5th Circuit Court of Appeals Overturns Texas Wine Shipping Ban: Coalition for Free Trade Applauds Decisive Ruling.

News Editors/Food & Beverage Writers

SACRAMENTO, Calif.--(BUSINESS WIRE)--June 27, 2003

The 5th Circuit Court of Appeals handed winery and consumer plaintiffs the first complete legal victory in the national campaign to remove restrictions on interstate, direct-to-consumer wine shipments, the Coalition for Free Trade announced today.

Yesterday's ruling by the 5th Circuit Court of Appeals confirmed that Texas' ban on interstate direct wine shipments is unconstitutional, and supported the plaintiff's position that such shipments should be open for both interstate and intra-state shipments.

"This is the biggest legal win to date," said Tracy Genesen, legal director for the Coalition for Free Trade and senior counsel at Miller, Owen & Trost, of Sacramento. "The Coalition for Free Trade praises the work of the attorneys on the case, and the 5th Circuit's endorsement for free trade and denial of further economic protectionism," she added. The decision conflicts with the 7th Circuit Court of Appeals ruling, and creates a legal environment of unsettled case law. Such conflicts are considered criteria for the U.S. Supreme Court to grant review.

Now, the state of Texas could petition the 5th Circuit Court of Appeals for a rehearing and if unsuccessful, may petition the U.S. Supreme Court for review.

Filed June 26, the Court's ruling is available at www.coalitionforfreetrade.org, and concludes:

    "As the record makes clear, small out-of-state wineries, which
    constitute a substantial majority of the total number of wineries
    throughout the country, are hurt by these discriminatory
    restrictions, as Texas wholesalers (despite having permits to
    import their wine) do not import their products because the
    quantity of product and the consumer demand in each wholesaler's
    local market are too small to justify the wholesaler's marginal
    cost in importing and selling the product. The Texas legislature
    thus achieves exactly what it sought: Texas wines are more
    available for purchase by Texas consumers because these consumers
    are essentially denied access to the products of out-of-state
    wineries, and vice-versa. This is exactly the type of geographic
    discrimination that is prohibited by the Commerce Clause and, as
    applied, is a patent violation of Plaintiffs' constitutional
    rights. For these reasons, the district court's summary judgment
    order is, in all respects, AFFIRMED."

It remains to be seen how and when consumers will be able to receive shipments from out-of-state wineries. The Coalition for Free Trade recommends that wineries wait for further information from the Texas Alcohol Beverage Commission prior making such shipments.

Sterling W. Steves, an attorney in Ft. Worth, and Mark C. Harwell, an attorney with Cotham, Harwell & Evans in Houston, represented the plaintiffs. The Coalition for Free Trade is a non-profit organization seeking judicial relief from laws prohibiting the direct shipment of wine, assisting winery and consumer plaintiffs with lawsuits in New York, Florida, North Carolina, Texas, and Michigan.

Yesterday's decision confirms previous rulings that Texas' law is unconstitutional. On July 17, 2002 U.S. District Court Judge Melinda Harmon of Houston ruled in favor of wineries and consumers--confirming her February 2000 ruling -- although a stay was immediately issued and expired on May 31, 2003.