The Expanded Concept of Facial Discrimination in the ...

University of South Dakota School of Law

From the SelectedWorks of David Day

2006

The Expanded Concept of Facial Discriminationin the Dormant Commerce Clause DoctrineDavid Day, University of South Dakota School of Law

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THE EXPANDED CONCEPT OF FACIALDISCRIMINATION IN THE DORMANT

COMMERCE CLAUSE DOCTRINE

DAVID S. DAYt

I. INTRODUCTION ................................... 498II. THE "DIRECT WINE SALES" CASE: THE

BACKGROUND .................................... 500A. THE DEVELOPMENTS IN THE AMERICAN WINE

INDUSTRY ............................................ 500B. THE MICHIGAN AND NEW YORK REGULATORY

SCHEMES ........................................ 501III. DORMANT COMMERCE CLAUSE DOCTRINE:

THE CONSTITUTIONAL BACKGROUND .......... 502IV. THE DISCRIMINATION TIER AND THE

GRANHOLM DECISION ........................... 503A. AN OVERVIEW OF THE GRANHOLM DECISION ....... 504B. THE GRANHOLM COURT'S "DISCRIMINATION"

ANALYSIS ............................................ 505C. THE TWENTY-FIRST AMENDMENT ANALYSIS ........ 506D. THE APPLICATION OF THE DISCRIMINATION

STANDARD ........................................... 506E. THE DISSENTING OPINIONS .......................... 506F. SUMMARY ....................................... 507

V. THE IMPACT OF GRANHOLM ON DORMANTCOMMERCE CLAUSE DOCTRINE ................. 507A. GRANHOLiMS FACIAL DISCRIMINATION ANALYSIS ... 507

1. Facial Discrimination and Exceptions ........ 507a. "Exceptions" and Dormant Commerce

Clause decisions ......................... 508b. "Exceptions" in other constitutional

doctrines ................................. 509

t Professor of Law, The University of South Dakota Law School. I want to thankSharon Red Deer, Jeremy Jehangiri, Sara Castle, Jennifer Zupp, Jessica Zupp, DeenaTownley, and Josh Houy for their research and editorial assistance. The research forthis Article was partially supported by a grant from the USD Law School Foundation.All remaining mistakes or errors, and the opinions expressed, are my responsibility.Professor Day has recently served as counsel, at trial and on appeal, for the plaintiffs ina case raising a number of issues, including the standards for facial discrimination,involving the dormant Commerce Clause doctrine (as well as other federal constitu-tional claims). See S.D. Farm Bureau, Inc. v. Hazeltine, 202 F. Supp. 2d 1020 (D.S.D.2002), affd, 340 F.3d 583 (8th Cir. 2003). The views expressed herein are not necessa-rily the views of the plaintiffs.

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498 CREIGHTON LAW REVIEW [Vol. 40

2. Facial Discrimination and Reciprocity ........ 511B. GRANHOLAS DISCRIMINATION-IN-EFFECT

ANALYsIs ............................................ 5111. The Discriminatory Effects Evidence .......... 5122. The Use of Discriminatory Effects Evidence:

Facial Discrimination By DiscriminatoryEffect ........................................ 513a. Discriminatory effects as an

independent holding ..................... 513b. Discriminatory effects as evidence of

facial discrimination ..................... 513VI. CONCLUSION ..................................... 515

I. INTRODUCTION

The dormant Commerce Clause doctrine is one of the main instru-ments in American Constitutional Federalism.1 Since at least 1970,the doctrine has been a two-tiered interpretative model. 2 On the up-per tier, the State regulatory schemes, which are considered "discrimi-natory," are evaluated at a very high level of scrutiny; some decisions,in fact, call this a "per se" level of scrutiny.3 On the second tier of this

1. See ROBERT F. NAGEL, THE IMPLOSION OF AMERICAN FEDERALISM 75 (2001);David S. Day, The Rehnquist Court and the Dormant Commerce Clause Doctrine: ThePotential Unsettling of the "Well-Settled Principles", 22 U. TOL. L. REV. 675, 676 (1991).

2. See DAN T. COENEN, CONSTITUTIONAL LAW: THE COMMERCE CLAUSE 253 (2004);MARK TUSHNET, THE NEW CONSTITUTIONAL ORDER 229 n.98 (2003); LAURENCE H. TRIBE,AMERICAN CONSTITUTIONAL LAW 1031 (3d ed. 2000); Norman R. Williams, Why CongressMay Not "Overrule" The Dormant Commerce Clause, 53 UCLA L. REv. 153, 160-61(2005). While the two-tiered model is the central structure of the modern dormant Com-merce Clause doctrine, there are some other dimensions to the complete doctrine. Cer-tain cases fall within "exceptions" to the two-tiered model. See COENEN, supra, at 287-314. The major subdoctrine is the "market participant exception." Reeves, Inc. v.Stake, 447 U.S. 429, 440 (1980). Some scholars, and Justice Scalia, would recognize a"subsidy" exception. COENEN, supra, at 224, 297-301. None of these "exceptions" hasbearing on the Granholm analysis, and they are beyond the scope of this Article. Overthe course of the doctrine's history, the Court has certainly used other interpretive mod-els besides the modern two-tiered approach. See generally, Noel T. Dowling, InterstateCommerce and State Power, 27 VA. L. REV. 1 (1940) (analyzing the history of dormantCommerce Clause jurisprudence); Jeremy R. Jehangiri, Note, The Dowling Thesis Re-visited: Professor Dowling and Justice Scalia, 49 S.D. L. REV. 867 (2004) (analyzing thehistory of dormant Commerce Clause jurisprudence).

