United States Court of Appeals For the First Circuit
No. 22-1843
KAMBIS ANVAR and MICHELLE DRUM,
Plaintiffs, Appellants,
v.
ELIZABETH K. DWYER, in her official capacity as Interim Director of RI Department of Business Regulation; PETER F. NERONHA, in his official capacity as Attorney General of Rhode Island; and RHODE ISLAND RESPONSIBLE BEVERAGE ALCOHOL COALITION, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND
[Hon. John J. McConnell, Jr., U.S. District Judge]
Before
Montecalvo, Selya, and Thompson, Circuit Judges.
James A. Tanford, with whom Robert D. Epstein and Epstein Seif Porter & Beutel, LLP were on brief, for appellants. Michael W. Field, Assistant Attorney General, with whom Katherine Connolly Sadeck, Assistant Attorney General, was on brief, for appellees Dwyer and Neronha. Deborah A. Skakel, with whom Blank Rome LLP, Gerald J. Petros, Ryan M. Gainor, and Hinckley Allen & Snyder LLP were on brief, for appellee Rhode Island Responsible Beverage Alcohol Coalition, Inc. John C. Neiman, Jr. and Maynard Nexsen PC on brief for Center for Alcohol Policy, amicus curiae. Jacob Hegeman, Frederick R. Yarger, Teresa G. Akkara, and Wheeler Trigg O'Donnell LLP on brief for Wine & Spirits Wholesalers of America, Inc. and American Beverage Licensees, amici curiae.
September 7, 2023 SELYA, Circuit Judge. This appeal arises out of a
challenge to Rhode Island's liquor laws on the ground that
consumers are denied access to alcohol deliveries from
out-of-state retailers in violation of the Commerce Clause. See
U.S. Const. art. I, § 8, cl. 3. With respect to alcoholic
beverages, the Twenty-first Amendment, see U.S. Const. amend. XXI,
§ 2, adds a gloss to the Commerce Clause — and we have not had the
occasion to visit this arcane corner of constitutional
jurisprudence following the Supreme Court's instructive opinion in
Tennessee Wine & Spirits Retailers Association v. Thomas, 139 S.
Ct. 2449 (2019). Other circuits, though, have grappled with
similar circumstances, and they have not been uniform in gauging
the reach of Tennessee Wine. Compare, e.g., Block v. Canepa, 74
F.4th 400, 414 (6th Cir. 2023), with B-21 Wines, Inc. v. Bauer, 36
F.4th 214, 229 (4th Cir. 2022), cert. denied, 143 S. Ct. 567
(2023). Consequently, we proceed with caution, deciding only the
narrow issue that this appeal presents. After careful
consideration, we affirm the district court's judgment in part,
vacate it in part, and remand for further proceedings consistent
with this opinion.
I
We briefly rehearse the background facts and travel of
the case.
- 3 - A
Rhode Island, like many states, controls the
distribution of alcohol within its borders through what is commonly
described as a three-tier system. The state issues licenses
specific to the manufacture, wholesale, or retail of alcohol,
thereby maintaining a distinction between each tier of the alcohol
supply chain. See R.I. Gen. Laws § 3-5-1. Manufacturers and
wholesalers are licensed by the Rhode Island Department of Business
Regulation (DBR). See id. § 3-5-14.1. Each such licensee is
required both to maintain a physical premises within the state,
see id. §§ 3-6-1, -9 to -11, and to be a distinct economic entity
such that no manufacturer has an interest in the business of a
wholesaler, see id. § 3-6-15.
The licensing of retailers is left to local
municipalities. See id. § 3-5-15. The retailers, too, must have
a physical presence within the state, see id. §§ 3-7-1, -3;
230-30-10 R.I. Code R. § 1.4.27, and they must remain separate and
apart from the interests of any manufacturer or wholesaler, see
R.I. Gen. Laws § 3-7-22(a). Licenses may issue only to Rhode
Island residents or companies authorized to do business in the
state. See id. § 3-5-10.
