Alexis Bailly Vineyard, Inc. v. John Harrington
Opinion
Alexis Bailly Vineyard, Inc. and The Next Chapter Winery, LLC (collectively, Farm Wineries) appeal from an order granting summary judgment to the Commissioner of the Minnesota Department of Public Safety (Commissioner). The district court held that the Farm Wineries lack standing to challenge a Minnesota statute that requires them to manufacture their wine with a majority of the ingredients grown or produced in Minnesota. On appeal, the Farm Wineries claim that the district court erred by granting summary judgment to the Commissioner and ask us to consider the merits of the dispute. We reverse the district court's order granting summary judgment and remand for further proceedings.
I.
Minnesota uses a three-tiered alcohol distribution system that separates the functions of manufacturer, wholesaler, and retailer. Retailers cannot manufacture alcohol and manufacturers cannot sell their product directly to retailers or the general public. See Minn. Stat. §§ 340A.301, 340A.401. Alternatively, Minnesota offers a "farm winery" license that allows manufacturers of wine or cider to sell their products directly to retailers and consumers. Minn. Stat. § 340A.315, subd. 2. The Minnesota Farm Wineries Act is part of an effort by Minnesota to "encourage and support the fledgling farm winery industry ... [and to] nurture grape growing and winemaking." RESEARCH DEPARTMENT , MINN. HOUSE OF REPRESENTATIVES , FARM WINERIES , at 1 (June 2012), https://www.house.leg.state.mn.us/hrd/pubs/farmwine.pdf. To qualify as a farm winery, license holders must pay an annual license fee of $50, produce less than 75,000 gallons of wine annually, and be located on agricultural land. Minn. Stat. § 340A.315, subds. 1, 2, 9. The Act also mandates that a farm winery produce wine "with a majority of the ingredients grown or produced in Minnesota." Id. § 340A.101, subd. 11.
Minnesota recognizes that growing grapes in northern climates is difficult and it may not be possible in some years for farm wineries to source more than half of their ingredients from Minnesota suppliers.
*777 So, the Act provides for an "affidavit exception" to the in-state requirement. Farm wineries may file an affidavit stating that "Minnesota-produced or -grown grapes, grape juice, other fruit bases or honey is not available in quantities sufficient to constitute a majority of the ... wine produced by a farm winery." Minn. Stat. § 340A.315, subd. 4. If the Commissioner agrees, "the farm winery may use imported products" for one year, "after which time the farm winery must use the required amount of Minnesota products ... unless the farm winery [ ] files a new affidavit." Id.
The Commissioner has never denied an affidavit request, but he does investigate them and the process is more than a rubber stamp. The Commissioner requires farm wineries to explain why they require an exemption from the in-state requirement and occasionally conducts site visits to ensure compliance. Farm wineries have historically filed affidavit requests when in-state growing conditions made it difficult or impossible for them to purchase enough ingredients from Minnesota growers.
The Farm Wineries hold farm winery licenses and want to expand their operations. Specifically, the Farm Wineries want to create new varieties, work with higher quality ingredients and more reliable suppliers, and increase the quantity of wine they produce. They argue that the in-state requirement prevents them from doing so.
In this pre-enforcement action, the Farm Wineries seek a declaration that the Act's in-state requirement violates the dormant Commerce Clause. Following discovery, the parties filed cross-motions for summary judgment. The district court granted the Commissioner's motion, holding that the Farm Wineries did not have standing to challenge the Act. Despite finding that the inability to grow their businesses constituted an injury in fact, the court determined that the Farm Wineries caused their own injuries when they chose to seek a farm winery license instead of a wine manufacturer license. The court therefore held that the Farm Wineries' injuries were not fairly traceable to the statute and that they lacked standing. The Farm Wineries timely appealed.
II.
We review the district court's standing analysis
de novo
.
Disability Support All. v. Heartwood Enters., LLC
,
A.
Injury in fact is "an injury to a legally protected interest that is 'concrete, particularized, and either actual or imminent.' "
United States v. Metro. St. Louis Sewer Dist.
,
The Farm Wineries introduced evidence that they intend to increase their production by purchasing out-of-state ingredients. This conduct is "arguably affected with a constitutional interest,"
The Act prohibits the Farm Wineries from increasing production by using out-of-state ingredients and they face a credible threat of prosecution if they disregard that fact. The Commissioner argues that the affidavit exception, along with a lack of prior enforcement, establishes that the threat of prosecution is not credible. Although Minnesota's enforcement history is relevant to our analysis, it is not determinative. Rather, when a course of action is within the plain text of a statute, a "credible threat of prosecution" exists.
See
North Dakota v. Heydinger
,
The Commissioner advances two other arguments for why the Farm Wineries have not been injured by the statute. Each misses the mark. First, he argues that under
Clapper v. Amnesty Intern. USA
,
Second, the Commissioner argues the Farm Wineries cannot show injury in the form of concrete economic loss because they have historically complied with the Act. Setting aside the fact that in this pre-enforcement challenge the Farm Wineries do not need to show economic loss, this argument additionally fails because they
can
make such a showing. The Farm Wineries have experienced reduced borrowing power, operational efficiencies, and marketing opportunities. As the district court recognized, "it is economically imprudent [for the Farm Wineries] to base substantial business investments on the mere
likelihood
of receiving future exemptions from state law."
Alexis Bailly Vineyard, Inc. v. Dohman
, No. 17-913,
The Commissioner nevertheless contrasts this case with two cases where we found injury based on economic losses,
S.D. Farm Bureau, Inc. v. Hazeltine
,
B.
Although the district court correctly held that the Farm Wineries had established injury in fact, the court further held that their injuries are not "fairly traceable" to the in-state requirement. We respectfully disagree. An injury is "fairly traceable" to a challenged statute when there is a "causal connection" between the two.
Lujan
,
It is true that the Farm Wineries do not have a right to sell alcohol outside of Minnesota's statutory framework and that they could have chosen to operate as wine manufacturers instead of farm wineries. But that is irrelevant to the traceability of their injuries. Minnesota is free to offer or not offer the farm winery license, or to establish other license options for the production and sale of alcohol. What it cannot do-and what the Farm Wineries allege it has done-is condition a license on compliance with unconstitutional discrimination against out-of-state grape growers.
See
Tenn. Wine and Spirits Retailers Assoc'n v. Thomas
, --- U.S. ----,
The district court, relying on
McConnell v. Fed. Election Comm'n
,
By contrast, the Farm Wineries have fully participated in this statutory scheme. They do not object to others having restraints removed from their businesses, they object to the restraints on their own. They are more like the plaintiffs in
Granholm v. Heald
,
* * *
The Farm Wineries have injuries that are traceable to the in-state requirement. For the same reason their injuries are traceable, they would be redressed by a declaratory judgment. We hold that the Farm Wineries have standing to bring this suit.
III.
The Farm Wineries urge us to reach the merits and hold that the Act is unconstitutional because it affords "differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter."
Hazeltine
,
We reverse the district court's order dismissing the case for lack of standing and remand to the district court to consider the Farm Wineries' challenge to the Act's in-state requirement.
Reference
- Full Case Name
- ALEXIS BAILLY VINEYARD, INC., a Minnesota Corporation; The Next Chapter Winery, LLC, a Minnesota Limited Liability Company Plaintiffs - Appellants v. John HARRINGTON, in His Official Capacity as Commissioner of the Minnesota Department of Public Safety Defendant - Appellee Adam Ruhland Amicus on Behalf of Appellant(s)
- Cited By
- 20 cases
- Status
- Published