Sakamoto v. Duty Free Shoppers, Ltd.

• Citation: 764 F.2d 1285
• Decision Date: 01 July 1985
• Docket Number: No. 84-1587,84-1587
• Parties: 1985-2 Trade Cases 66,712 Yosh SAKAMOTO, et al., Plaintiffs-Appellants, v. DUTY FREE SHOPPERS, LTD., et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1285

764 F.2d 1285

1985-2 Trade Cases 66,712

Yosh SAKAMOTO, et al., Plaintiffs-Appellants, v. DUTY FREE SHOPPERS, LTD., et al., Defendants-Appellees.

No. 84-1587.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 8, 1984.

Decided July 1, 1985.

William M. Fitzgerald, Saipan, CM, for plaintiffs-appellants.

Richard A. Pipes, Carbullido & Pipes, Agana, Guam, for defendant-appellee Guam Airport Authority.

Richard Opper, C. William Ullrich, Jr., Nancy Nye, Agana, Guam, for defendant-appellee Government of Guam.

Irving Scher, Jay N. Fastow (argued), Carl J. Munson, Weil, Gotshal & Manges, New York City, William J. Blair, Klemm, Blair & Barusch, Agana, Guam for defendant-appellee Duty Free Shoppers Ltd.

Appeal from the District Court of Guam, Territory of Guam.

Before HUG, TANG, and SCHROEDER, Circuit Judges.

SCHROEDER, Circuit Judge.

The plaintiffs are in the business of selling gifts to tourists in Guam. They brought this action challenging the legality of an exclusive concession agreement giving one of their competitors, Duty Free Shoppers, Ltd., exclusive rights to sell and deliver certain kinds of merchandise to departing passengers at the Guam Airport Terminal. The defendants in this suit are the parties to the concession agreement: Duty Free, the Government of Guam, the Guam Airport Authority, and the Authority's executive manager.

The district court granted summary judgment for the defendants and dismissed the action. The plaintiffs' principal contentions on appeal are that the concession agreement burdens interstate and foreign commerce in violation of the Commerce Clause of the United States Constitution and violates the antitrust laws. We affirm.

The business of plaintiffs and Duty Free is primarily aimed at Japanese tourists in Guam who purchase gifts or "omiyage" to carry back to Japan. The exclusive concession practice in question here began in 1967, and the current contract was entered into in 1978 as the result of competitive bidding. Duty Free submitted the highest bid, $140 million, and was awarded the fifteen year concession which gave it the exclusive right to sell and deliver specified merchandise at the airport. Proceeds from the contract represent a major source of funding for the construction and maintenance of the airport terminal.

In their challenge to the contract as violative of the commerce clause, plaintiffs do not contest the right of the Government of Guam and the Airport Authority, its agency, to limit by contract the number of businesses permitted to make sales on the premises of the airport. Nor do plaintiffs contend that the contract directly interferes with their ability to sell to customers elsewhere. Plaintiffs complain about the limitation on their right to deliver goods at the airport. They contend that the exclusive contract with Duty Free, which prevents them from delivering previously purchased merchandise to departing passengers as they arrive at the airport, is an undue burden on interstate and foreign commerce.

The defendants' threshold response to this argument, and one with which we agree, is that the limitations which the commerce clause places upon the power of state governments to burden commerce do not apply to the Government of Guam because Guam is not a state. The defendants correctly point out that these limitations on states, the "negative implications" of the commerce clause, flow from the commerce clause's grant of plenary authority over commerce to Congress. "[T]he states have not been deemed to have authority to impede substantially the free flow of commerce ... or to regulate those phases of the national commerce which, because of the need of national uniformity, demand that their regulation, if any, be prescribed by a single authority." Southern Pacific Co. v. Arizona, 325 U.S. 761, 767, 65 S.Ct. 1515, 1519, 89 L.Ed. 1915 (1945) (footnote omitted). The historical role of the commerce clause has been confined to limiting regulatory and taxing action by states which may interfere with federal sovereignty. See L. Tribe, American Constitutional Law at 336 (1978), quoted in Reeves, Inc. v. Stake, 447 U.S. 429, 437, 100 S.Ct. 2271, 2277, 65 L.Ed.2d 244 (1980).

Since Guam is an unincorporated territory enjoying only such powers as may be delegated to it by the Congress in the Organic Act of Guam, 48 U.S.C. Sec. 1421a, the Government of Guam is in essence an instrumentality of the federal government. See United States v. Wheeler, 435 U.S. 313, 320-21, 98 S.Ct. 1079, 1084-85, 55 L.Ed.2d 303 (1978). Plenary control by Congress over the Guamanian government is illustrated by the provision that Congress may annul any act of Guam's Legislature. 48 U.S.C. Sec. 1423i. Defendants therefore conclude that the negative implications of the commerce clause, designed to preserve congressional authority, cannot limit the Guamanian government, which is a creation of Congress itself. Wheeler, 435 U.S. at 321, 98 S.Ct. at 1085, 55 L.Ed.2d 303.

