Brooks v. Vassar , 462 F.3d 341 ( 2006 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
PETER BROOKS; DAVID T. GIES; 
PATRICIA CLEMMER PETERS; ROBIN B.
HEATWOLE; DRY COMAL CREEK
VINEYARDS, a Texas Corporation;
HOOD RIVER VINEYARDS, an Oregon
Sole Proprietorship; SCHNEIDER
LIQUOR COMPANY, INCORPORATED,
Plaintiffs-Appellees,
and
MIURA VINEYARDS, a California
Limited Liability Company; CLINT
BOLICK,
Plaintiffs,
v.
ESTHER H. VASSAR, Chairman,
Virginia Department of Alcoholic  No. 05-1540
Beverage Control; PAMELA O’BERRY
EVANS, Commissioner, Virginia
Department of Alcoholic Beverage
Control; SUSAN R. SWECKER,
Commissioner, Virginia Department
of Alcoholic Beverage Control,
Defendants-Appellants,
and
VIRGINIA WINE WHOLESALERS
ASSOCIATION, INCORPORATED,
Intervenor-Defendant.
VIRGINIA VINEYARDS ASSOCIATION,
Movant.

2 BROOKS v. VASSAR
PETER BROOKS; DAVID T. GIES; 
PATRICIA CLEMMER PETERS; ROBIN B.
HEATWOLE; DRY COMAL CREEK
VINEYARDS, a Texas Corporation;
HOOD RIVER VINEYARDS, an Oregon
Sole Proprietorship; SCHNEIDER
LIQUOR COMPANY, INCORPORATED,
Plaintiffs-Appellees,
and
MIURA VINEYARDS, a California
Limited Liability Company; CLINT
BOLICK,
Plaintiffs,
v.
ESTHER H. VASSAR, Chairman,
Virginia Department of Alcoholic  No. 05-1541
Beverage Control; PAMELA O’BERRY
EVANS, Commissioner, Virginia
Department of Alcoholic Beverage
Control; SUSAN R. SWECKER,
Commissioner, Virginia Department
of Alcoholic Beverage Control,
Defendants,
and
VIRGINIA WINE WHOLESALERS
ASSOCIATION, INCORPORATED,
Intervenor-Defendant-
Appellant.
VIRGINIA VINEYARDS ASSOCIATION,
Movant.

BROOKS v. VASSAR 3
PETER BROOKS; DAVID T. GIES; 
PATRICIA CLEMMER PETERS; ROBIN B.
HEATWOLE; DRY COMAL CREEK
VINEYARDS, a Texas Corporation;
HOOD RIVER VINEYARDS, an Oregon
Sole Proprietorship; SCHNEIDER
LIQUOR COMPANY, INCORPORATED,
Plaintiffs-Appellants,
and
MIURA VINEYARDS, a California
Limited Liability Company; CLINT
BOLICK,
Plaintiffs,
v.
ESTHER H. VASSAR, Chairman,
Virginia Department of Alcoholic  No. 05-1791
Beverage Control; PAMELA O’BERRY
EVANS, Commissioner, Virginia
Department of Alcoholic Beverage
Control; SUSAN R. SWECKER,
Commissioner, Virginia Department
of Alcoholic Beverage Control,
Defendants-Appellees,
and
VIRGINIA WINE WHOLESALERS
ASSOCIATION, INCORPORATED,
Intervenor-Defendant.
VIRGINIA VINEYARDS ASSOCIATION,
Movant.

4 BROOKS v. VASSAR
Appeals from the United States District Court
for the Eastern District of Virginia, at Richmond.
Richard L. Williams, Senior District Judge;
Dennis W. Dohnal, Magistrate Judge.
(CA-99-755-RLW)
Argued: May 26, 2006
Decided: September 11, 2006
Before NIEMEYER and TRAXLER, Circuit Judges, and
Joseph R. GOODWIN, United States District Judge for the
Southern District of West Virginia, sitting by designation.
Affirmed in part; reversed in part; and dismissed in part, vacated and
remanded by published opinion. Judge Niemeyer wrote the opinion,
in which Judge Traxler concurred except as to Part III.B and Judge
Goodwin concurred except as to Parts III and IV. Judge Traxler wrote
an opinion concurring in part and concurring in the judgment. Judge
Goodwin wrote an opinion concurring in Parts I, II, and V and dis-
senting from Parts III and IV.
COUNSEL
ARGUED: William Eugene Thro, State Solicitor General, OFFICE
OF THE ATTORNEY GENERAL OF VIRGINIA, Richmond, Vir-
ginia, for Appellants/Cross-Appellees. Daniel Roy Ortiz, UNIVER-
SITY OF VIRGINIA SCHOOL OF LAW, Charlottesville, Virginia,
for Appellees/Cross-Appellants. ON BRIEF: Judith Williams Jagd-
mann, Attorney General of Virginia, Carla R. Collins, Associate State
Solicitor General, Ronald N. Regnery, Associate State Solicitor Gen-
eral, OFFICE OF THE ATTORNEY GENERAL OF VIRGINIA,
Richmond, Virginia, for Esther H. Vassar, Chairman, Pamela O’Berry
Evans, Commissioner, and Susan R. Swecker, Commissioner, Vir-
ginia Alcoholic Beverage Control Board; Walter A. Marston, Jr.,
REED SMITH, L.L.P., Richmond, Virginia, for Virginia Wine
Wholesalers Association, Inc.
BROOKS v. VASSAR 5
OPINION
NIEMEYER, Circuit Judge:
This appeal involves a facial challenge, under the dormant Com-
merce Clause of the United States Constitution, to various aspects of
Virginia’s Alcoholic Beverage Control Act ("ABC Act"), Va. Code
§ 4.1-100 et seq., which generally prohibits the importation, distribu-
tion, and sale of wine and beer in Virginia except through a regulated,
three-tier structure. We sustain the constitutionality of:
(1) Virginia Code § 4.1-310(E), which provides an excep-
tion to the three-tier import restriction for consumers
who personally carry into Virginia no more than one
gallon (or four liters) of alcoholic beverages for per-
sonal consumption; and
(2) Virginia Code § 4.1-119(A), which authorizes state-
owned and -operated ABC stores to market and sell
only wine produced at Virginia "farm" wineries.
Accordingly, with respect to these two aspects of the ABC Act, we
reverse the judgment of the district court, which concluded that these
provisions unconstitutionally discriminated against interstate com-
merce.
With respect to challenged provisions of the ABC Act that permit
in-state producers of wine and beer, but not out-of-state producers, to
bypass the three-tier structure and sell directly to in-state retailers and
consumers — Virginia Code §§ 4.1-112.1(B); 4.1-207(4),(5); 4.1-
208(1),(7) — we conclude that Virginia legislative amendments
enacted while this appeal was pending render the challenge to those
provisions moot and therefore bar us from considering the district
court’s order and the amended provisions. Accordingly, with respect
to them, we dismiss the appeals, vacate the district court’s judgment,
and remand for dismissal of the claims challenging those provisions.
Finally, with respect to the district court’s conclusion that the
plaintiffs in this case are entitled to maintain their action under 42
6 BROOKS v. VASSAR
U.S.C. § 1983 and therefore qualify for an award of attorneys fees if
they are the prevailing party, as provided by 42 U.S.C. § 1988, we
affirm.
I
Through its ABC Act, which was enacted following the ratification
of the Twenty-first Amendment and the end of Prohibition, Virginia
regulates the distribution and sale of alcoholic beverages under a
three-tier structure. Under this structure, producers and sellers of alco-
holic beverages may sell in Virginia only to Virginia-licensed whole-
salers, who in turn may sell only to Virginia-licensed retailers, who
may then sell to consumers.
In November 1999, Clint Bolick and Robin Heatwole, individual
consumers of wine and beer, and Dry Comal Creek Winery, Miura
Vineyards, and Hood River Vineyard, wineries based in Texas, Cali-
fornia, and Oregon, respectively, commenced this action under 42
U.S.C. § 1983 against the members of Virginia’s Alcoholic Beverage
Control ("ABC") Board, alleging that Virginia’s ABC Act violated
the dormant Commerce Clause of the United States Constitution by
favoring in-state wine and beer producers and discriminating against
out-of-state producers. The district court granted summary judgment
to the plaintiffs, sustaining the plaintiffs’ challenges and enjoining the
enforcement of the relevant portions of the ABC Act. See Bolick v.
