44 Liquormart v. State of RI

• Court: Court of Appeals for the First Circuit
• Decided: October 24, 1994
• Docket: 93-1893A
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                 ____________________

        No. 93-1893

                               44 LIQUORMART, INC. AND
                          PEOPLES SUPER LIQUOR STORES, INC.,

                                Plaintiffs, Appellees,

                                          v.

                                STATE OF RHODE ISLAND,

                                 Defendant, Appellee,

RHODE ISLAND LIQUOR STORES ASSOCIATION,

                                Intervenor, Appellant.
                                 ____________________

        No. 93-1927
                               44 LIQUORMART, INC. AND
                          PEOPLES SUPER LIQUOR STORES, INC.,

                                Plaintiffs, Appellees,

                                          v.

                                STATE OF RHODE ISLAND,

                                Defendant, Appellant.
                                 ____________________

                    APPEALS FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

                [Hon. Raymond J. Pettine, Senior U.S. District Judge]
                                          __________________________
                                 ____________________

                                        Before

                                  Cyr, Circuit Judge,
                                       _____________
                            Aldrich, Senior Circuit Judge,
                                     ____________________
                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

Lauren E. Jones  with whom Caroline C. Cornwell, Jones Associates,
            _______________            ____________________  ________________
        William P. Gasbarro and Robert M. Brady were on brief for Rhode Island
        ___________________     _______________
        Liquor Stores Association.
            Rebecca Tedford  Partington, Special  Assistant Attorney  General,
            ___________________________
        with whom Jeffrey B. Pine, Attorney General, was on brief for State of
                  _______________
        Rhode Island.
            Evan  T.  Lawson  with  whom Lawson  &  Weitzen was  on  brief for
            ________________             __________________
        plaintiffs-appellees.

____________________

                                   October 24, 1994
                                 ____________________

ALDRICH, Senior Circuit Judge.   The State of Rhode
                               ____________________

            Island, that did not ratify the Eighteenth Amendment, and was

            among the  earliest to ratify the  Twenty-First that repealed

            it,  in  1956  adopted  two  statutes,  assertedly  aimed  at

            promoting temperance,  forbidding  advertising the  price  of

            intoxicating  liquor, except  at  the place  of sale  if sold

            within  the state.  The "declared purpose is the promotion of

            temperance and for the reasonable  control of the traffic  in

            alcoholic beverages."  R.I. Gen. Laws   3-1-5.

                      R.I. Gen. Laws   3-8-7 provides,

                           3-8-7.    Advertising price  of malt
                           3-8-7.    Advertising price  of malt
                      beverages,  cordials,  wine or  distilled
                      beverages,  cordials,  wine or  distilled
                      liquor.  -- No  manufacturer, wholesaler,
                      liquor.  -- 
                      or shipper from without this state and no
                      holder  of a  license  issued  under  the
                      provisions  of  this  title  and  chapter
                      shall cause or permit the  advertising in
                      any manner whatsoever of the price of any
                      malt   beverage,    cordials,   wine   or
                      distilled liquor offered for sale in this
                      state;   provided,   however,  that   the
                      provisions  of  this  section  shall  not
                      apply to price signs or tags attached  to
                      or  placed on merchandise for sale within
                      the licensed premises in  accordance with
                      rules and regulations of the department.

                      Section  3-8-8.1, post,  enlarges this  language to
                                        ____

            forbidding making  "reference to  the price of  any alcoholic

            beverage,"1  that  defendant  Rhode  Island   Liquor  Control

            Administrator,  a  strict  enforcer, construes  as  including

            remote references such as "WOW!"

____________________

            1.  See also Liquor Control Adm. Reg. 32.
                ___ ____

                                         -3-

In this action plaintiffs, 44  Liquormart, Inc. and

            Peoples Super Liquor Stores, Inc., having sufficient standing

            to  attack  these  statutes   in  every  particular,  seek  a

            declaration against the Administrator (hereinafter the State)

            of  unconstitutionality as contravening  the First Amendment.

            Rhode  Island  Liquor  Stores Association  (Association)  has

            intervened as a party defendant.  After a bench trial, in  an

            extensive opinion the court found for plaintiffs.  Defendants

            appeal.  They succeed with respect to limiting advertising by

            Rhode Island vendors.

