House of York, Ltd. v. Ring

• Decision Date: 14 December 1970
• Docket Number: No. 70 Civ. 3781.,70 Civ. 3781.
• Citation: 322 F. Supp. 530
• Parties: HOUSE OF YORK, LTD. and Chase Processing Corporation, Plaintiffs, v. Thomas F. RING, Benjamin H. Balcom, Robert E. Doyle, John C. Hart and Walter C. Schmidt, being the Chairman, Members and Commissioners of the State Liquor Authority of the State of New York, and Norman F. Gallman, A. Bruce Manley and Milton Koerner, being the Acting President and Members of the State Tax Commission of the State of New York, Defendants.
• Court: U.S. District Court — Southern District of New York

322 F. Supp. 530

HOUSE OF YORK, LTD. and Chase Processing Corporation, Plaintiffs, v. Thomas F. RING, Benjamin H. Balcom, Robert E. Doyle, John C. Hart and Walter C. Schmidt, being the Chairman, Members and Commissioners of the State Liquor Authority of the State of New York, and Norman F. Gallman, A. Bruce Manley and Milton Koerner, being the Acting President and Members of the State Tax Commission of the State of New York, Defendants.

No. 70 Civ. 3781.

United States District Court, S. D. New York.

December 14, 1970.

William M. Ivler, c/o Zraick & Nahas, New York City, for plaintiffs.

Louis J. Lefkowitz, Atty. Gen., New York City, for defendants; Joel Lewittes, Asst. Atty. Gen., of counsel.

Before FRIENDLY, Circuit Judge, and PALMIERI and BRYAN, District Judges.

PALMIERI, District Judge.

The plaintiffs seek a declaratory judgment of unconstitutionality and a permanent injunction against the enforcement of a New York state statute relating to the purchases of liquor and wine by residents of New York State.

Plaintiffs' application for a three-judge court was granted on September 14, 1970, pursuant to 28 U.S.C. §§ 2281, 2284. The court was convoked by order of the Chief Judge of this circuit on September 24, 1970.

The facts have been stipulated and so far as they are pertinent to this decision they are substantially as follows. The plaintiff, House of York, Ltd. (York), is engaged in soliciting orders for liquor and wine by mail for eventual delivery to the homes or places of business of New York residents. York is a Delaware corporation with its principal place of business in Wilmington, Delaware. It maintains no business facilities in New York State. Its solicitations are mailed in New Jersey. York has carried on a substantial business amounting to about one million dollars for the twelve month period prior to July 31, 1970, and to about five million dollars for the past three and one-half years.

Chase Processing Corporation (Chase), the second plaintiff, is a New York freight consolidator and forwarder. It subcontracts for twelve trucks which are engaged in the pick-ups and deliveries of merchandise to York's customers in New York. Chase has done a substantial business, amounting to about $225,000 a year.

The defendants are the New York state officials charged with enforcement of the challenged statute.

The statute which is the basis for this litigation, Chapter 242, Laws of 1970, became effective by its terms on September 1, 1970. Its effect is to prohibit York from sending its solicitations or order forms into the State of New York unless it is licensed;¹ to prohibit New York residents from availing themselves of York's services;² and to prohibit Chase from delivering liquor to mail order purchasers.³ Also in issue are sections 3 through 7⁴ which amend the Tax Law and, in effect, provide that an excise tax be paid on all liquors sold or used within New York by distributors and noncommercial importers except on specified amounts imported by a returning traveler incident to a journey if the liquor is in the actual possession of such traveler on his return.

There is no doubt that the law in question was aimed directly at persons like York engaged in the liquor and wine mail order business. The business is conducted substantially as follows: the price list is mailed to the New York State resident, along with an order blank. Upon the return of the order, and a check for the correct amount, the mail order concern forwards the order forms and checks to a Belgian shipper, K. Gjertsen & Co. (Gjertsen), at Antwerp. Purchase orders and checks are also mailed directly to the Belgian shipper in some instances. All the remittances for accepted orders are eventually deposited for collection in United States banks outside of New York State. Multiple orders of liquor and wine are assembled by Gjertsen in Antwerp and transported in sea freight containers to the United States. The United States customs duty is paid by Chase in behalf of the Belgian shipper and the individual orders are then picked up and delivered to the New York residents by truck.

Mail order businesses like York have not been regulated or taxed by the state, and there is no provision in the new law for their licensing. The conduct of these businesses has assertedly resulted in an avoidance of New York state taxes as well as license fees and regulations. Businesses within the State of New York engaged in dealing in the sale and distribution of alcoholic beverages are regulated and licensed and, defendants urge, have been adversely affected by the expansion of the businesses of the mail order concerns. This law was enacted, according to a published legislative memorandum, to prevent what was considered to be an unfair and unwise form of competition with New York state licensees, and to eliminate unfair tax advantages to out-of-state mail order firms selling alcoholic beverages to New York residents. An additional purpose was stated to be that of conforming the state alcoholic beverage tax law with the federal customs law.

