Lynn Fitch, Attorney General of the State of Mississippi, ex rel., the State of Mississippi and Commissioner of Revenue Herb Frierson and Mississippi Department of Revenue v. Wine Express Inc., Bottle Deals Inc. and Gold Medal Wine Club

Mississippi Supreme Court·Decided February 27, 2020·No. 2018-SA-01259-SCT·Published

Opinion

IN THE SUPREME COURT OF MISSISSIPPI NO. 2018-SA-01259-SCT

LYNN FITCH, ATTORNEY GENERAL OF THE STATE OF MISSISSIPPI, EX REL., THE STATE OF MISSISSIPPI AND COMMISSIONER OF REVENUE HERB FRIERSON AND MISSISSIPPI DEPARTMENT OF REVENUE

v.

WINE EXPRESS INC., BOTTLE DEALS INC. AND GOLD MEDAL WINE CLUB

DATE OF JUDGMENT: 09/04/2018 TRIAL JUDGE: HON. JOHN S. GRANT, III TRIAL COURT ATTORNEYS: JAMES A. BOBO DAVID J. CALDWELL

JOEL W. HOWELL, III

COURT FROM WHICH APPEALED: RANKIN COUNTY CHANCERY COURT ATTORNEYS FOR APPELLANTS: OFFICE OF THE ATTORNEY GENERAL BY: JAMES A. BOBO

KRISSY CASEY NOBILE

DAVID J. CALDWELL

ATTORNEY FOR APPELLEES: JOEL W. HOWELL, III NATURE OF THE CASE: CIVIL - TORTS-OTHER THAN PERSONAL INJURY & PROPERTY DAMAGE

DISPOSITION: REVERSED AND REMANDED - 02/27/2020 MOTION FOR REHEARING FILED: MANDATE ISSUED:

EN BANC.

BEAM, JUSTICE, FOR THE COURT:

¶1. The Mississippi Department of Revenue (MDOR) and the Office of the Attorney General of the State of Mississippi filed suit against Wine Express, Inc., Gold Medal Wine Club, and Bottle Deals, Inc., in the Chancery Court of Rankin County, Mississippi. The State

sought injunctive relief, disgorgement, monetary relief, attorneys’ fees, and punitive damages. Defendants moved for dismissal claiming that Mississippi courts lack personal jurisdiction over Defendants. After a hearing on the matter, the trial court granted Defendants’ motion.

¶2. The State appeals. We find that the trial court erred by finding that it lacks personal jurisdiction over the Defendants.

FACTS AND PROCEDURAL HISTORY

¶3. In early 2017, the Alcohol Beverage Control (ABC) Division of the Mississippi Department of Revenue and the Alcohol and Tobacco Enforcement Division of the Mississippi Attorney General’s Office investigated the shipment of wine and other alcoholic beverages into the state. Agents used common online search engines to search the websites of various Internet wine retailers. The investigation revealed that most Internet retailers make it “impossible” to place an order for alcoholic beverages once it is disclosed that the shipment would be to a location in Mississippi. This, however, is not so for the Defendants’ websites. In December 2017, the State sued the Defendants for injunctive relief to enforce the provisions of the “Local Option Alcoholic Beverage Control Law.” See Miss. Code Ann. §§ 67-1-1 to -99 (Rev. 2012).

¶4. Pursuant to this statutory scheme, Mississippi operates under a three-tier system in which the State acts as the wholesaler for alcoholic beverages, meaning Mississippi directly controls the distribution and sale of alcoholic beverages. Miss. Code Ann. § 67-1-41 (Rev. 2012). Each manufacturer ships its alcoholic beverages to a centralized warehouse in

Gluckstadt, Mississippi, which is owned by the State. From there, the alcohol is held in bailment by the State until ordered by privately held and permitted retailer package stores. Miss. Code Ann. § 67-1-51 (Supp. 2019) (issuance of permits). Once ordered, alcohol is then shipped by the State to individual package stores for resale to consumers who must purchase the alcohol while on the package store premises. Package store retailers may not ship or deliver alcohol to consumers. Miss. Code Ann. § 67-1-83(1) (Rev. 2012) (“It shall also be unlawful for the holder of any package retailer’s permit to sell any alcoholic beverages except by delivery in person to the purchasers at the place of business of the permittee.”).

