Siesta Village Market LLC v. Steen

Case: 08-10146 Document: 00511012977 Page: 1 Date Filed: 01/26/2010

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
January 26, 2010

No. 08-10146 Charles R. Fulbruge III
Clerk

SIESTA VILLAGE MARKET LLC, doing business as SIESTA MARKET;
KEN TRAVIS; KEN GALLINGER; MAUREEN GALLINGER; DR ROBERT
BROCKIE

Plaintiffs–Cross-Appellees

v.

JOHN T STEEN, JR, Commissioner of the Texas Alcoholic Beverage
Commission; GAIL MADDEN, Commissioner of the Texas Alcoholic Beverage
Commission; JOSE CUEVAS, JR, Commissioner of the Texas Alcoholic
Beverage Commission

Defendants – Cross-Appellants

WINE COUNTRY GIFT BASKETS.COM; K&L WINE MERCHANTS;
BEVERAGES & MORE INC; DAVID L TAPP; RONALD L PARRISH;
JEFFREY R DAVIS
Plaintiffs – Appellants-Cross-
Appellees

v.

ALLEN STEEN, in his official capacity as administrator of the Texas
Alcoholic Beverage Commission

Defendant – Appellee-Cross-
Appellant

GLAZERS WHOLESALE DRUG COMPANY, INC; REPUBLIC BEVERAGE
COMPANY
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Intervenor Defendants – Appellees-
Cross-Appellants

Appeal from the United States District Court
for the Northern District of Texas

Before JOLLY, PRADO, and SOUTHWICK, Circuit Judges.
Leslie H. Southwick, Circuit Judge:
This case primarily concerns a Texas law that allows alcohol retailers to
ship to the door of their local consumers. Out-of-Texas wine retailers claim that
the dormant Commerce Clause requires they be given a supposedly reciprocal
right to make direct shipments to any Texas consumer. The district court partly
accepted their argument. We hold that the statutes do not run afoul of the
dormant Commerce Clause. We VACATE and REMAND for entry of judgment.
FACTUAL AND LEGAL BACKGROUND
There were several parties to this case, but they can be grouped easily.
One plaintiff, Siesta Village Market LLC, who is a Florida wine retailer, has
dismissed its appeal. Another, Wine Country Gift Baskets.com, is a California
wine retailer. Wine Country’s appellate brief describes the plaintiffs, present
and past, as “a group of out-of-state wine retailers and Texas wine consumers.”
We refer to the plaintiffs collectively as “Wine Country.”
Suit was filed by Siesta Village and a few Texas wine consumers on March
31, 2006, in the Dallas Division of the U.S. District Court for the Northern
District of Texas. A nearly identical suit was filed by Wine Country, two other
California retailers, and a few named Texas consumers in the Fort Worth
Division. The suits were consolidated in the Dallas Division. The wine retailers
located outside of Texas wish to ship wine directly to Texas consumers.

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Defendants are Allen Steen, the Administrator of the Texas Alcoholic
Beverage Commission, and three Commission members sued in their official
capacities. They enforce the Texas Alcoholic Beverage Code (“TABC”). We will
refer to the various Defendants as “the State” or “Texas.”
Two Texas alcoholic beverage wholesalers intervened. These companies
are Glazer Wholesale Drug Company, Inc., and Republic Beverage Co.
As do many other States, Texas has a three-tier system for regulating
sales of alcoholic beverages. The first tier is the producer, who must sell its
product to the second-tier, which is a State-licensed wholesaler. The wholesaler
distributes the product to the third tier, consisting of State-licensed retailers.
Consumers purchase from the retailers. “[S]trict separation between the
manufacturing, wholesaling, and retailing levels” of the alcoholic beverage
industry must be maintained. T EX. A LCO. B EV. C ODE § 6.03(i).
The challenged Texas laws fall into three principal categories. Almost all
the relevant provisions apply to alcohol generally, though the complaint is from
companies whose commercial interest is solely in wine.
First, some laws allow individuals to bring alcoholic beverages into Texas
for their own use, known as a “personal import exception,” but limit the
quantity. The district court held that this direct-purchase restriction was
unconstitutional in part. “Texas cannot prohibit consumers from purchasing
wine from out-of-state retailers who comply with the Code and TABC
regulations,” the district court held. Siesta Vill. Mkt. v. Perry, 530 F. Supp. 2d
848, 868 (N.D. Tex. 2008). It ordered Texas to allow out-of-state retailers to
receive Texas-issued retailer permits. Therefore, any consumer who bought
wine from an out-of-state holder of a Texas permit would not be subject to the
quantity limit when entering the State with the beverages, though the limit for
importing would apply to the same person’s excessive purchases from out-of-
state retailers that did not have Texas permits.