                      The stage it set below is described by the State.

                           [T]he   advertising   ban   directly
                      advanced  the  governmental  interest  by
                      increasing   the    cost   of   alcoholic
                      beverages, thereby lowering the amount of
                      alcohol consumption by  residents of  the
                      State  of  Rhode  Island. . . .     [T]he
                      State's   power   to   totally  ban   any
                      advertising  about   alcoholic  beverages
                      necessarily included the lesser  power to
                      restrict price advertising.

            Further,  the State  contended that  plaintiffs, in  order to

            rely on the First  Amendment, must "prove that the  four part

            Central Hudson test could not be met."
            ______________

                      Association, a group of small liquor stores,  whose

            intervention as a co-defendant was not opposed  by the State,

            alleged as  its ground for intervening that if advertising of

            prices were to be  allowed, its members "would be  obliged to

            participate  in  the advertising  arena  and  would  be at  a

            definite disadvantage when  matched up against retailers  who

-4-

hold multiple licenses."   This complaint was later bolstered

            by adding  that competitive  price advertising would  tend to

            lower prices, and that "a more competitive market for alcohol

            might be considered an undesirable goal."

                      We start  with the four issues  that Central Hudson
                                                           ______________

            raises when a state's interest conflicts with the rights of a

            would-be commercial speaker.

                      At the outset, we must  determine whether
                      the  expression is protected by the First
                      Amendment.  [I]  For commercial speech to
                      come  within that provision,  it at least
                      must concern lawful  activity and not  be
                      misleading.   [II]  Next, we  ask whether
                      the  asserted  governmental  interest  is
                      substantial.    If  both inquiries  yield
                      positive answers, we must determine [III]
                      whether the  regulation directly advances
                      the  governmental interest  asserted, and
                      [IV]  whether it  is  not more  extensive
                      than is necessary to serve that interest.

            Central  Hudson  Gas  &  Electric  Corp.  v.  Public  Service
            ________________________________________      _______________

            Commission  of New  York,  447 U.S.  557,  566 (1980).    The
            ________________________

            ultimate  purpose  is  to  weigh "the  expression  [and]  the

            governmental  interests served  by its  regulation."   Id. at
                                                                   __

            563.

                      I.   In the present  case the first  test raises no

            question.   II.  For the second it was stipulated, "The State

            of Rhode Island has a substantial interest in regulating  the

            sale  of  alcoholic  beverages."    Plaintiffs  concede  that

            promoting  temperance  is such  an  interest.   The  dispute,

            accordingly,   is   whether   forbidding  price   advertising

-5-

"directly advances" temperance,  and "is  not more  extensive

            than  is necessary."  There is a further question with regard

            to local advertising by an out-of-state vendor.

                      III.    "Directly advances."    We  start with  the

            burden  of proof.    The  burden  is  on  the  party  seeking

            suppression, here the State.   Edenfield v. Fane, 113  S. Ct.
                                           _________    ____

            1792, 1800 (1993).   But to what extent?   The district court

            held  that  it was  an issue  for  it to  decide, unfettered,

            between competing  witnesses, and since, on  its weighing the

            evidence,  the  court was  not persuaded  that the  State was

            correct, it failed.  We do  not think the burden that strict.

            It is not correctness, it is reasonableness.

                      In the first place, the term "directly advances" is

            not absolute.  Edenfield, 113 S. Ct. at 1800 ("alleviate to a
                           _________

            material degree");  Trustees of  the State University  of New
                                _________________________________________

            York v.  Fox, 492  U.S. 469,  480 (1989) ("reasonable  fit").
            ____     ___

            See  also Posadas de Puerto  Rico Assoc. v.  Tourism Co., 478
            ___  ____ ______________________________     ___________

            U.S. 328, 342 (1986) ("reasonable").  And while the state has

            the  burden,  in California  v. LaRue,  409 U.S.  109, 118-19
                             __________     _____

            (1972), the Court spoke of "the added presumption in favor of

            the  validity of the state  regulation in this  area that the

            Twenty-First Amendment requires."  Historically the state has

            failed  where the  evidence was  "at most,  tenuous," Central
                                                                  _______

