Court Opinion

ID: 2994251
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:13:38.453483+00
Date Added: 2024-06-11T18:01:21.332114
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

Nos. 00-1062 & 00-1126

Kendall-Jackson Winery, Ltd., et al.,

Plaintiffs-Appellees,

v.

Leonard L. Branson, Chairman of the
Illinois Liquor Control Commission, et al.,

Defendants,

and

Wirtz Corporation, doing business
as Judge & Dolph, Ltd., et al.,

Defendants-Appellants.

Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
Nos. 99 C 3813 & 4312--Joan B. Gottschall, Judge.

Argued March 28, 2000--Decided May 12, 2000

  Before Easterbrook, Manion, and Evans, Circuit Judges.

  Easterbrook, Circuit Judge. Last year Illinois
revamped its regulation of the liquor
distribution business. The Illinois Wine and
Spirits Industry Fair Dealing Act of 1999, 815
ILCS 725/1 to 725/99, makes it unlawful for a
supplier of alcoholic beverages to cancel or
substantially alter any distribution arrangement,
new or existing, without "good cause." "’Good
cause’ means a failure by a distributor to comply
with essential and reasonable requirements
imposed upon the distributor by the supplier or
bad faith in the performance of the
distributorship agreement." 815 ILCS 725/5.
Suppliers, which often encourage competition
among distributors for the privilege of acting as
wholesalers (a process that holds down the cost
of distribution services), were dismayed by the
new statute. Some tried to terminate their
distributors before the new law was enacted, so
that they could at least take bids before
becoming locked in, only to be met by 815 ILCS
725/35(c)(2), which empowers the Illinois Liquor
Control Commission to order suppliers to continue
furnishing their goods to the same distributors,
on the same terms, and at the same prices, even
if preexisting contracts permit change at will.
Immediately after the Act went into force on May
21, 1999, several distributors asked the
Commission to direct suppliers to resume (or
continue) dealings that had been (or were about
to be) discontinued. The Commission swiftly
issued ex parte interim orders to that effect.
Section 725/35(f) forbids any state court to
interfere until the Commission has rendered a
final decision but does not set a time limit for
the Commission. After issuing its ex parte
orders, the Commission settled into what appeared
to be extended slumber. Flummoxed by the state
process, the suppliers turned to federal court.

  Suing under 42 U.S.C. sec.1983, three suppliers-
-Kendall-Jackson Winery, Jim Beam Brands, and
Sutter Home Winery--contend that the Act violates
the contracts clause of the Constitution by
depriving them of entitlements, such as the
rights to choose distributors and to set prices,
that they possessed under contracts and former
law. They also contend that the Act discriminates
against interstate commerce, and thus violates
the reservation of powers to Congress in the
commerce clause, because only out-of-state
wineries are locked into distributors. The Act,
which applies to "agreements" between suppliers
and distributors, defines that word this way:

"Agreement" means any contract, agreement, course
of dealing, or arrangement, express or implied,
whether oral or written, for a definite or
indefinite period between a supplier (other than
(i) an Illinois winery or (ii) a winery that has
annual case sales in the State of Illinois less
than or equal to 10,000 cases per year, and a
distributor pursuant to which a distributor has
been granted a distributorship).

815 ILCS 725/5. Although this language misplaces
the closing parenthesis (it should come after
"year" and not "distributorship"), the exclusion
of local wineries is plain and creates problems
under Bacchus Imports, Ltd. v. Dias, 468 U.S. 263
(1984), and similar cases. The exclusion of small
sellers also may have implications for interstate
commerce, because it carves out wineries that
sell fewer than 10,001 cases "in the State of
Illinois" rather than all small wineries. There
are similar, and redundant, exclusions in
sec.725/10(d), sec.725/30, and sec.725/35(b),
(c)(1), and (c)(2). The district court concluded
that the Act probably violates both the contracts
clause and the commerce clause, and it issued a
preliminary injunction. 82 F. Supp. 2d 844 (N.D.
Ill. 2000). The three suppliers then dropped
their old distributors, which appealed. R.J.
Distributing Co., one of these, dismissed its
appeal under Fed. R. App. P. 42(b). The two other
appeals are live--but the Commission is not among
the appellants. (We refer to "the Commission" for
convenience; its commissioners are the parties.
See Ex parte Young, 209 U.S. 123 (1908).)