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Second, and at the heart of this case, some of the laws allow in-state
retailers to deliver alcoholic beverages to their customers within designated local
areas, but forbid out-of-state retailers from delivering or shipping alcoholic
beverages to customers anywhere in Texas.1 Retailers may use common carriers
licensed under the TABC, which include such companies as Federal Express.
Just before summary judgment motions were filed in the consolidated suits, the
Texas legislature amended the prior law which had allowed holders of package
store permits or wine-only package store permits to ship their beverages
statewide. T EX. A LCO. B EV. C ODE § 22.03 (Vernon 2006) (amended Sept. 1, 2007).
The amendment drew in the boundaries of the area of permissible shipment
from the entire State to basically the county in which the retailer has a store.
Id. §§ 22.03 & 24.03 (Vernon 2009). The district court held that the statutes
discriminated against Wine Country and granted relief.
Third, the suit challenged requirements that the holders of TABC retailer
permits have been Texas citizens for one year. The decision in an earlier case
declared those provisions unconstitutional insofar as they applied to wholesalers.
S.Wine & Spirits of Tex. v. Steen, 486 F.Supp. 2d 626, 633 (W.D. Tex. 2007). The
district court in the present case declared the requirements unconstitutional as
applied to retailers. The State does not appeal the voiding of the requirement
and advised the district court that it will not enforce the citizenship rule.
The parties agreed on a preliminary injunction blocking enforcement of
certain provisions for the duration of the lawsuit. On summary judgment, the
district court declared twenty-three TABC provisions to be unconstitutional.
Siesta Vill. Mkt., 530 F. Supp. 2d at 873.

1
Although the statutes create some special permits for retailers selling only wine, the
statutes allowing local delivery apply to retailers selling only wine and also to full-service
package store permit holders. TEX . ALCO . BEV . CODE §§ 22.03(a); 24.03.

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The district court did not, however, provide the remedy Wine Country
wanted. The court decided that other provisions of the TABC, though clearly
regulating only in-state retailers, should be applied to out-of-state retailers.
Thus, Wine Country had a right to make direct shipments to Texas consumers,
but it was required to obtain a Texas retailer permit and purchase all wine
shipped to Texas consumers from Texas-licensed wholesalers. Such a “victory”
was, if not pyrrhic, apparently of no benefit.2
Wine Country’s dissatisfaction is evident from the fact it was the first to
appeal, thereby becoming the Appellant despite the general success of its
arguments. It claimed error in the remedy. The State cross-appealed to argue
that its statutes do not violate the dormant Commerce Clause. Siesta Village,
the named plaintiff in one of the two consolidated cases, initially was an
Appellant but has since dismissed its appeal.
DISCUSSION
The grant of a motion for summary judgment is reviewed de novo. Pasant
v. Jackson Nat’l Life Ins. Co., 52 F.3d 94, 96 (5th Cir. 1995). Summary judgment
is appropriate when there is no genuine issue of material fact and the moving
party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c)(2).
This appeal almost exclusively concerns questions of law.
Wine County convinced the district court that numerous TABC provisions
violated the dormant Commerce Clause. Wine Country’s arguments as the
Appellant center on the remedy imposed by the district court. Because we set
aside the invalidation of the statutory provisions, issues about the remedial

2
The Second Circuit found it operationally absurd for out-of-state retailers to purchase
inventory from in-state wholesalers, have it delivered to the retailers in some fashion, then
shipped back to in-state consumers. Arnold’s Wines, Inc. v. Boyle, 571 F.3d 185, 192 n.3 (2d
Cir. 2009). Wine Country also found the requirement to be dispiriting.

