Midcal Aluminum, Inc., v. Rice

Citation153 Cal.Rptr. 757,90 Cal.App.3d 979
Parties, 1979-1 Trade Cases P 62,612 MIDCAL ALUMINUM, INC., a California Corporation, Petitioner, v. Baxter RICE as Director of the Department of Alcoholic Beverage Control of the State of California, Respondent. California Retail Liquor Dealers Association, a California Corporation, Intervenor. Civ. 17992.
Decision Date26 March 1979
CourtCalifornia Court of Appeals

Damrell, Damrell & Nelson, Frank C. Damrell and Scott T. Steffen, Modesto, for petitioner.

Evelle J. Younger, Atty. Gen., L. Stephen Porter, Asst. Atty. Gen. and George J. Roth, Deputy Atty. Gen., for respondent.

William T. Chidlaw, Sacramento, for intervenor.

REYNOSO, Associate Justice.

The recent Supreme Court opinion of Rice v. Alcoholic Bev. etc. Appeals Bd. (1978) 21 Cal.3d 431, 146 Cal.Rptr. 585, 579 P.2d 476, which invalidated California's price maintenance laws relating to retail sales of distilled spirits, gives rise to this litigation. By writ of mandate Midcal Aluminum, Inc., seeks a determination as to the validity of the fair trade and price posting laws regulating the sale, both wholesale and retail, of wine in this state. We hold, as a logical axle of the Rice wheel, that the fair trade and price posting laws relating to wine are invalid at the wholesale and retail level.

1. The Background

An accusation was filed against petitioner before the Department of Alcoholic Beverage Control charging that on or about July 21, 1978, it sold or caused to be sold to a licensed retailer 27 cases of wine at prices less than the selling prices contained in the effective price schedule filed with the Department by the E & J Gallo Winery. The second count charged that petitioner had sold or had caused to be sold to certain retailers wine for which there was no effective fair trade contract duly filed with the Department. The petitioner stipulated to the truthfulness of the facts set forth in the accusation.

Petitioner entered into a further stipulation that "(T)he Department may, subject to a judicial determination of the constitutionality of Section 24850 et seq., Business and Professions Code and Rule 101 of Chapter 1, Title 4, California Administrative Code, impose a monetary penalty or suspension of (petitioner's) licenses as provided in Section 24880 of the Business and Professions Code." 1 Petitioner proceeded to file its petition for writ of mandate, in this court. 2

2. Mandate Proceedings

Mandate is an appropriate writ for the review of the exercise of quasi-judicial power by a constitutionally authorized statewide agency such as the Department of Alcoholic Beverage Control. (Sail'er Inn, Inc. v. Kirby (1971) 5 Cal.3d 1, 7, 95 Cal.Rptr. 329, 485 P.2d 529.) The writ is particularly appropriate in light of the following. First, petitioner attacks the validity of the fair trade and price posting laws on their face; no material facts are in dispute. Second, important issues of statewide significance are raised. Third, petitioner is placed in the untenable position of having to choose to obey possibly conflicting federal and state laws and face a penalty under the one it chooses to disobey. Under such circumstances it would be improper to require petitioner to exhaust its administrative remedies. (Sail'er Inn, Inc. v. Kirby, supra, 5 Cal.3d at pp. 6-7, 95 Cal.Rptr. 329, 485 P.2d 529.)

We do not share respondent's fear that our assuming jurisdiction in this case will herald the inundation of similar petitions, attempting to bypass the Alcoholic Beverage Control Appeals Board for review of mere disciplinary orders through feigned constitutional issues. Petitioner has conceded the factual basis for the accusation and questions only the validity of the law. We do not review the accusation; we consider only the validity of the fair trade and price posting laws. It is doubtful that licensees in like position will feign constitutional issues; it is understood that if those issues are rejected the licensee will be left before the Department to face accusations which it has admitted.

3. The Rice Rationale

In Rice v. Alcoholic Bev. etc. Appeals Bd., supra, 21 Cal.3d 431, 146 Cal.Rptr. 585, 579 P.2d 476, the California Supreme Court held that the fair trade laws relating to the retail sale of distilled spirits violate the Sherman Anti-Trust Act (15 U.S.C. § 1 et seq.). 3 Their invalidity necessarily followed. In reaching its decision the court considered whether the fair trade laws are within the "state action" exception to the Sherman Anti-Trust Act and whether the Twenty-First Amendment to the United States Constitution allowed the state to enact such laws. Neither the state action exception nor the Twenty-First Amendment was found to provide a basis for upholding the fair trade laws relating to retail sale of distilled spirits.