Within this three-tier system, alcoholic beverages sold
to consumers are first funneled through in-state wholesalers. They
are the only entities allowed to sell alcohol to licensed Rhode
- 4 - Island retailers. See id. § 3-7-18. And they alone can receive
shipments of alcoholic beverages from outside the state. See id.
§ 3-4-8.
This regulatory scheme does admit one exception:
consumers may buy alcohol for a non-business purpose from an
in-state or out-of-state manufacturer and have it shipped directly
to their home by common carrier if the purchase is made in person
on the manufacturer's premises. See id. Save for this exception,
consumers purchase alcoholic beverages only from licensed
retailers, who are permitted to sell them either in person, by
phone, or over the internet.1 See id. §§ 3-7-1, -3; 230-30-10 R.I.
Code R. § 1.4.10. Those retailers are also permitted to deliver
a consumer's purchases directly to her as long as the delivery is
made by the retailer (or by an employee of the retailer) during
lawful business hours. See 230-30-10 R.I. Code R. § 1.4.10.
Delivery by common carrier is forbidden. See id. Because Rhode
Island issues licenses only to in-state retailers, Rhode Island
consumers cannot avail themselves of similar deliveries from
1 RhodeIsland makes available various classes of retail-level liquor licenses. Many of these licenses are applicable only to specific types of businesses. See, e.g., R.I. Gen. Laws § 3-7-15 (authorizing licenses for railroad, marine, and air carriers); id. § 3-7-16 (authorizing licenses for convention halls). Our discussion primarily relates to the (most general) "Class A" type of retail license. See id. §§ 3-7-1, -3.
- 5 - out-of-state retailers (even those whose shops are very close to
the Rhode Island border).
B
Against this backdrop, we turn to the case at hand.
Plaintiffs-appellants Kambis Anvar and Michelle Drum are Rhode
Island wine consumers who allege that they would purchase wine
from out-of-state retailers and have it delivered to their homes
if that course of action was not prohibited by state law. In
October of 2019, they sued Elizabeth K. Dwyer, in her official
capacity as the Interim Director of the DBR, and Peter F. Neronha,
in his official capacity as the Rhode Island Attorney General, in
the United States District Court for the District of Rhode Island.
The plaintiffs entreated the district court to declare the
challenged liquor laws unconstitutional and to enjoin their
enforcement. Subsequently, the Rhode Island Responsible Beverage
Alcohol Coalition, Inc., an association of Rhode Island alcohol
wholesalers, intervened as a party-defendant to protect the
interests of its members. See Fed. R. Civ. P. 24.
In due course, the parties cross-moved for summary
judgment. See Fed. R. Civ. P. 56(a). The plaintiffs argued that
Rhode Island's alcohol control regime discriminates against
out-of-state retailers in violation of the Commerce Clause because
those retailers cannot sell and deliver alcohol purchased from
out-of-state wholesalers to Rhode Island consumers, nor can they
- 6 - deliver those potential purchases by common carrier.2 The
defendants, in turn, asserted that Rhode Island's laws are either
nondiscriminatory or an appropriate exercise of the state's
authority under the Twenty-first Amendment.
After hearing oral argument and mulling the parties'
competing contentions, the district court held that requiring
retailers to establish a physical presence within the state to
sell and deliver alcohol was allowed under the Twenty-first
Amendment because the physical-presence requirement was essential
to the state's three-tier system and, thus, necessary to "promote[]
the health and safety of Rhode Islanders." Anvar v. Dwyer, 633 F.
Supp. 3d 592, 599 (D.R.I. 2022). In upholding the
in-state-presence requirement for retailers, the court did not
examine concrete evidence to discern the effectiveness of that
requirement in promoting public health and safety. The court also
upheld, on similar grounds, the requirement that licensed
retailers purchase alcohol only from licensed in-state
wholesalers. See id.