Roberts, 199 F. Supp. 2d 397, 416-17 (E.D. Va. 2002) ("Bolick I").
Virginia appealed that decision to this court.
While the appeal of Bolick I was pending, the Virginia General
Assembly enacted H.B. 1652 and S.B. 1117, which modified some of
the contested statutory provisions. Virginia claimed on appeal that the
legislative changes mooted portions of the case and altered the argu-
ments and analysis necessary to adjudicate the remaining issues. We
agreed. In Bolick v. Danielson, 330 F.3d 274 (4th Cir. 2003) ("Bolick
II"), we vacated the district court’s order and remanded the case for
reconsideration in light of our intervening opinion in Beskind v. Eas-
ley, 325 F.3d 506 (4th Cir. 2003), which addressed a similar challenge
to North Carolina’s ABC laws.
On remand, the plaintiffs filed a second amended complaint that
substituted new plaintiffs and modified the plaintiffs’ claims to take
BROOKS v. VASSAR 7
into account the revisions enacted by the Virginia General Assembly.
The original "winery plaintiffs," Dry Comal Creek Winery and Hood
River Vineyards, were joined by Peter Brooks, David T. Gies, and
Patricia Clemmer Peters, consumers of wine and beer, and by Schnei-
der Liquor Company, a wine and beer retailer incorporated and
licensed in the District of Columbia. In their second amended com-
plaint, the plaintiffs identify five aspects of Virginia’s ABC Act, as
amended, that they allege unconstitutionally discriminate against out-
of-state producers and sellers of alcoholic beverages:
The first is the "Distribution Privilege" of in-state wineries
and breweries by which in-state wineries and breweries, but
not out-of-state wineries and breweries, are allowed to
bypass the wholesale level and sell and deliver unlimited
amounts of wine and beer directly to in-state retailers. See
Va. Code §§ 4.1-207(4),(5); 4.1-208(1),(7).
The second is a "Delivery Privilege" conferred on in-state
producers to deliver unlimited amounts of wine and beer
directly to consumers provided the producers use their own
mode of transportation to perform deliveries, while limiting
out-of-state producers and sellers to two cases per month
using common carriers. See id. §§ 4.1-207(4),(5); 4.1-
208(1),(7).
The third is a "Shipping Privilege" which favors in-state
retailers. All retailers are required to obtain licenses to sell
and ship directly to Virginia consumers, but out-of-state
retailers are also required to obtain written permission from
the producer of each type of wine or beer that the retailer
planned to ship into Virginia. See id. § 4.1-112.1(B).
The fourth is a "Personal Import Exception" that allows
individual consumers to import into Virginia one gallon or
four liters (if packaged in metric containers) of wine and
beer without requiring the wine and the beer to be sold
through the three-tier system. See id. § 4.1-310(E).
And the fifth is an "ABC Stores Restriction," limiting state-
owned and -operated ABC stores to marketing and selling
8 BROOKS v. VASSAR
only wine produced by Virginia "farm" wineries. See id.
§ 4.1-119(A).
On the parties’ cross-motions for summary judgment, the district
court held that the challenged portions of the ABC Act unconstitu-
tionally discriminated against out-of-state wine and beer producers
and sellers and that those portions were not saved by the Twenty-first
Amendment. In its judgment, dated April 27, 2005, the court declared
unconstitutional and enjoined the enforcement of Virginia Code
§§ 4.1-112.1(B); 4.1-207(4),(5); 4.1-208(1),(7); 4.1-310(E); and 4.1-
119(A).
Thereafter, the plaintiffs filed a motion to amend or clarify the dis-
trict court’s judgment, and Virginia filed a motion for a stay of the
judgment pending appeal. Before the district court had resolved these
motions, the Supreme Court issued its opinion in Granholm v. Heald,
544 U.S. 460 (2005), which directly addressed the relationship
between the dormant Commerce Clause and the Twenty-first Amend-
ment in the context of laws similar to the ABC Act at issue here. In
a Memorandum Opinion dated June 16, 2005, the district court in this
case recognized the Supreme Court’s intervening decision and held
that because "Granholm resolved the central question of this case
consistent with the Fourth Circuit’s interpretation [in Beskind] of the
tension between the Commerce Clause and the Twenty-First Amend-
ment, the Court is unpersuaded that it should stay the operation of its
[April 27, 2005] order." The district court denied the plaintiffs’
motion to amend or clarify the judgment and Virginia’s motion for a
stay.
From the district court’s judgment, Virginia filed this appeal, chal-
lenging the district court’s ruling only insofar as it struck down the
Personal Import Exception (§ 4.1-310(E)) and the ABC Stores
Restriction (§ 4.1-119(A)). Virginia conceded that the Distribution,
Delivery, and Shipping Privileges were unconstitutional under Gran-
holm, and it initially indicated an intent to ask the Supreme Court to
overrule its decision and uphold those provisions. But it has aban-
doned that course by reason of subsequent legislative action by the
Virginia General Assembly. In its appeal, Virginia also contends that
the district court erred in construing the plaintiffs’ action as arising
under 42 U.S.C. § 1983.
BROOKS v. VASSAR 9
The plaintiffs filed a cross-appeal, challenging the district court’s
remedy of striking down the Distribution, Delivery, and Shipping
Privileges for in-state producers of wine and beer. The plaintiffs con-
tend that the appropriate remedy is to enjoin the ABC Act’s prohibi-
tion against direct shipments to Virginia retailers and consumers by
out-of-state wine and beer producers rather than striking down the
privileges given to in-state producers and retailers.
While these appeals were pending, the Virginia General Assembly
passed H.B. 601, which essentially codified the district court’s judg-
ment concerning the Distribution, Delivery, and Shipping Privileges,
effective July 1, 2006. After enactment of this legislation, Virginia
filed a motion to vacate the district court’s judgment in part and to
dismiss the plaintiffs’ cross-appeal, claiming that the General Assem-
bly’s changes rendered moot the plaintiffs’ challenges to the Distribu-
tion, Delivery, and Shipping Privileges and to the district court’s
remedy. The plaintiffs agree and state that Virginia’s appeal with
respect to the Distribution, Delivery, and Shipping Privileges should
also be dismissed as moot.
Accordingly, we are now presented with the following issues: (1)
whether Virginia’s recent legislation moots Virginia’s appeal con-
cerning the Distribution, Delivery, and Shipping Privileges and the
plaintiffs’ cross-appeal concerning the imposed remedy; (2) whether
the Personal Import Exception violates the dormant Commerce
Clause interpreted in light of the Twenty-first Amendment; (3)
whether the ABC Stores Restriction violates the dormant Commerce
Clause interpreted in light of the Twenty-first Amendment; and (4)
whether the plaintiffs’ dormant Commerce Clause claims arise under
42 U.S.C. § 1983.
II
The district court’s April 27, 2005 judgment held in part that some
particular provisions of the ABC Act, which afford local wineries
Distribution, Delivery, and Shipping Privileges — all of § 4.1-
112.1(B) of the Virginia Code and portions of §§ 4.1-207(4), 4.1-
207(5), 4.1-208(1), and 4.1-208(7) — constituted an unconstitutional
discrimination against out-of-state producers and sellers of wine and
beer. By statutory modification, effective July 1, 2006, Virginia virtu-
10 BROOKS v. VASSAR
ally codified the portions of the district court’s decision relating to
these privileges. The General Assembly’s amendments track almost
completely the district court’s order. Although the amendment to
§ 4.1-112.1(B) strikes only one sentence in the statutory provision and
therefore does not literally implement the court’s order, the General
Assembly’s change substantially effectuates the order by striking only
the constitutionally offending sentence.
