WASHINGTON STATE APPLE AD. COM'N v. Holshouser

• Decision Date: 01 March 1976
• Docket Number: No. 75-0300-CIV-5.,75-0300-CIV-5.
• Citation: 408 F. Supp. 857
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: The WASHINGTON STATE APPLE ADVERTISING COMMISSION, a Washington State Agency, Plaintiff, v. James E. HOLSHOUSER, Governor of the State of North Carolina, et al., Defendants.

408 F. Supp. 857

The WASHINGTON STATE APPLE ADVERTISING COMMISSION, a Washington State Agency, Plaintiff, v. James E. HOLSHOUSER, Governor of the State of North Carolina, et al., Defendants.

No. 75-0300-CIV-5.

United States District Court, E. D. North Carolina, Raleigh Division.

Argued February 6, 1976.

Decided March 1, 1976.

Slade Gorton, Atty. Gen., State of Wash., Olympia, Wash., James Arneil, Sp. Asst. Atty. Gen., State of Washington (Davis, Arneil, Dorsey, Kight & Parlette, Wenatchee, Wash.), Robert C. Howison, Jr., Sp. Asst. Atty., State of Washington (Joyner & Howison, Raleigh, N. C.), for plaintiff.

Rufus L. Edmisten, Atty. Gen., North Carolina, Millard R. Rich, Jr., Deputy Atty. Gen., North Carolina Dept. of Justice, and Joseph E. Wall and John R. Jordan, Jr., Raleigh, N. C. (Jordan, Morris & Hoke, Raleigh, N. C.), for defendants.

Before CRAVEN, Circuit Judge, LARKINS, Chief District Judge, and DUPREE, District Judge.

MEMORANDUM DECISION

CRAVEN, Circuit Judge:

The Washington State Apple Advertising Commission challenges the constitutionality of N.C.Gen.Stat. § 106-189.1, which requires that "no grade other than the applicable U.S. grade" be shown on closed containers in which apples are "sold, offered for sale or shipped into" North Carolina.¹ The Commission argues that this statute violates the commerce clause, the equal protection and due process guarantees, and the first amendment to the United States Constitution. In oral argument plaintiff pressed but two of these claims — that the statute constitutes an unreasonable burden and restriction upon interstate commerce in violation of art. 1, § 8 of the Constitution, and that, by prohibiting the display of the Washington state grade, the statute violates the constitutional right of freedom of speech. We agree that the statute violates the commerce clause, and, accordingly, declare it unconstitutional and enjoin its enforcement as applied to state grade markings on closed containers. Our determination of that issue makes it unnecessary to examine the Commission's other objections to the law.²

I.

This action for declaratory and injunctive relief was brought by the Washington State Advertising Commission, an agency and corporate body created by legislative act of the State of Washington. On motion to dismiss, Judge Dupree, sitting alone,³ held that the Commission had standing to "assert all the claims presented in the complaint, both those interests clearly belonging to the Association itself and those belonging to the various individual growers and producers of the State of Washington and . . . that there exists the necessary amount in controversy." We agree, and proceed to the merits.⁴

II.

We find the essential facts to be as follows:

1. N.C.Gen.Stat. § 106-189.1 (1973) requires that all apples "sold, offered for sale or shipped into North Carolina in closed containers" shall bear "no grade other than the applicable U.S. grade or standard or the marking `unclassified,' `not graded' or `grade not determined.'" Violations of the statute are punishable by a criminal penalty in the amount of up to $50.

2. No such statute applies to any other type of produce or to apples shipped in open containers.

3. North Carolina is the only state in the nation which prohibits the display of Washington state grades on closed shipping containers.

4. In 1974, the last year for which figures are available, Washington apple growers shipped apples worth in excess of $2,000,000 directly into North Carolina. Additionally, apples worth approximately 30 to 40 percent of that amount were trans-shipped into North Carolina after direct shipment to other states.

5. The Commission spent in excess of $25,000 in advertising for the 1974 crop year. North Carolina has no statute or regulation which prohibits such advertising other than that involved in the grading statute under challenge in this case.

6. The State of Washington requires that all apples shipped in closed containers which are packed in the State must be graded according to either Washington State apple grade or the U.S. grade.

7. Presently 13 states have state grades. Of these, seven states, including Washington, currently ship apples into North Carolina.

8. At the time N.C.Gen.Stat. § 106-189.1 was enacted, North Carolina had no state apple grade.

9. As of September 1, 1974, the Washington State apple grades were made equivalent or superior to U.S. grades in all corresponding categories. These grades are established by Washington Department of Agriculture regulations.