At the outset, the plaintiffs' complaint also challenged 2
laws limiting the amount of alcohol a consumer may physically carry into the state. See R.I. Gen. Laws §§ 3-1-1(9), -4-1. The plaintiffs later abandoned that argument and, therefore, cannot resurrect it on appeal. See Teamsters Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992) ("If any principle is settled in this circuit, it is that, absent the most extraordinary circumstances, legal theories not raised squarely in the lower court cannot be broached for the first time on appeal.").
- 7 - As to the plaintiffs' challenge to the requirement that
retailers deliver alcohol themselves (as opposed to arranging for
delivery of customer purchases by common carrier), the district
court determined that the relevant laws do not discriminate against
out-of-state retailers because no retailer, regardless of
location, is permitted to deliver alcohol by common carrier. See
id. The court did not address whether the common-carrier
restriction, although neutral on its face, has a discriminatory
effect or purpose.
When all was said and done, the district court granted
the defendants' motion for summary judgment and denied the
plaintiffs' cross-motion. This timely appeal followed.
II
We review an order granting or denying summary judgment
de novo. See Minturn v. Monrad, 64 F.4th 9, 13 (1st Cir. 2023).
"The pendency of cross-motions for summary judgment does not alter
the standard of review." Conlogue v. Hamilton, 906 F.3d 150, 154
(1st Cir. 2018). "Cross motions simply require us to determine
whether either of the parties deserves judgment as a matter of law
on facts that are not disputed." Barnes v. Fleet Nat'l Bank, N.A.,
370 F.3d 164, 170 (1st Cir. 2004) (quoting Wightman v. Springfield
Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir. 1996)).
- 8 - III
The Constitution grants Congress the power "[t]o
regulate Commerce . . . among the several States." U.S. Const.
art. I, § 8, cl. 3. Encompassed within that affirmative grant of
power is, by negative implication, a concomitant command that
"prevents states from creating protectionist barriers to
interstate trade." Fam. Winemakers of Cal. v. Jenkins, 592 F.3d
1, 9 (1st Cir. 2010). Under this concomitant command, familiarly
known as the dormant Commerce Clause, a state law that
discriminates against either interstate goods or non-resident
actors can be upheld only if it "advances a legitimate local
purpose that cannot be adequately served by reasonable
nondiscriminatory alternatives." Dep't of Revenue of Ky. v. Davis,
553 U.S. 328, 338 (2008) (quoting Or. Waste Sys., Inc. v. Dep't of
Env't Quality of Or., 511 U.S. 93, 101 (1994)); see Ne. Patients
Grp. v. United Cannabis Patients & Caregivers of Me., 45 F.4th
542, 546 (1st Cir. 2022).
Even so, states are afforded greater leeway when
regulating alcohol because of the authority granted to them by the
Twenty-first Amendment. See Tenn. Wine, 139 S. Ct. at 2470.
Section 2 of the Twenty-first Amendment provides:
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.
- 9 - U.S. Const. amend. XXI, § 2. Given its plain meaning, section 2
seems to stand in tension with the dormant Commerce Clause. But
— notwithstanding the broad sweep of its text — section 2 has been
authoritatively construed "as one part of a unified constitutional
scheme," Tenn. Wine, 139 S. Ct. at 2462, so that state laws
promulgated under its auspices must nevertheless conform to the
"nondiscrimination principle" latent in the dormant Commerce
Clause, id. at 2470 (quoting Granholm v. Heald, 544 U.S. 460, 487
(2005)).
It follows, we think, that when assessing whether a
state's law regulating alcohol runs headlong into the dormant
Commerce Clause, a court first must determine whether the
challenged law discriminates — either on its face, in effect, or
in purpose — against interstate commerce. See Or. Waste Sys.,
Inc., 511 U.S. at 99; Fam. Winemakers of Cal., 592 F.3d at 9-10,
13. If it does, the inquiry then shifts to whether the challenged
law "serve[s] a State's legitimate [section] 2 interests" such as
addressing "the public health and safety effects of alcohol use."
