Court hears appeal on Mass. wine shipment law

Gerald Leader loves California wines but lives in Massachusetts, where state law sharply limits the ability of out-of-state wineries to ship their products directly to consumers.

"I can't go directly to wineries in Napa and Sonoma," said Leader, a retired Boston University professor, who, along with a group of like-minded people, are suing to have the restriction lifted.

On Monday, the 1st U.S. Circuit Court of Appeals in Boston is scheduled to hear arguments on the law that for years has been fermenting opposition from out-of-state wine producers, as well as connoisseurs like Leader who would prefer to order their bottles through the Internet or mail order.

Despite a 2005 Supreme Court ruling that opened the door wider to interstate wine shipments, restrictions remain in more than a dozen states. Attorneys say the outcome of the case in Massachusetts could influence others.

"It's an example of a protectionist law that violates the commerce clause of the U.S. Constitution," said Tracy Genesen, who will argue the case on behalf of Sacramento, Calif.-based Family Winemakers of California, which represents about 650 producers that claim they have essentially been frozen out of the Massachusetts market.

According to Free the Grapes, a coalition of wine producers, retailers and consumers, Alabama, Arkansas, Delaware, Maryland, Montana, New Jersey, Oklahoma, Pennsylvania, South Dakota and Utah prohibit wineries from shipping directly to consumers while Arizona, Kentucky, Ohio along with Massachusetts restrict shipments by companies that produce over a certain amount of wine.

The Massachusetts law, Genesen said, seeks to protect and advance in-state wholesalers and wineries at the expense of interstate commerce, effectively keeping 98 percent of domestic wine out of direct reach of Bay State consumers.

"You can make the world's greatest pinot noir these days, and because of the state law ... you might not be able to sell it to people who find it, hear about it, read about it, maybe even taste it on a vacation," said Paul Kronenberg, president of Family Winemakers of California.

The law, approved by the Massachusetts Legislature in 2006 over the veto of then-Gov. Mitt Romney, created a multi-tiered system in which wineries that in aggregate produce annually more than 30,000 gallons - equivalent to about 12,600 12-bottle cases - must decide whether to sell retail in Massachusetts through an in-state wholesaler or apply for a license to ship wines directly to consumers. They cannot, however, do both.

The cap does not affect any of the nearly three dozen wineries based in Massachusetts, all of which are small and produce under the 30,000-gallon limit.

U.S. District Court Judge Rya Zobel struck down the law last December, but the state appealed, leaving it intact pending a decision by the appellate court.

In a legal brief, Massachusetts argued that the lower court's finding that the law was discriminatory was "fatally flawed."

The production caps "represent a rational and well-reasoned solution to the acknowledged difficulties experienced by small wineries," wrote assistant attorney general David Hadas, who will argue the appeal for the state.

Massachusetts also contends that its system is the most flexible of any of the states with caps because it provides wineries a choice of whether to contract with a wholesaler or ship directly to consumers.

Kronenberg, however, said most of the wineries represented by his group can't find wholesalers and get shelf space in Massachusetts package stores because they are not among a relative handful of well-known national brands. He said the law also hamstrings companies that produce multiple wines, because if they manage to find a wholesaler for just one label, they are then barred from directly shipping any of their others.

The Supreme Court's 5-4 ruling in 2005 struck down laws in New York and Michigan as discriminatory because they allowed in-state wineries, but not out-of-state ones, from shipping directly to consumers. The decision prompted several other states to revise their statutes.