United States v. Colorado Wholesale Wine & Liquor Dealers Ass'n

• Decision Date: 10 October 1942
• Docket Number: No. 9514.,9514.
• Citation: 47 F. Supp. 160
• Parties: UNITED STATES v. COLORADO WHOLESALE WINE & LIQUOR DEALERS ASS'N, Inc., et al.
• Court: U.S. District Court — District of Colorado

47 F. Supp. 160

UNITED STATES v. COLORADO WHOLESALE WINE & LIQUOR DEALERS ASS'N, Inc., et al.

No. 9514.

District Court, D. Colorado.

October 10, 1942.

James McI. Henderson and George B. Haddock, Sp. Assts. to Atty. Gen., and Sheridan Morgan, Joseph J. Cella, Jr., Donald W. Marshall, and James R. Browning, Sp. Attys., all of Denver, Colo., for plaintiff.

Morris Rifkin, of Denver, Colo., for Colorado Package Liquor Ass'n Inc., and others.

Percy S. Morris and Charles Rosenbaum, both of Denver, Colo., for Hiram Walker, Inc., and others.

Grant, Shafroth & Toll, of Denver, Colo., for Seagram-Distillers Corporation and others.

E. R. Morrison, of Kansas City, Mo., and Charles Rosenbaum, of Denver, Colo., for Waterfill & Frazier Distillery Co. and another.

Robert S. Marx, of Cincinnati, Ohio, and Rothgerber & Appel, of Denver, Colo., for Schenley Distillers Corporation and another.

C. C. Dawson, Jr., Robert G. Bosworth, and Pershing, Bosworth, Dick & Dawson, all of Denver, Colo., for Ben-Burk, Inc., and others.

Robert E. More, M. J. Keegan, and Dines, Dines & Holme, all of Denver, Colo., for Brown Forman Distillers Corporation and another.

Max D. Melville and Ellis, Melville & Winner, all of Denver, Colo., for Glenmore Distilleries Co. and others.

William V. Hodges and Hodges, Vidal & Goree, all of Denver, Colo., for National Distillers Products Corporation and others.

A. G. Gertz and Hellerstein & Gertz, all of Denver, Colo., for D. J. Bielzoff Products Co.

M. O. Edison, of Denver, Colo., for American Distilling Co. and another.

Richard M. Davis and Newton, Davis, Drinkwater & Henry, all of Denver, Colo., for Somerset Importers, Ltd.

Byron G. Rogers, of Denver, Colo., for East-Side Winery and another.

Kenneth W. Robinson, Van Cise, Robinson & Charlton, and Quiat & Cummings, all of Denver, Colo., for Davis Bros., Inc., and others.

Sidney S. Jacobs, of Denver, Colo., for Colorado Beverage Co.

Graham Susman and Quiat & Cummings, all of Denver, Colo., for Colorado Alcohol Co. and others.

Julius Seeman, of Denver, Colo., for George M. Wheat and others.

Edward Miller, of Denver, Colo., for Isadore E. Eber and another.

Frank L. Fetzer, of Denver, Colo., for Earl B. Lewkowitz.

SYMES, District Judge.

The sufficiency of this indictment returned March 12, 1942, is directly raised by numerous motions to quash and demurrers filed by the several defendants. Exhaustive arguments have been had and many briefs filed. Count 1 of the indictment charges a combination and conspiracy to raise, fix and maintain the wholesale price of spirituous liquor and wines. The second count charges a similar combination and conspiracy to raise, fix and maintain the retail prices of alcoholic beverages. Each count charges a violation of § 1 of the Sherman Act, 15 U.S.C.A. § 1.

In the arguments at the bar, and in the briefs of defendants, the issues made are: that intoxicating liquor should be accorded a different status from other commodities in the application of the Sherman Act. The argument made is that by virtue of the 21st Amendment to the Constitution, transactions involving interstate sales of alcoholic beverages are removed from the operation of the Commerce Clause of the Federal Constitution, art. 1, § 8, cl. 3, and subject to the exclusive regulation of the several states after its arrival therein; and secondly, the charges contained in the indictment in question relate solely to wholesale and retail transactions within the State of Colorado — hence are not transactions in interstate commerce.

The indictment briefly (par. 18 to 21), describes the nature of the trade and commerce involved in the indictment, alleging that alcoholic beverages are marketed in Colorado by a continuous flow of shipments from producers located in other states to and through wholesalers and retailers in Colorado, to the consuming public; that 98%, or more, of all spirituous liquor consumed in Colorado is produced outside and shipped into the state, and thus distributed.

Paragraph 22, count 1, charges that the defendants and the other persons unknown, engaged in a combination and conspiracy, "to raise, fix and maintain the wholesale prices of spirituous liquor and wines shipped into the State of Colorado from producers located outside of Colorado, by raising, fixing, and stabilizing wholesale mark-ups and margins of profit on such liquor and wines."