  If the district court had entered relief
against the distributors, the Commission’s
decision not to appeal would not deprive the
distributors of an opportunity to rid themselves
of judicial obligations or restrictions. But the
district court’s injunction runs against the
Commission exclusively. The operative language
is:

Until further order of the Court, the
Commissioners, and all persons acting
under their direction or control, are
PRELIMINARILY ENJOINED from:

i. enforcing or applying the Illinois
Wine and Spirits Industry Fair Dealing Act
of 1999 in any way against Jim Beam; and

ii. enforcing any orders previously
issued by the Commission under the Act
directed to Jim Beam, including but not
limited to the order dated June 2, 1999
directing Jim Beam to continue providing
products alleged to have been withdrawn in
violation of the Act to Pacific Wine
Company at prices and quantities in effect
under prior distributorship relationships.

A second injunction, changing only the names and
date, was entered in favor of Kendall-Jackson.
Because the Commission has not appealed, it
remains bound by the injunctions no matter what
happens on the distributors’ appeals, so it is
not clear what point the distributors’ appeals
can serve. Penda Corp. v. United States, 44 F.3d
967, 971 (Fed. Cir. 1994). Many cases, of which
Diamond v. Charles, 476 U.S. 54 (1986), and
Princeton University v. Schmid, 455 U.S. 100
(1982), are examples, show that a choice by a
public body not to appeal from an adverse
decision may doom any effort by private litigants
to obtain review of the judgment. We inquired at
oral argument whether the distributors are
seeking more than an advisory opinion, and we
have received post-argument memoranda from both
the suppliers and the distributors.

  According to the distributors, we can knock out
the injunction against the Commission, despite
its election not to appeal, by concluding that
the district court should have abstained from
decision; and if the distributors’ appeal can
affect the injunction (and thus restore the
Commission’s entitlement to enforce its orders),
then they are entitled to pursue relief here. The
conclusion follows from the premise, but the
premise is unsound. The distributors conceive of
an obligation to abstain under Younger v. Harris,
401 U.S. 37 (1971), or Texas Railroad Commission
v. Pullman Co., 312 U.S. 496 (1941), the two
species of abstention potentially implicated by
this suit, as equivalent to the absence of
subject-matter jurisdiction, which means that all
of the district court’s orders (even those
against non-appellants) must be vacated. Yet Ohio
Bureau of Employment Services v. Hodory, 431 U.S.
471, 477-80 (1977), holds that a state may waive
Younger abstention. See also, e.g., Morales v.
Trans World Airlines, Inc., 504 U.S. 374, 381
(1992); Brown v. Hotel & Restaurant Employees,
468 U.S. 491, 500 n.9 (1984). An entitlement to
waive is incompatible with a jurisdictional
characterization, and in Ohio Civil Rights
Commission v. Dayton Christian Schools, Inc., 477
U.S. 619, 626 (1986), the Court drew this
conclusion and rejected a contention that
district courts lack jurisdiction whenever they
should have abstained.

  Illinois did not affirmatively waive the
benefits of abstention, as the state agencies did
in Hodory, Brown, and similar cases. But by
declining to appeal the Commission has forfeited
the application of that doctrine, at least for
the time being. Abstention is designed for the
states’ benefit, and if a state is content with
the outcome of federal litigation--as the
Commission is content with the preliminary
injunction--then abstention serves no point.
Perhaps federal judges have the power to
disregard a forfeiture (as opposed to a waiver),
just as they have discretion to overlook a
state’s failure to assert the exhaustion
requirement in a collateral attack on a criminal
judgment. See Granberry v. Greer, 481 U.S. 129
(1987); cf. Hilton v. Braunskill, 481 U.S. 770
(1987). Hodory observes that states cannot compel
federal courts to adjudicate a tough
constitutional point when state courts may
construe the statute in a way that obviates the
need. 431 U.S. at 480 n.11 (discussing Pullman
abstention). This implies that we might have the
power to consider abstention despite the
Commission’s acquiescence in the preliminary
injunction. But it does not demonstrate that we
should use whatever power we possess. Federal
courts abstain when states offer means to resolve
(or to avoid) consideration of constitutional
questions. Illinois does not offer any visible
means of avoidance, and it has done everything
possible to frustrate resolution. The Commission
can take as long as it wants to issue a final
order, and so far it has yet to address the
suppliers’ objections to continuation of their
pre-Act distribution relations. Until the
Commission acts, state courts are forbidden to
resolve disputes. Similarly unbounded delay by
Illinois was deemed unconstitutional in Edgar v.
MITE Corp., 457 U.S. 624 (1982), and none of the
Justices in MITE even hinted that abstention
would have been appropriate. Moreover, the
argument defendants offer in support of Pullman
abstention is not that state courts could
construe the Act in a way that makes
constitutional claims drop out, but that they
might be inclined to sever the exemption of local
suppliers. Severance does not avoid adjudication;
it is just one possible consequence of a
constitutional decision.

