Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-95-07168/USCOURTS-caDC-95-07168-0/pdf.json

Nature of Suit Code: 950
Nature of Suit: Contitutionality of State Statutes
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 10, 1995 Decided August 9, 1996

No. 95-7053

MILTON S. KRONHEIM & COMPANY, INC.,

APPELLEE

v.

DISTRICT OF COLUMBIA, ET AL.,

APPELLANTS

Consolidated with

No. 95-7168

Appeals from the United States District Court

for the District of Columbia

(No. 95cv00226)

James C. McKay, Jr., Assistant Corporation Counsel, argued the

cause for appellants, with whom Garland Pinkston, Jr., Acting

Corporation Counsel, and Charles L. Reischel, Deputy Corporation

Counsel, were on the briefs.

Bradford A. Berenson argued the cause for appellee, with whom

Mark D. Hopson was on the brief.

Nathalie P. Gilfoyle was on the brief for amicus curiae

Quality Brands, Inc.

Before: SILBERMAN, SENTELLE and HENDERSON, Circuit Judges.

Opinion for the court filed by Circuit Judge SENTELLE.

Separate concurring opinion filed by Circuit Judge SILBERMAN.

Separate dissenting opinion filed by Circuit Judge HENDERSON.

SENTELLE, Circuit Judge: The District of Columbia appeals from

an order of the United States District Court preliminarily and

permanently enjoining it from enforcing the Storage Act, D.C. Code

§ 25-114(f), which generally forbids alcoholic beverage licensees

from storing beverages outside the District. The district court,

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relying on a prior district court opinion affirmed by this court

without published opinion, held the Act to be an unconstitutional

violation of the Interstate Commerce Clause. We determine that the

District is not collaterally estopped by the prior opinion from

defending the constitutionality of its Act. We therefore reach the

merits of the controversy.

The District defends the storage requirement on three grounds.

First, that the District of Columbia Alcoholic Beverage Control Act

("ABC Act"), a congressional enactment, authorizes the local

warehousing requirement; therefore, the requirement is

constitutional as federal statutes are not subject to the

restrictions of the Commerce Clause. Second, even if the ABC Act

is subject to the restrictions of the Commerce Clause, the local

warehousing requirement does not violate the clause. And third,

even if the requirement would otherwise violate the Commerce

Clause, the Storage Act is constitutional as a valid exercise of

the District's core power under § 2 of the Twenty-first Amendment

to the Constitution. We hold that, although the ABC Act authorizes

the local warehousing requirement, the Act and any statute enacted

pursuant to it are subject to the restrictions of the Commerce

Clause; but we also hold that the storage requirement, although

facially inconsistent with the Commerce Clause, is constitutional

as a valid exercise of the District's core power under the

Twenty-first Amendment.

I. Background

In 1934, following the repeal of Prohibition, Congress enacted

the ABC Act to regulate the importation and distribution of liquor

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within the District of Columbia. Act of Jan. 24, 1934, § 2; D.C.

Code § 25-102. The Act created a three-tier system of distribution

that, among other things, required manufacturers, wholesalers and

retailers to obtain licenses before "manufactur[ing] for sale,

keep[ing] for sale, or sell[ing] any alcoholic beverage" within the

District of Columbia. ABC Act §§ 9(a), 12; D.C. Code §§ 25-

109(a)(1), 113. The Act also established an Alcoholic Beverage

Control Board, which was authorized to issue, transfer and revoke

any license under the Act. ABC Act §§ 4, 6; D.C. Code §§ 25-104,

106.

In addition, the ABC Act authorized the Commissioners (now the

Council of the District of Columbia) to adopt rules to "control and

regulate the manufacture, sale, keeping for sale, offer for sale,

solicitation of orders for sale, importation, exportation, and

transportation of alcoholic beverages in the District of Columbia."

ABC Act § 7; D.C. Code § 25-107(a). Acting pursuant to this

provision, in 1986 the Council enacted the District of Columbia

Wholesale Liquor Industry Storage Act ("the Storage Act"). The

Storage Act amended § 13 of the ABC Act by adding a sentence

requiring that no alcoholic beverage wholesaler licensed by the

District shall "store beverages upon premises outside the District,

except that licensed wholesalers permitted by the Board to store

beverages outside the District as of January 1, 1986, may continue

to do so until July 27, 1988." D.C. Code § 25-114(f).

Appellee Milton S. Kronheim & Co., Inc. ("Kronheim"), a

wholesaler of alcoholic beverages licensed under the ABC Act,

distributing liquor, beer and wine to District of Columbia

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retailers, is authorized to store alcoholic beverages at two

locations within the District. A Maryland affiliate of Kronheim,

The Kronheim Company, Inc., is a licensed wholesale distributor of

alcoholic beverages in Maryland. Kronheim desired to consolidate

its warehousing operations in the District and Maryland by leasing

a facility in Jessup, Maryland. Toward this end, Kronheim filed

suit in district court on February 2, 1995, seeking to enjoin

enforcement of the Storage Act.

In deciding this case, the district court relied upon an

earlier district court decision in Quality Brands, Inc. v. Barry,

715 F. Supp. 1138 (D.D.C. 1989). In that case, Quality Brands,

Inc., a licensed alcoholic beverage wholesaler in the District and

a competitor of Kronheim, sought a declaratory judgment that the

Storage Act was unconstitutional. The district court held that (1)

the local warehousing requirement facially discriminated against

interstate commerce in violation of the Commerce Clause, Quality

Brands, Inc., 715 F. Supp. at 1139-40; (2) the articulated

purposes given for the requirement could not withstand the "strict

scrutiny" accorded facially discriminatory legislation, id. at

1140-42; and (3) the Twenty-first Amendment did not shield the

District's discrimination against interstate commerce, id. at 1142-

43. Consequently, the Quality Brands court concluded that the

local warehousing requirement violated the Commerce Clause and

enjoined its enforcement. We affirmed that decision without a

published opinion. Quality Brands, Inc. v. Barry, 901 F.2d 1130,

1990 WL 51795 (D.C. Cir. 1990) (per curiam).

In this case, the district court granted Kronheim's motion for

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a preliminary injunction, finding that Kronheim would suffer

irreparable harm if its purchase of the Jessup warehouse did not go

forward immediately. Milton S. Kronheim & Co., Inc. v. District of

Columbia, 877 F. Supp. 21, 30 (D.D.C. 1995). The court held that

the district court's decision in Quality Brands collaterally

estopped the District from disputing the constitutionality of the

Storage Act. Id. at 26-27. The court also determined against the

District an issue left open in Quality Brands: whether Congress in

the ABC Act authorized the District to require local warehousing or

itself imposed such a requirement. Id. at 27-29.

The District filed an interlocutory appeal from this

preliminary injunction. On summary judgment, the district court

confirmed its findings, issued a declaratory judgment and

permanently enjoined enforcement of the District's local

warehousing requirement. The District appealed the final judgment

and this court consolidated the two appeals. After the district

court granted its preliminary injunction, Kronheim completed the

Jessup warehouse transaction and is currently consolidating its

inventory in the new warehouse.

II. Analysis

A. Collateral Estoppel

The first question we must address is whether the District is

collaterally estopped from defending the constitutionality of the

Storage Act because of the district court's opinion in Quality

Brands, Inc. Offensive collateral estoppel precludes a defendant

"from relitigating identical issues that the defendant litigated

and lost against another plaintiff." Jack Faucett Associates, Inc.

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v. AT&T Co., 744 F.2d 118, 124 (D.C. Cir. 1984), cert. denied, 469

U.S. 1196 (1985).

Three conditions must be satisfied before a party can be

estopped from relitigating an identical issue previously decided:

(1) [T]he issue must have been actually litigated, that

is contested by the parties and submitted for

determination by the court.

(2) [T]he issue must have been "actually and necessarily

determined by a court of competent jurisdiction" in the

first trial.

(3) [P]reclusion in the second trial must not work an

unfairness.

Id. at 125 (quoting Otherson v. Department of Justice, INS, 711

F.2d 267, 273 (D.C. Cir. 1983)). The constitutionality of the

Storage Act was certainly actually litigated, contested by the

parties, and submitted for determination by the court in Quality

Brands. Further, it was "actually and necessarily determined by a

court of competent jurisdiction," at least at the district court

level, in that litigation. However, our unpublished affirmance of

the district court decision, we must confess, provided no clarity

as to what was actually or necessarily determined on appeal.

