Food Association v. Massachusetts

• Court: Court of Appeals for the First Circuit
• Decided: December 7, 1999
• Docket: 99-1277
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 99-1277



             MASSACHUSETTS FOOD ASSOCIATION, ET AL.,



                     Plaintiffs, Appellants,



                                v.



  MASSACHUSETTS ALCOHOLIC BEVERAGES CONTROL COMMISSION, ET AL.,



                      Defendants, Appellees.

                       ____________________



No. 99-1280



             MASSACHUSETTS FOOD ASSOCIATION, ET AL.,



                      Plaintiffs, Appellees,



                                v.



  MASSACHUSETTS ALCOHOLIC BEVERAGES CONTROL COMMISSION, ET AL.,



                      Defendants, Appellees,



                               and



    WINE & SPIRIT WHOLESALERS OF MASSACHUSETTS, INC., ET AL.,



                           Appellants.


APPEALS FROM THE UNITED STATES DISTRICT COURT



                FOR THE DISTRICT OF MASSACHUSETTS



         [Hon. Douglas P. Woodlock, U.S. District Judge]


Before



                     Boudin, Circuit Judge,

                                

                 Bownes, Senior Circuit Judge,

                                

                   and Lipez, Circuit Judge.


J. Mark Gidley with whom Robert D. Paul, J. Christian Word,

White & Case LLP, Alan L. Kovacs, Howard J. Wayne, Eugene R.

Richard and Wayne, Richard, Hurwitz & McAloon were on brief for

plaintiffs.

     Jane L. Willoughby, Assistant Attorney General, with whom

Thomas F. Reilly, Attorney General, and Thomas A. Barnico,

Assistant Attorney General, were on brief for defendants.

     Bruce A. Singal with whom William C. Athanas, Donoghue,

Barrett & Singal, P.C., Louis A. Cassis, Cassis, Arena & Cayer and

Ernest Gellhorn were on brief for intervenor, appellants Wine &

Spirit Wholesalers of Massachusetts, Inc., et al.

     Bruce A. Singal, William C. Athanas, Donoghue, Barrett &

Singal, P.C., Louis A. Cassis, Cassis, Arena & Cayer and Ernest

Gellhorn on brief for Massachusetts Package Stores Association,

Inc., Wine & Spirits Wholesalers of Massachusetts, and

Massachusetts Wholesalers of Malt Beverages, Inc., Amici Curiae.  


December 2, 1999


BOUDIN, Circuit Judge.  Massachusetts, like many other

states, extensively regulates the sale of alcoholic beverages. 

Among other restrictions, retail outlets must be licensed, each

license embraces only a single location, and no firm or person is

allowed "more than three such licenses in the commonwealth . . . ." 

Mass. Gen. Laws ch. 138,  15 (1998).  Thus, no one can own more

than three retail liquor stores in the Commonwealth.  Although some

state regulations also impinge on retail prices, e.g., Mass. Gen.

Laws ch. 138,  25C, they are not at issue here.  

  The plaintiffs in this case--who include several

supermarket chains--brought this action in the district court to

enjoin enforcement of the three-store limit.  The complaint charged

that this statutory restriction conflicted with the Sherman Act, 15

U.S.C.  1, et seq., because it would be a per se violation of the

Sherman Act for private competitors to agree with each other to

impose such a limitation.  The complaint further alleged that the

defendants, the members of the Massachusetts Alcoholic Beverages

Control Commission, lacked power to supervise, and did not in fact

supervise, the anticompetitive consequences of this limitation

(i.e., less competition and higher prices).

  Several organizations moved to intervene to defend  the

statute.  One of them, the Massachusetts Package Stores Association

("MPSA"), is a trade association primarily representing retail

liquor stores.  The other two organizations--The Wine & Spirits

Wholesalers of Massachusetts and the Massachusetts Wholesalers of

Malt Beverages--are trade associations for alcoholic beverage

wholesalers in Massachusetts.  All three entities sought to

intervene as of right or, in the alternative, as permissive

intervenors.  Fed. R. Civ. P. 24(a)(2), (b)(2).  The Commission and

its members moved to dismiss the complaint for failure to state a

claim.  Fed. R. Civ. P. 12(b)(6).  After briefing and argument, the

district court, on January 6, 1999, denied intervention to the

trade associations but granted the defendants' motion to dismiss. 

