Eleanor Heald v. JOHN ENGLER, Governor

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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0308P (6th Cir.)
File Name: 03a0308p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
ELEANOR HEALD; RAY
HEALD; JOHN ARUNDEL;
KAREN BROWN; RICHARD
BROWN; BONNIE MCMINN;
GREGORY STEIN; MICHELLE
MORLAN; WILLIAM
HORWATH; MARGARET
CHRISTINA; ROBERT
CHRISTINA; TRISHA HOPKINS;
JIM HOPKINS; DOMAINE
ALFRED, INC.,
Plaintiffs-Appellants,
v.
JOHN ENGLER, Governor;
JENNIFER M. GRANHOLM,
Attorney-General;
JACQUELYN STEWART,
Chairperson, Michigan Liquor
Control Commission, in their
Official Capacities,
Defendants-Appellees,
MICHIGAN WINE & BEER
WHOLESALERS ASSOCIATION,
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No. 01-2720
2 Heald, et al. v. Engler; et al. No. 01-2720
Intervening
Defendant-Appellee.
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Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 00-71438—Bernard A. Friedman, District Judge.
Argued: May 7, 2003
Decided and Filed: August 28, 2003
Before: GUY, BOGGS, and DAUGHTREY, Circuit
Judges.
_________________
COUNSEL
ARGUED: James A. Tanford, INDIANA UNIVERSITY
SCHOOL OF LAW, Bloomington, Indiana, for Appellants.
Donald S. McGehee, OFFICE OF THE ATTORNEY
GEN ERAL, MICH IGAN LIQUOR CONTROL
COMMISSION, Lansing, Michigan, Anthony S. Kogut,
WILLINGHAM & COTÉ, East Lansing, Michigan, for
Appellees. ON BRIEF: James A. Tanford, INDIANA
UNIVERSITY SCHOOL OF LAW, Bloomington, Indiana,
for Appellants. Irene M. Mead, OFFICE OF THE
ATTORNEY GENERAL, MICHIGAN LIQUOR CONTROL
COMMISSION, Lansing, Michigan, Anthony S. Kogut,
WILLINGHAM & COTÉ, East Lansing, Michigan, for
Appellees. Louis R. Cohen, WILMER, CUTLER &
PICKERING, Washington, D.C., William H. Mellor, Steven
M. Simpson, INSTITUTE FOR JUSTICE, Washington, D.C.,
Clint Bolick, INSTITUTE FOR JUSTICE, Phoenix, Arizona,
for Amici Curiae.

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No. 01-2720 Heald, et al. v. Engler; et al. 3
1Similar actions have been brought challenging direct shipment bans
in North Carolina, Virginia, Indiana, Texas, Florida and New Y ork,
amo ng other states. See, e.g., Beskind v. Easley, 325 F. 3d 306 (4th Cir.
2003) (affirming lower court finding that North Carolina’s statutory
scheme discriminates between in-state and out-of-state wineries, violates
the Commerce Clause, and is not “saved” by the Twenty-first
Amendm ent); Bainbridge v. Turner, 311 F.3d 11 04, 1115 (11th Cir.