Although our memorandum accompanying the judgment in that matter

recited that we affirmed that decision "substantially for the

reasons articulated in the opinion of the district court," we

expressly stated that at least one other "substantial argument" had

not been properly raised and that we did not determine the Commerce

Clause issue. Therefore, the district court, obviously unable to

reverse our prior decision but receiving little guidance from it

for precedential purposes, quite justifiably found the first two

elements of collateral estoppel to be present. Also quite

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justifiably, the district court did not undertake a massive

investigation of the further element, as that court would have been

in no position to declare the Storage Act constitutional anyway in

view of the circuit having reached the result we did in Quality

Brands. We are not so constrained.

While we must follow existing circuit law as established in

our precedent, "we are bound only by prior published opinions of

this Circuit and not by other means of deciding cases." United

States v. North, 910 F.2d 843, 881 (D.C. Cir. 1990) (emphasis in

original). We are therefore free in this published opinion to

depart from the conclusion reached in our earlier unpublished

memorandum. Kronheim understandably offers our unpublished

disposition for its preclusive effect. Our circuit rules, while

forbidding the citation of unpublished opinions as precedent,

nonetheless permit use of those dispositions for preclusion. D.C.

Cir. R. 28(c). We do not, however, find preclusion here. Despite

the presence of the first element of collateral estoppel, the

presence of the second element is much less certain. The third

element, that is, that "preclusion in the second trial must not

work an unfairness," is not likely to be present where the first or

second is unclear. That is, logically there is a fair probability

of unfairness in estopping the relitigation of an issue where the

fullness of its first litigation is uncertain. Because we have

concluded that our decision in Quality Brands did not necessarily

involve adjudication of the issue before us, and because we have

concluded that the district court was misled by our disposition, we

have reexamined the fairness of applying collateral estoppel. We

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1The dissent takes our result to task for "rais[ing] a

number of questions, [including] how today's decision will affect

Quality Brands." Dissent at 15 n.9. We obviously do not decide

that question as it is not before us, but as our dissenting

colleague herself tacitly recognizes, that question will be

governed, not by nonmutual offensive collateral estoppel, but

rather by case preclusion between the parties to the very action

in question, the form of preclusion traditionally known as res

judicata. See Dissent at 15 n.9, and authorities collected

therein. Should the District attempt to act against Quality

Brands without further legislative enactment, the effects of this

decision on the relationship between the parties to the original

action will then be ripe for decision. 

hold that the District was not collaterally estopped from

litigating the issues decided in Quality Brands. We will therefore

proceed to examine the merits of the District's arguments on the

constitutionality of the statute.1

B. The Constitutional Issues

The constitutional considerations before us are not simple

ones to decide, or even to express. Basically, Kronheim's

position, tracking the position of the plaintiff in Quality Brands,

is that the Storage Act, by discriminating against out-of-state

storage of alcoholic beverages by wholesalers, unconstitutionally

burdens interstate commerce under the Commerce Clause of the

Constitution, Art. I, § 8, cl. 3. The Quality Brands decision held

that it did, that the justifications offered for that

discrimination did not pass strict scrutiny, and that the

Twenty-first Amendment did not shield the District's Act from

interstate Commerce Clause analysis. Because we have held that the

Quality Brands decision does not have preclusive effect, we will

consider the District's answers to Kronheim's arguments.

Before we analyze the merits of the question, we will briefly

review the application of the Commerce Clause and the Twenty-first

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Amendment to enactments of the District of Columbia as it is not

immediately apparent that either constitutional provision applies,

though after appropriate study, we conclude that each does.

1. The Commerce Clause

Article I, § 8, cl. 3, provides only that "Congress shall have

Power ... To regulate Commerce with foreign Nations, and among the

several States, and with the Indian Tribes." Though the face of

this provision does not appear to preclude anything, the Supreme

Court has long held that the clause not only grants regulatory

power to Congress, but also "denies the States the power

unjustifiably to discriminate against or burden [interstate

commerce]." Oregon Waste Systems, Inc. v. Department of

Environmental Quality, --- U.S. ---, 114 S. Ct. 1345, 1349 (1994)

(citing, inter alia, Welton v. Missouri, 91 U.S. 275 (1876)). The

Framers intended this "plenary authority over interstate commerce

... "to avoid the tendencies toward economic Balkanization that had

plagued relations among the Colonies and later among the States

under the Articles of Confederation.' " Id. (quoting Hughes v.

Oklahoma, 441 U.S. 322, 325-26 (1979)).

This "negative commerce clause" would clearly provide the

framework for analysis of the Storage Act if the District of

Columbia were a state. That is, we would necessarily examine the

legislation to determine if it "unjustifiably ... discriminat[ed]

against or burden[ed] the interstate flow of articles of commerce."

Oregon Waste Systems, 114 S. Ct. at 1349. But D.C. is not a state.

Nonetheless, the same analysis applies. Our precedents dictate

that we apply to local legislation of the District the same

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interstate commerce analysis as we would to state laws. See, e.g.,

Electrolert Corp. v. Barry, 737 F.2d 110 (D.C. Cir. 1984) (applying

negative commerce clause analysis to District legislation banning

the possession of radar detectors). Therefore, should we determine

that state legislation such as the Storage Act would be invalid

under the negative commerce clause analysis, it is as invalid as it

would be if the District were a state.

Because one line of the District's defense is that the

Twenty-first Amendment empowers it to enact this legislation even

in the face of the interstate Commerce Clause, we need also

determine whether the Twenty-first Amendment applies to the

District. Section 2, the relevant section of the amendment, states

in its entirety:

The transportation or importation into any State,

Territory, or possession of the United States for

delivery or use therein of intoxicating liquors, in

violation of the laws thereof, is hereby prohibited.

"By interpretation of [the Supreme] Court the Amendment has been

held to relieve the states of the limitations of the Commerce

Clause on their powers over" the transportation or importation into

the state of "intoxicating liquor." Carter v. Virginia, 321 U.S.

131, 137 (1944). That "relief " has over the years been held far

less than absolute, but before we consider the limitations on the

states' powers to regulate alcohol within their boundaries under

the Twenty-first Amendment, we must first determine whether that

Amendment is at all relevant to the District of Columbia, which is

still not a state. Ultimately, we conclude that the District for

present purposes is to be considered as if it were a state under

the Twenty-first Amendment. Because our reasons for so concluding

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are partially subsumed within the next step of our analysis, we

will proceed with that analysis on the assumption that the

Twenty-first Amendment applies rather than engage in a discussion

that would soon prove duplicative.

2. The Congressional Enactment

The District first asserts that the Storage Act is not a

violation of the interstate Commerce Clause on the basis that

Congress required in-District storage under the ABC Act itself.

According to the District, this would shield the Act from Commerce

Clause scrutiny, as Congress, acting under the explicit power grant

of that clause, obviously cannot be constrained by the implicit

negative commerce clause. While this is true as a generality,

there is a possible exception applicable to legislation concerning

only the District of Columbia. When Congress passes legislation

for the District of Columbia under the power expressly delegated to

it by Article I, § 8, cl. 17 of the Constitution, "[t]o exercise

exclusive Legislation in all Cases whatsoever, over [the]

District," it acts "in like manner as the legislature of a State."

Gibbons v. District of Columbia, 116 U.S. 404, 407 (1886). As

such, it may choose "to exercise a part, only, of its powers,"

Neild v. District of Columbia, 110 F.2d 246, 251 (D.C. Cir. 1940),

and limit itself thereby to those powers which would be available

to a state legislature. If that is the case with the ABC Act, then

arguably the interstate Commerce Clause would apply as if that Act

were state legislation rather than a congressional enactment.

However, it does not necessarily follow from the fact that

Congress legislates for the District that it intends to deprive

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itself "of the rest of its powers." Id. Even in legislating for

the District, Congress may, if it chooses, "exercise ... within the

District, general legislative powers delegated to Congress by the

Constitution." Id. If it has done so in the ABC Act, then there

is no colorable argument that the negative commerce clause renders

that Act invalid. Therefore, we will proceed to determine whether

Congress in enacting that legislation intended to act as the

legislature of the District, arguably bound by the negative

commerce clause, or as the general legislature, plainly not so

bound.

Congress enacted the ABC Act in January of 1934, in direct and

express response to the repeal of Prohibition by the Twenty-first

Amendment the preceding month. That amendment by itself had worked

a fundamental alteration in the balance between regulation of

alcohol by the federal government and by the states. It did not,

however, resolve the question as to the District of Columbia. Cf.

