Adolph Coors Co. v. Bentsen, 92-1348

• Decision Date: 23 August 1993
• Docket Number: No. 92-1348,92-1348
• Citation: 2 F.3d 355
• Parties: , 21 Media L. Rep. 2022 MADOLPH COORS COMPANY, Plaintiff-Appellee, v. Lloyd BENTSEN, * in his official capacity as Secretary of the United States Department of Treasury; and Steve Higgins, in his official capacity as Director of the Bureau of Alcohol, Tobacco and Firearms, Defendants-Appellants, and Speaker and Bipartisan Leadership of the U.S. House of Representatives, Intervenor-Defendant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 355

2 F.3d 355

62 USLW 2143, 21 Media L. Rep. 2022

MADOLPH COORS COMPANY, Plaintiff-Appellee, v. Lloyd BENTSEN, ^* in his official capacity as Secretary of the United States Department of Treasury; and Steve Higgins, in his official capacity as Director of the Bureau of Alcohol, Tobacco and Firearms, Defendants-Appellants and Speaker and Bipartisan Leadership of the U.S. House of Representatives, Intervenor-Defendant.

No. 92-1348.

United States Court of Appeals Tenth Circuit.

Aug. 23, 1993.

Rehearing Denied Dec. 1, 1993.

John S. Koppel (Stuart M. Gerson, Asst. Atty. Gen., and Stuart E. Schiffer, Acting

Asst. Atty. Gen., Dept. of Justice, Washington, DC, Michael J. Norton, U.S. Atty., Denver, CO, and Michael Jay Singer, Atty., Appellate Staff, Civ. Div., Dept. of Justice, Washington, DC, with him on the briefs), Atty., Appellate Staff, Civ. Div., Dept. of Justice, Washington, DC, for defendants-appellants.

K. Preston Oade (Jim M. Hansen, of Bradley, Campbell, Carney & Madsen, Professional Corp., Golden, CO, with him on the brief), of Bradley, Campbell, Carney & Madsen, Professional Corp., Golden, CO, for plaintiff-appellee.

Before TACHA and BARRETT, Circuit Judges, and BROWN, District Judge. ^**

TACHA, Circuit Judge.

Appellants (collectively referred to as the "Government") appeal a district order declaring the portion of 27 U.S.C. Sec. 205(e)(2) which prohibits statements of alcohol content on malt beverage labels to be an unconstitutional restraint on commercial speech in violation of the First Amendment. The Government also appeals the court's order enjoining the Government from enforcing that provision. We exercise jurisdiction under 28 U.S.C. Sec. 1291 and affirm.

I. Background

Congress enacted the Federal Alcohol Administration Act ("Act"), 27 U.S.C. Secs. 201-211, in 1935 after the repeal of Prohibition. The Act contains comprehensive regulations of the alcoholic beverage industry, including provisions that were intended to remedy industry practices which Congress had determined were unfair, deceptive, and harmful to both competitors and consumers. Two such provisions prohibit statements of alcohol content on malt beverage ¹ labels and advertisements unless such disclosures are required by state law. 27 U.S.C. Sec. 205(e)(2), (f)(2). ²

In 1987, Adolph Coors Co. ("Coors") sought the Bureau of Alcohol, Tobacco and Firearms's approval for proposed labels and advertisements that disclosed the alcohol content of its malt beverages. The bureau denied the request pursuant to Sec. 205(e)(2) and (f)(2). Coors then brought this action to challenge the decision, arguing that the provisions impose an unconstitutional restraint on commercial speech in violation of the First Amendment.

The district court granted summary judgment for Coors and the Government appealed. On appeal, we evaluated the provisions under the four-part test for restrictions on commercial speech set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980):

At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.

Id. at 566, 100 S.Ct. at 2351. Applying the first two parts of the test, we concluded that the proposed labels and advertisements were commercial speech protected by the First Amendment and that the Government had asserted a legitimate and substantial interest in preventing strength wars among malt beverage brewers. See Adolph Coors Co. v. Brady, 944 F.2d 1543, 1547-49 (10th Cir.1991) ("Coors I "). We reversed and remanded, however, holding that there were genuine issues of material fact as to whether the statutory prohibitions directly advance the Government's interest in preventing strength wars and whether there is a reasonable fit between the Government's asserted interest and the complete prohibitions imposed by the statute. See id. at 1554.

