Supreme Court Strikes Down Nonsensical Tennessee Liquor Law

Tennessee's residency requirement for retail license applicants "blatantly favors the state's residents and has little relationship to public health and safety," Justice Alito wrote.

Tennessee can no longer impose a two-year residency requirement for those seeking to obtain a retail liquor license, the U.S. Supreme Court ruled 7-2 Wednesday.

The case hinged on whether the 21st Amendment—which repealed Prohibition—gave states full regulatory reign over the sale of alcoholic beverages, no matter how protectionist their policies might be. Writing for the majority, Justice Samuel Alito said that it did not.

"Because Tennessee's two-year residency requirement for retail license applicants blatantly favors the state's residents and has little relationship to public health and safety, it is unconstitutional," he wrote.

That was good news for Doug and Mary Ketchum, who relocated to Tennessee in 2016 in order to run Kimbrough Wines & Spirits, a Memphis alcohol store the couple agreed to purchase while they still lived in Salt Lake City, Utah.

The couple wanted better air for their severely disabled daughter, Stacie, who suffered a collapsed lung while living in Salt Lake City. When they heard about a chance to buy Kimbrough Wines & Spirits, they applied for a license to run the store. Despite the fact that Tennessee had a law on the books requiring two years of state residency to obtain a liquor license, the Tennessee Alcoholic Beverage Commission agreed to approve their application and that of another out-of-state applicant, Total Wine. Tennessee's attorney general had, by that time, issued two opinions declaring the law unconstitutional.

Things were fine until the Tennessee Wine & Spirits Retailers Association—which lobbies for regulations that benefit state alcohol industry incumbents—sued the Tennessee Alcoholic Beverage Commission to stop both the Ketchums and Total Wine, a privately owned retail alcohol chain, from getting a Tennessee liquor license.

"In-staters are terrified that somebody like Total Wine is going to come in and compete with them," Institute for Justice attorney Anya Bidwell, who represents the Ketchums, tells Reason. The Retailers Association lost in the lower courts but kept appealing in hopes that they could block competition from out of state.

On paper, the law not only required that alcoholic retailers be in-state residents for two years in order to obtain a liquor license, but it also stipulated that they live there for 10 in order to renew. Liquor licenses require annual renewal, meaning that, if the Ketchums had succeeded in getting a license after their first two years, they would have lost it for the next seven.

In his dissent, Justice Neil M. Gorsuch said the majority was engaging in judicial activism and projecting their own policy prescriptions onto the 21st Amendment.

"Like it or not, those who adopted the 21st Amendment took the view that reasonable people can disagree about the costs and benefits of free trade in alcohol," he wrote. "Under the terms of the compromise they hammered out, the regulation of alcohol wasn't left to the imagination of a committee of nine sitting in Washington, D.C., but to the judgment of the people themselves and their local elected representatives."

The post-Prohibition era amendment ultimately repealed the ban on alcohol, but states also used it—and still do use it—to mold consumer behavior around the consumption of alcohol. Tennessee's liquor license requirements, passed in 1939, were no different.

"People don't realize there were still a lot of those pro-Prohibitionist forces at play in that era," C. Jarrett Dieterle, Director of Commercial Freedom at the R Street Institute, says. "There were still a lot of efforts to limit people's access to alcohol."

That's not lost on Gorsuch, who tipped his hat to pro-temperance regulation in his dissent. "Tennessee's residency requirement reduces competition in the liquor market by excluding nonresidents or recent arrivals," he wrote. "But even that effect might serve a legitimate state purpose by increasing the price of alcohol and thus moderating its use, an objective states have always remained free to pursue under the bargain of the 21st Amendment."