Indiana Liquor Law Is Not Preempted By Federal Law
LEBAMOFF ENTERPRISES v. HUSKEY (January 17, 2012)
An Indiana state law prohibits retail liquor stores from shipping wine to its customers except through the use of its own employees. Lebamoff Enterprises, which owns several retail liquor stores in northern Indiana, and two wine consumers who live more than 100 miles from Lebamoff's stores brought suit challenging the law’s constitutionality. They argue that the law is preempted by the Federal Aviation Administration Authorization Act of 1994 and also violates the Constitution's commerce clause in that it unduly burdens interstate commerce. Judge Magnus-Stinson (S.D. Ind.) entered judgment for the state. The plaintiffs appeal.
In their opinion, Seventh Circuit Judges Posner, Sykes, and Hamilton (concurring in the judgment) affirmed. The Court first addressed the preemption argument. The Federal Aviation Administration Authorization Act prohibits a state from enacting a law "related to a price, route, or service of any motor carrier." Although the state law does not regulate motor carriers, it does prohibit them from performing a service. But this is not a simple case of a federal and state law in conflict. The interests that Indiana is protecting are within the core powers of the Twenty-First Amendment. With the power of the Constitution on both sides, a court must balance the competing interests. There is a strong presumption of validity when, as here, the interests are core. Upon balancing those interests, the Court concluded that Indiana’s attempts to limit underage drinking prevailed. The preemption argument fails. The plaintiffs' second argument is that the law so burdens interstate commerce that it violates the commerce clause. The commerce clause does not permit states to discriminate in favor of local producers. The statute does not expressly so discriminate but it does allow wineries (in or out of state) to deliver to customers if they have verified a customer’s age at the winery in person. When a statute directly discriminates against interstate commerce, it is generally struck down. When the effect on commerce is indirect, a court looks to the state’s interest and balances the local benefit with the interstate burden. Here, the Court ultimately concluded that there was no effect on interstate commerce, even incidental. Therefore, the statute stands.
Judge Hamilton wrote in concurrence, reaching the same result through a different route. He would not have applied a balancing test. When a state is exercising its core Twenty-First Amendment powers, as is the case here, the law should be upheld without further analysis.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select