Opinion ID: 202664
Heading Depth: 2
Heading Rank: 2

Heading: Overall Statutory Scheme.

Text: 43 Taking aim at R.I. Gen. Laws §§ 3-5-11 and 3-5-11.1, the plaintiffs mount a ferocious attack on the State's prohibition against franchise and chain-store arrangements in the retail liquor industry. Their argument runs along the following lines. In determining whether an entity is a chain-store organization (and, thus, forbidden from obtaining a Class A liquor license), the statutory scheme continues to count chains in which one or more stores are located outside of the state. See id. § 3-5-11(a). That aspect of the statute, when combined with the 2004 ban on franchise-type arrangements, creates (or so the plaintiffs tell us) a regime designed to achieve economic protectionism by advantaging independently owned Rhode Island liquor stores. So viewed, the plaintiffs continue, the statutory scheme discriminates in both purpose and effect, legislates extra-territorially, and unduly burdens the free flow of interstate commerce. 44 The State takes a diametrically opposite position. It asserts that the statutory scheme applies uniformly across the board, barring chain-store organizations and franchise entities, regardless of whether they are based in Rhode Island, from owning package stores. It adds that the evidence adduced at trial revealed no burden on interstate commerce, let alone a discriminatory effect. 45 We begin with purpose. Parties challenging the validity of a state statute on purpose grounds must show that the statute was prompted by a discriminatory purpose. See Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S.Ct. 1727, 60 L.Ed.2d 250 (1979); Alliance of Auto. Mfrs., 430 F.3d at 37. Here, the plaintiffs maintain that their effort finds sustenance in two places in the record. First, they identify what they term an admission by the State that the 2004 amendments were not enacted to promote temperance. Second, they point to two actions by lawyers representing the defendants (actions which, in the plaintiffs' view, make pellucid that the legislature's sole purpose was to keep the retail liquor industry from being dominated by a few mega-players wielding nationwide market power). Based on these isolated snippets, the plaintiffs urge us to hold that the real goal of the statutory scheme is economic protectionism. 46 The district court declined to make that quantum leap, and so do we. The words of a legislative body itself, written or spoken contemporaneously with the passage of a statute, are usually the most authoritative guide to legislative purpose. See, e.g., Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 463 n. 7, 471 n. 15, 101 S.Ct. 715, 66 L.Ed.2d 659 (1981); Houlton Citizens' Coal., 175 F.3d at 191. The purpose of the 2004 amendments, as articulated in the statute itself, is to promote the effective and reasonable control and regulation of the Rhode Island alcoholic beverage industry and to help the consumer by protecting their choices and ensuring equitable pricing. R.I. Gen. Laws § 3-5-11.1(a). To put this statement of purpose into perspective, it should be recalled that the prohibitions against franchise and chain-store arrangements in the retail liquor industry are part of Title 3 of the Rhode Island General Laws. Title 3's stated purpose is the promotion of temperance and for the reasonable control of the traffic in alcoholic beverages. Id. § 3-1-5. The plaintiffs have not proffered any convincing reason for doubting these formal statements of legislative purpose. 47 To be sure, the plaintiffs try. The centerpiece of their effort is the State's so-called admission that the 2004 amendments were not intended to promote temperance. That brazen claim relies on the State's answer to an interrogatory, which clarified that the State was not planning to argue in the district court that the amendments had actually reduced the consumption of alcoholic beverages. We are hard-pressed to see how that interrogatory answer, which merely narrowed the field as to the issues that the State was planning to emphasize at trial, in any way vitiates the General Assembly's clear statements of overall legislative purpose. 48 The remainder of the plaintiffs' evidentiary cache consists of two statements of counsel. The first is a comment by counsel for the intervenor-defendant — a trade association, not a state agency — about the need to count out-of-state entities in the chain-store calculus lest a giant, behemoth, nationwide liquor retailer . . . quickly dominate the entire market with [its] nationwide market power, thereby completely undermining in one fell swoop the purpose of the law, which is to treat all Class A license holders equally. The second is an offer of proof tendered by an attorney for the State in connection with a rebuffed exhibit, which was designed to supply background for the General Assembly's decision to structure the retail liquor industry without any chain-store entity controlling the business in a number of different locations. To say that these statements override — or even weaken — the legislature's formal statements of purpose would be to elevate hope over reason. 49 What we have said to this point fully answers the plaintiffs' questions about the General Assembly's intent. On this record, we have no choice but to reject the construct that enactment of the overall statutory scheme was driven by a discriminatory purpose. See generally Fireside Nissan, Inc. v. Fanning, 30 F.3d 206, 218 (1st Cir.1994) (finding protection of consumers against perceived harmful franchising practices to be a legitimate legislative objective). 50 The plaintiffs' claim of discriminatory effect is equally unavailing. Here, too, the plaintiffs must carry the devoir of persuasion. See Alliance of Auto. Mfrs., 430 F.3d at 40. After a full trial, the district court found no compelling evidence of discriminatory effect. Because that finding is not clearly erroneous, it commands our respect. See Fed.R.Civ.P. 52(a). 51 The plaintiffs' principal rejoinder rests on an overly expansive reading of our decision in Walgreen Co. v. Rullan, 405 F.3d 50 (1st Cir.2005). In that case, the challenged statute exempted existing pharmacies (roughly 92% of which were locally owned) from compliance with a set of facially neutral statutory requirements. Id. at 55-56. The statute also allowed those grandfathered pharmacies to wield great influence in the enforcement of the statutory requirements vis-à-vis new entrants. Id. Statistical data adduced at trial strongly indicate[d] that the statute suppressed competition and favored local interests. Id. at 56. 