Opinion ID: 794416
Heading Depth: 4
Heading Rank: 2

Heading: Thibodaux/Burford Abstention and the Twenty-first Amendment

Text: 12 In the Supreme Court decision of Burford, an oil company sued in federal court to attack the validity of an order of the Texas Railroad Commission granting the defendant a permit to drill oil wells. 3 319 U.S. at 317, 63 S.Ct. 1098. The order was part of Texas's regulatory system created to conserve oil and gas. Id. at 318, 63 S.Ct. 1098. Given Texas's interest in conserving gas and oil and that industry's impact on its entire economy, and because a decision by a federal court would interfere with the complex administrative and judicial system created by that state to address the precise issue, the Supreme Court held that abstention was appropriate. Id. at 332, 63 S.Ct. 1098. The Court held that in appropriate circumstances, federal courts, `exercising a wise discretion,' restrain their authority because of `scrupulous regard for the rightful independence of the state governments.' Id. (quoting Railroad Comm. v. Pullman Co., 312 U.S. 496, 501, 61 S.Ct. 643, 85 L.Ed. 971 (1941)). Similarly, in Thibodaux, the Supreme Court held that it was appropriate for a district court to stay proceedings pending the interpretation by the state court of a disputed, and never-before addressed, statute involving eminent domain. 360 U.S. at 29, 79 S.Ct. 1070. The Supreme Court noted that: 13 The special nature of eminent domain justifies a district judge, when his familiarity with the problems of local law so counsels him, to ascertain the meaning of a disputed state statute from the only tribunal empowered to speak definitively—the courts of the State under whose statute eminent domain is sought to be exercised—rather than himself make a dubious and tentative forecast. 14 Id. The Court in Thibodaux observed that abstention was particularly appropriate in the context of eminent domain because that area of law is intimately involved with sovereign prerogative. Id. at 28, 79 S.Ct. 1070. 15 Purportedly following Thibodaux, the district court held that abstention was appropriate in this instance because the Twenty-first Amendment gave the states the sole authority to regulate matters involving alcohol. The district court noted that under the Twenty-first Amendment and the states' inherent police power, the states possess broad authority to regulate, restrict or ban the sale of alcohol. Granholm v. Heald, 544 U.S. 460, 125 S.Ct. 1885, 1902, 161 L.Ed.2d 796 (2005) (The aim of the Twenty-first Amendment was to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use.); 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 514, 116 S.Ct. 1495, 134 L.Ed.2d 711 (1996) (Section . . . 2 [of the Twenty-first Amendment] delegated to the several States the power to prohibit commerce in, or the use of, alcoholic beverages.). The district court further noted that the Twenty-first Amendment vests states with the authority to control issues intertwined with the sale and use of alcohol. New York Liquor Auth. v. Bellanca, 452 U.S. 714, 718, 101 S.Ct. 2599, 69 L.Ed.2d 357 (1981) (holding that states have the authority to prohibit or regulate adult entertainment in liquor-licensed establishments). Based on Ohio's authority over alcohol use and distribution within its borders, the fact that Ohio has an intricate regulatory regime to govern the sale and importation of alcoholic beverages, and the fact that no court had addressed the substantive issues before the district court, it declined to exercise jurisdiction. The court determined that Ohio's interests in resolving the present cases substantially outweighs the defendant's right to have these matters heard in a federal court. 16 Schieffelin & Co. and Superior argue that the district court erred in declining to exercise jurisdiction. First, they argue that the thrust of the litigation, whether Schieffelin & Co. is a successor manufacturer under R.C. 1333.87, is not an issue of substantial public import whose importance transcends the results of the case then at bar, but rather is really nothing more than an ordinary commercial dispute. Schieffelin & Co.'s argument is compelling. This dispute does not involve the licensing of liquor distributors, or the means by which liquor is sold. Rather, the only issue before the district court is whether, under Ohio law, Schieffelin & Co. was justified in terminating the franchise without just cause. The district court's conclusion that abstention is appropriate whenever litigation involving any aspect of alcohol is involved because of the Twenty-first Amendment is misguided. 