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relief implementing the invalidation become moot. We thus do not discuss Wine
Country’s arguments on the remedy.
The State of Texas as Cross-Appellant does not contest the district court’s
invalidation of the requirement that retailers establish Texas residency. That
part of the judgment was not included in any notice of appeal and therefore has
not been brought to us for reversal or affirmance.
Texas vigorously does contest the holding that the dormant Commerce
Clause interfered with what Texas considers to be a right granted by the
Twenty-first Amendment to favor in-state retailers in some respects.
Texas also argues that the direct shipping laws are justified by legitimate
state interests. It alleges valid local public interests exist and the law has only
incidental effects on interstate commerce. Its policy justifications include the
State’s need to access retail sites for inspection and enforcement, which can
uncover illegal activities – specifically regarding alcohol or more generally such
as for money laundering – and the State’s goals of promoting temperance,
insuring tax collections, and assuring the separation between the three tiers.
We do not reach the policy justifications, as our reversal is for other reasons.
The last section in the Texas brief explains its embrace of the remedy that
Wine Country rejects. There is no need to review those arguments.
We discuss only the cross-appeal arguments presented by Texas. First, we
will examine closely the United States Supreme Court opinion that spoke
strongly and supportively about the three-tier system for distribution of alcohol.
We then look at what three subsequent opinions from other courts have said
about it. We then briefly review the district court’s decision, and finally we
apply our analysis to it.
A. The three-tier system and Granholm
Intoxicating liquor is the only consumer product identified in the
Constitution. Only its regulation by States is given explicit warrant.

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The transportation or importation into any state, territory, or
possession of the United States for delivery or use therein of
intoxicating liquors, in violation of the laws thereof, is hereby
prohibited.

U.S. C ONST. amend. XXI, § 2. The goals of “promoting temperance, ensuring
orderly market conditions, and raising revenue” are met through regulation of
the production and distribution of alcoholic beverages. North Dakota v. United
States, 495 U.S. 423, 432 (1990) (plurality opinion). The understanding of a
State’s power under the Twenty-first Amendment may have changed since the
1933 ratification, but we need not review seventy-five years of history. Instead,
we rely primarily on the latest Supreme Court explanation.
The basic point Texas makes on appeal is that the three-tier system allows
certain kinds of distinctions and particularly allows distinctions between in-state
and out-of-state retailers. Further, allowing Texas-licensed retailers to make
their sales in certain ways, namely, by delivery, and prohibiting out-of-state
retailers from doing anything at all, is said to be authorized by controlling
interpretations of the Twenty-first Amendment.
We start where Texas urges us to start, and where the district court did,
by examining the most recent Supreme Court discussion of the interplay
between a State’s authority to regulate alcohol and the dormant Commerce
Clause. See Granholm v. Heald, 544 U.S. 460 (2005). The Court reaffirmed the
principle that, despite what might appear to be absolute authority granted to
States by the Twenty-first Amendment to regulate alcohol, the anti-
discrimination principles of the dormant Commerce Clause nonetheless place
some restrictions on the States.
The Court said that “in all but the narrowest circumstances, state laws
violate the Commerce Clause if they mandate ‘differential treatment of in-state
and out-of-state economic interests that benefits the former and burdens the

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latter.’” Id. at 472 (quoting Ore. Waste Sys., Inc. v. Dep’t of Envtl. Quality of Ore.,
511 U.S. 93, 99 (1994)). “State laws that discriminate against interstate
commerce face ‘a virtually per se rule of invalidity.’” Id. at 476 (quoting
Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978)).
The Granholm Court invalidated two States’ “direct shipping” laws
allowing in-state wineries to ship wine they produced directly to consumers, but
barring out-of-state wineries from doing the same. It found the “discriminatory
character” of Michigan’s prohibition “obvious,” as that State’s laws prohibited
any shipment from out-of-state wineries, while allowing in-state wineries to ship
after obtaining a permit. Id. at 473. New York’s scheme was more complicated,
allowing out-of-state wineries to ship to in-state consumers if the wineries
established a physical presence in the State and became part of New York’s
three-tier distribution system. The Court nonetheless found New York’s rules
discriminatory, noting that the rules clearly gave “preferential terms” to in-state
wineries, which qualified for a simpler permit, did not have to participate in the
three-tier system, and could ship wine directly from the site of its production.
Id. at 474. Both States’ laws, then, dealt with producers.
At least as to producers, the Court held that the “Amendment does not
supersede other provisions of the Constitution and, in particular, does not
displace the rule that States may not give a discriminatory preference to their
own producers.” Id. at 486.
Once finding the laws discriminatory, the Court examined whether they
might be saved by a tenet of the dormant Commerce Clause that exempts laws
that “‘advance[] a legitimate local purpose that cannot be adequately served by
reasonable nondiscriminatory alternatives.’” Id. at 489 (quoting New Energy Co.
of Ind. v. Limbach, 486 U.S. 269, 278 (1988)). Obtaining such an exemption
requires the “clearest showing” that the law is the only adequate means of
serving the State’s legitimate purpose. Id. at 490 (quoting C&A Carbone, Inc.

