Last Sunday I was delighted to fly to San Francisco and meet with Pepperdine Law School Dean, former Solicitor General of the United States, and Independent Counsel investigator of President Bill Clinton, Ken Starr, to talk about…..wine deregulation!
As a Pepperdine Law graduate myself and fellow Reagan Administration alumni, I had a couple of other reasons to really enjoy our 2 hour meeting, but the main purpose of our discussion had to do 
with a project that is close to Dean Starr’s heart (and also good for it), namely, working to oppose prohibitionist-style laws that still exist in many states that bar the direct shipment of wine to consumers. These regulatory barriers, including barriers to direct purchase and shipment of wine over the internet, exist in large states such as Texas and New Jersey, and are highly discriminatory against smaller family wineries in California that produce high quality products but cannot get access to these states for sales through the outmoted "three tier" (producer, wholesaler, retailer) system. These laws are out of tune with the internet, sales programs of companies like Beverages and More, shipping businesses of Federal Express, DHL, UPS, and the wine appreciation lifestyle that consumers otherwise enjoy in states like California.
Dean Starr works with Tracy Genesen, a partner at the San Francisco office of Kirkland and Ellis, where we met, who is a seasoned trial and appellate attorney. Genesen provides legal guidance to wine industry trade associations on the legal and public policy aspects of direct shipping of wine to consumers, and is counsel to the "Family Winemakers of California" organization. Genesen also serves as Legal Director for the Coalition for Free Trade, which is an organization representing wineries that are affected by state regulatory barriers.
During our meeting, Dean Starr and Genesen explained that new suits and amended complaints have been filed in the past year attacking requirements that consumers must purchase wine in person, with the first court decisions recently issued in Maine and Kentucky. Related cases are also ongoing in Texas and New Jersey. Wineries also are challenging legal shipping limits that are based on production volume.
Starr and Genesen have teamed up to work on these cases and also to get the word out about these discriminatory practices, and wrote an article for the the National Law Journal earlier this year about the issues wineries are confronted with in obtaining market access. They have written about recent litigation which puts a new twist on the direct-shipping issues that prompted a U.S. Supreme Court ruling. In the ruling, the Supreme Court found that laws in New York and Michigan discriminated against out-of-state wineries by allowing only in-state wineries to ship directly to consumers. Granholm v. Heald, 544 U.S. 460 (2005). The ruling pitted the Constitution’s commerce clause against the 21st Amendment. The lead counsel in that successful Supreme Court case for the wineries? None other than Dean Starr!
According to their National Law Journal article, at the time of the Supreme Court’s ruling, 26 states allowed direct shipping of wine to consumers. Now, 34 states have opened their doors, but several states still face legislative hurdles or litigation. About 30 lawsuits were pending over direct-shipping laws earlier this year. A small number of those suits involve shipping to retailers, but most have been filed by wineries and consumers seeking to overturn direct-to-consumer laws considered discriminatory under the Supreme Court’s definition.
There is some concern now that states will enact laws to get around the Supreme Court’s decision by using devices such as "volume" controls, so, local wineries can be "protected" in discrimination against California and other out-of-state producers that don’t meet the volume requirement. For example, Genesen has stated that Massachussets will allow direct- shipping if a winery produces less than 30,000 gallons of wine. None of the wineries in Massachusetts produces over 30,000 gallons, so all of them can direct ship, but all wineries that produce more than this small amount of wine are excluded from direct-shipping, including over the internet. These laws are also vulnerable to a Constitutional challenge, and are being monitored by Starr and Genesen.
Dean Starr is not only a brilliant lawyer, he is highly cultured, and a true gentleman. Our time with him and Tracy was an absolute delight. Though we were focused on talking about wine deregulation, we were able to divert to a few side discussions about developments at the law school and his observations on the Robert’s Court, and a little cultural talk. My only regret was I didn’t bring my copy of the Independent Counsel’s Report on President Clinton, dog-eared as it is, for an autograph! Maybe next time.
Care to read comments, or make your own about today’s Daily Commentary?
Just click here to go to the FR Weblog, where this Commentary has its own blog post, and where you can read and make comments.