The parties agree that these recent amendments fully implemented
the district court’s judgment enjoining enforcement of portions of the
relevant statutes. Furthermore, the plaintiffs have all but conceded
that there is no practical likelihood that Virginia will repeal these
amendments and restore the enjoined provisions. Accordingly, Vir-
ginia requests that the portions of the district court’s judgment that
deal with the Distribution, Delivery, and Shipping Privileges be
vacated as moot.
The doctrine of mootness constitutes a part of the constitutional
limits of federal court jurisdiction. "To qualify as a case fit for
federal-court adjudication, an actual controversy must be extant at all
stages of review, not merely at the time the complaint is filed." Arizo-
nans for Official English v. Arizona, 520 U.S. 43, 67 (1997) (internal
quotation marks omitted). Federal courts have no power to hear moot
cases, and because a case can become moot at any time — even after
the entry of a final judgment — the doctrine prevents a federal court
of appeals from exercising its appellate jurisdiction in a moot case.
See Mellen v. Bunting, 327 F.3d 355, 363-64 (4th Cir. 2003). A case
is not moot, and the exercise of federal jurisdiction may be appropri-
ate, however, if a party can demonstrate that the apparent absence of
a live dispute is merely a temporary abeyance of a harm that is "capa-
ble of repetition, yet evading review." See id. at 364.
When a legislature amends or repeals a statute, a case challenging
the prior law can become moot "even where re-enactment of the stat-
ute at issue is within the power of the legislature." Am. Legion Post
7 of Durham, N.C. v. City of Durham, 239 F.3d 601, 606 (4th Cir.
2001). Only if reenactment is not merely possible but appears proba-
ble may we find the harm to be "capable of repetition, yet evading
review" and hold that the case is not moot. Id.; see also Reyes v. City
of Lynchburg, 300 F.3d 449, 453 (4th Cir. 2002) (mooting an appeal
BROOKS v. VASSAR 11
when there was "no reasonable expectation that Lynchburg [would]
reenact the ordinance" (citing Arizonans for Official English, 520
U.S. at 67)).
In the case before us, the parties agree that, consistent with the dis-
trict court’s order, Virginia’s recent amendments "essentially moot
three of the claims Plaintiffs won below" because the amendments
changed the operation of the Distribution, Delivery, and Shipping
Privileges so as to effectuate the district court’s judgment. Further-
more, because the plaintiffs have all but agreed that there is no practi-
cal likelihood Virginia will reenact these privileges, we agree with the
parties that challenges to these privileges are moot and that we have
no jurisdiction to determine whether the amendments are constitu-
tional or whether the district court’s judgment was correct. Accord-
ingly, we dismiss Virginia’s appeal insofar as it pertains to the
plaintiffs’ challenges to the Distribution, Delivery, and Shipping Priv-
ileges and the entirety of the plaintiffs’ cross-appeal.
When we dismiss an appeal as moot, we generally also vacate the
district court’s judgment and order the district court to dismiss the
moot portions of the case. See United States v. Munsingwear, Inc.,
340 U.S. 36, 39 (1950); Mellen, 327 F.3d at 364. Although the Con-
stitution compels dismissal of a moot case, vacatur on appeal is an
equitable rule "warranted only where mootness has occurred through
happenstance, rather than through voluntary action of the losing
party." Mellen, 327 F.3d at 364; see also U.S. Bancorp Mortgage Co.
v. Bonner Mall P’ship, 513 U.S. 18, 25 (1994). Inasmuch as we have
held that a State legislature’s amendment of a challenged law is not
"voluntary cessation" attributable to the State’s executive officials
defending a challenge to that law, see Valero Terrestrial Corp. v.
Paige, 211 F.3d 112, 116 (4th Cir. 2000), we decline the plaintiffs’
request that we remand to have the district court determine "whether
mootness was directly and deliberately caused by Defendants."
The portions of the district court’s judgment holding that the Distri-
bution, Delivery, and Shipping Privileges are unconstitutional and the
portions of its final injunction barring their enforcement are vacated,
and we remand this case to the district court to dismiss the relevant
claims.
12 BROOKS v. VASSAR
III
We now consider whether Virginia Code § 4.1-310(E)(i), the Per-
sonal Import Exception to the three-tier system, violates the dormant
Commerce Clause.
Virginia Code § 4.1-310 prohibits generally the importation of
alcoholic beverages into Virginia except through the three-tier struc-
ture. That provision, however, makes some exceptions for, by way of
example, industrial, manufacturing, and medical purposes, see Vir-
ginia Code § 4.1-310(A)(i)-(iii), and for boats, railcars, and common
carriers engaged in interstate commerce, see id. § 4.1-310(E)(iii). It
also makes an exception for a small amount (one gallon or four liters)
of alcoholic beverages for personal consumption — the Personal
Import Exception — see id. § 4.1-310(E)(i).1 Only through exceptions
such as these may a person or entity import alcoholic beverages out-
side of the three-tier structure.
The plaintiffs contend that the Personal Import Exception discrimi-
nates against interstate commerce because it
limits the amount of wine and beer Virginia consumers can
personally transport into the State for their personal con-
sumption, thus "causing local goods to constitute a larger
share, and goods with an out-of-state source to constitute a
smaller share of, the total sales in the market. . . . At the
same time, Virginia imposes no restriction on how much
wine or beer residents can purchase from in-state retailers,
wineries, or breweries and personally transport within the
Commonwealth. . . . This difference in treatment constitutes
facial and effectual discrimination in violation of the dor-
1
Section 4.1-310(E) of the Virginia Code provides in relevant part:
The provisions of this chapter shall not prohibit (i) any person
from bringing, in his personal possession, or through United
States Customs in his accompanying baggage, into the Common-
wealth not for resale, alcoholic beverages in an amount not to
exceed one gallon or four liters if any part of the alcoholic bever-
ages being transported is held in metric-sized containers.
BROOKS v. VASSAR 13
mant Commerce Clause that cannot be "saved" by the
Twenty-First Amendment.
Plaintiffs advanced this argument in their brief before the Virginia
legislature’s recently enacted amendments rendered moot the plain-
tiffs’ challenges to the Distribution, Delivery, and Shipping Privileges
in the ABC Act. And their challenge to the Personal Import Exception
depended in part on the discrimination created by Virginia’s allowing
consumers to buy unlimited amounts of wine directly from Virginia
wineries (bypassing the three-tier structure) but only one gallon or
four liters of wine from out-of-state wineries. Because Virginia win-
eries can no longer sell directly to consumers, this argument has also
become moot. Indeed, with the amendments now in place, out-of-state
wineries may be favored over in-state wineries in that consumers can
purchase one gallon or four liters of wine directly from out-of-state
wineries and import the wine into Virginia without going through the
three-tier system, but they cannot buy wine directly from in-state win-
eries.2
Plaintiffs’ challenge to the Personal Import Exception also included
the argument that it discriminates against interstate commerce
because consumers can purchase unlimited amounts of wine from
Virginia retailers but may import only a gallon or four liters of wine
from out-of-state suppliers. As they summarize, "The personal impor-
tation limitation discriminates against wine and beer purchased out of
state." This argument has not been rendered moot, and we need to set
forth the governing principles of the Commerce Clause and the
Twenty-first Amendment before addressing it.
A
The Commerce Clause states that Congress "shall have the Power
. . . To regulate Commerce . . . among the several states." U.S. Const.
2
The ABC Act contains another exception to the three-tier structure,
which is neutral to the issues in this case. Section 4.1-112.1(A) of the
Virginia Code authorizes wine and beer shippers to obtain licenses to sell
and ship directly to consumers for personal consumption not more than
two cases of wine or beer per month. Both in-state and out-of-state win-
eries and breweries may obtain such licenses.
