Day v. Henry: Legal protections for interstate shipment of alcohol

Reed Day, et al.

Petitioners,

v.

Ben Henry, Director, Arizona Department of Liquor Licenses and Control, et al.

Respondents.

Summary of argument

In the two-plus decades since this Court’s decision in Granholm v. Heald, 544 U.S. 460 (2005)—and the seven years since Tennessee Wine & Spirits Retailers Association v. Thomas, 588 U.S. 504 (2019)—lower courts have continued to resist this Court’s clear holdings regarding interstate shipment of alcohol.

When it comes to the intersection of the Twenty-First Amendment and the Commerce Clause, a split has developed among the circuit courts, with a slight majority now adopting what has become known as the “essential feature” test for Dormant Commerce Clause challenges to alcohol regulations. Based on this framework, if a regulatory requirement like in-state physical presence for an alcohol retailer is dubbed “essential” to the functioning of a state’s three-tier system of alcohol distribution, then it is immunized from a Dormant Commerce Clause challenge.

This case epitomizes that legal disjunction. The Ninth Circuit upheld Arizona’s in-state physical presence requirement for wine retailers as an “essential feature” of the state’s three-tier system because doing otherwise, the court held, would “effectively be hacking off two of the three legs that constitute Arizona’s three-tier system.” Day v. Henry, 152 F.4th 961, 974 (9th Cir. 2025).

But the “essential feature” test operates in an evi-dentiary void, with no concrete evidence needed to es-tablish whether the regulatory provision at issue pro-motes a legitimate, nonprotectionist interest like pro-tecting health and safety. Not only does this test run contrary to the explicit holdings in Granholm and Tennessee Wine, it collapses when evidence is applied.

In-state physical presence requirements, like the one at issue here, are demonstrably non-essential to the functioning of state alcohol regulatory systems generally and the three-tier system specifically. The fact that courts are nonetheless declaring such regulatory provisions to be “essential” underscores the inherent flaws in the “essential feature” test—and the need for this Court to step in again.

Amici makes three main points regarding the “essential feature” test:

First, for years, greater abridgments of the three-tier system than out-of-state Direct-to-Consumer (DtC) alcohol shipments from retailers have not interfered with an “essential feature” of the system. In fact, no state in America has a perfectly “pristine” three-tier system, as numerous circumventions of the system—from laws allowing producers to ship alcohol directly to consumers, to brewpub laws, to self-distribution authorizations—have been around for decades. These already existing workarounds are more substantial disruptors to the three-tier system than allowing out-of-state alcohol retailers to ship to consumers without an in-state physical presence, as is at issue here.

For example, allowing out-of-state producers to ship alcohol directly to consumers is a more significant abridgment of the three-tier system, but this Court in Granholm pointedly declined to declare producers’ in-state physical presence to be an “essential feature” immune from constitutional scrutiny. Therefore, allowing out-of-state retailers to ship alcohol to consumers without an in-state physical presence—a more modest abridgement of the three-tier system—cannot be said to undermine an “essential feature” of the system.

Second, the defining feature of America’s alcohol regulatory system is licensure, not the three-tier system in and of itself. By using licensure, states have proven adept at regulating alcohol delivery in the absence of in-state physical presence—or any physical presence whatsoever.

Specifically, since the COVID-19 global pandemic, the so-called “fourth tier” delivery of alcohol—allowing retailers to ship and deliver alcohol to consumers—has seen a meteoric rise. The growth of this additional tier shows that state regulatory regimes can effectively regulate alcoholic-beverage delivery, even without an in-state presence requirement. Just like any tier of the alcohol regulatory system, a straightforward license for out-of-state retail shippers can readily buffer against potential negative externalities that may arise from the sale and shipment of out-of-state alcohol.

Third, allowing out-of-state retailers to ship alcohol to consumers without an in-state physical presence is best seen as a niche amplification of the three-tier system, not as an undermining of it. As observers of the industry understand—but courts like the Ninth Circuit have failed to appreciate—out-of-state retailers are not competing with in-state wholesalers and retailers but are rather selling alcohol that is generally not available within a state’s current system.

For these reasons, the “essential feature” test fails on its own terms. In-state physical presence for alcohol retailers is demonstrably non-essential to the functioning of the alcohol regulatory system and allowing courts—without concrete evidence—to simply deem it to be “essential” creates a get-out-of-jail-free card for state governments seeking to shield protectionist laws.

This Court was abundantly clear in Granholm and Tennessee Wine that states cannot discriminate against out-of-state economic interests unless doing so advances a legitimate, nonprotectionist interest like public health and safety. Because lower courts have pointedly decided not to listen—and have adopted the “essential feature” test as a backdoor evasion of this Court’s holdings—the Court should grant certiorari and put an end to this manufactured loophole.

Full Brief: Day v. Henry

The post Day v. Henry: Legal protections for interstate shipment of alcohol appeared first on Reason Foundation.

Source: https://reason.org/amicus-brief/day-v-henry-legal-protections-for-interstate-shipment-of-alcohol/