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LORETTO WINERY LTD. v. GAZZARA

January 30, 1985

LORETTO WINERY LTD. and R M R WINE DISTRIBUTORS CORP., Plaintiffs,
v.
ANTHONY V. GAZZARA, Chairman, HUGH B. MARIUS DOYLE, TERRENCE FLYNN and FREDERICK T. PANNOZO, as Commissioners of the State Liquor Authority, Division of Alcoholic Beverage Control, State of New York, Defendants, THE NEW YORK STATE WINE GRAPE GROWERS, INC. and NEW YORK STATE FOOD MERCHANTS ASSOCIATION, INC., Defendant-Intervenors



The opinion of the court was delivered by: BRIEANT

Brieant, J.

In the present action, this Court has been asked to examine the constitutionality of certain provisions of the New York Alcoholic Beverage Control Law ("ABC Law"). Plaintiff, *fn1" alleging the absence of any genuine issue of material fact, moves pursuant to Rule 56, F.R.Civ.P. for an order declaring section 3, subdivisions 36-a and 79-a of the aforementioned statute unconstitutional and enjoining defendants from enforcing those provisions. Defendants also move for summary judgment in their favor, asserting that the legislation is constitutional as a matter of law. *fn2"

The provisions of the ABC Law at issue herein became effective July 24, 1984, and provide in substance that the sale of a newly defined "wine product" in retail grocery stores pursuant to a license, a practice not allowed previously in New York State, would now be permitted. N.Y.Alc.Bev.C.L., Section 3, subdivision 79-a. The law defines "wine product" as a beverage containing inter alia, "wine produced exclusively from grapes grown in New York State and containing not more than six percentum alcohol by volume." (Emphasis added). N.Y.Alc.Bev.C.L., Section 3, subdivision 36-a. *fn3"

 Thus, although locally grown grapes can be integrated with other ingredients to produce a "wine product" for sale in licensed retail grocery stores, the prior ban against the sale in retail grocery stores of any wine products remains intact as to items made wholly or in part from grapes grown outside the State of New York.

 Generally wines are sold in "package stores" licensed to do so, which do not sell groceries or non-alcohol related products. New York has less than 4,500 package stores, compared to about 23,000 retail grocery stores, so the opportunity to sell a wine product in a grocery invites far greater market penetration with resulting significant advantage to the product made with New York grapes.

 Plaintiff Loretto Winery Ltd. is a California corporation with its principal place of business in that State. It is engaged in the business of producing and selling wines and wine products made, at least in substantial part, from grapes grown in the State of California. Among the beverages produced and sold by plaintiff is a "California Special Wine Cooler," a wine product sold in forty states and containing six percentum of alcohol. (Affidavit of Dominic Scotto, October 15, 1984, at 1-2). This product, it is conceded by defendants, is not chemically different from the newly authorized New York "wine product." (Transcript of September 6, 1984, at 7).

 Plaintiff has previously taken steps to have its wine product sold in New York in package stores, but, until recently, had been prevented from doing so due to its failure to comply with certain state labelling requirements. Id. at 2. However, prior to commencement of this action, the New York State Liquor Authority granted its approval for the sale by plaintiff of its wine product in New York package stores. (See Statement of Defendants submitted pursuant to Rule 3(g) of the Civil Rules of the United States District Court for the Southern District of New, at 5). Plaintiff continues to be prevented, by reason of the 1984 amendments, from selling its wine product in New York's retail grocery stores. This is solely because it does not use 100% grapes grown in New York.

 Plaintiff charges that the 1984 amendments to the ABC Law are unconstitutional under the interestate commerce clause. U.S. Const., art. I, ยง 8, cl. 3. n.4 [Footnote omitted]Specifically, plaintiff contends that the amendments unlawfully discriminate against, and unduly burden interstate commerce in grapes and grape products, and that as a result of the ban against the sale of its California wine product in New York grocery stores, plaintiff will suffer severe and irreparable injury in the form of lost revenue. Plaintiff further asserts that it has no adequate remedy at law. (Amended Complaint, at 6-8).