¶5. Mississippi law further provides as follows:

It shall be unlawful for any person to manufacture, distill, brew, sell, possess, import into this state, export from the state, transport, distribute, warehouse, store, solicit, take order for, bottle, rectify, blend, treat, mix or process any alcoholic beverage except as authorized in this chapter. However, nothing contained herein shall prevent importers, wineries and distillers of alcoholic beverages from storing such alcoholic beverages in private bonded warehouses located within the State of Mississippi for the ultimate use and benefit of the Department of Revenue as provided in § 67-1-41.

Miss. Code Ann. § 67-1-9(1) (Supp. 2019).

No alcoholic beverage intended for sale or resale shall be imported, shipped or brought into this state for delivery to any person other than as provided in this chapter, or as otherwise provided by law for native wines.

Miss. Code Ann. § 67-1-41(3) (Rev. 2012).

¶6. Section 67-1-51, as noted above, sets forth the various permits that must be obtained from the State in order to engage in the possession, sale, and distribution of alcoholic beverages to adults. The Defendants do not possess any of the permits required by state law.

¶7. In February 2018, the State filed an amended complaint for injunctive relief, disgorgement, monetary relief, attorneys’ fees and punitive damages.1 The State alleged that through the Defendants’ interactive, commercial websites, they sold and directed the shipment of thousands of bottles of alcohol into Mississippi. The State alleged that the damages are the unpaid sales taxes and excise taxes due in relation to the taxable illegal transaction and the unrealized wholesale markup.

¶8. The Defendants separately filed motions to dismiss based on a lack of personal jurisdiction under Mississippi Rule of Civil Procedure 12(b)(2), but the grounds for dismissal in each motion were the same. The Defendants stated that they are incorporated in New York or California with no physical presence or place of business in Mississippi. Further, all the purchases made by the buyers were made online. In each transaction, the Defendants received, processed, finalized, and completed the sales orders in their places of business in New York or California. And the Defendants contend that alcohol purchases by consumers in Mississippi were made F.O.B. (Free on Board), and title to the goods passed to the buyers at the time and place that the goods left the Defendants’ respective premises located outside the state of Mississippi.2

1 The State filed a motion to file a second amended complaint on July 30, 2018; but that motion was noticed for hearing on the same date that the court concluded it did not have personal jurisdiction. Therefore, it did not issue a ruling on the motion to amend.

2 Gold Medal’s sales contracts provide in pertinent part as follows:

Title to, and ownership of, all wine passes from seller to buyer in the State of California, and buyer takes all responsibility for shipping the wine from California to his or her home state. . . . . The buyer is solely responsible for the shipment of wine and other goods purchased and for determining the

¶9. The State opposed the motions, arguing that the Defendants are operators of unlicensed virtual liquor stores in Mississippi. The State argued that the Defendants had intentionally decided to direct activities in Mississippi and to allow orders to be placed through their highly interactive websites.

¶10. Before the trial court ruled on the matter, the parties had conducted jurisdiction- related discovery. According to the State, the discovery revealed that the Defendants had sold and directed the shipment of thousands of bottles of alcoholic beverages into the State, profiting more than $200,000.

¶11. On August 23, 2018, the trial court held a hearing on the State’s motion to amend and on the Defendants’ motions for dismissal. The trial court entered an order granting the Defendants’ motion to dismiss for lack of personal jurisdiction.

¶12. The trial court reasoned as follows:

legality and tax/duty consequence of having the wine and other goods shipped to the applicable destination.

Bottle Deal’s sales contracts likewise provide as follows:

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Lynn Fitch, Attorney General of the State of Mississippi, ex rel., the State of Mississippi and Commissioner of Revenue Herb Frierson and Mississippi Department of Revenue v. Wine Express Inc., Bottle Deals Inc. and Gold Medal Wine Club, (Mich. 2020).

Lynn Fitch, Attorney General of the State of Mississippi, ex rel., the State of Mississippi and Commissioner of Revenue Herb Frierson and Mississippi Department of Revenue v. Wine Express Inc., Bottle Deals Inc. and Gold Medal Wine Club (Lynn Fitch, Attorney General of the State of Mississippi, ex rel., the State of Mississippi and Commissioner of Revenue Herb Frierson and Mississippi Department of Revenue v. Wine Express Inc., Bottle Deals Inc. and Gold Medal Wine Club) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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