Norman's on the Waterfront, Inc. v. Wheatley, 317 F. Supp. 247, 254

(D.V.I. 1970), aff'd, 444 F.2d 1011 (3d Cir. 1971) (noting that

"[t]hough the 21st Amendment shifted the balance of power to

regulate alcoholic beverages in interstate commerce, it did not

purport to alter the relationship between Congress and the

territories"). Congress therefore passed the ABC Act to fill that

void with respect to the District of Columbia. The apparent

purpose of the Act read as a whole was to put the District in

essentially the same position with reference to alcoholic beverage

control as were the separate states. Thus, while it might be said

that Congress was acting "in like manner as the legislature of a

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State," Gibbons, 116 U.S. at 407, we cannot say with any certainty

that Congress intended to deprive itself of the full range of its

powers as it was not only determining, state-like, what the

regulation of alcoholic beverages should be after the end of

Prohibition, but also making the Congress-like determination that

the void existed and that it, exercising its plenary power under

Art. I, § 8, cl. 17, should fill that gap. With respect to states,

the whole range of regulation of alcoholic beverages is exercised

under either the Twenty-first Amendment by the states themselves or

the interstate Commerce Clause by the Congress. With regard to the

District, Congress in 1934 was exercising both powers and it would

make no sense to say the Congress could not regulate the interstate

commerce aspect because Congress itself was the only body which

could. We thus conclude that if Congress mandated the in-District

limitation of the Storage Act, then the congressional mandate would

not be invalidated by the negative commerce clause.

All of this however does not determine the case. Congress did

not in fact mandate the storage requirement, although some

provisions of the ABC Act point to an interpretation consistent

with that requirement. It is one thing to contemplate the

possibility of a requirement, another to mandate it. The District

argues that Congress mandated the requirement when it provided in

section 13 that "[e]ach license shall particularly describe the

place where the rights of the license are to be exercised.

Alcoholic beverages shall not be ... kept for sale ... by any

licensee on premises other than the premises designated on the

license." D.C. Code § 25-114(e). It notes that section 11(c) of

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the Act also authorizes wholesalers to sell alcoholic beverages

"from the place therein described." D.C. Code § 25-111(a)(3). The

District's argument then couples these concepts with section 2 of

the Act, D.C. Code § 25-102, which limits the territorial scope of

the Act by providing that "[i]t shall apply only to the District of

Columbia." However, neither these nor the similar sections further

cited by the District compel the conclusion that Congress intended

that a wholesaler could store only at a place within the District.

Section 2 simply makes clear that the licensing process in

question did not contemplate an attempt by Congress to retake the

ground removed by the Twenty-first Amendment by regulating the

commerce in alcohol within or among the several states. Limiting

wholesalers to described premises does not say that those premises

must be in the District. It may be that Congress so contemplated,

it is not clear that Congress so mandated. Indeed, it is clear

that it did not. If it had, the District Council would have had no

need to have amended section 13 in the way now in controversy.

Nor, would the District need to be defending that Amendment. It

might be said that the precise reason we are here is that Congress

did not mandate storage only within the District.

As Kronheim notes, the District itself construed the ABC Act

as allowing out-of-District storage before the passage of the

Storage Act, and even then grandfathered existing non- conforming

warehouses. That is obviously inconsistent with its argument for

congressional mandate. Kronheim can also argue credibly that

section 24 of the Act, captioned "Licensees Doing Business Outside

of the District," compels its interpretation that wholesalers may

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store their beverages outside the District. But that section can

equally be read as suggesting only that it is permissible under the

Act for a District-licensed manufacturer and in limited

circumstances a District-licensed wholesaler to do business outside

the District. Because the ABC Act neither mandates nor forbids the

storage limitation, we face the question left open by our

unpublished resolution of Quality Brands: that is, does the

Storage Act violate the negative commerce clause?

3. The Storage Act

Because we have determined that the local warehousing

requirement of the Storage Act is a creature of the enactment by

the District of Columbia Council and not the Congress, we must

determine if it violates the Commerce Clause. In making this

determination, we must at last consider whether the District of

Columbia is treated as a state for purposes of the Twenty-first

Amendment and, if so, what effect section 2 of that Amendment has

on the Commerce Clause implications for the Storage Act. One-half

of the equation is simple. That is, we will treat the District of

Columbia as a state for purposes of Twenty-first Amendment

analysis. As noted above, Congress determined at the time of the

passage of the ABC Act in response to the repeal of Prohibition in

the Twenty-first Amendment that the District would function in a

state-like manner for alcohol regulation purposes. We have no

warrant to interfere with Congress's plenary power under Art. I, §

8, cl. 17, "[t]o exercise exclusive Legislation in all Cases

whatsoever, over [the] District." Thus, when the District Council,

acting under its delegated legislative authority, amended the Code,

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its act was subject to the Commerce Clause, as affected by the

interplay between that Clause and the Twenty-first Amendment.

The first step in analyzing whether a state law unjustifiably

discriminates or burdens interstate commerce under the "negative"

commerce clause is to

determine whether it "regulates evenhandedly with only

"incidental' effects on interstate commerce, or

discriminates against interstate commerce." Hughes [v.

Oklahoma, 441 U.S. 322, 336 (1979).] ... If a

restriction on commerce is discriminatory, it is

virtually per se invalid. By contrast, nondiscriminatory

regulations that have only incidental effects on

interstate commerce are valid unless "the burden imposed

on such commerce is clearly excessive in relation to the

putative local benefits."

Oregon Waste Systems, 114 S. Ct. at 1350 (citations omitted). 

The District argues that the local warehousing requirement

does not impermissibly burden interstate commerce. First, it

contends that the requirement does not favor District manufacturers

over out-of-state manufacturers as all alcoholic beverages sold in

the District are manufactured outside the District, and, even if

alcoholic beverages were produced in the District, they would be

subject to the same requirement. Second, the District argues that

the requirement does not discriminate against out-of-state labor,

noting that the ABC Act and the Storage Act do not impose a

residency requirement upon workers at storage facilities. And

third, the District claims that the requirement does not favor

District wholesalers over out-of-state wholesalers as the Acts

apply only to wholesalers licensed by the District.

Kronheim contends that the storage requirement discriminates

against interstate commerce in warehouse facilities and storage

space. It argues: "In essence, the Storage Act is a

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discriminatory local content and processing requirement, which

requires alcoholic beverage wholesalers to acquire and maintain ...

[an] element[ ] of productioncommercial real estatewithin the

boundaries of the District." We agree with the appellee and find

the local warehousing requirement is patently discriminatory. The

requirement not only deprives out-of-state businesses access to a

local market, C & A Carbone, Inc. v. Clarkstown, N.Y., 114 S. Ct.

1677, 1681 (1994), but also requires business operations be

performed in the District even if they could be performed more

efficiently elsewhere. Pike v. Bruce Church, Inc., 397 U.S. 137,

145 (1970).

In this aspect, our analysis of the Storage Act is similar to

the Supreme Court's consideration of an ordinance of a New York

municipality requiring specified local handling of solid waste

which had the effect of depriving out-of-state businesses of a

local market by preventing them from preforming an initial

processing step reserved for a favored local operator. Though the

town argued that the ordinance was not discriminatory because it

did not differentiate among items of solid waste on the basis of

geographic origin, the Court disagreed, noting that "the article of

commerce is not so much the solid waste itself, but rather the

service of processing and disposing of it." C & A Carbone, Inc.,

114 S. Ct. at 1682. As appellee notes, the article of commerce at

issue here is not so much the sale of alcoholic beverages, but

rather, the service of storing the beverages. Regarding this

stream of commerce, the Storage Act discriminates as it allows only

wholesalers who store their beverages within the District to sell

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their product. In Carbone, the Court struck down the solid waste

ordinance holding that "[i]n this light, the ... ordinance is just

one more instance of local processing requirements that [the Court]

long ha[s] held invalid." Id. The same reasoning applies here,

and we hold that the Storage Act is facially discriminatory.

Because the statute is facially discriminatory, Commerce

Clause jurisprudence, ignoring for the moment the effects of the

Twenty-first Amendment, would dictate that we should invalidate the

statute unless the District can show that the local warehousing

requirement "advances a legitimate local purpose that cannot be

adequately served by reasonable nondiscriminatory alternatives."

New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 278 (1988);

see also Oregon Waste Systems, 114 S. Ct. at 1351. This inquiry

requires the strictest scrutiny. Hughes, 441 U.S. at 337.

