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SJC 13541, S&H Independent Premium Brands
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East LLC et al,
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the Alcoholic Beverages Control Commission et al.
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Attorney Green.
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Good, still morning.
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Good morning, Your Honors.
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May it please the court.
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Benjamin Green on behalf
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of the appellants S&H Independent Premium Brands East
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and SNH Independent Premium Brands West.
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Section 25E of the Liquor Control Act
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is a fair trade regulation
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that prevents suppliers, those that manufacture
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or produce alcoholic beverages
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from abusing their superior bargaining power
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as suppliers are at the top
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of the distribution chain, 25E impacts not only wholesalers
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who are in the middle, but also retailers and consumers.
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As explicitly stated in the statute,
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these protections are afforded to any licensed wholesaler,
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which by its plain meaning includes in-state wholesalers
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with section 18 licenses
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and licensed out of state wholesalers
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who have section 6 18B certificates.
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Okay, so that last part is the part that is the crux
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of the case as far as I can tell, right?
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And it doesn't, can you tell me why you just said
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that that's plain meaning?
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Because maybe you can point me
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to the exact statutory language
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that you think makes that plain plain.
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Absolutely, Your Honor.
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So it goes to the phrase, any license wholesaler,
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which is in the first paragraph.
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Right, of you're talking about 25E, right?
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Of 25E, yes.
Sure.
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So, and licensed wholesalers also used in section 18.
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Yes.
It's used,
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but there's also a phrase about being a certified out
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of state supplier, correct?
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Yes, so section 18B deals with those
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that have licenses out of state.
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And section 18 does not say that out
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of state certified suppliers
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are also licensed wholesalers.
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No, section 18 does not use that language.
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So when you say that the statutory language is plain,
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I'm looking for an explicit statutory provision that says
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what you just argued, which is that
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the phrase any licensed wholesaler
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includes out of state certified suppliers.
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Yes, Your Honor, so-
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Is there any such statutory language?
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Your Honor, I would say that the phrase any,
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which is explicitly included in the statute means
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that the term license wholesaler should have
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the broadest possible meaning.
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Okay, that's a interpretation.
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My question was slightly different.
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My question was one of an explicit statutory provision,
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because if your answer is yes,
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I'm gonna ask you to point it to me.
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If your answer is no, we can move on
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and then go into the realm of interpreting language
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as opposed to saying it's explicitly provided.
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So I'd say no, Your Honor,
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but I would point you to the legislative
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history of the statute.
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At one point, the statute in 18B said
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that certificate holders
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of 18B cannot be considered licensees
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anywhere in this chapter.
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That language was removed
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and added only into another section of 25
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that deals with credit terms.
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So the legislature explicitly removed basically a statement
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that said kind of the opposite of that.
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That said you can't consider section 18Bs
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to be licensees in other sections.
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But it didn't make them licensed wholesalers.
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They're only licensed wholesalers if we take the fact
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that they have a license from some other state, right?
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They're clearly not, they're in a different category,
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whether the different category is constitutional
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or not a separate question, but they're clearly
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in a different category, aren't they?
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Well, yes sir.
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And they are licensed by a different authority
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from a different state.
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And so consistent with the commerce clause,
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given that observation, how is it possible
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that the ABCC can possibly regulate things
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that are happening out of Massachusetts consistent
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with the commerce clause?
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Thank you, Your Honor.
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So in terms of regulation,
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there's multiple ways to look at it.
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The first is that the commission can regulate parties
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that have consented to the jurisdiction
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of the commission, which all-
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Regard to their outta state supply activities.
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Well, when you, the language is clear that you have
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to abide by all of the laws
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of the Liquor Control Act and the commission.
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So it is-
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With regard to their activities
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and how they choose to supply things
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outside of Massachusetts.
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The statutory language does not include
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an exception for that.
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But the commerce clause does.
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It limits the regulatory authority of the ABCC
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to things that happen in the Commonwealth.
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Once the Commonwealth starts extending its reach to things
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that happen, as did here outside of the Commonwealth,
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then I think that squarely might
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present a commerce clause problem.