            Hudson, 447  U.S. at  569; "unsupported assertions:   nowhere
            ______

            does the State cite  any evidence or authority of  any kind,"

-6-

Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 648
            ________    ______________________________

            (1985);  lack of studies  or "anecdotal evidence," Edenfield,
                                                               _________

            113  S. Ct. at 1800.  Warrantable inferences, however, may be

            sufficient.  Posadas, 478 U.S. at 341-42 (advertising).  What
                         _______

            should  a  court do  when  there  is no  empirical2  evidence

            either  way,  and  expert  opinions  go  both  ways?     Even

            plaintiffs' expert,  whom the  court credited,  admitted that

            "advertising  has  cumulative effects  that are  difficult to

            detect in studies, and that research studies have been varied

            and equivocal because it  is a difficult topic  to research."

            Should the court be free to choose?

                      IV.   Before answering  these questions we  observe

            that the "not  more extensive than  is necessary" inquiry  is

            subject to the same considerations.  Re R.M.J., 455 U.S. 191,
                                                 _________

            207 (1982) ("reasonably necessary").   The district court did

            not deal with this directly, except to note the concession of

            the   State's  expert   that   "the  objective   of  lowering

            consumption of alcohol by  banning price advertising could be

            accomplished  by  establishing   minimum  prices  and/or   by

            increasing  sales taxes on alcoholic beverages."  This is not

            an  answer; the  State is  entitled to  a reasonable  choice.

            This includes choice of method --  it is not obliged to prove

____________________

            2.  This  word is a summary of the court's findings that such
            studies  as were offered  were too inconclusive  to be relied
            on.

                                         -7-

that  some  other  method,  e.g.,  taxation,  would  be  less

            effective.  Cf. Fox, 492 U.S. at 478.
                        __  ___

                      Returning  to  our   questions,  there  would  seem

            inherent merit  in the  State's  contention that  competitive

            price  advertising would  lower prices,  and that  with lower

            prices there would be more sales.   We would enlarge on this.

            There  are   doubtless  many  buyers  whose   consumption  is

            sometimes  measured by their free  money.  If  a buyer learns

            that  plaintiffs charge less, is  he not likely  to go there,

            and then buy  more?   Correspondingly, if  ignorant of  lower

            prices elsewhere, will  he not  tend to buy  locally, at  the

            higher price, and thus buy less?  See Stanley I. Ornstein and
                                              ___

            Dominique  M.   Hanssens,  Alcohol   Control  Laws   and  the
                                       __________________________________

            Consumption  of Distilled  Spirits and  Beer, 12  J. Consumer
            ____________________________________________

            Res. 200  (September 1985).  Further,  if Association members

            would  fight plaintiffs' advertised  prices, as they presage,

            by lowering their own,  then, again, might there not  be more

            buys?

                      Even plaintiffs' witness  Smart conceded that  some

            believed this inference reasonable.

                      What I'm  aware of are studies  that show
                      that  people  generally  decide how  much
                      money  they  have to  spend  on alcoholic
                      beverages per  week or  per month.   Then
                      they  tend to spend  that amount,  and if
                      they can spend it  in one way, they'll do
                      it and in another  way they'll do that as
                      well.

-8-

Advertising must  be generally  productive, or so  much money

            would  not be  spent on  it.   Posadas,  478 U.S.  at 341-42;
                                           _______

            Oklahoma Telecasters Ass'n v. Crisp,  699 F.2d 490, 501 (10th
            __________________________    _____

            Cir.  1983), rev'd  on other grounds  sub nom  Capital Cities
                         ________________________________  ______________

            Cable,  Inc.  v. Crisp,  467  U.S.  691 (1984).    We do  not
            ____________     _____

            consider, in the absence  of any affirmative contradiction to

            rely  on, that  the  district  court  was  free  to  hold  it

            unreasonable.   In addition,  the presumption based  upon the

            Twenty-First  Amendment,  LaRue,  supra, seems  precisely  in
                                      _____   _____

            order.