Appellant advances two such purposes. First, the District contends

that the storage requirement serves important inspection and

enforcement interests, noting that the District's power to enforce

its alcoholic beverage laws is limited to premises within its

borders. Second, the District argues that the storage requirement

is integral to both maintaining its "three-tier system of

distribution," which strictly separates the functions of supplier,

wholesaler and retailer, and discouraging creation of a "tied

house," in which one firm controls the entire chain of

distribution.

Appellee contests both of these putative regulatory interests.

First, appellee argues that the local warehousing requirement does

not serve inspection or enforcement interests as the District has

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never inspected any wholesaler's warehouse or goods prior to

distribution to retailers, nor has the District explained why

inspections could not occur at a warehouse outside the District.

Second, appellant contends that the District makes "little effort

to maintain a three-tier level of distribution," noting that even

if the District did have such an interest it could be equally

served in other non-discriminatory ways. The district court ruled

with appellee, relying on the collateral estoppel worked by Quality

Brands. Because we have ruled that we are not so estopped, we will

examine the question anew.

The court in Quality Brands, applying strict scrutiny, found

that appellant's justifications did not survive scrutiny under the

Supreme Court's final test from Hughes: that is, "whether

non-discriminatory alternatives exist to serve the local purpose."

Quality Brands, 715 F. Supp. at 1142. In reaching that conclusion,

the Quality Brands court examined the history of the adoption of

the local warehousing requirement, noting that at the time of the

Council's vote on the amendment, the general counsel raised the

question of the Act's constitutionality, alerting the board to the

negative commerce clause implications of protectionist legislation.

Id. at 1141. A member of the Council suggested "several putatively

legitimate state interests which would be promoted by requiring

geographic proximity of warehouses, e.g., auditing company records,

monitoring compliance with the ABC laws, monitoring licenses,

checking tax forms for audits," and similar enforcement goals. Id.

The Quality Brands court rejected the enforcement rationales along

with the three-tier licensing system as not established under the

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lack of nondiscriminatory alternatives test. If this regulation

dealt with any industry not governed by the Twenty-first

Amendmentthat is, any industry except alcoholic beverageswe might

well be inclined to agree. However, in the case of alcohol, the

problem is a more difficult one. Because it is alcohol that the

Storage Act regulates, the Twenty-first Amendment does apply, and

we must extend our analysis.

As we noted above, "[b]y interpretation of [the Supreme] Court

the Amendment has been held to relieve the states of the

limitations of the Commerce Clause on their powers over" the

transportation or importation into the state of "intoxicating

liquor." Carter v. Virginia, 321 U.S. 131, 137 (1944). As we

further noted, however, that relief has in more recent years been

held far less than absolute. The more recent case Bacchus Imports,

Ltd. v. Dias, 468 U.S. 263 (1984), is a more current authoritative

delineation of the relationship between the Commerce Clause and the

Twenty-first Amendment. In Bacchus, the Supreme Court considered

an Hawaiian statute which imposed an excise tax on liquors sold at

wholesale but provided exemptions from that tax for certain locally

produced alcoholic beverages. The Court, noting that "[t]he

legislature's reason for exempting" the local liquors was to

"promote the establishment of a new industry" and " "to help' in

stimulating" a local industry. 468 U.S. at 270 (quoting In re

Bacchus Imports, Ltd., 65 Haw. 566, 573-74, 656 P.2d 724, 730

(1982)).

The Supreme Court held that this protectionist legislation

"violated the Commerce Clause because it had both the purpose and

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effect of discriminating in favor of local products." Bacchus, 468

U.S. at 273. The state of Hawaii argued that the Twenty-first

Amendment saved the tax exemption from the fate it would have

endured under "ordinary Commerce Clause principles." Id. at 274.

The Court rejected that argument, noting that "[t]he central

purpose" of the Twenty-first Amendment "was not to empower States

to favor local liquor industries by erecting barriers to

competition." Id. at 276. Because Hawaii's justification for its

tax structure discriminating against interstate commerce was the

promotion of local industry, the statute before the Court

"constitute[d] mere economic protectionism" and was "therefore not

entitled to the same deference as laws enacted to combat the

perceived evils of an unrestricted traffic in liquor." Id.

Kronheim may colorably and even credibly argue that the

District's local warehousing requirement is protectionist. Indeed,

we cannot say with any assuredness that protectionism is not a

purpose of the legislation. Nonetheless, the Storage Act both by

its terms and according to its history is designed to advance the

core enforcement purposes protected by section 2 of the

Twenty-first Amendment. In this case then, the legislative body

operated with a mixed motive.

While under Bacchus and other Supreme Court decisions, e.g.,

324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987), the Supreme Court

has been consistently emphasizing limitations on the Twenty-first

Amendment power of the states, the nonprotectionist side of the

District's mixed motive places section 2 squarely within the

Amendment's ambit. Thus, unlike the Hawaiian statute, it was

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"enacted to combat the perceived evils of an unrestricted traffic

in liquor," as set out in the councilman's statement analyzed by

the Quality Brands court. The Bacchus decision struck down the

Hawaiian statute "because the tax violates a central tenet of the

Commerce Clause but is not supported by any clear concern of the

Twenty-first Amendment." Bacchus, 468 U.S. at 276. The Supreme

Court has long recognized that the Amendment "created an exception

to the normal operation of the Commerce Clause," Craig v. Boren,

429 U.S. 190, 206 (1976), and that the resultant authority of the

state under the Amendment over importation of intoxicants "is

transparently clear." Id. at 207. The Court has also concluded

that the state's authority under the Amendment includes the

"plenary power to regulate and control ... the distribution, use,

or consumption of intoxicants within her territory after they have

been imported." Department of Revenue v. James Beam Co., 377 U.S.

341, 346 (1963). Nothing in Bacchus or the other later cases

overrules the principles iterated in the Boren and Beam cases.

Despite the mixing with the tainted motive of protectionism, D.C.'s

claimed motives of "legitimate state interests which would be

promoted by requiring geographic proximity of warehouses, e.g.,

auditing company records, monitoring compliance with the ABC laws,

monitoring licenses, checking tax forms for audits, etc.," Quality

Brands, 715 F. Supp. at 1141, falls squarely within the state's

core enforcement powers over alcohol.

Eloquently testifying to the legitimacy of the District's

claims, as well as to the potentially dire consequences of the

precedent we might establish by striking the Act, are an array of

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state statutes subject to potential attack on the same Commerce

Clause basis. See, e.g., Ark. Code § 3-5-216(a) (1987) ("[L]ight

wines or beer ... may be received and kept in storage at a

distributor's place of business in this state"); Cal. Bus. & Prof.

Code § 23355.1(a) (1992) ("Deliveries of distilled spirits by a

licensee to a retail licensee may be made from the vendor's

licensed premises or from a warehouse located within the county in

which the vendor's licensed premises are located ..."); Colo. Rev.

Stat. § 12-47-115(1)(a)(I), (b)(I), (c.5) (1985 Rep. Vol.) ("A

wholesaler's liquor license shall be issued ... for the following

purposes only: (I) To maintain and operate two warehouses and one

sales room in this state ... "); Del. Code tit. 4, § 501(f) (1993)

("No person may import into this State any alcoholic liquor unless

it is delivered directly to a licensed warehouse or warehouses in

Delaware and is unloaded and physically stored in said warehouse or

warehouses."); Fla. Stat. § 561.54 (1987) ("It is unlawful ... to

make delivery from without the state of any alcoholic beverage to

any person ... within this state, except ... qualified bonded

warehouses in this state"); N.J. Rev. Stat. § 33:1-11 (1993)

("[T]he delivery of such alcoholic beverages by the holder of [a

plenary wholesaler's] license to retailers ... shall be from

inventory in a warehouse located in New Jersey which is operated

under a plenary wholesale license."); Minn. Stat. § 340A.305

(1994) ("All licensed wholesalers must own or lease warehouse space

within the state and must have adequate delivery facilities to

perform the function of a wholesaler.... [A]lcoholic beverages

manufactured outside the state ... must be unloaded into the

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wholesaler's warehouse located in this state. Licensed wholesalers

may distribute alcoholic beverages only from the warehouse");

Okla. Stat. Ann. tit. 37, § 521.E (1995) ("A wholesaler license

shall authorize the holder thereof to operate a single bonded

warehouse with a single central office together with delivery

facilities at a location in this state only at the principal place

of business for which the wholesaler license was granted."); S.D.

Compiled Laws Anno. § 35-4-45 (1992) ("Any bonded warehouse with

South Dakota may, upon compliance with the provisions of this

section, receive alcoholic beverages for storage purposes").