Tenn. Wine, 139 S. Ct. at 2469, 2474. To prove as much, the state
may not rely on either "mere speculation" or "unsupported
assertions" but, rather, must proffer "concrete evidence"
demonstrating that the main effect of the law is the advancement
of, say, public health and safety, not economic protectionism.
- 10 - Id. at 2474 (quoting Granholm, 544 U.S. at 490, 492). If the law's
predominant effect is protectionist in nature, such that it cannot
be upheld under the Twenty-first Amendment, the court must then
determine whether the law "advances a legitimate local purpose
that cannot be adequately served by reasonable nondiscriminatory
alternatives." Granholm, 544 U.S. at 489 (quoting New Energy Co.
of Ind. v. Limbach, 486 U.S. 269, 278 (1988)).
IV
With this legal framework in place, we move from the
general to the specific. The plaintiffs asseverate that Rhode
Island's issuance of licenses only to retailers who maintain a
physical presence within the state unconstitutionally
discriminates against out-of-state retailers who are thus
prohibited from delivering alcohol directly to Rhode Island
consumers. See R.I. Gen. Laws §§ 3-4-8, -5-1, -7-1, -7-3;
230-30-10 R.I. Code R. § 1.4.27. And if that prohibition is
unlawful — their thesis runs — so, too, is the requirement that
retailers make deliveries themselves (instead of through common
carrier) because out-of-state retailers would be put at an unfair
logistical disadvantage in comparison to in-state retailers when
making those deliveries. See R.I. Gen. Laws § 3-4-8; 230-30-10
R.I. Code R. § 1.4.10. We address each of these asseverations in
turn.
- 11 - We first pause to note, though, that the plaintiffs do
not appeal the district court's determination that Rhode Island's
requirement that licensed retailers purchase alcohol only from
licensed in-state wholesalers, see R.I. Gen. Laws § 3-7-18, is
valid under the Twenty-first Amendment. The plaintiffs make no
mention of the relevant provision in their opening brief and —
although they argue against that requirement in their reply brief
— that is too little and too late. It is settled beyond hope of
contradiction that arguments appearing for the first time in an
appellant's reply brief are deemed waived. See FinSight I LP v.
Seaver, 50 F.4th 226, 235 (1st Cir. 2022); Sandstrom v. ChemLawn
Corp., 904 F.2d 83, 86 (1st Cir. 1990). Accordingly, we affirm
the district court's entry of summary judgment insofar as it
addresses the constitutionality of section 3-7-18, and we limit
our review to those issues properly before us.
A
Rhode Island law facially discriminates against
out-of-state retailers by authorizing the issuance of retail
licenses exclusively to state residents or in-state businesses.
See R.I. Gen. Laws §§ 3-5-1, -5-10, -7-1, -7-3. So, too, it
facially discriminates against out-of-state retailers by requiring
such licensees to maintain a physical presence within the state.
See 230-30-10 R.I. Code R. § 1.4.27. Due to those restrictions,
out-of-state retailers cannot sell or deliver alcoholic beverages
- 12 - to Rhode Island residents within the borders of the state (as Rhode
Island retailers can).
Despite that impediment to interstate commerce, the
district court upheld the in-state-presence requirement on the
ground that it is integral to Rhode Island's three-tier system of
alcohol regulation and, thus, a valid exercise of the state's
authority under the Twenty-first Amendment. See Anvar, 633 F.
Supp. 3d at 598-99. In announcing this holding, the court relied
in part on a Supreme Court dictum describing the three-tier system
of alcohol regulation in favorable terms. See id.
We do not gainsay that the Supreme Court has, in the
past, described the implementation of a three-tier system as an
appropriate use of a state's authority under the Twenty-first
Amendment. See Granholm, 544 U.S. at 489 ("We have previously
recognized that the three-tier system itself is 'unquestionably
legitimate.'" (quoting North Dakota v. United States, 495 U.S.
