Adolph Coors Co. v. Brady

• Decision Date: 23 September 1991
• Docket Number: 89-1239,Nos. 89-1203,s. 89-1203
• Citation: 944 F.2d 1543
• Parties: , 19 Media L. Rep. 1328 ADOLPH COORS COMPANY, Plaintiff-Appellee, v. Nicholas BRADY, in his official capacity as Secretary of the United States Department of the Treasury; Steve Higgins, in his official capacity as Director, Bureau of Alcohol, Tobacco and Firearms, Defendants-Appellants, and Speaker and Bipartisan Leadership Group of the United States House of Representatives, Intervenor-Defendant-Appellant, Center for Science in the Public Interest; G. Heileman Brewing Company, Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1543

944 F.2d 1543

60 USLW 2216, 19 Media L. Rep. 1328

ADOLPH COORS COMPANY, Plaintiff-Appellee, v. Nicholas BRADY, in his official capacity as Secretary of the

United States Department of the Treasury; Steve Higgins, in

his official capacity as Director, Bureau of Alcohol,

Tobacco and Firearms, Defendants-Appellants,

and

Speaker and Bipartisan Leadership Group of the United States

House of Representatives, Intervenor-Defendant-Appellant,

Center for Science in the Public Interest; G. Heileman

Brewing Company, Amicus Curiae.

Nos. 89-1203, 89-1239.

United States Court of Appeals, Tenth Circuit.

Sept. 23, 1991.

John S. Koppel, Atty., Dept. of Justice, Washington, D.C. (Stuart M. Gerson, Asst. Atty. Gen., Washington, D.C., Michael J. Norton, U.S. Atty., Denver, Colo., John F. Cordes and Michael J. Singer, Attys., Dept. of Justice, Washington, D.C., with him on the briefs), for defendants-appellants.

Steven R. Ross, General Counsel to the Clerk (Charles Tiefer, Deputy General Counsel to the Clerk, Michael L. Murray, Sr. Asst. Counsel to the Clerk, Robert Michael Long, Asst. Counsel to the Clerk, Janina Jaruzelski, Asst. Counsel to the Clerk), U.S. House of Representatives, Washington, D.C., for intervenor-defendant-appellant.

K. Preston Oade, Jr. (Thomas J. Carney and Linda Gavit, with him on the brief), of Broadley, Campbell, Carney & Madsen, Golden, Colo., for plaintiff-appellee.

Bruce Silverglade of Center for Science in the Public Interest, Washington, D.C., filed a brief as amicus curiae.

Reid L. Ashinoff of Ashinoff, Ross & Korff, New York City, Randy J. Smith of G. Heilemen Brewing Co., Inc., and Joseph E. Meyer, III, and Erin K. Toll of Pendleton & Sabian, P.C., Denver, Colo., filed a brief for amicus curiae G. Heilmen Brewing Co., Inc.

Before McKAY, McWILLIAMS and SEYMOUR, Circuit Judges.

SEYMOUR, Circuit Judge.

Nicholas Brady, Secretary of the Treasury, et al. (the Treasury), and intervenors Speaker and Bipartisan Leadership Group of the United States House of Representatives (the House), appeal the district court's grant of summary judgment in favor of Adolph Coors Co. (Coors). The district court ruled that 27 U.S.C. §§ 205(e) and 205(f) (1988), which prohibit the disclosure of alcohol content information in advertising or labeling malt liquor, constitute an illegal restraint on free speech in violation of the First Amendment, and enjoined the government's enforcement of the statute's restrictions. We reverse and remand.

I.

In 1987, Coors submitted an application to the Bureau of Alcohol, Tobacco and Firearms (BATF) requesting approval for labels and advertisements for its Coors and Coors Light beer that would disclose the alcohol content of these products. The BATF denied Coors' application stating that sections 205(e)(2) and 205(f)(2) prohibit labels or advertisements disclosing the alcohol content of malt beverages unless such disclosure is required by state law. ¹

On July 2, 1987, Coors filed a complaint against the Secretary of the Treasury, and the Director of the BATF, alleging that sections 205(e) and 205(f) violate Coors' rights under the Free Speech Clause of the First Amendment because they prohibit Coors from disclosing truthful information as to the alcohol content of its malt beverages. Coors asked the district court to set aside the BATF's denial of Coors' labeling and advertisement application, and to declare the statutory sections invalid.

The Treasury admitted in its answer that sections 205(e)(2) and 205(f)(2) are unconstitutional under the First Amendment. The Justice Department, acting on behalf of the Treasury and BATF, also asserted that the Executive Branch believed restricting the labeling and advertising of the alcoholic content of malt beverages to be unconstitutional. The House, however, moved to intervene in order to defend the constitutionality of the statute.

