Facts
- Tennessee’s retail liquor licensing scheme required an individual applicant for an initial liquor-store license to have lived in Tennessee for the prior two years.
- Tennessee also required ten consecutive years of Tennessee residency to renew a liquor-store license.
- For corporate applicants, Tennessee required all stockholders to be Tennessee residents (and included related residency requirements tied to the statutory period).
- The Tennessee Attorney General issued an opinion concluding the residency requirements discriminated against out-of-state economic interests in violation of the Commerce Clause.
- After that opinion, the Tennessee Alcoholic Beverage Commission (TABC) stopped enforcing the residency requirements.
- Two applicants that did not satisfy the residency requirements sought liquor-store licenses, including a national retailer (Tennessee Fine Wines and Spirits, LLC, doing business as Total Wine Spirits Beer & More) and another business entity (Affluere Investments, Inc.).
- The Tennessee Wine and Spirits Retailers Association (the Association), a trade group of existing Tennessee liquor retailers, threatened to sue the TABC if it granted licenses to the nonresident applicants.
- Russell F. Thomas, the TABC’s Executive Director, filed a declaratory judgment action in Tennessee state court seeking a ruling on the constitutionality of the residency requirements.
- The case was removed to federal court, where the district court held the residency requirements unconstitutional under the Commerce Clause.
- The Sixth Circuit affirmed and invalidated the residency and related corporate provisions; Tennessee did not appeal.
- The Association sought Supreme Court review only of the Sixth Circuit’s invalidation of the two-year residency requirement for initial liquor-store licenses.
Issues
- Whether Tennessee’s two-year durational-residency requirement for initial retail liquor-store licenses discriminates against interstate commerce in violation of the dormant Commerce Clause.
- If the requirement is unconstitutional under the dormant Commerce Clause, whether § 2 of the Twenty-first Amendment nonetheless permits Tennessee to impose that residency requirement.
Decision
- The Supreme Court affirmed the Sixth Circuit.
- The Court held Tennessee’s two-year residency requirement for initial retail liquor-store licenses violates the Commerce Clause because it facially discriminates against out-of-state economic actors.
- The Court held § 2 of the Twenty-first Amendment does not authorize discriminatory retail licensing rules whose primary effect is economic protectionism and that lack a demonstrated connection to public health or safety.
- Justice Alito wrote the majority opinion, joined by Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, Kagan, and Kavanaugh (7–2).
- Justice Gorsuch dissented, joined by Justice Thomas.
Legal Principles
- A state law that facially discriminates against interstate commerce is presumptively invalid under the dormant Commerce Clause and survives only if the state shows the discrimination is narrowly tailored to a legitimate local objective that cannot be adequately served by reasonable nondiscriminatory alternatives.
- Section 2 of the Twenty-first Amendment grants states substantial authority over the transportation, importation, and sale of alcohol within their borders, but it does not give states a free pass to enact protectionist measures that favor in-state businesses over out-of-state competitors.
- The Twenty-first Amendment must be read together with the Commerce Clause; alcohol regulation is not categorically exempt from Commerce Clause limits.
- States may use a three-tier distribution system and regulate the retail tier, but discriminatory barriers to entry require evidence-based justification tied to legitimate regulatory interests such as public health and safety, not merely economic favoritism.
- When a state claims health-and-safety justifications for a discriminatory alcohol rule, courts consider whether the state has shown a real connection between the discrimination and the asserted interests, and whether ordinary licensing tools (e.g., background checks, inspections, bonds, and enforcement mechanisms) could accomplish the same ends without discriminating based on residency.
Conclusion
The Court held that Tennessee’s two-year residency requirement for initial retail liquor-store licenses is unconstitutional discrimination against interstate commerce and is not excused by § 2 of the Twenty-first Amendment because the rule largely functions to protect in-state retailers from out-of-state competition and was not shown to be necessary to achieve public health or safety objectives.