Norman Williams Co. v. Rice

• Citation: 108 Cal.App.3d 348,166 Cal.Rptr. 563
• Court: California Court of Appeals
• Decision Date: 17 July 1980
• Parties: , 1980-2 Trade Cases P 63,484 NORMAN WILLIAMS COMPANY, a California Corporation; Schwab Distributing Company, Inc., a California Corporation doing business as Gold Coast Wines & Spirits; Lewis-Westco & Co., a California Corporation; Greene Cat Liquors, Inc., A California Corporation; Frederica Auldridge, doing business as South Bay Liquor; Ralph E. Pierce and Sharon L. Pierce, doing business as Texas Liquor House; and William A. Kirby, Jr., and Shirley D. Kirby, doing business as House of Fine Spirits, Petitioners, v. Baxter RICE, Director, Department of Alcoholic Beverage Control, Respondent, Wine & Spirits Wholesalers of California, a California Corporation, Bohemian Distributing Company, Intervenors. Civ. 19089.

Page 563

166 Cal.Rptr. 563

108 Cal.App.3d 348, 1980-2 Trade Cases P 63,484

NORMAN WILLIAMS COMPANY, a California Corporation; Schwab Distributing Company, Inc., a California Corporation doing business as Gold Coast Wines & Spirits; Lewis-Westco & Co., a California Corporation; Greene Cat Liquors, Inc., A California Corporation; Frederica Auldridge, doing business as South Bay Liquor; Ralph E. Pierce and Sharon L. Pierce, doing business as Texas Liquor House; and William A. Kirby, Jr., and Shirley D. Kirby, doing business as House of Fine Spirits, Petitioners, v. Baxter RICE, Director, Department of Alcoholic Beverage Control, Respondent, Wine & Spirits Wholesalers of California, a California Corporation, Bohemian Distributing Company, Intervenors.

Civ. 19089.

Court of Appeal, Third District, California.

July 17, 1980.

Hearing Denied September 24, 1980.

Feldman, Waldman & Kline, Leland R. Selna, Jr., Max Lieberman, George G. Weickhardt and Thomas W. Martin, San Francisco, for petitioners.

Harry M. Snyder and Luana L. Martilla, San Francisco, as amici curiae on behalf of petitioners.

George Deukmejian, Atty. Gen., and George J. Roth, Deputy Atty. Gen., for respondent.

Pillsbury, Madison & Sutro, Noble K. Gregory, Parker A. Maddux, Gary W. Jackson, Heller, Ehrman, White & McAuliffe, Stephen V. Bomse, San Francisco, White & Case, Macdonald Flinn, Edna R. Sussman, New York City, Douglas W. Metz, Abraham Tunick, Richman & Garrett, Lionel Richman, Ivan J. Potts, Michael J. Shelley, and James M. H. Ball, Los Angeles, as amici curiae on behalf of respondent.

Ball, Hunt, Hart, Brown & Baerwitz, Joseph A. Ball, Anthony Murray, Long Beach, Michael J. Maloney, Los Angeles, James Polish, Beverly Hills, William T. Chidlaw, Sacramento, Wyman, Bautzer, Rothman, Kuchel & Silbert, Frank Rothman and Christina A. Snyder, Los Angeles, Cal., Wyman, Bautzer, Rothman, Kuchel & Silbert and George Miron, Washington, D. C., for intervenors.

REYNOSO, Associate Justice.

In this proceeding in writ of mandate we are called upon to determine the validity of that portion of Business and Professions Code section 23672 (as amended by Assem. Bill No. 499, Stats.1979, ch. 280, § 1; hereinafter "designation statute"), which provides that a licensed importer shall not purchase or accept delivery of any brand of distilled spirits unless designated as an authorized importer of such brand by the brand owner or its authorized representative. We conclude for reasons which we explain, that the designation statute is invalid. Accordingly, we issue the writ. ¹

This dispute arises out of the determination by the appellate courts of this state that California's alcoholic beverage price maintenance laws are invalid. Prior to 1978 the Business and Professions Code contained price maintenance provisions concerning all aspects of the alcoholic beverage industry. In Rice v. Alcoholic Bev. etc. Appeals Bd. (1978) 21 Cal.3d 431, 146 Cal.Rptr. 585, 579 P.2d 476, the California Supreme Court unanimously determined that the price maintenance provisions relating to the retail sale of distilled spirits were in violation of the Sherman Act (15 U.S.C. § 1 et seq.), and that no legitimate state interest outweighed the policies of the Sherman Act. (Id., at p. 459, 146 Cal.Rptr. 585, 579 P.2d 476.) The Court declared the price maintenance provisions relating to retail sales of distilled spirits invalid. (Ibid.)

In Capiscean Corp. v. Alcoholic Bev. etc. Appeals Bd. (1979) 87 Cal.App.3d 996, 151 Cal.Rptr. 492, the First District Court of Appeal considered the validity of the price maintenance provisions relating to the retail sale of wine. The court found the decision in Rice, supra, controlling and declared those provisions to be invalid. The alcoholic beverage price maintenance laws reached this court in Midcal Aluminum, Inc. v. Rice (1979) 90 Cal.App.3d 979, 153 Cal.Rptr. 757. We considered the validity of the price maintenance laws relating to the wholesale and retail sale of wine and concluded that those laws were invalid under the decision in Rice, supra.

