Family Winemakers of California Making Headway in Massachusetts

Tim Roden | June 15, 2008

Family Winemakers of CaliforniaOn May 29, 2008, Family Winemakers of California filed a motion for summary judgment in Family Winemakers of California v. Jenkins, now before the federal district court for Massachusetts. The suit alleges that section 19F, the Massachusetts law that permits direct-to-consumer wine shipping, is unconstitutional because it “unequivocally discriminates against interstate commerce in both purpose and effect” by limiting direct shipment privileges to wineries annually producing no more than 30,000 gallons. The motion asks the court to declare that discrimination unconstitutional and requests that the court allow section 19F to remain in force, but enjoin Commonwealth of Massachusetts officials from applying the volume cap.

Section 19F was modified to replace a prior Massachusetts local-only direct shipping law, which was found facially discriminatory and invalidated in Stonington Vineyards, Inc. v. Jenkins. The current motion argues that the new text in section 19F was simply a more subtle means to accomplish the same protectionist ends. The bill that amended 19F was vetoed by Governor Romney, who declared that the measure would not cure the previous law’s deficiencies. The Massachusetts legislature, however, overrode his veto and signed the bill into law, setting the stage for judicial determination of which side was right.

Section 19F as amended creates a two-classification system based on the size of the winery’s annual production and wholesaler relationship. Section 19F(a) presents a choice for wineries producing more than 30,000 gallons annually –in effect, they can ship directly to consumers or have wholesaler representation. Wineries producing no more than 30,000 gallons annually can ship directly to consumers while also maintaining a relationship with a wholesaler.

Family Winemakers of California’s summary judgment motion alleges that the “large” wineries are primarily out-of-state and that section 19F, though facially neutral on location, is in intent and effect protectionist and discriminatory. Moreover, the law specifically dictates that fruit wine does not count toward the gallonage cap; the motion argues that a much larger portion of wine produced in Massachusetts is fruit wine than wine produced elsewhere, enhancing the discriminatory effect.

Unsurprisingly, Massachusetts has filed a cross-motion for summary judgment in response, arguing that section 19F is facially-neutral, not discriminatory, and less restrictive than similar laws in other states that have been upheld. The Commonwealth’s motion requests that the court join the courts in Maine, Kentucky, and Arizona which have left production caps in effect in their respective states. An amicus brief filed by the Wine & Spirits Wholesalers of Massachusetts also supports the 30,000-gallon production cap. A key problem with challenges in other states has been the lack of economic evidence supporting discriminatory effects; the current motion attempts to bypass that requirement, in part on the grounds that the previous flat ban on out-of-state direct shipment prevented compilation of economic evidence, excusing the plaintiff from a burden of proof it could not meet because of the defendants’ unlawful conduct.

Oral argument is scheduled for July 29, 2008. If the court determines that a genuine issue of material fact does not exist as outlined in either of the individual motions, the court will grant the motion of the party whose legal argument It finds persuasive. However, the court could deny both motions and rule that evidence is required to resolve issues of fact.

If the court grants the plaintiff’s motion, the resulting injunction enjoining Massachusetts from enforcing the capacity cap and the wholesaler relationship restriction of 19F would, in theory, open the state to shipments from out-of-state wineries. However, obstacles to direct shipments into the state might persist. For example, the decision would not directly affect current carrier policies; FedEx and UPS could continue to refuse to ship to Massachusetts. In addition, an injunction might not resolve issues apart from the volume cap, such as how individual importation limits would be enforced by state officials.

Whatever its outcome, Family Winemakers of California v. Jenkins will serve as an important precedent on the constitutionality of capacity caps. In particular, a plaintiff’s victory on summary judgment would significantly lower the evidentiary bar for challenges to thinly-veiled protectionist measures presented as facially neutral.