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Full 9th Circ. To Rehear Calif. Store Booze-Ad Ban Appeal

Full 9th Circ. To Rehear Calif. Store Booze-Ad Ban Appeal

 

Source: Law360

By Kat Greene 

November 16, 2016

 

The Ninth Circuit on Wednesday agreed to reconsider its decision reviving an advertising company’s challenge to California’s law barring liquor producers from paying retailers for in-store marketing after an army of amici came forward to assail the panel’s January ruling.

 

A three-judge panel had found that the U.S. Supreme Court’s 2011 decision in Sorrell v. IMS Health meant that California’s Business and Professions Code Section 25503, part of the “tied house” rules that separate alcohol manufacturers and retailers, should be subject to heightened scrutiny on whether it violates the First Amendment, according to that decision.

 

The rule itself prohibits liquor makers from paying alcohol retailers anything in exchange for advertising.

 

Several industry groups jumped into the fray to bolster the state’s bid for rehearing, arguing, among other things, that “tied house” laws are in place to keep the alcohol markets from descending the country into the chaos seen before Prohibition, court records show.

 

The dust-up started in November 2011, when Retail Digital Network filed suit for declaratory relief, naming as a defendant Jacob Appelsmith, director of the state’s Alcoholic Beverage Control Board, and seeking to overturn Section 25503. Appelsmith has since been replaced in his post and court caption by Timothy Gorsuch.

 

RDN, which installs display screens in stores and sells ads on them to various companies including liquor producers, claims in its appeal briefing that it had signed contracts with over 100 stores to place screens in their stores in exchange for a percentage of RDN’s revenue.

 

Once RDN went to liquor companies seeking their business, however, it found that major companies such as Diageo PLC, Jack Daniel’s Tennessee Whiskey and MillerCoors indicated that their legal departments stopped them from buying ads on RDN’s screens for fear of violating Section 25503.

 

In May 2013, U.S. District Judge Consuelo B. Marshall granted the state summary judgment, and the appeals panel revived the case, saying Judge Marshall should review the law under the 2011 Sorrell standard, court records show.

 

Six separate alcohol industry and advocacy groups had filed amicus briefs encouraging the court to rethink the decision that the California government couldn’t silence speech just because adults who hear it might be too persuaded, saying the rules were in place to keep beer and liquor makers from driving up demand and leading to “intemperate consumption,” court records show.

 

The “tied house” laws serve to insulate retailers from undue influence of producers and prevent what the nation experienced prior to the Prohibition: Vertical integration led to excessive retail capacity, which stimulated sales, which led to overconsumption and alcohol abuse, the National Beer Wholesalers Association and Wine & Spirits Wholesalers of America Inc. said in their brief.

 

Retail Digital Network, meanwhile, argued in its own brief that the appeal was simply premature, and that there was no real reason to hold up the case for en banc review until the lower court could take a second crack at the issue. The state was merely trying to reargue, in its bid for rehearing, the case it had just lost, RDN said.

 

Olivier Taillieu, who represents RDN, told Law360 on Wednesday that he and his client are confident in their case.

 

“We’re optimistic that the full Ninth Circuit is going to align itself with current Supreme Court First Amendment jurisprudence and invalidate the unjustified burden placed on advertisers by the state of California,” he said.

 

Representatives for the other parties didn’t immediately respond to requests for comment after business hours on Wednesday.

 

Retail Digital is represented by Olivier A. Taillieu and Raffi V. Zerounian of The Tallier Law Firm.

 

California is represented by Attorney General Kamala D. Harris, Senior Assistant Attorney General Alicia M.B. Fowler, Supervising Deputy Attorney General Jerald L. Mosley and Deputy Attorney General Gabrielle H. Brumbach.

 

Wine and Spirits Wholesalers of California Inc. is represented by Michael Brill Newman of Holland & Knight LLP. California Beer and Beverage Distributors is represented by Robert A. Brundage and Brian C. Rocca of Morgan Lewis & Bockius LLP. The National Beer Wholesalers Association and Wine & Spirits Wholesalers of America Inc. are represented by Michael D. Madigan and Brandt F. Erwin of Madigan Dahl & Harlan PA. The California Craft Brewers Association is represented by Carl L. Blumenstein of Nossaman LLP. Public Citizen Inc. is represented by Scott L. Nelson, Allison M. Zieve and Julie A. Murray of the Public Citizen Litigation Group.

 

The case is Retail Digital Network LLC v. Timothy Gorsuch, case number 13-56069, in the U.S. Court of Appeals for the Ninth Circuit.