We therefore conclude that although the Act facially violates

the negative commerce clause, it is supported by a clear concern

for the core enforcement function of the Twenty-first Amendment,

and we therefore reverse the district court's decision declaring

the statute unconstitutional.

III. Conclusion

For the reasons set forth above, we conclude that the local

warehousing requirement of the Storage Act is constitutional. The

decision of the district court is reversed.

SILBERMAN, Circuit Judge, concurring: I concur, but write

separately to explain the effect, as I see it, of our prior

decision in Quality Brands, Inc. v. Barry, 901 F.2d 1130 (D.C. Cir.

1990) (Unpublished Memorandum) (per curiam).

In Quality Brands, the district court determined that D.C.'s

in-district warehousing requirement facially violated the Commerce

Clause, that it was not justified by compelling government

purposes, and that given the Supreme Court's recent limitations,

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the Twenty First Amendment did not authorize the District's

discrimination. 715 F. Supp. 1138, 1140-42 (D.D.C. 1989). D.C.

appealed, and on appeal offered a new argument: that the

congressional ABC Act directly imposed the in-district warehousing

requirement, obviating any Commerce Clause inquiry. In an

unpublished memorandum decision, we explained that

[w]e have elected to dispose of this appeal by

unpublished order primarily because the most substantial

argument put forward by the appellantsan argument which,

if we accepted it, would allow us to avoid reaching any

constitutional issuewas not properly raised before the

district court. Under these circumstances, we think it

unnecessary to discuss the several rather important and

difficult questions of constitutional law involved.

Instead, we affirm substantially for the reasons

articulated in the opinion of the district court.

Kronheim's subsequent suit against the District raised the

same issue as the Quality Brands suit, i.e., whether the District

constitutionally could require in-district warehousing. Kronheim

asserted that the Quality Brands decision collaterally estopped

D.C. from arguing the constitutional issues (although not the

statutory claim). The district court agreed that D.C. was estopped

since Kronheim could not easily have joined the prior suit and

since estoppel was not unfair to the District. It cited our

statement that "we affirm substantially for the reasons ... of the

district court" in support of its conclusion that the District was

estopped. Although the court noted the District's argument that

non-mutual collateral estoppel does not apply to the government, it

stated that it was unclear whether this applied to state

governments or to the District and then nevertheless, without

resolving this issue, proceeded to apply the analysis developed in

Parklane Hosiery Co. v. Shore, 439 U.S. 322, 329-31 (1979), for

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non-governmental actors. 

To be sure, our statement that "we affirm substantially for

the reasons ... of the district court" is rather confusing. But I

think the fair import of our decision, read as a whole, is that we

expressly refrained from deciding the constitutional questions,

both Commerce Clause and Twenty First Amendment, because the

District had raised a new issue on appeal: whether Congress had

imposed the warehousing requirement by statutein which case the

constitutional issues would not be relevant. We did not publish in

order to avoid giving our opinion precedential effect, which could

only mean we wished to preserve the District's opportunity to raise

the issue again. It should be understood that not establishing a

precedent in these circumstances is essentially the same as not

creating collateral estoppel against the District, because only the

District would be the subject of a subsequent suit. Although it is

possible to read our memorandum, as does appellee, as leaving open

only the statutory issue, Judge Sentelle's opinion makes clear that

the two are intertwined. And, it would be anomalous for us to

conclusively resolve an important constitutional issue by simply

stating we agree "substantially" with the district court.

Even had we decided Quality Brands in a published decision on

the merits, it is not clear collateral estoppel would apply.

Collateral estoppel is not generally available against the federal

government, U.S. v. Mendoza, 464 U.S. 154, 159-63 (1984), and this

rule may very well apply to the states. See Hercules Carriers,

Inc. v. Florida, 768 F.2d 1558, 1578-79 (11th Cir. 1985) (applies

to states); but see State v. United Cook Inlet Drift Assoc., 895

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1I am also unsure whether the other requirements for

non-mutual offensive collateral estoppel are met. See Parklane

Hosiery, 439 U.S. at 329-31. For the reasons discussed above, it

is not clear that the constitutional issues were actually and

necessarily determined in our prior decision, since we purported

not to reach them. And given our refusal to reach the issues in

that appeal, it seems unfair to bind D.C. to the district court

decision. It also appears possible for Kronheim to have

intervened in the prior case; clearly Kronheim's ability to

determine where to locate its warehouses was at stake, even if it

had no plans for an immediate move. 

P.2d 947, 950-52 (Alaska 1995) (does not apply to Alaska). Mendoza

held that the non-mutual offensive collateral estoppel applied in

Parklane Hosiery did not pertain to the federal government because

the government is not in the same position as a private litigant.

The government litigates quantities of suits, often involving

issues of public importance, and it may decide not to appeal for

policy reasons or due to the constraints of limited resources.

Making the first decision final freezes development of the law and

forces the government to appeal every decision as a precautionary

matter. See Hercules Carriers, 768 F.2d at 1578-79. (Of course

that the District did appeal in Quality Brands does not affect this

doctrinal reasoning.). We need not decide whether the Mendoza

doctrine applies to District litigation, however, because in my

view our Quality Brands opinion was not designed to and did not

have preclusive effect.1

KAREN LECRAFT HENDERSON, Circuit Judge, dissenting:

The majority holds that the Wholesale Liquor Industry Storage

Act of 1986 (Storage Act) discriminates against interstate

commerce: it is "patently discriminatory" because the "[local

warehousing] requirement not only deprives out-of-state businesses

access to a local market but also requires business operations be

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performed in the District even if they could be performed more

efficiently elsewhere." Majority Opinion (Maj. Op.) at 14

(citations omitted). As a result, the Storage Act violates the

dormant commerce clause, and thus is unconstitutional, unless it

survives strict scrutiny. The majority concludes that, regardless

whether the Storage Act meets strict scrutiny, the legislation is

a valid exercise of core twenty-first amendment powerbecause a

District of Columbia (District) councilman said so. Id. at 17-20.

The trouble is that the District unsuccessfully litigated the

dormant commerce clause and twenty-first amendment issues over six

years ago. Accordingly the court below concluded that the doctrine

of issue preclusion, in particular nonmutual offensive collateral

estoppel, bars the District from relitigating the constitutionality

of the Storage Act. In my view the district court did not err in

so concluding and therefore I would not reach the merits. I

respectfully dissent.

I. BACKGROUND

A. Legislative History of the Storage Act.

In 1979 the District's Alcoholic Beverages Control Board

(Board) granted Quality Brands, Inc., a District-licensed

wholesaler, permission to store its District-bound alcoholic

beverages in Maryland. As a result, jobs within the jurisdiction

of Local 639 of the International Brotherhood of Teamsters were

lost to Maryland. Local 639 then lobbied the District's governing

body, the District Council (Council), to enact legislation

prohibiting wholesalers from using warehouse facilities outside the

District. To that end, in 1981 a bill entitled the "Wholesale

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Liquor Industry Job Protection Act" was introduced. Substantially

identical bills were reintroduced in 1983 and 1985 bearing the same

eyebrow-raising title.

In January 1986 the Council's Committee on Consumer and

Regulatory Affairs held a hearing on the proposed legislation. The

record manifests that the witnesses who testified at the hearing,

including the president of Local 639, focused exclusively on the

loss of jobs and tax revenue resulting from wholesalers using

warehouse facilities outside the District. For example, the

director of the District Department of Consumer and Regulatory

Affairs testified, "The executive supports this bill because it

will create and protect jobs for District of Columbia residents.

This bill would also increase the tax base because current and

prospective licensees would have to use facilities in the city to

store their beverages." Appellee's Legislative History and

Statutory Addendum (Appellees Addendum) 50. A competitor of

Quality Brands testified that the authorization extended to Quality

Brands put his company at a competitive disadvantage and emphasized

that it "has meant and will mean the continuing layoff of employees

in Washington, as well as shrink the tax base." Id. at 44. The

president and general counsel of the D.C. Wine & Spirits

Wholesalers Association, Inc., a trade association consisting of

five District-licensed wholesalers, urged passage of the bill,

which the association viewed "as a job protection act." Id. at 47

(emphasis in original). The committee report accompanying the bill

described the bill as a job protection measure. See Appellant's

Statutory and Legislative History Addendum (Appellant's Addendum)

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55-57.

In short, the Storage Act (aka "Job Protection Act") was

conceived and justified as an act of pure economic protectionism.

