A Florida based wine importer, Orion Wine Imports, LLC and its owner brought an action challenging the constitutionality of the California statute that permit alcoholic beverages to be imported to California only when consigned and delivered to a licensed importer at the importer’s licensed premises or at a licensed public warehouse.
The plaintiffs claimed the California statute violates the Commerce Clause and the Privileges and Immunities Clause and sought to require California to offer permits to out-of-state wine importers and wholesalers to obtain licenses under the same or similar licensure terms as in-state importers and wholesalers as well as to import sell and deliver wine directly to California retailers. California responded with a motion to dismiss. We wrote about this case and the motion to dismiss that had been filed back in February. You can find that entry here along with the relevant pleadings.
The district court recently dismissed that second amended complaint and granted leave to the plaintiffs to file a third amended complaint. In assessing whether the California’s regulations regarding wine importation and direct sale to retailers was discriminatory, the court found that none of the challenged statutes facially discriminated or mandated differential treatment of in-state and out-of-state economic interests by benefitting the former and burdening the latter holding:
Orion or any other “out-of-state business” may apply for and obtain either or both an importer’s and/or wholesaler’s “license” in California to have alcohol come to rest, be stored, and be shipped from a licensed public warehouse. Therefore, the law, by its terms, applies equally to in-state and out-of-state importers because the statutes at issue require all importers to have a physical premises in California at which to receive delivery of imported alcohol. Accordingly, plaintiffs’ challenge rests on the assertion that the statutory provisions at issue are discriminatory in effect.
The court went on to address the failings in the commerce clause challenge given representations made in oral argument and in subsequent briefing that made it difficult to assess the exact claims asserted:
At hearing on the motion, however, it became apparent that the basis for plaintiffs’ Commerce Clause claim is unclear, as the parties expressed confusion as to whether plaintiffs can obtain the licenses they seek as out-of-state importers. Both defense counsel and counsel for amici asserted plaintiffs could obtain the combination of importer’s and wholesaler’s licenses allowing plaintiffs to import wine, transfer it to themselves by leasing space in a public warehouse and sell it directly to California retailers on equal terms as California-based entities. Plaintiffs’ counsel, in contrast, argued for the first time that plaintiffs cannot obtain this combination of licenses even if they lease public warehouse space in California. Further compounding this confusion is the fact that the threadbare allegations in the Second Amended Complaint do not focus the issue to make clear how the California law at issue here is discriminatory other than to generally allege that because plaintiff Orion “is located in Florida and has no premises in California, it is prohibited from importing, selling and delivering wine directly to California-licensed retailers.” SAC ¶ 11; see also id. ¶¶ 8, 10 (alleging out-of-state entities cannot get license allowing them to “import, sell and deliver wine directly to California-licensed retailers”). Taking into account the arguments made by plaintiffs’ counsel at hearing, especially on the public warehouse option, which do not appear to be consistent with the allegations in plaintiffs’ Second Amended Complaint, plaintiffs have not clearly advanced a coherent claim regarding the alleged discriminatory economic burden imposed by section 23661.
The post-hearing memoranda submitted by the parties do not clarify whether plaintiffs could obtain the licenses they seek by leasing public warehouse space. Plaintiffs provided citations to additional authority and asserted they can gain the privilege of distributing wine directly to retailers only by opening a permanent business in California, not by leasing warehouse space. Pls.’ Mem. Providing Citations for New Authority Raised at the Hearing, ECF No. 44, at 2-3. Defendant responded that plaintiffs misstate the law regarding their ability to conduct business on the same basis as California-based importers. Def.’s Resp. to Pls.’ Post-Hearing Mem., ECF No. 48, at 3-4.
The inconsistency between and among the pleadings, briefing and arguments in this case regarding whether and to what extent plaintiffs must establish a physical presence in California to obtain the licenses they seek precludes the court’s reasoned evaluation of plaintiffs’ claim, such as it is, and determination of its viability. Moreover, plaintiffs’ barebones pleading exposes the absence of a full understanding of the regulatory structure and where there is a possibility of obtaining licenses after leasing public warehouse space.
For these reasons, the court GRANTS defendant’s motion to dismiss plaintiffs’ Commerce Clause claim, but with leave to amend if possible subject to Federal Rule of Civil Procedure 11.
You can read the court’s order dismissing the complaint brought by the wine importer here.
You can read the newly filed third amended complaint challenging these restrictions on wine importation here.
Interestingly, the court rejected the company’s privileges and immunities claim following precedent that only natural persons have those rights and not corporations, rejecting a Citizen’s United argument that the plaintiffs had advanced.
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