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Byrd v. Tennessee Wine & Spirits Retailers Association

United States District Court, M.D. Tennessee, Nashville Division

April 14, 2017

CLAYTON BYRD in his official capacity as Executive Director of the TENNESSEE ALCOHOLIC BEVERAGE COMMISSION, et al., Plaintiffs,
v.
TENNESSEE WINE AND SPIRITS RETAILERS ASSOCIATION, Defendant.

          MEMORANDUM

          KEVIN H. SHARP, UNITED STATES DISTRICT JUDGE

         Pending before the Court is Plaintiff[1] Tennessee Fine Wines and Spirits, LLC's (d/b/a Total Wine Spirits Beer & More) (“Tennessee Fine Wines”) Motion for Partial Summary Judgment, (Docket No. 55), to which Plaintiff Clayton Byrd (“Byrd”) and Defendant Tennessee Wine and Spirits Retailers Association (“Association”) have filed Responses in Opposition, (Docket Nos. 73, 90), and Plaintiff Tennessee Fine Wines has replied, (Docket Nos. 76, 95). For the reasons set forth below, the Court will grant Plaintiff Tennessee Fine Wines' Motion.

         BACKGROUND

         The relevant facts are undisputed for present purposes and are as follows: Plaintiff Byrd is the Executive Director of the Tennessee Alcoholic Beverage Commission (“the Commission”), a Tennessee state agency tasked with licensing the sale and delivery of alcoholic beverages. Plaintiff Byrd filed this action seeking a declaratory judgment regarding the constitutionality of the residency requirement for issuing a retail license outlined in Tenn. Code Ann. § 57-3-204(b)(2)(A). (Docket No. 1-1). Plaintiff Tennessee Fine Wines is a Tennessee limited liability company whose members are not residents of Tennessee. It seeks to own and operate one or more retail liquor stores, referred to as retail package stores, in Tennessee.

         On July 5, 2016, Plaintiff Tennessee Fine Wines filed an application with the Commission for a new retail package store to be located in Nashville, Tennessee. Plaintiff Tennessee Fine Wines asserts that its representatives met with the Commission's staff, including Plaintiff Byrd, to discuss its plan to apply for a retail package store license prior to filing its application. It further asserts that those discussions included whether the residency requirements would preclude it from obtaining a license. Plaintiff Byrd disputes having met with representatives of Tennessee Fine Wines prior to the submission of its application. The Commission's staff advised Plaintiff Tennessee Fine Wines that, in light of two opinions by the Tennessee Attorney General that the residency requirements are unconstitutional, the Commission has not enforced the residency requirements and has licensed nonresidents in the past. The Commission's staff recommended that the Commission approve Plaintiff Tennessee Fine Wines' application, subject to certain conditions. The Commission twice deferred its vote on Plaintiff Tennessee Fine Wines' application for a retail package store license, the last time being indefinitely until the Court resolves Plaintiff Byrd's declaratory action.

         STANDARD OF REVIEW

         Pursuant to Federal Rule of Civil Procedure 56, this Court is required to grant a motion for summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Plaintiff Tennessee Fine Wines' Motion for Partial Summary Judgment presents pure issues of law, which are appropriate for resolution at the summary judgment stage.

         LEGAL ANALYSIS

         The Commission issues retail package store licenses pursuant to Tenn. Code Ann. § 57-3-204 and other statutory provisions. Tenn. Code Ann. § 57-3-204 contains residency requirements that prohibit the Commission from issuing retail package store licenses to nonresidents. Specifically, when it comes to issuing a license to an individual, the statute provides in pertinent part that:

No retail license under this section may be issued to any individual: Who has not been a bona fide resident of this state during the two-year period immediately preceding the date upon which application is made to the commission or, with respect to renewal of any license issued pursuant to this section, who has not at any time been a resident of this state for at least ten (10) consecutive years[.]

T.C.A. § 57-3-204(b)(2)(A). Furthermore, with respect to corporations, the statute states, inter alia, that:

         The commission may, in its discretion, issue such a retail license to a corporation; provided, that no such license shall be issued to any corporation unless such corporation meets the following requirements:

(A) No retail license shall be issued to any corporation if any officer, director or stockholder owning any capital stock in the corporation, would be ineligible to receive a retailer's license for any reason specified in subdivision (b)(2), if application for such retail license had been made by the officer, director or stockholder in their individual capacity;
(B) All of its capital stock must be owned by individuals who are residents of this state and either have been residents of the state for the two (2) years immediately preceding the date application is made to the commission or, with respect to renewal of any license issued pursuant to this section, who has at any time been a resident of this state for at least ten (10) consecutive years;

T.C.A. § 57-3-204(b)(3)(A)-(B).

         Plaintiff Tennessee Fine Wines argues that the residency requirements are unconstitutional because they violate the Commerce Clause as well as the Privileges and Immunities Clause of the United States Constitution. Because the relevant facts are undisputed, this case presents a strictly legal question as to whether Plaintiff Tennessee Fine Wines is entitled to summary judgment as a matter of law. It is.

         I. Commerce Clause

         The Commerce Clause of the U.S. Constitution both expressly grants Congress the power to regulate commerce among the several States, see U.S. Const. art. I, § 8, cl. 3, and implicitly limits the States' power to discriminate against interstate commerce. See, e.g., New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 273 (1988). The Commerce Clause's negative implication- also known as the dormant Commerce Clause-arises from a concern over “economic protectionism-that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.” Jelovsek v. Bredesen, 545 F.3d 431, 435 (6th Cir. 2008) (citing New Energy, 486 U.S. at 273-74). “[I]n all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate ‘differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.'” Granholm v. Heald, 544 U.S. 460, 472 (2005) (citing Oregon Waste Sys., Inc. v. Dep't of Envtl. Quality of State of Or., 511 U.S. 93, 99 (1994)).

         Dormant Commerce Clause challenges proceed under a two-tiered analysis. Int'l Dairy Foods Ass'n v. Boggs, 622 F.3d 628, 644 (6th Cir. 2010). Under the first tier, a court determines whether “a state statute directly regulates or discriminates against interstate commerce, or [whether] its effect is to favor in-state economic interests over out-of-state interests.” Am. Beverage Ass'n v. Snyder, 735 F.3d 362, 369-70 (6th Cir. 2013) (internal quotation marks and citation omitted). To prevail, a plaintiff must satisfy its burden of showing that a state regulation discriminates against out-of-state interests either “(a) facially, (b) purposefully, or (c) in practical effect.” Id. at 370 (internal quotation marks and citations omitted). “If the plaintiff satisfies its burden, then ‘a discriminatory law is virtually per se invalid and will survive only if it advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.'” Id. (citation omitted). Under the second tier, if the challenged state regulation is neither extraterritorial nor discriminatory, then a court applies the Supreme Court's balancing test set forth in Pi ...


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