The House and Coors filed cross-motions for summary judgment. Following a hearing, the district court issued an order holding that sections 205(e)(2) and 205(f)(2) constitute an illegal restraint on speech under the First Amendment, and enjoining the BATF from enforcing those provisions. The Treasury, which now defends the constitutionality of the statutory sections, and the House seek a reversal of the district court's order. The relevant facts and legal arguments presented to the district court and the legal conclusions drawn therefrom are summarized below.

II.

To review a summary judgment order, we apply the same standard used by the trial court under Fed.R.Civ.P. 56. Osgood v. State Farm Mut. Auto Ins. Co., 848 F.2d 141, 143 (10th Cir.1988). Rule 56 directs that summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. This court determines whether, under the correct interpretation of the substantive law, there exist material factual disputes which preclude summary judgment. See id.; see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). In determining whether a material issue of fact exists, we review the record in the light most favorable to the party opposing summary judgment. McKenzie v. Mercy Hosp., 854 F.2d 365, 367 (10th Cir.1988). The district court's conclusions of law are reviewed de novo. Id.

Commercial speech is that which does " 'no more than propose a commercial transaction.' " Virginia Pharmacy Bd. v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 762, 96 S.Ct. 1817, 1825-26, 48 L.Ed.2d 346 (1976) (quoting Pittsburgh Press Co. v. Human Relations Comm'n, 413 U.S. 376, 385, 93 S.Ct. 2553, 2558-59, 37 L.Ed.2d 669 (1973)). Advertising has been recognized as commercial speech. Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 637, 105 S.Ct. 2265, 2274, 85 L.Ed.2d 652 (1985). Product labels, which are part of a firm's marketing plan to provide certain information to the consumer, also constitute commercial speech. See id.; Central Hudson Gas v. Public Serv. Comm'n, 447 U.S. 557, 563, 100 S.Ct. 2343, 2350, 65 L.Ed.2d 341 (1980) (noting that "[t]he First Amendment's concern for commercial speech is based on the informational function of advertising").

Regulations limiting commercial speech that are challenged on First Amendment grounds are subject to a four-part analysis described by the Supreme Court as follows:

"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."

Central Hudson, 447 U.S. at 566, 100 S.Ct. at 2351.

A.

In order for commercial speech to come within the protection of the First Amendment under the first prong of the Central Hudson test, it must concern a lawful activity and not be misleading. Id. The labeling and advertising of malt beverages relate to an activity lawful under federal law. U.S. Const. amend. XXI, § 1 (repeal of Prohibition); see also Dunagin v. City of Oxford, 718 F.2d 738 (5th Cir.1983) (although alcohol sales and consumption may be illegal in some state counties, such activity is nonetheless considered lawful for First Amendment purposes). Moreover, as the district court correctly noted, consumers have a substantial interest in knowing the alcohol content of beer. For example, many state statutes prohibit certain activities (such as driving) at or past a specific level of intoxication. Rec., vol. II, at 53. Consequently, restrictions on alcohol content disclosure are within the ambit of First Amendment protection. ²

B.

Under the second prong of the Central Hudson test, we must assess the strength of the government's interest in regulating the disclosure of alcohol content. The legislative history introduced in evidence below reveals the Congressional interests underlying sections 205(e) and 205(f). The Federal Alcohol Administration Act (FAAA), which became law in 1935 shortly after the repeal of Prohibition, was designed as a comprehensive statute to deal with practices ³ within the alcohol beverage industry that Congress had judged to be unfair and deceptive, resulting in harm to both competitors and consumers. When reporting favorably to Congress on the FAAA, the House Ways and Means Committee summarized its conclusions with respect to alcohol content disclosure as follows:

"The variation of alcoholic content has little consumer importance and the industry recognizes that attempts to sell beer and other malt beverages on the basis of alcoholic content are attempts to take advantage of the ignorance of the consumer and the psychology created by prohibition experiences.

"Legitimate members of the industry have suffered seriously from unfair competition resulting from labeling and advertising that uses such terms as 'strong', 'extra strength', 'high test', 'high proof', 'pre-war strength', '14 percent original extract', and from brand names or other statements or references which include conspicuous numerals or symbols intending to suggest that the numerals or symbols represent the alcoholic content. Usually such representations of excess alcoholic content are false, but irrespective of their falsity, their abuse has grown to such an extent since repeal that the prohibition of all such statements is in the interest of the consumer and the promotion of fair competition."

Federal Alcohol Administration Act: Hearings Before the Ways and Means Committee, HR8539, 74th Cong., 1st Sess. (1935). The legislation thus stemmed from the belief that withholding alcohol content information would benefit the consumer and promote fair competition within the...