Massachusetts Food Ass'n v. Sullivan, 184 F.R.D. 217, 228 (D. Mass

1999).

  The plaintiffs in the district court now appeal from the

dismissal of their complaint.  The trade associations that sought

to intervene appeal from the denial of intervention (but in an

amicus brief support the dismissal of the complaint).  Our review

of the judgment of dismissal is de novo.  Rogan v. Menino, 175 F.3d

75, 77 (1st Cir. 1999), petition for cert. filed, 68 U.S.L.W. 3274

(U.S. Oct. 14, 1999) (No. 99-646).  Since we affirm the judgment of

dismissal, the intervention issue is largely (although not

entirely) academic, and we return to it only after addressing the

merits.

  At first blush, one might think this a strange complaint. 

The state statute limiting retail liquor outlets looks like a

garden-variety act of local legislation limiting the number of

licenses that the state will grant, and the statute neither

authorizes nor directs private parties to engage in anticompetitive

agreements among themselves.  Putting aside the special status of

state liquor regulation under the Twenty-First Amendment, U.S.

Const. amend. XXI, 2, one of the best settled rules in antitrust

law is that the Sherman Act was not intended to "apply" to the

states so as to foreclose otherwise valid state regulation.  Parker

v. Brown, 317 U.S. 341, 350-52 (1943); see also Neo Gen Screening,

Inc. v. New England Newborn Screening Program, 187 F.3d 24, 28 (1st

Cir. 1999), petition for cert. filed, 68 U.S.L.W. 3263 (U.S. Oct.

8, 1999) (No. 99-617); Tri-State Rubbish, Inc. v. Waste Management,

Inc.,  998 F.2d 1073, 1076 (1st Cir. 1993).  But, as we shall see,

there are qualifications on this general rule, and the case law is

not entirely coherent.  See generally I Areeda & Hovenkamp,

Antitrust Law  221 (1997).  With some ingenuity, the plaintiffs in

this case have sought to make the most of the resulting

ambiguities.

  Almost from the outset, the immunity from the Sherman Act

afforded to "state action" has been hedged by a concern with state

laws deemed merely to authorize or direct conduct by private

parties that--absent such state legislation--would violate the

antitrust laws.  Cf. Parker, 317 U.S. at 351-52.  It is one thing

to say that a state may itself regulate in an "anticompetitive"

fashion; it is quite another to say that the state can effectively

exempt private parties from obeying the antitrust laws.  Thus, a

state cannot shield private parties from the federal antitrust laws

by enacting a statute saying no more than that competing grocery

stores may agree to fix prices; through the Supremacy Clause, the

Sherman Act would preempt such a law.

  This qualification is itself qualified.  Under certain

conditions, the states have been allowed to authorize or direct

private conduct otherwise inconsistent with the Sherman Act.  The

main conditions are that the state do so as part of a deliberate

policy to displace competition and that the state provide an

alternative regime that provides "active supervision" of the

conduct, Patrick v. Burget, 486 U.S. 94, 100 (1988); an example

would be a specific authorization for joint ratemaking by

intrastate carriers coupled with state agency authority to require

that the resulting rates be just and reasonable.  Southern Motor

Carriers Rate Conference, Inc. v. United States, 471 U.S. 48

(1985); see I Areeda, supra,  226.