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v. Clarkstown, 511 U.S. 383, 393 (1994)). The States claimed two purposes –
prevention of underage drinking and the need for taxes. Id. at 489. The Court
found that neither had sufficient evidentiary support to save those States’ laws.
Id. at 490-92. We do not discuss this point because we determine that the Texas
provisions are constitutional and do not need to be saved.
A decision by this court foreshadowed Granholm. In it, we struck down
Texas laws that allowed Texas wineries to ship directly to consumers and thus
bypass going first to a wholesaler, but these laws prohibited out-of-state wineries
from doing the same. Dickerson v. Bailey, 336 F.3d 388, 406-7 (5th Cir. 2003).
The Texas legislature responded to Dickerson by authorizing wineries wherever
located to ship directly to Texas consumers once they were issued the
appropriate permit. T EX. A LCO. B EV. C ODE §§ 54.01-.12.
We disagree with Wine Country that Dickerson answers today’s questions.
That precedent, as did Granholm, concerned wineries, i.e., the producers of the
product traveling in commerce. The producers in a three-tier system often are
not located in the State in which the sales occur. The traditional three-tier
system, seen as one that funnels the product, Granholm, 544 U.S. at 489, has an
opening at the top available to all. The wholesalers and retailers, though, are
often required by a State’s law to be within that State. The distinction is seen
in Texas law. It allows wineries themselves, located for example in California
or Florida as are the retailer plaintiffs, to ship directly to Texas consumers.
Texas argues that the following language in Granholm certifies the
constitutionality of the three-tier system that most States use, and is the lens
through which the concept of discrimination needs to be seen:
The States argue that any decision invalidating their
direct-shipment laws would call into question the constitutionality
of the three-tier system. This does not follow from our holding.
“The Twenty-first Amendment grants the States virtually complete
control over whether to permit importation or sale of liquor and how

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to structure the liquor distribution system.” Cal. Retail Liquor
Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 110 (1980). A
State which chooses to ban the sale and consumption of alcohol
altogether could bar its importation; and, as our history shows, it
would have to do so to make its laws effective. States may also
assume direct control of liquor distribution through state-run
outlets or funnel sales through the three-tier system. We have
previously recognized that the three-tier system itself is
“unquestionably legitimate.” North Dakota v. United States, 495
U.S. at 432; see also id. at 447 (Scalia, J., concurring in judgment)
(“The Twenty-first Amendment . . . empowers North Dakota to
require that all liquor sold for use in the State be purchased from a
licensed in-state wholesaler”). State policies are protected under the
Twenty-first Amendment when they treat liquor produced out of
state the same as its domestic equivalent. The instant cases, in
contrast, involve straightforward attempts to discriminate in favor
of local producers.
Id. at 488-89 (citations reformatted). That language may be dicta. If so, it is
compelling dicta. What we make of that language, and its ability to protect
these Texas statutes from Wine Country’s dormant Commerce Clause
arguments, is the next part of our analysis.
B. Other Courts’ Granholm analysis
Granholm dealt specifically with state laws treating in-state and out-of-
state producers of alcohol differently. This present appeal involves retailers.
Since Granholm, other decisions from outside this Circuit have addressed that
precedent’s applicability to retailers who wish to ship wine into other States. We
will discuss the three that are the most relevant.3
In the earliest decision, some Virginia consumers and a few out-of-state
wineries challenged a Virginia statute that limited the amount of alcohol that
consumers could personally carry into the State for their own use. Brooks v.

