Virginia ABC Plenary Power is disrupting legal DTC wine sales

When an Authority acts as a hearing office, judge, jury, and appeals court against itself, you should be alarmed

The Virginia ABC just pulled the nuclear option. In a desperate attempt to protect Virginia wholesalers and preserve its own control, the agency invoked its so-called “plenary power”: a legal claim of unlimited authority used to overturn its own ruling that favored a California winery’s right to ship as a fulfillment facility.

Think about that: an agency acting as judge, jury, and appellate court against itself. It’s a power move born of fear, not law, and it should alarm anyone who believes in fair commerce or basic checks and balances.

What is Plenary Power?

For those following this ongoing saga, you already know I’ve been documenting the VA ABC’s ongoing crusade against direct shipping. In this process, I’ve been subject to their horrible interpretation of Virginia consumer rights and the overriding desires of their state legislators. The VA ABC, the “enforcement” agency, continues to undermine their state regulations in favor of their own interpretations.

Under the 21st Amendment, states can regulate alcohol within their borders. But the VA ABC has gone further, trying to dictate how businesses operate outside their borders. That’s not regulation. That’s complete overreach.

When the VA ABC created their state DTC permit, it was meant to provide an alternative to the three-tier system, and it worked, which did not please the wholesalers. Because the VA ABC can’t rewrite the law, they’ve instead chosen to weaponize interpretation, inventing new barriers that don’t exist in statute, and that even their own lawyers can’t defend.

Cornell Law defines plenary power as “complete power over a particular area with no limitations”. That definition should concern you. No state agency should operate without checks and balances.

The VA state legislature created a mechanism for wineries to legally ship DTC. The courts agree with this definition. The VA ABC disagrees and is in control of enforcement. That’s what makes the VA ABC plenary power scary. They go unchecked and so become very dangerous in precedent setting.

How the Virginia ABC interpret their own code

“Va. Code§ 4.1-101 (A) provides:

The Board of Directors of the Authority is vested with control of the possession, sale, transportation, distribution, and delivery of alcoholic beverages in the Commonwealth, with the plenary power to prescribe and enforce regulations and conditions under which alcoholic beverages are possessed, sold, transported, distributed, and delivered so as to prevent any corrupt, incompetent, dishonest, or unprincipled practices and to promote the health, safety and welfare, convenience, and prosperity of the people of the Commonwealth.”
* bold items added for emphasis

How the ABC Board interpret this:

“The Board is of the opinion that plenary power bestows on this Board complete power over a particular area with no limitations.”

Let that sink in. A state agency is openly claiming unreviewable power and then using that power to overrule its own legal findings when they do not like their own administrative law judge’s decision.

Now Virginia takes it even a step further.

Virginia’s Code grants the ABC Authority the power to control the possession, sale, transportation, distribution, and delivery of alcoholic beverages within the Commonwealth.

Nowhere in the law does it say the ABC can exercise those rights outside Virginia’s borders. Yet that’s exactly what they’re trying to do. They are trying to apply their rules to businesses outside the state where they have no authority.

And let’s not forget, this is the same agency that misplaced $1 million worth of product and couldn’t reconcile $1.6 billion in inventory. They define “incompetent” in their own mission statement and then meet it.

Even though the ABC believes in its so-called plenary power, it’s still limited by one small but important thing, the U.S. Constitution. The ABC’s authority is constrained by both state and federal law, and it can be restricted or expanded only by the Virginia General Assembly or overturned in court. Plenary power is not absolute; it’s broad, but it isn’t boundless. Judicial review exists for exactly this reason, and that’s where the ABC is headed next.

Here is where things get really weird and wild.

The Virginia ABC is the Authority overseeing the operations of the liquor distribution in the state.

The Board is considered the “Hearing Officer” of the Virginia ABC.

The Board can delegate their role as the Hearing Officer to an Administrative Law Judge (Hearing Office) to review and opine on specific hearings. In essence the Hearing Officer and Board are one in the same.

What does this mean? The VA ABC acts as both the regulator and its own judge.

In the latest case, a California winery argued it could act as a fulfillment center under California law. The Board, by way of the Hearing Officer, found for the California winery, reviewed the case and ruled in favor of the winery.

ABC’s own attorneys didn’t like that result, so they appealed their own agency’s decision. On appeal, they requested to present additional evidence. The hearing officer allowed it, reviewed it, and then reaffirmed his original decision for the California winery.

Again, not liking their own decision, the agency’s attorney appealed. This time they claimed there were “outside concerns” about the Hearing Officer’s decision. Outside concerns? From someone outside of the agency that has so much leverage that they can have the agency appeal again?

Well, that person or entity soon made themselves known.

Virginia Wholesalers Association quickly appeared filing an Amicus Brief supporting the ABC’s position. The “outside concerns” were the wholesalers. The same group who has been fighting against direct sales from the start.

What happened next was terrible. After a quiet backroom huddle between the Board and the ABC attorneys that are appealing the case, the Board (remember they are also the hearing officer who found for the CA Winery), decide to invoke its Plenary Powers rule and override its own decision.

That’s not regulation. That’s clear corruption. Good job there is still judicial review.

In its role as an administrative law judge, the Board holds hearings, issues subpoenas, and hears testimony in disciplinary matters, contested applications, and franchise issues.

So “in its role as an administrative law judge” it also gets to appeal its own findings. Failing a successful appeal against itself, it can use its plenary powers to overturn its own administrative law judge’s decisions. But when an agency can both issue a ruling and then appeal, and then use absolute power to reverse it, the term “judge” loses all meaning.

I have written many times about our dealings with the Authority with the hope that common business sense would prevail, which I define as providing consumers choice, following the laws related to reporting, payment of taxes, adhering to quantity limits, and not selling to underage people. However, it appears impossible to overcome the influence of the Wholesaler Associations in the state of Virginia who argue process over the substance of the law.

The legislation states that the ABC’s power is to be used for the “public purpose” of promoting the health, safety, and welfare of Virginia’s people. This provides a framework within which the ABC must exercise its authority. 

But blocking direct shipments by licensed out of state direct shippers does not protect Virginians. It protects wholesalers.

The Authority is not returning the expected financial results to the state. It is failing to keep order in its own house by losing product and failing to manage its own system. And it is wasting state funds pursuing the building of barriers for the state that obstructs the welfare of Virginia’s people.

Conclusion

Sadly, Virginia is not alone. It’s just the most visual at the moment of the broader trend of incumbents using old laws to block modern commerce, while hiding behind the facade of public safety and the 21^st Amendment. All this is done for a few large businesses at the expense of thousands of American family businesses and millions of consumers.

The good news? Judicial review still exists. And that’s exactly where this is headed next. The courts have already sided with direct shippers before and they’ll likely do so again. We won’t stop fighting the good fight because we know we are on the right side. Consumers deserve better. Wineries deserve better. And Virginia deserves better.

The wine industry is at a crossroads and if you think we can turn this ship around under the current iron curtain of the three tier system then you are mistaken. It’s been an interesting 90 year experiment. Let’s now see if direct sales (both consumer and trade) is the way forward.