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MATTER AFFILIATED DISTILLERS BRANDS CORP. v. STATE LIQUOR AUTHORITY (02/20/69)

COURT OF APPEALS OF NEW YORK 1969.NY.40580 <http://www.versuslaw.com>; 246 N.E.2d 518; 24 N.Y.2d 31 decided: February 20, 1969. IN THE MATTER OF AFFILIATED DISTILLERS BRANDS CORP., APPELLANT,v.STATE LIQUOR AUTHORITY, RESPONDENT Matter of Affiliated Distillers Brands Corp. v. State Liq. Auth., 29 A.D.2d 358, reversed. Counsel O. John Rogge, Milton C. Weisman, Roy H. Carlin, Max J. Halpern and Harold Bookman for appellant. Milton Koerner and Hyman Amsel for respondent. Judges Burke, Scileppi, Bergan, Keating and Jasen concur with Chief Judge Fuld; Judge Breitel dissents and votes to affirm in a separate opinion. Author: Fuld


Matter of Affiliated Distillers Brands Corp. v. State Liq. Auth., Judges Burke, Scileppi, Bergan, Keating and Jasen concur with Chief Judge Fuld; Judge Breitel dissents and votes to affirm in a separate opinion.

Author: Fuld

 The State Liquor Authority, in June of 1967, disapproved the application of the petitioner, Affiliated Distillers, for a brand label registration for its "Ancient Age Kentucky Straight Bourbon Whiskey, 86 Proof, 8 Years Old." The question on this appeal is whether, in so doing, the Authority exceeded the discretion given it by section 107-a of the Alcoholic Beverage Control Law (infra, pp. 36-37) which prohibits the sale of liquor without a brand label "registered and approved by the authority."

In passing on the application, the Authority found nothing wrong or misleading in the label submitted by the petitioner. It withheld its approval -- and thereby prevented the petitioner from introducing its eight-year-old bourbon in the New York market -- solely on the ground that, shortly before the date of the application, the petitioner had withdrawn from sale in New York a six -year-old bourbon, also 86 proof and also bearing the brand name "Ancient Age Kentucky Straight Bourbon", which continued to be sold in great quantity, and at lower prices than the eight-year liquor, in other parts of the country. The withdrawal of the lower-priced six -year-old bourbon and the nearly simultaneous proposal to introduce a more costly eight -year-old bourbon, similarly labeled except as to age, were characterized by the Authority as being "designed to circumvent" the so-called "affirmation section" of the Alcoholic Beverage Control Law (§ 101-b, subd. 3, pars. [d]-[i]). Those paragraphs -- (d) through (i) -- (infra, pp. 37-38), in effect, require a distiller of whiskey to offer its products in New York at prices not higher than the lowest prices at which it sells them in any other State.

The petitioner brought this article 78 proceeding to compel the Authority to approve the label for its eight-year-old Ancient Age Whiskey.*fn1 In opposition, the Authority contended that its action did not fall within any of the categories listed in section 121 of the Alcoholic Beverage Control Law (infra, p. 40) and was, therefore, not judicially reviewable. It went on, nevertheless, to defend, on the merits, its conclusion that the petitioner's application was an attempt to evade the requirements of section 101-b. In the course of doing so -- and this is most significant -- the Authority conceded that there was a difference between the two kinds of whiskey.*fn2 It further indicated -- and through counsel has explicitly stated on the argument in this court -- that it would approve the eight-year label if the petitioner also continued to offer the six-year product in the New York market. The court at Special Term held that the denial of the registration was "without basis in fact" and "arbitrary and capricious" and remanded the matter to the Authority.

On appeal, a divided Appellate Division reversed. It concluded that section 107-a gave the Authority discretion with regard to approving brand label registrations, so as to give effect to the objectives of the other sections of the Alcoholic Beverage Control Law, section 101-b among them, and the court found adequate basis in the record for the Authority's determination. That action of the Authority, the court also held, was not subject to judicial review. The dissenting justice expressed the view that the statute only permitted the Authority to prevent discrimination in price between sales of like products in New York and in other states but did not empower it to prevent a distributor from withdrawing from the New York market one of two admittedly different products. The action taken by the Authority being beyond its lawful powers, it was subject to judicial review, the dissenter went on to urge, notwithstanding section 121. With both of these conclusions we agree.

We turn, first, to section 107-a itself. Subdivision 4 of that section -- the part with which we are mainly concerned -- states, quite simply, that "[no] liquor * * * shall be labeled, offered or advertised for sale" unless it is done "in accordance with" regulations of the Authority and unless "the brand or trade name label" affixed to the container of the beverage "shall have been registered with and approved by the authority and the appropriate fee paid".*fn3

Under paragraph (a), the functions of the Authority are not -- as the petitioner contends -- purely ministerial. The Authority may, undoubtedly, exercise discretion to refuse to approve a label which would help an applicant to violate any part of the Alcoholic Beverage Control Law. However, and this is decisive, there is nothing in the statute prohibiting the conduct which the Authority freely acknowledges it was trying to prevent -- namely, the withdrawal by the petitioner of its six-year-old bourbon from the New York market and the offering, at a higher price, of a similarly named but clearly labeled and concededly different eight-year-old whiskey instead. No matter how worthy the Authority's objective may seem from the point of view of the consumer, it appears to lack any legal foundation whatever.

