U.S. Supreme Court to Decide on Discriminatory State Laws Against Newcomers

Doug Ketchum outside of his Memphis liquor store, Kimbrough Wine & Spirits. (Photo by Karen Pulfer Focht)

JOHN E. KRAMER, INSTITUTE FOR JUSTICE

Arlington, Va.—Doug and Mary Ketchum moved to Memphis in 2016 with the dream of buying a business that would give them more time with their 32-year-old daughter, Stacie, who has been severely handicapped since an early age, and who doesn’t have many years left to live, according to their doctor.

But, thanks to the actions of a politically powerful private cartel, the Ketchums’ dream has turned into a nightmare, and they now struggle to find time to spend with each other, let alone with their daughter.

A legal fight centered on whether the Ketchums may own and operate their Memphis business—a liquor store—is now the subject of a U.S. Supreme Court case that will be argued on January 16, 2019. The case, Tennessee Wine and Spirits Retailers Association v. Blair, examines Tennessee’s law that requires someone to reside in the state for two years before they can receive a liquor license and 10 years before that license can be renewed. The case is expected to have major implications for laws that discriminate in favor of in-state special interests and against newcomers to a state, like the Ketchums.

Yesterday, the Institute for Justice (IJ), which represents the Ketchums, filed its merits brief with the U.S. Supreme Court documenting how enforcing the law defended by the Tennessee liquor cartel would violate the constitutional rights of Doug and Mary Ketchum.

The Ketchums had no choice but to move out of Utah. Their daughter, Stacie, suffers from cerebral palsy and one of her lungs collapsed when a temperature inversion in the Salt Lake valley severely worsened the air quality there. To save Stacie’s life, they had to find another place to live.

The Ketchums moved to Tennessee because the region offered cleaner air and a better quality of life for Stacie, and they learned of a rare opportunity to purchase an historic liquor store called Kimbrough Wines & Spirits. The store was frequented by legends like Johnny Cash, who used to record in Sun Studio, just a mile-and-a-half down the road. Becoming business owners would offer the Ketchums the flexibility necessary to spend as much time as they need to care for their daughter during the precious remaining years they have left together. In addition, it would supply them with a stable income to provide for themselves and their family.

Two months after they applied for the retail liquor license with the Tennessee Alcoholic Beverage Commission, the Ketchums left Utah behind and moved to Tennessee.  The Tennessee Alcoholic Beverage Commission routinely granted retail liquor licenses to applicants, even if they were from out of state. True, the laws on the books prohibited anyone who has not resided in Tennessee for the period of two years from getting a license, and anyone who hasn’t resided there for the period of 10 years from renewing it. But the laws were so patently unconstitutional that even the Office of the Tennessee Attorney General admitted as much in two opinions it issued on the subject. Relying on those opinions, the Commission’s staff recommended that the Ketchums’ application be granted.

But then the Tennessee Wine & Spirits Retailers Association got involved.

The Tennessee Wine & Spirits Retailers Association is a special interest group that exists to protect cartel members from competition, including keeping newcomers to the state from selling alcohol. It threatened to sue the Commission if the Ketchums’ application—and an application of one other candidate, Total Wine—were granted. To prevent this from happening, the Commissioner himself went to court, asking it to resolve the issue of whether the durational residency requirements were constitutional. In an ironic twist, it is the Tennessee Wine & Spirits Retailers Association—and not the State of Tennessee—that is now defending this law before the U.S. Supreme Court. Clearly demonstrating how in-state liquor interests are seeking to preserve their cartel, the Retailers Association has hired its own private outside counsel —rather than the Tennessee Attorney General—to defend its position before the U.S. Supreme Court. The Attorney General never so much as filed a brief with the High Court to defend this law, which his office has twice recognized is unconstitutional.

Doug Ketchum said, “If you want to understand how powerful the liquor retailers lobby is here in Tennessee, consider this:  I can run for Governor in Tennessee after residing here for only seven years, but I can’t legally renew my liquor license until I’ve lived here for ten years. That’s ridiculous. It is a purely anticompetitive power play by a cartel designed to keep out newcomers.”

Mary Ketchum said, “We moved to Tennessee to own the liquor store, which would give us more time with Stacie, and so Doug and I could be there for her 24/7. But because of this legal fight brought on by the retail liquor cartel, Doug has had to take on a second job. The only time I get to see him is when we work together at the store on Sundays. We moved to Tennessee so we could have more time with Stacie, but now we have even less time together. It is exhausting.”

Institute for Justice Senior Attorney Michael Bindas summarized the legal arguments at the heart of IJ’s defense of the Ketchums: “A state may not discriminate against someone because they come from another state; once an American gains residency in any state, he or she may exercise all of the rights of any other resident of that state. The state cannot arbitrarily restrict those rights merely to protect in-state special interests, yet that is exactly what the Tennessee Wine & Spirits Retailers Association is demanding. Americans have a fundamental right as citizens of this nation to earn an honest living in any state regardless of their state of origin. Being able to move freely from state to state is not only constitutionally enshrined in the Fourteenth Amendment, it has had the practical benefit of making America one of the most dynamic societies and marketplaces in the world thanks to our freedom of movement and commerce.”

There is a new name for private special interest organizations like the Tennessee Wine & Spirits Retailers Association that rent out government power and then use that power to keep out competition, thus maximizing their own profits. These private interests are called bottleneckers.

“The Tennessee Wine & Spirits Retailers Association is doing what all such bottleneckers do:  it is trying to use government power to create an artificial bottleneck that protects its members from competition, so they can rake in monopoly profits and not have to work as hard to compete,” said Institute for Justice Attorney Anya Bidwell. “But that is not what government power is supposed to be used for. The power of government should be used to protect the rights of the Ketchums, not the special private interests of bottleneckers.”

IJ President Scott Bullock concluded, “A state’s ability to regulate alcohol sales under the Twenty-First Amendment is not unlimited; a state cannot, for example, discriminate against newly arrived residents and out-of-staters who want to lawfully sell alcohol in a state merely to protect in-state interests.”

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[NOTETo arrange interviews on this subject, journalists may call John Kramer, IJ’s vice president for communications, at (703) 682-9320 ext. 205. More information on the case is available at:  https://ij.org/case/tennessee-wine-and-spirits-retailers-association-v-blair/.]


John E. Kramer is Vice President for Communications at the Institute for Justice. Used with permission of the Institute for Justice.