 In contrast, defendants contend that the challenged provisions of the ABC Law comply with applicable constitutional requirements. Moreover, argue defendants, even though the ABC Law may offend the commerce clause, the Twenty-first or Repeal Amendment of the Constitution left to the states broad powers to regulate the sale or use of alcoholic beverages within their borders, including the authority to enact legislation limiting the sale of wine products in retail grocery stores to those produced exclusively from grapes grown within the State.

 A brief review of the history of National Prohibition and the prohibition movement is essential. This effort reached its culmination in the ratification of the Eighteenth Amendment, effective January 1, 1920, and declined markedly after that Amendment was repealed in 1933. We consider below the background of the Twenty-first Amendment and the extent to which it conferred upon the states the power, after repeal of National Prohibition, to regulate the sale or use of intoxicating liquors in interstate commerce.

 I

 The roots of prohibition at the national level in this country date back before the founding of the Prohibition Party in 1869. The prohibitionists, comprised mostly of people living on the farms and in country towns, believed that alcohol constituted a grave threat to the moral fiber of the public in the United states and had to be stamped out. *fn5" Though the movement did gain public support, its initial achievement was in creating support of principles, rather than having any practical impact. thus the early effort to achieve prohibition proved largely ineffective. Then, just four years after the inception of the Prohibition Party, the Women's Christian Temperance Union ("WCTU") was founded. This organization, building upon the foundation laid by the Prohibition Party, drew the support of women in a nationwide effort not only to gain support for prohibition, but also to elect government officials dedicated to "local option," a 19th century practice by which communities voted themselves "Dry." The WCTU also favored the enactment and enforcement of legislation that would restrict the interstate flow of liquor throughout the United States. F. Dobyns, The Amazing Story of Repeal (1940) at 229-30. The WCTU, like the Prohibition Party, was not immediately successful in achieving its objectives. Both organizations, however, did succeed in keeping the prohibition movement alive and created a social climate that would later be conducive to gaining substantive changes in the laws.

 Those changes came closer in 1893 with the formation of the Anti-Saloon League. For the very first time those advocating prohibition of unrestricted liquor traffic were able to gain the support of a wide cross-section of the population, including businessmen, and various church groups, university faculties and political parties. *fn6" Acting together, the members of the Anti-Saloon League proved so successful that by the year 1919 the group had played a pivotal role in persuading the legislatures of over thirty-three states to enact "dry laws" restricting the local liquor traffic. Along the road, recognizing that since the time of the Whiskey Rebellion (1794), the United States treasury had depended principally on the excise tax on alcohol, the Prohibitionist movement supplied the political impetus to give us the Federal Income Tax, supporting the enactment of the Sixteenth Amendment, effective February 25, 1913. It was their hope that creating this new unbounded source of federal revenue would make the enactment of National Prohibition easier, and it probably did.

 The Prohibition movement in the United States peaked in 1919 with the ratification of the Eighteenth Amendment to the United States Constitution. That Amendment provided in relevant part:

 
"Section 1. After one year from the ratification of this article the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited.
 
Section 2. The Congress and the several States shall have concurrent power to enforce this article by appropriate legislation."

 Little did the proponents realize at the time that their achievement of the goal toward which they had worked for more than half a century would also signify the beginning of the demise of the organized temperance movement in this country. The weakness in the Eighteenth Amendment and the Volstead Act, passed to enforce it, became apparent immediately after ratification. Indeed, some of the defects were so obvious that in retrospect they may have been the product of intentional libertarian sabotage. Most important of these weaknesses was the fact that the Amendment and the implementing legislation did not prohibit the consumption or use of alcoholic beverages, nor their mere possession. Also, the one-year delay in the effective date of prohibition created the justified impression of class bias; for a man of wealth was furnished the opportunity to "spend a year building up his cellar while the poor man, about to be deprived of his beer and his saloon at one and the same time, could only sit and wait for the terrible day to come." D.B. Chidsey, On and Off the Wagon (1969) at 73. Additionally, it became apparent during the interim one-year period that some people were simply not going to accept this intrusion into their personal life-style lying down:

