Sixth Circuit Allows Wine Shipments to Kentucky

A federal appeals court ruled on Dec. 24 that Kentucky must allow small out-of-state wineries to ship their wares into the state even if a customer buys the wines online or over the phone.

The Sixth U.S. Circuit Court of Appeals' ruling upholds an earlier decision that struck down Kentucky's law prohibiting wine shipments from out of state.

The three-judge panel ruled that the in-person purchase requirement in Kentucky's law violates the Commerce Clause of the Constitution. Judge Eric L. Clay wrote for the panel that requiring wine purchasers to drive up to 4,800 miles to buy a bottle of wine is impractical.

"Out-of-state wineries are clearly burdened by Kentucky's regulatory scheme," Clay wrote.

The ruling came in a lawsuit filed by Cherry Hill Vineyards, of Rickreall, Ore., which claimed Kentucky's law gave preference to Kentucky businesses over out-of-state merchants.

Cherry Hill challenged Kentucky's law on four grounds: that the provision limiting shipments to wineries that produce less than 50,000 gallons a year unfairly protects Kentucky's small wineries; that limiting shipments to two cases at a time favors local wineries; requiring wine purchases to be made in-person discriminates against out-of-state businesses; and that the creation of the Kentucky Grape and Wine Council leads to Kentucky businesses being treated differently than out-of-state businesses.

Kenneth Handmaker, the attorney for the Wine and Spirits Wholesalers of Kentucky, declined immediate comment Wednesday. A message left for the Wine and Spirits Wholesalers of America also was not returned.

U.S. District Judge Charles R. Simpson III did uphold the state's two-case limit and the creation of the Kentucky Grape and Wine Council, which is designed to promote bluegrass wines and cut deals with wholesalers to sell them, calling the provisions "evenhanded" and said they did not violate the Commerce Clause.

Simpson twice struck down the state's in-person requirement -- first in an existing law, then in a measure passed by the General Assembly before it could take effect in 2007.

The U.S. Supreme Court in 2005 overturned laws in New York and Michigan that prohibited buying wine directly from out-of-state wineries. The ruling stemmed from lawsuits by a group of wineries claiming those states violated interstate commerce laws because they allowed in-state wineries to ship directly to consumers but prevented out-of-state wineries from doing so.

The state of Kentucky dropped out of the lawsuit and appealed in 2007, saying Simpson left enough of the law in place. The Wine and Spirits Wholesalers intervened in the case and kept the appeal alive.