Gillhaus Beverage Co., Inc. v. Lerner
| Decision Date | 11 January 1979 |
| Parties | GILLHAUS BEVERAGE COMPANY, INC., t/a Favin Importers & James Sleigh, Ltd., et al., Plaintiffs, v. Joseph H. LERNER, Division of Alcoholic Beverage Control, et al., Defendants. Irving HEIR, Individually and on behalf of a class, Plaintiff-Appellant, v. Joseph H. LERNER, Director, Division of Alcoholic Beverage Control, et al., Defendants-Respondents. John J. GARRITY, et al., Plaintiffs, v. Joseph H. LERNER, Director, Division of Alcoholic Beverage Control, et al., Defendants. |
| Court | New Jersey Supreme Court |
Harold H. Fisher and John Zen Jackson, Newark, for plaintiff-appellant (Shanely & Fisher, Newark, attorneys).
Alan Dexter Bowman and Carl A. Wyhopen, Deputy Attys. Gen., for defendants-respondents (John J. Degnan, Atty. Gen., attorney).
The opinion of the court was delivered by
The appeal herein, taken as of right, by plaintiffs, involves a class action filed by Irving Heir, the holder of a solicitor's permit issued by the New Jersey Division of Alcoholic Beverage Control (Division). Plaintiff represents a class consisting of the members of the Wine and Liquor Salesmen of New Jersey Local 19, later expanded to include all licensed solicitors whether or not they were members of the union. 1 The complaint challenges the legality of an investigation being conducted by the Director of the Division into certain alleged illegal practices in the liquor business in this State. Specifically, the challenge is directed to a questionnaire and letter distributed by the Director to all licensed solicitors in the wholesale liquor industry.
The investigation stems from a federal Securities and Exchange Commission proceeding in the spring of 1976 which disclosed the existence of kickbacks and commercial bribery in the liquor business throughout the nation, including New Jersey. As a result of these disclosures, the Director of the Division began an investigation of the wholesale liquor industry in order to ascertain the nature and extent of unlawful trade practices in this State. As part of his investigation, the Director, on February 23, 1977, sent questionnaires to all licensees and solicitors in the wholesale liquor wine and beer industry seeking sworn answers to inquiries about a variety of trade practices. The questionnaires were to be returned no later than March 21, 1977.
In a covering letter the Director urged cooperation with the investigation and added that a failure to return the completed questionnaire or to provide "complete and accurate answers to all questions" might subject "your license or permit to suspension or revocation." The Director also warned:
I realize that, if you answer all of the questions truthfully and forthrightly, you may be revealing unlawful activity in which you were engaged. In disciplinary proceedings which may result, your admission, and cooperation with respect thereto, will be a mitigating factor, which will be taken into consideration in the imposition of penalty.
However, with respect to violations committed by you which the Division prosecutes based upon its own information, or through information supplied by others, particularly where you have withheld information, or have given false and misleading information in your answers to the questionnaire, they will be dealt with accordingly.
Copies of the questionnaire and covering letter sent to Heir and all other licensed salesmen and solicitors, are appended to this opinion.
The questionnaires sent to wine and liquor wholesalers, and malt beverage wholesalers, were also challenged in separate suits. The Gillhaus suit was filed on behalf of wine and liquor wholesalers. The Garrity suit was brought on behalf of the malt beverage wholesalers. All three suits, Heir, Gillhaus and Garrity, were consolidated before the trial judge who issued temporary restraints against enforcement of the questionnaires pending resolution of the litigation.
On cross-motions for summary judgment, the trial judge ruled in favor of defendants and entered judgment dismissing the complaints and vacating the temporary restraints. He held (1) that use of a questionnaire was within the statutory authority of the Director in conducting an investigation into possible violations of the Alcoholic Beverage Law; (2) that the questionnaire in and of itself did not represent a violation of any notion of fair play or due process; (3) that plaintiffs fifth amendment claims were being raised prematurely. Plaintiffs in all three suits filed appeals with the Appellate Division.