  With abstention out of the picture, the
distributors’ position collapses. Their injury is
derivative rather than direct. Nothing in the
injunctions imposes any disabilities on them,
rather than the Commission. The distributors
emphasize that the injunctions injure them, by
depriving them of the benefits of the
Commission’s orders. That much is indisputable;
the problem, however, is that this injury cannot
be undone now unless we are entitled to vacate
injunctions that do not run against the
appellants. The critical question is this: when
a district judge enters an order creating
obligations only for Defendant A, may the court
of appeals alter the judgment on appeal by
Defendant B when obligations imposed on A
indirectly affect B? The distributors have not
located any decision by the Supreme Court giving
an affirmative answer, which would be
incompatible with Diamond and Princeton. The
Commission’s decision not to appeal leaves the
distributors in the position that they would have
occupied had the Commission not entered the
orders in the first place--and because Illinois
does not recognize any private right of action to
contest such an enforcement decision by the
Commission, it would not be sound to allow the
distributors to challenge that decision
indirectly. Cf. Heckler v. Chaney, 470 U.S. 821
(1985); Allen v. Wright, 468 U.S. 737 (1984);
Leeke v. Timmerman, 454 U.S. 83 (1981); Linda
R.S. v. Richard D., 410 U.S. 614 (1973).

  By addressing the subject under the rubric of
"injury in fact," the distributors miss the real
problem: redressability. Sure the injunction
injures them, but how can their appeal redress
that injury given that the injunction will
continue to bind the Commission? See Sea Shore
Corp. v. Sullivan, 158 F.3d 51 (1st Cir. 1998);
Associated Builders & Contractors v. Perry, 16
F.3d 688 (6th Cir. 1994); McLaughlin v. Pernsley,
876 F.2d 308 (3d Cir. 1989). When a statute
creates a private right of action, it is possible
to see how such a question may be answered
affirmatively. Consider Mausolf v. Babbitt, 125
F.3d 661 (8th Cir. 1997), in which the district
court enjoined the National Park Service from
enforcing certain regulations, and the Park
Service did not pursue an appeal. Private parties
that had intervened in the case sensibly were
allowed to appeal, not simply because the
injunction injured them (to the extent the
regulations had helped them) but because federal
regulations may be enforced by private parties by
suits against the agencies (under the
Administrative Procedure Act) and by suits
against private parties under the federal-
question jurisdiction to the extent a statute or
regulation creates a private right of action, or
under 42 U.S.C. sec.1983 to the extent the
defendant is a state actor. See Maine v.
Thiboutot, 448 U.S. 1 (1980). Many cases are
similar in spirit to Mausolf, and we do not
question their holdings. Likewise, a union or
employer that prevails before the National Labor
Relations Board may ask the Supreme Court to
review a decision refusing to enforce that order,
even though the Board’s General Counsel has
absolute prosecutorial discretion not to file a
charge of unfair labor practices. After a charge
has been filed, the Board has dual roles as
prosecutor and adjudicator, and private parties
acquire rights in the Board’s final decisions
that are enforceable even if the Board is content
to see its orders annulled. 29 U.S.C. sec.160(f).
But the distributors do not contend that Illinois
law treats the Commission as an adjudicator,
whose unfavorable decisions are subject to
judicial review, nor has the Commission entered
any final decision.

