A U.S. district court has found an Iowa law that allows in-state wineries to sell directly to Iowa retailers (i.e., self-distribute), but bars out-of-state wineries from exercising the same privilege unconstitutional. Like many states’ laws governing breweries, wineries, or distilleries, Iowa extended self-distribution privileges only to holders of a particular winery license. And, like most states, that license was only available to producers located within the state. A Colorado winery challenged Iowa’s scheme as discriminatory under the so-called “dormant” Commerce Clause of the U.S. Constitution.

According to the opinion in Buckel Family Wine LLC v. Mary Mosiman, the unconstitutional discrimination arose from requiring that a holder of the necessary license allowing sales directly to Iowa retailers must maintain an in-state premises. As such, Iowa effectively forces out-of-state persons to establish a business in Iowa in order to exercise the self-distribution privilege. Relying heavily on the Supreme Court’s decisions in Tennessee Wine & Spirits Association v. Thomas (2019) and Granholm v. Heald (2005), the district court found this to violate the dormant Commerce Clause.

In finding the existing winery self-distribution legal scheme unconstitutional, the court made several notable rulings. Echoing Granholm, the court rejected Iowa’s argument that the law does not discriminate because an out-of-state winery can establish a “branch” operation within the state that would enjoy self-distribution privileges. The court also rejected Iowa’s argument that the challenged laws should be viewed as laws regulating the wholesale tier, suggesting that the judge might have given weight to a number of precedents that characterized the holding in Granholm as limited to laws regulating producers and products. Many contend that this limitation on Granholm was rejected by the Supreme Court in Tennessee Wine & Spirits Association, but the court’s decision to treat Iowa’s law as regulating producers avoided an in-depth examination of this issue.

Having found Iowa’s wine self-distribution laws discriminatory, the court applied the Tennessee Wine standard, asking whether the state had produced “concrete evidence” that the law was “reasonably necessary” to support “public health or safety measures or on some other legitimate nonprotectionist ground.” Examining each of Iowa’s proffered justifications for treating out-of-state wineries differently than in-state wineries, the court rejected all the state’s justifications. As a result, the court entered an injunction prohibiting the state from enforcing its requirement that the winery license class in question be limited to in-state businesses. The plaintiffs also can request an award of their attorney’s fees as the prevailing party in a civil rights case.

Similar lawsuits have been filed in other states and bear watching as courts appear to be taking less of a laissez-faire approach to states’ bald assertions of regulatory primacy in alcohol matters. Given the large number of states that extend self-distribution privileges to only in-state businesses, more decisions could substantially reshape the self-distribution legal landscape.