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Battipaglia v. New York State Liquor Authority

September 21, 1984


Appeal from an order of the District Court for the Southern District of New York, Richard Owen, Judge, granting motions for summary judgment by the defendant New York State Liquor Authority and a wholesaler who had intervened as a defendant in an action by a wholesaler and a retailer which sought a declaration that certain provisions of § 101-b of New York's Alcoholic Beverage Control Law are in violation of § 1 of the Sherman Act and therefore unconstitutional and an injunction against their enforcement. Affirmed. WINTER, Circuit Judge, filed a dissenting opinion.

Author: Friendly



FRIENDLY, Circuit Judge:

Plaintiff Jack R. Battipaglia is the owner of a licensed liquor store in Long Island City, New York. Plaintiff Bacchus Selections, Inc. is a licensed wholesaler of wines. In this action in the district Court for the Southern District of New York against the New York State Liquor Authority (SLA), they sought a declaration that certain provisions of § 101-b of New York's Alcoholic Beverage Control Law requiring wholesalers to post and maintain schedules of prices and discounts violate § 1 of the Sherman Act and are therefore invalid under the Supremacy Clause. The complaint alleged that the effect of those provisions was "to restrain commerce in the product market of wine in the State of New York by prohibiting wholesalers and retailers from competitive pricing which could benefit the consuming public . . ., that the provisions of the Alcoholic Beverage Control Law . . . and the conduct of Defendant Authority constitute a combination and conspiracy in restraint of trade and commerce in wine among the states", and that "by reason of the above-mentioned illegal acts and practices, Defendant Authority has proximately caused injury to plaintiffs in the form of higher prices to them and to members of the general consuming public who purchase wine in the State of New York."

After answer and limited discovery, plaintiffs moved for summary judgment. Judge Owen denied the plaintiffs' motion in an opinion which held that the New York statute did not contravene § 1 of the Sherman Act but that, if it did, conduct thereunder was insulated from attack under the antitrust laws by the "state action" doctrine of Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943).*fn1 After the motion was decided, Peerless Importers, Inc. (Peerless), another wholesaler of wines, was granted leave to intervene as a defendant in opposition to plaintiff's motion. Thereafter the Authority and Peerless moved for summary judgment in their favor. The judgment granted the motions on the basis of his opinion denying plaintiffs' motion, and this appeal followed.


Section 101-b is entitled "Unlawful discriminations prohibited; filing of schedules; schedule listing fund". We quote § 1 in the margin.*fn2 Section 2 makes it unlawful for any person who sells liquor or wine to discriminate in price, discounts for time of payment, or on quantity of merchandise sold between one wholesaler and another wholesaler or between one retailer and another retailer purchasing liquor or wine having the same brand or trade name and of like age and quality, or to grant any discount, rebate, free goods, allowance or other inducement of any kind except certain maximum discounts therein specified. Section 3(b), which is the object of plaintiffs' attack, provides that

no brand of liquor or wine shall be sold to or purchased by a retailer unless a scedule . . ., is filed with the liquor authority, and is then in effect[,]

unless "prior written permission of the authority is granted for good cause shown and for reasons not inconsistent with the purpose of this chapter." N.Y. Alco Bev. Cont. Law § 101-b(3)(b). Section 4 provides that the schedule required by paragraph 3(b) must be filed before the fifth day of each month and that the prices and discounts would become effective on the first day of the following calendar month and should remain effective for such month. Within ten days after the filing the Authority must make the schedules or a composite available for inspection by licensees. Within three days after the date provided for such inspection, a wholesaler may amend his filed schedule for sales to retailers in order to meet lower competing prices and discounts "provided such amended prices are not lower and discounts are not greater than those to be met." N.Y. Alco. Bev. Cont. Law § 101-b(4).