No other justification was asserted. No one suggested that the

local warehousing requirement would assist the District in

regulating alcoholic beverages. This is not surprising: The

record contains no evidence that District officials have ever even

visited a wholesaler's warehouse. And the record manifests that a

wholesaler can store beverages outside the District yet comply with

the Alcoholic Beverages Control Act (ABC Act), enacted by Congress

in 1934, and its implementing regulations. See Brief of Amicus

Curiae Quality Brands, Inc., Exhibit G. (admissions of District).

At any rate, the bill came before the Council as a whole

during a legislative session in April 1986. A council member noted

that the Council's General Counsel had expressed concern about the

legality of the local warehousing requirement under the dormant

commerce clause because the legislation amounted to economic

protectionism. Councilman John Ray responded that the Storage Act

was more than that:

The interest that we have ... is to audit the records of

these companies, to check their warehouses to make sure

that they're in compliance with the ABC laws of the

District of Columbia, to make sure their licenses are

posted correctly, to check each and every truck they own

to make sure their licenses are posted correctly, to make

sure all the lettering and numbering of these trucks are

correct and in accordance with our licensing laws, to

make sure that their tax forms are file [sic] so that we

can audit to make sure that they're paying the proper

taxes to the District of Columbia because taxes are based

upon the gallons they sell per year, and all other laws

which comply [sic] with the District of Columbia.

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1It is Ray's unsupported "11th-hour" statement, a statement

essentially made in anticipation of litigation, on which the

majority relies to conclude that the Council enacted the Storage

Act " "to combat the perceived evils of an unrestricted traffic

in liquor.' " Maj. Op. at 18 (quoting Bacchus Imports, Ltd. v.

Dias, 468 U.S. 263, 276 (1984)). 

Appellant's Addendum 62.1 The bill passed its first reading. On

second reading three days later, it passed with a "grandfather"

provision exempting from the Storage Act those District-based

wholesalers then operating warehouses outside the District (i.e.,

Quality Brands). At the third and final reading of the bill an

amendment was offered to remove the grandfather provision and to

replace it with a provision which, in effect, gave Quality Brands

a 2-year grace period before it had to find a warehouse in the

District. The bill passed as amended and became law.

B. Quality Brands' Lawsuit. 

Quality Brands filed a lawsuit in 1988 to challenge the

constitutionality of the Storage Act. The district court held that

the Storage Act violated the dormant commerce clause because it

facially discriminated against interstate commerce and could not

withstand strict scrutiny. Quality Brands, Inc. v. Barry, 715 F.

Supp. 1138, 1139-42 (D.D.C. 1989). The court further held that the

Storage Act was not designed to serve a core purpose of the

twenty-first amendment. Id. at 1142-43. Accordingly it "ordered

that enforcement of the Act is enjoined." Id. at 1143.

On appeal this Court affirmed the district court's judgment

enjoining enforcement of the Storage Act. Quality Brands, Inc. v.

Barry, 901 F.2d 1130 (D.C. Cir. 1990) (table); Joint Appendix (JA)

64 ("ORDERED and ADJUDGED, by this Court, that the judgment of the

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2According to Kronheim's complaint, the District continued

to enforce the Storage Act notwithstanding the Quality Brands

holding. JA 12. In addition, the complaint alleged that the

District Court appealed from in this cause is hearby affirmed for

the reasons set forth in the accompanying memorandum."). An

accompanying unpublished memorandum stated: "we affirm

substantially for the reasons articulated in the opinion of the

district court." Quality Brands, Inc. v. Barry, 901 F.2d 1130,

1990 WL 51795, at *1 (D.C. Cir.). The memorandum explained that

the court declined to consider an argument the District failed to

"press" in the district court, namely that the Storage Act did not

violate the dormant commerce clause because the local storage

requirement in fact flowed from the congressionally-enacted ABC

Act.

C. Kronheim's Lawsuit.

Milton S. Kronheim & Co., Inc. (Kronheim) is a

District-licensed wholesaler. Kronheim has been a wholesaler in

the District since 1903. Historically the company has used

warehouses in the District and, indeed, in 1986 the company lobbied

(through its trade association) in support of the Storage Act. A

decade later, however, Kronheim, on the brink of a financial

crisis, determined that it could not operate at a profit if it

continued to store its inventory in the District. JA 48, 55.

Kronheim proposed to consolidate, in a Maryland warehouse, its

District-bound inventory with the inventory of its Maryland

affiliate. With its warehouse leases in the District set to expire

in early 1995, Kronheim applied in February 1995 for a preliminary

injunction to enjoin the District from enforcing the Storage Act.2

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District, through the Alcoholic Beverage Control Board, was

enforcing an unwritten "come to rest" policyrequiring alcoholic

beverages sold by a District-licensed wholesaler to "come to

rest" in the District at least 24 hours before being sold to a

retailerin an attempt to evade our decision in Quality Brands. 

Id. Kronheim urged that both the District's enforcement of the

Storage Act and the Board's "come to rest" policyboth requiring

local storageviolated the dormant commerce clause and that

Quality Brands precluded the District from relitigating the

constitutionality of a local storage requirement. 

The district court granted the injunction. The court held:

[The District is] collaterally estopped from disputing

the application of Judge Revercomb's ruling in Quality

Brands to the parallel situation of plaintiffs [sic]

here: namely, (1) that the local warehousing requirement

facially discriminates against the kind of interstate

commerce in which plaintiff plans to engage; (2) that

the articulated purposes given for the requirement cannot

withstand the "strict scrutiny" accorded facially

discriminatory legislation; and (3) that the TwentyFirst Amendment does not validate the discrimination

against the interstate commerce in which plaintiff plans

to engage.

Milton S. Kronheim & Co., Inc. v. District of Columbia, 877 F.

Supp. 21, 26-27 (D.D.C. 1995). The court below added that this

Court's affirmance of the Quality Brands judgment constituted

"further persuasive authority" for applying collateral estoppel.

Id. at 27. Finally, the court below rejected on the merits the

statutory issue this Court declined to consider in Quality Brands,

to wit, whether Congress, via the ABC Act, prohibited

District-licensed wholesalers from storing alcoholic beverages

outside the District. Id. at 27-29.

The majority today agrees with the latter ruling, holding that

the local warehousing requirement is a creature of the District,

not Congress, and thus is subject to the dormant commerce clause.

The majority nevertheless reverses. Over six years after our order

in Quality Brands affirming the ruling that the Storage Act is

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3Nonmutual offensive collateral estoppel "occurs when a

plaintiff seeks to foreclose a defendant from relitigating an

issue the defendant has previously litigated unsuccessfully in

another action against ... a different party." United States v.

Mendoza, 464 U.S. 154, 159 n.4 (1984). 

unconstitutional, the majority now reverses field and concludes

that the Storage Act is constitutional. The majority errs, I

respectfully submit, in (again) passing on the constitutionality of

the Storage Act because the lower court correctly concluded that

the doctrine of nonmutual offensive collateral estoppel bars the

District from relitigating the dormant commerce clause and the

twenty-first amendment issues.

II. NONMUTUAL OFFENSIVE COLLATERAL ESTOPPEL

CAN APPLY TO THE DISTRICT

Before addressing why I believe the District is collaterally

estopped from defending the constitutionality of the Storage Act,

I must address the District's argument that it should always be

immune from the application of nonmutual offensive collateral

estoppel.3 The argument is grounded on the Supreme Court's

decision in United States v. Mendoza, 464 U.S. 154 (1984), a due

process case involving the federal government. The Court held that

"nonmutual offensive collateral estoppel simply does not apply

against the Government in such a way as to preclude relitigation of

issues such as those in this case." Id. at 162. The Court

observed that the federal government is more likely than any

private party to be involved in lawsuits against different parties

raising the same legal issues: the federal government litigates

nationwide in multiple forums and frequently litigates legal

questions of substantial public importance. Id. at 160. The crux

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of the Court's opinion is its observation that allowing nonmutual

offensive collateral estoppel to be used against the federal

government would have two adverse consequences. First, and most

important, it "would substantially thwart the development of

important questions of law by freezing the first final decision

rendered on a particular legal issue," thereby "depriv[ing] [the]

Court of the benefit it receives from permitting several courts of

appeals to explore a difficult question before [the] Court grants

certiorari." Id. at 160. Second, "[t]he Solicitor General's

policy for determining when to appeal an adverse decision would

also require substantial revision" because the Solicitor General

would, in effect, have "to appeal every adverse decision in order

to avoid foreclosing further review." Id. at 160-61; see also id.

at 163; cf. United States v. Stauffer Chem. Co., 464 U.S. 165,

173 & n.6 (1984).

Mendoza's rationale is inapplicable to the District. Cf.

