Recent developments indicate that the last of the Sixth Circuit’s beer and wine cases we reported about last year may be headed for the Supreme Court. Even if it doesn’t go up on cert, the case is an example that a well-focused petition for rehearing en banc can be an effective tool, even if it doesn’t actually result in rehearing en banc.
The plaintiff American Beverage Association raised a dormant Commerce Clause challenge to a Michigan statute, Mich. Comp. Laws 455.572a, amending the state’s Bottle Bill and requiring certain beverages sold in Michigan to bear a unique-to-Michigan mark. The statute was passed to keep people from redeeming bottles in Michigan for a 10-cent refund when the bottles were purchased in other states that don’t require bottle deposits. Notably, the statute prohibited the sale of bottles that contained the unique mark in any state other than Michigan and imposed fines and potential jail sentences for violations. As a practical matter, the out-of-state manufacturers raised concerns that they were being required maintain segregated manufacturing and distribution networks that deprived them of economies of scale and a flexibility in managing their inventories.
In a unanimous decision, the Sixth Circuit concluded that the statute violated the Commerce Clause because it had extraterritorial effects. American Bev. Ass’n v. Snyder, Case No. 11-2097 (Nov. 30, 2012). Although the statute was not discriminatory (it applied to all manufacturers of a certain size), it imposed criminal penalties for the sale of bottles bearing the unique-to-Michigan mark in other states. Judge Sutton authored a separate concurrence questioning whether extraterritorial effect should, by itself, be a bar to state regulation of commerce. However, because current precedent invalidates state regulations that are not discriminatory but are extraterritorial, he joined the court’s opinion.
The defendants filed a Motion for Rehearing En Banc, requesting clarification about whether extraterritoriality ended the inquiry or, as defendants suggested, it could still survive if it “advances a legitimate local purpose that cannot be adequate served by reasonable nondiscriminatory alternatives.” In his concurrence, District Judge Rice (S.D. Ohio) indicated he believed that a finding of extraterritoriality ended the discussion, but there was no clear resolution of the issue in the main opinion. Although defendants may have been disappointed with the substantive answer they received, the petition for rehearing did lead to the panel issuing an amended decision including a statement that no further review of the local purpose or other reasonable alternatives was necessary following their finding of extraterritorial effect.
Now that the issue regarding extraterritoriality has been fully resolved, it appears that the defendants may be preparing a petition for certiorari. Not only did they indicate in their petition for rehearing that they were considering such a move, but they have also recently filed a motion to stay the issuance of the mandate. We will continue to monitor this case and any action by the Supreme Court.
We will also be monitoring yet another alcoholic beverage case pending before the Sixth Circuit, Maxwell’s Pic-Pac, Inc. v. Dehner, Case No. 12-6056, which attacks Kentucky’s prohibition against grocery stores and convenience stores selling package liquor and wine as a violation of the federal Equal Protection Clause and state separation of powers requirement. Briefing is scheduled to conclude this spring.