For some of us who were "present at the creation" of the Twenty-First Amendment, there is an aura of unreality in plaintiffs' assumption that we must examine the validity of New York's Alcoholic Beverage Control Law (ABC Law) just as we would examine the constitutionality of a state statute governing the sale of gasoline. The Twenty-First Amendment was designed to end the "noble experiment" by which the Federal government endeavored to control the drinking habits of all citizens and to place control of alcoholic beverages in the states. Fulfillment of the latter purpose required that, in addition to repealing the Eighteenth Amendment, which was accomplished by § 1, the Amendment should give the states full authority to deal with the subject of intoxicating liquor free from limitations imposed by the Commerce Clause, which had hampered such regulation before the Eighteenth Amendment was adopted. This was accomplished by § 2 of the Twenty-First Amendment which provides:

The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

In its first encounter with the Amendment, only years after ratification, the Supreme Court, without dissent, ruled that a state could impose a license fee on the importation of beer that would have been forbidden by the Commerce Clause itself. State Board of Equalization v. Young's Market Co., 299 U.S. 59, 64, 81 L. Ed. 38, 57 S. Ct. 77 (1936). The Court also posed, as a rhetorical question, "Can it be doubted that a state might establish a state monopoly of the manufacture and sale of beer . . .," id. at 63, something as antithetical to the Sherman Act as could be imagined.*fn3 Discussion continued in this vein until Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 12 L. Ed. 2d 350, 84 S. Ct. 1293 (1964). Although Justice Stewart there made the frequently cited declaration quoted in the margin,*fn4 id. at 332, and also said that a contention that the Twenty-First Amendment had somehow operated to "repeal" the Commerce Clause "would be patently bizarre and is demonstrably incorrect", id. at 331-32, the actual decision was the unsurprising one -- although it did surprise two Justices -- that the Amendment did not empower New York to prohibit the sale at John F. Kennedy International Airport of tax-free liquor for "ultimate delivery and use . . . in a foreign country", id. at 333. Justice Stewart's remarks in Idlewild must also be read along with his observation, only two terms later, that in a case concerning liquor destined for use, distribution or consumption exclusively in New York -- indeed another section of the very statute here at issue -- "the Twenty-First Amendment demands wide latitude for regulation by the state." Joseph E. Seagram & Sons v. Hostetter, 384 U.S. 35, 42, 16 L. Ed. 2d 336, 86 S. Ct. 1254 (1966). However, in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, 445 U.S. 97, 106-10, 63 L. Ed. 2d 233, 100 S. Ct. 937 (1980), the Court gave further attention to the relation of state powers under the Twenty-First Amendment and the commerce power and, after noting that the Amendment gave the states "virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system", id. at 110, concluded that:

Although States retain substantial discretion to establish other liquor regulations, those controls may be subject to the federal commerce power in appropriate situations. The competing state and federal interests can be reconciled only after careful scrutiny of those concerns in a "concrete case". Hostetter v. Idlewild Liquor Corp. 377 U.S., at 332.

Id. Since this appeal was argued, the Court has again stated that "it is by now clear that the Amendment did not entirely remove state regulation of alcoholic beverages from the ambit of the Commerce Clause," Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 52 U.S.L.W. 4979, 4982-83, 82 L. Ed. 2d 200, 104 S. Ct. 3049 (1984).*fn5

Still this is not at all to say, as plaintiffs assume, that attacks on state regulation of the liquor business as conflicting with the antitrust laws are to be decided as if § 2 of the Twenty-First Amendment did not exist. In Bacchus Imports, the Court referred to the language in Midcal that a "pragmatic effort [must be made] to harmonize state and federal powers," 445 U.S. at 1098, and also to the statement in Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 52 U.S.L.W. 4803, 4809, 81 L. Ed. 2d 580, 104 S. Ct. 2694 (1984), that "whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding that its requirements directly conflict with express federal policies." We hold that the challenged sections of New York's Alcoholic Beverage Control Law are not in direct conflict with § 1 of the Sherman Act but that if they were, the ...

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