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So I'd also point out, Your Honor, that the issue
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that you're addressing, which is important,
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doesn't change based on the interpretation
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that the commission has put forth.
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And the reason because of that is that their position
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is that licensed wholesalers get this protection,
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but licensed wholesalers in Massachusetts don't have to sell
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to retailers in Massachusetts.
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They can sell to other wholesalers
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and they can sell to wholesalers in any other states.
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So a licensed wholesaler in Massachusetts
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could purchase beverages from a supplier in California.
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The beverages could never leave there,
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and that licensed wholesaler could then sell those beverages
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to say Colorado and Florida.
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So you not put the same exact jurisdictional issue
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with their interpretation as well.
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Okay.
But don't the licensed
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wholesalers, they have a lot of responsibilities.
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They have to, that's how we collect taxes on the alcohol.
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They have this, they're sort of the monitoring point, right.
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And so to be a licensed wholesaler,
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you take on a bunch of responsibilities
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that an 18B person doesn't take on, right?
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Sometimes, Your Honor, depending on how you operate.
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Isn't it all times?
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Doesn't, isn't a licensed wholesaler held up to a bunch
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of tasks and responsibilities.
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You gotta be able to go to their warehouse
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and check the inventory.
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You put taxes on, and your guys outta state wholesalers,
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no one's checking their inventory
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'cause you can't, they don't have anything.
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They don't have a place of business in Massachusetts
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and they pay less to become one.
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Aren't you, you're comparing apples to oranges.
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There may still be discriminatory treatment.
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I'm not, I'm not getting away from that.
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But it looks like the statutory argument
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seems to have very little merit to it.
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Your Honor, first I'd say that section 25E
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doesn't regulate wholesalers.
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It actually regulates suppliers.
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It prevents suppliers from engaging
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in unfair business practices.
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Yeah, but the whole licensed wholesalers,
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there's all kinds of things they have to do that,
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you know, and that's how we make money in Massachusetts,
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that that's how we collect our taxes, right,
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off of what's done in their premises.
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Your Honor, I'm not arguing that there aren't distinctions
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between in-state wholesalers and out-of-state wholesalers
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and that the regulations in state are different
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than the regulations out of state.
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Right, but so then doesn't that just leave you
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with your dormant commerce clause problem argument?
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I just don't see your statutory argument.
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I do see, I do want to understand
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your commerce clause argument
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because clearly we're giving special rights
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and special obligations to a Massachusetts company
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that we're not giving to others,
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but they're performing a different
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function under the statute.
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They can perform different functions.
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A wholesaler in Massachusetts, his license though,
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could be performing the exact same function
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of selling just to other wholesalers.
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Doesn't the wholesaler still have to do all
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that tax collection and other stuff?
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A licensed wholesaler in Massachusetts,
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even if they're selling only to other licensed wholesalers,
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aren't they subject to a bunch of obligations as well?
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I think it depends on the fact situation.
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I think the other wholesaler they send sell to
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then might become the, of certain obligations.
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But I think you are correct
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that we should jump into the dormant commerce clause issue
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as that is really central to our overall argument.
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Right.
Now although you guys,
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although Your Honor has noted the distinction.
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You're not challenging the constitutionality
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of section 18, correct?
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Sorry, Your Honor,
You're not challenging
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the constitutionality of section 18.
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I'm not, Your Honor.
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So this is solely a challenge to section 25 in terms
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of a constitutional challenge.
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Solely 25E, yes, Your Honor.
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25E.
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How do you get there without, from the face of 25E?
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I don't see on the face
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of 25E any disparate treatment
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depending on whether a person is out of state
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or a company as an out of state company
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or an in-state company.
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There are none, none of these distinctions
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are drawn in section 25E.
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Yes, Your honor.
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So if section 25E,
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if the term any licensed wholesaler
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can refer only to section 18 wholesalers
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and section 18 wholesalers have to be either individuals
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that are citizens or LLCs that are owned by citizens
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or companies that are incorporated in Massachusetts.
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Then section 25E the protections are limited.
