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"It's a sweeping decision rejecting the argument that Granholm (the 2005 Supreme Court Ruling on consumer-direct wine shipping) does not apply to retailers," Specialty Wine Retailers Association Executive Director Tom Wark said. "Retailers may not be discriminated against if a state is going to give its own in-state retailers the right to ship."

In an unusual and unprecedented move, however, the judge wrote that the State of Texas has the option to force out-of-state-retailers to purchase wine from Texas wholesalers. "Texas can constitutionally require that wine sold and shipped to Texas consumers be purchased from a Texas licensed wholesaler," Fitzwater declared.

"Imagine if Texas allowed out-of-state retailers to buy from its wholesalers," said Wark. "All of a sudden a Texas retailer could buy from wholesalers in a whole bunch of states. I don't think that's what Texas wholesalers want."

"Not only is it illegal under California law and other state's law, but I believe it's illegal under Texas law," Wark said. "We won on everything but there's that little unfortunate part the judge got wrong. I feel sorry for Lou Bright (who heads the Texas ABC). How is he going to implement this?"

It appears that under this decision, a state can either allow direct shipping from both in state and out of state retailers--or shut down all shipping from retailers to consumers---whether it involves in-state or out-of-state-retailers. The decision may additionally affect lawsuits on the retailer shipping issue in New York and Michigan. In New York, a court recently ruled that Granholm does not apply to retailers and the case is before an appellate court. In Michigan, a preliminary court decision ruled that Granholm applies to retailers.

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"This is really about the consumer," Wark said, "a step toward consumers across the country being able to purchase what they want. It will lead to lower prices for wine, more access to wine, and for states to be able to collect more taxes."*

Editorial:

In what was neither a complete victory nor defeat for out-of-state retailers and Texas wholesalers, Judge Sidney Fitzwater of the U.S. District Court for the Northern District of Texas ruled that Granholm offers protection from discrimination to both wineries and retailers. In other words, he ruled that Texas law barring out-of-state retailers from shipping directly to consumers is unconstitutional. The judge interprets that Granholm requires Texas to allow both in-state and out-of-state retailers to ship directly to Texans or none at all. This part of the ruling is a victory, but perhaps a hollow victory, for the Specialty Wine Retailers Association (SWRA) and here's why. The judge wrote that the State of Texas has the option to force out-of-state retailers to purchase wine from Texas wholesalers, so he's basically leaving the decision up to the state.

"The court concludes that Texas' ban on the sale and shipment of wine by out-of-state retailers to Texas residents is unconstitutional, but it also holds that the requirement that wine retailers--including out-of-state retailers--first purchase such wine from Texas-licensed wholesalers is constitutional."

However, it's worth noting that the judge dismissed arguments by wholesalers that barring direct shipments from out-of-state retailers would help prevent minors from accessing alcohol and ensure proper tax collection.

In the unlikely even that out-of-state retailers start purchasing wine from Texas wholesalers, we're pretty sure things would get chaotic fast. Plus, is it even legal? We smell more court dates and legal wrangling to figure this thing out.

In all, the language of the decision does not bode well for wholesalers nationally, but Texas wholesalers managed to dodge a bullet. The decision will likely affect similar retailer lawsuits in New York and Michigan. A New York court recently ruled that Graholm doesn't apply to retailers, while a Michigan court decided Granholm does apply to retailers.**

Sources: *“Direct Shipping: Texas Judge Says Granholm Applies to Retailers,” Wine Business, January 15, 2008; **“TEXAS COURT DECISION RESULTS IN HOLLOW VICTORY,” Megan Haverkorn, Wine Spirits Daily–E-mail, January 15, 2008