2002) (finding that Florida’s alcohol distribution statutes’ differentiation
between in-state and out-of-state wineries facially discriminates against
interstate commerce and remanding for further fact-finding on whether
Florid a’s statutory scheme is “necessary to effectuate the . . . core concern
[of revenue raising] in a way that justifies treating out-of-state firms
differently from in-state firms”); Brindenbaugh v. Freeman-Wilson, 227
F.3d 848 , 851 (7th Cir. 2000) (finding that Indiana’s ban on direct
shipment from out-of-state wineries is constitutional because Ҥ 2 of the
twenty-first amendm ent empow ers Ind iana to control alcohol in ways that
it cannot control cheese”) ; Swedenbu rg v. K elly, 232 F.Supp. 2d 135
(S.D. N.Y. 2002) (finding that New York’s ABC law’s ban on direct
shipment of out-o f-state wine is unconstitutional); Dickerson v. Bailey,
212 F. Supp.2d 673, 695 (S.D. Tex. 2002) (finding that Texas’s ban on
direct shipment by o ut-of-state wineries violates the dormant Commerce
Clause and noting that the state had “fail[ed] to demonstrate how a
statutory exception for local wineries from T exas’ three-tier regulatory
system . . . is justified by any of the traditional core concerns of the
twenty-first amendment” or to show “that the core interests of taxation
and orderly market conditions . . . could not be effected by alternative,
nondiscriminatory options for these out-of-state wineries”), aff’d,
Dickerson v. Bailey, 336 F.3d 388 (5th Cir. 200 3); Bolick v. Robe rts, 199
F. Supp.2d 397, 409 (E.D.Va. 20 02) (ad opting, with amendments,
magistrate judge’s findings that Virginia’s ABC laws violated the dormant
Commerce Clause and tha t the state had failed to produce “any
_________________
OPINION
_________________
MARTHA CRAIG DAUGHTREY, Circuit Judge. In this
civil rights action brought pursuant to 42 U.S.C. § 1983, the
plaintiffs raise a constitutional challenge to Michigan’s
alcohol distribution system, contending that state provisions
differentiating between in-state and out-of-state wineries
violate the Commerce Clause.1 Those regulations prohibit
4 Heald, et al. v. Engler; et al. No. 01-2720
meaningful evidence” showing that the state cannot “accomp lish its
legitimate interests without discriminating against out-of-state direct
shippers of wine”), vacated by Bolick v. Danielson, 330 F.3d 274 (4th Cir.
2003) (remanding for reconsideration in light of intervening chan ge in
app licable statutes); see also Coope r v. McBeath, 11 F.3d 5 47 (5th Cir.
1994) (striking down Texas’s three-year durational residency and
citizenship requireme nts for obtaining a liquor permit because these
restrictions violated the dormant Commerce Clause and were not “saved”
by the Twenty-first Amendment).
2Affidavits submitted by the plaintiffs included statements from
various oenophiles; the H ealds, who are wine critics and consultants;
Dom aine Alfred, a California winery; and several other wine and alcohol
manufacturers and distributers. Many of the affiants attested to their
desire to have wine fro m out-of-state wine ries shipped directly to their
homes, their inability to do so, the general unavailability of certain wines
in Michigan, and the willingness of the wineries and distributors to pay
required taxes and ob tain necessary p ermits, if allowed to ship directly to
the direct shipment of alcoholic beverages from out-of-state
wineries, while allowing in-state wineries to ship directly to
consumers, provided that the in-state wineries comply with
certain minimal regulatory requirements. The plaintiffs, who
include wine connoisseurs, wine journalists, and one small
California winery that ships its wines to customers in other
states, claim that this system is unconstitutional under the
dormant Commerce Clause because it interferes with the free
flow of interstate commerce by discriminating against out-of-
state wineries. The defendants, who include Michigan
officials (referred to collectively in this opinion as “the state”)
and the intervening trade association, argue in response that
Michigan’s regulatory scheme is constitutional under the
Twenty-first Amendment to the federal constitution.
The parties filed cross-motions for summary judgment, and
the district court granted the state’s motion and denied the
plaintiffs’ motion. The plaintiffs then filed a motion to
reconsider, arguing that the district court should have
addressed cross-motions to strike various evidence submitted
by the two sides prior to the summary judgment decision.2

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No. 01-2720 Heald, et al. v. Engler; et al. 5
consumers.
Do cuments filed on behalf of the defendants included reports from
the Michigan Department of Treasury, Office of Revenue and Tax
Analysis, which detailed estimates of lost tax revenue to remote sales; an
affidavit from the manager of the Manufacturers and Wholesalers Section
of the Licensing Division of the Michigan Liquor Control Commission
that listed all licensed “Outstate Seller of Wine” license holders; an
affidavit from the director of the Licensing Division of the Michigan
Liquor Control Commission averring that, of the wineries from which the
plaintiffs wish to purchase wine, som e are lice nsed as out-o f-state sellers,
and the others have not applied for such licenses; an affidavit from the
director of the Enforcement Division of the Michigan Liquor Co ntrol
Commission detailing the number of “controlled buy operations”
conducted by the C omm ission in M ichigan to identify retailers that sell
alcohol to minors; an affidavit from an assistant in the Liquor Control
Division of the Michigan Dep artment of Attorney General, detailing
controlled buy operations co nduc ted over the internet; and an (unsworn)
statement by Sen. Orrin Hatch, made before the Senate Judiciary
Committee, entitled “Interstate Alcohol Sales and the 21st Amendment.”
