North Dakota v. United States

• Decision Date: 21 May 1990
• Docket Number: No. 88-926,88-926
• Parties: NORTH DAKOTA, et al., Appellants v. UNITED STATES
• Court: U.S. Supreme Court

495 U.S. 423

110 S.Ct. 1986

109 L.Ed.2d 420

NORTH DAKOTA, et al., Appellants

v UNITED STATES.

No. 88-926.

Argued Oct. 31, 1989.

Decided May 21, 1990.

Syllabus

The United States and North Dakota exercise concurrent jurisdiction over two military bases on which the Department of Defense (DoD) operates clubs and package stores. In 1986, in order to reduce the price the military pays for alcoholic beverages sold on such bases, Congress passed a statute directing that distilled spirits be "procured from the most competitive source, price and other factors considered." A DoD regulation also requires that alcohol purchases be made in such a manner as to obtain "the most advantageous contract, price and other considered factors." Although the regulation promises cooperation with state officials, it denies any obligation to submit to state control or to make purchases from in-state or state-prescribed suppliers. Since long before 1986, North Dakota has maintained a liquor importation and distribution system, under which, inter alia, out-of-state distillers/suppliers may sell only to state-licensed wholesalers or federal enclaves, while licensed wholesalers may sell to licensed retailers, other licensed wholesalers, and federal enclaves. One state regulation requires that all persons bringing liquor into the State file monthly reports, and another requires that out-of-state distillers selling directly to a federal enclave affix a label to each individual item indicating that the liquor is for consumption only within the enclave. After a number of out-of-state distillers and importers informed military officials that they would not deal with, or would increase prices to, the North Dakota bases because of the burden of complying with the two state regulations, the Government filed suit in the District Court seeking declaratory and injunctive relief against the regulations' application to liquor destined for federal enclaves. The court granted the State's motion for summary judgment, reasoning that there was no conflict between the state and federal regulations because the state regulations did not prevent the Government from obtaining beverages at the "lowest cost." The Court of Appeals reversed, holding that the state regulations impermissibly made out-of-state distillers less competitive with local wholesalers.

Held: The judgment is reversed.

856 F.2d 1107 (CA8 1988), reversed.

Justice STEVENS, joined by THE CHIEF JUSTICE, Justice WHITE, and Justice O'CONNOR, concluded that the state regulations are not invalid under the Supremacy Clause. Pp. 430-444.

(a) Under § 2 of the Twenty-first Amendment—which prohibits the transportation or importation of intoxicating liquor into a State for delivery or use therein in violation of state law—a State has no power to pass regulations that burden the Federal Government in an area or over a transaction that falls outside the State's jurisdiction, see, e.g., Collins v. Yosemite Park & Curry Co., 304 U.S. 518, 58 S.Ct. 1009, 82 L.Ed. 1502, but has "virtually complete control" over the importation and sale of liquor and the structure of the liquor distribution system within the State's jurisdiction, see California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 110, 100 S.Ct. 937, 945-946, 63 L.Ed.2d 233. Since North Dakota's labeling and reporting regulations fall within the core of the State's power to regulate distribution under the Twenty-first Amendment and unquestionably serve a valid state interest in prohibiting the diversion of liquor from military bases into the civilian market, they are supported by a strong presumption of validity and should not be lightly set aside, see, e.g., Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714, 104 S.Ct. 2694, 2708, 81 L.Ed.2d 580. Pp. 430-433.

(b) The regulations do not violate the intergovernmental immunity doctrine. Although they may indirectly affect the Federal Government's liquor costs, they do not regulate the Government directly, since they operate only against suppliers. See, e.g., Helvering v. Gerhardt, 304 U.S. 405, 422, 58 S.Ct. 969, 976, 82 L.Ed. 1427. Nor do they discriminate against the Government or those with whom it deals, since the regulatory regime of which they are a part actually favors the Government. All other liquor retailers in the State are required to purchase from state-licensed wholesalers, whereas the Government alone has the option either to do so or to purchase from out-of-state wholesalers who have complied with the labeling and reporting requirements. Thus, the regulatory system does not discriminate with regard to the economic burdens that result from it. See Washington v. United States, 460 U.S. 536, 544-545, 103 S.Ct. 1344, 1349-1350, 75 L.Ed.2d 264. Pp. 434-439.