Certainly, nothing in the remaining subdivisions of section 107-a itself helps to sustain the administrative action. Subdivision 2, the only other provision having possible relevance, runs counter to the claims of the Authority. Referring to regulations which the Authority is empowered to promulgate, subdivision 2 recites that they "shall be calculated to prohibit deception of the consumer", to provide him with "adequate information as to quality and identity" and to "achieve national uniformity in this field in so far as possible." However, as we have pointed out, the Authority makes no claim that the proposed label is deceptive, false or incomplete in any respect. The Authority rests its case entirely on its professed purpose of giving effect to subdivision 3 of section 101-b -- and to that portion of the statute we now turn.

The "affirmation" provisions, paragraphs (d) through (i) of subdivision 3 of section 101-b (L. 1964, ch. 531, § 9), reversed the State's long-standing policy of discouraging the reduction of liquor prices*fn4 and of enforcing the maintenance of retail prices at levels fixed by the distiller (former § 101-c; L. 1950, ch. 689, § 1).

In 1964, acting on the recommendations of a Moreland Act Commission and of the Governor, the Legislature repealed the resale price maintenance section of the statute (L. 1964, ch. 531, § 11).*fn5 In its declaration of policy, the Legislature stated that "consumers of alcoholic beverages in this state should not be discriminated against or disadvantaged by paying unjustifiably higher prices for brands of liquor than are paid by consumers in other states" (L. 1964, ch. 531, § 8). Going beyond the recommendations just mentioned, the Legislature also amended section 101-b by adding to its subdivision 3 the provisions which -- as since amended and re-lettered (L. 1967, ch. 798, §§ 1-4) -- are now paragraphs (d) through (i). They are unusual, if not unique, in the field of consumer protection.

Paragraph (d), the key to the amendments, requires the "owner" of a "brand of liquor" to include in the monthly schedule of prices it files with the Authority -- the filing of the schedules themselves has been mandated since 1942 (§ 101-b, subd. 3, par. [a] [L. 1942, ch. 899, § 1]) -- a verified "affirmation * * * that the * * * price of liquor to wholesalers set forth in such schedule is no higher than the lowest price at which such item of liquor will be sold" anywhere else in the country during the month for which such schedule is in effect. (Emphasis supplied.)*fn6 With respect to each "item," the underlying schedule must state, pursuant to paragraph (a) of subdivision 3, the "exact brand or trade name * * * nature of contents, age and proof where stated on the label". Paragraph (f) of that same subdivision, in effect, prohibits the purchase or sale of "any item" not covered by an affirmation.

Upon the most cursory reading, it is evident that amended section 101-b is a regulation of prices only and not a regulation of the kinds of liquor products which may or may not be sold in New York. The discrimination at which it is aimed is, manifestly, solely that involved in offering the same product at higher prices in this State than elsewhere. There is not a word in the statute which confers upon the Authority the power to forbid a distiller to withdraw one of its products from sale in New York or to make the offering of one of a distiller's products a condition to the approval of a label for a different product. It is true that, if a distiller sells only its more expensive whiskeys in New York, while making a wider selection of its products, including cheaper items, available in other states, it practices a kind of discrimination against the New York consumer. But, quite plainly, the Legislature did not undertake to control this kind of discrimination, nor -- and this is most important -- to establish any standards or criteria for doing so. Had such regulation been intended, the draftsman of the statute could readily have found clear and direct language to express the legislative purpose.

Nothing that we have said, of course, implies that a concerted withdrawal of cheaper products by distillers who should be in competition might not violate antitrust laws. (See U. S. Code, tit. 15, §§ 1, 2; General Business Law, §§ 340-347.) Nor does the Authority lack power, under section 107-a, to exercise discretion with respect to new labels describing liquors which are not significantly different from one or more others, whether such others are still being offered by the distiller on the New York market or have been withdrawn from that market. In such cases, the Authority might well have basis for concluding that the manipulation of labels for what are, essentially, the same products undermines the price regulations established by amended section 101-b and violates reasonable standards of labeling under section 107-a.*fn7

In the present case, however, it is the Authority itself, as already noted, which has determined that the two products are, in fact, different (supra, p. 35). Under these circumstances, it must be concluded that the Authority is not seeking to enforce the policies against price discrimination embodied in section 101-b but is attempting, instead, to enforce an unauthorized policy of its own directed against product discrimination. The Authority ...


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