After conducting a trial on remand, the district court held that the relevant portion of Sec. 205(f)(2) is constitutional, but that the portion of Sec. 205(e)(2) which prohibits statements of alcohol content on malt beverage labels imposes an unconstitutional restraint on commercial speech in violation of the First Amendment because it neither directly advances nor reasonably fits the goal of preventing strength wars. The Government now appeals the district court's judgment with respect to Sec. 205(e)(2) and we limit our review to that provision.

II. Discussion

The Government has the burden of proving that the labeling prohibition of Sec. 205(e)(2) directly advances its interest in preventing strength wars. ³ We stated in Coors I that the Central Hudson test requires "an immediate connection between the prohibition and the government's asserted end. If the means-end connection is tenuous or highly speculative, the regulation cannot survive constitutional scrutiny." 944 F.2d at 1549 (internal quotations omitted). The Government challenges this standard on appeal and, relying on Posadas de Puerto Rico Association v. Tourism Co., 478 U.S. 328, 106 S.Ct. 2968, 92 L.Ed.2d 266 (1986), argues that the Government need only demonstrate that Congress reasonably believed that the statutory prohibition would further its objective when it enacted the labeling restriction. See id. at 341-42, 106 S.Ct. at 2976-77.

Since the Government filed its appellate brief, however, the Supreme Court has decided Edenfield v. Fane, --- U.S. ----, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993), in which it articulates a standard that is consistent with our pronouncements in Coors I and much stricter than the "reasonably believed" standard the Government would have us adopt. In Edenfield, the Court stated that, under this third prong of the Central Hudson test, courts must determine "whether the challenged regulation advances [the government's] interests in a direct and material way." Id., at ----, 113 S.Ct. at 1798. It went on to say that the party restricting commercial speech carries the burden of justifying the restriction and that "[t]his burden is not satisfied by mere speculation or conjecture; rather, a governmental body seeking to sustain a restriction on commercial speech must demonstrate that the harms it recites are real and that its restriction will in fact alleviate them to a material degree." Id., at ----, 113 S.Ct. at 1800. This burden also applies to prophylactic regulations like the challenged prohibition in Sec. 205(e)(2) where the Government prohibits conduct at the outset rather than waiting until harm has occurred. Id., at ----, 113 S.Ct. at 1803 (prophylactic ban "in no way relieves the State of the obligation to demonstrate that it is regulating speech in order to address what is in fact a serious problem and that the preventative measure it proposes will contribute in a material way to solving that problem").

The Government asserts that the prohibition on speech contained in Sec. 205(e)(2) was imposed to prevent strength wars among malt beverage manufacturers. This assertion is supported by the Act's legislative history which contains testimony "that labels displaying alcohol content resulted in a strength war wherein producers competed for market share by putting increasing amounts of alcohol in their beer." Coors I, 944 F.2d at 1548. There was also hearing testimony "that not disclosing the alcohol content on malt beverages would relieve marketplace pressures to produce beer on the basis of alcohol content, resulting over the long term in beers with a lower alcohol content." Id. The Government argues that, despite changes in the malt beverage industry and market since 1935, Sec. 205(e)(2) directly advances its crusade against the continuing danger of strength wars. After reviewing the record, we conclude that, although the Government's interest in preventing strength wars is legitimate and is within its regulatory authority, the prohibition in Sec. 205(e)(2) does not advance this interest in a direct and material way.

The Government relies primarily on anecdotal evidence that malt beverage manufacturers already are competing and advertising on the basis of alcohol strength in the malt liquor sector of the market. ⁴ The record contains evidence that consumers who prefer malt liquor do so primarily because of its higher alcohol content and that a number of manufacturers have tried to advertise malt liquor--in violation of the regulations--by using descriptive terms such as "power," "strong character," "dynamite," and "bull" to tout its alcohol strength. On the basis of this evidence, the Government makes an inferential and conclusory argument that the ...