3
A fourth decision analyzing Granholm was recently released, but we find nothing in
it to affect our reasoning. Family Winemakers of Cal. v. Jenkins, No. 09-1169, 2010 WL
118387, at *5-15 (1st Cir. Jan. 14, 2010) (state law granting distribution rights to “small”
wineries was held to discriminate in favor of in-state wineries, all of whom were “small”).

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Vassar, 462 F.3d 341, 349 (4th Cir. 2006). The plaintiffs’ theory was that the
provision was unconstitutional because consumers could purchase an unlimited
amount of wine from in-state sources but only limited amounts out-of-state for
their personal importation into Virginia.
The opinion for the court held that plaintiffs’ effort to compare in-state
retailers to out-of-state retailers and then allege they were treated differently
was fundamentally a challenge to the three-tier system itself. Brooks, 462 F.3d
at 352 (Niemeyer, J.).4 Because the Supreme Court had described the three-tier
system as “unquestionably legitimate,” the court held the Virginia statutes to be
constitutionally sound. Id. (quoting Granholm, 511 U.S. at 489).
In another decision, there were challenges to New York statutes that are
analogous to those here. New York law permitted an in-state alcoholic beverage
retailer to deliver directly to consumers’ residences in New York, using the
retailer’s vehicles or by using vehicles of a transportation company licensed by
the State’s liquor authority; out-of-state retailers did not have comparable
rights. Arnold’s Wines, Inc. v. Boyle, 571 F.3d 185, 188 (2d Cir. 2009).
The Second Circuit started with a recognition that the Twenty-first
Amendment does not authorize all alcohol regulation. Any discrimination
between in-state and out-of-state alcohol products or producers must reasonably
further a legitimate state interest “that cannot adequately be served by
reasonable nondiscriminatory alternatives.” Id. at 189 (citation omitted). The
court’s focus on “products or producers” is the central debate: how much further,
if at all, beyond products and producers do the anti-discrimination principles go?
The Second Circuit held products and producers are the limit. It described
plaintiffs’ arguments as simplistic analogies to the Granholm-identified

4
Judge Niemeyer wrote for the court, but a second judge concurred only in the
judgment with respect to this part of the opinion, while the third judge on the panel dissented
from that part. This reasoning presumably has limited precedential effect in that Circuit.

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discrimination. A State’s making distinctions among in-state and out-of-state
retailers, and even requiring wholesalers and retailers to be present in and
licensed by New York, were fundamental components of the three-tier system
authorized in Granholm. Id. at 190.
The court concluded that the New York laws permitting only in-state
retailers to ship directly to consumers were in “stark contrast” to the laws struck
down in Granholm, which “created specific exceptions to the states’ three-tier
systems favoring in-state producers.” Id. at 191. It found that the production-
related discrimination involved in Granholm “was exactly the type of economic
protectionist policy the Commerce Clause sought to forestall, and where the
Granholm Court drew the line.” Id.
The line drawn by the court was between the broad state powers under the
Twenty-first Amendment “to regulate the transportation, sale, and use of alcohol
within their borders,” and any “attempts to discriminate in favor of local
products and producers.” Id. It held New York’s laws were evenhanded in their
control of “importation and distribution of liquor within the state,” and that
made the dormant Commerce Clause all but irrelevant. Id. at 192.
In the third case, the court considered a Michigan law authorizing some
in-state retailers to ship wine directly to consumers, while out-of-state retailers
without a physical presence in Michigan could not. Siesta Vill. Mkt., LLC v.
Granholm, 596 F. Supp. 2d 1035, 1037-38 (E.D. Mich. 2008). The Michigan
court limited the effect of the Supreme Court’s Granholm decision: “While the
[Granholm v.] Heald court did state that the three-tier system was an
appropriate use of state power, it did not approve of a system that discriminates
against out-of-state interests.” Id. at 1039. The court found that “regulations
creat[ing] an extra burden on out-of-state wine retailers” were not saved by the
Twenty-first Amendment. Id. The court also held it to be insufficient that out-
of-state retailers could comply with Michigan law by establishing a location in