(c) Congress has not here spoken with sufficient clarity to pre-empt North Dakota's attempt to protect its liquor distribution system. The language of the federal procurement statutes does not expressly pre-empt the state reporting and labeling regulations or address the problem of unlawful diversion. The state regulations do not directly prevent the Government from obtaining covered liquor "from the most competitive source, price and other factors considered," but merely raise the price charged by the most competitive source, out-of-state shippers. Pp. 439-441.

(d) The state reporting and labeling requirements are not pre-empted by the DoD regulation. That regulation does not purport to carry a greater pre-emptive power than the federal statutes. Nor does the regulation's text purport to pre-empt any such laws. Its command to the military to consider various factors in determining "the most- advantageous contract, price and other considered factors" cannot be understood to pre-empt state laws that merely have the incidental effect of raising costs for the military. Although the regulation does admonish that military cooperation with local authorities should not be construed as admitting an obligation to submit to state control or to buy from in-state or state-prescribed suppliers, the North Dakota regulations do not require such actions. Pp. 442-443.

(e) The present record does not establish the precise burdens the reporting and labeling laws will impose on the Government, but there is no evidence that they will be substantial. It is for Congress, not this Court, to decide whether the federal interest in procuring the most inexpensive liquor outweighs the State's legitimate interest in preventing diversion. It would be an unwise and unwarranted extension of the intergovernmental immunity doctrine for the Court to hold that the burdens associated with the regulations—no matter how trivial—are sufficient to make them unconstitutional. Pp. 443-444.

Justice SCALIA, although agreeing that the availability to the Government of the option of buying liquor from in-state distributors saves the labeling regulation from invalidity, concluded that it does so not because the Government is thereby relieved of the burden of having to pay higher prices than anyone else, but only because that option is not a course of action that the Government has a constitutional right to avoid. The Twenty-first Amendment is binding on the Government like everyone else, and empowers North Dakota to require that all liquor sold for use in the State be purchased from a licensed in-state wholesaler. Since letting the Government choose between purchasing label-free bottles from such wholesalers and purchasing labeled bottles from out-of-state distillers provides the Government with greater rather than lesser prerogatives than those enjoyed by other liquor retailers, the labeling requirement does not discriminate against the United States and thus does not violate any federal immunity. Pp. 444-448.

Justice BRENNAN, joined by Justice MARSHALL, Justice BLACKMUN, and Justice KENNEDY, agreed that North Dakota's reporting regulation is lawful. Pp. 448, 465, n. 10.

STEVENS, J., announced the judgment of the Court and delivered an opinion, in which REHNQUIST, C.J., and WHITE and O'CONNOR, JJ., joined. SCALIA, J., filed an opinion concurring in the judgment, post, p. 444. BRENNAN, J., filed an opinion concurring in the judgment in part and dissenting in part, in which MARSHALL, BLACKMUN, and KENNEDY, JJ., joined, post, p. 448.

Nicholas J. Spaeth, Fargo, N.D., for appellants.

Michael R. Lazerwitz, Washington, D.C., for appellee.

Justice STEVENS announced the judgment of the Court and delivered an opinion, in which THE CHIEF JUSTICE, Justice WHITE, and Justice O'CONNOR join.

The United States and the State of North Dakota exercise concurrent jurisdiction over the Grand Forks Air Force Base and the Minot Air Force Base. Each sovereign has its own separate regulatory objectives with respect to the area over which it has authority. The Department of Defense (DoD), which operates clubs and package stores located on those bases, has sought to reduce the price that it pays for alcoholic beverages sold on the bases by instituting a system of competitive bidding. The State, which has established a liquor distribution system in order to promote temperance and ensure orderly market conditions, wishes to protect the integrity of that system by requiring out-of-state shippers to file monthly reports and to affix a label to each bottle of liquor sold to a federal enclave for domestic consumption. The clash between the State's interest in preventing the diversion of liquor and the federal interest in obtaining the lowest possible price forms the basis for the Federal Government's Supremacy Clause and pre-emption challenges to the North Dakota regulations.

I

The United States sells alcoholic beverages to military personnel and their families at clubs and package stores on its military bases. The military uses revenue from these sales to support a morale, welfare, and recreation program for personnel and their families. See 32 CFR § 261.3 (1989); DoD...