Court Opinion

ID: 9478139
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:41:22.133148+00
Date Added: 2024-06-11T17:46:16.009008
License: Public Domain

LAY, Chief Judge,
dissenting.
*1115I respectfully dissent.
There is no question that the state regulation requiring labels on all bottles sold by out-of-state liquor distributors directly to federal enclaves in the State of North Dakota was not conceived to be, nor does it have the effect of, a tax on the federal government. Furthermore, the regulation involved is not an attempt to regulate liquor consumption on a federal enclave. This regulation is exclusively intended to prohibit the diversion of this liquor into the state’s domestic commerce.
It should be clear that Tax Commission I and II1 relied upon by the majority are distinguishable from the present situation. In holding that the twenty-first amendment does not provide state authorization to require labeling to prevent diversion of liquor sales within the state, the majority slights the statement of the Supreme Court in Tax Commission I:
This is not to suggest that the State is without authority either to regulate liquor shipments destined for the bases while such shipments are passing through Mississippi or to regulate the transportation of liquor off the bases and into Mississippi for consumption there. Thus, while it may be true that the mere “shipment [of liquor] through a state is not transportation or importation into the state within the meaning of the [Twenty-first] Amendment,” Carter v. Virginia, 321 U.S. 131, 137 [64 S.Ct. 464, 468, 88 L.Ed. 605] (1944), a State may, in the absence of conflicting federal regulation, properly exercise its police powers to regulate and control such shipments during their passage through its territory insofar as necessary to prevent the “unlawful diversion” of liquor “into the internal commerce of the State,” see Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S., at 333, 331 n. 10 [84 S.Ct. at 1299, 1297 n. 10]; Carter v. Virginia, supra; Duckworth v. Arkansas, 314 U.S. 390 [62 S.Ct. 311, 86 L.Ed. 294] (1941).
Tax Commission I, 412 U.S. at 377-78, 93 S.Ct. at 2191-93. The Supreme Court thus clearly observed that the twenty-first amendment provides states with the authority to prohibit diversion of liquor that is imported to federal enclaves located within its boundaries.
There is no conflicting federal regulation or statute which requires the finding of federal preemption. The controlling statute which allegedly supersedes the earlier regulation simply states that the government must purchase liquor for military installations “from the most competitive source, price and other factors considered * * *.” 10 U.S.C. § 2488(a)(1) (Supp. IY 1986). To urge federal preemption of this state regulation, which the majority concedes was passed in good faith to prevent diversion of out-of-state sales to military installations, by reason of this federal statute is to eradicate any real meaning to the core provisions of the twenty-first amendment.2 By virtue of this amendment, “a State is totally unconfined by traditional *1116Commerce Clause limitations when it restricts the importation of intoxicants destined for use, distribution, or consumption within its borders.” Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 330, 84 S.Ct. 1293, 1297, 12 L.Ed.2d 350 (1964). There is nothing in the history of the amendment which states that the military shall be exempt from the effects of all types of state regulation in its procurement of liquor. In fact, such a position would be ridiculous in light of the myriad of state regulations applied to distillers and suppliers of liquor. Compliance with regulations regarding the importation of raw materials, general operations of the distillery or brewery, treatment of employees, bottling, and shipping necessarily increase the cost of liquor. The congressional mandate to purchase liquor for military personnel at the “most competitive” terms nonetheless impliedly accepts the presence of these expenses as unavoidable factors that increase the lowest available prices.3
The record suggests that significant expenses would be incurred if out-of-state liquor distributors comply with the North Dakota regulation. It is also reasonable to assume that the expense of compliance would be passed along to the federal government if it purchased liquor from these distributors. This increase in price, however, is neither the result of taxation nor an attempt to regulate liquor on a federal enclave. The regulation is solely intended to prevent diversion of out-of-state liquor destined for the military bases. As such, the state is within its power under the twenty-first amendment to enact this regulation. The federal government must accept the resulting increase in the cost of out-of-state liquor when it considers sources from which to purchase its liquor.
I therefore dissent.

. United States v. State Tax Comm’n of Mississippi, 412 U.S. 363, 93 S.Ct. 2183, 37 L.Ed.2d 1 (1973) ("Tax Commission I”) and United States v. Tax Comm’n of Mississippi, 421 U.S. 599, 95 S.Ct. 1872, 44 L.Ed.2d 404 (1975) ("Tax Commission II”).

. The state succinctly refutes the preemption argument in its statement contained in its brief:
Before a balancing of state and federal interests is necessary, however, there must exist clear congressional intent to preempt the area and a direct conflict between the state and federal laws. Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 [67 S.Ct. 1146, 1152, 91 L.Ed. 1447] (1947), cautions that “we start with the assumption that the historic police powers of the states are not to be superseded by [federal legislation] unless that was the clear and manifest purpose of Congress.” (Emphasis supplied.) Unless Congress’s preemptive intent is abundantly clear, courts hesitate to invalidate state and local legislation for the added reason that "the state is powerless to remove the ill effects of our decision, while the national government, which has the ultimate power, remains free to remove the burden.” Penn Dairies, 318 U.S. at 275 [63 S.Ct. at 624]. A review of the federal law in the present case fails to reveal a congressional intent, either express or implied, to preempt the state’s liquor regulations aimed at preventing "unlawful diversion” in contravention of the state’s established liquor distribution system. Furthermore, as determined by the lower court, there is no direct conflict between the state and federal laws.
Appellee’s brief at 28.

. This conclusion of the federal government’s acceptance of these regulations is further bolstered with respect to state regulation prohibiting diversion by a Department of Defense directive which states that no member of the armed services shall divert "alcoholic beverages to unauthorized personnel, or for purposes which violate federal, state, or local laws * * DoD 1015.3-R, ch. 4, fF3.