                      Parenthetically, the State contends this discussion

            to be unnecessary in view of the Court's action, 459 U.S. 807

            (1982),  dismissing  an  appeal,  "for  want  of  substantial

            federal question," from the decision in Queensgate Investment
                                                    _____________________

            Co. v. Liquor Control Commission, 69 Ohio St.2d 361 (1982), a
            ___    _________________________

            price  advertising  limitation  case.    The  district  court

            rejected  this contention  because  of a  "different  factual

            predicate," and because "a summary dismissal lacks a reasoned

            opinion."   As to the latter, it  is settled that such action

            has  precedental  effect,  although not  necessarily  on  the

            identical reasoning  of the  court.   Mandel v.  Bradley, 432
                                                  ______     _______

            U.S. 173, 176 (1977).  As to facts, the Ohio  case involved a

            statute  similar to  the one  at bar.   Defendant  restaurant

            advertised,  in a circular, 50  cent drinks --  a markdown --

            with meals.  We see no relevant factual distinction.

-9-

The  Ohio court, recognizing that commercial speech

            was  entitled to  some protection,  pursued the  four Central
                                                                  _______

            Hudson   tests  and   found   that  the   statute  was   "not
            ______

            unreasonable"   in  light  of  the  Twenty-First  Amendment's

            authorization to curb the evils  of alcoholic beverages.  690

            Ohio St.2d at 366.  It concluded as follows.

                      The   regulation   is   directed   toward
                      regulation of the intoxicants themselves,
                      rather than speech.   This is unlike  the
                      case, e.g., in  [Virginia State Board  of
                                       ________________________
                      Pharmacy  v.  Virginia Citizens  Consumer
                      ________      ___________________________
                      Council,  Inc.,  425  U.S.  748  (1976),]
                      ______________
                      where the speech was the actual focus  of
                      the  regulation,  since  the aim  of  the
                      restriction   was   the   prevention   of
                      competition in  pharmaceutical sales, not
                      the   discouragement  of   pharmaceutical
                      purchases.

            Ibid.
            ____

                      Reliance  on  Queensgate  as  conclusive,  however,
                                    __________

            might raise  possible questions.   The first  is whether  the

            Court would have said  there was no federal question  if free

            speech had  been curtailed by a  regulation clearly unrelated

            to  liquor.   We need not  answer this because  we have found

            that the State's  action was  reasonable as a  control.   But

            suppose  the  primary  purpose  was that  eliminated  by  the

            Queensgate court?  On the issue  of purpose the State is  not
            __________

            helped  by  its  friends.   Association's  given  reason  for

            wanting  to  intervene  as  a  defendant,  that  the  statute

            protects the small vendor from the giants, could make logical

            sense,  but might  not be  a lawful  use of  the Twenty-First

-10-

Amendment.   Cf.  California Retail  Liquor Dealers  Ass'n v.
                         __   ________________________________________

            Midcal Aluminum,  Inc., 445 U.S. 97  (1980); Bacchus Imports,
            ______________________                       ________________

            Ltd. v. Dias, 468 U.S. 263  (1984).  We need not resolve this
            ____    ____

            question either, however.   There  is a burden  to rebut  the

            statutes'  declared purpose,  and  plaintiffs  have  made  no

            attempt.   We  conclude  therefore that,  with Queensgate  or
                                                           __________

            without, plaintiff 44 Liquormart must lose.

                      Finally,  we observe that  our conclusion coincides

            with the  Rhode Island court's.   Rhode Island  Liquor Stores
                                              ___________________________

            Ass'n v. Evening Call Pub. Co., 497 A.2d 331 (R.I. 1985); S &
            _____    _____________________                            ___

            S Liquor Mart, Inc. v. Pastore, 497 A.2d 729 (R.I. 1985).  We
            ___________________    _______

            have  not   mentioned  its  decisions  hitherto  because  our

            obligation  is  to  decide  for  ourselves.    See  Watson v.
                                                           ___  ______

            Estelle, 886 F.2d 1093, 1095 and n.3 (9th Cir. 1989).
            _______

                      Peoples Super Liquor Stores, a Massachusetts vendor

            that wishes  to advertise  its Massachusetts prices  in Rhode

            Island, has a different case.  Because of R.I. Gen. Laws   3-

            8-8.1 no Rhode Island publisher will accept advertisements.

