Costco Wholesale Corp. v. Hoen

• Decision Date: 15 August 2008
• Docket Number: No. 06-36040.,06-36040.
• Citation: 538 F.3d 1128
• Parties: COSTCO WHOLESALE CORPORATION, a Washington corporation, Plaintiff-Appellant, v. Roger HOEN; Vera Ing; Merritt D. Long, in their official capacities as members of the Washington State Liquor Control Board; Washington Beer & Wine Wholesalers Association, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

538 F.3d 1128

COSTCO WHOLESALE CORPORATION, a Washington corporation, Plaintiff-Appellant, v. Roger HOEN; Vera Ing; Merritt D. Long, in their official capacities as members of the Washington State Liquor Control Board; Washington Beer & Wine Wholesalers Association, Defendants-Appellees.

No. 06-36040.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 11, 2008.

Filed August 15, 2008.

David J. Burman, Perkins Coie LLP, Seattle, WA, for the plaintiff-appellant.

Paul R. Romain and John C. Guadnola, Gordon Thomas Honeywell Malanca Peterson & Daheim LLP, Tacoma, WA, for the intervenor-appellee.

Appeal from the United States District Court for the Western District of Washington; Marsha J. Pechman, District Judge, Presiding. D.C. No. CV-04-00360-MJP.

Before: CARLOS T. BEA and MILAN D. SMITH, JR., Circuit Judges, and JOSEPH M. HOOD,^* Senior Judge.

MILAN D. SMITH, JR., Circuit Judge:

In this appeal, we consider the circumstances in which an intervenor may be held liable for attorney's fees and costs under 42 U.S.C. § 1988(b) and 15 U.S.C. § 26. Costco Wholesale Corporation (Costco) brought claims against the Washington State Liquor Control Board and certain state officials (collectively, State Defendants), contending that several of Washington's liquor laws violate the Commerce Clause and federal antitrust law. Intervenor-Appellee Washington Beer and Wine Wholesalers Association (WBWWA) materially assisted the State Defendants throughout the litigation, and its members had much at stake financially because of Costco's claims. The district court ruled in favor of Costco on the majority of the claims, but held that only the State Defendants were liable for attorney's fees and costs under § 1988(b) and § 26. Costco challenges the district court's decision not to impose joint and several liability for those expenses on WBWWA. We affirm on the question of WBWWA's liability under § 1988(b), but vacate and remand with respect to § 26.

I. BACKGROUND

Washington regulates the sale and distribution of alcoholic beverages through a three-tiered system that strictly limits the pricing authority and business practices of beverage producers, distributors, and retailers. Costco filed an action against the State Defendants contending, in Count I, that several aspects of this system violate the Sherman Antitrust Act, 15 U.S.C. § 1 et seq. Count II alleged that Revised Code of Washington §§ 66.24.170 and 66.24.240 violate the Commerce Clause of the United States Constitution by permitting only Washington-based wineries and breweries to distribute directly to retailers in the state. Count III claimed that the restraints challenged in Counts I and II give rise to a cause of action under 42 U.S.C. § 1983. Count IV contended that the challenged provisions also deprived Costco of rights secured by the Washington Constitution.

Shortly after the filing of the complaint, WBWWA, a nonprofit professional trade organization comprised of beer and wine distributors, filed a motion to intervene as a defendant pursuant to Federal Rule of Civil Procedure 24(a). The district court granted the motion after finding that (1) WBWWA had a protectable interest in the litigation because Costco's claims challenged the statutes and regulations underlying WBWWA members' contractual arrangements with producers and retailers, and (2) the State Defendants would not necessarily adequately represent WBWWA's interests in the litigation. Thereafter, WBWWA materially assisted the State Defendants in defending the challenged laws at every stage of the litigation.

Costco mostly prevailed in the district court notwithstanding WBWWA's intervention. Following the United States Supreme Court's decision in Granholm v. Heald, 544 U.S. 460, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005), the district court granted summary judgment in favor of Costco on Count II of the Complaint and the related part of Count III, holding that Revised Code of Washington §§ 66.24.170 and 66.24.240 violate the Commerce Clause by discriminating against out-of-state breweries and wineries. To remedy the violation, Costco requested an injunction permitting out-of-state producers of beer and wine to distribute directly to in-state retailers. However, the district court declined to order that remedy, finding that it would be excessively disruptive of the State's regulatory scheme, and instead enjoined in-state producers from distributing directly to in-state retailers. The court stayed the entry of judgment to permit the Washington Legislature a reasonable period within which to either withdraw the direct-sales privilege from in-state producers or to extend the privilege to out-of-state producers. The Legislature responded by passing a measure that extended the privilege to out-of-state producers for a period of two years.

