A Southern California craft distillery that produces about 75,000 gallons of spirits annually is suing New York state officials over a new law that restricts out-of-state distilleries’ ability to sell their products directly to New York consumers.
The Obscure, a distillery in Los Angeles that was founded during the Covid pandemic, filed the federal lawsuit Wednesday in the Southern District of New York, naming the New York State Liquor Authority and several authority officials as defendants. Attorneys with nonprofit constitutional rights advocacy organization, the Pacific Legal Foundation, are representing The Obscure distillery in a bid to strike down the New York statute as an illegal impediment to interstate trade.
Under the New York law, The Obscure could ship its products directly to New York residents via its website or orders from tourists who have visited the Los Angeles distillery only if California offered New York distilleries the same access to its markets.
“Unfortunately for The Obscure, California has a similar discriminatory and unconstitutional law,” the lawsuit states.
As a result, California distilleries cannot ship their products directly to customers in New York, or vice versa.
“This is exactly the type of trade war that the founders sought to prohibit when they cast aside the Articles of Confederation in favor of the Constitution and its Interstate Commerce Clause,” the complaint states. “Such anti-competitive bans on interstate commerce are plainly unconstitutional.”
The plaintiff is urging the court to declare the New York law in violation of the U.S. Constitution and to put in place a permanent injunction to prevent New York officials or liquor authority employees from enforcing the statute. The Obscure is also seeking reimbursement for attorney fees and legal costs of the lawsuit.
After being in business for five years, the distillery expects to have 30,000 visitors in the year 2025 alone. The tourists include New Yorkers who enjoy their distillery tours so much they would like Obscure spirits shipped to their homes, according to the complaint.
The distillery does have other avenues to sell its products in New York, but those options are financially less appealing, according to the plaintiff.
“While The Obscure could sell through an importer (which can then sell to a wholesaler), selling spirits in New York through an importer and wholesaler raises The Obscure’s cost of doing business, because importers and wholesalers charge significant fees for their services,” the complaint says.
“Laws that treat businesses differently based on location are discriminatory and unconstitutional,” Jeff Jennings, a lawyer for the Pacific Legal Foundation, said in a statement emailed to the Southern California Record. “By allowing in-state distilleries privileges that out-of-state distilleries don’t have, New York has created an unfair trade barrier, violating the Constitution’s Commerce Clause.”
Jennings acknowledged that California has the same restrictions on out-of-state distilleries as New York, but he said the lawsuit could lead to a more open and dynamic distillery industry market for all Americans.
“... Two wrongs don’t make a right, and everyone loses in these protectionist standoffs,” Jennings said. “The bottom line is that laws treating businesses differently based on their location are unconstitutional.”