  What state entities can adopt such a policy (state

executives? local municipalities?), how clearly the policy must be

articulated, and (above all) what kind of supervision will suffice

are among the issues that have provoked endless litigation.  See I

Areeda, supra,  226.  For example, supervision may be a proxy for

competition, designed to protect consumers (e.g., utility

regulation); but supervision is not clearly limited to cases of

this character.  See, e.g., Patrick, 486 U.S. at 100-01 (suggesting

that state supervision reinforces requirement that anticompetitive

behavior at issue be consistent with the state's deliberate

policy).  

  But our facts do not require an examination of clear

articulation, active supervision or other conditions for immunity. 

It is only where state legislation "would otherwise" be preempted

by the Sherman Act that these further inquiries are required. 

Fisher v. City of Berkeley, California, 475 U.S. 260, 265 (1986). 

In this case, the state has not ordered or authorized private

parties to engage in conduct that, absent immunity, would even

arguably violate the antitrust laws; there is no private agreement

or arrangement between retailers as to the number of retail outlets

and therefore no violation to be shielded.  The state simply

insists upon licensing retail liquor stores--as it does for many

businesses or professions--and limits the number of licenses to

three per owner.

  Despite disclaimers, the plaintiffs' case rests in the

end on the implicit proposition that the Massachusetts statute is

preempted because it produces an effect that could not be produced

by agreement of private parties without violating the antitrust

laws.  Admittedly, private parties could not agree that each of

them would operate only three such outlets.  United States v. Topco

Associates, Inc., 405 U.S. 596 (1972); Addamax Corp. v. Open

Software Found., Inc., 152 F.3d 48, 51 (1st Cir. 1998).  This

resemblance in effects is the gist of the plaintiffs' position,

although it is narrowed by the suggestion that preemption may be

confined to statutes that produce the same effect as a per se

violation (rather than a non-per se one); and, of course,

plaintiffs concede that even a per se violation would be all right

if the requisite state policy and active supervision existed.

  The difficulty with this "similar effects" argument is

that much direct government regulation prohibiting one form of

economic activity or requiring another involves directives that

private parties could not themselves implement without violating

the antitrust laws.  For example, competing shoe stores could not

agree on closing hours or holidays without committing per se

violations of the antitrust laws; nor could competing taxi

companies agree on the number of taxicabs to be operated; nor could

cable companies agree that only one or two of them should serve a

locality.  Yet all of these results are examples of commonplace

state or local regulation, sometimes accompanied by local price

regulation but sometimes not.

  To allow federal judges to decide which of these

legislative enactments should survive and which should be condemned

comes close to reintroducing the kind of judgments that got the

Supreme Court into so much trouble in the  Lochner era.  The result

might well be more competition and greater consumer welfare.  But

it would come at the cost of second-guessing the democratically

elected legislature's decisions about the proper balance between

competition and other social policies that are commonly reflected

in such legislation.  The Sherman Act is a "charter of economic

liberty," Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 4

(1958), but only as against private restraints.

  From these examples, it is evident that one must be

careful in parsing general statements to the effect that states may

not compel "private parties to engage in anticompetitive behavior." 

324 Liquor Corp. v. Duffy, 479 U.S. 335, 345-46 n.8 (1987).  What

is centrally forbidden is state licensing of arrangements between

private parties that suppress competition--not state directives

that by themselves limit or reduce competition. This is the very

distinction stressed by the Supreme Court in Fisher where it

sustained the City of Berkeley's rent control ordinance (rent

control being a classic constraint on competitive pricing).  As the

Court there explained,

    [a] restraint imposed unilaterally by

  government does not become concerted-action

  within the meaning of the statute simply

  because it has a coercive effect upon parties

  who must obey the law.  The ordinary

  relationship between the government and those

  who must obey its regulatory commands whether

  they wish to or not is not enough to establish

  a conspiracy.



Fisher, 475 U.S. at 267.

  The only fact patterns that give the plaintiffs any

purchase is a set of Supreme Court decisions that struck down state

statutes that were deemed to direct and implement private conduct

replicating resale price maintenance schemes.  The schemes were

structured to allow one party (manufacturer or wholesaler) to set

the resale price to be charged by purchasers at the next level. 