3. See Or. Waste Sys., Inc. v. Dep't of Envtl. Quality, 511 U.S. 93, 99 (1994)("strictest scrutiny"); Granholm v. Heald, 544 U.S. 460, 493 (2005) ("exacting stan-dard"). The burden of persuasion, in a discrimination tier case, is on the State to show"the discrimination is demonstrably justified." Chem. Waste Mgmt., Inc. v. Hunt, 504U.S. 334, 344 (1992). Under the recent case law, especially since the late 1980s, thelevel of scrutiny applied on the discrimination tier has been a form of "strict scrutiny."Much like in the 1960s and 70s for equal protection, strict scrutiny is "fatal in fact" eventhough not in theory. Gerald Gunther, Foreword: In Search of Evolving Doctrine on aChanging Court: A Model for a Newer Equal Protection, 86 HARv. L. REV. 1, 18 (1972).Indeed, the State has won only one discrimination tier case in the modern era - at least


2007] DORMANT COMMERCE CLAUSE DOCTRINE 499

doctrine, State regulatory schemes, which are considered to be "non-discriminatory," are evaluated under a standard less than strict scru-tiny.4 The second tier standard is the "undue burden" standard,which is most frequently identified with the Pike v. Bruce Church,Inc.5 decision from 1970.6 While there are certainly doctrinal contro-versies about the exact level of scrutiny on the two tiers, there alsodoes not appear to be any serious dispute that the undue burden stan-dard is more than a rational basis standard. 7

The last term of the Rehnquist Court had a doctrinally significantdormant Commerce Clause case. Granholm v. Heald8 turned out tobe a very close case; it was decided on a five-to-four basis. Much of thecommentary on Granholm will focus on the argument that theTwenty-first Amendment conferred upon the States the power to dis-criminate against interstate commerce regarding alcohol. 9 As inter-esting as this argument may be, it is not the major concern here. ThisArticle will focus on the Court's decision that the regulatory schemesat issue constituted "facial" discrimination against interstate com-merce. This Article is a review of Granholm and particularly an ex-amination of its analysis of the facial discrimination holding. TheGranholm decision is an expansive example of the facial discrimina-tion doctrine, and it reflects the continuing tension between judicial

when the Court actually applied the "strictest scrutiny." See Maine v. Taylor, 477 U.S.131, 151-52 (1986). Under these circumstances, States will always seek to fight dor-mant Commerce Clause claims on the nondiscrimination tier, under the lower standardof "undue burden." Challengers, in contrast, will always seek to have the statutoryscheme viewed as 'discriminatory."

4. See Bendix Autolite Corp. v. Midwesco Enters., Inc., 486 U.S. 888, 891 (1988)(applying the undue burden standard); Camps Newfound/Owatonna, Inc. v. Town ofHarrison, 520 U.S. 564, 582-83 n.16 (1997) (discussing the undue burden standard).

5. 397 U.S. 137 (1970).6. David S. Day, Revisiting Pike: The Origins of the Nondiscrimination Tier of the

Dormant Commerce Clause Doctrine, 27 HAMLINE L. REV. 45, 46-47 (2004). For presentpurposes, the undue burden standard will be considered a form of "intermediatescrutiny."

7. Fulton Corp. v. Faulkner, 516 U.S. 325, 345 (1996). The only way that a statecan secure the deferential rational basis standard is to fit the case into one of the doc-trine's "exceptions." COENEN, supra note 2, at 287-306.

8. 544 U.S. 460 (2005).9. Leading Cases, Twenty-first Amendment, 119 HAxv. L. REV. 307, 310-17 (2005);

Marc Aaron Melzer, Comment, A Vintage Conflict Uncorked: The 21st Amendment, theCommerce Clause, and the Fully-Ripened Fight Over Interstate Wine and Liquor Sales,7 U. PA. J. CONST. L. 279, 279-304 (2004) (history of Granholm); Aaron Nielson, RecentDevelopment, No More 'Cherry-Picking. The Real History of the 2 1st Amendment's § 2,28 HARV. J.L. & PUB. POL'Y 281, 285-94 (2004); Lisa Lucas, Comment, A New Approachto the Wine Wars: Reconciling the Twenty-first Amendment with the Commerce Clause,52 UCLA L. REV. 899, 914-35 (2005).


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protection of interstate commerce and the pro-State jurisprudence ofthe Rehnquist Court.' 0

This Article will provide, in Part II, an overview of the Granholmdecision." Then, in Part III, this Article will review the recent historyof the discrimination tier.12 In Part IV, this Article will discuss theplace of Granholm in the discrimination tier doctrine. 13 In Part V,this Article will discuss some of the implications of the Granholm deci-sion for dormant Commerce Clause doctrine generally.' 4

II. THE "DIRECT WINE SALES" CASE: THE BACKGROUND

A. THE DEVELOPMENTS IN THE AMERICAN WINE INDUSTRY

As in any dormant Commerce Clause case, an understanding ofthe case requires careful consideration of the State regulatory schemebeing challenged and the nature of the economic activity being regu-lated. 1 5 Most States regulate the sale or importation of wine througha three-tiered system, requiring separate licenses for producers,wholesalers, and retailers. 16 In recent years, however, the Americanwine industry has undergone a significant change in at least two re-spects. First, the number of wineries, especially small wineries, hasexploded. There are now over 3,000 wineries in the United States. 17

A second simultaneous development is that the wholesale market forwine has greatly consolidated in recent years. The number of licensedwholesalers under the three-tiered licensing scheme has dropped from1600 to 600.18 The "increasing winery-to-wholesaler ratio" was eco-nomically problematic for many of the small wineries since they didnot produce enough wine, nor have sufficient consumer demand fortheir new wines, to make it economical for the now smaller number ofwholesalers to carry their products.' 9 In these economic circum-stances, many small wineries started to "rely on 'direct shipping' to

10. See Richard H. Fallon, Jr., The "Conservative" Paths of the Rehnquist Court'sFederalism Decisions, 69 U. CHI. L. REV. 429, 432 (2002) (stating the dormant Com-merce Clause is somewhat the "exception").

11. See infra notes 15-29 and accompanying text.12. See infra notes 30-39 and accompanying text.13. See infra notes 40-61 and accompanying text.14. See infra notes 62-110 and accompanying text.15. See DAVID CRUMP ET AL., CASES AND MATERIALS ON CONSTITUTIONAL LAw 213

(4th ed., LexisNexis 2002) (noting that dormant Commerce Clause cases are fact-intensive).

16. Granholm v. Heald, 544 U.S. 460, 466 (2005). Michigan and New York wereStates with such three-tiered schemes. Granholm, 544 U.S. at 466.

17. Id. at 467.18. Id.19. Id. Wholesalers are obviously profit oriented and will carry only those wines

that have a substantial consumer demand or where the bulk purchase and resale makesit favorable for the wholesalers. Melzer, 7 U. PA. J. CONST. L at 308.

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reach new markets." 20 The increasingly common resort to e-com-merce on the Internet was also a factor underlying the Granholm v.Heald21 case. 2 2 At the time of the Granholm decision, twenty-sixStates allowed "direct shipping of wine with various restrictions."23

Thirteen of the twenty-six States had "reciprocity laws," which al-lowed direct shipment from the wineries outside the State to consum-ers, as long as the State of origin provided similar nondiscriminatorytreatment to wines from the reciprocal State.2 4

B. THE MICHIGAN AND NEW YORK REGULATORY SCHEMES

The Michigan and New York statutory schemes regulated directwine sales to consumers. The State statutory schemes shared manycommon features. In general terms, both Michigan and New York al-lowed in-state wineries to make direct sales to in-state consumers, butthey did not allow out-of-state wineries to make direct sales to in-stateconsumers.

