Opinion ID: 2597548
Heading Depth: 3
Heading Rank: 2

Heading: Post-1935 congressional and regulatory agency intent to preempt state wine label regulation

Text: Bronco further suggests that subsequent to the enactment of 27 United States Code section 205(e) in August 1935 and the adoption, by agencies within the Department of the Treasury, of implementing regulations, both Congress and the federal regulators manifested intent that the federal wine labeling regulations would preempt more stringent state wine labeling regulations. Applying again, as we must, a presumption against preemption in this context, we inquire whether Congress or the regulatory arm established within the Department of the Treasury evinced a clear and manifest intent to preempt state wine labeling regulations such as California's section 25241. In so doing, we keep in mind the entire history of state regulation of wine labeling and the history and language of the FAA Act described above. As explained below, after reviewing (i) the early federal regulations and early state regulations that imposed standards higher than the federal regulations, (ii) subsequent federal regulations and pronouncements recognizing the applicability of state labeling law, and state wine regulations enacted in the mid-1970s (especially certain Oregon regulations, one of which is substantively similar to the challenged section 25241), and (iii) a 1988 amendment to the FAA Act, concerning health warnings on alcoholic beverages, we continue to find no evidence of any clear or manifest intent on the part of Congress or the responsible federal agency to preempt state wine labeling regulation such as section 25241. Indeed, the evidence demonstrates that the federal agency has long contemplated or at least acquiesced in concurrent and stricter state regulation.
As noted above, prior to adoption of the FAA Act, California had in place, by December 1934, specific and detailed wine regulations restricting, among other things, the use of place names on wine labels. (See ante, pt. II.B.1.e.) In bulletins and reports issued in the years immediately thereafter, the California Department of Public Health touted its enforcement of those state regulations, which it described as requiring the honest labeling of wines. [47] In late December 1935, four months after adoption of the FAA Act, and one year after California's adoption of its own post-Prohibition-repeal wine labeling regulations, valid federal wine labeling regulations were approved, and those regulations became effective on March 1, 1936. (U.S. Dept. Treas., Fed. Alcohol Admin., Regs. No. 4 Relating to Labeling and Advertising of Wine (Dec. 30, 1935), arts. I-VII, 1 Fed.Reg. 83 (Apr. 1, 1936) (hereafter Regulations No. 4); see, generally, Controls Over Labeling, supra, 7 Law Contemp. Probs. 645, 652, fn. 25 et seq.) The federal labeling regulations, as amended in 1938 (see 3 Fed.Reg.2093 (Aug. 26, 1938)) and thereafter, presently are designated 27 Code of Federal Regulations, sections 4.20 through 4.39. One key provision  Code of Federal Regulations section 4.25(b)(1)(i) and (iii)  states that a wine is entitled to be described with an appellation of origin if [a]t least 75 percent of the wine is derived from fruit . . . grown in the appellation area indicated and it conforms to the laws and regulations of the named appellation area governing the composition, method of manufacture, and designation of wines made in such place. (Italics added.) [48] Soon after the adoption of this federal provision in 1938, a California statute was enacted, and two regulations were adopted, all three of which imposed more stringent California wine labeling requirements. First, in 1939, the Legislature amended the state ABC Act (Bus. Prof. Code, 23000 et seq.) to prohibit the use on wine labels of the phrase California Central Coast counties dry wine, unless the wine was in fact made entirely from grapes grown in specified Central Coast counties. (Stats.1939, ch. 1033, §§ 1-4, p. 2838; see Bus. Prof.Code, §§ 25236-25238.) Second, by 1942, a regulation had been adopted imposing a similar 100 percent grape origin requirement for any wine labeled as `California' or any geographical subdivision thereof. (See Cal. Dept. of Pub. Health, Regs. Establishing Stds. of Identity, Quality, Purity and Sanitation and Governing the Labeling and Advertising of Wine in Calif. (May 23, 1942), art. I, § 2(aa) [49] (hereafter 1942 Regulations), presently found at Cal.Code