 
"There was a rash of warehouse robberies. The government doubled the guards, but the robberies multiplied and millions of gallons of bonded whiskey were carted away. There were also burglaries at the estates of men who were known to have built up large stocks of wine and liquor. Yet nobody dreamed that the age of hijacking was beginning. The word itself had been known in the underworld at least as far back as 1890, but it was not widely used because of hijacking had not been widely practiced. That would soon be changed." Id. at 73-74.

 After prohibition took effect in 1920, the nation's thirst for alcohol failed to subside. Indeed, consumption increased. The public became intrigued with alcohol and drinking because the sale of booze was forbidden. Average law abiding citizens frequented the night clubs and speakeasies which flourished during the decade. "By 1929 it was estimated that there were 219,000 speakeasies in the United states, 32,000 of which were in New York City." F. W. Board, Jr., America and the Jazz Age. A History of the 1920's (1968) at 71. Bootlegging became a national industry. Not surprisingly, with the profit to be made in bootlegging, smuggling of liquor over and indeed under the borders with Canada and Mexico and by a flotilla of all sorts of vessels into the United States also became rampant. Moreover, because the Amendment and supporting federal legislation prohibited only the sale of intoxicating liquors for "beverage purposes," sale and use of liquor for "medicinal purposes: expanded to all parts of the country. Thus was created an unlikely source for alcohol; the beloved family doctor.

 A historian wrote:

 
"A ... tragic result was the fact that large numbers of normally honest and law-abiding physicians and druggists felt that the [prohibition] law was so drawn that its violation was forced upon them. Their success depends not alone upon their skill, but also upon their good will. If a man asked for a liquor prescription, it was the duty of the physician to refuse it unless he honestly believed that the man suffering from 'some known ailment' for which an alcoholic beverage was a proper remedy. He knew, however, that if he took this course, the man would not only resent it but also go to some more accommodating physician for his liquor supply. He feared that he would not only lose the money which he would have received for the liquor prescription, which he was willing to do, but that he would also lose the man's legitimate patronage, which he was unwilling to do. So he said to himself, 'Well, he will get his liquor anyway, and I am not going to sacrifice my practice to a sentimental and futile obedience to a foolish law.' and he lapsed to the status of a bootlegger." F. Dobyns, The Amazing Story of Repeal (1940) at 291.

 Add to the availability of prescription liquor a statutory exemption for sacramental wine, the ready availability of denatured ethyl alcohol for manufacturing and hospital use, which could be recooked and diverted into bootleg channels, as well as pure alcohol used in food, medicines and flavoring extracts. Most freedom loving families made "home brew" in the basement and gin in the bathtub. Non-alcoholic "flavor drops" and non-alcoholic grape and malt products were sold freely in the neighborhood drug and grocery stores. These alone or together with raisins, prunes, corn middlings, wheat, apples, molasses or plaint white sugar could be fermented in water wherever the wild yeast is borne on the wind, which is everywhere. Such items as a worm and a proofer box could readily be added to a home heating system or erected outdoors in the hills to make whiskey, rum, or "white lightning." Under contemporary slang the expression to "strike a blow for freedom" became, overnight, a part of the language as a euphemism for pouring a drink.

 Last, but by no means least, the "Noble Experiment" *fn7" was assured of failure because the Amendment gave concurrent enforcement powers to state and federal authorities. Everybody's business soon became nobody's responsibility. The state and local officials had more important work to do than enforce this unpopular law, and looked to the federal government. The latter removed Prohibition cases from the regular federal law enforcement agencies and entrusted the work to ...


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