Opinion ID: 2597548
Heading Depth: 1
Heading Rank: 7

Heading: Continuing regulation by other states

Text: Despite the initial failure of federal regulation of wine labels, regulation by the states continued in and through 1935. In addition to California's then long-established general food and beverage regulations, and its then recent specific wine regulations, described ante, part II.B.1.d-e, the Ohio and Oregon wine labeling statutes, described above ( ante, fns. 24 & 26), still were in effect [40] and most other states had food and beverage statutes, the majority of which regulated mislabeling or misbranding of beverages, including wine. As already explained, many of those statutes adopted specific and comprehensive wine standards that were enforceable only under state, and not federal, law  and as of 1935, many had been revised specifically to bar misrepresentations on labels concerning the place of manufacture or production. [41]
In light of the history set forth above, we disagree with Bronco's assertion, advanced in its original brief in this court, that federal regulation of wine labeling prior to Congress's adoption of the FAA Act in August 1935 was well established, and that [b]y contrast, the states' regulation of wine labeling . . . ranged from limited to none. Nor do we agree with the accusation of amici curiae Abundance Vineyards et al. that the Department and the NVVA have suggested, misleadingly, that the States, and not the Federal government, historically played the dominant role in the regulation of the alcoholic beverage industry before enactment of the FAA Act. (Italics added.) Based upon our review of the relevant history, we conclude that from the mid to late 19th century until shortly after the repeal of Prohibition, the states' exercise of their traditional police power to regulate the labeling of food  including wine and other alcoholic beverages  was both extensive and dominant. This historic evidence demonstrates that when, as described below, Congress finally entered the specific field of wine label regulation in August 1935 by enacting the FAA Act, under which the federal regulation here at issue was promulgated, Congress was legislating in a field traditionally regulated by the States. ( ARC America Corp., supra, 490 U.S. 93, 101, 109 S.Ct. 1661, 104 L.Ed.2d 86, and cases cited.) [42] Accordingly, a strong presumption against preemption applies, and a court should not find that the traditional police powers of the states to regulate wine labels (in order to prevent the deception of consumers) are superseded unless it is clear and manifest that Congress intended to preempt state law. We turn now to consider whether, as Bronco claims, there was, at the time of the enactment of the FAA Act or thereafter, a clear and manifest intent on the part of Congress to preempt wine labeling regulation by the states such as is found in section 25241. We find no such intent. We thereafter consider whether, as Bronco claims, section 25241 is impliedly preempted by federal law because it stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. ( Hines, supra, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581.) As we explain, we find no such implied preemption.