The district court denied the motion to reconsider, noting that
it had effectively denied the cross- motions to strike as moot,
because it did not consider the challenged evidence in
deciding the summary judgment motions.
The plaintiffs now appeal both the grant of summary
judgment and the denial of their motion to reconsider. For the
reasons set out below, we conclude that the regulations in
question are discriminatory in their application to out-of-state
wineries, in violation of the dormant Commerce Clause, and
cannot be justified as advancing the traditional “core
concerns” of the Twenty-first Amendment. We therefore
reverse the district court’s judgment and remand the case with
directions to the district court to enter judgment in favor of
the plaintiffs.
PROCEDURAL AND FACTUAL BACKGROUND
Michigan regulates alcohol sales under a “three-tier
system”: consumers must purchase alcoholic beverages from
licensed retailers; retailers must purchase them from licensed
6 Heald, et al. v. Engler; et al. No. 01-2720
wholesalers; and wholesalers must purchase them from
licensed manufacturers. This system is similar to that used by
most states. See Vijay Shankar, Alcohol Direct Shipment
Laws, 85 Va. L. Rev. 353, 355 (1999).
The plaintiffs allege that Michigan’s system discriminates
against out-of-state wineries in favor of in-state wineries
because it prevents out-of-state wineries from shipping wine
directly to Michigan consumers, which in-state wineries are
allowed to do. As the district court correctly noted, this
distinction between in-state and out-of-state wineries can only
be understood by reading a number of provisions in
conjunction with each other:
[The distinction] can be gleaned from various Michigan
Liquor Control Commission regulations, which are
codified within the Michigan Administrative Code.
R436.1057 states that “[a] person shall not deliver, ship,
or transport into this state beer, wine, or spirits without
a license authorizing such action. . . .” The only
applicable license, an “outstate seller of wine license,”
may according to R436.1705(2)(d) be obtained by a
“manufacturer which is located outside of this state, but
in the United States, and which produces and bottles its
own wine.” However, under R436.1719(4) the holder of
such a license may ship wine “only to a licensed
wholesaler at the address of the licensed premises except
upon written order of the commission.” In answers to
interrogatories, a representative of the Michigan Liquor
Control Commission indicates that “[a]t present, there is
no procedure whereby an out-of-state retailer or winery
can obtain a license or approval to deliver wine directly
to Michigan residents . . . .”
In contrast, the Michigan Liquor Control Commission
indicates that the “ability to deliver wine to the consumer
is available to winemakers licensed in Michigan,
inasmuch as under the provisions of MCL 436.1113(9)
these licensees are permitted to sell at retail the wines

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No. 01-2720 Heald, et al. v. Engler; et al. 7
they manufacture. . . . A licensed Michigan winemaker
may deliver their [sic] own products to customers
without an SDM [specially designated merchant] license
. . . .
The plaintiffs contend that this differential treatment of in-
state and out-of-state wineries violates the dormant
Commerce Clause because it gives in-state wineries a
competitive advantage over out-of-state wineries. In-state
wineries can, for example, bypass the price mark-ups of a
wholesaler and retailer, making in-state wines relatively
cheaper to the consumer and allowing them to realize more
profit per bottle. In addition, the cost to an out-of-state
winery of the license that enables it to sell to a Michigan
wholesaler is $300, while a comparable Michigan winery
must pay only a $25 license fee to qualify to ship wine
directly to Michigan customers. Finally, for customers who
desire home delivery, Michigan wineries have a competitive
advantage over out-of-state wineries that cannot ship directly
to customers. In response, the state argues that the
regulations to which an in-state winery is subject “more than
offset, both in costs and burden, any nominal commercial
advantage given by the ability to deliver directly to
customers” and characterizes the burden on out-of-state
wineries as “de minimis.”