14 BROOKS v. VASSAR
art. I, § 8, cl. 3. It is well established that this affirmative grant of
authority implies a "negative" or "dormant" constraint on the power
of the States to enact legislation that interferes with or burdens inter-
state commerce. Dennis v. Higgins, 498 U.S. 439, 447 (1991) ("It is
also clear, however, that the Commerce Clause does more than confer
power on the Federal Government; it is also a substantive restriction
on permissible state regulation of interstate commerce" (internal quo-
tation marks omitted)); Healy v. Beer Institute, Inc., 491 U.S. 324,
326 n.1 (1989) ("This Court long has recognized that this affirmative
grant of authority to Congress also encompasses an implicit or ‘dor-
mant’ limitation on the authority of the States to enact legislation
affecting interstate commerce"). A state law that discriminates against
interstate commerce is the paradigm of legislation prohibited under
the Commerce Clause, see Brown-Forman Distillers Corp. v. New
York State Liquor Auth., 476 U.S. 573, 579 (1986), where discrimina-
tion is defined simply as "‘differential treatment of in-state and out-
of-state economic interests that benefits the former and burdens the
latter.’" Beskind, 325 F.3d at 514 (quoting Oregon Waste Sys. Inc. v.
Dep’t of Environmental Quality, 511 U.S. 93, 99 (1994)).
In applying the dormant Commerce Clause to state alcohol regula-
tions, we must also take into consideration the Twenty-first Amend-
ment, which was ratified in 1933, repealing the Eighteenth
Amendment and ending this country’s experiment with Prohibition.
Section 2 of the Amendment provides that:
The 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, is
hereby prohibited.
The Twenty-first Amendment was designed to protect certain "core
interests" of the States in "‘promoting temperance, ensuring orderly
market conditions, and raising revenue’" through regulation of the
manufacture, distribution, and sale of alcoholic beverages. Beskind,
325 F.3d at 513 (quoting North Dakota v. United States, 495 U.S.
423, 432 (1990)). To accomplish that end, "some power to regulate
interstate commerce was withdrawn from Congress so that the Com-
merce Clause could not be construed to prevent the enforcement of
State laws regulating the importation of alcoholic beverages and the
BROOKS v. VASSAR 15
manufacture and consumption of alcoholic beverages within State
borders." Id. The Twenty-first Amendment thus provided the States
with authority to enact legislation affecting interstate commerce, but
it left unsettled whether, and to what extent, the States were subject
to the nondiscrimination principle of the Commerce Clause in pro-
moting their core interests.
In Beskind, which involved a challenge to North Carolina’s ABC
laws, which discriminated against out-of-state wine producers by
allowing only in-state wineries to sell wine directly to consumers, we
interpreted the Supreme Court’s Twenty-first Amendment cases as
establishing a two-part analytical framework for determining whether
state alcohol regulations were permissible. We first considered
"whether the purported State regulation violates the Commerce
Clause without consideration of the Twenty-first Amendment," and,
second, if it did, we then asked whether the "‘principles underlying
the Twenty-first Amendment [were] sufficiently implicated by the
[State regulation] . . . to outweigh the Commerce Clause principles
that would otherwise be offended.’" Id. at 513-514 (second alteration
in original) (quoting Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 275
(1984))
Since our decision in Beskind, the Supreme Court has modified this
analytical framework, preserving the first inquiry but narrowing the
second, at least when economic protectionism is at issue. In Gran-
holm, which invalidated direct-shipment prohibitions in Michigan and
New York’s laws — similar to the North Carolina laws struck down
in Beskind and the provisions mooted here by Virginia’s recent legis-
lation — the Supreme Court affirmed that the first step in reviewing
state alcohol regulations is to determine whether they discriminate
against interstate commerce in violation of the Commerce Clause. 544
U.S. at 476. If the regulations do violate the Constitution in that man-
ner, they are not automatically saved by the Twenty-first Amendment.
Id. at 486-87. The Court rejected the view that the Twenty-first
Amendment allows "States to regulate the direct shipment of wine on
terms that discriminate in favor of in-state producers," id. at 476, and
concluded that "[t]he [Twenty-first] Amendment did not give States
the authority to pass nonuniform laws in order to discriminate against
out-of-state goods, a privilege they had not enjoyed at any earlier
time." Id. at 484-85 (emphasis added).
16 BROOKS v. VASSAR
A discriminatory state law can, however, still be upheld by apply-
ing Commerce Clause jurisprudence — determining whether the state
regulations reasonably advance legitimate state interests "that cannot
be adequately served by reasonable nondiscriminatory alternatives."
Id. at 489 (internal quotation marks omitted). Thus, the Supreme
Court has made clear that the same "exacting standard" that applies
to discriminatory state regulations in other contexts applies to state
alcohol regulations, such that discrimination in violation of the dor-
mant Commerce Clause can be upheld "only after finding, based on
concrete record evidence, that a State’s nondiscriminatory alternatives
will prove unworkable." Id. at 493.
In Granholm, the Supreme Court applied those principles in con-
cluding that the laws of Michigan and New York, which allowed local
wineries, but not out-of-state wineries, to ship directly to retailers and
consumers, violated the dormant Commerce Clause. The "differential
treatment" between in-state and out-of-state wineries was held to con-
stitute an indefensible "discrimination against interstate commerce."
544 U.S. at 467; see also id. at 476. But the court also noted repeat-
edly that the commonplace three-tier systems themselves did not vio-
late the Constitution. It observed that it is "unquestionably legitimate"
for a State to bar the importation of alcoholic beverages or to "funnel
sales through the three-tier system." Id. at 489; see also id. ("State
policies are protected under the Twenty-first Amendment when they
treat liquor produced out of state the same as its domestic equiva-
lent").
B
As we have already noted, the core of plaintiffs’ challenge to the
Personal Import Exception — which was based on the fact that Vir-
ginia wineries could sell unlimited amounts of wine directly to con-
sumers, while out-of-state wineries could only sell one gallon or four
liters to consumers for personal import — has been rendered moot by
Virginia’s recent statutory enactments.
Nonetheless, the plaintiffs continue to argue, in challenging the
Personal Import Exception, that it "operates to advantage all in-state
entities that sell directly to consumers . . . over out-of-state counter-
parts." (Emphasis added). Because only retailers in Virginia may
BROOKS v. VASSAR 17
now sell directly to consumers, this argument must be that in-state
retailers are favored over out-of-state retailers.3 But an argument that
compares the status of an in-state retailer with an out-of-state retailer
— or that compares the status of any other in-state entity under the
three-tier system with its out-of-state counterpart — is nothing differ-
ent than an argument challenging the three-tier system itself. As
already noted, this argument is foreclosed by the Twenty-first
Amendment and the Supreme Court’s decision in Granholm, which
upheld the three-tier system as "unquestionably legitimate." As the
ABC Act now stands, all out-of-state suppliers of wine are required
by Virginia to sell in Virginia through the three-tier system (except
for the two-case exception of § 4.1-112.1(A)), and the Personal
Import Exception to that import restriction does not favor in-state
wineries. Indeed, it favors the out-of-state wineries insofar as one gal-
lon or four liters of wine may be imported into Virginia outside of the
three-tier structure, whereas in-state wineries can sell only through the
three-tier structure or from their own retail premises for which they
must obtain a separate retail license.
The plaintiffs’ only remaining argument against the Personal
Import Exception is that in limiting consumers to importing one gal-
lon or four liters of out-of-state wine, Virginia "discriminates against
wine and beer purchased out of state" because "Virginia imposes no
restriction on how much wine or beer residents can purchase from in-
state retailers." This argument rests on the syllogism that (1) because
imports are limited to one gallon or four liters, out-of-state purchases
are limited in the same way; (2) yet, in-state purchases are not limited
to one gallon or four liters; and (3) therefore, the import limitation
discriminates against out-of-state purchases. The logic of the argu-
ment, however, rests on at least two errors.
First, the plaintiffs’ comparison assumes that the regulation of the
quantity of wine that may be imported into Virginia is a surrogate for
the regulation of the quantity of wine that may be purchased outside
of the State. But it does not follow logically (nor factually) that a
3
Again, as noted in footnote 2, above, wine and beer shippers, both in-
state and out-of-state, may obtain a shipper’s license authorizing them to
sell and ship two cases of wine per month directly to consumers for per-
sonal consumption. See Va. Code § 4.1-112.1(A).