The resemblance in form and function to traditional private resale

price maintenance, see Dr. Miles Medical Co. v. John D. Park &

Sons, Co., 220 U.S. 373 (1911), was so close that the Supreme Court

treated the arrangements as if they were nothing other than private

resale price maintenance schemes licensed and abetted by the state.

  There are no private restraints in this case, whether

operating alone or in conjunction with state action.  Cf. Duffy,

479 U.S. at 345 n.8.  The Massachusetts statute limiting licenses

to three per company does not authorize or direct any private

agreements or permit any competitor to determine the price or

location of another.  The three-store limit is no more an agreement

among competitors, or subordination of one competitor to the

dictates of another, than a state electrical code that prescribes

safety standards for contractors who wire buildings for

electricity.  As in Fisher, the restrictions have been

"unilaterally imposed by government . . . to the exclusion of

private control."  Fisher, 475 U.S. at 266.

  Our conclusion in no way depends on the premise that the

Massachusetts three-store limit serves the public interest or on

the amici's dubious suggestion that the limit has no effect on

price or output.  Whatever its purported or actual purpose, cf.

Johnson v. Martignetti, 375 N.E.2d 290, 297 (Mass. 1978), it is

common knowledge that many statutes regulate private activities to

protect the narrow economic interests of other companies, often to

the detriment of the public.  See Frank H. Easterbrook, Antitrust

and the Economics of Federalism, 26 J.L. &. Econ. 23, 23-24 (1983). 

But unless such a statute licenses or commands a private restraint,

this is a matter for the voters and not for the federal courts--at

least so far as the Sherman Act is concerned.  Of course, such

state statutes remain subject to the constraints of the Commerce

Clause and other constitutional provisions.

  This brings us to the separate question whether MPSA and

the two wholesaler trade associations should have been allowed to

intervene.  The district court held that the wholesalers' interests

were too general and contingent to justify intervention; in the

case of MPSA, whose members were subject to the very three-store

regulation challenged by plaintiffs, the court said that its

members did have a direct and concrete interest in defending the

statute but that they were adequately represented by the

Commonwealth.  As for permissive intervention, the court found that

all three trade associations could adequately express their views

through amicus briefs.

  The problem presented in this case is a common one: a

private party attacks a regulatory statute or administrative rule;

the state or its regulators are its defendants; and other parties

having an economic interest in the validity or invalidity of the

statute or regulation seek to intervene.  The standard for

intervention as of right is set forth in Rule 24(a)(2) as follows:

    Upon timely application anyone shall be

  permitted to intervene in an action: . . .

  when the applicant claims an interest relating

  to the property or transaction which is the

  subject matter of the action and the applicant

  is so situated that the disposition of the

  action may as a practical matter impair or

  impede the applicant's ability to protect that

  interest, unless the applicant's interest is

  adequately represented by existing parties.



In such cases, the timeliness of intervention and the practical

impact on the would-be intervenor are rarely in dispute: it is the

"interest" and "adequately represented" criteria that are usually

decisive.

  Rule 24(a)(2)'s reference to "an interest relating to the

property or transaction" suggests that the drafters had in mind

something narrower and more akin to property or contract interests

in conventional private litigation as the necessary stake; but this

narrow reading has not been accepted in practice.  See Daggett v.

Commission on Governmental Ethics and Election Practices, 172 F.3d

104, 110 (1st Cir. 1999).  We will therefore assume that the

district court was right in holding that MPSA satisfied the

"interest" requirement and assume arguendo (and solely to shorten

the opinion) that the district court was wrong in holding that the

wholesalers lacked such an interest.

  But, perhaps as a counterweight to the broad reading of

"interest," the courts have been quite ready to presume that a

government defendant will "adequately represent" the interests of

all private defenders of the statute or regulation unless there is

a showing to the contrary.  See Public Serv. Co.  v. Patch, 136

F.3d 197, 207 (1st Cir. 1998).  And while there are various ways to

show that state representation is not adequate, the burden of

overcoming the presumption is upon the would-be intervenor,

Daggett, 172 F.3d at 111.  The trial court, in applying a general

rule to specific facts, is usually accorded a measure of deference

in making the adequate-representation determination, so long as the

court applies the proper legal standards.  Id. at 111-12.