The statutes and regulations relating to price maintenance of wine challenged in this proceeding bear no significant differences to the statutes and regulations relating to price maintenance of distilled spirits found to be invalid in Rice v. Alcoholic Bev. etc. Appeals Bd., supra, 21 Cal.3d 431, 146 Cal.Rptr. 585, 579 P.2d 476. Under Business and Professions Code section 24862 no licensee may sell or resell to a retailer, and no retailer may buy any item of wine except at the selling or resale price contained in an effective price schedule or in an effective fair trade contract. No licensee is permitted to sell or resell to any consumer any item of wine at less than the selling or resale price contained in an effective price schedule or fair trade contract. Under section 24866 each grower, wholesaler, wine rectifier or rectifier must make and file fair trade contracts and/or file schedules of the resale prices of wines. These sections result in price fixing in wine identical to that found to be repugnant to the Sherman Anti-Trust Act when applied to distilled spirits. (See Rice v. Alcoholic Bev. etc. Appeals Bd., supra, 21 Cal.3d at pp. 445-446, 146 Cal.Rptr. 585, 579 P.2d 476; see also, Capiscean Corporation v. Alcoholic Bev. etc. Appeals Bd. (1979) 87 Cal.App.3d 996, 151 Cal.Rptr. 492, holding the price maintenance provisions relating to the retail price of wine to be invalid under Rice.) Our consideration is controlled by the reasoning of the Supreme Court in Rice. Unless there appears an independent basis for upholding the fair trade laws relating to wine we must declare those laws to be invalid.

We do not find the provisions of the fair trade laws relative to wholesale price maintenance different from those relative to retail price maintenance. Price fixing, whether at the wholesale or retail level, is violative of the Sherman Anti-Trust Act. (See United States v. Topco Associates (1971) 405 U.S. 596, 611-612, 92 S.Ct. 1126, 1135-1136, 31 L.Ed.2d 515, 527-528; Kiefer-Stewart v. Seagram, 340 U.S. 211, 213-214, 71 S.Ct. 259, 260-261, 95 L.Ed. 219, 223-224; United States v. Bausch & Lomb Optical Co. (1943) 321 U.S. 707, 720, 64 S.Ct. 805, 812, 88 L.Ed. 1024, 1033; Dr. Miles Med. Co. v. John D. Park & Sons Co. (1910) 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502.) The wholesale price maintenance provisions relating to wine cannot be upheld for the same reasons the retail price maintenance provisions were declared invalid in Rice.

The intervenor suggests that the distinction between wine and distilled spirits renders Rice inapplicable. We cannot agree. All of the considerations involved in Rice apply to wine as well as to distilled spirits. Thus, the court in Rice noted that the price maintenance provisions have resulted in the elimination of any semblance of competition within the industry and that the consumer pays about the highest retail prices for liquor, beer and wine in the country, although the state levies one of the lowest excise taxes on these beverages. (21 Cal.3d at p. 455, 146 Cal.Rptr. 585, 579 P.2d 476. See Sen. Select Com. Rep. on Laws Relating to Alcoholic Beverages (1974) Vol. 1, pp. 9 and 82-83.)

The purpose of the price maintenance provisions, to promote temperance and orderly marketing conditions, can be achieved by other means in regard to wine as well as distilled spirits. (See 21 Cal.3d at pp. 456-457, 146 Cal.Rptr. 585, 579 P.2d 476.) The declared purposes of the fair trade laws relating to alcoholic beverages do not indicate that the protection of the California wine industry was a legislative consideration, nor do we find anything in the Act so to suggest. (See Bus. & Prof.Code, § 24749.) That the provisions do not distinguish between California wines and imported wines indicates that protection of the California wine industry was not the purpose of the enactment of the provisions, as does the fact that the provisions are identical in result and operation to the distilled spirit price maintenance provisions. We conclude that the wine price maintenance provisions of the Business and Professions Code violate the Sherman Anti-Trust Act. (See Capiscean Corporation v. Alcoholic Bev. etc. Appeals Bd., supra, 87 Cal.App.3d 996, 151 Cal.Rptr. 492.) 4

5. Non-Severability

Respondent argues that the wholesale price posting requirements are valid and should be severed from the invalid portions of the statutes. We have noted that we find wholesale price fixing to be invalid. Intervenor suggests that portions of sections 24862 and 24866 merely require each distributor to post a schedule of prices at which he will sell to retailers. The exchange of price information is not a violation of the antitrust laws when the exchange does not amount to price fixing. (Treasure Val. Potato Bar. Ass'n v. Ore-Ida Foods, Inc. (1974) 9 Cir., 497 F.2d 203, cert. denied 419 U.S. 999, 95 S.Ct. 314, 42 L.Ed.2d 273; Gray v. Shell Oil Co. (1972) 9 Cir., 469 F.2d 742, cert. denied 412 U.S. 943, 93 S.Ct. 2773, 37 L.Ed.2d 403.) Further, it is argued, a requirement that wine distributors file with the Department a list of their selling prices to...

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