Terroir in Court

Lee Pender | October 2, 2006

For the first time in post-Granholm legal maneuvering, a court has recognized the geographic distinctiveness of wine as a factor in applying the “level playing field” requirement.

Kentucky is one of about eight states that responded to Granholm by authorizing only on-site sales. The argument by the wholesalers and their allies in favor of that approach was that applying the on-site requirement to all wineries, local and out-of-state, constituted equal treatment for Commerce Clause purposes.

The Granholm opinion had, of course, rejected New York’s argument that all wineries were treated equally because out-of-state sellers were, like local producers, entitled to rent warehouses and maintain offices in the state. Thus, we already knew a state could not adopt facially equal provisions that introduce substantial impracticalities for interstate sellers not shared by local wineries. The question was whether an on-site-only law was such a provision.

In Huber Winery v. Wilcher, a federal court in Kentucky ruled that Granholm forbids laws that allow residents to purchase wine at wineries in all locations, noting that the effect is to foreclose a larger number of wineries in the major producing states, while imposing only a minor inconvenience on consumers who travel to wineries in Kentucky and adjacent states. The opinion is important because (1) it applies the “strict scrutiny” test, which is standard for overt discrimination, to the de facto discrimination before it, and (2) it recognizes that practical availability of wine from one growing region does not compensate for denying practical access to the greater variety of wines from others –i.e., that “interstate commerce” is not all the same. In reaching the latter conclusion, the court agreed with the plaintiffs that “each winery’s products are distinctive,” expressly declaring that the consumer rights to interstate commerce recognized in Granholm are not satisfied by Kentuckians’ ability to purchase Tennessee and Indiana wine on-site, to the exclusion by travel distance of the products of California, Oregon and Washington.