After the trial court dismissed the complaints and vacated the restraints, the Director sent a second letter to licensees setting another deadline of August 15, 1977 for answering the questionnaire. The letter further stated:
In order to insure that there is no misunderstanding regarding the questionnaire, you are asked to complete and return the questionnaire by August 15, 1977, under your statutory obligation to facilitate a Division investigation, Rule 35 of State Regulation 20, N.J.S.A. 33:1-35. If you feel that you may claim a privilege in answer to a particular question asked, you may respond to that specific question by asserting the privilege which you claim. In determining whether or not you have failed to facilitate or hindered the investigation on the basis of your answers to the questionnaire, a claim of privilege to a specific question will be considered an appropriate response.
This new deadline was stayed by the Appellate Division pending appeal which was heard on an accelerated basis. Following argument, the Appellate Division, in an unreported Per curiam opinion, affirmed the dismissal of the Heir and Gillhaus complaints essentially for the reasons expressed by the trial judge. As to the Garrity suit, the Appellate Division reversed the dismissal of the complaint and remanded to the Director of the Division with direction to give further consideration to the questionnaire as it related to the malt beverage industry. It noted that the industry activities under scrutiny were not unlawful in the case of malt beverages and that it might be unreasonably burdensome to require malt beverage wholesalers to answer all of the questions in the absence of a demonstrable need.
The Garrity ruling by the Appellate Division has not been appealed. Likewise, the Gillhaus plaintiffs have not appealed the Appellate Division affirmance of the dismissal of their complaint. The sole matter before us is the Heir complaint, plaintiffs therein having filed an appeal as of right. R. 2:2-1(a)(1).
Plaintiffs' basic contention is that the questionnaire and covering letter are violative of fifth amendment rights in that the Division seeks to compel licensees to disclose possible illegal and incriminating activities under the threat of sanctions and recriminations if they fail to comply. They are critical of the trial and appellate rulings which did not consider the merits of plaintiffs' fifth amendment claims, but merely held that they had been raised prematurely.
Plaintiffs also challenge the technique of investigation by the use of questionnaires as Ultra vires, unreasonable and violative of due process. Finally, they argue that the questionnaire violates their right of privacy and also that since they are a suspect class by virtue of an investigation into criminal activities, they are entitled to declaratory and injunctive relief that they need not answer the questionnaire.
The Alcoholic Beverage Control Act, N.J.S.A. 33:1-1 Et seq., vests the Director with extensive regulatory and investigative power over the liquor industry. The language of Section 35 authorizing the Director to investigate activities involving intoxicating beverage is broad in its sweep:
The Director of the Division of Alcoholic Beverage Control and each other issuing authority may make, or cause to be made, such investigations as he or it shall deem proper in the administration of this chapter and of any and all other laws now or which may hereafter be in force and effect concerning alcoholic beverages, or the manufacture, distribution or sale thereof * * *. N.J.S.A. 33:1-35.
The Legislature has also imposed strict requirements upon licensees:
Every applicant for a license, and every licensee, and every director, officer, agent and employee of every licensee, shall, on demand, exhibit to the director * * * all of the matters and things which the director of the division * * * is hereby authorized or empowered to investigate, inspect or examine, and to facilitate, as far as may be in their power so to do, in any such investigation, examination or inspection, and they shall not in any way hinder or delay or cause the hindrance or delay of same, in any manner whatsoever. Id.
The Director is empowered in conducting the investigation to
examine, under oath, any and all persons whatsoever and compel by subpoena the attendance of witnesses and the production of books, records, accounts, papers and documents of any person or persons and the director * * * may take any oath or affirmation of any person to any deposition, statement, report or application required in the administration of this chapter * * *. Id.
To insure, however, that the expansive reach of the Director's authority would not be indirectly circumscribed by the express listing of his powers, the statute further provides:
The above enumerations of purposes and powers shall not be construed as exclusive and shall not limit such power to investigate, examine and subpoena for any purpose consonant with the administration and enforcement of this chapter. Id.
Moreover, the Legislature has mandated that the chapter is to be liberally construed in order to effectuate the objective of remedy the "abuses inherent in liquor traffic." N.J.S.A. 33:1-73.
While Section 35 does not specifically refer to the use of questionnaires, we conclude that the use of this investigative tool is...
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