In its order granting summary judgment to the state and
denying summary judgment to the plaintiffs, the district court
held that “Michigan’s direct shipment law is a permitted
exercise of state power under § 2 of the 21st Amendment”
because it is not “mere economic protectionism.” In reaching
this conclusion, the court found that Michigan’s statutory
scheme was designed “to ensure the collection of taxes from
out-of-state wine manufacturers and to reduce the risk of
alcohol falling into the hands of minors.”
After this order had issued, the plaintiffs filed a motion to
reconsider, asking the district court to rule on the motions to
strike before granting either side summary judgment and to
8 Heald, et al. v. Engler; et al. No. 01-2720
“make specific findings of fact based on the record” before
reaching a final decision. The plaintiffs argued that the
district court’s failure to rule on the motions to strike “left the
record devoid of evidence supporting the court’s conclusion
that the direct shipment law furthers legitimate 21st
Amendment purposes,” and that the court had applied the
incorrect legal standard in dismissing the complaint. The
district court denied the plaintiffs’ motion for reconsideration,
saying that it had not considered the challenged evidence in
ruling on the summary judgment motions and that the
motions to strike were effectively denied as moot.
For the reasons set out below, we reverse the district court’s
judgment, vacate the order granting summary judgment in the
state’s favor, and remand the case for entry of summary
judgment in favor of the plaintiffs.
DISCUSSION
The central question in this case is how the “dormant”
Commerce Clause and the Twenty-first Amendment interact
to limit the ways in which a state can control alcohol sales
and distribution. Article I, Section 8, Clause 3 of the United
States Constitution grants Congress the power “[t]o regulate
Commerce with foreign Nations, and among the several
States, and with the Indian Tribes . . . .” The Supreme Court
has long held that “this affirmative grant of authority to
Congress also encompasses an implicit or ‘dormant’
limitation on the authority of the States to enact legislation
affecting interstate commerce.” Healy v. The Beer Institute,
491 U.S. 324, 326 n.1 (1989) (citations omitted).
In 1933, Congress enacted the Twenty-first Amendment,
which repealed the 18th Amendment, thereby ending
Prohibition. Section 2 of the Twenty-first Amendment
prohibits “[t]he transportation or importation into any State,
Territory or possession of the United States for delivery or
use therein of intoxicating liquors, in violation of the laws
thereof . . . .” Initially, the Supreme Court afforded the states

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No. 01-2720 Heald, et al. v. Engler; et al. 9
nearly limitless power to regulate alcohol under the new
amendment. See, e.g., Ziffrin, Inc. v. Reeves, 308 U.S. 132,
138 (1939) (“The Twenty-first Amendment sanctions the
right of a state to legislate concerning intoxicating liquors
brought from without, unfettered by the Commerce Clause.”);
Indianapolis Brewing Co. v. Liquor Control Comm’n, 305
U.S. 391, 394 (1939) (“Since the Twenty-first Amendment
. . . the right of a state to prohibit or regulate the importation
of intoxicating liquor is not limited by the Commerce
Clause. . . .”); State Bd. of Equalization v. Young’s Market
Co., 299 U.S. 59 (1936).
The state relied on these cases in the district court, but we
find that reliance disingenuous at best because, as early as the
1960s, the Supreme Court signaled a break with this line of
reasoning. In Hostetter v. Idlewild Bon Voyage Liquor Corp.,
377 U.S. 324, 331-32 (1964), a case involving the prohibition
of liquor sales to departing international airline travelers, the
Court observed:
To draw a conclusion from this line of decisions [Ziffrin,
Young’s Market, etc.] that the Twenty-first Amendment
has somehow operated to ‘repeal’ the Commerce Clause
wherever regulation of intoxicating liquors is concerned
would, however, be an absurd oversimplification. If the
Commerce Clause had been pro tanto ‘repealed,’ then
Congress would be left with no regulatory power over
interstate or foreign commerce in intoxicating liquor.
Such a conclusion would be patently bizarre and is
demonstrably incorrect. . . .
Both the Twenty-first Amendment and the Commerce
Clause are parts of the same Constitution. Like other
provisions of the Constitution, each must be considered
in the light of the other, and in the context of the issues
and interests at stake in any concrete case.
