U.S. Brewers Ass'n, Inc. v. Healy

• Decision Date: 01 November 1982
• Docket Number: D,No. 994,994
• Citation: 692 F.2d 275
• Parties: 1982-83 Trade Cases 65,023 UNITED STATES BREWERS ASSOCIATION, INC., et al., Plaintiffs-Appellants, v. John F. HEALY, et al., Defendants-Appellees. ocket 82-7158.
• Court: U.S. Court of Appeals — Second Circuit

Page 275

692 F.2d 275

1982-83 Trade Cases 65,023

UNITED STATES BREWERS ASSOCIATION, INC., et al., Plaintiffs-Appellants, v. John F. HEALY, et al., Defendants-Appellees.

No. 994, Docket 82-7158.

United States Court of Appeals Second Circuit.

Argued May 19, 1982.

Decided Nov. 1, 1982.

William H. Allen, Washington, D.C. (H. Thomas Austern, Richard A. Friedman, Sarah E. Burns, Covington & Burling, Washington, D.C., Winthrop J. Allegaert, Thomas J. Sheridan, III, Richards, O'Neil & Allegaert, New York City, on brief), for plaintiffs-appellants U.S. Brewers Ass'n, et al.

William Hughes Mulligan, New York City (John D. Feerick, Jeffrey Glekel, Charles M. Yablon, Timothy G. Reynolds, Skadden, Arps, Slate, Meagher & Flom, New York City, Day, Berry & Howard John R. Lacey, Asst. Atty. Gen., Hartford, Conn., Richard M. Sheridan, Asst. Atty. Gen., Newington, Conn. (Carl R. Ajello, Atty. Gen. of the State of Conn., Robert M. Langer, Asst. Atty. Gen., Hartford, Conn., Robert F. Vacchelli, Asst. Atty. Gen., Newington, Conn.), for defendants-appellees John F. Healy, et al.

Hartford, Conn., of counsel), for plaintiff-appellant Anheuser-Busch, Inc.

Before TIMBERS, VAN GRAAFEILAND, and KEARSE, Circuit Judges.

KEARSE, Circuit Judge:

Plaintiffs United States Brewers Association, a non-profit corporation representing brewers and importers of beer, and individual companies that are brewers or importers of beer, appeal from a final judgment of the United States District Court for the District of Connecticut, M. Joseph Blumenfeld, Judge, dismissing their complaint against defendants John F. Healy, et al., officials of the Connecticut Liquor Control Department, seeking declaratory and injunctive relief to prohibit the enforcement of Secs. 30-63a(b), 30-63b(b), and 30-63c(b) (the "beer price affirmation" provisions or "Connecticut statute") of the Connecticut Liquor Control Act, Conn.Gen.Stat.Ann. Secs. 30-1 to 30-113 (West 1975 & Supp.1982). Plaintiffs contended principally that the beer price affirmation provisions violate the Supremacy Clause of the Constitution, art. VI, cl. 2, by requiring them to violate Sec. 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1976), and place an impermissible burden on interstate commerce in violation of the Commerce Clause of the Constitution, art. I, Sec. 8, cl. 3. In an opinion reported at 532 F.Supp. 1312 (1982), the district court granted summary judgment in favor of defendants. Since we conclude that the Connecticut statute places an unconstitutional burden on interstate commerce, we reverse.

I. FACTS

The Connecticut Liquor Control Act is a comprehensive statute regulating the sale and distribution of liquor in Connecticut. Historically the retail price of beer has been generally higher in Connecticut than in its neighboring states, i.e., Massachusetts, New York, and Rhode Island. As a consequence Connecticut residents have crossed state borders in significant numbers to purchase beer in other states at lower retail prices. In 1981, the Connecticut legislature amended the Liquor Control Act, effective January 1, 1982, by enacting the beer price affirmation provisions challenged here. The district court found it undisputed that the purpose of these provisions was to lower the retail price of beer in Connecticut, thereby increasing the purchase of beer by Connecticut residents within the state and generating increased tax revenues for the state. 532 F.Supp. at 1316-17.

Several provisions were adopted to achieve these goals. Conn.Gen.Stat. Sec. 30-63(c) provides, as it did before the 1981 amendments, that each manufacturer or importer of beer (collectively "brewers") ¹ must file a schedule stating the per-unit ² price that it will charge Connecticut wholesalers for its products in the following month. ³ These "posted prices" must be Conn.Gen.Stat. Sec. 30-63b(b) was added to require that when the brewer posts its prices pursuant to Sec. 30-63(c), it must also file a sworn affirmation that its posted per-unit prices will be no higher than its prices for the corresponding units sold ⁴ in any state bordering Connecticut during the month covered by the posting. ⁵ In the same vein, Sec. 30-63a(b) was added to prohibit a brewer from selling beer to a Connecticut wholesaler at a unit price higher than the lowest price charged for that unit by the brewer in any state bordering Connecticut. ⁶

filed on the thirteenth day of the prior month, Conn. Dep't of Liquor Regs. Sec. 30-6-B4; and Sec. 30-63(c) as amended in 1981 provides that the posted prices may not be changed, except that within the four-day period following the posting deadline a manufacturer or wholesaler may lower its posted price to meet, but not to beat, the lower posted price of another manufacturer or wholesaler with respect to a beer of like grade and quality. A brewer is not permitted to deviate from its posted prices in selling to Connecticut wholesalers during the one-month period to which the posting applies. Id.

