Minter-Weisman Co., Inc. v. Commissioner of Revenue, MINTER-WEISMAN
| Decision Date | 26 July 1994 |
| Docket Number | No. C9-94-167,MINTER-WEISMAN,C9-94-167 |
| Citation | 520 N.W.2d 1 |
| Parties | 1994-2 Trade Cases P 70,690 COMPANY, INC., Relator, v. COMMISSIONER OF REVENUE, Respondent. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
1. Minn.Stat. Sec. 325D.33, subd. 3 (1992), prohibits wholesalers from giving or offering any rebates or concessions for cigarette sales, even if the sales price does not drop below the minimum legal price. Predatory intent is not an element of a violation of Minn.Stat. Sec. 325D.33, subd. 3.
2. The terms "rebate," "concession," and "discount" as used in Minn.Stat. Sec. 325D.33, subd. 3, are not unconstitutionally vague.
3. As applied, Minn.Stat. Sec. 325D.33, subd. 3, does not violate the contract clauses of the Minnesota or Federal Constitutions.
William R. Skolnick, LuAnn M. Petricka, William R. Skolnick, P.A., Minneapolis, for appellant.
Hubert H. Humphrey, III, Atty. Gen., Kurt J. Erickson, Julie S. Wingert, Asst. Attys. Gen., Tax Litigation Div., St. Paul, for respondent.
Considered and decided by DAVIES, P.J., and LANSING and FORSBERG, JJ.
The Commissioner of Revenue concluded that relator Minter-Weisman Company violated Minn.Stat. Sec. 325D.33, subd. 3 (1992), by giving rebates to cigarette retailers. Minter-Weisman argues that (1) the Commissioner misconstrued section 325D.33, subdivision 3, by applying it to above cost sales; (2) the statute as applied unlawfully restrains trade; (3) the statute impairs Minter-Weisman's right to contract; (4) the statute is unconstitutionally vague; and (5) the Commissioner violated the Minnesota Administrative Procedure Act by changing its interpretation of the statute. We disagree and affirm.
In 1992, the Minnesota Department of Revenue (DOR) investigated Minter-Weisman, a cigarette distributor and wholesaler, for giving rebates and concessions to retailers.
On June 18, 1993, the DOR issued a warning letter to Minter-Weisman alleging that it had violated Minn.Stat. Sec. 325D.33, subd. 3 (1992) (). The DOR did not, however, allege that Minter-Weisman was selling cigarettes below the minimum legal price. See Minn.Stat. Sec. 325D.32, subds. 9, 10 (1992) (defining legal price).
In September 1993, Minter-Weisman requested a hearing before an administrative law judge pursuant to Minn.Stat. Sec. 325D.33, subd. 6. Both parties made cross-motions for summary affirmance or withdrawal of the warning letter and for attorney fees. The ALJ recommended granting the DOR's summary affirmance motion, denying Minter-Weisman's motion, and denying both parties' requests for attorney fees. The Commissioner of Revenue adopted the ALJ's recommendations. Minter-Weisman moved for reconsideration and the Commissioner reaffirmed. This certiorari appeal followed.
1. Does Minn.Stat. Sec. 325D.33, subd. 3 (1992), prohibit cigarette wholesalers from offering or giving rebates or concessions even if the sales price does not go below the minimum legal price?
2. Is predatory intent a necessary element for a violation of Minn.Stat. Sec. 325D.33, subd. 3?
3. Does the Department of Revenue's enforcement of Minn.Stat. Sec. 325D.33, subd. 3, amount to unlawful restraint of trade?
4. Does Minn.Stat. Sec. 325D.33, subd. 3, violate the void-for-vagueness doctrine?
5. Does Minn.Stat. Sec. 325D.33, subd. 3, as applied to Minter-Weisman, violate the contract clause?
6. Did the Department of Revenue's October 1992 news release constitute rulemaking under the Minnesota Administrative Procedures Act?