State v. United Cook Inlet Drift Ass'n, 895 P.2d 947, 950-52

(Alaska 1995) (distinguishing Mendoza and holding that state of

Alaska is not exempt from nonmutual offensive collateral estoppel).

The District does not litigate in multiple federal forums but

rather in one federal circuit with one district court. Therefore,

immunizing the District from nonmutual offensive collateral

estoppel will not "better allow thorough development of legal

doctrine by allowing litigation in multiple forums," Mendoza, 464

U.S. at 163, or prevent "freezing the development of the law," id.

at 164. Moreover, compared to the Solicitor General, the

District's Corporation Counsel is responsible for far less

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4The District relies on Hercules Carriers, Inc. v. Florida,

768 F.2d 1558 (11th Cir. 1985), where the court held "that the

rationale outlined by the Supreme Court in Mendoza for not

applying nonmutual collateral estoppel against the government is

equally applicable to state governments." Id. at 1579. Hercules

offered no supporting analysis but instead relied on two

observations. First, Mendoza "did not differentiate between

federal governmental interests and state governmental interests." 

Id. Of course not; the case dealt only with the federal

government. Second, Hercules stated that Mendoza contained

nothing "to suggest that the concerns expressed by the Supreme

Court were peculiar to the federal government." Id. That

statement is simply incorrect. At any rate, unlike the states in

the Eleventh Circuit, the District does not litigate in multiple

federal district courts. 

litigation and the District does not assert that its Counsel

maintains, or has a compelling need to maintain, a "policy of

circumspection in determining when to pursue appeals." Stauffer

Chem., 464 U.S. at 173 n.6.4

No legitimate public policy would be served by immunizing the

District from nonmutual offensive collateral estoppel here. True,

the District, like all government entities, does at times litigate

issues of "substantial public importance." Mendoza, 464 U.S. at

160. But if the District receives an adverse district court

decision, it can appeal to this Court, and an adverse decision by

this Court will bind the District in future litigation irrespective

of the applicability of nonmutual offensive collateral estoppel:

principles of res judicata and estoppel will bar the District from

relitigating the issue with the same party; and stare decisis

should ordinarily preclude the District from relitigating the issue

with a different party (this Court publishes the disposition of an

issue of substantial public importance, D.C. Cir. R. 36(a), and

published decisions have precedential effect, D.C. Cir. R. 28(c)).

If we decline to pass on the merits of such an issue, the District

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5Kronheim does not argue that the District is collaterally

estopped from raising this issue. 

can move to vacate the district court's judgment and thereby

deprive it of any preclusive effect.

III. COLLATERAL ESTOPPEL BARS RELITIGATION

OF THE CONSTITUTIONAL ISSUES

The District raises three issues in defense of the Storage

Act. First, as a threshold issue, the District argues that the

local warehousing requirement was imposed by Congress and thus the

dormant commerce clause is inapplicable. Second, the Storage Act

does not violate the dormant commerce clause because it does not

discriminate against interstate commerce or, if it does, it

nonetheless passes strict scrutiny. Third, irrespective of its

impact on interstate commerce, the Storage Act is sanctioned by the

twenty-first amendment.

The court below concluded that the threshold (statutory) issue

had no merit and the majority agrees.5 I would add that the

argument is downright disingenuous. The District contends that the

Storage Act "was enacted by the Council simply to make it clear"

that the "ABC Act, as it was enacted by Congress, prohibits

wholesalers from storing alcoholic beverages outside the District."

Brief of Appellant at 18. But the record belies any claim that the

Council thought Congress prohibited storage outside the District.

First, the committee report accompanying the bill stated that

"there are no statutory restrictions" in the ABC Act regarding

storage outside the District. Appellant's Addendum 55. Councilman

Ray, who authored the report, elsewhere explained to the Council

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that the Council could permit a wholesaler to store its inventory

outside the District. Id. at 63, 67, 80. Second, the Council

added, on second reading, a grandfather provision which would have

allowed Quality Brands to continue to store its beverages in

Maryland, plainly violating the purported congressional mandate.

Third, the Council's General Counsel doubted the constitutionality

of the bill under the dormant commerce clause, which does not apply

to a congressional mandate. In short, the Council did not act on

the premise that Congress mandated required local warehousing. The

claim is instead a post hoc rationale offered to save the Storage

Act, and an unpersuasive one at that.

A. This Court's disposition in Quality Brands has preclusive

effect.

Once we dispose of the threshold issue we are left with the

dormant commerce clause and the twenty-first amendment issues.

These are the precise issues litigated and adjudicated in Quality

Brands. The majority concedes that the constitutional issues were

"actually litigated" and "actually and necessarily determined" by

the district court in Quality Brands. Maj. Op. at 6. On appeal

this Court issued an order affirming that judgment. The

accompanying unpublished memorandum declared that the panel

affirmed "substantially for the reasons articulated in the opinion

of the district court," Quality Brands, 1990 WL 51795, at *1, an

opinion which decided both the commerce clause and the twenty-first

amendment issues (there were no alternative holdings). See Quality

Brands, 715 F. Supp. at 1139-43. Our disposition in Quality Brands

should estop the District from relitigating the constitutional

issues. It is of no consequence that we did not expressly (and

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again) analyze the issues. See Securities Indus. Ass'n v. Board of

Governors, 900 F.2d 360, 364-65 (D.C. Cir. 1990) ("even when an

opinion is silent on a particular issue, issue preclusion applies

if resolution of that issue was necessary to the judgment");

American Iron & Steel Inst. v. EPA, 886 F.2d 390, 397 (D.C. Cir.

1989) (same "even in absence of any opinion") (emphasis in

original), cert. denied, 497 U.S. 1003 (1990). Nor does it matter

that we affirmed in an unpublished decision. D.C. Cir. R. 28(c)

(unpublished decision has preclusive effect). What matters is that

we affirmed the district court for the reasons the district court

used.

The majority asserts that "our decision in Quality Brands did

not necessarily involve adjudication of the issue[s] before us."

Maj Op. at 7. I do not understand how the statement can be

correct. We affirmed the district court's judgment. However

"murky" the language of the unpublished memorandum, see id. at 6,

there is no dodging the fact that the only issues the district

court decided in Quality Brands were the constitutional issues and

they were the only issues we could have affirmed "substantially for

the reasons" the district court gave. Indeed, because we plainly

did not reverse or vacate the injunction or dismiss the appeal, we

necessarily adjudicated the constitutional issues. See Watts v.

United States, 402 F.2d 676, 685 (D.C. Cir. 1968) ("Collateral

estoppel will prevent the relitigation of an issue that was

necessary to a prior judgment or final disposition of a case."),

rev'd on other grounds, 394 U.S. 705 (1969). Contrary to the

majority's reading, the unpublished memorandum in Quality Brands

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nowhere "expressly stated ... that we did not determine the"

constitutional issues. Maj. Op. at 6 (emphasis added); Concurring

Opinion (Con. Op.) at 2 ("we expressly refrained from deciding the

constitutional questions"). Rather, it stated that we "elected to

dispose of th[e] appeal by unpublished opinion" and that we thought

"it unnecessary to discuss" the constitutional issues but would

instead "affirm substantially for the reasons articulated in the

opinion of the district court." Quality Brands, 1990 WL 51795, at

*1 (emphasis added).

The concurring opinion's deconstruction of the unpublished

memorandum is not persuasive. According to the concurring opinion,

"[w]e did not publish to avoid giving our opinion precedential

effect, which could only mean we wished to preserve the District's

opportunity to raise the [constitutional] issue again." Con. Op.

at 2. Why, then, the affirmance? As I read the unpublished

memorandum, Quality Brands affirmed the trial judge but declined to

publish any discussion of the constitutional issues because, in the

event the District's statutory argument had merit, a published

opinion would have constituted an advisory opinion both on the

dormant commerce clause and the twenty-first amendment. There is

no suggestion in the unpublished memorandum that "we wished to

preserve the District's opportunity to" have another crack at

litigating the constitutional issues. Even if that were its

unarticulated objective, the court failed in that objective because

it overlooked the preclusive effect of the order affirming the

lower court.

In any event, if forced to choose, why would we defer to an

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6Hubbell declared that the judgment of a lower court in a

prior suit "operate[s] as a complete estoppel to the present

suit, unless the proceedings subsequent to the judgment in the

former suit in some way deprived that judgment of its force and

effect as res adjudicata." 171 U.S. at 207 (emphasis added). In

Hubbell there were two "proceedings subsequent to the judgment." 

First, the losing party moved for a new trial which was denied. 