10. As a direct result of the enactment of N.C.Gen.Stat. § 106-189.1, some apple growers in the State of Washington have taken the following actions:

a. Washington state grades have been manually obliterated from closed shipping boxes to be shipped to North Carolina at a cost of five to 15 cents per box;

b. Preprinting of shipping boxes with state grades have been abandoned and the applicable U.S. grade stamped manually or mechanically on boxes;

c. Accounts in North Carolina have been cancelled, and sales to the state curtailed. (Some individuals have abandoned marketing in the state entirely.)

These results of the legislation constitute a burden on interstate commerce.

11. The existence of multiple, inconsistent state grades pose a danger of confusion in the apple marketing industry. There is, however, no showing that Washington state grades have caused any confusion.

12. The stated purpose of the North Carolina apple grading statute is to "standardize grading labels, reduce confusion, and prevent deception" in the marketing of apples in the state. Brief for Defendant at 13.

13. The purchase of apples in closed shipping containers is normally and generally done only by wholesale produce brokers and distributors or by the produce buyers for food stores and supermarkets. Apples are not generally sold at retail to the public in their shipping containers.

III.

The State of North Carolina argues that the statute is a valid exercise of police power and, as such, is not unconstitutional under the commerce clause. It contends that the purpose of the legislation is to eliminate "confusion and deception in the marketing of foodstuffs" which results from the proliferation of multiple inconsistent and non-uniform state grades. This interest, North Carolina argues, is a valid local concern under the state's police powers, "akin to . . . regulations protecting the health and welfare of the State's citizens." Brief for Defendant at 5. See Florida Lime and Avocado Growers, Inc. v. Paul, 373 U.S. 132, 146, 83 S.Ct. 1210, 1219, 10 L.Ed.2d 248, 259 (1963). Furthermore, the state notes the statute is nondiscriminatory on its face; it applies to all apples moving in commerce in the state regardless of their point of origin inside or outside the state.

Given these basic propositions, North Carolina argues that no balancing of local benefit against the burden on interstate commerce is required:

If the legislation is a reasonable means of achieving a non-discriminatory, legitimate goal it is constitutional. When protection of the health, safety and welfare of the citizenry is the purpose for enacting such legislation, "public policy" questions of whether the benefits outweigh the costs of compliance are questions properly determined by the state legislature.

Brief for Defendant at 8-9.

We believe that the labels the state attempts to pin on this statute are not conclusive as to its constitutionality. North Carolina's first major point in support of the statute's validity is that it is nondiscriminatory, applying alike to apples moving in commerce in the state whether produced inside or outside the state. That this is facially correct does not afford a basis for decision.

In Best & Co. v. Maxwell, 311 U.S. 454, 61 S.Ct. 334, 85 L.Ed. 275 (1940), the Supreme Court struck down as discriminating against interstate commerce a North Carolina tax of $250 "on every person or corporation, not a regular retail merchant in the state, who displays samples in any hotel room rented or occupied temporarily for the purpose of securing retail orders." In reaching this result, the Court stated:

The commerce clause forbids discrimination, whether forthright or ingenious. In each case it is our duty to determine whether the statute under attack, whatever its name may be, will in its practical operation work discrimination against interstate commerce. This standard we think condemns the tax at bar. Nominally the statute taxes all who are not regular retail merchants in North Carolina, regardless of whether they are residents or nonresidents. We must assume, however, on this record that those North Carolina residents competing with appellant for the sale of similar merchandise will normally be regular retail merchants. The retail stores of the state are the natural outlets for merchandise, not those who sell only by sample. . . . The only corresponding fixed-sum license tax to which appellant's real competitors are subject is a tax of $1 per annum for the privilege of doing business. Nonresidents wishing to display their wares must either establish themselves as regular North Carolina retail merchants at prohibitive expense, or else pay this $250 tax that bears no relation to actual or probable sales but must be paid in advance no matter how small the sales turn out to be.

Id. at 455-56, 61 S.Ct. at 335, 85 L.Ed. at 277 (emphasis added and footnotes omitted).

Similarly, in Minnesota v. Barber, 136 U.S. 313, 10 S.Ct. 862, 34 L.Ed. 455 (1890), the Court struck down a facially neutral statute which required that animals must be inspected in the state before slaughter if fresh meat from them was to be sold there. The Court dealt with the discriminatory impact of the statute as follows:

It is, however, contended in behalf of the State, that there is in fact no interference, by this Statute, with the bringing of cattle, sheep and swine into Minnesota from other States,

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