Regs., tit. 17, § 17015, subd. (a)(1).) Third, by 1942 a California regulation barred the sale of wines labeled with so-called coined (or semi-generic) brand names if the brand designation resembles an established wine type name such as . . . Madeira, . . . Port, . . . Claret, [or] Burgundy, etc. . . . . (See 1942 Regs., supra, art. II, § 8.) Under this and subsequent versions of the same regulation, a label such as Burgundy brand was long barred in California. [50] The first two California labeling rules described above plainly imposed (and still impose) a more stringent standard than the 75 percent requirement set forth in the federal appellation of origin regulation. (Regs. No. 4, § 25, as revd. 3 Fed.Reg. 2093, 2096 (Aug. 26, 1938), presently found at 27 C.F.R. § 4.25(b)(1)(i).) The third provision described above prohibited name types that the federal regulations have permitted since 1941 upon a proper showing. (See 27 C.F.R § 4.33(b), as revd. 6 Fed.Reg. 2874 (June 13, 1941) [disallowing such a geographic name unless a federal officer finds the name, either qualified by word brand or otherwise, conveys no erroneous impressions as to the . . . origin . . . of the product].) Although the parties dispute whether the first two state rules cited above are sanctioned by title 27 Code of Federal Regulations section 4.25(b)(1)(iii)  the federal provision that expressly authorizes state regulation concerning the composition (the grape ingredients) or designation of wine (the class or type of wine, as distinct from its source or origin)  the third California regulation, the coined brand-name provision, cannot be so distinguished. That state regulation plainly controlled, more strictly than the federal rules, not the mere composition or designation of wines, but the brand-name labeling of wines. In any event, there is no indication that any question previously has arisen concerning the authority or enforceability of the California statute [51] or of either regulation. Indeed, since mid-1939, the California Legislature has authorized state wine regulations that are stricter than federal wine regulations, [52] and for nearly the past 35 years, the Legislature expressly has authorized state wine regulations to  differ from or be inconsistent with  federal wine regulations (Health & Saf.Code, § 110525, italics added); [53] yet there is no indication the federal government has taken issue with this long-standing assertion of broad state authority. [54] The history of the early post-Prohibition-repeal California and federal wine labeling regulations reveals no evidence of any clear or manifest intent on the part of Congress, or the regulatory agency charged with executing the relevant law, to preempt state wine labeling regulation such as section 25241. This history suggests, instead, the opposite.
Beginning in the mid-1970s, the BATF, which in 1972 had been delegated the task of creating and enforcing federal regulations (see ante, fn. 43), began to consider proposals to further define and regulate appellations of origin. In connection with that inquiry, the BATF also began to consider how better to regulate the use in brand names of terms of geographic or viticultural significance. (42 Fed.Reg. 30517, 30518 (June 15, 1977).) [55] In 1978 the BATF adopted, but then postponed enforcement of, new brand-name rules, [56] and it also adopted new regulations concerning appellations of origin including a new subcategory within appellations of origin known as viticultural areas. (43 Fed.Reg. 37672, 37674, 37678 (Aug. 23, 1978).) [57] The 1978 federal appellations of origin regulation expressly recognized the enforceability of state laws in relation to placing a viticultural area designation on a wine label, making the right to so label a wine contingent on compliance with, among other things,  the laws and regulations of all of the States contained in the viticultural area.  (27 C.F.R. former 4.25a(e)(3)(iv) (1978-1981); id., former § 4.25a(e)(3)(v) (1981-1986), italics added.) [58] Prior to and during this same period of federal regulatory action and consideration of geographic brand-name regulations (see ante, fn. 56), in 1977 the State of Oregon departed from the federal labeling regulations in substantial ways, imposing more stringent state rules concerning matters such as percentage content of Oregon appellation wines, [59] use of semi-generic place names, [60] percentage content of varietal wines, [61] use of the term estate bottled, [62] and the use of geographic brand names. [63] In each of these respects, Oregon reserved the right to disapprove wine labels that had been granted a valid federal certificate of label approval. [64] For present purposes, the most relevant of these various departures from federal wine labeling regulations concerns Oregon's geographic brand-name rule. Effective March 1, 1977, Oregon Administrative Rule 845-10-292(6)(e) provided that appellation names  including the names of Oregon counties, and the names of Oregon wine-producing regions Willamette Valley, Umpqua Valley, and Rogue Valley  shall not be used in a brand name, in the name of a winery or in any other manner on a label unless 100 percent of the grapes used to produce the wine were grown within the boundaries of that appellation of origin.  (Italics added.) The regulation included a grandfather clause permitting use by a winery of a brand name which has been in use by that winery on its approved labels prior to January 1, 1977.  (Or.Admin.R.XXX-XX-XXX(6)(e) (1977), italics added.) [65] Like the other Oregon labeling rules that specifically exceed the federal regulations, this Oregon geographic brand regulation remains in force today, more than a quarter-century after its adoption. (See Or. Admin. R. XXX-XXX-XXXX(4)(f) (2004)). [66] We find these Oregon regulations relevant to our current inquiry in three interrelated respects. [67] First, the state regulations  especially the strict geographic brand-name rule, and the estate-bottled rule  demonstrate that Oregon has long imposed labeling rules that are both (i) more stringent than the federal rules and (ii) go far beyond 27 Code of Federal Regulations section 4.25(b)(1)(iii)'s authorization for states to regulate the composition, method of manufacture, [or] designation of wines. . . . Second, it is clear that the BATF has long been aware of these stricter Oregon rules and apparently views them as enforceable. The Oregon regulations had been in place for approximately 16 months at the time the BATF adopted its 1978 regulation concerning the use of viticultural area appellations on wine labels. That 1978 BATF regulation, as noted above, expressly acknowledged and required compliance with the laws and regulations of all the States contained in the viticultural area. (27 C.F.R. former § 4.25a(e)(3)(iv) (1978-1981); id., former 4.25a(e)(3)(v) (1981-1986), italics added.) By so providing, the BATF, as of 1978, acknowledged the propriety and enforceability of the more stringent labeling rules promulgated by the states. Indeed, any doubt in this regard is dispelled by the BATF's action and comments seven years later (in late January 1986) when, in the course of repealing as a federal requirement 27 Code of Federal Regulations former section 4.25a(e)(3)(v)'s rule concerning compliance with state regulations relating to viticultural areas, the BATF expressly and repeatedly acknowledged both the existence and the enforceability of Oregons more stringent wine labeling regulations. [68] The BATF explained that although it had decided, with regard to viticultural areas, to eliminate compliance with state laws as a federal requirement, the underlying substantive state law requirements relating to viticultural areas would remain, to be enforced solely by the respective states. The BATF observed: State laws and regulations of the state in which the wine was fermented or finished will, of course, continue to apply to the producing winery. These state laws and regulations are enforced by the state involved. (51 Fed. Reg. 3773, 3774 (Jan. 30, 1986), italics added.) [69] Third and finally, the Oregon geographic brand-name regulation, in particular, sheds light upon the BATF's apparent understanding of the grandfather clause at issue in this case. Almost 10 years after Oregon adopted its restrictive geographic brandname labeling regulation, the BATF, after considering various options over the preceding decade (see ante, fn. 56, and post, fn. 70), amended 27 Code of Federal Regulations section 4.39(i)(1) in the manner at issue in this case, to prohibit the use of labels with brand names implying that a wine was made with grapes grown in the area suggested by the brand name, unless at least 75 percent of the grapes used to make the wine were in fact from that area. But, as noted above, the new federal regulation also contained a grandfather clause that lies at the center of the controversy in this case, under which such otherwise