Id. at 209. Second, that party noticed an appeal but failed to

perfect it; the appeal was not allowed. Id. at 210. Thus, the

Supreme Court held, the lower court's prior judgment had not been

deprived of its preclusive effect. Id. Significantly, the fact

that the merits of the lower court's decision had not been

reviewed by an appellate court did not dilute the preclusive

effect of the judgment. 

internally inconsistent unpublished memorandum over the unequivocal

affirmance? Litigants and district judges rely on the judgments of

this Court and should have confidence that our judgments mean what

they say. I would not disregard our judgment and mandate in

Quality Brands.

B. The district court's unmodified judgment in Quality Brands has

preclusive effect.

Even if we ignore our affirming order and indulge the fiction

that we did not adjudicate the constitutional issues in Quality

Brands, the majority is not out of the woods. The Supreme Court

has held that collateral estoppel applies "so long as the judgment

in the first suit remains unmodified." Southern Pac. R.R. Co. v.

United States, 168 U.S. 1, 49 (1897). The majority cannot deny

that in Quality Brands we did not reverse, vacate or set aside the

lower court's judgment enjoining enforcement of the Storage Act.

The district court's unmodified judgment should therefore be

accorded preclusive effect. Hubbell v. United States, 171 U.S. 203

(1898).6

Yet the majority disregards the district court's judgment.

Why? Because we purportedly declined to review it. But it is well

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7The Quality Brands court, it bears repeating, did not

dismiss the appeal; it affirmed. But, as noted, I am indulging

the majority's fiction that the court did not affirm. If, as the

majority reasons, we did not affirm and it is plain that we did

not reverse or vacate, then under the majority's logic our

Quality Brands disposition amounts to a dismissal of the appeal. 

established that a lower court judgment may have preclusive effect

despite the lack of appellate review. Johnson Co. v. Wharton, 152

U.S. 252 (1894) (appellate "re-examination" not necessary);

Hubbell, 171 U.S. at 210; Angel v. Bullington, 330 U.S. 183, 189-

90 (1947); Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394,

398 (1981). This principle applies not only when the losing party

fails to appeal an adverse judgment but also when the losing party

does appeal and the appeal is dismissed without appellate review on

the merits.7

Wight v. Montana-Dakota Util. Co., 299 F.2d 470 (9th Cir.

1962), is instructive. A decade earlier Mondakota Gas Company

(Mondakota) had been sued, the district court had granted summary

judgment against Mondakota on several issues and Mondakota had

appealed. The Ninth Circuit dismissed the appeal without

considering the merits because Mondakota failed to timely pay the

filing fee. Mondakota Gas Co. v. Montana-Dakota Util. Co., 194

F.2d 705 (9th Cir. 1952) (per curiam). Thereafter, in Parissi v.

Telechron, Inc., 349 U.S. 46, 47 (1955) (per curiam), the Supreme

Court held that the untimely payment of a filing fee did not affect

the validity of the petitioner's appeal and added that it

disapproved of the Ninth Circuit's decision in Mondakota Gas. In

other words, Mondakota's appeal had been improperly dismissed. A

decade later, in Wight, Mondakota attempted to relitigate issues

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identical to the ones it had lost on summary judgment in the

earlier litigation and argued "that the doctrine of res judicata

should not apply because that [earlier] case was never ruled on on

its merits by an appellate court." Wight, 299 F.2d at 471. The

district court rejected the argument and the Ninth Circuit

affirmed, holding that "[t]he dismissal of the appeal from the

judgment of the District Court ... did not operate to prevent that

judgment from becoming final and from being res judicata." Id. at

477.

Wight relied on United States v. Munsingwear, Inc., 340 U.S.

36 (1950). In Munsingwear, a price fixing case, the district court

ruled against the government and the government appealed. While

the appeal was pending, Munsingwear moved for dismissal because an

intervening event had rendered moot the issue decided by the

district court. The Eighth Circuit dismissed the appeal.

Thereafter the district court held that its unreviewed judgment was

res judicata as to the government. The government appealed,

arguing that res judicata did not apply because there had been no

appellate review on the merits. The Eighth Circuit disagreed: "It

is not conceivable to us that this refusal [to entertain an appeal

in the prior case] had the effect of emasculating the judgment of

the District Court which was appealed from, or of reserving the

issue determined by that judgment for relitigation by the

parties...." United States v. Munsingwear, Inc., 178 F.2d 204,

209 (8th Cir. 1949). The Supreme Court affirmed. The Court

rejected the government's argument that "res judicata should not

apply" to "those who have been prevented from obtaining the review

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8The District's failure to make the statutory argument

before the district judge in Quality Brands may well have been a

strategic maneuver. The District does not contend that it was

unaware of the argument while it was defending the Storage Act in

Quality Brands. In fact, on appeal in Quality Brands the

District unsuccessfully tried to convince us that it had raised

the argument below. Quality Brands, 1990 WL 51795, at *1. Why

did the District not press the argument below? It appears that

Councilman Ray was of the view that the Council (but not the

Board) should be able to exempt a wholesaler from any local

warehousing requirement. See Appellant's Addendum 63, 67, 80. 

The Council, of course, could not exercise such power if Congress

had in fact prohibited storage outside the District. Thus, it

was in the Council's interest not to argue that Congress

prohibited out-of-District storage but instead to seek a ruling

that the District could require local warehousing without

offending the Constitution. 

to which they are entitled." Munsingwear, 340 U.S. at 39. The

Court held that the government should have moved to vacate the

adverse district court judgment when the Eighth Circuit dismissed

the appeal in the original litigation. Id. at 39-40.

How do these decisions bear on our case? First, even assuming

we refrained from reviewing the merits of the trial judge's

decision in Quality Brands, his judgment should be accorded

preclusive effect because it was not vacated or otherwise modified.

Second, if the District believed that we did not review the merits

of the district court judgment in Quality Brands, it should have

moved to vacate that judgment. Third, vacatur likely would have

been unwarranted because the District was responsible for any lack

of appellate review, see U.S. Bancorp Mortgage Co. v. Bonner Mall

Partnership, 115 S. Ct. 386, 391-93 (1994): the District's failure

to press the statutory argument before the trial judge is what,

according to the unpublished memorandum, caused us to demur on the

constitutional issues. Cf. supra note 6 (discussing Hubbell v.

United States ).8

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9The majority opinion raises a number of questions, not

least among them how today's decision will affect Quality Brands,

which has been operating a warehouse in Maryland (with the

Board's permission) since 1979. It successfully challenged the

Storage Act over six years ago (having filed for declaratory and

injunctive relief on July 19, 1988) and relies on, as it is

entitled to do, this Court's order affirming the injunction. It

bears emphasizing that the law the majority today revives

contains no grandfather provision for Quality Brands: under the

terms of the Storage Act, Quality Brands had until July 27, 1988

(2 years after the effective date) to move its inventory back to

the District. Appellee's Addendum 56-57; Brief of Amicus Curiae

at 5.

Before today, if the District had attempted to force Quality

Brands to use a warehouse in the District (e.g., by threatening

to revoke Quality Brands' license), the company could have moved

to enforce the injunction. Res judicata plainly would have

barred the District from collaterally challenging the injunction

on the merits. See Maggio v. Zeitz, 333 U.S. 56, 68 (1948); 18

CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE & PROCEDURE § 4433, at 307

(1981) ("Preclusion ... prevents reexamination of the validity of

a permanent injunction or similar order in subsequent contempt

proceedings."); id. § 4414, at 117 n.21. If, after today, the

District can enforce the Storage Act against Quality Brands, the

majority will have allowed the District to wage a successful

collateral attack on the judgment underlying the Quality Brands

injunction. On the Footnote 9Continued other hand, if Quality

Brands is immune from today's decision upholding the Storage Act

while Kronheim and all other wholesalers are not, the majority

opinion will become a catalyst for the very inconsistency

collateral estoppel is designed to prevent. Montana v. United

States, 440 U.S. 147, 154 (1979) (collateral estoppel "fosters

IV. CONCLUSION

I believe the majority errs as a matter of fact in finding

that this Court did not adjudicate in Quality Brands the

constitutional issues raised by the District again in this

litigation. Moreover, the majority errs as a matter of law in

concluding that the district court's unmodified judgment in Quality

Brands does not have preclusive effect based on our purported

failure to review the decision on the merits. Finally, the

majority omits to consider the consequences of not applying

collateral estoppel.9 I respectfully dissent.

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reliance on judicial action by minimizing the possibility of

inconsistent decisions"). The majority considers none of this. 

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