17 The district court acknowledged that, despite the Twenty-first Amendment, federal courts have frequently heard cases involving alcohol-related litigation. The district court maintained, however, that federal courts only intervene in alcohol-related litigation when the state's conduct possibly infringes on other constitutional rights. Granholm, 544 U.S. 460, 125 S.Ct. 1885, 161 L.Ed.2d 796; Bellanca, 452 U.S. 714, 101 S.Ct. 2599, 69 L.Ed.2d 357; Larkin v. Grendel's Den, Inc., 459 U.S. 116, 122 n. 5, 103 S.Ct. 505, 74 L.Ed.2d 297 (1982); Craig v. Boren, 429 U.S. 190, 209, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976). However, the district court overlooked the numerous instances in which federal courts have exercised jurisdiction in alcohol-related litigation, even in the absence of tension between the Twenty-first Amendment and other constitutional rights. See Wirtz Corp. v. United Distillers & Vintners North America, Inc., 224 F.3d 708, 713 (7th Cir.2000) (holding that suit was improperly removed from state tribunal, although approving district court's refusal to abstain from exercising jurisdiction); Decatur Liquors, Inc. v. District of Columbia, 384 F.Supp.2d 58 (D.D.C.2005) (holding that abstention is unnecessary in a suit brought by liquor licensees claiming that amendment to liquor code was not passed in accordance with procedural requirements of Home Rule Act); Dayton Heidelberg Distrib. Co., Inc. v. Vineyard Brands, Inc., 108 F.Supp.2d 859 (S.D.Ohio 2000) (litigation involving Ohio's Alcoholic Beverages Franchise Act). As the district court noted, federal courts, including this Court, have actually considered the specific act in question. 4 Dayton Heidelberg Distrib. Co., Inc. v. Vineyard Brands, Inc., No. 01-4061, 774 Fed.Appx. 509 (6th Cir.2003); Dayton Heidelberg., 108 F.Supp.2d 859 (S.D.Ohio 2000); Jameson Crosse, Inc. v. Kendall-Jackson Winery, Ltd., 917 F.Supp. 520 (N.D.Ohio 1996). 18 The Supreme Court's decision in Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 84 S.Ct. 1293, 12 L.Ed.2d 350 (1964), is especially instructive. In that case, a corporation sued to enjoin the New York State Liquor Authority from interfering with its business of selling tax-free bottled wines and liquors to departing international airline travelers. The New York State Liquor Authority had determined that the plaintiff was unlicensed and unlicensable under state law and, as in this case, the resolution of the litigation depended on the interpretation of a state statute. Id. at 326-27, 84 S.Ct. 1293. The Supreme Court affirmed the district court's decision declining to abstain. Unlike many cases in which abstention has been held appropriate, there was here no danger that a federal decision would work a disruption of an entire legislative scheme of regulation. Id. at 329, 84 S.Ct. 1293. The Supreme Court further noted that there, as here, neither party requested that the federal court decline to exercise jurisdiction. Id. 19 The district court determined that abstention was appropriate because many of the issues before the district court have not been addressed by any other court. Specifically, the district court noted that it is unclear whether damages or other such relief are available under R.C. 1333.87. Further, the district court noted that no court has addressed the relationship between R.C. 1333.85(D), which allows a successor manufacturer to terminate a distribution franchise absent just cause, and R.C. 1333.85(B)(4), which excludes a manufacturer's sale, assignment or other transfer of the manufacturer's product or brand to another manufacturer over which it exercises control. Determining whether the transfer of rights to Schieffelin & Co. is governed by R.C. 1333.85(B)(4) or (D) is the heart of this litigation. 20 That a state statute has not been previously considered by a state court, however, is not a basis for abstention. First, although it is not immediately clear at first blush whether Schieffelin & Co. is a successor manufacturer, R.C. 1333.85 is unambiguous. Furthermore, the scope of the term successor manufacturer, while certainly important to the parties, is not a particularly important issue of state law. For these reasons, the district court erred in abstaining from exercising its jurisdiction in this case.