Does a State Law That Bars Newcomers From Selling Liquor Violate Their 'Privileges or Immunities'?

In a case SCOTUS will hear next month, victims of Tennessee's protectionism argue that it flouts the 14th Amendment as well as the Commerce Clause.


Institute for Justice

Doug and Mary Ketchum moved to Tennessee from Utah in 2016 to escape air quality problems in the Salt Lake Valley that endangered their 32-year-old daughter, Stacie, who has cerebral palsy. They bought a liquor store in Memphis, which they thought would support the family while giving them the flexibility they needed to take care of their daughter. They did not anticipate that a Tennessee trade group would use a moribund law to block their business plans and squash their livelihood.

That protectionist law is the focus of a case the U.S. Supreme Court is scheduled to hear next month. It provides an opportunity for the Court to clarify the interaction between the 21st Amendment, which gives states broad authority to regulate (or ban) alcoholic beverages, and the Commerce Clause, which aims to promote free trade among the states and has been understood to forbid anti-competitive policies like Tennessee's. The Institute for Justice, which represents the Ketchums, is also urging the Court to recognize the relevance of the 14th Amendment's long-neglected Privileges or Immunities Clause by ruling that it forbids states to restrict the economic opportunities of newcomers.

The Ketchums knew Tennessee had a law that limits liquor store licenses to people who have lived in the state for at least two years immediately before applying and limits annual renewals to people who at some point have lived in the state for at least 10 consecutive years. But they also knew that the Tennessee Alcoholic Beverage Commission had not enforced the law for years because state's attorney general had deemed it unconstitutional. That situation distressed the Tennessee Wine and Spirits Retailers Association (TWSRA), which threatened to sue the commission if it allowed the Ketchums to operate their liquor store or issued a license to the Total Wine chain, which is also involved in the case.

A federal judge agreed that the law the trade group sought to revive was unconstitutional, and so did the U.S. Court of Appeals for the 6th Circuit. Now the TWRSA is trying again in Tennessee Wine and Spirits Retailers Association v. Blair, claiming the 21st Amendment authorizes Tennessee's liquor protectionism.

That argument seems to be foreclosed by Granholm v. Heald, the 2005 case in which the Supreme Court ruled that the 21st Amendment did not empower Michigan and New York to prohibit out-of-state wineries from shipping their products directly to consumers while allowing in-state wineries to do so. In Granholm, the Court said "state regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause," which requires close scrutiny of state laws that treat businesses differently based on their location.

Quoting an earlier decision, the Court noted that "when a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, we have generally struck down the statute without further inquiry." The only exception is when a state can show that its policy "advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives."

In this case, the TWRSA, which has taken Tennessee's place in defending the residency requirements for liquor licenses, has not even tried to meet that test. Instead it argues that Granholm should be read as applying only to restrictions on products from other states, not to restrictions on people from other states. The trade group claims that "states may regulate the in-state sale of alcohol 'unfettered by the Commerce Clause,' provided 'they treat liquor produced out of state the same as its domestic equivalent.'" As the Institute for Justice notes in its brief for the Ketchums, that distinction does not make much sense under Granholm or the nondiscrimination principle it enforced.

While Total Wine's brief focuses entirely on the Commerce Clause issue, the Institute for Justice devotes most of its brief to arguing that Tennessee's residency rules violate the Privileges or Immunities Clause, which says "no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States." The Institute for Justice marshals extensive historical evidence to show that "the original public understanding of the clause was that it would protect the right of the freedmen (and their white Northern supporters) to migrate in connection with a livelihood and be treated equally in their new states of residence."

The Supreme Court has not shown much interest in protecting Americans' "privileges or immunities" since the late 19th century, preferring to rely on the Equal Protection Clause or the dubious concept of "substantive due process" when overturning state laws that impinge on rights that were supposed to be protected by the 14th Amendment. But the Court did rely on the Privileges or Immunities Clause in Saenz v. Roe, a 1999 decision that overturned California's one-year residency requirement for full welfare benefits.

"If the Privileges or Immunities Clause protects the right of a newly arrived resident to be treated equally in the receipt of welfare benefits," the Institute for Justice argues, "it surely protects her right to be treated equally in the pursuit of a livelihood." The brief also notes that Justice Clarence Thomas' concurring opinion in McDonald v. Chicago, the landmark 2010 ruling that applied the Second Amendment to state and local governments, relied on the original public understanding of "privileges or immunities."

It seems likely that the Supreme Court will limit its ruling to the proper application of the nondiscrimination principle. But it would be a nice surprise if the Court also breathed some more life into the Privileges or Immunities Clause, which is directly relevant to the unjust situation the Ketchums face.