Wawszkiewicz v. Department of Treasury, s. 80-1086
| Decision Date | 22 December 1981 |
| Docket Number | Nos. 80-1086,80-1137 and 80-1244,s. 80-1086 |
| Citation | 670 F.2d 296 |
| Parties | Edward J. WAWSZKIEWICZ, et al. v. DEPARTMENT OF the TREASURY, et al., Appellants. Edward J. WAWSZKIEWICZ, et al., Appellants, v. DEPARTMENT OF the TREASURY, et al. Edward J. WAWSZKIEWICZ, et al. v. DEPARTMENT OF the TREASURY, et al. The Wine Institute, Appellant. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeals from the United States District Court for the District of Columbia (D.C. Civil Action No. 79-0842).
Susan A. Ehrlich, Atty., Dept. of Justice, Washington, D.C., with whom Alice Daniel, Asst. Atty. Gen., Charles F. C. Ruff, U. S. Atty. and William Kanter, Atty., Dept. of Justice, Washington, D.C., were on the brief, for Department of the Treasury, et al., appellants in No. 80-1086 and cross-appellees in Nos. 80-1137 and 80-1244.
R. Frederic Fisher, San Francisco, Cal., with whom Harold E. Mesirow, Washington, D.C., was on the brief, for Edward J. Wawszkiewicz, et al., appellees in Nos. 80-1086 and 80-1244 and cross-appellants in No. 80-1137.
Arnold M. Lerman, Roger M. Witten, John F. Cooney and Phoebe H. Northcross, Washington, D.C., were on the brief, for Wine Institute, appellant in No. 80-1244, amicus curiae in No. 80-1086, urging reversal, and amicus curiae in No. 80-1137, urging affirmance.
Paula W. Gold, Atty., Dept. of the Atty. Gen., Commonwealth of Mass., Boston, Mass., was on the brief, for the Atty. Gen. of the Commonwealth of Mass., amicus curiae in Nos. 80-1086, 80-1137 and 80-1244, urging affirmance.
Thomas F. Olson and Lillian S. Shek, Sacramento, Cal., were on the brief, for California Farm Bureau Federation, amicus curiae in Nos. 80-1086 and 80-1137, urging reversal.
Before ROBINSON, Chief Judge, McGOWAN, Senior Circuit Judge, and EDWARDS, Circuit Judge.
Opinion PER CURIAM.
These appeals question the validity of four regulations promulgated by the Treasury Department's Bureau of Alcohol, Tobacco and Firearms in an effort to set standards for labeling and advertising grape wine. Intensive study of these rules satisfies us that one is well buttressed by the record, and accordingly we uphold it. The other three, we find, are bereft of support either in evidence or logic, and these we remand to the agency for further consideration.
At the close of the Prohibition Era, Congress set out to regulate the resurgent industry in alcoholic beverages. In 1935, Congress passed the Federal Alcohol Administration Act 1 which, among other things, proscribes interstate commerce in wine unless it is
labeled in conformity with such regulations, to be prescribed by the Secretary of the Treasury ... as will prohibit deception of the consumer ... and as will prohibit, irrespective of falsity, such statements ... as the Secretary of the Treasury finds to be likely to mislead the consumer; ... as will provide the consumer with adequate information as to the identity and quality of the products ... (and) as will prohibit statements on the label that are ... false (or) misleading .... 2
The Act also outlaws wine advertisements that are inconsistent with the labeling standards. 3
In 1978, the Bureau, acting for the Secretary, 4 amended a number of implementing regulations, including the four types at issue in this litigation. 5 One of the contested rules involves varietal wines-those, such as Chardonnay or Pinot Noir, made from a particular variety of grape-and permits a wine label to carry the name of a given grape-type "if the wine derives ... at least 51 percent of its volume from that variety of grape." 6 Thus a wine may, consistently with the regulation, be labeled "Chardonnay" so long as it owes 51 percent 7 of its volume to Chardonnay grapes, even though the rest is contributed by grapes of some other kind.