As explained below, contrary to Bronco's assertions the history of the 1935 FAA Act discloses no intent on the part of Congress to supplant or preempt state efforts to regulate wine labeling. In late August 1935, Congress replaced the defunct FAC Administration with the Federal Alcohol Administration Act. (Pub.L. No. 74-401 (Aug. 29, 1935) 49 Stat. 977, presently 27 U.S.C. § 201 et seq.) The essential aspects of the FAA Act exist today in substantially unamended form and remain the basis for federal regulation of wine labeling. (See Benson, Regulation of American Wine Labeling: In Vino Veritas? (1978) 11 U.C. Davis L.Rev. 115, 154 et seq. ( Regulation of American Wine Labeling ).) Substantively, the FAA Act in large measure emulated the main aspects of the invalidated FAC Administration. (After Repeal, supra, at p. 32; Regulation of American Wine Labeling, supra, 11 U.C. Davis L.Rev. 115, 165.) The FAA Act makes it illegal for any person to produce, sell, or ship wine in interstate or foreign commerce unless that person is licensed to do so by the Secretary of the Treasury. [43] (27 U.S.C. § 203(a) & (b).) Title 27 United States Code section 205(e)the primary federal statutory provision for present purposes  directs the Secretary of the Treasury to promulgate such regulations with respect to packaging, marking, branding, and labeling . . . (1) as will prohibit deception of the consumer with respect to [ alcoholic beverage ] products . . . .; [and] (2) as will provide the consumer with adequate information as to the identity and quality of the products . . . . (Italics added.) To enforce these requirements, this section of the FAA Act also requires that any person who sells or ships wine in interstate or foreign commerce first obtain from the Secretary of the Treasury (or his or her designee) a certificate of label approval, or COLA, for each wine, and directs that no wine may be shipped or sold in interstate commerce unless it bears a label that has been reviewed and approved by the Secretary of the Treasury through issuance of a COLA. Finally, the section further provides that no wine label may be removed or altered except as authorized by Federal law or except pursuant to federal regulations authorizing relabeling for purposes of compliance with the requirements of this subsection or of State law. ( Ibid. ) Testifying in support of the legislation that became the FAA Act, Joseph H. Choate, former Chairman of the FAC Administration, explained that the goal was to continue the work of the recently invalidated FAC Administration. Adverting to the regulations mentioned above that recently had been adopted by the FAC Administration ( ante, pt. II.B.1.f), Mr. Choate explained that the purpose of those regulations  and of the new FAA Act  was to to provide such regulations, not laid down in statute, so as to be inflexible, but laid down under the guidance of Congress, under general principles, by a body which could change them as changes were found necessary. [¶] These regulations were intended to insure that the purchaser should get what he thought he was getting, that the representations both on labels and in advertising should be honest and straightforward and truthful . . . . [ The consumer ] should be told what was in the bottle, and all the important factors which were of interest to him about what was in the bottle.  (Hearings before House Com. on Ways and Means on H.R. No. 8539, 74th Cong., 1st Sess., p. 10 (1935), testimony of Joseph H. Choate, italics added.) Similarly, Representative Thomas Cullen of New York, the author of the bill that became the FAA Act (see 79 Cong. Rec. (1935) 11713 et seq.), promoting his legislation on the floor of the House, asserted that the proposed bill was necessary in order to do something to prevent the unfair trade activities of those in the industry who chisel and take advantage of the ignorance of the consumer by dishonest labeling . . . . (Remarks of Rep. Cullen on H.R. No. 8539, 74th Cong., 1st Sess., 79 Cong. Rec. (1935) 11714; see generally Regulation of American Wine Labeling, supra, 11 U.C. Davis L.Rev. 115, 165-167.) As with the 1906 federal Pure Food and Drugs Act, and by contrast to other legislation passed only days prior to adoption of the FAA Act in August 1935, [44] nothing in the body of the FAA Act reveals congressional intent to supersede concurrent (or more stringent) regulation of wine labeling by the states under their traditional police powers. As already explained, at the time Congress adopted the FAA Act in August 1935, the states, led by California (see ante, pt. II.B.1.d & e), were continuing to exercise their traditional police powers in this area. (See ante, pt. II.B.1.g, describing the then extant statutes of various states.) Consistently with this history and contemporaneous practice, the bill's author, Representative Cullen, while promoting the bill embodying the FAA Act on the floor of the House, emphasized the cooperative, as opposed to preemptive, nature of the federal legislation. He asserted: [W]e must do something to supplement legislation by the States to carry out their own policies. The liquor industry is too big and the constitutional and practical limitations on the States are so considerable that they alone cannot do the whole job.  (Remarks of Rep. Cullen on H.R. No. 8539, 74th Cong., 1st Sess., 79 Cong. Rec. (1935) 11714, italics added; accord, H.R.Rep. No. 1542, 74th Cong., 1st Sess., pp. 2-3 (1935).) [45] Representative Cullen also assured the House that by enactment of the bill, [n]o power is taken away from the States to provide such safeguards as they deem best for their own protection. (79 Cong. Rec., supra, 11174.) [46] Based upon this legislative history, and in light of the backdrop against which Congress acted  the prior decades of state legislation regulating the labeling or misbranding of wine as a general food and beverage product, or of wine specifically  we conclude that Bronco has failed to establish that Congress, at the time it enacted the FAA Act, acted with the clear or manifest purpose of preempting state statutes regulating wine labels.
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.
Having concluded that Bronco has failed to carry its burden of establishing clear or manifest intent on the part of Congress, or congressional intent as interpreted by the BATF, to preempt the traditional exercise of state police power such as the wine labeling regulation found in section 25241, we proceed under the presumption that no such preemption was intended. We bear this presumption in mind when we consider below Broncos assertion that section 25241, by imposing a labeling requirement that is more exacting than the federal requirement, is impliedly preempted by federal law.