25

There were, however, a number of differences between the Michi-gan and New York schemes. The Michigan statutory scheme was acomplete ban, but it provided an "exception" for the forty in-state win-eries. 26 Because of this exception, in-state wineries were able to makedirect shipments to Michigan consumers, but out-of-state wineriescould not.2 7 Michigan's discriminatory treatment against out-of-statewineries was, for a dormant Commerce Clause case, unusuallytransparent.

While the New York regulatory system also treated out-of-statewineries differently than in-state wineries, New York had a slightlydifferent regulatory scheme than Michigan's complete ban. The pri-mary means in New York for an out-of-state winery to engage in directsales was for the out-of-state winery to establish a "branch factory,office, or storeroom within the state of New York."28 This was knownas the "physical presence" requirement. The physical presence provi-sion was, in effect, an "exception" to New York's ban on direct sales toin-state consumers. An out-of-state winery could sell directly to NewYork consumers (the nation's second largest wine market) only if itwere to establish an in-state facility. The problem, of course, was that

20. See Granholm, 544 U.S. at 468.21. 544 U.S. 460 (2005).22. See Granholm, 544 U.S. at 467, 489-90; Melzer, 7 U. PA. J. CONST. L at 279.23. Granholm, 544 U.S. at 467.24. Id. Reciprocity agreements are often treated as an indication of facial discrimi-

nation. Id. at 473; C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383,390 (1994).25. Granholm, 544 U.S. at 466.26. Id. at 469. The Court used the term "exception." Id.27. Id. Michigan required out-of-state wineries to sell through a wholesaler. Id.28. Id. at 470 (quoting N.Y. ALco. BEV. CoNT. LAw § 3(37) (McKinney 2005)).



establishing an in-state facility was prohibitively expensive for manysmall wineries. 2 9

III. DORMANT COMMERCE CLAUSE DOCTRINE: THECONSTITUTIONAL BACKGROUND

Because the judicial scrutiny on the discrimination tier is sub-stantially more severe than the nondiscrimination tier, the crucial in-quiry in a dormant Commerce Clause case is whether a particularState regulatory scheme constitutes "discrimination."30 In determin-ing whether the State regulation is discriminatory, the Court has rec-ognized three basic types of discrimination. 3 1 First, a State regulationcan be facially discriminatory.3 2 Second, a facially neutral regulationmay be discriminatory in purpose.33 Finally, as a third form, a Stateregulatory scheme may be discriminatory in effect.34 While any of thethree forms is sufficient, there is a significant advantage to a facialdiscrimination theory. The Court's leading critic of the dormant Com-merce Clause doctrine - Justice Scalia - will accept the doctrine's limi-tation on State authority only when he finds that the State regulation

29. See id. at 475 (stating cost would be "prohibitive").30. Or. Waste Sys., Inc. v. Dep't of Envtl. Quality, 511 U.S. 93, 99 (1994); Fulton

Corp. v. Faulkner, 516 U.S. 325, 331 (1996).31. See COENEN, supra note 2, at 224; Jennifer L. Larsen, Note, Discrimination in

the Dormant Commerce Clause, 49 S.D. L. REV. 844, 854-65 (2004). As demonstrated bythe Granholm decision, these three types of discrimination can co-exist in any givencase, and the types may, in some cases, overlap. The three types of discrimination arecertainly not hermetically sealed categories, but the three types are useful analyticaltools. See infra notes 90-110 and accompanying text.

32. See Or. Waste Sys., Inc., 511 U.S. at 99. There are other facial discriminationdecisions relying on a textualist approach. Perhaps one of the closest to Granholm isSouth Central Bell Telephone Co. v. Alabama, 526 U.S. 160 (1999). Alabama's franchisetax allowed in-state corporations to control the amount of tax because the tax for in-state corporations were based only on the par value of the stock. S. Cent. Bell Tel. Co.,526 U.S. at 162. For out-of-state corporations, the tax was calculated based on severalfactors, and out-of-staters did not have the same control over the amount of franchisetax paid as in-state entities. Id. The Court unanimously found that the Alabamascheme was "facially" discriminatory. Id. at 169. See also Fulton Corp., 516 U.S. at 347(facial discrimination).

33. See W. Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 194 (1994) (stating theMassachusetts' pricing order's "avowed purpose and its undisputed effect are to enablehigher cost Massachusetts dairy farmers to compete with lower cost dairy farmers inother States"); Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 271 (1984) ("[It is undis-puted that the purpose of the exemption was to aid ... [local] industry.").

34. Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 353 (1977) (alterna-tive holding); C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 386 (1994);Brannon P. Denning, Correspondence, The Dormant Commerce Clause Doctrine: Prole-gomenon to a Defense, 88 MiNN. L. REV. 1801, 1810 (2004); COENEN, supra note 2, at231-39.

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is facially discriminatory. 35 Thus, to capture Justice Scalia's vote, theCourt must use a facial discrimination theory.

Besides these types of discrimination, the dormant CommerceClause doctrine has recognized at least four different modes of dis-crimination: (1) tariff-type regulations;3 6 (2) protectionist regula-tions;37 (3) isolationist regulations; 38 and (4) State regulationsimposing an extraterritorial effect.3 9 Regulations with characteristicsfitting any of these modes can give rise to a judicial determination of"discrimination." For present purposes, these modes are not immedi-ately significant because the Michigan and New York regulationswere obviously protectionist.

IV. THE DISCRIMINATION TIER AND THE GRANHOLMDECISION

In Granholm v. Heald,40 both the New York and Michigan regula-tory systems were challenged on dormant Commerce Clausegrounds. 4 1 The lower courts actually split on the dormant CommerceClause issues.4 2 The cases were consolidated at the U.S. SupremeCourt level. In a five-to-four decision, the Supreme Court struck downboth of the State regulatory schemes. 4 3

35. Leading Cases, 119 HARv. L. REV. at 315 n.64; Day, 27 HAMLINE L. REV. at 19n.21. Moreover, as a practical matter, lawyers would prefer a facial discrimination the-ory since it does not require the difficult (and expensive) factual record necessary forpurposeful discrimination or discrimination-in-effect. Facial discrimination decisionsare, in other words, "easy cases," at least relative to purposeful discrimination or dis-crimination-in-effect cases. See Brannon P. Denning, Cuno and the Court: The Case forMinimalism, 4 GEO. J.L. & PUB. PoL'Y 33, 34 (2006).

