More on the Commerce Clause

 One of my favorite podcasts, More Perfect, just came out with a podcast on the Commerce clause that I found particularly interesting given our discussion in class. I'm linking the podcast below - it's a really interesting listen!

The commerce clause itself is shockingly short - just 16 words. For reference - this is the entirety of the commerce clause: The US Congress will have the power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."

We learned in class about how the Granholm case (https://en.wikipedia.org/wiki/Granholm_v._Heald for more detail) invoked the Commerce Clause in it's argument, which was at least a small victory for wine shipments against the rigid 3 tier system. I thought it would be interesting to share a bit more context on the commerce clause, as it seems that there could be legal standing for further action on behalf of wineries and the wine industry as a whole (I'm not a legal scholar, and heavily biased wine lover, but still..).

This podcast shed more light on the history of how the commerce clause has been used. The first major case that invoked the commerce clause was Gibbons v. Ogden - essentially saying that the commerce clause prevents states (NY in this case) from discriminating against other states' companies' use to favor local companies. In this case, NY was regulating the use of their port such that out of state shipping companies either couldn't use the port or had to pay massive tariffs in order to support a NY based company. This seems like a pretty straightforward application in 1824.

The next case they bring up was in 1942, and expands the use of the commerce clause quite a bit. For background, the US was in the middle of the great depression and the dust bowl, and in order to support the economy, Congress began regulating the wheat market. They guaranteed the price of wheat, and capped farmers at farming 11.1 acres of wheat (so as to not flood the supply with the guaranteed price).

Filburn was a farmer in Ohio who grew all sorts of things, including wheat. He grew his allotted 11.1 acres to sell, then a few more (well, quite a few more) acres to feed the animals on his farm. A government official inspected his farm, and fined him for the additional acres. Stating that these acres were for private use, and not for sale on the market, Filburn sued the federal government.

Now, since we've all taken micro here at the GSB I think we understand why the government wanted to regulate this guy. If every farmer just grew the wheat they needed in addition to what they sold instead of buying it on the market, many big buyers (aka farmers with animals to feed) wouldn't buy wheat and the government wouldn't be able to effectively regulate the market. That being said, this was one of the first times (according to the podcast, I'm not a legal historian myself) that the government regulated private conduct in this way. Some argued that if the government could regulate wheat grown for private consumption, could they not regulate the dress a mother and child sewed together? Or even prosecute for child labor? Stay tuned for how this applies to to the ACA at the end..

The government won, and we're past the Marshall court era. This decision expanded the commerce clause's power a fair deal, but nothing compared to what's to come in the Warren court.

Then in 1964, the commerce clause saw a whole new arena - civil rights. In 1964 many restaurants were still segregated, even after the passage of the Civil Rights Act of 1964. For whatever reason (not the job of this post to go into...), integration of restaurants and other establishments just wasn't happening in many places. Katzenbach v. McClung saw Ollie McClung, the owner of a barbecue joint in Birmingham sued for not serving African-American customers in the dining room (only through the take-away business). How does this connect to the commerce clause? The primary two arguments were as follows: 1) This was not a local business, it was an interstate one and thus subject to regulation under the commerce clause. While Ollie's may think they are local shop, they buy most of their meat from a company that sources from all over the country. Their salt? Ketchup? Same thing. Their product is created from a long chain of interstate commerce. 2) By refusing to serve customers of a certain race, these establishments significantly hindered interstate commerce by restricting flow of certain people from state to state.

This raises two questions for me in regards to wineries and the 3 tier system. First of all, is there a case to be made that by not allowing wineries to distribute in a more direct manner, that the 3 tier system is inhibiting interstate commerce of the inputs of wine that are not local grapes? Specifically, could it be argued that the 3 tier system is forcefully reducing production of wineries and therefore reducing how much they would engage in interstate commerce if they could produce more? (Admittedly a bit of a stretch, but hey - look at Katzenbach v McClung!). Second, if the commerce clause in McClung is essentially saying "you can't restrict service/sales to certain groups, that will impede the free flow of interstate travel and interstate commerce", could that not be said too for out of state winery visitors who want to purchase and ship wine home from that winery? Okay, I'm clearly stretching my legal training, which is entirely via podcast, but the parallels were interesting nonetheless.

For what it's worth, though, it seems the commerce clause is losing some steam with more conservative contemporary court constructions. This use of the commerce clause was again revisited in regards to the ACA - does the commerce clause have the ability to compel a private citizen to participate in commerce (via the individual mandate)? This is ever so slightly nuanced from Filburn.

