En Banc Panel Upholds California Tied House Law Against First Amendment Challenge

In a 10-1 decision, an en banc panel of the 9th Circuit overruled a previous three judge decision of the Ninth Circuit and reinstated a district court decision that upheld a California alcohol law regulating the payment between suppliers/wholesalers and retailers.

In the opinion authored by Judge Paez the opinion noted that the Supreme Court’s Central Hudson test is still the appropriate legal standard for evaluating a commercial speech matter and that the 9th Circuit’s previous holding in Actmedia is still good law and controls this case.  Judge Paez did not embrace the temperance argument of Actmedia but noted that the challenged California laws “directly and materially advances the state’s interests in a triple-tiered distribution scheme.”

Since most states and the federal government have similar laws this is an important decision for the nation.

Given the long-standing national gun fight over 1st Amendment issues, I would not be surprised to see RDN try to appeal to the Supreme Court.

(previous post)  –   Oral Arguments Held In 9th Circuit Case

An 11 judge en banc panel of the 9th Circuit heard arguments on the Retail Digital Network appeal on January 19, 2017, in San Francisco.  The judges fired a series of questions to the attorneys for Retail Digital Network, the US Chamber and the California Attorney General’s office and speculation on the final outcome is a terribly imprecise science that I will avoid here.

The US Chamber of Commerce and the Washington Legal Foundation filed last minute amicus briefs in support of Retail Digital Network.  The Chamber was granted a portion of the oral argument time from Retail Digital Network.

The judges did seem to struggle with the specific details of the law in question and how it works in the marketplace.  Moreover, the Ninth Circuit had many questions on the state of commercial free speech law in the United States Supreme Court.  With additional cases on commercial free speech pending before the Supreme Court, the Ninth Circuit may take awhile to issue a decision.

(previous post) 9th Circuit Grants en Banc Review in Retail Digital Network Case

In a very important development, the 9th Circuit has issued an order granting en banc review of a 3 judge panel on the Retail Digital Network litigation.   This litigation by Retail Digital Network challenges California “tied house” laws restricting direct or indirect payments to retailers as a violation of the First Amendment.   The state of California as well as amicus briefs from the California Craft Brewers Association, National Beer Wholesalers and Wine and Spirits Wholesalers of America, California Beer and Beverage Distributors and Wine and Spirits Wholesalers of California, and Public Citizen all urged the court in January 2016 to have the three judges rehear the matter or, in the alternative, send the case for review by the entire en banc court. The court has agreed to an en banc review to further examine this important alcohol regulatory issue. The Chief Judge of the 9th Circuit was on the original 3 judge panel. The 9th Circuit could have just rejected this petition for review or en banc hearing, instead they have chosen to allow the rare en banc review of this matter.

Oral arguments on this case are set for the week of January 17 in San Francisco.

(previous post- 8/12/16)    Amicus Briefs Accepted by Ninth Circuit in Retail Digital Network Case

In March, the state of California filed a petition and brief for panel rehearing or rehearing en banc after the Ninth Circuit’s decision to reverse and remand with instructions to trial court a decision on the challenge to the California law that prohibits alcohol manufacturers and distributors from giving anything of value to retailers for advertising.

California noted that the Ninth Circuit opinion did not give enough deference to a prior Ninth Circuit case on the exact same law that upheld the California law in question.  The Ninth Circuit held in Actmedia, Inc. v. Stroh, 830 F.2d 957 (9th Cir. 1986) that section 25503(h) does not violate the First Amendment.  The state noted that the proper standard to overturn Ninth Circuit precedent is “clearly irreconcilable” and the facts and law of this case, and any changing Supreme Court opinions did not meet that standard.  The Ninth Circuit opinion seemingly emphasized the 2011 decision Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011) as changing relevant First Amendment law and creating a new “heightened scrutiny” to commercial speech challenges.   However, the Sorrell case has been controversial and others circuits have strongly suggested that that the case did not create any new law beyond the existing four-part test articulated in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980) which was used to uphold the same law in Actmedia.

Amicus briefs in support of the state were filed by the California Craft Brewers Association, National Beer Wholesalers and Wine and Spirits Wholesalers of America, California Beer and Beverage Distributors and Wine and Spirits Wholesalers of California, as well a strong brief from the non-alcohol industry perspective of Public Citizen.   These briefs offered new arguments and amplified many of the state’s arguments.  The briefs highlighted both the errors in law as well as the unforeseen consequences both in California and across the nation if the Ninth Circuit’s ruling was to stand unchanged.

Plaintiff Retail Digital Network’s response brief can be found here.

These briefs were filed along with a motion to permit these briefs in early March and were notified on August 12th that these amicus briefs would in fact be accepted and considered. Now it is up to the Ninth Circuit to rule on the state’s underlying request.

Professor Shaun Martin at the University of San Diego School of Law operates a very informative blog covering the Ninth Circuit and he offered his views of the Ninth Circuit’s decision when it came out in January. It is a very interesting read and can be found here.

(Earlier Post Jan.2016)   9th Circuit Remands First Amendment Challenge to California Tied House Provision

The Ninth Circuit remanded to the trial court a decision on whether a California Alcohol Beverage Control regulation that prohibits alcohol manufacturers and distributors from giving anything of value to retailers for advertising violates the First Amendment in light of recent United States Supreme Court precedent.  The case name is Retail Digital Network v. Applesmith.

The regulation in question prevents third party companies from getting payment for advertising services in licensed retail stores from alcohol suppliers and wholesalers and then sharing that funding with the licensed retailers.  The challenged laws are part of a broader set of tied house laws that regulate the financial interrelationships of suppliers, distributors, and retailers.

The district court had ruled for California after noting controlling 9th Circuit precedent and applying the long-standing Central Hudson test.  However, the 9th Circuit determined that the existing case, Actmedia Inc. v. Stroh, 830 F.2d 957 (9th Cir. 1986), is most likely no longer good law after the Supreme Court’s Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011).

Because the case was decided at the summary judgment level with a limited factual record, the 9th Circuit remanded the case back to the district court to consider the case under the Sorrell standard and a more robust factual record.

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