36. See W. Lynn Creamery, Inc., 512 U.S. at 193 ("The paradigmatic example of alaw discriminating against interstate commerce is the protective tariff or customsduty....").

37. See, e.g., Dean Milk Co. v. City of Madison, 340 U.S. 349, 356 (1951).38. Wyoming v. Oklahoma, 502 U.S. 437, 455 (1992); Kassel v. Consol. Freight-

ways Corp., 450 U.S. 662, 666 (1981) (plurality opinion).39. Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511, 521 (1935) (Cardozo, J.); Brown-

Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 576 (1986); Healy v.Beer Inst., Inc., 491 U.S. 324, 328 (1989); Day, 22 U. TOL. L. REV. at 688-89 (discussingHealy).

40. 544 U.S. 460 (2005).41. Granholm v. Heald, 544 U.S. 460, 471 (2005).42. In Heald v. Engler, 342 F.3d 517 (6th Cir. 2003), affd sub nom. Granholm v.

Heald, 544 U.S. 460 (2005), the court of appeals struck down the Michigan scheme. TheNew York regulatory scheme, in contrast, was upheld in Swedenburg v. Kelly, 358 F.3d223 (2d Cir. 2004), rev'd sub nom. Granholm v. Heald, 544 U.S. 460 (2005). TheSwedenburg decision was based, in part, on the use of the undue burden standard of thenondiscrimination tier. Swedenburg, 358 F.3d at 239. The two conflicting decisionswere consolidated at the Supreme Court and decided in Granholm.

43. The Court, in an opinion by Justice Kennedy, concluded that "[t]he currentpatchwork of laws . . . is essentially the product of an ongoing, low-level trade war."Granholm, 544 U.S. at 465, 473. The Court further concluded that allowing the Statesto "discriminate against out-of-state wine invites a multiplication of preferential trade


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A. AN OVERVIEW OF THE GRANHOLM DECISION

The Granholm decision has three basic parts. The first part - andthe focus here - addressed the issue whether the State regulatoryschemes would be considered "discriminatory."44 The Court's analysisof the discrimination issue was the predicate for the other basic partsof the Granholm decision. The second part of the majority's opinionfocused on the question of whether the Twenty-first Amendment gavethe States the authority to discriminate against interstate commercein the liquor industry.4 5 Since the Granholm majority concluded thatthe scope of the Twenty-first Amendment did not permit regulatorydiscrimination, the third part of the decision addressed the issue ofwhether the regulatory schemes could satisfy the standard appliedunder the discrimination tier of the doctrine. 46 The Court concludedthat, even though the States may have had legitimate safety concerns,they failed the discrimination tier standard because various nondis-criminatory alternatives were available.4 7

areas destructive to the very purpose of the Commerce Clause." Id. (quoting Dean MilkCo. v. City of Madison, 340 U.S. 349, 356 (1951)).

44. Granholm, 544 U.S. at 466-76.45. Id. at 476-89.46. Id. at 489-93. The Granholm majority was somewhat inconsistent about just

what it was using as the standard. While citing to Maine v. Taylor, 477 U.S. 131 (1986),the Granholm Court called the test for the discrimination tier "this exacting standard."Granholm, 544 U.S. at 493. At another point, however, the Court, citing to New EnergyCo. v. Limbach, 486 U.S. 269, 278 (1988), described the standard as "whether eitherState's regime 'advances a legitimate local purpose that cannot be adequately served byreasonable nondiscriminatory alternatives.'" Granholm, 544 U.S. at 463. This lan-guage - requiring only a "legitimate local purpose" does not seem to be "exacting." Theterm "legitimate" is normally associated with the rational basis standard. Indeed, thelanguage from the New Energy decision seems a far cry from "strict scrutiny." While adetailed examination of this issue is beyond the scope of this commentary, I would sug-gest that the majority's purported reliance on the language from New Energy might beunderstood as an effort to hold Justice Scalia - the author of New Energy and the long-standing critic of dormant Commerce Clause doctrine - as part of the five-Justice major-ity. See Day, 22 U. TOL. L. REV. at 684 (New Energy, a facial discrimination case, wasthe only time Justice Scalia wrote a dormant Commerce Clause decision for the Courtstriking down a State regulation). See also Healy v. Beer Inst., Inc., 491 U.S. 324, 344(1989) (Scalia, J., concurring in part and in the judgment) (differing from majority byfinding facial discrimination).

47. Granholm, 544 U.S. at 492. The States offered "two primary justifications":restricting any access by minors to alcoholic beverages and facilitating tax collection.The Granholm majority conceded that such justifications were "not wholly illusory," butthat these "regulatory objectives can be achieved without discriminating against inter-state commerce." Id. at 491. In other words, since the States failed the means test ofthe discrimination tier, the majority did not examine the substance of the profferedjustifications.


20071 DORMANT COMMERCE CLAUSE DOCTRINE 505

B. THE GRANHOLM COURT'S "DISCRIMINATION" ANALYSIS

The Granholm Court's analysis began by asking whether the reg-ulatory schemes were "discriminatory."48 The Court's discriminationtier analysis implicitly started with the now familiar assumption thatdiscrimination can be shown as facial discrimination, discriminationin purpose, or discrimination-in-effect. 4 9 With respect to both theNew York and Michigan regulatory schemes, the existence of theState-created exceptions was a basis for finding that the regulatoryschemes were facially discriminatory. 50

Beyond facial discrimination, however, the Court also found therewas discrimination-in-effect. 5 1 This required, of course, an extensivefactual analysis. In the case of Michigan, for example, the majority'seffect analysis noted that the "two extra layers of overhead increase [d]the cost of out-of-state wines to Michigan consumers." 52

In the case of New York, the Court concluded that the State's"physical presence" exception to the otherwise complete ban was "justan indirect way of subjecting out-of-state wineries, but not local ones,to the three-tier system."5 3 The physical presence requirement inNew York ran up the cost of doing business for out-of-staters, and themajority reasoned that it also increased the costs to consumers in NewYork.5 4 Since out-of-state wines were now more expensive because ofthe physical presence requirement, the Court concluded that the regu-latory scheme actually encouraged New York consumers to buy wineproduced in-state. 55

48. Id. at 466. There was no discussion about whether the state direct wine salesregulatory schemes might survive scrutiny on the nondiscrimination tier. The State ofMichigan raised the issue of the undue burden standard. See Petition for Writ of Certio-rari at 22-24, Granholm v. Heald, 544 U.S. 460 (2005) (No. 03-1116). The State of NewYork also argued that the undue burden (i.e., Pike) standard should apply. See Brief ofNew York Respondents at 41-42, Granholm v. Heald, 544 U.S. 460 (2005) (No. 03-1274).The Court completely ignored the issue. This refusal to consider the case under theundue burden standard of the nondiscrimination tier is consistent with the Court's pat-tern ever since 1989. See Day, 27 HAMLINE L. REV. at 48-50 n.22.