52 The instant case is easily distinguishable from Walgreen. Here, the plaintiffs adduced no evidence that the prohibition on franchise and chain-store arrangements, in itself, has had, or threatens to have, a debilitating or unfair impact either on competition in general or — leaving aside residency requirements — on out-of-state enterprises in particular. There is, for example, no evidence of any carve-out or other device that would enable in-state entities to evade the challenged restrictions, nor is there any hint of a home-field advantage in connection with the State's enforcement of the restrictions. The absence of any such evidence is telling. See, e.g., Exxon Corp. v. Gov. of Md., 437 U.S. 117, 125-26, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978) (rejecting unsubstantiated argument that effect of evenhanded proscription against refiners was to protect in-state independent dealers from out-of-state competition); see also Lewis v. BT Inv. Mgrs., Inc., 447 U.S. 27, 42, 100 S.Ct. 2009, 64 L.Ed.2d 702 (1980) (discussing Exxon and terming the absence of discrimination between interstate and local competitors a most critical factor). 53 Notwithstanding this lack of evidence, the plaintiffs asseverate that evenhanded laws that apply to in-state and out-of-state entities alike nonetheless may produce a discriminatory effect, in violation of the dormant commerce clause, if they favor a subset of in-state interests. Walgreen, 405 F.3d at 58 (citing C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 391, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994)). This asseveration can be dispatched quickly. Leaving to one side the residency requirements, see supra Part III(A), the statutory scheme at issue here does not favor in-state interests at all. 4 54 To this, we add one further observation: that a state regulation that burdens some interstate firms does not, by itself, establish a claim of discrimination against interstate commerce. Exxon, 437 U.S. at 126, 98 S.Ct. 2207 (footnote omitted). Thus, the fact that the mosaic of state laws enacted by the General Assembly may have had a negative impact on W & S's business model is, in itself, insufficient to show discriminatory effect. 55 This brings us to the claim that the statutory scheme has an impermissible extraterritorial reach. The district court did not address this claim, presumably due to shortcomings in the manner of its presentment. Even assuming that this argument was squarely presented, it does not profit the plaintiffs' cause. 56 A statute is per se invalid if it regulates commerce wholly outside the state's borders or when the statute has a practical effect of controlling conduct outside of the state. Pharm. Care Mgmt. Ass'n v. Rowe, 429 F.3d 294, 311 (1st Cir.2005) (quoting Pharm. Research & Mfrs. of Am., 249 F.3d at 79). The argument sketched by the plaintiffs on this point is that the statutory scheme dictates that businesses must abandon (or refrain from entering into) out-of-state franchise and chain-store arrangements in order to be eligible for a Rhode Island retail liquor license. That bare claim, without more, fails to pass muster. The plaintiffs have not explained how the commercial activity identified is wholly outside the State's boundaries nor have they explained why the force exerted by the statutory scheme, with respect to out-of-state conduct, can fairly be described as control. This sophisticated area of law requires developed argumentation, with evidentiary support. Cf. Beer Inst., 491 U.S. at 337 n. 14, 109 S.Ct. 2491 (labeling as a critical consideration regarding extraterritorial reach claims the overall effect of the statute on both local and interstate commerce). On the sketchy arguments asserted by the plaintiffs, we are unable to say that the scheme necessarily requires out-of-state commerce to be conducted according to in-state terms. Pharm. Care Mgmt. Ass'n, 429 F.3d at 311 (quoting Cotto Waxo Co. v. Williams, 46 F.3d 790, 794 (8th Cir.1995)). 57 Leaving residency strictures to one side, see supra Part III(A), the most that the plaintiffs have shown is that the neutral, evenhanded requirements that we have been discussing incidentally burden interstate commerce by precluding various methods of distribution in the retail liquor market. That is not enough. In order to invalidate the requirements, any such burden would have to be clearly excessive in relation to the putative local benefits. Pike, 397 U.S. at 142, 90 S.Ct. 844. 58 Here, the hoped-for local benefits consist primarily of regulating and safeguarding against anticompetitive behavior in the retail liquor market. See R.I. Gen. Laws § 3-5-11.1; see also Heald, 544 U.S. at 488-89, 125 S.Ct. 1885; Wine & Spirits, 418 F.3d at 51, 54. The corresponding burdens on interstate commerce are minimal. Again leaving to one side the residency requirements, see supra Part III(A), the plaintiffs have identified only two conceivable burdens: a loss of flexibility in arranging business affairs and a less-than-optimally-efficient distribution system for alcoholic beverages that have traveled through interstate commerce. Even accepting that these are real burdens, the plaintiffs have the obligation of proving excessiveness, see Pharm. Care Mgmt. Ass'n, 429 F.3d at 313 — and they have not come close to showing that the burdens they envision are excessive in relation to the statutory scheme's legitimate goals. 59 We need not tarry. The Supreme Court previously has rejected the notion that the dormant commerce clause protects particular business structures or methods of operation in retail markets. See Exxon, 437 U.S. at 127, 98 S.Ct. 2207. The plaintiffs' argument that consumers would be advantaged by unregulated competition in retail liquor sales, like the argument rejected in Exxon, relates to the wisdom of the statute, not to its burden on commerce. Id. at 128, 98 S.Ct. 2207. It is, therefore, of little moment. The bottom line is that the plaintiffs have failed to prove a violation of the dormant commerce clause.