Supporters of interstate shipping of wine from producers to consumers see their cause as a contest between David and Goliath: mom-and-pop wineries and connoisseurs of the grape vs. New York, Michigan and powerful liquor wholesalers.
But when the Supreme Court hears arguments in the case on Tuesday, the little guys will have a heavyweight in their corner, too: billionaire Jess Jackson, 74, the founder of the ninth-largest wine producer in the United States, Kendall-Jackson Wineries.
Virginia winemaker Juanita Swedenburg is one of the parties to the suit seeking to overturn laws barring direct interstate wine sales.
(Tracy A. Woodward -- The Washington Post)
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Through a nonprofit organization, the Coalition for Free Trade, Jackson and other California winemakers who espouse economic freedom -- and hope to move more product -- have raised and spent hundreds of thousands of dollars supporting the court challenges. The coalition hired big-name legal advisers including former Whitewater independent counsel Kenneth W. Starr and former Stanford law school dean Kathleen M. Sullivan. Sullivan will argue part of the case before the justices.
"Jess Jackson carried a lot of weight out there. He sits atop Kendall-Jackson, which along with Gallo is one of the big boys," said James A. Tanford, a law professor at Indiana University who filed the first lawsuit in 1998 and works closely with the Coalition for Free Trade. "When he speaks, people in the California wine business listen."
As the role of Jackson and his allies shows, the wine case is not only a clash of constitutional principles, but also an effort by businesses to win in court what they were denied in state legislatures.
This is a variation on a recent theme at the Supreme Court. In 2002, the health insurance industry asked the court to strike down state laws giving patients an independent review of benefits denials. The court said no. But in 2004, the insurers persuaded the court to strike down state laws that created a right to sue managed-care companies for medical malpractice.
Jackson keeps a low profile and holds no formal position in the Coalition for Free Trade; he declined a request for an interview. But people familiar with the case describe him as a key player behind the legal effort that has led to Tuesday's argument.
Retail wine sales total about $20 billion per year, according to MKF Group, an economic consulting firm in St. Helena, Calif. The top three producers account for 60 percent of wine sold, but in recent years small, family-operated wineries have proliferated. The number of wineries in the United States has gone from 500 to 800 in 1975 to well over 2,000 now, according to the Federal Trade Commission. Wineries have opened in all 50 states.
Yet the wine trade is governed by a regulatory system from the 1930s.
The 21st Amendment, which repealed Prohibition in 1933, gave states the power to tax and control the flow of alcoholic beverages within and across their borders. Most set up a "three-tier" system: a state-licensed wholesaler brought in beer, wine and spirits; state-licensed retailers sold them to customers; and customers drank.
Over time, the system has given rise to a consolidated wholesale business dominated by a few companies that control producers' access to liquor store shelves.
But in the late 1990s, some small winemakers began selling over the Internet. For high-end wineries too small to crack the wholesalers' distribution networks, such sales were a way to maintain customers who had come in contact with them, often on vineyard tours.
Wholesalers saw these sales, still a tiny percentage of the total market, as a threat to the three-tier system. Fearing what would happen if bigger producers got into the act, the wholesalers lobbied state legislatures for a crackdown.
All told, 24 states -- including New York and Florida, the second- and third-largest wine-consuming states, after California -- ban direct shipping from out of state. In five states, including Maryland and Florida, it is a felony.
