Brown-Forman Distillers Corp. v. Mathews

• Citation: 435 F. Supp. 5
• Decision Date: 31 August 1976
• Docket Number: Civ. A. No. 76-0042-0.
• Court: United States District Courts. 6th Circuit. United States District Court of Western District of Kentucky
• Parties: BROWN-FORMAN DISTILLERS CORP. et al., Plaintiffs, v. F. David MATHEWS, Secretary of Health, Education and Welfare, et al., Defendants.

435 F. Supp. 5

BROWN-FORMAN DISTILLERS CORP. et al., Plaintiffs, v. F. David MATHEWS, Secretary of Health, Education and Welfare, et al., Defendants.

Civ. A. No. 76-0042-0.

United States District Court, W. D. Kentucky, Owensboro Division.

August 31, 1976.

Bert T. Combs, E. L. Galloway, Tarrant, Combs & Bullitt, Louisville, Ky., Charles N. Brower, White & Case, Washington, D.C., for plaintiffs.

George J. Long, U.S. Atty., Western District of Ky., Louisville, Ky., for defendants.

MEMORANDUM OPINION

JAMES F. GORDON, Senior District Judge.

Plaintiffs¹ in this action seek a declaratory judgment that neither the Food and Drug Administration, hereinafter FDA, nor the Department of Health, Education and Welfare possesses the jurisdiction or authority to require or to regulate the labeling² of alcoholic beverages. They also seek injunctive relief to prohibit the application to such beverages of the labeling provisions of the Federal Food, Drug and Cosmetic Act of 1938, 21 U.S.C. § 301, et seq., hereinafter the 1938 Act, and related regulations promulgated by FDA.

American government in the twentieth century has grown far beyond the initial three branches of government envisioned and established in Articles I through III of the United States Constitution. This growth has largely been the result of the rapid multiplication of government bodies called administrative agencies.

Administrative agencies oversee or regulate in the areas which have been delegated to them. Theoretically each agency has its own particular area of concern and its jurisdiction is limited to that area. Sometimes, however, the body delegating authority to the agency writes the agency's enabling act in such a manner that there is an actual or apparent overlap of jurisdiction over a particular subject matter between two agencies. Therein lies this case.

This litigation represents several questions including whether one administrative agency, the Bureau of Alcohol, Tobacco and Firearms, hereinafter BATF, has exclusive jurisdiction to regulate the labeling of alcoholic beverages or whether such labeling regulation rests concurrently with the BATF and the FDA. Amazingly this particular query has taken nearly forty years to reach the federal courts. The reason for this delay is readily apparent once the factual background concerning this case is known.

To understand fully the significance of recent events involving the parties in this lawsuit it is necessary to travel back to 1935. In that year Congress passed legislation known as the Federal Alcohol Administration Act, 27 U.S.C. § 201, et seq., hereinafter called the 1935 Act. There is no question but that this legislation extends authority to regulate labeling of alcoholic beverages to the Secretary of the Treasury, who in turn has delegated that authority to the BATF. In 1938 Congress enacted the Federal Food, Drug and Cosmetic Act, supra. Under the 1938 Act Congress granted the FDA affirmative labeling jurisdiction over "food." "Food" was defined, in part, as "articles used for . . . drink for man . . .." 21 U.S.C. § 321(f). Given the expansive definition of food the FDA believes that it has concurrent jurisdiction with the BATF to regulate the labeling of alcoholic beverages.

Recognizing an apparent potential for conflicting and redundant regulatory action over the labeling of alcoholic beverages arising from the seemingly overlapping jurisdictional grants set forth in the 1935 and 1938 Act, the FDA published on April 11, 1940 (only four months after the effective date of 21 U.S.C. § 343(i) requiring for the first time ingredient labeling of all "food"), Trade Correspondence No. 224, wherein the agency declared:

"While we have indicated that cordials, liquluers, wine and whiskey are subject to the Act the 1938 Act, we will continue as in the past to leave to the Federal Alcohol Administration the regulation of the labeling of these alcoholic beverages under the more specific Federal Alcohol Administration Act.

"While beer is classed as food under the Act and would, therefore, be subject to the adulteration and misbranding provisions of that Act when shipped within its jurisdiction, we expect to continue our policy of not duplicating the work of the Federal Alcohol Administration with respect to the labeling of such products. That Administration, as you know, is charged with the enforcement of specific legislation dealing with alcoholic beverages."