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the State. The “prohibitive” expense of opening physical stores in multiple
States gave a clear advantage to in-state retailers. Id. at 1040 (citing Granholm,
544 U.S. at 474-75). Accordingly, the court struck down the Michigan laws.5
C. The District Court’s Interpretation
The district court here considered the Texas “Personal Import Exception,”
which authorizes individuals to import alcohol for their own use. One section
prohibits importation unless authorized. T EX. A LCO. B EV. C ODE §107.05. That
section is then made inapplicable to Texas residents who import for personal use
not more than one quart of liquor, one gallon of wine, or twenty-four twelve-
ounce bottles of beer. Id. §107.07. There is no direct limit on how much can be
purchased, only on how much can be imported.
These provisions were held by the district court to discriminate against
out-of-state retailers because they “prohibit customers from purchasing wine
from out-of-state retailers” in unlimited quantities. Siesta Vill. Mkt., 530 F.
Supp. 2d at 868. The remedy was to allow out-of-state retailers to apply for
Texas retail permits, even without the retailers’ opening a location in the State.
Any retailer with a Texas permit and making sales at locations outside of Texas
could not be limited in sales volumes when those limits do not apply to Texas
permit holders making sales inside Texas.
The district court also held that the Texas local shipping rights to were
discriminatory. The court held the relevant question to be whether there was
discrimination “with respect to access to in-state markets,” and there could be no
exception for de minimis levels of discrimination. Id. at 864 (emphasis in
original). The disability imposed on out-of-state retailers was not a “mere
practical consequence” of location, as it might be if Texas permitted only over-
the-counter sales of alcohol. Since Texas allowed in-state retailers to ship

5
An appeal to the Sixth Circuit was apparently mooted by an intervening change in the
Michigan statutes being challenged.

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alcohol, there was no practical reason why out-of-state retailers could not also.
Id. at 865-66. Shipping was the key, because shipping was as easily done from
outside the State as from within.
Having found the Texas laws discriminatory, the court turned to the
question of whether the State could show legitimate local purposes, not
obtainable by nondiscriminatory alternatives, to justify the discrimination. We
do not ultimately reach that analysis, so we do not summarize it here.
D. Dormant Commerce Clause Analysis
We first analyze the provisions that allow an in-state retailer to deliver
within its county but bars an out-of-state retailer from shipping into Texas.
Texas argues that distinguishing between retailers in this way is a fundamental
part of the constitutional three-tier system, which is “unquestionably
legitimate.” Granholm, 544 U.S. at 488-89.
To the contrary, Wine Country focuses on the Granholm prohibition on a
state’s liquor laws discriminating against out-of-state interests. Wine Country
acknowledges that the Court limited its holding to discrimination benefitting
alcohol on the basis of its in-state production status, but Wine Country argues
that makes sense as that was the Granholm dispute. Texas argues the
Granholm failure to mention retailers was significant, as distinctions favoring
in-state retailers are inherently part of the three-tier system.
We first note what is not in issue. The discrimination that Granholm
invalidated was a State’s allowing its wineries to ship directly to consumers but
prohibiting out-of-state wineries from doing so. Texas grants in-state and out-of-
state wineries the same rights. T EX. A LCO. B EV. C ODE §§ 54.01-54.12.
Such discrimination – among producers – is not the question today. When
analyzing what else is invalid under the Supreme Court’s Granholm reasoning,
we find direction in a source for some of the Court’s language. The Court quoted
a 1986 precedent that “a comprehensive system for the distribution of liquor

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within [North Dakota’s] borders” was “unquestionably legitimate.” Granholm,
544 U.S. at 489 (quoting North Dakota v. United States, 495 U.S. 423, 432
(1986)). North Dakota employed a three-tier system similar to that in Texas, in
which producers sell to state-licensed wholesalers, who sell to state-licensed
retailers. North Dakota, 495 U.S. at 428. That sort of system has been given
constitutional approval. The discrimination that would be questionable, then,
is that which is not inherent in the three-tier system itself. If Granholm’s
legitimizing of the tiers is to have meaning, it must at least mean that. The
legitimizing is thus a caveat to the statement that the Commerce Clause is
violated if state law authorizes “differential treatment of in-state and out-of-
state economic interests that benefits the former and burdens the latter.”
Granholm, 544 U.S. at 472 (internal quotation marks and citation omitted).
Therefore, the foundation on which we build is that Texas may have a
three-tier system. That system authorizes retailers with locations within the
State to acquire Texas permits if they meet certain eligibility requirements.
Those retailers must purchase their alcoholic beverages from Texas-licensed
wholesalers, who in turn purchase from producers. Each tier is authorized by
Texas law and approved by the Twenty-first Amendment – so says Granholm
– to do what producers, wholesalers, and retailers do.6
Wine Country argues that the three tiers have tumbled because Texas has
permitted retailers to make home deliveries within a confined range. At least
in part, this must be an argument that Texas retailers are being allowed to act
in ways that are unacceptable for retailers in a constitutionally sound system.
The defect is one of discrimination: Texas retailers are doing what a retailer in

