Justia Summary

Tennessee law requires applicants for an initial license to operate a retail liquor store to have resided in Tennessee for the prior two years; an applicant for license renewal must have resided in Tennessee for 10 consecutive years. A corporation cannot obtain a license unless all of its stockholders are residents. The state attorney general opined that the requirements were invalid. The Tennessee Alcoholic Beverage Commission (TABC) declined to enforce them and sought a declaratory judgment.

The Sixth Circuit and Supreme Court held that the two-year requirement violated the Commerce Clause and is not saved by the Twenty-first Amendment. Under the dormant Commerce Clause cases, a state law that discriminates against out-of-state goods or nonresident economic actors can be sustained only on a showing that it is narrowly tailored to “advanc[e] a legitimate local purpose.” Tennessee’s two-year residency requirement favors Tennesseans over nonresidents but, because it applies to the sale of alcohol, must be evaluated in light of section 2 of the Twenty-first Amendment: 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.” Section 2 grants the states latitude with respect to the regulation of alcohol but does not allow states to violate the non-discrimination principle and does not entirely supersede Congress’s power to regulate commerce.

States have not historically enjoyed absolute authority to police alcohol within their borders. Tennessee’s objective of ensuring that retailers are subject to process in state courts could easily be achieved by requiring a nonresident to designate an agent to receive process. Tennessee can thoroughly investigate applicants without requiring residency. Nor is the residency requirement essential to oversight. The goal of promoting responsible alcohol consumption could be served by limiting the number of licenses and the amount of alcohol that may be sold to an individual, mandating more extensive training, or monitoring retailer practices.