  Nor do they contend that Illinois law provides
a private right of action, after the fashion of
the APA, to enforce the Commission’s orders that
the district court enjoined. Recall that Illinois
forbids any judicial review of the Commission’s
interim decisions under sec.725/35. See 815 ILCS
725/35(f). Whatever review and enforcement
ultimately may be available under sec.725/35(e)
depend on a final order. A distributor applying
to the Commission for interim relief under
sec.725/35(d) appears to be just like a person
asking the NLRB’s General Counsel to initiate a
proceeding under the National Labor Relations
Act. (Wirtz Corporation asserts that a state
court could issue a writ of mandamus to compel
the Commission to proceed, but it does not cite
any decision doing this, under either the 1999
Act or any similar Illinois law, and decisions
such as Fisher v. Lexington Health Care, Inc.,
188 Ill. 2d 455, 722 N.E.2d 1115 (1999), appear
to look the other way.) Because private parties
cannot conduct an independent enforcement action,
the injunction could not adversely affect the
distributors in such an action, so Fishgold v.
Sullivan Drydock & Repair Corp., 328 U.S. 275,
282-83 (1946), does not support their appeal. Our
situation is similar to Diamond, where the state
law was enforceable only by a public prosecutor,
without the possibility of review at the behest
of private persons. Unlike an order issued by the
NLRB, an interim order issued by the Commission
appears to be enforceable only by (or at the
behest of) the Commission itself. To the extent
that Norman’s on the Waterfront, Inc. v.
Wheatley, 444 F.2d 1011 (3d Cir. 1971), and
Goldie’s Bookstore, Inc. v. Superior Court, 739
F.2d 466, 468 n.2 (9th Cir. 1984), hold that
anyone who suffers injury in fact may appeal an
order directed to a non-appealing public
prosecutor, they did not survive Diamond.

  One aspect of the distributors’ argument on the
merits undercuts their contention that they may
appeal independently of the Commission and
suggests that they were not aggrieved by the
injunction at all. Responding to the suppliers’
invocation of the contracts clause, the
distributors contend that sec.725/35 does not
change the law of Illinois. According to the
distributors, modification or termination of a
liquor distribution arrangement was unlawful in
Illinois before the 1999 Act in the absence of
good cause even if the contract between supplier
and distributor expressly allows modification or
termination for any reason (or establishes a
dealership at will). This rule may be located, as
the dealers see things, in a general duty of good
faith and fair dealing that Illinois applies to
contracts, and which (they say) sec.725/35 just
instantiates. Like the district court, we doubt
that Illinois has any such rule. See L.A.P.D.,
Inc. v. General Electric Corp., 132 F.3d 402 (7th
Cir. 1997); Echo, Inc. v. Whitson Co., 121 F.3d
1099 (7th Cir. 1997); Digital Equipment Corp. v.
Uniq Digital Technologies, Inc., 73 F.3d 756 (7th
Cir. 1996); Industrial Representatives, Inc. v.
CP Clare Corp., 74 F.3d 128 (7th Cir. 1996);
Continental Bank, N.A. v. Everett, 964 F.2d 701
(7th Cir. 1992); Jespersen v. Minnesota Mining &
Mfg. Co., 183 Ill. 2d 290, 700 N.E.2d 1014
(1998); Hentze v. Unverfehrt, 237 Ill. App. 3d
606, 610-11, 604 N.E.2d 536, 539 (5th Dist.
1992). Still, the distributors are free to file
breach-of-contract actions against their former
suppliers in state court, and if they are right
about the existence and extent of the "good
faith" duty in state law, then they will obtain
the relief they seek independently of sec.725/35.
The injunction against the Commission would not
hamper pursuit of that goal in private contract
litigation. If the distributors are wrong,
however, then it is hard to avoid the district
court’s conclusion that sec.725/35 has serious
constitutional problems, because it dramatically
reallocates rights under contracts that predate
the legislation, and again the distributors do
not have much to gain by this appeal.

  If we err about the extent to which the
Commission has the same freedom as a public
prosecutor, then the distributors have a ready
recourse. They may apply to a state court for an
order compelling the Commission to appeal from
any permanent injunction that the district court
may enter. If the state court issues such an
order (or if the Commission decides on its own to
appeal), then all issues will be presented for
resolution on the merits at the end of the case.
If, however, the Commission again declines to
appeal and the distributors are unable to
persuade a state court to direct it to appeal,
that will demonstrate how similar this situation
is to Diamond. We trust that the district court
will bring the case to a swift conclusion, so
that our inability to resolve the legal questions
on appeal from the preliminary injunction will
not cause undue injury to any affected party.
Because this panel also will hear any appeals
from the final disposition, see Operating
Procedure 6(b), we can expedite ultimate decision
(and the parties could speed things up a bit more
by relying on the legal arguments in the briefs
that they have already filed).

  The appeals are dismissed.