49. See COENEN, supra note 2, at 224.

50. Granholm, 544 U.S. at 467 ("explicit discrimination"). At a later point in theopinion, the Court reiterated that the "Michigan and New York laws by their own termsviolate [the anti-discrimination rule of the doctrine]." Id. at 476 (emphasis added).

51. Id. at 466-67.52. Id. at 474. The extra cost to Michigan consumers created by the required extra

overhead was a discriminatory effect.53. Id.

54. See id. at 474-75 ("additional steps that drive up the cost of their wine.").

55. Id. at 474.



C. THE TWENTY-FIRST AMENDMENT ANALYSIS

After analyzing the discrimination issue, the Granholm opinioncontained an extended discussion about the role of the Twenty-firstAmendment as it relates to the States' possible immunity against dor-mant Commerce Clause analysis.5 6 In essence, the States argued thatthe Twenty-first Amendment authorized it to "discriminate" againstinterstate commerce regarding alcoholic beverages. The Granholmmajority, however, rejected this proposition. While recognizing thatthe Twenty-first Amendment did give the States regulatory authorityover alcoholic beverages and might even permit a State to go "dry," themajority rejected the theory that the Twenty-first Amendment was de-signed to allow States to discriminate against interstate commerce inthe process of regulating alcoholic beverages.57

D. THE APPLICATION OF THE DISCRIMINATION STANDARD

After concluding that the State regulatory schemes were discrimi-natory, and not immunized by the Twenty-first Amendment, theGranholm majority applied the higher standard from the discrimina-tion tier.5 8 After a generous discussion of the States' asserted inter-ests, the Court struck down both regulatory schemes. The Stateinterests were not sufficiently tailored to satisfy the discriminationtier standard. 59

E. THE DISSENTING OPINIONS

There were two dissents. Justice Stevens' dissent focused onwhat he called the majority's misunderstanding of the history of alco-hol regulation. 60 And, as literally the only member of the Court whomight actually remember the days of the Prohibition, Justice Stevensprovided some moving passages.

The longer dissent, by Justice Thomas, concluded on historicalgrounds that the Twenty-first Amendment allowed the States to dis-

56. Id. at 476.57. Id. at 484-85. See also Leading Cases, 119 HARv. L. REV. at 310-11.58. Granholm, 544 U.S. at 489 (quoting New Energy Co. v. Limbach, 486 U.S. 269,

278 (1988)). The Granholm Court indicated that the burden of persuasion rested on theState: "Our Commerce Clause cases demand more than mere speculation to supportdiscrimination against out-of-state goods." Granholm, 544 U.S. at 492.

59. See Granholm, 544 U.S. at 493 (stating a State's nondiscriminatory alterna-tives must be proven to be "unworkable").

60. Id. at 496-97 (Stevens, J., dissenting). See also Leading Cases, 119 HARv. L.REV. at 311 n.41.

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criminate against interstate commerce.6 1 Neither dissent addressedthe discrimination issue.

F. SuMMARY

In sum, the Granholm decision involved a challenge to a Stateregulatory scheme that adversely impacted interstate commerce inthe wine industry. The Court found that the regulatory schemes werediscriminatory. This led to the application of the rigorous level ofscrutiny from the discrimination tier of the doctrine. This rigorouslevel of scrutiny was "fatal in fact," and the Court struck down theMichigan and New York statutes.

V. THE IMPACT OF GRANHOLM ON DORMANT COMMERCECLAUSE DOCTRINE

The Granholm v. Heald62 decision is important for understandingthe continuing evolution of the discrimination tier of the dormantCommerce Clause. At one level, the Granholm decision seemed to reston both facial discrimination and discrimination-in-effect theories. Itis, in that regard, similar to several recent discrimination tier deci-sions. At a closer level of analysis, however, the Granholm decisionconstitutes an unheralded expansion of the facial discriminationsubdoctrine.

A. GRANHOLM S FACIAL DISCRIMINATION ANALYSIS

1. Facial Discrimination and Exceptions

The facial discrimination holding in Granholm rested on theCourt's conclusion that the regulatory schemes were crafted with "ex-ceptions." The exception in the Michigan scheme was quite transpar-ent: only the forty in-state wineries could ship directly to Michiganconsumers. 6 3 The exception in the New York scheme was more subtle,but no less fatal. New York's winery licensing scheme gave the mostfavorable treatment (i.e., the most direct access to New York consum-ers) to holders of "farm winery" licenses; under New York's regulatoryscheme, only in-state wineries could receive the farm winery license.This "licensing exception" was, therefore, the source of the facialdiscrimination.

6 4

61. Granholm, 544 U.S. at 514 (Thomas, J., dissenting). Justice Thomas wrote forall four dissenters, but he did not directly address the discrimination issue.

62. 544 U.S. 460 (2005).63. Granholm v. Heald, 544 U.S. 460, 469 (2005).64. Granholm, 544 U.S. at 475-76.



a. "Exceptions" and Dormant Commerce Clause decisions

Prior to Granholm, the leading dormant Commerce Clause deci-sion relying on a State's use of "exceptions" established in a regulatoryscheme to determine facial discrimination was Kassel v. ConsolidatedFreightways Corp.6 5 In Kassel, Iowa banned certain double-trailertrucks from Iowa highways, even though all neighboring States al-lowed such trailers.6 6 The Iowa ban, however, contained various ex-ceptions, especially for "border cities" and "farm equipment."6 7 Theseexceptions were at least part of the basis of the Court's conclusion thatthe Iowa ban was a discriminatory scheme aimed at isolationist andprotectionist objectives.68 The Granholm Court's use of exceptionswould seem to be close to Kassel. The Kassel decision was, however, aplurality decision. Its status as authority might accordingly bequestioned.

Another significant decision involving a State regulatory schemeutilizing "exceptions" was Bacchus Imports, Ltd. v. Dias.6 9 TheGranholm majority relied upon Bacchus, 70 and Justice Thomas' dis-sent responded by calling for Bacchus to be overruled. 7 1 As such,Bacchus was important to the development of the facial discrimina-tion doctrine.