In substantial part, the district court also ruled in Costco's favor on cross-motions for summary judgment concerning Count I. With one exception, the court also held that all of the challenged restraints violate federal antitrust law. Accordingly, WBWWA's and the State Defendants' motions were denied. The court denied Costco's motion for summary judgment as well, but only because there were disputed issues of material fact concerning whether the challenged restraints were defensible as valid exercises of the State's powers under the Twenty-first Amendment.

The district court subsequently held a bench trial to adjudicate the Twenty-first Amendment defense to Costco's antitrust claims. Based on the evidence presented, the court concluded that the Twenty-first Amendment did not shield the restraints found invalid under the Sherman Act. The district court then enjoined the State Liquor Control Board from enforcing any of the restraints except for the retailer-toretailer sales ban.

Based on its adjudication of the motions for summary judgment and at the bench trial, the district court entered judgment in favor of Costco on all aspects of Count I except for the retailer-to-retailer sales ban. The court also entered judgment in favor of Costco on Count II and the related portion of Count III. Judgment was entered in favor of the State Defendants and WBWWA on the retailer-to-retailer sales ban under Count I, and on Count IV without prejudice to Costco pursuing that claim in state court.

The State Defendants and WBWWA appealed to our court the adjudication of Count I, and Costco cross-appealed the district court's decision concerning the legality of the retailer-to-retailer sales ban. We reversed the district court in part and affirmed in part in Costco Wholesale Corp. v. Maleng, 514 F.3d 915, 2008 WL 223121 (9th Cir.2008). We affirmed by holding that the price-posting and price-holding requirements violate the Sherman Act, that those requirements are not saved by the Twenty-first Amendment, and that the retailer-to-retailer sales ban comports with the Sherman Act. Id. at 946. We reversed by holding that none of the other challenged restraints violate the Sherman Act. Id. The judgment on Counts II, III, and IV was not reviewed. Id. at 923 n. 5.

While Maleng was pending on appeal, the district court adjudicated liability for attorney's fees and costs. The parties stipulated that Costco was entitled to $1,635,741 in fees and $66,972 in costs and that the State Defendants were liable. However, the parties disagreed about whether WBWWA should be jointly and severally liable along with the State Defendants. Applying Independent Federation of Flight Attendants v. Zipes, 491 U.S. 754, 109 S.Ct. 2732, 105 L.Ed.2d 639 (1989), the district court held that WBWWA was not liable for fees and costs because WBWWA did not violate federal antitrust law or Costco's constitutional rights and did not defend the state laws in a frivolous manner. Costco now appeals that decision.¹

II. JURISDICTION AND STANDARD OF REVIEW

28 U.S.C. § 1291 confers jurisdiction to review a district court's denial of attorney's fees. Thomas v. City of Tacoma, 410 F.3d 644, 647 (9th Cir.2005). "Awards of attorney's fees are generally reviewed for an abuse of discretion." Id. However, "[a]ny elements of legal analysis and statutory interpretation that figure in the district court's attorneys' fees decision are reviewed de novo." Barrios v. Cal. Interscholastic Fed'n, 277 F.3d 1128, 1133 (9th Cir.2002).

III. DISCUSSION

The parties' dispute concerns whether Independent Federation of Flight Attendants v. Zipes, 491 U.S. 754, 109 S.Ct. 2732, 105 L.Ed.2d 639 (1989), permits Costco to recover attorney fees and costs from WBWWA. Zipes involved a class of flight attendants who sued their airline employer for sex discrimination under Title VII of the Civil Rights Act of 1964. Id. at 755, 109 S.Ct. 2732. After almost ten years of litigation, the parties reached a comprehensive settlement. Id. at 756-57, 109 S.Ct. 2732. The petitioner flight attendants' union intervened to challenge the settlement on behalf of flight attendants not affected by the employer's discriminatory practice, but the district court, Seventh Circuit, and Supreme Court successively rejected that challenge and upheld the agreement. Id. at 757, 109 S.Ct. 2732. The original class of plaintiff flight-attendants then sought attorney's fees against the union. Id. at 757-58, 109 S.Ct. 2732. The district court and court of appeals awarded fees, but Zipes reversed, holding that a district court should not grant fees under 42 U.S.C. § 2000e-5(k) against an "innocent" intervenor unless the intervenor's action was "frivolous, unreasonable, or without foundation." Id. at 761, 109 S.Ct. 2732.

Because Costco partially prevailed on its antitrust claims under Count I and prevailed on its § 1983 claim under Counts II and III, there are two possible statutory bases for imposing liability for attorney's fees and costs on WBWWA. The first is 42 U.S.C. § 1988(b), which provides that "[i]n any action proceeding to enforce a provision of [42 U.S.C. § ]1983 . . . ...