In reviewing an agency's summary affirmance, a reviewing court determines (1) whether there are any genuine issues of material fact, and (2) whether the agency erred in its application of the law. Huber v. Niagara Mach. & Tool Works, 430 N.W.2d 465, 467 (Minn.1988); see Minn.R. 1400.5500(k) (1991) (). A reviewing court need not defer to an administrative agency on questions of law. St. Otto's Home v. Minnesota Dep't of Human Servs., 437 N.W.2d 35, 39-40 (Minn.1989). The construction of a statute is a legal question. Id.
1. The statute at issue provides:
Subd. 3. Rebates or concessions. It is unlawful for a wholesaler to offer a rebate in price, to give a rebate in price, to offer a concession of any kind, or to give a concession of any kind in connection with the sale of cigarettes. For purposes of this chapter, the term "discount" is included in the definition of a rebate.
Minn.Stat. Sec. 325D.33, subd. 3 (1992).
The DOR argues that subdivision 3 should be construed literally; thus, rebates and concessions are unlawful whether or not the wholesaler's price is below the minimum legal price. Minter-Weisman argues instead that subdivision 3 must be read in conjunction with the entire act; hence, rebates and concessions are allowed so long as the legal price is maintained. We disagree and hold that section 325D.33, subdivision 3, prohibits cigarette wholesalers from offering or giving rebates and concessions whether or not the sale price is less than the minimum legal price.
Read literally, the prohibition of rebates and concessions in subdivision 3 does not apply only when the sale price is below the minimum legal price. See Minn.Stat. Sec. 645.16 (1992) (). And construing section 325D.33, subdivision 3, as written, makes sense because it prevents wholesalers from invoicing a legal price and then giving undisclosed, after-the-fact rebates or concessions. Thus, it assists in enforcement.
Minter-Weisman notes that subdivision 1 of section 325D.33 only prohibits sales "at less than cost," and it reasons a fortiori that the scope of subdivision 3 must be limited to rebates and concessions that create below cost prices. Subdivision 3, however, was enacted in 1987, while subdivision 1 was enacted 20 years earlier. See 1967 Minn.Laws ch. 600 Sec. 4 (). By Minter-Weisman's reading, the 1987 amendment added nothing, since below cost sales had already been illegal for 20 years. Moreover, although the headnote to section 325D.33--"SALES AT LESS THAN COST"--ostensibly supports Minter-Weisman's construction, it is of little legal import. See Minn.Stat. Sec. 645.49 (1992) ().
Minter-Weisman also claims the word "discounts" in subdivision 4, requiring wholesalers to preserve invoices, makes a literal construction of subdivision 3 incongruous because the legislature cannot outlaw discounts while simultaneously requiring discounts to be invoiced. We disagree. Subdivision 4 can be read to refer to time-of-sale discounts. It can also refer to manufacturers' discounts, which are important for calculating a wholesaler's cost and which, if disclosed on original invoices, are permitted. See Minn.Stat. Sec. 325D.32, subd. 10(a), (b) (1992) (). Thus, subdivision 3 does not conflict with subdivision 4. Moreover, subdivision 4 is a general provision--referring to the reporting of invoices generally--while subdivision 3 is a special provision dealing specifically with wholesaler rebates and concessions. Consequently, subdivision 4 does not affect our construction of subdivision 3 2. Minter-Weisman argues that proving a wholesaler's predatory intent--its intent to injure competition--is a necessary element of a subdivision 3 violation. The DOR argues that a subdivision 3 violation only requires proof that Minter-Weisman offered or gave rebates or concessions. We agree with the DOR and conclude that Minter-Weisman inappropriately relies on Twin City Candy & Tobacco Co. v. A. Weisman Co., 276 Minn. 225, 149 N.W.2d 698 (1967). Twin City is distinguishable. Section 325D.33, subdivision 3, is not a price-fixing statute and does not establish minimum prices, as did the provision at issue in Twin City. See id. at 227-28, 149 N.W.2d at 700-01 ().
3. Minter-Weisman contends that the Act as enforced is an unlawful restraint of trade. Since the record does not show that Minter-Weisman raised this claim before the ALJ, the issue is not properly before us on appeal. See Elbow Lake Co-op Grain Co. v. Commodity Credit Corp., 144 F.Supp. 54, 61-62 (D.C.Minn.1956) (), aff...
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