The crucial question presented here is whether the New York state law impinges upon any constitutional rights of the plaintiffs. The plaintiffs suggest that their rights are contravened under the Commerce, the Export-Import and the Equal Protection Clauses of the Constitution. We conclude that they are not contravened for the reasons hereinafter set forth.

I. The Commerce Clause⁵

The twenty-first amendment to the Constitution is dispositive of plaintiffs' claim that the disputed statute violates the Commerce Clause. That amendment to the Constitution, which repealed the eighteenth amendment, thereby ending the national prohibition of all manufacture, sale, transportation, importation or exportation of intoxicating liquors, provides that "the transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." U.S.Const. amend. XXI, § 2. A series of decisions by the Supreme Court rendered shortly after the ratification of this amendment made it abundantly clear that the states were considered to have acquired plenary authority to deal with intoxicating beverages after importation. State Board of Equalization of State of California v. Young's Market Co., 299 U.S. 59, 57 S.Ct. 77, 81 L.Ed. 38 (1936); Mahoney v. Joseph Triner Corp., 304 U.S. 401, 58 S.Ct. 952, 82 L.Ed. 1424 (1938); Indianapolis Brewing Co. v. Liquor Control Comm., 305 U.S. 391, 59 S.Ct. 254, 83 L.Ed. 243 (1939); Finch & Co. v. McKittrick, 305 U.S. 395, 59 S.Ct. 256, 83 L.Ed. 246 (1939). Taken together, these decisions and their progeny present the plaintiffs with a formidable legal barrier to their success in this litigation. See Note, The Evolving Scope of State Power Under the 21st Amendment: The 1964 Cases, 19 Rutgers L.Rev. 759 (1965); 65 Colum.L.Rev. 153 (1965). Nevertheless, the plaintiffs press upon us, in urging us to strike down the New York statute in question and to enjoin its enforcement, contentions to the effect that their business activities are protected by the provisions of the Commerce Clause and rely on Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 84 S.Ct. 1293, 12 L.Ed.2d 350 (1964) in support of their claims. In that case New York was prevented from terminating the business of a retail liquor dealer whose store was at New York's principal airport and who, under the sanction and supervision of the Bureau of Customs, acquired tax-free liquors for export from bonded wholesalers for resale exclusively to airline passengers, with delivery deferred until the latter arrived at foreign destinations. In holding them to be transactions within the protection of the Commerce Clause the Court said that both the twenty-first amendment and the Commerce Clause were parts of the same Constitution, and, like other provisions of the Constitution "each must be considered in the light of the other, and in the context of the issues and interests at stake in any concrete case." Ibid at 332, 84 S.Ct. at 1298. Since ultimate delivery and use of the liquor there was in a foreign country and not in New York, the decision can hardly furnish plaintiffs with any ground for support in this case. Similarly, Ammex Warehouse Co. of San Ysidro, Inc. v. Dept. of Alcoholic Beverage Control, 224 F.Supp. 546 (S.D.Cal. 1963), aff'd per curiam, 378 U.S. 124, 84 S.Ct. 1657, 12 L.Ed.2d 743 (1964), and Epstein v. Lordi, 261 F.Supp. 921 (D.N.J.1966), aff'd per curiam, 389 U.S. 29, 88 S.Ct. 106, 19 L.Ed.2d 29 (1967), involved liquor passing through rather than into the regulating states. Indeed, the district court stated in Epstein:

New Jersey also has the power to prohibit or to condition in the most discriminatory fashion the importation into its territory of all intoxicants "for delivery or use" within New Jersey, as that phrase is employed in the Twenty-first Amendment (citing cases).

Where, however, the liquor is not brought into the State for "delivery or use therein", regulation cannot be predicated upon the Amendment. 261 F.Supp. at 932.

The facts in the case before us most closely resemble those in American Travelers Club, Inc. v. Hostetter, 219 F.Supp. 95 (S.D.N.Y.1963), where plaintiff, a Delaware corporation, distributed order forms to departing travelers for liquor purchases and made all subsequent arrangements for its importation and the delivery of the liquor in New York State. Distinguishing Idlewild, the court stated:

There liquor was purchased and paid for by departing travelers in New York City, but there was no delivery or use until arrival at the foreign destination. The Twenty-first Amendment was found inapplicable because there was no "delivery or use" within New York * * *.

The instant case, however, is different * * *. New York's action is directed at the importation of liquor for delivery and use within the

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