The Supreme Court’s approach to cases involving the
intersection of the Commerce Clause and the Twenty-
10 Heald, et al. v. Engler; et al. No. 01-2720
first Amendment has continued to develop since
Hostetter. In Capital Cities Cable v. Crisp, 467 U.S. 691
(1984), although not a liquor importation or Commerce
Clause case, the Court found that a state ban on alcohol
advertising conflicted with regulations of the Federal
Communications Commission. The Court applied a
balancing test to determine “whether the interests
implicated by a state regulation are so closely related to
the powers reserved by the [Twenty-first] Amendment
that the regulation may prevail, notwithstanding that its
requirements directly conflict with express federal
policies.” Id. at 714. The Court concluded that the
federal interest must prevail because the state’s banning
of alcohol advertising did not directly relate to the core
concerns of the Twenty-first Amendment, i.e., to exercise
“control over whether to permit importation or sale of
liquor and how to structure the liquor distribution
system.” Id. at 715 (quotation omitted).
In subsequent cases, the Supreme Court has continued to
analyze challenges to state alcohol laws by determining how
closely related the law in question is to the “core concerns” of
the Twenty-first Amendment. Shortly after Capital Cities
was decided, the Court issued Bacchus Imports v. Dias, 468
U.S. 263 (1984), in which out-of-state wholesalers challenged
a Hawaii excise tax exemption for certain locally produced
alcoholic beverages. The state argued that the statute
advanced legitimate state interests, that it imposed no patent
discrimination against interstate trade, and that the effect on
interstate commerce was minimal. Id. at 270. The Court
rejected these defenses, finding that “the legislation
constitutes ‘economic protectionism’ in every sense of the
phrase,” id. at 272, and noting that “one thing is certain: The
central purpose of the [21st Amendment] was not to empower
States to favor local liquor industries by erecting barriers to
competition.” Id. at 276. Instead, the Court considered
“whether the principles underlying the [Twenty-first]
Amendment are sufficiently implicated by the [tax
exemption] to outweigh the Commerce Clause principles that

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No. 01-2720 Heald, et al. v. Engler; et al. 11
would otherwise be offended.” Id. at 275. In Bacchus, the
state did not contest that the law’s purpose was “to promote
a local industry,” so the Court did not have to engage in the
normal Commerce Clause analysis of whether the law was
sufficiently closely related to the promotion of lawful
interests to vitiate its discriminatory effect. Instead, it found
that the law discriminated against interstate commerce in
violation of the Commerce Clause and was therefore
unconstitutional.
Since Bacchus, the Supreme Court has been less than
prolific in construing the content of the Twenty-first
Amendment’s “core concerns,” addressing the definition of
“core concerns” only once – and then only in a plurality
opinion. In North Dakota v. United States, 495 U.S. 423
(1990), the Court had before it an intergovernmental
immunity case, rather than a Commerce Clause challenge. At
issue was whether North Dakota’s reporting and labeling
requirements were constitutional, despite interfering with
contrary federal interests in selling liquor to military
personnel. The Court upheld the statute, finding that the state
regulations “fall within the core of the State’s power under
the Twenty-first Amendment” because they were enacted
“[i]n the interest of promoting temperance, ensuring orderly
market conditions, and raising revenue . . . .” Id. at 432.
But, because North Dakota did not involve a Commerce
Clause challenge, the analysis in the plurality opinion cannot
be taken to control the analysis in this case. That is, we do
not interpret the “in the interest of” language to mean that a
state need only be motivated by the “core concerns” of the
Twenty-first Amendment to shield its laws from
constitutional scrutiny. Under a Commerce Clause analysis,
facially discriminatory laws are still subject to strict scrutiny,
meaning that the state must demonstrate that no reasonable
nondiscriminatory alternatives are available to advance the
same legitimate goals. See, e.g., Hughes v. Oklahoma, 441
U.S. 322, 336-7 (1979) (finding that, “[a]t a minimum,” a
statute that “on its face discriminates against interstate
12 Heald, et al. v. Engler; et al. No. 01-2720
commerce . . . invokes the strictest scrutiny of any purported
legitimate local purpose and of the absence of
nondiscriminatory alternatives”). Likewise, the language in
North Dakota to the effect that the states have “virtually
complete control” over the importation and sale of liquor,
although heavily emphasized by the district court in this case,
has little value in a case requiring a Commerce Clause
analysis. Because North Dakota did not involve
interpretation of the Commerce Clause, we reject the
implication that a state’s “virtually complete control” over
liquor regulation enables it to discriminate against out-of-state
interests in favor of in-state interests. Bacchus simply forbids
such an analysis.