misleading labels are not prohibited, so long as the label was in use prior to July 1986 and the label discloses the true appellation of origin of at least 75 percent of the grapes actually used to make the wine inside the bottle. ( Id., § 4.39(i)(2)(ii).) [70] In view of the BATF's explicit acknowledgement, only four months prior to its adoption of the provision at issue in the present case, that the Oregon labeling regulations are proper and enforceable (see 51 Fed.Reg. 3773, 3774 (Jan. 30, 1986)), it is reasonable to assume that the BATF, when it adopted the grandfather clause, was aware of Oregon's more stringent geographic brand-name labeling rule. And yet the BATF said nothing in its new provision or in its discussion of that new rule to suggest that the new rule preempted Oregon's long-standing, closely related, and more stringent brand-name labeling rule. Accordingly, contrary to Bronco's theory that the BATF itself viewed or views its wine labeling regulations as preempting more stringent state regulations, we conclude that the history of the federal and Oregon wine labeling regulations in the mid-1970s through the present reveals no evidence of any such intent. Instead, that history strongly indicates that the BATF has long contemplated that the states will enforce their own stricter labeling requirements, and that the agency did not and does not view its labeling regulations as preempting more stringent state regulations such as section 25241.
In 1988, Congress amended the FAA Act to require that all wine labels (and the labels of other alcoholic beverages) contain a warning on the back label, as follows: GOVERNMENT WARNING: (1) According to the Surgeon General, women should not drink alcoholic beverages during pregnancy because of the risk of birth defects. (2) Consumption of alcoholic beverages impairs your ability to drive a car or operate machinery, and may cause health problems. (27 U.S.C. § 215(a).) Congress gave the BATF authority to issue appropriate regulations to enforce Congress's will (27 U.S.C. § 215(b) (d)), and, stressing the perceived need in this particular area for Congress to exercise the full reach of the Federal Government's constitutional powers in order to establish a comprehensive Federal program (27 U.S.C. § 213), further provided expressly for federal preemption of such health warnings on alcoholic beverage labels: No statement relating to alcoholic beverages and health, other than the statement required by section 215 of this title, shall be required under State law to be placed on any container of an alcoholic beverage. . . . (27 U.S.C. § 216.) The BATF responded by adopting implementing regulations (see 27 C.F.R. § 16.20 et seq.) as well as a provision expressly reaffirming the preemptive effect of that regulation. (27 C.F.R. § 16.32.) As the United States Supreme Court has observed, `an express definition of the pre-emptive reach of a statute . . . supports a reasonable inference . . . that Congress did not intend to pre-empt other matters.' ( Lorillard Tobacco Co. v. Reilly (2001) 533 U.S. 525, 541, 121 S.Ct. 2404, 150 L.Ed.2d 532, quoting Freightliner Corp. v. Myrick (1995) 514 U.S. 280, 288, 115 S.Ct. 1483, 131 L.Ed.2d 385; accord, Bass River Associates v. Mayor, Tp. Com'r (3d Cir.1984) 743 F.2d 159, 162 [It is of some interest and no small significance that a provision in the same title does provide for federal preemption of state and local laws or regulations . . .].) This inference and these observations are especially apt here, in light of the history described above, which strongly suggests (i) no intent on the part of Congress, in 1935 or thereafter, to preempt any other category of state wine label laws, and (ii) the BATF's acknowledgement of, and apparent acquiescence in, the more stringent wine labeling laws of the states, and specifically those of Oregon. Indeed if Congress, as Bronco asserts, by enactment of the FAA Act in 1935, already had generally preempted state regulation of wine labels, there would have been no need for any express preemption clause or preemption regulation with respect to the 1988 health warnings for wine labels. Once again, this history reveals no evidence of any clear or manifest intent on the part of Congress or the BATF to preempt state wine labeling regulation such as section 25241. Instead, the history supports an opposite inferencethat neither Congress nor the BATF intended to preempt state wine labeling laws such as section 25241.