Finally, new Sec. 30-63c(b) provides that a brewer's "lowest" price to a wholesaler in a neighboring state is to be determined by taking into account adjustments for rebates, discounts, allowances, and other inducements of any kind offered to the out-of-state wholesaler; and it requires each brewer to offer to Connecticut wholesalers all of the same sizes of its brand that are offered in the bordering states. ⁷ For a Plaintiffs commenced the present action seeking declaratory and injunctive relief prohibiting the enforcement against them of the beer price affirmation provisions, contending that the Connecticut statute is unconstitutional in two principal respects. ⁸ First, plaintiffs argued that the beer price affirmation provisions require industry-wide conduct tantamount to the fixing of minimum prices, which would violate Sec. 1 of the Sherman Act, 15 U.S.C. Sec. 1, if undertaken voluntarily by private parties. They contended that the Connecticut provisions are thus preempted by the Sherman Act, and that the enforcement of the state provisions would violate the Supremacy Clause of the Constitution. Second, plaintiffs contended that the Connecticut statute is protectionist legislation that impermissibly burdens interstate commerce and discriminates against out-of-state businesses in violation of the Commerce Clause. Defendants, on the other hand, contended that the Twenty-first Amendment to the Constitution gives the state carte blanche to regulate the prices at which plaintiffs may sell beer in Connecticut and that, accordingly, plaintiffs' claims must fail. Both sides moved for summary judgment.

violation of these provisions a brewer may have its permit to do business in Connecticut revoked or suspended, Conn.Gen.Stat.Ann. Sec. 30-57 (West Supp.1982), or may be fined $1000 and/or imprisoned for up to one year, Conn.Gen.Stat.Ann. Sec. 30-113 (West Supp.1982).

The district court granted defendants' motion and dismissed the complaint. The court held that the beer price affirmation statute does not violate the Supremacy Clause because it does not require brewers to enter into a contract, combination, or conspiracy in violation of the Sherman Act. 532 F.Supp. at 1328-30. The court rejected plaintiffs' Commerce Clause claims on the grounds that the legislation is not impermissibly protectionist or discriminatory in intent because it attempts only to equalize, not to favor, the competitive position of Connecticut dealers, id. at 1323; that the statute has no discriminatory effect because out-of-state wholesalers have "no right, constitutional or otherwise, to receive lower prices from the brewers," id. at 1324; and, relying on Joseph E. Seagram & Sons v. Hostetter, 384 U.S. 35, 86 S.Ct. 1254, 16 L.Ed.2d 336 (1966), that the statute does not place an undue burden on commerce, 532 F.Supp. at 1324-27.

On appeal, plaintiffs pursue their Supremacy Clause and Commerce Clause claims. ⁹ For the reasons below, we conclude that the Connecticut statute is permitted by neither the Commerce Clause nor the Twenty-first Amendment, and we reverse the judgment on that ground without reaching plaintiffs' Supremacy Clause contentions.

II. DISCUSSION

The Commerce Clause of the Constitution provides that "Congress shall have Power ... To regulate Commerce with foreign Nations, and among the several States ...." U.S.Const. art. I, Sec. 8, cl. 3. This grant of authority to Congress has long been construed to place implicit limitations on actions affecting interstate commerce that may be taken by individual states. See, e.g., Cooley v. Board of Wardens, 53 U.S. (12 How.) 299, 13 L.Ed. 996 (1851); The Passenger Cases, 48 U.S. (7 How.) 282, 12 L.Ed. 72 (1849). In general the Commerce Clause is viewed as intending to promote free trade among the states and to liberate the flow of articles in commerce from the provincialism evident in many local regulations. See, e.g., Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 522, 55 S.Ct. 497, 500, 79 L.Ed. 1032 (1935).

A. General Commerce Clause Principles

With these goals in mind several general precepts regarding the Commerce Clause have been formulated. State regulation that is designed to confer economic benefits on the businesses and residents of the state, and to do so at the expense of businesses and residents of other states, is generally impermissible. See, e.g., Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 350-53, 97 S.Ct. 2434, 2445-2446, 53 L.Ed.2d 383 (1977). Such discriminatory regulation constitutes "simple economic protectionism," which is "virtually per se" unconstitutional. City of Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S.Ct. 2531, 2535, 57 L.Ed.2d 475 (1978) (state prohibition of use of local landfills for garbage of out-of-state origin violates Commerce Clause).

If, on the other hand, the state regulation does not seek to distinguish between articles of commerce on the basis of their domestic or out-of-state origins, and the effects on...