Washington Breweries Sue the state of Oregon alleging discrimination
On July 26th 2022 three Washington breweries filed a lawsuit against the State of Oregon alleging unlawful discrimination against them that violates the U.S. Constitution. The complaint is an attempt to overturn Oregon state rules that prohibit out-of-state breweries to self-distribute or ship their own beer direct to consumers in the state. Washington has no similar laws, and many Oregon breweries enjoy the ability to cross state lines and sell their beer without aligning themselves with a third party wholesale company.
The lawsuit has wider implications and could impact the competitiveness and viability of small breweries over the entire country who would be interested in shipping beer directly to their fans in Oregon.
Vancouver, Washington’s Fortside Brewing, and Seattle’s Mirage Beer, joined Burlington’s Garden Path Fermentation in the 2-count complaint filed in United States District Court in Portland called Garden Path Fermentation v. Brown Case No. 3:22-cv-01086. The suit was shepherded by Justin Leigh, co-owner of Goldendale, Washington farmhouse brewery Dwinell Country Ales, and a practicing lawyer who will serve as an expert witness when the lawsuit goes to court.
Justin Leigh (center front) of Dwinell Country Ales, with Fortside Brewing crew
Leigh is also an active member of the Washington Brewers Guild’s Legislative Affairs Committee, and has devoted considerable effort to modernize that states Direct-to-Consumer rules. He is now taking the fight to Oregon as an advocate for small breweries like his own, and the three others involved in the lawsuit. Leigh says he understands the value of guilds, but that it’s understandably not their priority to lobby for small brands or out of state competitors.
“I considered lobbying as a method of achieving legislative change, but determined that challenging the allegedly unconstitutional laws through the Court system as a more efficient and effective way to achieve change,” says Leigh who identified the commerce clauses that he believed the state was in violation of, and brought them to the attention of Granholm v. Heald. Attorneys Robert Epstein and James Tanford of Epstein Seif Porter & Beutel notably litigated the Granholm case before the Supreme Court, along with their associate, Alexander Avtig, and local counsel Judith A. Parker of the J.A. Parker Law Firm LLC.
Garden Path Fermentation co-founder Ron Extract
Washington’s highly regarded farmhouse brewery Garden Path Fermentation briefly flirted with Oregon distribution in 2019, but is now the lead plaintiff in the case. Owner Ron Extract is known for his wild yeast driven beers, coolship fermentations, and small batch meads which have developed a strong cult following, and the chance to get them into the hands of his fans by shipping direct as well as loosening alcohol laws was an opportunity he relished.
“For any state to grant legal rights or privileges to in-state businesses, while denying those same rights or privileges to businesses in other states is a direct violation of the Commerce Clause of the U.S. Constitution,” says Extract. “With the opportunity to take a stand against such practices, we were eager to do so.”
The lawsuit alleges current Oregon law is in violation of Article 1, Section 8, Clause 3 of the United States Constitution, known as the “Commerce Clause” which grants Congress the authority to regulate interstate commerce. The clause has developed into a legal doctrine, sometimes referred to as the “Dormant Commerce Clause,” which includes a nondiscrimination principle that individual states are prohibited from enforcing laws that discriminate against, or unduly burden, interstate commerce according to the plaintiffs. Even though the 21st Amendment of the Constitution, which repealed Prohibition, allowed states wide latitude to regulate alcohol sales, the U.S. Supreme Court’s ruling in Granholm v. Heald (2005) established the principle that states could not favor their own alcohol industries.
One might ask why Washington state breweries should be afforded the same privileges as tax paying Oregon brands who work within the system, or argue that each state should have the legislative freedom to control how and when alcohol is distributed within their borders. Both Extract and Leigh contend that it is not only unconstitutional but is an unfair business practice that stymies competition and penalizes them even if they wish to pay for the privilege to sell their products in Oregon.
“We also pay taxes and licensing fees in Oregon,” says Extract, “and would gladly pay whatever additional fees Oregon brewers are required to pay for the rights to self-distribute and to sell our products directly to Oregon consumers.”
Leigh adds “When out-of-state breweries sell their beer into Oregon (through a wholesaler), the same $2.60 per bbl excise tax applies to that incoming product. As a result, the State of Oregon still receives the revenue raising benefit of the excise tax on out-of-state beer.”
As an example, a Washington brewery would need to be a licensed distributor, or likely sign a wholesale agreement with a licensed Oregon distributor who would take a percentage to sell their kegs in the state. Meanwhile Portland’s own Ruse Brewing is able to sell their own beer at their new Ruse Crust Collective location across state lines in Vancouver, Washington without using a distributor.
“Oregon brewers will always have an advantage selling beer in Oregon,” says Extract, and this wouldn’t change that. “The change we seek would at least give Washington producers the opportunity to compete on a level playing field, even if they're doing so with the inherent disadvantage of lacking the "nativist" appeal of our in-state counterparts.”
There are no damages sought in Garden Path Fermentation v. Brown. Rather, the plaintiffs are requesting the court declare statutes ORS §§ 471.200 and 471.221 that regulates who can and cannot self-distribute, and ORS § 471.282 and OAR 845-006-392 which regulates the same for direct to consumer shipping, as both being unconstitutional.
Justin Leigh of Dwinell Country Ales
“The Court may strike portions of the existing law or kick it back to the legislature to make the necessary updates in accordance with the Court's decision,” says Leigh. “This lawsuit may take 3-5 years to litigate, but we are going to win. There's really no question. The State of Oregon can't overcome what's called "strict scrutiny" That is, because Oregon's laws are, on their face, discriminatory, the Court will apply the strict scrutiny test, thereby shifting the burden to Oregon to prove that the Oregon legislature passed the laws in question to further a "compelling governmental interest," which must be narrowly tailored to achieve that interest. Oregon can't meet this evidentiary burden.”
Individuals may read the Complaint by visiting the U.S. District Court’s website: ord.uscourts.gov.