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So you're not, but you had just told Justice Wolohojian
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that you're not challenging section 18, at least,
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and as I understand it, there's been a representation
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that posts the Supreme Court case,
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it's no longer being enforced
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in that out of state versus in-state way.
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That's correct, I'm not challenging 18.
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At the time though, that the, just to clarify,
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the ABC's, the commission's position about non-enforcement
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did not arise until after the commission dismissed our 25E.
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Let me put my question a different way.
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Just pretend section 18 doesn't exist for the moment.
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Yes.
Just pretend.
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And let's look, I'm looking right now at section 25E
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without reference to anything beyond section 25E,
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is there anything within 25E itself
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that could give rise language of 25E
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to a dormant clause argument?
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So, Your Honor, if you were to just look
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at 25E in pure isolation,
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then I don't think you would interpret the phrase
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any licensed wholesaler to refer to a section 18 licensee.
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It would interpret everywhere.
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So on it face, it would not raise,
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a dormant commerce clause issue
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if we limit it just to 25E.
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If you limit it to 25E,
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unless it's the interpretation that is presented
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by the commission is that that only applies
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to in-state wholesalers.
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Okay, so that seems to, I hate to repeat myself,
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but if you're not challenging section, the constitutionality
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of section 18 on dormant commerce clause grounds
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or on the basis of Tennessee Distillery
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or whatever the name is of that Supreme Court case,
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how do you shoehorn those arguments into a challenge
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of section 25E alone?
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You know, because when our appellant went
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to get 25E protections, the commission said
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these protections are not afforded
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to out of state wholesalers.
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And that basically set the chain of okay
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by the commission standard
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and their interpretation 25E is only protects
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in-state wholesalers and does not protect
269
00:13:16.650 --> 00:13:17.947
out of state wholesalers.
270
00:13:17.947 --> 00:13:20.250
Does it matter that your client never sought
271
00:13:20.250 --> 00:13:22.770
to be a licensed wholesaler?
272
00:13:22.770 --> 00:13:23.940
No, Your Honor, 'cause at the time
273
00:13:23.940 --> 00:13:26.130
they would not have technically been able to.
274
00:13:26.130 --> 00:13:28.920
What are you saying is the time?
275
00:13:28.920 --> 00:13:31.350
At the time that they filed the petition,
276
00:13:31.350 --> 00:13:33.810
they could not have gotten a section 18 wholesaler
277
00:13:33.810 --> 00:13:35.730
certificate because they were a,
278
00:13:35.730 --> 00:13:37.940
not a domestic Massachusetts company.
279
00:13:37.940 --> 00:13:42.480
It was the petition filed after Tennessee or before?
280
00:13:42.480 --> 00:13:44.910
It was filed after Tennessee.
281
00:13:44.910 --> 00:13:46.560
But before the commission said
282
00:13:46.560 --> 00:13:48.183
that they're no longer enforcing the residency to require.
283
00:13:48.183 --> 00:13:52.680
That or didn't, when did the ABCC stop?
284
00:13:52.680 --> 00:13:55.710
When did it react to Tennessee?
285
00:13:55.710 --> 00:13:58.530
Your Honor, that's slightly unclear from the record.
286
00:13:58.530 --> 00:13:59.640
Okay.
During the briefing
287
00:13:59.640 --> 00:14:03.210
at the motion for judgment on the pleading stage,
288
00:14:03.210 --> 00:14:06.180
an affidavit was submitted by the commission
289
00:14:06.180 --> 00:14:09.660
saying that after they had evaluated post Tennessee,
290
00:14:09.660 --> 00:14:12.720
and I don't know that they gave a specific date since then,
291
00:14:12.720 --> 00:14:14.360
at some point they stopped enforcing this.
292
00:14:14.360 --> 00:14:16.230
So if they stopped that enforcement
293
00:14:16.230 --> 00:14:18.873
before you filed your petition?
294
00:14:20.670 --> 00:14:22.620
I would say, Your Honor, if they had stopped
295
00:14:22.620 --> 00:14:26.250
the enforcement before the issue itself arose
296
00:14:26.250 --> 00:14:28.860
before we were cut off from our supplier
297
00:14:28.860 --> 00:14:31.380
and at that point had a chance to get,
298
00:14:31.380 --> 00:14:33.300
become a section 18 licensee
299
00:14:33.300 --> 00:14:35.040
and get those protections,
300
00:14:35.040 --> 00:14:36.240
that would've made a difference.