6
Wine Country at oral argument emphasized a provision of Texas law allowing Texas
retailers to receive direct shipments from Texas wineries, bypassing the wholesaler tier. See
TEX . ALCO . BEV . CODE § 110.053. This provision is not on the list of those enjoined by the
district court and is not a subject of this appeal. Siesta Vill Mkt.., 530 F. Supp. 2d at 851.

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California or Florida physically and practically can do, which is to use a licensed
shipper to deliver to a Texas consumer, but legally cannot do.
To address the argument, it would be useful to know what specific actions
allegedly caused the retailers to stop being Granholm-approved, traditional
third-tier retailers. If Texas allowed a retailer to carry the beverages to a
customer’s vehicle parked in its lot, or across the street, would that be a
problem? If a retailer’s own delivery trucks traveled to the customer, is that
discrimination? Does discrimination not begin until a retailer uses a licensed
shipper? Relevant to the answer, Texas has not defended on the basis that
retailers are just permitted to serve their usual local markets in enhanced,
customer-friendly ways. Indeed, at oral argument, the Texas Solicitor General
said that the geographical limits to local deliveries were irrelevant. The prior
state-wide delivery version of the provision would be constitutional under that
argument. We need not and do not reach the broader definitional issue.
In analyzing “retailing” for Twenty-first Amendment purposes, we find a
useful warning in concurring Judge Calabresi’s observations in Arnold’s Wines.
He found a tension between the original (likely) meaning of the Twenty-first
Amendment and the current interpretation, a change largely the result of
Supreme Court reaction to the changing economic and social world since the
adoption of the Amendment. Arnold’s Wines, 571 F.3d at 198-201 (Calabresi, J.,
concurring). He also concluded that uncertainty existed about the direction the
Supreme Court will take with its developing interpretation of the Amendment.
Yet he agreed that the majority applied the best understanding of its current
meaning. The best understanding is also what we seek.
We pull back from any effort to define the reach of a traditional three-tier
retailer. Instead, we resolve whether what Texas has allowed here is so
substantially different from what retailing must include as not to be third-tier
retailing at all. Because of Granholm and its approval of three-tier systems, we

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No. 08-10146

know that Texas may authorize its in-state, permit-holding retailers to make
sales and may prohibit out-of-state retailers from doing the same. Such an
authorization therefore is not discrimination in Granholm terms. The rights of
retailers at a minimum would include making over-the-counter sales. Wine
Country’s argument implies that is where Granholm-approved retailing ends
and where the potential for discrimination begins. We disagree. Texas has
adjusted its controls over retailers by allowing alcoholic beverage sales to
customers other than those who walk into a store. Still, sales are being made to
proximate consumers, not those distant to the store. Retailers are acting as
retailers and making what conceptually are local deliveries.
Our read of Granholm is that the Twenty-first Amendment still gives each
State quite broad discretion to regulate alcoholic beverages. The dormant
Commerce Clause applies, but it applies differently than it does to products
whose regulation is not authorized by a specific constitutional amendment.
Regulating alcoholic beverage retailing is largely a State’s prerogative.
Granholm prohibited discrimination against out-of-state products or
producers. Texas has not tripped over that bar by allowing in-state retailer
deliveries. Yet it also has not discriminated among retailers. Wine Country is
not similarly situated to Texas retailers and cannot make a logical argument of
discrimination. The illogic is shown by the fact that the remedy being sought in
this case – allowing out-of-state retailers to ship anywhere in Texas because
local retailers can deliver within their counties – would grant out-of-state
retailers dramatically greater rights than Texas ones.
Wine Country argues that Texas has created the need for that outsized
remedy through its discrimination, and Texas can eliminate local unfairness by
broadening the rights granted its own retailers. The problem with the argument
is that it ignores the Twenty-first Amendment. When analyzing whether a
State’s alcoholic beverage regulation discriminates under the dormant