The issue in Bacchus was whether a "tax exemption" in a Stateexcise tax constituted facial discrimination. Hawaii imposed a twentypercent excise tax on sales of liquor at the wholesale level of the three-level regulatory scheme. 7 2 Originally, the excise tax was imposed on

65. 450 U.S. 662 (1981) (plurality opinion).66. See Kassel v. Consol. Freightways Corp., 450 U.S. 662, 665 (1981) (plurality

opinion).67. See Kassel, 450 U.S. at 666 (plurality opinion). The Kassel Court referred to

these statutory exceptions as "exemptions."68. Id. at 678 (plurality opinion); Id. at 684 (Brennan, J., concurring in the judg-

ment). The Kassel decision also relied on evidence of isolationist purpose and isolation-ist effect. See id. at 674, 677 (plurality opinion) ("Iowa's law added about $12.6 millioneach year to the costs of trucking companies."). The statutory exceptions, however, werethe basis of the Kassel Court's "facial discrimination" analysis. See also Bacchus Im-ports, Ltd. v. Dias, 468 U.S. 263, 276 (1984). Especially since it was a plurality opinionand because of the plurality's disclaimer, it requires a somewhat expansive reading tosee Kassel as a facial discrimination decision. Kassel, 450 U.S. at 678 n.26 (pluralityopinion). It was certainly possible, in 1981, to read Kassel as only a discriminatorypurpose or discriminatory effect decision. But, after Granholm, Kassel can be seen as afacial discrimination decision as well as a purpose and discriminatory effect decision.There is, of course, a certain amount of synergy in the facial discrimination subdoctrine.

69. 468 U.S. 263 (1984). Both Bacchus and Kassel were pre-Rehnquist Courtdecisions.

70. Granholm, 544 U.S. at 487-88.71. Id. at 524 (Thomas, J., dissenting). Justice Thomas directed his discussion of

Bacchus to the Twenty-first Amendment issues, and not to the Bacchus analysis ofdiscrimination.

72. Bacchus, 468 U.S. at 265.

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20071 DORMANT COMMERCE CLAUSE DOCTRINE 509

all wholesale liquor sales.73 Hawaii, however, subsequently exemptedtwo alcoholic products from the tax: "okolehao," a brandy from an in-digenous Hawaiian plant, and "fruit wine" manufactured in Hawaii. 74

The Court relied on the Hawaii Supreme Court's description of thelegislature's motivation in establishing the exceptions to the excisetax.7 5 The Court determined that "it is undisputed that the purpose ofthe exemption was to aid Hawaiian industry."7 6

The Bacchus Court eventually concluded that "the tax exemptionhere at issue seems clearly to discriminate on its face against inter-state commerce by bestowing a commercial advantage on okolehaoand pineapple wine. . . ."77 However, because of the various argu-ments advanced by Hawaii to justify the tax scheme, the BacchusCourt additionally discussed discriminatory purpose and discrimina-tory effect theories and ruled against the State on both thesegrounds.

7 s

Although Bacchus was a majority decision, its weight as a control-ling authority might be questioned regarding whether a case of facialdiscrimination might be made from the regulatory scheme's use of ex-ceptions. Bacchus, after all, also involved the Court's determination ofdiscriminatory purpose and discriminatory effect. In light of Kasseland Bacchus, however, the Granholm decision will confirm that aState's use of "exceptions" in its drafting of a regulatory scheme willmake the regulatory scheme susceptible to a facial discriminationchallenge. The exceptions, moreover, can be subtle, such as NewYork's winery licensing scheme. Granholm seemingly has establishedthat, even when there might be some dispute about the exceptions, thescope of the exceptions can serve as the basis for finding facial dis-crimination. This is, therefore, a significantly expansive decision re-garding the facial discrimination subdoctrine.

b. "Exceptions" in other constitutional doctrines

The Court's use of exceptions to determine facial discrimination isan expansive notion of the dormant Commerce Clause doctrine. Thejudicial use of exceptions has, however, a number of analogies in otherconstitutional doctrines. The judicial use of exceptions in the dormantCommerce Clause doctrine to characterize the governmental schemeas deserving the heightened scrutiny of the discrimination tier has atleast two counterparts. As explained below, one doctrine with a paral-

73. Id.74. Id.75. Id. at 270.76. Id. at 271.77. Id. at 268 (emphasis added).78. Id. at 273.



lel use of exceptions is Free Speech doctrine; another doctrinal coun-terpart is Free Exercise doctrine.

The first counterpart is the Free Speech doctrine. The modernFree Speech jurisprudence is a two-track doctrine. 79 Government"abridgments" that, on the one hand, are "content-based" are sub-jected to strict scrutiny.80 Government regulations which are "con-tent-neutral," on the other hand, are tested with intermediatescrutiny: either the time, place, or manner standard, or the incidentalregulation standard.8 1 A challenger always wants to have its case an-alyzed in track one (and protected by strict scrutiny).

One of the basic criteria for determination of a content-based reg-ulation is the government's use of exceptions. In the seminal decision,Police Dept. of Chicago v. Mosley,8 2 the Court determined that a Chi-cago ban on picketing near schools was a content-based regulation be-cause the city had created an exception for "labor picketing."8 3 InGranholm, Michigan's exception for the politically-favored in-statewineries is a close parallel to Chicago's exception for the politically-favored labor movement.

The second counterpart is the Free Exercise doctrine. The mod-ern Free Exercise doctrine is also a two-tiered model that, at least insome circumstances, uses "exceptions" to determine the application ofthe higher tier. For example, in Church of the Lukumi Babalu Aye,Inc. v. City of Hialeah,8 4 the city passed an ordinance prohibiting cer-tain methods of animal slaughter. The alleged purposes were preven-tion of animal cruelty and protection of public health. The facialneutrality of this ordinance, however, was undercut by the city's ex-ception for "kosher slaughter." The Court determined, in part fromthe exceptions stated in the text, that the ordinance was a purposefulburden on the group's free exercise of religion and, therefore, subjectto strict scrutiny. 85

79. LAURENCE TRIBE, AMERICAN CONSTITUTIONAL LAW 791 (2d ed. 1988); ERWINCHEMERINSKY, CONSTITUTIONAL LAW, PRINCIPLES AND POLICIES §11.2.1, at 903 (2d ed.2002).

80. Simon & Schuster, Inc. v. Members of the N.Y. State Crime Victims Bd., 502U.S. 105, 118 (1991); Boos v. Barry, 485 U.S. 312, 321 (1988). See Cohen v. California,403 U.S. 15, 24 (1971).

