The Supreme Court held that Tennessee’s statutory scheme which required a two-year durational-residency for the issuance of an initial retail liquor store license violated the Commerce Clause. Persons and companies wishing to operate retail liquor stores required applicants for an initial license to have resided in the state for the prior two years, requiring an applicant for renewal of a license to reside in the state for ten consecutive years, and requiring any corporation seeking to obtain a license to have all of its stockholders as residents of the state. Two businesses which did not meet these requirements applied for licenses and the Tennessee Wine and Spirits Retailers Association (Association) threatened to sue the Tennessee Alcoholic Beverage Commission (Commission) if it granted the licenses.
The Commission’s Executive Director filed a declaratory judgment action in state court to settle the question of constitutionality. The case was removed to federal district court which found the requirements unconstitutional. While the state chose not to appeal, the Association took up the mantle and appealed to the Sixth Circuit. The Sixth Circuit affirmed the district court ruling and held that the statute violated the Commerce Clause. The Association further appealed only with respect to the initial two-year residency requirement. The Court affirmed and held that the statute did violated the Commerce Clause and was not protected by the Twenty-first Amendment, which grants states a wide berth in discretion with respect to regulation of alcohol. The Court held that the Twenty-first Amendment did not allow states to violate the nondiscrimination principle and that protectionism was not a legitimate purpose shielding state alcohol laws from violating interstate commerce laws.