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Judge overturns N.Y. wine shipping ban

Internet wine sellers win a courtroom victory when a federal judge rules that a New York state law banning wine shipments from out-of-state wineries to residents is unconstitutional.

Internet wine sellers won a courtroom victory Tuesday, when a federal judge ruled that a New York state law is unconstitutional.

In what is viewed as a test case, U.S. District Judge Richard Berman struck down a state law banning wine shipments from out-of-state wineries to New York state residents.

"The court concludes that the New York ban on the direct shipment of out-of-state wine is unconstitutional," Berman wrote in a 32-page opinion.

Tuesday's decision comes as a procession of courts grapples with whether to permit criminal sanctions aimed at out-of-state businesses that ship alcohol into certain states. Courts have approved such bans in Indiana and Michigan, while other courts have ruled against them in Virginia and North Carolina, and a challenge to a Florida law is in flux.

"Any winery that is set up to do Internet commerce will be able to--if we ultimately prevail here--ship to consumers in New York," said Steve Simpson, an attorney at the libertarian Institute for Justice (IJ), a public-interest law firm that brought the lawsuit.

IJ is representing the Lucas Winery in Lodi, Calif., which sells wine over the Internet, and the Swedenburg Winery in Middleburg, Va.

"This is a great opinion," Simpson said. "It's a huge boon to free trade. The judge made clear that New York can't exercise its power under the 21st Amendment as a pretext for protectionism. He didn't buy the notion that the states and wholesalers put forward that there is any temperance or tax justification."

The 21st Amendment of the U.S. Constitution says that shipping alcohol into a state "in violation of the laws thereof, is hereby prohibited." But Judge Berman said that the state law violates the Constitution's Commerce Clause by slapping undue burdens on out-of-state shippers.

A spokesman for the New York attorney general's office, which is defending the law, would not say whether the state would appeal. "We have not made any determination at this time. We have received the court's decision and we are reviewing it at this time."

Beer and wine distributors in New York state back the law, which grants them a profitable monopoly--markups are in the 25 percent range--on selling out-of-state alcohol.

IJ argued that wineries that are too small to draw the attention of a distributor, which can carry only a limited number of labels, are out of luck. The law says that "no alcoholic beverages shall be shipped into the state" unless sent to a licensed distributor.

A Justice Department appropriations bill, recently signed by President Bush, permits people physically visiting an out-of-state winery to have wine shipped to them at home.

Judge Berman said he would not rule yet on whether to strike down the law in its entirety or find another approach, and set a hearing for Dec. 5 to hear arguments on that point.