                           3-8-8.1.  Price advertising by media
                           3-8-8.1.  Price advertising by media
                      or advertising companies unlawful.  -- No
                      or advertising companies unlawful.
                      newspaper,    periodical,     radio    or
                      television  broadcaster  or  broadcasting
                      company  or  any  other person,  firm  or
                      corporation  with  a  principal place  of
                      business  in  the state  of  Rhode Island
                      which  is  engaged  in  the  business  of
                      advertising  or selling  advertising time
                      or  space  shall   accept,  publish,   or
                      broadcast any advertisement in this state
                      of  the price  or make  reference to  the
                      price of any alcoholic beverages. . . .

-11-

By  the  hypothesis under  which we  are justifying

            forbidding   price  advertising   by  local   vendors,  State

            residents, whose shopping opportunity is thus curtailed, will

            be  more  likely to  purchase  at higher-priced  neighborhood

            outlets  and  less  at lower-priced,  viz.,  discount sellers

            elsewhere.  Insofar as this constriction is aimed  at foreign

            sellers, it  is a  deliberate, and, by  hypothesis effective,

            discrimination and restraint on interstate commerce.  Thus we

            have two questions.   One, is the State's interest  in health

            and welfare sufficient to overcome the foreign vendors' right

            of free speech?  Two,  if so, are the rights given  the State

            by the Twenty First Amendment  sufficient to meet the foreign

            vendors' further objections under the Commerce Clause?

                      Viewed simply as free speech,  if a party wishes to

            come into a state and do business, to some extent,  at least,

            it should be subject to the same regulations as are its local

            counterparts.   While the question may be close, where we are

            dealing simply  with  commercial  speech,  whose  rights  are

            limited,  Bigelow  v. Virginia,  421  U.S. 809,  818  et seq.
                      _______     ________                        __ ___

            (1975), we  believe the State health  interest, as reinforced

            by the  Twenty First Amendment,  should empower the  State to

            restrict foreigners as well.  Nor  do we find support for the

            contrary in the Bigelow opinion.  We read the language relied
                            _______

            on by  Peoples Super Liquor Stores  in the light  of the fact

            that the advertisement contained more than commercial speech.

-12-

See 421 U.S. at 822; Friedman v. Rogers, 440 U.S. 1, 11, n.10
            ___                  ________    ______

            (1979).  Here we have no more than commercial.

                      The serious  question is whether  the Twenty  First

            Amendment can  prevail against  the Commerce Clause  when the

            State is  deliberately favoring local vendors against foreign

            enterprise.   The full meaning  and effect of  this Amendment

            has  been much  debated.  At  a minimum  it does  not do away

            altogether  with  the  Commerce  Clause.   Cf.  Hostetter  v.
                                                       __   _________

            Idlewild  Bon  Voyage Liquor  Corp.,  377  U.S. 324,  331-332
            ___________________________________

            (1964).   But, as a  matter of dictum,  the Court in  Bacchus
                                                                  _______

            Imports,  Ltd.  v. Dias,  468 U.S.  263,  at 276  (1984), has
            ______________     ____

            recognized the  possibility that  a state might  discriminate

            "to promote temperance or  to carry out any other  purpose of

            the Twenty  First Amendment."   We have  tentatively explored

            this question in some depth, and find it difficult.

                      This  raises a  problem.   The  record shows  that,

            initially,  Peoples  included  the  Commerce  Clause  in  its

            contentions.  On appeal,  it dropped it.   While at first  we

            thought that the two principles were so tied together that we

            should  nevertheless  consider  it, we  have  concluded  that

            fairness to the State, and, indeed to us, requires that we do

            not do  so without full briefing and  argument.  Accordingly,

            we apply the  general principle and hold  the Commerce Clause

            waived.   Interface Group, Inc. v.  Mass. Port Authority, 816
                      _____________________     ____________________

            F.2d 9,  16 (1st Cir. 1987).   Since without it  Peoples must

-13-

fail,  the  decision below  is  reversed,  with judgment  for

            defendants.

-14-