rubin & Rudman, Family Winemakers of California's local counsel, also assisted.

"Our winery members want the court to invalidate key sections of Massachusetts law and level up so that all wineries, regardless of size, can compete in the Massachusetts market on their terms," said Paul Kronenberg, President of the Sacramento-based Family Winemakers of California. Of the association's 700+ winery members, more than 90% produce less than 10,000 cases per year. "The wine distributor cartel is promoting the cap provision to shut down legal, regulated direct-to-consumer shipments," he added.

Attorneys say the case has broad implications. The contested "cap" provision is similar to laws in Ohio, Arizona and Kentucky, and has been considered, but failed, for three consecutive years in Florida's legislature.

Background on Massachusetts Law

Massachusetts House Bill 4498 became law in 2006, prohibiting an out-of-state winery from shipping directly to a Massachusetts adult consumer if the winery has been represented by a Massachusetts wholesaler within the last six months, or if the winery produces more than 30,000 gallons of wine a year. No such limitations exist for Massachusetts' 25 wineries because none produce more than the 30,000 gallon cap - they can sell directly to Massachusetts consumers as well as through in-state wholesalers. Out-of-state wineries over the cap don't have this option.

Then Governor Mitt Romney vetoed HB 4498 in November 2005 - commenting on its "anti-consumer effect, as well as its dubious constitutionality" - but the veto was overridden. The following January, Governor Romney introduced a separate bill similar to legislation working successfully in many other states, commenting that "It's time we end the monopoly that wholesalers have over wine salesO"

Additionally, the 2006 law effectively bans shipments from out-of-state wineries. HB 4498 limits how much wine an individual consumer can receive from an aggregate of wineries every year, but does not provide a mechanism for wineries to know how much an individual has received from other wineries. Most states have a case limit per winery per individual per year, rather than per individual. Because wineries can loose their federal license to make wine for non-compliance, the statute bars interstate shipments. Perhaps more importantly, FedEx and UPS do not ship into Massachusetts.

A total of 35 states allow winery-to-consumer shipments in some form - up from 17 states a decade ago - and those legal states now represent about 80% of wine consumption in the U.S. Massachusetts is the eighth largest wine consumption state; only New Jersey has a larger consumption base and continues to ban interstate winery-to-consumer shipments. (Source: Adams Wine Handbook 2007).

About Coalition for Free Trade

Founded in 1997, the Coalition for Free Trade is a 501(c)3 non-profit legal foundation whose only goal is to legalize direct-to-consumer shipments of wine from out-of-state wineries and retailers in those states where it is currently prohibited. Its legal team was instrumental in bringing the issue before the U.S. Supreme Court in 2004. But the 2005 ruling requires additional litigation to remove discriminatory trade barriers that continue to prohibit of-age consumers from receiving wine for personal enjoyment directly from out-of-state wineries and retailers.