81. See, e.g., Ward v. Rock Against Racism, 491 U.S. 781, 803 (1989); City of Laduev. Gilleo, 512 U.S. 43, 56 (1994). See generally David S. Day, The Hybridization of theContent-Neutral Standards for the Free Speech Clause, 19 ARiz. ST. L.J. 195, 211(1987).

82. 408 U.S. 92 (1972).83. See Police Dept. of Chicago v. Mosley, 408 U.S. 92, 94, 94 n.2 (1972). See also

City of Ladue, 512 U.S. at 51.84. 508 U.S. 520 (1993).85. See Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520,

536-37 (1993) ("A pattern of exemptions . . . contributes to the [religious] gerryman-der."). See generally Richard F. Duncan, Free Exercise and Individualized Exemptions:

510 [Vol. 40



As demonstrated above, judicial interpretation of both the FreeSpeech and Free Exercise doctrines utilize exceptions to determinethat the government's regulation should be tested against the height-ened scrutiny tier. In these doctrines, the exceptions create the infer-ence that the government has acted for an invidious reason and, thus,in violation of the constitutional provision.

In the dormant Commerce Clause doctrine, the exceptions to aregulatory scheme similarly create the inference that the State hasone or more discriminatory objectives: protectionism, isolationism, orextraterritoriality. The judicial use of "exceptions" to determine facialdiscrimination is, therefore, parallel to the Free Speech and Free Ex-ercise doctrines.

2. Facial Discrimination and Reciprocity

There was another dimension to the Granholm Court's facial dis-crimination analysis, although it was suggested only by analogy. TheCourt has often used the presence of state reciprocity agreements as abasis for finding facial discrimination.8 6 In Granholm, the Court dis-cussed the history of wine sale regulation in California.8 7 California'sregulatory scheme involved, at least at one point, reciprocity agree-ments. The Court also analogized the thirteen states with reciprocityagreements to the Michigan and New York regulatory schemes.8 8 Themajority concluded that the Michigan and New York schemes werepart of a "low-level" trade war.8 9

The analogy to reciprocity was, in all likelihood, more importantto the analysis of the New York scheme. In the Michigan scheme, ofcourse, the exceptions were more transparent. The Court's considera-tion of reciprocity agreements, even if only by analogy, is another doc-trinal element in the expanded facial discrimination analysis.

B. GRANHOLfS DISCRIMINATION-IN-EFFECT ANALYSIS

The Granholm decision also found that both the Michigan andNew York schemes had substantial discriminatory effects on inter-state commerce. 90 The majority perceived two types of discriminatory

Herein of Smith, Sherbert, Hogwarts, and Religious Liberty, 83 NEB. L. REV. 1178, 1190(2005).

86. Granholm, 544 U.S. at 473; C & A Carbone, 511 U.S. at 390.87. Granholm, 544 U.S. at 473.88. See id. ("... a reciprocal right in the shipping State.").89. Id.90. This "discriminatory effects" approach drew a sharp response from Justice

Thomas. Justice Thomas declared that the majority's opinion relied on a "confusedmishmash of elite opinion." See Granholm, 544 U.S. at 521 (Thomas, J., dissenting).Criticizing the other side for "elitism" is not a new argument by Justice Thomas. SeeZelman v. Simmons-Harris, 536 U.S. 639, 682 (2002) (Thomas, J., concurring) (criticiz-



effects. The two types of discriminatory effects, when considered cu-mulatively, presented a distinct impact on interstate commerce.

1. The Discriminatory Effects Evidence

The first type of discriminatory effect was the impact of the regu-latory scheme on the out-of-state wineries. In the case of Michigan,the Court concluded that, even if an out-of-state winery could secure a"wholesaler to distribute its wine, the wholesaler's markup wouldrender the shipment through the three-tier system economically infea-sible."9 1 In the case of New York, the in-state "physical presence" re-quirement had the effect of increasing the costs of business for out-of-state wineries. 9 2 The New York licensing scheme also denied the"best" form of license to out-of-state wineries. 93 The Court, accord-ingly, concluded that the economic impact of New York's scheme onout-of-staters was impermissibly protectionist.

The second type of discriminatory effects observed by theGranholm majority concerned the impact of the regulatory schemes onconsumers. For the Michigan case, the Court found that the "two ex-tra layers of overhead increase the cost of out-of-state wines to Michi-gan consumers."9 4 For the New York scheme, the Court alsodiscerned discriminatory impact on consumer prices. 95 The Courtconcluded that both schemes restricted consumer choices and, in ef-fect, promoted in-state wines over out-of-state wines.9 6 Because of therestrictions, consumers had fewer choices and paid higher prices. TheCourt perceived these effects as protectionist and, therefore,discriminatory.

ing the opponents of vouchers as "cognoscenti"). Justice Scalia has frequently relied onan anti-elitism argument to critique the majority. See Romer v. Evans, 517 U.S. 620,636-53 (1996) (Scalia, J., dissenting); United States v. Virginia, 518 U.S. 515, 566-603(1996) (Scalia, J., dissenting). But, to my knowledge, this is the first time elitism wasalso suspect because it was a "mishmash." Of course, the body of dormant CommerceClause doctrine is simply not a "mishmash," elite or otherwise. Jim Chen, Correspon-dence, A Vision Softly Creeping: Congressional Acquiescence and the Dormant Com-merce Clause, 88 MiNN. L. REV. 1764, 1793 (2004).

91. Granholm, 544 U.S. at 468.92. Id. at 474-75. The record indicated that no out-of-state winery had ever quali-

fied for the New York license. Id. at 474. Mere theoretical availability is not enoughunder either tier of the dormant Commerce Clause doctrine.

93. Id.94. Id. Basically, New York required out-of-state wineries to get an extra "certifi-

cate" to engage in direct sales. Id. at 475.95. See id. at 474-75 ("additional steps that drive up the cost of [out-of-statel ...

wine").

96. Id. at 473-75.

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2. The Use of Discriminatory Effects Evidence: FacialDiscrimination By Discriminatory Effect

As discussed above, the Granholm Court relied on evidence of dis-criminatory effect. The issue with respect to the Granholm decision'sanalysis of discriminatory effects is not so much what the Court didwith the discriminatory effects evidence, but how this aspect of thedecision will be read in the future. The Granholm analysis of discrim-inatory effects may be read at least two ways: (1) as an independentalternative holding or (2) as supportive of the facial discriminationholding.

a. Discriminatory effects as an independent holding

The "independent holding" reading of Granholm seems clearly de-fensible. There was ample evidence of discriminatory effects. Sincethe Granholm Court found two types of discriminatory effects in bothState schemes, the Court found a sufficient basis for a discrimination-in-effect holding.