Given this background, we cannot endorse the district
court’s characterization of the regulation in this case as a
constitutionally benign product of the state’s three-tier system
and, thus, “a proper exercise of [Michigan’s Twenty-first
Amendment] authority, despite the fact that such a system
places a minor burden on interstate commerce.” Instead, we
invoke Justice Scalia’s view, expressed in an opinion
concurring in the Supreme Court majority’s decision striking
down a state price-affirmation statute, in which he explained
that:
[The law’s] invalidity is fully established by its facial
discrimination against interstate commerce . . . . This is
so despite the fact that the law regulates the sale of
alcoholic beverages, since its discriminatory character
eliminates the immunity afforded by the Twenty-first
Amendment.
Healy v. Beer Institute, 491 U.S. 324, 344 (1989) (Scalia, J.,
concurring) (citations omitted).
The proper approach in this case, then, is to apply the
traditional dormant Commerce Clause analysis and, if the
provisions are unconstitutional under the Commerce Clause,
to determine whether the state has shown that it has no

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No. 01-2720 Heald, et al. v. Engler; et al. 13
reasonable nondiscriminatory means of advancing the “core
concerns” of the Twenty-first Amendment.
In reviewing challenges brought under the Commerce
Clause, the Supreme Court has long held that statutes that
facially discriminate are “virtually per se” invalid, citing as a
clear example “a law that overtly blocks the flow of interstate
commerce at a State’s borders.” Philadelphia v. New Jersey,
437 U.S. 617, 624 (1978). However, a lower level of scrutiny
is applied when a statute does not discriminate on its face:
Where the statute regulates evenhandedly to effectuate a
legitimate local public interest, and its effects on
interstate commerce are only incidental, it will be upheld
unless the burden imposed on such commerce is clearly
excessive in relation to the putative local benefits. . . .
[T]he extent of the burden that will be tolerated will of
course depend on the nature of the local interest
involved, and on whether it could be promoted as well
with a lesser impact on interstate activities.
Id., quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142
(1970). Moreover, we have recognized the following test for
determining whether state economic regulations violate the
dormant Commerce Clause:
When a state statute directly regulates or discriminates
against interstate commerce, or when its effect is to favor
in-state economic interests over out-of-state interests,
[the Supreme Court has] generally struck down the
statute without further inquiry. When, however, a statute
has only indirect effects on interstate commerce and
regulates evenhandedly, [the Supreme Court has]
examined whether the State’s interest is legitimate and
whether the burden on interstate commerce clearly
exceeds the local benefits. In either situation the critical
consideration is the overall effect of the statute on both
local and interstate activity.
14 Heald, et al. v. Engler; et al. No. 01-2720
McNeilus Truck & Mfg., Inc. v. Ohio ex rel. Montgomery, 226
F.3d 429, 442 (6th Cir. 2000) (quotations omitted).
As we indicated in McNeilus, the proper starting point for
dormant Commerce Clause analysis is to determine whether,
in fact, the state provision “directly, in effect, or in purpose
treats in-state and out-of-state interests differently . . . .” Id.
If a court finds that the statute does discriminate, then the
issue becomes, applying “rigorous scrutiny [,] . . . whether the
statute serves a legitimate state interest that cannot otherwise
be met.” Id. In other words, laws that facially discriminate
are normally invalid, unless they advance “a legitimate local
purpose that cannot be adequately served by reasonable
nondiscriminatory alternatives.” New Energy Co. of Ind. v.
Limbach, 486 U.S. 269, 278 (1988) (citations omitted).