423, 432 (1990))); see also Cherry Hill Vineyard, LLC v. Baldacci,
505 F.3d 28, 30 (1st Cir. 2007).3 But the Court, of late, has
3 Historically, the three-tier system was adopted by states to curb excessive alcohol consumption engendered by the "tied- house" system — an economic arrangement under which alcohol producers staked saloonkeepers to premises and equipment in exchange for their agreement to sell the producer's product exclusively (and often excessively). See Tenn. Wine, 139 S. Ct. at 2463 n.7. The three-tier system sought to prevent the resultant harm to the public health by foreclosing vertical integration in the supply chain for alcohol distribution. See id.
- 13 - cautioned that the Twenty-first Amendment does not necessarily
"sanction[] every discriminatory feature that a State may
incorporate into its three-tiered scheme." Tenn. Wine, 139 S. Ct.
at 2471. Each state's variation of the three-tier system, then,
"must be judged based on its own features." Id. at 2472.
Here, the district court concluded that the
in-state-presence requirement is an essential feature of Rhode
Island's three-tier system because it allows state officials to
conduct on-site inspections to ensure compliance with the law.
See Anvar, 633 F. Supp. 3d at 599. But the court arrived at that
conclusion based on an expert report affirming that principle in
the abstract, together with the naked fact that retailers are
required by law to maintain certain sales records for inspection.
See R.I. Gen. Laws § 3-7-28. At no point did the court engage
with any "concrete evidence" as to how the in-state-presence
requirement furthers the legitimate aims of the Twenty-first
Amendment. Tenn. Wine, 139 S. Ct. at 2474 (quoting Granholm, 544
U.S. at 490). For instance, the court made no mention of whether
such enforcement actions actually take place, whether such efforts
have effectively curtailed behavior deleterious to the public
health, or whether the requirement has tangibly benefited public
health and safety in some other way.
Nor did the district court explicitly consider whether
the plaintiffs' arguments or proffered evidence were sufficient to
- 14 - rebut the defendants' stated justification for the
in-state-presence requirement. Cf. Lebamoff Enters. Inc. v.
Whitmer, 956 F.3d 863, 879 (6th Cir. 2020) (McKeague, J.,
concurring) (upholding alcohol regulation because plaintiffs
failed to produce "sufficient countervailing evidence" rebutting
state's showing that law promoted public health). The plaintiffs
offer data and reports ostensibly demonstrating that states that
allow out-of-state retail deliveries of alcohol do not experience
a corresponding erosion in public health and safety. They also
insist that Rhode Island's rationale for imposing an
in-state-presence requirement on retailers is undercut by the
exception available to out-of-state manufacturers, who can deliver
directly to consumers as long as consumers make their purchases
from the manufacturer's premises. See R.I. Gen. Laws § 3-4-8.
Whether this showing outweighs the defendants' offer of proof is
a matter to be decided in the first instance by the district court.
See Block, 74 F.4th at 414 (remanding to district court to assess
evidence within framework erected by Tennessee Wine).
The short of it is that a discriminatory aspect of a
state's version of the three-tier system cannot be given a judicial
seal of approval premised either on the virtues of three-tier
systems generally or on the basis of a theoretical benefit to
public health and safety associated with the challenged
regulation. See Tenn. Wine, 139 S. Ct. at 2474-75. After all,
- 15 - there is nothing inherent in the three-tier system — which aims at
preventing vertical integration between alcohol producers,
wholesalers, and retailers — that necessarily demands an
in-state-presence requirement for retailers. See B-21 Wines,
Inc., 36 F.4th at 235 (Wilkinson, J., dissenting) ("One can easily
imagine a state maintaining a strict licensing regime to ensure
that the tiers remain distinctly owned, while treating in-state
and out-of-state retailers alike."). But see id. at 229 (upholding
in-state retailer requirement as integral to three-tier system);
Sarasota Wine Mkt., LLC v. Schmitt, 987 F.3d 1171, 1185 (8th Cir.
