
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-