Here, it is clear that the Michigan statutory and regulatory
scheme treats out-of-state and in-state wineries differently,
with the effect of benefitting the in-state wineries and
burdening those from out of state. As discussed above,
Michigan wineries enjoy both greater access to consumers
who wish to have wine delivered to their homes, and greater
profit through their exemption from the three-tier system.
Out-of-state wineries, on the other hand, must participate in
the costly three-tier system, to their economic detriment and,
although this is not clear from the record, may be shut out of
the Michigan market altogether if unable to obtain a
wholesaler. The Fourth Circuit reached a similar conclusion
in a case considering North Carolina’s alcohol distribution
system, which is nearly identical to Michigan’s. In Beskind
v. Easley, 325 F.3d 506 (4th Cir. 2003), the court found that
North Carolina’s alcohol distribution laws, which
discriminate against out-of-state wineries in favor of in-state
wineries, are unconstitutional unless “the State can show that
it advances a legitimate local purpose that cannot be
adequately served by reasonable nondiscriminatory
alternatives.” Id. at 515 (internal quotations and citations
omitted).

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No. 01-2720 Heald, et al. v. Engler; et al. 15
Having determined that the provision is facially
discriminatory, we now turn to the question of whether the
regulatory scheme is nevertheless constitutional because it
“fall[s] within the core of the State’s power under the
Twenty-first Amendment,” having been enacted “in the
interest of promoting temperance, ensuring orderly market
conditions, and raising revenue,” North Dakota v. United
States, 495 U.S. 423, 432 (1990), and because these interests
“cannot be adequately served by reasonable
nondiscriminatory alternatives.” New Energy Co. of Ind. v.
Limbach, 486 U.S. 269, 278 (1988) (citations omitted).
We conclude, based on the evidence in the record, that
defendants have not shown that the Michigan scheme’s
discrimination between in-state and out-of-state wineries
furthers any of the concerns listed above, much less that no
reasonable non-discriminatory means exists to satisfy these
concerns. This is so even if, taking the evidence in the light
most favorable to defendants, we assume that all of the
evidence they submitted was admissible. It is important to
keep in mind that the relevant inquiry is not whether
Michigan’s three-tier system as a whole promotes the goals
of “temperance, ensuring an orderly market, and raising
revenue,” but whether the discriminatory scheme challenged
in this case – the direct-shipment ban for out-of-state wineries
– does so. See, e.g., Beskind, 325 F.3d at 517 (“The question
is not whether North Carolina can advance its regulatory
purpose by imposing fewer burdens on in-state wineries than
out-of-state wineries . . . . Rather, the question is whether
discriminating in favor of in-state wineries . . . serves a
Twenty-first Amendment interest.”). Obviously, the state
bears the burden of justifying a discriminatory statute, and
“the standards for such justification are high.” New Energy
Co., 486 U.S. at 278; see also Cooper v. McBeath, 11 F.3d
547, 553 (5th Cir. 1994) (describing the burden of proof faced
by the state as “towering”); Hughes v. Oklahoma, 441 U.S.
322, 337 (1979) (“[F]acial discrimination by itself may be a
fatal defect. . . . [A]t a minimum [it] invokes the strictest
scrutiny.”).
16 Heald, et al. v. Engler; et al. No. 01-2720
The district court correctly recognized that state liquor laws
are not completely immune from Commerce Clause
challenges, but it placed too much reliance on Supreme Court
precedent that has specifically upheld the three-tier
distribution system, quoting North Dakota v. United States,
495 U.S. at 431, for the proposition that the states have
“virtually complete control” over the importation and sale of
liquor. As we noted above, however, North Dakota involved
a Supremacy Clause challenge and did not implicate the
Commerce Clause. It therefore cannot be relied on in this
case in light of Supreme Court cases that do discuss the
intersection of the Twenty-first Amendment and the
Commerce Clause, such as Bacchus.
Nor do we find persuasive the district court’s reliance on
three additional cases. One, House of York, Ltd. v. Ring, 322
F. Supp. 530 (S.D.N.Y. 1970), is a district court opinion that
pre-dates Bacchus. The second, Bainbridge v. Bush, 148 F.
Supp.2d 1306 (M.D.Fla. 2001), has subsequently been
reversed. See Bainbridge v. Turner, 311 F.3d 1104 (11th Cir.
