R. E. Spriggs Co. v. Adolph Coors Co.

Decision Date28 February 1974
CourtCalifornia Court of Appeals Court of Appeals
Parties, 1974-1 Trade Cases P 74,999 R. E. SPRIGGS CO. and Richard Spriggs, etc., Cross-Complainants and Appellants, v. ADOLPH COORS COMPANY, a corporation, Cross-Defendant and Respondent. Civ. 41861, 40228.

Demetriou & Del Guercio, Richard A. Del Guercio, Thomas Elke, San Francisco, and James R. Jurecka, Los Angeles, for cross-complainants and appellants.

McCutchen, Black, Verleger & Shea, G. William Shea and James E. Allen, Jr., Los Angeles, for cross-defendant and respondent.

STEPHENS, Acting Presiding Justice.

This is an appeal from a dismissal of appellant's third cause of action on the ground that the court lacked jurisdiction to consider the action.

In brief, respondent Adolph Coors Company (hereinafter, Coors) is a corporation organized and existing under the laws of the State of Colorado and is authorized and qualified to do business in the State of California. Coors manufactures, brews and bottles beer only in Golden, Colorado, and sells its beer to wholesale distributors in the Western United States, including California. All sales are made FOB Golden, Colorado. Coors does not distribute or sell its beer other than to wholesale distributors. Appellant R. E. Spriggs Co., Inc. (hereinafter, spriggs) operated a wholesale beer distribution business in Los Angeles County. By agreement with Coors, Spriggs distributed Coors' products in Los Angeles County from 1937 until termination on September 22, 1965. The written distribution agreements between Spriggs and Coors and between Coors and other wholesale distributors who distributed Coors' beer in Los Angeles County and other areas in California designated the territory within which each such distributor could distribute Coors beer.

In its third cause of action, Spriggs alleged combinations in restraint of trade and sought damages under the Cartwright Act (Bus. & Prof.Code, § 16700 et seq.). 1 In the joint pretrial statement Spriggs contended that the written agreements violated the Cartwright Act by reason of the territorial limitations contained therein; that the agreements between Coors and its distributors resulted in territorial limitations, price-fixing and conspiracy to exclude Spriggs from selling beer at locations within and without Los Angeles, all in violation of the Cartwright Act. There is no question but that at all times relevant to this case Coors was engaged in interstate trade and commerce. All sales of this beer by Coors to Spriggs were made in such interstate commerce. The trial judge found that interstate commerce was directly involved in the sale of Coors beer to Spriggs and held that the supremacy clause of the United States Constitution (Art. VI, Clause 2) and the Sherman Antitrust Act (Title 15, U.S.C., §§ 1 and 15) precluded the application of the Cartwright Act to the factual situation presented by the third cause of action and the evidentiary record.

The judgment entered by the trial court dismissing the third cause of action for lack of jursidiction is the only issue raised by the present appeal.

Although the commerce clause of the federal Constitution 2 provides that 'Congress shall have the Power . . . to regulate Commerce with foreign Nations and among the several States, . . .' nothing in this clause expressly provides that the power of Congress to regulate interstate commerce is exclusive or that the states have no power to regulate interstate commerce. However, the Supreme Court has recognized that the constitutional grant of the power to Congress under the commerce clause to regulate commerce among the several states necessarily implies the subordination of the states to that power. (See, e.g., Milk Control Board v. Eisenberg Farm Products Co., 306 U.S. 346, 59 S.Ct. 528, 83 L.Ed. 752.)

Where the activity is exclusively in interstate commerce without intrastate aspects, the commerce and supremacy clauses of the United States Constitution prohibit state regulation or interference with that activity. It is equally axiomatic that where the activity and its effect is wholly intrastate, the states retain full authority under their police powers to regulate the activity. The central issue to be resolved in this case is the nature and extent of Congress' power in the field of a bifurcated activity which has both interstate and intrastate aspects.

Respondent contends that Congress' power is exclusive. However, review of the case law in this area, particularly with respect to the need to reconcile the fact of our federalism with the reality of the reservation of the commerce power in the Congress, convinces us that Congress' power is merely paramount and does not, without more, proscribe state regulation of the intrastate aspects of a commercial activity.