The second group of pertinent regulations are what might be called geographical rules. They allow a wine to be represented as the product of a given area-such as "Napa Valley" or "Sonoma County"-when in fact the percentage of its grapes raised in the locality indicated may be as low as 75, 8 or 85 if a so-called "viticultural area" is connoted. 9 Beyond that, and without caveat to the consumer, a wine label may utilize a corporate or trade name that includes a geographical term although none of the wine comes from the area suggested. 10 In contrast, a brand name containing words of geographical significance cannot be used on a wine label "unless the Director (of the Bureau) finds that such brand name, either when qualified by the word 'brand' or when not so qualified, conveys no erroneous impressions...." 11
The regulations further permit a winery to state on a wine's label that it "produced" the wine when it may have fermented and clarified only 75 percent of the bottle's contents. 12 A winery may also declare that it "made" a wine when actually the wine was produced elsewhere and then shipped to the "maker" merely for some cursory treatment. 13
The regulations under attack are identical or substantially similar to forerunners promulgated in 1935, 14 which were reconsidered by the Bureau during the 1970's. A brief review of those proceedings will put the case in helpful context.
The Bureau first undertook revision of the labeling requirements in 1975. 15 The next year, in response to industry and consumer comments, it published two proposals relevant here. First, it suggested a prohibition on brand names signifying geography unless the word " 'brand' is (employed in) direct conjunction therewith." 16 The reason given was that "(p)atently, the use on labels of geographical names which bear no relationship to the origin of the grapes used to make the wine can be confusing to the consumer." 17 At the same time, the Bureau recommended modification of the rules governing representations as to the origin of wine grapes to insist that 95 percent of wines carrying a vintage date, and 75 percent of all other wines, come from the area indicated on the label. 18
In 1977, the Bureau recommended even more sweeping revisions of the regulations. One would be an increase in the required percentage of varietal grapes from the current 51 to 75, and mandatory disclosure on the label of the proportion of such grapes. 19 Another, in response to comments that "regulations relating to trade names ... mislead the consumer as to the identity of the producer or maker," would "amend( ) regulations designed to remedy the misleading aspects of the section" 20 by prohibiting altogether the use of "made by," and limiting application of "produced by" to wineries that had actually fermented and clarified 95 percent of the wine so labeled. 21 Still others, pertaining to geographical representations, would require 95 percent of the grapes to come from the area indicated on a label giving a vintage date or a naming vineyard, 85 percent to be produced at a stated point of origin when that point is a viticultural area, and 75 percent to be grown in a stated political subdivision represented as the source of a wine so labeled. 22
The Bureau issued its regulations in final form in 1978, with major revisions, however, of the proposals. The 75 percent varietal minimum was retained, though the mandatory varietal percentage statement was dropped. 23 Redefinition of winemaking expressions such as "made by" and "produced by" was also scrapped. 24 The minimum geographical percentage was kept at 85 for wine labeled as originating in viticultural areas and 75 for wine labeling the name of a political subdivision, but the 95 percent minimum for vintage-dated or vineyard wines was eliminated. 25 Lastly, the proposed prohibition on misleading brand names, after minor modification, was incorporated. 26
Three sophisticated wine consumers 27 who participated in the proceedings leading to adoption of the new regulations challenged four of them in the District Court. 28 Each of the four is invalid under the Federal Alcohol Administration Act, they argued, for each indulges wineries in statements not wholly accurate. It is deceptive, they said, for a winery to label a wine "Chardonnay" when in fact only 75 percent of the grapes from which it was made actually were of that type; for it to represent that a wine comes from Napa Valley when only 85 percent of its grapes were grown there; or for it to proclaim that it "made" a wine that in fact it purchased. 29 Indeed, the consumers continued, a wine label that does not list by percentages each grape-type used and each area represented is misleading and inadequate as a matter of law. 30
The District Court, after reviewing the administrative record, agreed in part. Deeming the statutory language regarding false and misleading statements "clear and direct," the court was disposed to "rely to the extent possible on the ordinary meaning of the words used, as it is the understanding of the ordinary consumer which must control." 31 From this perspective, the court reasoned that 32 Rejecting the justifications proffered by the Bureau for the regulations as framed, the court concluded:
There is thus no basis, in law or in fact, for permitting the use of a varietal name on wine labels without disclosing that the identified grape variety does not represent 100 percent of the content.... (T)he percentage of the labeled variety must be truthfully communicated. The same rationale requires that wine labels making representations as to geographic origin or the nature of specific winemaking operations should couple such representations with a more precise indication of what minimum percentages or other...
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