In count 2 of the indictment the charge is exactly the same, except it refers to fixing the retail prices.

It is further charged that the effect of the conspiracy charged is to raise, fix and stabilize, and the maintenance of a wholesale price in Colorado at levels acceptable to and approved by the defendants, thus eliminating price competition among the defendant wholesalers, and between the defendant wholesalers and other members of the defendant wholesale association in the sale and distribution of spirituous liquor and wines shipped into Colorado in interstate commerce, and restraining and suppressing interstate trade and commerce in spirituous liquors and wines not covered by producer-wholesaler fair trade contracts.

The first point made by the defendants may be briefly disposed of. We cannot agree that by the 21st Amendment to the Constitution liquor was removed from interstate commerce, or that jurisdiction over it was thereby vested exclusively in the several states, nor that the said Amendment gave the individual states control over intoxicating liquor within their respective borders, with supreme jurisdiction to regulate or limit the sale thereof, without violating the Commerce Clause of the Federal Constitution and the Sherman Act.

We take judicial notice that the objective of the 21st Amendment was the repeal of the 18th Amendment. The proviso therein contained prohibiting the transportation or importation into a state for delivery or use in violation of the laws thereof of liquor was a saving clause to avoid a conflict with those states which at the time had their own state prohibition laws, or might thereafter adopt prohibition as a matter of state policy. The Amendment was never intended to deprive the Federal Government of any of its vast powers over interstate commerce between, or among the states, and certainly was not designed to limit in the slightest degree the jurisdiction of the Federal Government or the powers conferred upon it by the Commerce Clause of the Federal Constitution.

In Jameson & Co. v. Morgenthau, 307 U.S. 171, 59 S.Ct. 804, 83 L.Ed. 1189, the Supreme Court held that there was no substance in the contention that the 21st Amendment gave the states any exclusive control over commerce in intoxicating liquors, unlimited by the Commerce Clause of the Federal Constitution. The Amendment simply gives the states the right to adopt or reject prohibition as a matter of state policy as they might see fit.

The power of Congress over interstate commerce is complete and can neither be enlarged nor diminished by the exercise or non-exercise of state power, and extends to those intrastate activities which so affect interstate commerce, or the exercise of the power of Congress over it, as to make their regulation an appropriate means to the attainment of a legitimate end.

In the case at bar the agreement denounced in the indictment may, for the sake of argument, be denominated as an intrastate activity or agreement. It nevertheless affected interstate commerce, because it regulated and prescribed the price at which liquor shipped by certain defendants — the producers — to other defendants — the wholesalers and retailers in Colorado — would be sold for consumption and resale there. Thus it is an intrastate activity affecting interstate commerce, and subject to the Sherman Act. United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609, 132 A.L.R. 1430.

In reference to the Wilson Act, 27 U.S.C.A. § 121, and the other similar acts discussed at length in some of the briefs in support of the motions, it is only necessary to say that they merely provide that liquors transported into any state and remaining there for use, shall upon arrival in such state be subject to the operation and effect of the laws of such state enacted in the exercise of its police power, to the same extent and in the same manner as though such liquids or liquors had been produced in such state or territory, whether imported in the original package or not. These acts were passed by the Congress to insure to the state complete control over intoxicating liquor, and remove from liquor shipped into a state the protection of the Interstate Commerce Clause, and make it subject at once to state regulation, in spite of the original package decisions.

As stated in Re Rahrer, 140 U.S. 545, at page 560, 11 S.Ct. 865, 35 L.Ed. 572, Congress simply declared that liquor upon arrival in the state shall fall within the category of domestic articles of a similar nature. And in Clark Distilling Co. v. Western Maryland Ry. Co. and State of West Virginia, 242 U.S. 311, 37 S.Ct. 180, 61 L.Ed. 326, L.R.A.1917B, 1218, Ann.Cas. 1917B, 845, the Supreme Court held the Webb-Kenyon Act, 27 U.S.C.A. § 122, withdrew from the immunity of interstate commerce liquor shipped into a state for personal use, contrary to state law, and withdrew from shipments of liquor into states having prohibition the immunity of interstate commerce.

The most serious contention made, and one which has given the court the most trouble, is the argument that intoxicating liquor once delivered to a wholesaler in Colorado ceases to be in interstate commerce, and that agreements fixing the prices of liquor by such wholesalers and retailers within the state do not constitute violations of the Sherman Act, because interstate commerce has ceased prior to such sales.

The indictment, however, charges in effect that the fixing of the prices of the liquor after it had come into possession of the wholesalers in Colorado, was the result of a combination...