18 BROOKS v. VASSAR
restriction on importation effects a restriction on out-of-state pur-
chases. Second, even if importation were a surrogate for out-of-state
purchases, the argument improperly compares unlike market func-
tions. After claiming that the import limitation is the equivalent of a
limitation on out-of-state purchases, plaintiffs then compare the one
gallon/four-liter out-of-state wine purchases from wineries with pur-
chases of unlimited amounts from in-state retailers. But in comparing
these different purchases — restricted out-of-state purchases from
wineries with unrestricted in-state purchases from retailers — the
plaintiffs overlook the fact that Virginia’s ABC Act authorizes the
purchase of unlimited quantities of alcoholic beverages out-of-state,
which then may be imported into the State through the three-tier
structure. And it is only the purchases of unlimited amounts through
the three-tier structure, not through the one-gallon/four-liter exception
to the structure, that may be compared with the unlimited amounts
that may be purchased in state from retailers.
Under the ABC Act, Virginia regulates all sales of wine and beer
in Virginia, but it does not regulate any sales outside of Virginia. Vir-
ginia regulates all imports of wine and beer into Virginia without reg-
ulating the prior sales of that wine and beer. The Personal Import
Exception is an exception only to its generally applicable import regu-
lation. Thus, an import regulation is quite distinct and different from
a sales regulation, and comparing in-state sales with importation can-
not give rise to a legitimate comparison for determining discrimina-
tion. The only fair comparison would be how the statute treats in-state
sales and out-of-state sales, or in-state wineries and out-of-state win-
eries, or in-state product and out-of-state product.
The Personal Import Exception places no restriction on the amount
of wine a person may purchase, either inside or outside Virginia. It
also permits any person to import unlimited amounts of wine into the
state through the three-tier structure. Where it does make an exception
— allowing the import of a gallon or four liters of wine without going
through the three-tier structure — it tends to favor, not discriminate
against, interstate commerce because a consumer can buy one gallon
or four liters of wine directly from a winery in another State and per-
sonally carry the wine into Virginia for consumption without com-
porting with the three-tier system or going through a retailer. The
same consumer, however, cannot buy a similar quantity of wine
BROOKS v. VASSAR 19
directly from an in-state winery; the consumer would have to pur-
chase all such wine from an in-state retailer. The Personal Import
Exception is, at bottom, only an exception for small amounts of wine
that need not be imported through the three-tier structure, and this
benefit is afforded to both Virginians and nonresidents.
Because the Twenty-first Amendment "‘grants the States virtually
complete control over whether to permit importation or sale of liquor
and how to structure the liquor distribution system," Granholm, 544
U.S. at 488 (quoting California Retail Liquor Dealers Ass’n v. Midcal
Aluminum, Inc., 445 U.S. 97, 110 (1980)), and because the dormant
Commerce Clause only prevents a State from enacting regulation that
favors in-state producers and thus discriminates against interstate
commerce, the Personal Import Exception does not violate the Clause.
C
In addition, the Personal Import Exception is justified as an appro-
priate regulation under the Twenty-first Amendment that is not denied
legitimacy by being "economic protectionism," as was condemned by
the holdings of Granholm and Bacchus.
In Granholm, the Supreme Court struck down state laws in Michi-
gan and New York that regulated the import of wine into the states
and that, at the same time, allowed in-state wine producers to sell
wine directly to consumers. Characterizing the laws as "straightfor-
ward attempts to discriminate in favor of local producers," 544 U.S.
at 489, the Court pointed out that the Twenty-first Amendment’s pur-
pose was not "to favor local liquor industries," id. at 487 (quoting
Bacchus, 468 U.S. at 276). The purpose of the Twenty-first Amend-
ment was "to allow States to maintain an effective and uniform sys-
tem for controlling liquor by regulating its transportation, importation,
and use." Id. at 484.
Similarly in Bacchus, the Court struck down a Hawaiian law that
exempted local wine from the State’s 20% excise tax as "economic
protectionism." The Court rendered its holding in response to the fol-
lowing question:
20 BROOKS v. VASSAR
The question in this case is thus whether the principles
underlying the Twenty-first Amendment are sufficiently
implicated by the exemption for okolehao and pineapple
wine to outweigh the Commerce Clause principles that
would otherwise be offended. Or as we recently asked in a
slightly different way, "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."
468 U.S. at 275-76 (quoting Capital Cities Cable, Inc. v. Crisp, 467
U.S. 691, 714 (1984)). The Court concluded that economic protec-
tionism was not justified by the Twenty-first Amendment. "Here, the
State does not seek to justify its tax on the ground that it was designed
to promote temperance or carry out any other purpose of the Twenty-
first Amendment, but instead acknowledges that the purpose was ‘to
promote a local industry.’" Id. at 276.
In short, these cases stand for the proposition that a State’s regula-
tion of the transportation, importation, and use of alcoholic beverages
in the State is protected by the Twenty-first Amendment, but eco-
nomic protectionism is not and otherwise violates the dormant Com-
merce Clause.
While the favoritism shown by Virginia in this case to local win-
eries by allowing them to sell directly to consumers did amount to
economic protectionism that violated the dormant Commerce Clause,
the Commonwealth’s interest in otherwise regulating the importation,
transportation, and use of wine in Virginia is protected by the
Twenty-first Amendment. It is readily apparent that the Personal
Import Exception is not economic protectionism but part of Virginia’s
import regulation. It provides a de minimis exception to Virginia’s
import regulations, allowing consumers to import one gallon or four
liters of wine for personal consumption. Under no economic construct
could such a provision be considered economic protectionism of local
industry. To the contrary, it actually amounts to disadvantage local
wineries whose wine may only be purchased through retailers.
Accordingly, we hold that, for this additional reason, the Personal
Import Exception does not violate the dormant Commerce Clause.
BROOKS v. VASSAR 21
IV
The plaintiffs also contend that Virginia’s restriction authorizing
ABC stores to sell only wine "produced by [Virginia] farm wineries,"4
see Va. Code § 4.1-119(A), impermissibly discriminates against
wines produced outside the Commonwealth, in violation of the dor-
mant Commerce Clause.
Virginia does not deny that its ABC Stores Restriction discrimi-
nates against out-of-state wines but claims that its policy of selling
only in-state wines through its own stores is protected under the "mar-
ket participant" exception to the dormant Commerce Clause.
The district court rejected this defense, holding that the Common-
wealth’s dual role as regulator and competitor in the market for alco-
holic beverages undermines its status as a constitutionally protected
market participant. See Bolick I, 199 F. Supp. 2d at 447-49 ("The state
is therefore both a regulator and a competitor which prevents applica-
tion of the market participant exception in regard to the state’s sale
of wine because the Commerce Clause acts as an implied restraint
upon state regulatory powers . . . involving interstate commerce"
(internal quotation marks omitted) (alteration in original)). Virginia
contends that the district court simply erred as a matter of law because
"[t]here is nothing in the jurisprudence of the Supreme Court or this
Court that suggests that the Market Participation Exception does not
4
The ABC Act defines "farm winery" as
an establishment (i) located on a farm in the Commonwealth
with a producing vineyard, orchard, or similar growing area and
with facilities for fermenting and bottling wine on the premises
where the owner or lessee manufactures wine that contains not
more than 18 percent alcohol by volume or (ii) located in the
Commonwealth with a producing vineyard, orchard, or similar
growing area or agreements for purchasing grapes or other fruits
from agricultural growers within the Commonwealth, and with
facilities for fermenting and bottling wine on the premises where
the owner or lessee manufactures wine that contains not more
than 18 percent alcohol by volume.
Va. Code § 4.1-100.
22 BROOKS v. VASSAR
apply in situations where the government is acting as a regulator of
the products that it is selling or purchases."
Before applying the dormant Commerce Clause to State activities
that burden or discriminate against interstate commerce, a court must
determine whether the State "is acting as a market participant, rather
than as a market regulator." South-Central Timber Development, Inc.
v. Wunnicke, 467 U.S. 82, 93 (1984) (emphasis added). If the State
is a valid market participant, "the dormant Commerce Clause places
no limitation on its activities." Id. This market participant exception
"makes sense because the evil addressed by [the dormant Commerce
Clause] — the prospect that States will use custom duties, exclusion-
ary trade regulations, and other exercises of governmental power (as
opposed to the expenditure of state resources) to favor their own citi-
zens — is entirely absent where the States are buying and selling in
the market." College Sav. Bank v. Florida Prepaid Postsecondary
Educ. Expense Bd., 527 U.S. 666, 685 (1999) (citation omitted).