Here's the episode for those interested! http://www.radiolab.org/story/radiolab-presents-more-perfect-one-nation-under-money/

The Napa Valley Castle - Castello di Amorosa

This past weekend, I had the opportunity to spend some time catching up with my folks over dinner. My father, quite the amateur wine enthusiast, wanted to know just about everything we had covered in this class. When discussing themes covered by guest lecturers, the concept of the three-tier distribution system sparked quite the extended conversation. My father was under the impression that the wine we were drinking that night (La Castellana by Castello di Amorosa) had been imported from Italy and sold at the family's Napa Valley "sister" vineyard, without the use of a distributor.

Though made in the Italian style, the wine was actually produced in the Napa Valley and was sold primarily onsite compliments of the relatively new direct to consumer legislation discussed in class. After clearing up the confusion and reading up more on the history of the winery, it turns out the most interesting component of this story was not the wineries' (lack of) importing capabilities, but rather the grandness of the winery structure itself.

Castello di Amorosa started as a passion project of its owner, Dario Suttui, whose grandfather emigrated from Italy in the late 1800s and established a winery in the San Francisco Bay Area, V.Suttui. Dario purchased the hundred-seventy acre plot of lot in Napa Valley that became Castello di Amorosa in the early 1990s with the intention of re-planting vineyards to support existing operations at V.Suttui.

Compliments of his Italian heritage and penchant for medieval architecture, Dario Suttui quickly changed his mind and set out to build something unique to his family – an authentic Italian winery in the Napa Valley. To inform his designs, he spent months surveying structures across the Italian countryside, including castles, vineyards, and wine cellars, some dating back to the early 12^th and 13^th centuries. As his travels increased, so did his ambitions with the project. What was originally intended to be an 8,500 square foot Tuscan winery quickly ballooned into a 121,000 square foot castle.

Over the span of thirteen years, Suttui imported master builders, architects, and craftsmen from the Old World to design the structure in partnership with American contractors. The cellars, which occupy the majority of the square footage of the structure (roughly 80,000 square feet), took up the majority of this construction time (10 years), as Suttui sought to create production and aging facilities as authentic to the Old World style as possible. 

Additions to the castle’s façade, including a full dry moat, fortified walls, towers, and loggias, though not impacting the winemaking processes themselves, were added to complete the unique feel of the structure and property.

Though Dario at times had to sell cheap vintages of his wine to fund some of the construction efforts, strict authentic Italian winemaking processes have been re-enforced since completion of the winery project that have led to incredible ratings (>90) on the vast majority of their vintages.

I highly recommend checking out Castello di Amorosa on your next trip to the Napa Valley if you're interested at all in the Old World Style of wines (the 2012 Cab was fantastic). If you share Suttui's passion for craftmanship, check out the full history of the project here.

K&L Wine Merchants

Professor Rapp has previously mentioned K&L in class, and I wanted to write a bit more about it because it's a store I went to a few times in San Francisco and was consistently impressed by its quality.

First, I was surprised by their selection of older-vintage wines at affordable prices, particularly for Bordeaux and certain Napa cabs. I previously thought drinking older wine was only for fancy people -- those who purchased wine at auction, or stored vintages themselves for a long time. If you're interested in trying out older wine, K&L seems like a good place to start.

Second, I was impressed by the selection and quality of champagnes K&L offered. I previously thought that drinking "nice" champagne meant paying a lot for a brand like Dom Perignon or Crystal,  but K&L seems to offer many interesting vintage champagnes for a lot cheaper than those brands.

Third, I felt that there was a strong commitment to wine education at the store. Rather than being consistently upsold on product, salespeople I've interacted with consistently steered me to wines both slightly below and slightly above my initial price point, and helped me discover interesting new regions and varietals. They also offer wine storage on-site, for folks who may not have enough space, or the right conditions, to store wine in the Bay Area.

Fourth, although K&L only has physical stores in the Bay Area and Los Angeles, they offer a pretty well-designed website and affordable shipping rates to customers in other areas. I'd be curious what their split of wine sales is between online and in-store.

Two other interesting tidbits about wine shipping: first, the USPS will not ship alcohol under any circumstances, so K&L only uses FedEx and UPS. Second, it is a little more expensive to ship champagne with K&L than other types of wine (about $0.50/bottle or $6/case). I'm not sure whether this has to do with the size/shape of champagne bottles, or the conditions needed to properly ship champagne -- this may be the topic of the next blog post!