Gibson Wine Co. v. Snyder, 10978.

• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)
• Writing for the Court: WILBUR K. MILLER, PRETTYMAN and BAZELON, Circuit
• Citation: 194 F.2d 329
• Parties: GIBSON WINE CO., Inc. v. SNYDER et al.
• Docket Number: No. 10978.,10978.
• Decision Date: 10 January 1952

194 F.2d 329 (1952)

GIBSON WINE CO., Inc.
v.
SNYDER et al.

No. 10978.

United States Court of Appeals District of Columbia Circuit.

Argued June 15, 1951.

Decided January 10, 1952.

194 F.2d 330

Frederic P. Lee, Washington, D. C., for appellant.

John J. Donnelly, Jr., Sp. Asst. to Atty. Gen., with whom Asst. Atty. Gen. H. G. Morison and Wallace A. Russell, Attorney, Bureau of Internal Revenue, Washington, D. C., were on the brief, for appellees John W. Snyder, Secretary of the Treasury, et al.

Theodore Jaffe and Manuel J. Davis, Washington, D. C., entered appearances for appellees Honeywood Distilleries, Inc., et al.

Before WILBUR K. MILLER, PRETTYMAN and BAZELON, Circuit Judges.

PRETTYMAN, Circuit Judge.

The Gibson Wine Company, Inc., is a California corporation which produces, bottles and distributes wine pursuant to a basic permit issued under the Federal Alcohol Administration Act.¹ Regulations duly promulgated under the Act² have since 1938 contained the following provision:³

"(5) Fruit wine derived wholly (except for sugar, water, or added alcohol) from one kind of fruit shall be designated by the word `wine' qualified by the name of such fruit, e. g., `peach wine,' `blackberry wine.'"

On March 25, 1941, the Deputy Commissioner of Internal Revenue, having authority upon this subject, advised the District Supervisor in San Francisco that wine made from a variety of berries known as boysen-berries or boysen blackberries would not be entitled to the designation "blackberry wine". That ruling was transmitted by the District Supervisor to a company engaged in the manufacture of wine from these berries.

On February 18, 1949, the Deputy Commissioner advised the same wine company that wine made from these berries might be labeled "blackberry wine", and the District Supervisor at Seattle issued a circular to all bonded wineries in his district, transmitting that information.

On November 30, 1949, the Deputy Commissioner wrote the Wine Institute that his office had undertaken a comprehensive study of the subject and had concluded that, although

194 F.2d 331

from a horticultural standpoint the boysenberry is a variety of blackberry, it differs from berries commonly identified as blackberries and that the differences are recognized by growers, manufacturers, horticulturists, and government agencies; he made reference to the labeling of foods under the Food, Drug and Cosmetic Act, to the requirements of the Food and Drug Administration in prescribing standards of identity for preserves, jams, jellies, etc., to the Cold Storage Reports of the Department of Agriculture, and to the price listings of food brokers and wholesale distributors. The Deputy Commissioner said: "I am accordingly of the opinion that, under the provisions of Section 21, Class 5(e) of Regulations No. 4, Relating to Labeling and Advertising of Wine, any wine labeled as `Blackberry Wine' should be derived, in whole, from one or more of the varieties of berries commonly identified for commercial purposes as `blackberries' and `dewberries' * * *" He listed the names of varieties which would thus be included under the label "blackberry wine" and concluded that a wine derived wholly from boysenberries should be labeled "boysenberry wine"

In the meantime the Gibson Wine Company, our present appellant, had, in June, 1948, commenced the production of berry wine from the boysen variety. After the Deputy Commissioner's ruling of November, 1949, it brought a civil action in the United States District Court for the District of Columbia against the Secretary of the Treasury and the Commissioner and Deputy Commissioner of Internal Revenue, seeking an injunction to restrain those officials from preventing it from labeling as "blackberry wine" wine produced from any variety of blackberry, including the boysen variety. Answer being filed, trial was had on the merits of the issues raised. Witnesses were presented, and exhibits were introduced. The court made findings of fact, reached conclusions of law, and entered judgment dismissing the complaint. 95 F.Supp. 145. This appeal followed.