  The would-be intervenors argue that the Commonwealth

cannot be an adequate representative of their interests while it

also regulates them.  In support of this position, they point to

Conservation Law Found. v. Mosbacher, 966 F.2d 39 (1st Cir. 1992),

and the district court opinion in Patch, 173 F.R.D. 17 (D.N.H.

1997).  In Mosbacher, we held that commercial fishing groups could

intervene as of right to oppose a challenge to a state agency's

approval of a fishery plan, noting that the fishing groups were

regulated by the agency.  Mosbacher, 966 F.2d at 44.  In Patch, the

district court allowed intervention by several electric utilities

who were largely aligned with state regulators in defending a major

state reform plan that restructured retail power regulation in the

state.  Patch, 173 F.R.D. at 27-28.  From these decisions, MPSA

infers a general rule that the state defendant's representation is

inadequate as a matter of course whenever it is also the regulator

of the entity that seeks to intervene.

  The cases do not support such a per se rule.  We

certainly did not adopt such a rule in Mosbacher, where the

intervenors overcame the presumption of adequate representation by

the government defendant because, inter  alia, the agency had not

filed an answer to the complaint but had instead accepted a consent

decree providing for virtually all the relief sought and subjecting

the fishing groups to more stringent rules than had previously been

in effect.  Id. at 44.  It is not clear whether the district court

was applying a per se rule in Patch; but in any event that part of

its decision was not appealed to us.

  Here, there is no doubt that the Commonwealth was

zealously interested in upholding the validity of the statute.  The

only difference between it and the would-be intervenors was their

interest in offering other legal arguments (for example, based on

the Twenty-First Amendment) to sustain the statute.  But these

arguments were easily presented in amicus briefs.  This is not a

case where the complaint was framed so as to require an evidentiary

determination and where the would-be intervenors had information

that could only be presented by their participation as parties. 

See generally Daggett, 172 F.3d at 112.

  The would-be intervenors point out that an amicus does

not enjoy the same opportunities as a full-fledged litigant even to

offer legal argument; for example, in this court, amicus briefs are

shorter than regular briefs and oral argument is at the court's

discretion.  Fed. R. App. P. 29(d),(g).  But a court is usually

delighted to hear additional arguments from able amici that will

help the court toward right answers, and the amici can easily seek

a larger allotment of pages or time to participate in oral

argument.  See id.

  The more interesting claim is that the Commonwealth might

refuse to appeal if it lost; or--if it won and plaintiffs sought

certiorari--the Supreme Court might limit the questions to be

considered to those set forth in the certiorari petition.  But

amici, like respondents, can advise the Supreme Court of missing

arguments.  Davis v. United States, 512 U.S. 452, 457 n.* (1994)

(citing Teague v. Lane, 489 U.S. 288, 300 (1989) (plurality

opinion)).  And if the Commonwealth refused to appeal from a

defeat, a would-be intervenor could then seek to intervene.  7C

Wright, Miller & Kane,  Federal Practice and Procedure  1909, at

345 & n.38 (1986); see also Daggett, 172 F.3d at 112.

    As for permissive intervention, the would-be intervenors

likely met the low threshold set by Rule 24(b)--that their defenses

included questions of law common to the defenses offered by the

state.  Fed. R. Civ. P. 24(b).  But even where this necessary

condition is present, the rule merely permits intervention at the

discretion of the district court.  Daggett, 172 F.3d at 112-13. 

The district court reasonably concluded that the Commonwealth was 

adequately representing the interests of everyone concerned to

defend the statute and that any variations of legal argument could

adequately be presented in amicus briefs.  We see no abuse of

discretion in this ruling.

  Affirmed.