Parts of Indiana law declared unconstitutional. Can I ship there now?

Sovos | September 4, 2007

Earlier this year, we discussed the “new vintage” of wine litigation that was taking place across the country. As background, since the 2005 Granholm decision, the wine wholesale lobby has recognized that they must pick their battles, and therefore concede the ability for wineries to ship directly to consumers in most states. Recognizing they would be hard pressed to pass legislation that would prohibit direct shipping outright, they instead began introducing provisions in direct shipping bills that created de facto discrimination.

Two such examples could be found in the text of Indiana HB 1016. The first was a previous visit requirement in Indiana that said a Hoosier resident must first make a physical visit to a winery before placing an off-site (Internet, wine club, phone, etc.) order. The second was a ridiculous requirement that prohibited wineries that were permitted in their state to wholesale wine (this is the case in California, Washington, and Oregon, which represent 90% of the wine produced in this country) from obtaining a Direct Wine Seller’s Permit.

On Wednesday, Judge John Daniel Tinder of the U.S. District Court in the Southern District of Indiana ruled on these forms of discrimination in Baude v. Heath.

IT IS THEREFORE ORDERED, ADJUDGED, AND DECLARED that the Indiana Code Section 7.1-3-26-7(a)(6) is unconstitutional insofar as it bars wineries that possess wholesale privileges in states other than Indiana from seeking a Direct Wine Seller’s permit. Defendant David L. Heath, in his official capacity as Chairman of the Indiana Alcohol and Tobacco Commission, is ENJOINED from enforcing this statute to that extent.

IT IS FURTHER ORDERED, ADJUDGED, AND DECLARED that Indiana Code Sections 7.1-3-26-6(4) and 7.1-3-26-9(1)(A) are unconstitutional insofar as they require an initial transaction to be made physically in person between customers and permit holders before a Direct Wine Seller permit holder may ship its products directly to an Indiana resident. Defendant Heath, in his official capacity as Chairman of the Indiana Alcohol and Tobacco Commission, is ENJOINED from enforcing these statutes to that extent.

In the decision, Tinder even went so far as to say “The wholesale prohibition is not aimed so much at protecting Indiana’s wineries as it is at guarding the bank accounts of Indiana’s wholesalers.” Wow! These forms of discrimination can no longer be part of the wholesaler arsenal because they violate the Commerce Clause of the U.S. Constitution.

This is a very important decision, and many are rightfully celebrating the victory for wineries and consumers. However, a major roadblock to shipping wine into Indiana remains in place. HB 1016 stipulates that “A consumer may not receive more than two hundred sixteen (216) liters of wine in total from one (1) or more direct wine sellers in a calendar year.”

As we’ve discussed before, most wineries will continue to choose not to ship to Indiana consumers because they can’t possibly know if the consumer has already received their 24 case allotment. FedEx and UPS will continue to ship to Indiana, and some wineries will likely assume the risk and ship to Indiana consumers anyway. But the majority of wineries will opt out until the Indiana ABC clarifies their enforcement policies on this matter. Hopefully the Indiana legislature will address this issue directly in the next session.

Litigation and legislation battles continue in other states that will further shake up the wine shipping landscape. For example, in Family Winemakers of California v. Jenkins, the Family Winemakers seek to overturn the Massachusetts provision that prohibits wineries that produce more than 30,000 gallons from receiving a direct shipping permit. Massachusetts also has a law similar to Indiana where a MA resident may receive no more than 240 liters across all wineries.

Click here to read the full Baude v. Heath Opinion

Click here to read the full Baude v. Heath Decision