While the reported decisions considering this or similar questions are few in number, they support defendants' position. In Buscaglia v. Ballester, 162 F.2d 805 (1st Cir.), cert. denied, 332 U.S. 816, 68 S.Ct. 154, 92 L.Ed. 393 (1947), the First Circuit held that the commerce clause did not restrict the unincorporated Territory of Puerto Rico because Congress had the power under the territories clause to limit territorial action "even to the extent of annuling local legislation." Id. at 807. Cf. Sea Land Services, Inc. v. Municipality of San Juan, 505 F.Supp. 533 (D.P.R.1980) (decided after Puerto Rico became a commonwealth and holding that although the commerce clause does not apply to Puerto Rico ex proprio vigore, its prohibitive effect is binding on the commonwealth through the territories clause).

In United States v. Husband R. (Roach), 453 F.2d 1054 (5th Cir.1971), cert. denied, 406 U.S. 935, 92 S.Ct. 1785, 32 L.Ed.2d 136 (1972), the Fifth Circuit held that the Governor of the Canal Zone was not subject to the limitations imposed on a state legislative body by the commerce clause. Id. at 1059-60. The court reasoned that since Congress retains plenary power to regulate the territories, U.S. Const. art. IV, Sec. 3, cl. 2, and to regulate interstate and foreign commerce, U.S. Const. art. I, Sec. 8, cl. 3, the Governor of the Canal Zone as Congress's "delegate," is not subject to the commerce clause limitations. 453 F.2d at 1059-60. Scholarly commentary agrees that constitutional restrictions on the states' regulation of interstate commerce do not extend to unincorporated territories. Leibowitz, United States Federalism: The States and the Territories, 28 Am.U.L.Rev. 449 (1979); Leibowitz, The Applicability of Federal Law to Guam, 16 Va.J.Int'l.L. 21 (1975); Fuster, The Origins of the Doctrine of Territorial Incorporation and Its Implications Regarding the Power of the Commonwealth of Puerto Rico to Regulate Interstate Commerce, 43 Rev.Jur.U.P.R. 259 (1974).

Ninth Circuit precedent is not to the contrary. In Anderson v. Mullaney, 191 F.2d 123 (9th Cir.1951), aff'd 342 U.S. 415, 72 S.Ct. 428, 96 L.Ed. 458 (1952), we held that while the limitation on state regulation of commerce through the commerce clause did not apply by its own force to the Territory of Alaska, the legislative power granted to the Territorial Legislature was such that the territory should be treated as if it were a state. Alaska at the time was an incorporated territory, well on its way to statehood, and all provisions of the United States Constitution applied. Act of August 24, 1912, ch. 387, Sec. 3, 37 Stat. 512 (codified at 48 U.S.C.A. Sec. 23 (1952) ).

The distinction between incorporated territories which are thought of as future states, see Granville-Smith v. Granville-Smith, 349 U.S. 1, 5, 75 S.Ct. 553, 555-56, 99 L.Ed. 773 (1955) and unincorporated territories, to which only the "essentials" of the Constitution apply, is not new. It goes back to the 1901 series of Supreme Court decisions known as the insular cases: Downes v. Bidwell, 182 U.S. 244, 21 S.Ct. 770, 45 L.Ed. 1088 (1901); Armstrong v. United States, 182 U.S. 243, 21 S.Ct. 827, 45 L.Ed. 1086 (1901); Dooley v. United States, 182 U.S. 222, 21 S.Ct. 762, 45 L.Ed. 1074 (1901); DeLima v. Bidwell, 182 U.S. 1, 21 S.Ct. 743, 45 L.Ed. 1041 (1901); see also Downes v. Bidwell, 182 U.S. 244, 21 S.Ct. 770, 45 L.Ed. 1088 (White, J., concurring). History and the views of scholars and judges who have focused on the issue all support our conclusion that the limitations the commerce clause places on the powers of states to regulate commerce do not affect the government of the unincorporated Territory of Guam.

This court has never directly addressed the applicability of the commerce clause's negative implications to unincorporated territories like Guam. We have, however, in three cases, assumed without discussion that the commerce clause limits the government of Guam in the same manner that it limits the states. ¹ See Pacific Broadcasting Corp. v. Riddell, 427 F.2d 519 (9th Cir.1970) (gross receipts tax not violative of the commerce clause); Asiatic Trans-Pacific, Inc. v. Maddox, 371 F.2d 132 (9th Cir.1967) (gross receipts tax not violative of the commerce clause); Manila Trading & Supply Co. v. Maddox, 335 F.2d 150 (9th Cir.1964) (gross receipts tax violative of the commerce clause).

We do not view these cases as controlling precedent on the applicability of the commerce clause to Guam. In those cases, this court simply assumed that the commerce clause applied, but the issue was never raised or discussed. Such unstated assumptions on non-litigated issues are not precedential holdings binding future decisions. See United States v. L.A. Tucker Truck Lines, 344 U.S. 33, 37-38, 73 S.Ct. 67, 69, 97 L.Ed. 54 (1952) (prior decision is not binding precedent on point neither raised by counsel nor discussed in the opinion of the court in that case); Webster v. Fall, 266 U.S....