2021) (same). Such a requirement — if it is to be sanctioned —
must be supported by "concrete evidence" demonstrating that its
predominant effect advances the goals of the Twenty-first
Amendment and not merely the protection of in-state business
interests. Tenn. Wine, 139 S. Ct. at 2474 (quoting Granholm, 544
U.S. at 490); see Block, 74 F.4th at 414.
We add a coda. The plaintiffs argue vociferously that
the district court applied the wrong legal standard by not
considering whether nondiscriminatory alternatives to the
challenged laws were available. That argument, however, conflates
the proper Twenty-first Amendment inquiry with a traditional
analysis under the dormant Commerce Clause. See supra Part III.
The district court may find the existence of alternatives relevant
- 16 - in assessing whether the challenged laws in fact promote public
health and safety, but the mere existence of possible alternatives
does not, for purposes of a Twenty-first Amendment inquiry,
necessarily invalidate a challenged law. See B-21 Wines, Inc., 36
F.4th at 225-26 ("Although consideration of nondiscriminatory
alternatives could have some relevance to [the Twenty-first
Amendment] inquiry, it does not transform the applicable framework
into the test that ordinarily applies to a dormant Commerce Clause
challenge when the Twenty-first Amendment is not implicated.").
C
That ends this aspect of the matter. We vacate the
district court's entry of summary judgment as to the
constitutionality of the in-state-presence requirement for
retailers, and we remand that issue for a fuller consideration of
the parties' respective offers of proof. The district court may,
of course, take additional evidence on this issue if it sees fit.
V
The plaintiffs concede that their challenge to Rhode
Island's common-carrier restriction, see R.I. Gen. Laws § 3-4-8;
230-30-10 R.I. Code R. § 1.4.10(A)-(B), is conditioned upon a
finding of unconstitutionality with respect to the
in-state-presence requirement for retailers. If out-of-state
retailers cannot sell and deliver alcohol into the state, it does
not much matter whether they are prevented from making such
- 17 - hypothetical deliveries by common carrier. But if the district
court determines on remand that the in-state-presence requirement
for retailers is unconstitutional, a separate inquiry must then be
mounted to determine the constitutionality of the common-carrier
restriction.
Below, the district court — despite upholding the
in-state-presence requirement — proceeded to address the
plaintiffs' challenge to the common-carrier restriction. The
court ruled that the latter requirement was nondiscriminatory
because the relevant statutory and regulatory provisions made no
distinction between in-state and out-of-state retailers. See
Anvar, 633 F. Supp. 3d at 599. That portion of the district
court's judgment also must be vacated. We explain briefly.
Even if a law does not appear to be discriminatory on
its face, it still may have a discriminatory effect if "it affects
similarly situated entities in a market by imposing
disproportionate burdens on out-of-state interests and conferring
advantages upon in-state interests." Fam. Winemakers of Cal., 592
F.3d at 10. So, too, a law may be discriminatory in its purpose
if it is "motivated by an intent to discriminate against interstate
commerce." Id. at 13. As a threshold matter, though, it is
incumbent upon the plaintiffs to provide proof of any allegedly
discriminatory effect or purpose. See id. at 9.
- 18 - Should the district court deem the in-state-presence
requirement unconstitutional — a matter on which we take no view
— it must then reassess whether the plaintiffs have sufficiently
demonstrated that the common-carrier restriction has a
discriminatory effect or purpose. See id. at 10, 13. If so, the
court must proceed to analyze whether the law is a permissible
exercise of Rhode Island's authority under the Twenty-first
Amendment. See Tenn. Wine, 139 S. Ct. at 2474-75.
VI
We need go no further. For the reasons elucidated above,
the judgment of the district court is affirmed in part, vacated in
part, and remanded for further proceedings consistent with this
opinion. All parties shall bear their own costs.
So Ordered.
- 19 -