A state law is not invalid merely because it regulates commerce, and the mere grant of the commerce power to the federal government does not of itself preclude state action. (Breard v. Alexandria, 341 U.S. 622, 634--635, 71 S.Ct. 920, 95 L.Ed. 1233; Cities Service Co. v. Peerless Oil & Gas Co., 340 U.S. 179, 186--187, 71 S.Ct. 215, 95 L.Ed. 190.) 3 'The fact that Congress has acted to prevent restraints on trade in interstate commerce, of itself, does not invalidate legislation by a state effecting substantially the same result. The fundamental inquiry in such instances is whether the state legislation is in conflict with national policy.' (State of California v. Zook, 336 U.S. 725, 729, 69 S.Ct. 841, 93 L.Ed. 1005.) The power which reposes in Congress under the commerce clause extends to three categories of commercial activities: first, the use of the channels of interstate commerce; second, protection of the instrumentalities of interstate commerce or persons or things in commerce; third, those activities affecting interstate commerce. (Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686.) It is with this last aspect that we are concerned, 4 as it is in that category that Congress is given a wide latitude within which it may regulate.

In the case of Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122, a unanimous court held that wheat grown wholly for home consumption was constitutionally within the scope of federal regulation. There, the court said:

'(E)ven if appellee's activity be local and though it may not be regarded as commerce, it may still, whatever its nature be reached by Congress, if it exerts a substantial economic effect on interstate commerce. . . . (317 U.S. at p. 125, 63 S.Ct. at p. 89.)

This recognition that the test of interstate commerce envisions a qualitative rather than a quantitative standard has been followed to the present. (Perez v. United States, Supra; Atlanta Motel v. United States, 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258; Katzenbach v. McClung, 379 U.S. 294, 85 S.Ct. 377, 13 L.Ed.2d 290.)

However, the recognition that Congress has the power to act does not Ipso facto negate the states' power to regulate. The rule is that in the absence of clear occupation of the field in which the activity is to be regulated, a state may regulate the interstate aspects of an activity, even though the regulation has home effect upon interstate commerce. (See, e.g., Head v. New Mexico Bd. of Examiners, 374 U.S. 424, 83 S.Ct. 1759, 10 L.Ed.2d 983; Huron Portland Cement Co. v. Detroit, 362 U.S. 440, 80 S.Ct. 813, 4 L.Ed.2d 852.)

It is not contended that the Cartwright Act imposes an 'undue burden' upon commerce, or that it discriminates against interstate commerce. The Cartwright Act does not impose an economic barrier protecting local industry such as was condemned in Dean Milk Co. v. Madison, 340 U.S. 349, 71 S.Ct. 295, 95 L.Ed. 329. Neither does it unduly burden interstate commerce in that the Cartwright Act, as construed in Corwin v. Los Angeles Newspaper Service, 4 Cal.3d 842, 94 Cal.Rptr. 785, 484 P.2d 953, is complementary to the relevant provisions of the federal antitrust statutes 5 and may be justified as a reasonable means of protecting a significant state interest, i.g., prevention of unfair competition. 6 Rather, respondent's arguments center upon the contention that the relevant federal antitrust legislation has evidenced a congressional intent to occupy the field so as to preempt state regulation in this area and confine any alleged restraint of trade violation to the jurisdiction of the federal courts. 7

In order to sustain a finding that Congress has by legislation preempted a field of commerce from state regulation, it must be shown by persuasive reasoning either that the nature of the regulated subject permits no other conclusion, or that the Congress has unmistakably so ordained. (Florida Avocado Growers v. Paul, 373 U.S 132, 83 S.Ct. 1210, 10 L.Ed.2d 248; Huron Portland Cement Co. v. Detroit, Supra, at p. 443 of 362 U.S., 80 S.Ct. 813.)

The history of the Sherman Antitrust Act makes it clear that the Congress did not intend that the federal legislation preempt parallel state efforts to control unfair competitive practices. Before the enactment of the Sherman Act, some 21 states had legislation proscribing 'combinations in restraint of trade.' 8 Thus, it was not by accident that Congress did not use language in its act that would expressly preclude state regulation though the activity possessed interstate qualities. Senator Sherman, in urging enactment of his bill, stated:

'This bill . . . has for its . . . object to invoke the aid of the courts of the United States to deal with the combinations . . . when they affect injuriously our foreign and interstate commerce . . . and in this way to supplement the enforcement of the established rules of the common and statute laws by the several states in dealing with combinations that affect injuriously the industrial liberty of the citizens of those states. It is to arm the ...

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