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No. 08-10146

Commerce Clause, a beginning premise is that wholesalers and retailers may be
required to be within the State. Starting at that point, we see no discrimination
in the Texas law.
We view local deliveries as a constitutionally benign incident of an
acceptable three-tier system. That view is consistent with the unquestioning
reference by the Supreme Court in Granholm to a Michigan statute that
authorized retailers to make home deliveries under certain conditions.
Granholm, 544 U.S. at 469.7 A State’s granting this authority to retailers is
neither recent nor unique. Texas has permitted direct delivery and carrier
shipment by in-state retailers at least since 1977. T EX. A LCO. B EV. C ODE § 22.03
(Vernon 2006, adopted Sept. 1, 1977). Some other States also allow delivery by
in-state retailers.8 A State’s right to authorize a variety of retail practices for
alcoholic beverages free of dormant Commerce Clause barriers may not be
limitless. Yet it seems to us that implementing consumer-friendly practices for
in-state retailing of these products often has more to do with changing economic
realities than with the Constitution.
We hold that the limited rights Texas has given its state-licensed retailers
to make deliveries do not transgress the dormant Commerce Clause.
We now turn briefly to the separate provisions regarding personal
importing. As mentioned before, Texas has placed a limit on the quantity of
alcoholic beverages that an individual can purchase out-of-state and then bring
into Texas. T EX. A LCO. B EV. C ODE §§ 107.05(a) & 107.07(a). Preliminarily, it

7
Michigan has subsequently repealed this provision and banned all direct shipment
by retailers, perhaps in response to the ruling of the district court in Siesta Vill. Mkt., 596 F.
Supp. 2d 1035. See MICH . COM P . LAW S ANN . § 436.1203(2) (amend. eff. March 31, 2009)).
8
See, e.g., COLO . REV . STAT . ANN . § 12-47-407(3) & § 408(3); FLA . STAT . ANN . § 561.57(1);
235 ILL . COM P . STAT . ANN . § 5/5-1(d); IND . CODE ANN . § 7.1-3-9-9; IOW A AD M IN . CODE r. 185-
17.1(1); ME . REV . STAT . ANN . tit. 28-A, § 2077(2) & (3); MD . CODE ANN . art. 2B, § 2-301(b)(1);
MASS . GEN . LAW S ANN . ch. 138, § 22; MINN . R. 7515.0580; N.J. ADM IN . CODE § 13:2-20.3; N.Y.
COM P . COD ES R. & REGS . tit. 9, § 67.1; 02-040-016 R.I. CODE R. § 4(10).

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should not be overlooked that Texas did not, indeed can not, limit the number
of alcoholic beverages consumers may buy at an out-of-state retailer. Any
purchase limits would have to come from the other State’s laws. The barrier
Texas imposes is at its border.
We conclude that the incidental effect on foreign retail sales resulting from
limits on quantities to be brought into Texas is at worst an acceptable balancing.
The interests of Texas consumers in purchasing alcoholic beverages outside of
Texas are recognized, but the State validly insists that the vast majority of the
alcoholic beverages consumed in Texas be obtained through its own retailers.
In effect, Texas has granted a limited exception to the three-tier system. We find
no constitutional defect. See Brooks, 462 F.3d at 353-54 (similar provision in
Virginia law upheld against dormant Commerce Clause challenge).
CONCLUSION
We reverse the district court’s holding that the personal import exception
authorized by Texas Alcoholic Beverage Code sections 107.05(a) and 107.07(a),
has any defect under the dormant Commerce Clause.
We also reverse the district court’s invalidation of provisions that only
retailers with a physical presence within the State could deliver to consumers
in the State. The provisions as listed by the district court are Texas Alcoholic
Beverage Code sections 6.01, 11.01, 22.01, 22.03, 24.01, 24.03, 37.01, 37.03,
37.03, 41.01, 43.04, 54.12, and 107.07(f).
Consequently, in those respects the district court’s judgment is VACATED.
We REMAND for entry of judgment consistent with this opinion.

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