The line of cases applying the market participant exception estab-
lishes this principle both clearly and consistently. In Hughes v. Alex-
andria Scrap Corp., 426 U.S. 794 (1976), the Court held that the
State of Maryland could pay local sellers of automobile scrap above-
market rates for the scrap even though the State’s activity potentially
reduced the export of automobile scrap from Maryland. The Court
held that "[n]othing in the purposes animating the Commerce Clause
prohibits a State . . . from participating in the market and exercising
the right to favor its own citizens over others." Id. at 810. In Reeves,
Inc. v. Stake, 447 U.S. 429 (1980), the Court approved of South
Dakota’s decision to limit the sale of cement from a state-owned
facility to South Dakotans. And in White v. Massachusetts Council of
Construction Employers, Inc., 460 U.S. 204 (1983), the Court held
that the Mayor of Boston was participating in the construction market
when he ordered that buildings funded from the public fisc could only
be constructed by work forces, at least 50 percent of which were city
residents. Although the Court recognized the existence of some limits
"on a state or local government’s ability to impose restrictions that
reach beyond the immediate parties with which the government trans-
acts business," it did not articulate those limits because everyone in
the construction labor market who was affected by the Mayor’s order
BROOKS v. VASSAR 23
was, "in a substantial if informal sense, ‘working for the city.’" Id. at
211 n.7.
The Court did, however, define some limits to the market participa-
tion exception in South-Central Timber, in which a plurality held that
the State of Alaska could not, as a condition of sale, require the pur-
chasers of its unprocessed timber to process it in-state. Even though
the Court reaffirmed "the principle that the Commerce Clause places
no limitations on a State’s refusal to deal with particular parties when
it is participating in the interstate market in goods," 467 U.S. at 94,
it limited the scope of the principle to the market in which the State
was participating. The Court recognized that the State was a partici-
pant in the timber market but was not a participant in the downstream
market of timber-processing. And, unlike the construction workers in
White, the timber purchasers could not be deemed State employees.
The Court concluded that because the State did not participate as an
economic competitor in the downstream timber-processing market in
which its restrictions nevertheless had a significant effect, the State’s
conditions amounted to impermissible regulation.
These cases stand for the principle that the market participation
exception applies to protect discriminatory conduct when the State
acts like a participant in the relevant market. Cf. South-Central Tim-
ber, 467 U.S. at 96 (noting that, in the commercial context, "the seller
usually has no say over, and no interest in, how the product is to be
used after sale"). States, therefore, have the freedom to make discrim-
inatory decisions while acting in a market, but they cannot impose
any terms or conditions "that have a substantial regulatory effect out-
side of that particular market" to achieve by contract what the dor-
mant Commerce Clause would forbid them to achieve by statute. Id.
at 97.
As evidenced by the ABC Stores Exception, § 4.1-119(A) of the
ABC Act, Virginia has elected to sell beer and wine, as well as some
related products — along with liquor — from state-owned and oper-
ated stores. And just as the Commonwealth has elected not to sell
every brand of liquor manufactured, it has elected not to sell out-of-
state wines, choosing instead to sell only Virginia-produced wines. In
doing so, it competes as a participant in the Virginia wine market with
the thousands — more than 10,000, according to Virginia — of other
24 BROOKS v. VASSAR
private wine retailers who sell both Virginia wines and out-of-state
wines in Virginia. Virginia’s choice of selling only Virginia wine is
no more inappropriate than would be its choice to sell only Hershey’s
brand chocolate bars at a State commissary. Like all other in-state
wine retailers, the ABC stores can choose which wines they purchase
and stock, and Virginia’s commitment to purchase only in-state wines
is a choice that any wine retailer would be free to make for itself. This
choice is indistinguishable from Maryland’s choice in Alexandria
Scrap. Just as Maryland favored in-state sellers when it purchased
automobile scrap at high prices, Virginia favors in-state wines in its
stores.
The plaintiffs contend that the ABC Stores Restriction falls outside
of the Supreme Court cases delineating the market participation
exception. They rely on two arguments to support that conclusion: (1)
that the exception does not apply when a State acts as a "pervasive
market regulator" that establishes a "channel of commerce that it itself
controls to disadvantage out-of-state interests even when other pri-
vate, competing channels of commerce exist," and (2) that the excep-
tion does not apply when a State "is simply trying to leverage its
market power in one domain to achieve otherwise prohibited regula-
tory power in another." The plaintiffs contend that because Virginia
maintains a monopoly on the sale of hard liquor, being the only seller
of hard liquor in Virginia, it is attempting to use that monopoly to
gain a competitive advantage for wines produced within the Com-
monwealth. We address these arguments seriatim.
A
The plaintiffs rely on South-Central Timber to argue that States
may not simultaneously regulate and participate in a market: "The
fact that the Virginia ABC Board pervasively regulates the market it
participates in forecloses application of the market participant excep-
tion here. Its role as regulator constitutionally overshadows its role as
participant." The plaintiffs, however, misread South-Central Timber.
In South-Central Timber, Alaska, in selling timber, required that
the purchaser of the timber process the timber in Alaska before ship-
ping it outside of the State. The Supreme Court did not deny Alaska
the right to sell the timber as a market participant to whomever it
BROOKS v. VASSAR 25
chose and at whatever price. Rather, as the Court noted, Alaska was
attempting to impose "conditions downstream in the timber-
processing market." Id. at 95. The Court explained, "In the commer-
cial context, the seller usually has no say over, and no interest in, how
the product is to be used after sale." Id. at 96. Summarizing its rejec-
tion of Alaska’s condition as impermissible for a market participant,
the Court stated, "The limit of the market-participant doctrine must be
that it allows a State to impose burdens on commerce within the mar-
ket in which it is a participant, but allows it to go no further." Id. at
97 (emphasis added). Contrary to the plaintiffs’ argument, the holding
of South-Central Timber leaves the market participant free to burden
or discriminate in the market in which it participates, even if it also
regulates the market.
State regulation of markets across the country is pervasive; most
States, if not all, have general market regulations, such as unfair trade
practices laws. If the mere fact of regulation precluded applying the
market participant exception, no State would ever qualify. Plaintiffs
thus must argue that the State cannot participate in a market when it
pervasively regulates that specific market.
But the Supreme Court has approved applying the market partici-
pant exception even when a State’s regulations are trained on the spe-
cific market in which it participates. This was the situation in
Alexandria Scrap, in which the State of Maryland not only partici-
pated in the automobile scrap market, but, through the same legisla-
tion authorizing above-market purchases from in-state scrap sellers,
also required those sellers to "obtain a license and pay a recurring
fine" if they did not sell their scrap to willing purchasers, including
Maryland. See Alexandria Scrap, 426 U.S. at 797; see also Chance
Mgmt., Inc. v. South Dakota, 97 F.3d 1107, 1113 (8th Cir. 1996)
(finding that, despite South Dakota’s heavy regulation of the state lot-
tery and all other forms of gambling, the State’s pervasive involve-
ment in running the lottery was not "regulation of ‘the market,’" but
rather was no more than "administering its own business").
The fact that Virginia regulates the alcohol market is not sufficient
to preclude its status as a market participant. To contravene the dor-
mant Commerce Clause, a State must do more than regulate markets
in which its participation happens to favor local interests. The State
26 BROOKS v. VASSAR
acts unconstitutionally when its participation in one market results in
regulation of another market in which it does not participate. That
cannot be said of Virginia’s decision to sell only Virginia wines from
its own retail stores as its participation in the wine market has no reg-
ulatory effects on other markets.