1 Toulmin, Law of Food, Drugs, and Cosmetics, Section 109 at 157 (1963).

For thirty-five years, from 1940 until 1975, the FDA never took any significant affirmative steps to regulate the labeling of alcoholic beverages. During this same period BATF was actively engaged in regulating all aspects of the labeling of alcoholic beverages. See 27 C.F.R. Parts 4, 5 and 7.³

On October 8, 1974, FDA and BATF entered into a Memorandum of Understanding confirming that BATF would continue to have the primary responsibility for the regulation of the labeling of alcoholic beverages. 39 Fed.Reg. 36127. This Memorandum of Understanding also stated that the BATF in consultation with FDA was developing comprehensive ingredient labeling regulations with respect to distilled spirits, wine and malt beverages pursuant to the 1935 Act which regulations would be in consonance with the 1938 Act and regulations promulgated thereunder. These proposed regulations with respect to ingredient labeling were published by BATF on February 11, 1975. 40 Fed.Reg. 6349-6360.

For six days BATF held public hearings with respect to the proposed ingredient labeling regulations during which the agency, in accordance with the notice and comment provisions of the Administrative Procedure Act, 5 U.S.C. § 553, considered the views of industry representatives, consumer groups and nonindustry experts, including in excess of 1000 written comments. Having extensively studied the question BATF in early November, 1975, withdrew its ingredient labeling proposals. The agency based its withdrawal on five explicit findings:

. . . First, that it appears the cost of ingredient labeling to the industry, and ultimately to the consumer, would be excessive in relation to the benefits received.

* * * * * *

Second, the content of alcoholic beverages is extensively regulated at the present time.

* * * * * *

Third, the uniqueness of manufacturing processes of alcoholic beverages is such that it makes labeling of their ingredients of little value and, in certain cases, even misleading.

* * * * * *

Fourth, representations were made that ingredient labeling requirements would hinder the on-going multilateral trade negotiations in expanding international trade.

* * * * * *

Finally, ingredient labeling is supported by only a small segment of the public.

* * * * * *

In view of the foregoing, we have concluded that the public interest would not be served by the adoption of the proposed amendments at this time.

40 Fed.Reg. at 52613.

Within weeks of the BATF's decision to withdraw its notice of proposed rulemaking, the FDA acted. The FDA issued a ruling announcing that "because of BATF's decision not to require ingredient labeling the memorandum of understanding with BATF has been terminated by FDA." The notice then stated:

This notice advises manufacturers and other affected persons that FDA will take regulatory action to enforce the food labeling requirements of the Federal Food, Drug, and Cosmetic Act, and regulations promulgated thereunder, in respect to alcoholic beverages shipped in interstate commerce after January 1, 1977.⁴

40 Fed.Reg. at 54455. Prior to the publication of this decision by FDA, no notice or opportunity to comment were accorded to any interested persons.

Given the above-stated action by the FDA the plaintiffs believe they are confronted with two varying and conflicting regulatory regimes established by two different administrative agencies pursuant to two different statutes; hence, they filed suit for declaratory and injunctive relief.

The case is now before us on cross-motions for summary judgment.⁵ To analyze properly the question whether the BATF has exclusive jurisdiction over regulating labeling of alcoholic beverages or whether such jurisdiction is held concurrently with the FDA, the Court must examine both the legislative history of the 1935 and 1938 Acts and the statutes themselves.

Immediately after the repeal of the Prohibition Amendment, the 18th Amendment to the United States Constitution, in 1933, by the 21st Amendment, President Roosevelt created by executive order the Federal Alcohol Control Administration, hereinafter FACA, which was to regulate the liquor industry until Congress could enact new legislation. Exec. Order No. 6474 (Dec. 4, 1933). The Supreme Court, however, held unconstitutional the National Industrial Recovery Act of 1933, 48 Stat. 195, under which the FACA had been created. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570 (1935).

Recognizing the absence of a regulatory body for the alcoholic beverage industry, Congress took immediate action and commenced work on legislation which eventually was signed into law on August 29, 1935, only three months after the Schechter decision.

The Department of Agriculture, of which FDA was a part, actually recommended to Congress that special legislation be enacted concerning regulation of the liquor industry. The Secretary of Agriculture stated:

Misbranding of beverage whisky amounting to definite misrepresentation prompts administrative action. However, the character of the liquor traffic obviously makes special legislation necessary.

Rep. of Sec. of Agric. (1934) at 85.

H.R. 8870, which was to become the 1935 Act, was reported favorably to the House by the Ways and Means Committee. It was noted by the committee that existing laws including the food and drug laws (which presumably was a reference to the Pure Food and Drug Act of 1906, 34 Stat. 768, hereinafter 1906 Act) were...