The first point presented by appellant is that the Deputy Commissioner's ruling of November 30, 1949, was an attempt to modify or amend a regulation and was invalid because it was not approved by the Secretary, as required by the statute,⁴ and no hearing was had prior to the promulgation of the ruling, as required by the statute⁵ and by Section 4 of the Administrative Procedure Act.⁶ The appellee officials say that the Deputy Commissioner's ruling was not an amendment or modification of a regulation but was merely an interpretative ruling. They say that interpretative rulings are within the authority of the Deputy Commissioner and are not within statutory requirements as to notice and hearing.

The distinctive characteristics of interpretative rulings, as contrasted with so-called regulations, have long been recognized. Administrative officials frequently announce their views as to the meaning of statutes or regulations. Generally speaking, it seems to be established that "regulations", "substantive rules" or "legislative rules" are those which create law, usually implementary to an existing law; whereas interpretative rules are statements as to what the administrative officer thinks the statute or regulation means. Discussion of the subject will be found in many places. See, for example, "Rule Making Under the Administrative Procedure Act" by David Reich, in Volume VII, New York University School of Law Institute Proceedings, pages 492, 516 (Feb. 1947), where the author says: "A substantive rule is one which, as I have said, is intended to implement the statutory structure or the statutory powers of an agency. An interpretative rule is one which does not have the full force and effect of a substantive rule but which is in the form of an explanation of particular terms in an Act. If you had an expression in a statute such as `Interurban Railway,' the query might come up as to what is an `interurban railway.' A particular agency may adopt a rule defining an interurban railway. That, in a sense, may be called an interpretative

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rule." And also see, in the same volume, pages 389, 400-401, "The Impact of the Federal Administrative Procedure Act on the Federal Food, Drug, and Cosmetic Act" by Michael F. Markel.⁷ Professor Davis discusses the subject at some length in his new book on Administrative Law, Section 55, and other references will be found there

The term "rule" in the Administrative Procedure Act (Section 2(c), includes interpretative statements, but in the provisions relating to rule-making "interpretative rules" are specifically excepted from the requirements as to notice and hearing (Section 4(b) and (c).

We think the ruling of the Deputy Commissioner here under consideration was clearly an interpretative ruling. On its face it purported to be merely the opinion of the Deputy Commissioner as to the meaning of the regulation. In the action in the District Court the parties and the court treated it as an expression of opinion. We think that treatment was correct.

Since the Deputy Commissioner's ruling was an interpretative one, it was not subject to the requirements of approval by the Secretary, of a hearing prior to promulgation, or of the rule-making procedure of the Administrative Procedure Act. Such exemptions have effect on the weight which the courts will accord to the administrative view and thus affect the limits of the judicial review; so a question is suggested as to whether the District Court correctly gauged the extent of its power of review. In a case in which that question is presented for decision, the problem would be an interesting one. See Skidmore v. Swift & Co.⁸ and Bowles v. Seminole Rock Co.⁹ Professor Davis discusses the matter at some length in Sections 56 and 253 of his Administrative Law. However, in the posture of the case at bar, the question does not arise. The District Court treated the Deputy Commissioner's ruling as a mere expression of opinion, examined the whole question on the merits de novo ab initio, made its own findings on the evidence before it, and reached its own conclusions upon the merits. Clearly the District Court gave the Deputy Commissioner's ruling no greater weight than was required; whether the court gave it less than the required weight does not arise. The case did not come to us upon an appeal from the administrative agency; it came as an appeal from a judgment of the District Court in a civil action for injunction. In such a case we will not reverse unless the findings are clearly erroneous or there is an error of law.

The trial court examined with care the propriety of the ruling. The question whether wine made from these berries should, pursuant to Regulations No. 4, be labeled "blackberry wine" or "boysenberry wine" was examined in the greatest detail at the trial, with a wealth of evidence, and the court made detailed findings as to the nature of the berries, their history, the characteristics of the wine made from them, and the commercial usages applicable to them. The court found, among many other things, "In the common language of the people, and to the consumer, boysenberries and...