B
The plaintiffs also contend that the ABC Stores Restriction falls
outside the market participant exception because the State sells in-
state wines in the same stores as hard liquor, thereby "leverag[ing] its
market power in one domain" — the hard liquor market in which it
has a monopoly — "to achieve otherwise prohibited regulatory power
in another" — the wine market. To support this "leveraging" claim,
the plaintiffs argue that, if Virginia licensed private retailers to sell
liquor rather than state-run ABC stores, it could not pass a law allow-
ing the private stores to sell only Virginia wines. That would discrimi-
nate against out-of-state wines in violation of the dormant Commerce
Clause.
We find this "leveraging" argument, and the hypothetical reasoning
advanced to support it, both misleading and irrelevant. The hypotheti-
cal is misleading because it involves state regulation of private busi-
nesses competing in the wine market and not state participation in
that market, fatally assuming away the prerequisites of the market
participant exception; and it is irrelevant because Virginia does not
prohibit privately-owned stores from selling out-of-state wines.
Indeed, as the plaintiffs concede, there are thousands of retail outlets
at which consumers may purchase both out-of-state and Virginia-
produced wines at fully competitive prices. Furthermore, there is no
evidence in the record to suggest that Virginia’s sale of Virginia farm
wines at ABC stores interferes with or burdens the free and competi-
tive market in both in-state and out-of-state wines. There is no evi-
dence that consumers face any impediment to purchasing wines of
their preference at fair market prices. This lack of evidence is particu-
larly relevant given the district court’s finding that "the consumer
who prefers to purchase an out-of-state or foreign vintage, as well as
distilled spirits which are only available at state stores, is deterred
from buying his favorite wine after he buys his liquor because of the
inconvenience involved in going to a separate source."
BROOKS v. VASSAR 27
While there is no evidence in the record to support any claim of
consumer deterrence, the Commonwealth nonetheless cannot be
barred from making business choices that favor local interests on the
ground that some consumers might be inconvenienced. Any choice to
sell one brand or type of product rather than another could have that
result. If the Commonwealth maintained its monopoly on hard liquor
and authorized its ABC store managers to stock both in-state and out-
of-state wines, the ABC store manager’s choice to purchase and sell
only a limited array of brands and types of wine would still inconve-
nience consumers who wanted to purchase what the manager failed
to select. On the district court’s theory and according to the plaintiffs,
so long as the Commonwealth maintains its lawful monopoly in hard
liquor, it could not sell any wines because to do so would inconve-
nience consumers who prefer some alternative.
The cases establishing the market participant exception do not
compel that conclusion and, in fact, militate against it. They stand for
the proposition that a State may engage as a competitor in a free and
open market, making business choices to buy and sell goods, even if
those choices favor local products. And that is all that Virginia has
done here; it sells in-state wines from its ABC stores in a fully com-
petitive wine market. See Reeves, 447 U.S. at 437 ("There is no indi-
cation of a constitutional plan to limit the ability of States themselves
to operate freely in the free market"). And its doing so does not regu-
late the sale of wines in Virginia by other stores.
The dissent’s argument — which has not been advanced by the
plaintiffs — that because Virginia has a monopoly in the sales of hard
liquor, it somehow cannot be a participant in the market for the sale
of wine because the "relevant market" is a single market for the sale
of both "wine and liquor," is flawed for several reasons. First, it is a
non-sequitur to conclude that Virginia does not compete in the sale
of wine because it has a monopoly in the sale of hard liquor. Second,
the dissent’s reliance on Virginia’s supposed market control of a sin-
gle market consisting of wine and liquor does not take into account
the fact that consumers can purchase wine not only from ABC Stores
but also from over 10,000 private retailers throughout the Common-
wealth. Third, if the dissent suggests that Virginia has a monopoly for
stores where one can buy both wine and liquor, that says nothing
about a relevant market. Simply because a retailer sells two different
28 BROOKS v. VASSAR
products from the same location when no other retailer sells the same
two products does not make the retailer a monopolist in a joint "mar-
ket," and this is true even if no other retailer sells one of the products.
These are matters of convenience, not monopoly power. Finally, there
is no evidence in the record to support the dissent’s single market the-
ory in an economic sense. The dissent cannot legitimately argue that,
based on an intuited assumption, consumers demanding a bottle of
whiskey or vodka will fulfill that demand by buying a bottle of wine
or that consumers demanding a bottle of wine will fulfill that demand
by buying a bottle of whiskey or vodka. Common sense compels a
conclusion that there simply is no cross-elasticity of demand to justify
concluding that there is a single market consisting of wine and liquor.
As the record stands, a fully competitive market exists in Virginia
for the sale of wine, and Virginia’s ABC Stores are but one class of
retailer that participates in that market.
V
Finally, we address Virginia’s contention that the plaintiffs cannot
bring their dormant Commerce Clause challenges under 42 U.S.C.
§ 1983, and that, consequently, the plaintiffs do not qualify to make
a claim for attorneys fees under 42 U.S.C. § 1998, if they satisfy that
provision. Specifically, Virginia claims that, in Gonzaga University v.
Doe, 536 U.S. 273 (2002), the Supreme Court narrowed the scope of
§ 1983 actions to only those claims based on an "unambiguously con-
ferred right." Virginia contends that the Commerce Clause does not
confer individual rights and so cannot form the basis of a § 1983
action.
This claim, however, overlooks Dennis v. Higgins, 498 U.S. 439(1991). In Dennis, the Supreme Court resolved a conflict among the
circuits on precisely this question, holding that, in addition to allocat-
ing power between the federal and state governments, the Commerce
Clause confers "‘a right which every citizen of the United States is
entitled to exercise under the Constitution and laws of the United
States.’" Id. at 448 (quoting Crutcher v. Kentucky, 141 U.S. 47, 57
(1891)); see also Medigen of Kentucky, Inc. v. Pub. Serv. Comm’n,
985 F.2d 164, 167 n.3 (4th Cir. 1993) (applying Dennis and holding
that "Commerce Clause violations [are] actionable under § 1983");
BROOKS v. VASSAR 29
Yamaha Motor Corp. v. Jim’s Motorcycle, Inc., 381 F. Supp. 2d 499,
502 (E.D. Va. 2005) (Payne, J.) (noting that "Gonzaga does not over-
rule Higgins and that the Fourth Circuit has applied Higgins in reach-
ing the same result").
Given that Gonzaga did not expressly overrule Dennis, Dennis
remains controlling authority. We have previously acknowledged the
Supreme Court’s instruction that "‘[i]f a precedent of this Court has
direct application in a case, yet appears to rest on reasons rejected in
some line of decisions, the Court of Appeals should follow the case
which directly controls, leaving to this Court the prerogative of over-
ruling its own decisions.’" Nat’l Home Equity Mortgage Ass’n v.
Face, 283 F.3d 220, 224 (4th Cir. 2002) (alteration in original) (quot-
ing Agostini v. Felton, 521 U.S. 203, 237 (1997) (internal quotation
marks omitted)). Not only has Virginia failed to show that Gonzaga
sub silentio overruled Dennis, but it has also provided no authority
authorizing us to ignore directly controlling Supreme Court precedent
that has not been overruled.
VI
In sum, we affirm the district court’s ruling that plaintiffs may
bring their Commerce Clause challenges under 42 U.S.C. § 1983; we
reverse the district court’s judgment holding unconstitutional the Per-
sonal Import Exception and the ABC Stores Restriction; and we dis-
miss as moot the appeal and cross-appeal insofar as these appeals
relate to provisions of the ABC laws amended by the Virginia legisla-
ture effective July 1, 2006, vacate the relevant judgment of the district
court, and remand with instructions to dismiss plaintiffs’ challenges
to these provisions.
AFFIRMED IN PART; REVERSED IN PART; AND
DISMISSED IN PART, VACATED AND REMANDED
TRAXLER, Circuit Judge, concurring in part and concurring in the
judgment:
I concur in the judgment, and I concur in all but part III(B) of the
excellent opinion written by Judge Niemeyer.
30 BROOKS v. VASSAR
GOODWIN, District Judge, concurring and dissenting:
I concur in Parts I, II, and V of the majority opinion. I respectfully
dissent from Parts III and IV. I would affirm the district court’s con-
clusion that the Personal Import Exception1 and ABC Stores Restriction2
are unconstitutional.