2002) (holding that the state must show that an alcohol-
distribution statute that discriminates between in-state and
out-of-state wineries furthers core concerns of the Twenty-
first Amendment in order to survive a Commerce Clause
challenge). The third, Bridenbaugh v. Freeman-Wilson, 227
F.3d 848 (7th Cir. 2000), is the sole federal court of appeals
decision to find that analogous direct shipment laws are
constitutional under the Twenty-first Amendment. However,
Bridenbaugh is distinguishable on its facts, and it has been
criticized by several federal courts for its failure to engage in
the requisite dormant Commerce Clause analysis. See, e.g.,
Bolick v. Roberts, 199 F. Supp.2d 397, 408 (E.D. Va. 2002)
(finding Brindenbaugh “improperly decided because it does
not rely on the established dormant Commerce Clause
analysis”); Dickerson v. Bailey, 212 F. Supp.2d 673, 682
(S.D. Tex. 2002) (observing that in its “concentration on
Indiana’s three-tiered scheme . . . [the court] did not discuss
the last forty years of Supreme Court jurisprudence relating
to balancing and harmonizing the dormant commerce clause

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No. 01-2720 Heald, et al. v. Engler; et al. 17
and §2 of the twenty-first Amendment”), aff’d, Dickerson v.
Bailey, 336 F.3d 388 (5th Cir. 2003) (finding that
Brindenbaugh was factually distinguishable from that case);
Bainbridge v. Turner, 311 F.3d 1104, 1114 n.15 (11th Cir.
2002) (commenting that the court “disagree[s] with the
analytical framework used in [Bridenbaugh]”).
For example, Bridenbaugh did not involve any out-of-state
wineries as plaintiffs, and it thus addressed only whether the
Indiana statute discriminated against customers who wanted
to have out-of-state wine shipped directly to them.
Furthermore, it appears the Indiana statutes differ from the
provisions at issue here, as the court found that “Indiana
insists that every drop of liquor pass through its three-tiered
system and be subjected to taxation.” Bridenbaugh, 227 F.3d
at 853. Michigan, on the other hand, effectively exempts in-
state wineries from the three-tier system, an exemption it does
not extend to out-of-state wineries. Finally, in contrast to this
case, the Bridenbaugh plaintiffs were “concerned only with
direct shipments from out-of-state sellers who lack and do not
want Indiana permits.” Id. at 854. By contrast, the plaintiffs
in this case are willing to acquire Michigan permits and pay
taxes on wines shipped; they simply want to be eligible for
such permits on the same basis as in-state wineries. For all of
these reasons, we do not find the opinion in Bridenbaugh
persuasive.
The district court in this case was correct in finding that the
Michigan alcohol distribution system discriminates between
in-state and out-of-state interests to the extent that in-state
wineries may obtain licenses to ship wine directly to
consumers, but out-of-state wineries may not and are instead
required to go through the more costly three-tier system.
What the district court did not do was undertake the necessary
analysis that follows from such a finding. Instead, it
concluded that Michigan’s system “cannot be characterized
as ‘mere economic protectionism,’” because the system
furthers the “core concerns” of the Twenty-first Amendment.
The district court’s observation that “[t]he Michigan
18 Heald, et al. v. Engler; et al. No. 01-2720
Legislature has chosen this path to ensure the collection of
taxes from out-of-state wine manufacturers and to reduce the
risk of alcohol falling into the hands of minors” and its
conclusion that “the 21st Amendment gives it the power to do
so,” without more, do not constitute strict scrutiny, as
required by Supreme Court precedent. It is not enough that
the Michigan Legislature has chosen this particular regulatory
scheme to further what are legitimate objectives. The proper
inquiry, detailed above, is whether it “advances a legitimate
local purpose that cannot be adequately served by reasonable
nondiscriminatory alternatives.” New Energy Co. of Ind. v.
Limbach, 486 U.S. 269, 278 (1988). We find no evidence on
this record that it does.
CONCLUSION
For the reasons set out above, we REVERSE the judgment
of the district court granting summary judgment to the
defendants and REMAND the case for entry of judgment in
favor of the plaintiffs.

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