There is, of course, a downside to any discrimination-in-effectstheory. As an independent holding, a discrimination-in-effect theoryrequires a higher degree of judicial intervention than a facial discrimi-nation theory. The Court, for example, must review empirical evi-dence, which was frequently disputed, to determine discriminatoryeffect. In certain circles, especially the chambers of Justices Scaliaand Thomas, the discrimination-in-effect theory is rejected-largelybecause it depends on the heightened judicial intervention. 9 7

b. Discriminatory effects as evidence of facial discrimination

Reading the discrimination-in-effect evidence as supportive of fa-cial discrimination avoids the concern about "activist" (i.e., interven-tionist) judicial review. It therefore avoids the hostility of JusticesScalia and Thomas. This advantage is probably illustrated by JusticeScalia's willingness to join the Granholm majority-without a sepa-rate opinion.

In the later years of the Rehnquist Court, there were several deci-sions where effects evidence was important to the Court's facial dis-crimination analysis. In Fulton Corp. v. Faulkner,98 for example, theCourt determined that a North Carolina tax was facially discrimina-tory.99 The Court relied on evidence of discriminatory effect to deter-

97. Day, 22 U. TOL. L. REV. at 703. For lawyers, a discrimination-in-effect theorypresents the practical (and economic) problem of producing the admissible evidence ofdiscriminatory effect.

98. 516 U.S. 325 (1996).99. Fulton Corp. v. Faulkner, 516 U.S. 325, 333 (1996).



mine facial discrimination.10 0 The Court's reliance was demonstratedby the content of the opinion and by its placement of the discrimina-tory effects evidence in a footnote on the page where the facial dis-crimination holding was announced.101 In the 1997 CampsNewfound / Owatonna, Inc. v. Town of Harrison ' 0 2 decision, moreover,the Court determined that a Maine property scheme constituted facialdiscrimination against interstate commerce. 10 3 In reaching this con-clusion, the Camps Court relied upon evidence of the scheme's dis-criminatory effect.10 4 Camps seemed to present a relatively easytextualist decision, but the majority apparently wanted to reinforceany textual analysis. Relying on the dramatic effects of the schemeapparently helped to defeat the State's arguments that the tax schemewas nondiscriminatory.

10 5

In the 1999 South Central Bell Telephone Co. v. Alabama deci-sion,10 6 furthermore, the Court utilized a facial discrimination theoryto overturn an Alabama franchise tax scheme. Although the Courtmight have relied solely on a textualist approach, the Court bolsteredits analysis by relying on the evidence of discriminatory effect.' 0 7 TheCourt discussed the discriminatory effects evidence in the same para-graph as the textualist analysis.' 0 8

There is, conversely, other case law supporting a "facial discrimi-nation by discriminatory effects" theory. It appears that a lack of evi-dence of discriminatory effect can be detrimental to a facialdiscrimination theory. In Pharmaceutical Research & Manufacturersof America v. Walsh, 109 for example, the challengers' failure to provideevidence of discriminatory effect weighed heavily against the chal-lengers and helped to defeat the claim."10

100. Fulton Corp., 516 U.S. at 333.101. Id. at 333 n.3.102. 520 U.S. 564 (1997).103. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 575-76

(1997).104. Camps, 520 U.S. at 578, 581 n.15.105. Id. at 579, 579-80 n.13.106. 526 U.S. 160 (1999).107. See S. Cent. Bell Tel. Co. v. Alabama, 526 U.S. 160, 169 (1999) ("The tax there-

fore facially discriminates against interstate commerce .... This discrimination isborne out in practice, as the record, undisputed here, shows. . .

108. S. Cent. Bell. Tel. Co., 526 U.S. at 169.109. 538 U.S. 644 (2003).110. Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 669-70 (2003). The

Court also recognized that the lack of evidence of discriminatory effect undercut thechallengers' dormant Commerce Clause claim in American Trucking Ass'ns, Inc. v.Michigan Public Service Commission, 545 U.S. 429, 433-36 (2005). This unanimous de-cision confirms that facial discrimination theories are increasingly interwoven with dis-criminatory effects theories.

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These decisions collectively demonstrate that, in the RehnquistCourt, a holding regarding facial discrimination was frequently bol-stered by reliance on evidence of discriminatory effect. The RehnquistCourt, in other words, had shown a preference for the use of facialdiscrimination theories. As such, the evidence of discriminatory effectis often treated as supportive of facial discrimination rather than as aseparate, independent discrimination-in-effect holding.

In sum, the impact of Granholm's discriminatory effects analysismay be doctrinally significant. The Court's use of effect to find facialdiscrimination is an expansive approach. Especially by considering ef-fects on in-state consumers, Granholm confirms a broader notion offacial-discrimination-in-effect.

VI. CONCLUSION

The discrimination tier analysis of the Granholm decision will beovershadowed, at least in the short run, by the Court's holding regard-ing the scope of the Twenty-first Amendment. The facial discrimina-tion holding, however, is a doctrinally significant development. TheCourt's use of the "exceptions" to find facial discrimination marks anexpansion of this sub-doctrine. Moreover, the Court's reliance on the"discriminatory effects" of the State regulatory schemes to support itsconclusion of facial discrimination confirms a pattern observed in thepast fifteen years of the Rehnquist Court. 1 '

Taken together, the Court's focus on textual exceptions and on thedisproportional effects of the regulatory schemes marks a substantialexpansion of the facial discrimination doctrine. The Granholm deci-sion suggests that, in future cases, the challengers will have an easiertime establishing the existence of State discrimination against inter-state commerce. n 2 With an expanded theory of facial discriminationnow recognized, the commercial interests and entities involved in in-terstate commerce will have greater access to heightened judicialscrutiny. This, in turn, means that such challengers are more likely toprevail.

Facial discrimination is an easier theory for challengers than pur-poseful discrimination or discrimination-in-effect. The Granholm de-cision expanded the availability of facial discrimination. Under thesecircumstances, Granholm is not just a loss of State authority overcommerce in alcoholic beverages, but it also portends decreased Stateauthority over other aspects of interstate commerce."i 3

111. See, e.g., Fulton Corp., 516 U.S. at 333 n.3; S. Cent. Bell. Tel. Co., 526 U.S. at169; Or. Waste Sys., Inc., 511 U.S. at 106.

112. Granholm, 544 U.S. at 524-25 (Thomas, J., dissenting).113. Cf. Leading Cases, 119 HAv. L. REV. at 317.


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