I.
In Granholm v. Heald, 544 U.S. 460 (2005), the Supreme Court
adopted a framework for examining whether state liquor laws violate
the dormant Commerce Clause. The Court responded to lower court
decisions finding the Twenty-First Amendment could, in some situa-
tions, save state liquor laws that discriminated against interstate com-
merce. Our opinion in Beskind v. Easley, 325 F.3d 506 (4th Cir.
2003), was such a decision. In Beskind, we held that when consider-
ing a state liquor law, we first examine whether the law violates the
dormant Commerce Clause. Beskind, 325 F.3d at 513. If so, we
explained we then look to the "principles underlying the Twenty-first
Amendment" to determine if they are sufficiently implicated by the
law "to outweigh the Commerce Clause principles that would other-
wise be offended." Beskind, 325 F.3d at 513-14 (quoting Bacchus
Imports, Ltd. v. Dias, 468 U.S. 263, 275 (1984)).
I believe the majority opinion misconstrues the effect that the
Supreme Court’s decision in Granholm had on the analytical frame-
work we constructed in Beskind. The majority reads Granholm as
only modifying that framework. The majority explains, "the Supreme
Court has modified th[e] [Beskind] framework, preserving the first
inquiry but narrowing the second." Op. at 15 (emphasis added). In my
view, Granholm does not narrow, but rather completely eliminates
consideration of Beskind’s "second inquiry."
1
The Personal Import Exception allows individual consumers to import
one gallon (or four liters) of wine and beer into Virginia without having
to pass through the three-tier distribution system. Va. Code § 4.1-310(E).
2
The ABC Stores Restriction prevents ABC stores from marketing and
selling any wine not produced by Virginia "farm" wineries. Id. § 4.1-
119(A).
BROOKS v. VASSAR 31
Quite simply, I read Granholm as requiring us to apply the same
dormant Commerce Clause analysis to discriminatory liquor laws that
we apply to other discriminatory laws. Granholm, 544 U.S. at 476.
We do not consider the principles of the Twenty-first Amendment.
See id. at 487-88 ("[T]he Twenty-first Amendment does not super-
sede other provisions of the Constitution.").
It is clear, however, that because the majority believes the Personal
Import Exception does not discriminate against interstate commerce,
the majority’s constitutional conclusion would be the same even
under my conception of the proper articulation of the change effected
by Granholm.
II.
The majority concludes that to find the Personal Import Exception
unconstitutional, we also would have to find Virginia’s three-tier dis-
tribution system unconstitutional. I disagree. The discriminatory
effect of the Personal Import Exception occurs after the beverages
have passed through Virginia’s three-tier system. It is at this stage,
when the alcoholic beverages are on the shelves ready for market, that
interstate commerce is impermissibly impeded. See H.P. Hood &
Sons, Inc. v. Du Mond, 336 U.S. 525, 535 (1949) ("[T]he ‘negative’
or ‘dormant’ aspect of the Commerce Clause prohibits States from
‘advancing their own commercial interests by curtailing the move-
ment of articles of commerce, either into or out of the State.’"). The
law tilts the market in favor of in-state retailers by preventing Virgin-
ians from having meaningful access to the markets of other States.
See Granholm, 544 U.S. at 473 (finding state liquor laws unconstitu-
tional because they "deprive citizens of their right to have access to
the markets of other States on equal terms") (emphasis added).
I concede that a restriction on imports does not necessarily target
out-of-state purchases. Obviously, a Virginian may buy the same
amount of beer or wine in an out-of-state store as may a purchaser
from any other State. In theory then, Virginia consumers are not
denied access to the markets of other States because they are free to
purchase the same amounts as other consumers. In reality, however,
because Virginians may not carry more than a gallon of what they buy
into Virginia, they are denied access to other States’ markets on equal
32 BROOKS v. VASSAR
terms with other consumers. Having an opportunity to purchase is not
the equivalent of having meaningful market access. Such access
requires not only that a consumer be able to purchase a product, but
also that the consumer be able to use it. By preventing importation
into Virginia, the Personal Import Exception impedes interstate com-
merce.
Consider this example: Mr. Smith lives in Bristol, Virginia, a town
on the Virginia/Tennessee border. He wants to purchase a 12-pack of
beer. The closest place he can buy beer is just across West State Street
in Tennessee. The closest store in Virginia is nearly twice as far from
Mr. Smith’s house. The Personal Import Exception deprives Mr.
Smith of meaningful access to the conveniently located Tennessee
retailer merely because it is located across the state line. To buy more
than one gallon of beer (128 ounces), Mr. Smith must go to a Virginia
store. Mr. Smith presumably could go to Tennessee and buy a 12-
pack (approximately 144 ounces), but would have to either discard or
drink two of the beers before crossing the street back into Virginia.
The import restriction prevents Virginians from meaningfully partici-
pating in the markets of other States. As a result, the restriction imper-
missibly impedes interstate commerce.
The Commonwealth argued that because Granholm noted that a
State could completely bar the importation of alcohol, it follows that
a law limiting alcohol importation is clearly permissible. Granholm,
however, plainly indicates that a complete bar could be enacted only
in "[a] State which chooses to ban the sale and consumption of alco-
hol altogether." Granholm, 544 U.S. at 488-89 (emphasis added).
Virginia has not prohibited either the sale or consumption of alcohol
altogether.
Virginia’s limitation on the quantity of alcoholic beverages a per-
son may bring into the Commonwealth favors in-state economic inter-
ests over out-of-state economic interests. As Granholm explains,
"Time and again [the Supreme Court] has held that, in all but the nar-
rowest circumstances, state laws violate the Commerce Clause if they
mandate ‘differential treatment of in-state and out-of-state economic
interests that benefits the former and burdens the latter.’" Id. at 472(quoting Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S.
93, 99 (1994)). Statutes with this effect are "generally struck down
BROOKS v. VASSAR 33
. . . without further inquiry." Id. at 487 (quoting Brown-Forman Dis-
tillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986)).
"State laws that discriminate against interstate commerce face ‘a vir-
tually per se rule of invalidity.’" Id. at 476 (quoting Philadelphia, 437
U.S. at 624)).
The Personal Import Exception can be saved only if the regulation
"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). Virginia argues the law
advances two purposes: 1) it facilitates tax collection and 2) it con-
trols the importation of bootleg liquor. Both of these interests may be
adequately served by reasonable nondiscriminatory alternatives. J.A.
at 551 (As the Magistrate Judge below found, "the prohibition cannot
be viewed as serving any legitimate core concern of the Twenty-first
Amendment unless, of course, one concludes that transportation of
unlimited quantities of alcoholic beverages acquired within Virginia
necessarily has less potential for intemperance or other abuse than
that acquired ‘over the state line’"); see also Granholm, 544 U.S. at
489-92 (rejecting collecting tax revenue and protecting minors as
legitimate local purposes for Michigan and New York laws).
Accordingly, I believe the Personal Import Exception is unconstitu-
tional because it violates the dormant Commerce Clause.
III.
The ABC Stores Restriction is also unconstitutional. Virginia con-
cedes this law discriminates against out-of-state wines, but claims the
"market participant" exception justifies the discrimination.
The majority finds the market participant exception applicable
because Virginia is a competitor in the market for wine in Virginia.
The majority, however, fails to accurately define the relevant market.
Because ABC Stores are the only stores where consumers may pur-
chase liquor in Virginia, these stores are the only places where con-
sumers may purchase wine and liquor in the same place. A
consumer’s demand for purchasing both a bottle of liquor and a bottle
of wine at the same time may be satisfied only in ABC Stores. The
34 BROOKS v. VASSAR
relevant market is not the market for wine, but the market for wine
and liquor.
Virginia has granted itself a monopoly in the market for the joint
sale of wine and liquor through its ABC Stores, and uses that monop-
oly to impermissibly discriminate against out-of-state wines. As a
result, the market participant exception cannot justify the ABC Stores
Restriction.
IV.
Accordingly, I respectfully dissent from Parts III and IV of the
majority opinion, and would find the Personal Import Exception and
the ABC Stores Restriction unconstitutional.