An intervenor in Midcal Aluminum, Inc. v. Rice, supra, the California Retail Liquor Dealers Association, petitioned the California Supreme Court for a hearing but that Court declined to hear the case. The dealers association then sought certiorari from the United States Supreme Court, which was granted. (--- U.S. ----, 100 S.Ct. 45, 62 L.Ed.2d 31.) On March 3, 1980, the United States Supreme Court issued its decision in California Liquor Dealers v. Midcal Aluminum (1980) --- U.S. ----, 100 S.Ct. 937, 63 L.Ed.2d 233.) The Court unanimously (Brennan, J. not participating) affirmed this court's decision, and approved the California Supreme Court's opinion in Rice, supra. California's alcoholic beverage price maintenance laws are thus no longer enforced.

Prior to the judicial decisions striking down the alcoholic beverage price maintenance provisions of the Business and Professions Code, section 23672 of that code provided: "A licensed importer shall not purchase or accept delivery of any brand of distilled spirits unless he is designated as an authorized importer of such brand by the (licensee who filed the minimum retail price schedule for such brand pursuant to Section 24755.) Such distilled spirits imported into California shall come to rest at the warehouse of the licensed importer or an authorized warehouse for the account of such licensed importer, before sale and delivery to a retail licensee." When the price maintenance provisions were declared invalid, the Department of Alcoholic Beverage Control took the position that section 23672 became unenforceable because there were no longer any minimum retail price schedules required to be filed.

Among the petitioners are licensed importers and wholesalers of distilled spirits as well as licensed retailers of distilled spirits. After the price maintenance provisions of the Business and Professions Code were declared invalid the importer petitioners secured sources of supply of national brand distilled spirits in Oklahoma, referred to as the "Oklahoma connection." Under Oklahoma law a distiller who chooses to sell distilled spirits in Oklahoma must sell to all licensed Oklahoma wholesalers and may not discriminate either as to price or as to quantity. (37 O.S.1961, §§ 501 et seq.) The distiller is required to sell distilled spirits at a rate which is no higher than the lowest rate at which the seller sells in any other state. (Id., § 536(a)(1)). The licensed wholesalers may sell to any licensed retailer or wholesaler within Oklahoma, and may sell distilled spirits out of Oklahoma to "qualified persons." (Id., § 521, subd. (e).) The importer petitioners have been able to purchase national brand distilled spirits in Oklahoma, import such distilled spirits to California, and sell these products to licensed retailers at prices below the suggested wholesale prices which the distillers provide to their designated wholesalers.

The amendment of Business and Professions Code section 23672 provided for by Assembly Bill 499 amends the language of that section to read: "A licensed importer shall not purchase or accept delivery of any brand of distilled spirits unless he is designated as an authorized importer of such brand by the brand owner or his authorized agent. Such distilled spirits imported into California shall come to rest at the warehouse of the licensed importer or an authorized warehouse for the account of such licensed importer, before sale and delivery to a retail licensee." (Stat.1979, ch. 280, § 1.) This provision would effectively preclude the importer petitioners from competing for the wholesale market of certain national brands, because they have been denied designation as authorized importers by the brand owners. The petitioners thus will be unable to secure these brands from the distillers and are precluded from purchasing such brands from Oklahoma sellers.

The importer petitioners seek a peremptory writ of mandate or alternatively prohibition ordering the Department of Alcoholic Beverage Control not to enforce section 23672 so that they may continue to compete in the wholesale distilled spirit market with national brands obtained from Oklahoma sellers. The retailer petitioners seek such a writ so that they may continue to purchase national brand distilled spirits at prices below the distillers' suggested wholesale prices. We issued an alternative writ of mandate and stayed enforcement of the statute pending the return to the writ and further order of this court.

The basis of the judicially declared invalidity of the California alcoholic beverage price maintenance provisions was the Sherman Antitrust Act, 15 United States Code, sections 1 et seq. (Rice v. Alcoholic Bev. etc. Appeals Bd., supra, 21 Cal.3d at p. 459, 146 Cal.Rptr. 585, 579 P.2d 476; Midcal Aluminum, Inc. v. Rice, supra, 90 Cal.App. 3d at p. 984, 153 Cal.Rptr. 757; Capiscean v. Alcoholic Bev. etc. Appeals Bd., supra, 87 Cal.App.3d at pp. 999-1000, 151 Cal.Rptr. 492.) In view of the United States Supreme Court's approval of the California appellate opinions, it is clear that the Sherman Act applies to interstate commerce in alcoholic beverages. (California Liquor Dealers v. Midcal Aluminum, Inc., supra, --- U.S. ---- at p. ----, 100 S.Ct. 937 at p. 945, 63 L.Ed.2d 233 at p. 245.) We thus consider whether Business and Professions Code section 23672, as amended, is in violation of the Sherman Act. ²

The California Supreme Court's opinion in Rice is instructive on the course of the inquiry we must make. We must first consider whether the scheme, in the absence of governmental sanction, would violate the Sherman Act. If the scheme would violate the Sherman Act in the absence of governmental sanction, we must then consider whether governmental sanction for the scheme validates the scheme despite the Sherman Act. That inquiry is two-fold. It must be determined whether the...