301
00:14:36.240 --> 00:14:37.073
But by the time kind of this-
302
00:14:37.073 --> 00:14:38.490
Why would that make a difference?
303
00:14:38.490 --> 00:14:40.770
'Cause I thought there was a representation in your brief
304
00:14:40.770 --> 00:14:42.210
that there's no time limit
305
00:14:42.210 --> 00:14:46.263
as on when you can file the 25E petition.
306
00:14:47.190 --> 00:14:49.200
I don't believe that's actually raised
307
00:14:49.200 --> 00:14:51.150
in the brief.
Is there a time limit?
308
00:14:52.410 --> 00:14:53.820
I'm not sure of the time limit.
309
00:14:53.820 --> 00:14:56.070
But there's no argument in this case
310
00:14:56.070 --> 00:14:57.840
that this was not timely filed.
311
00:14:57.840 --> 00:14:59.883
No, no, but if there's no time limit.
312
00:15:02.824 --> 00:15:06.193
Oh, well, Your Honor, yeah, theoretically,
313
00:15:08.010 --> 00:15:09.540
although it's never been raised,
314
00:15:09.540 --> 00:15:11.730
if your question is at this point,
315
00:15:11.730 --> 00:15:15.810
could S&H now get a section 18 license and then-
316
00:15:15.810 --> 00:15:17.820
Or, you know, one month later than it did.
317
00:15:17.820 --> 00:15:19.470
And then bring 25E challenge.
318
00:15:19.470 --> 00:15:22.980
Go get a license and have brought the challenge afterwards
319
00:15:22.980 --> 00:15:25.200
because Tennessee was decided
320
00:15:25.200 --> 00:15:27.780
before you filed your petition.
321
00:15:27.780 --> 00:15:30.150
You don't actually then go
322
00:15:30.150 --> 00:15:33.510
and seek to become a licensed wholesaler.
323
00:15:33.510 --> 00:15:36.600
Instead you just file a petition.
324
00:15:36.600 --> 00:15:41.600
As far as we know, it may be that ABCC had already changed
325
00:15:42.150 --> 00:15:43.740
its position with respect
326
00:15:43.740 --> 00:15:48.740
to instate and out of state entities being entitled
327
00:15:50.100 --> 00:15:52.143
to become licensed wholesalers.
328
00:15:53.280 --> 00:15:55.290
Why doesn't all that matter?
329
00:15:55.290 --> 00:15:57.000
So, Your Honor, I don't believe it would be fair
330
00:15:57.000 --> 00:15:59.970
to hold my client to the standard of knowing
331
00:15:59.970 --> 00:16:02.250
what the ABCC is doing internally
332
00:16:02.250 --> 00:16:03.600
having never said it publicly.
333
00:16:03.600 --> 00:16:08.520
But maybe to the standard of seeking to find out
334
00:16:08.520 --> 00:16:12.453
by filing an application to become a licensed wholesaler.
335
00:16:14.130 --> 00:16:16.110
It is possible that that might have been a way,
336
00:16:16.110 --> 00:16:18.810
but that's a very roundabout way to do it.
337
00:16:18.810 --> 00:16:20.640
And also the issue here, there is,
338
00:16:20.640 --> 00:16:23.370
there's no timeline necessarily when you have
339
00:16:23.370 --> 00:16:26.100
to file the 25E petition that's raised.
340
00:16:26.100 --> 00:16:30.810
But practically, once you're cut off from a supplier,
341
00:16:30.810 --> 00:16:31.950
you're going to go out of business
342
00:16:31.950 --> 00:16:33.750
unless you get immediate relief.
343
00:16:33.750 --> 00:16:36.570
And that's why you go immediately to the commission
344
00:16:36.570 --> 00:16:39.180
and say, can you please give us this relief
345
00:16:39.180 --> 00:16:42.180
that basically the supplies can keep coming to us
346
00:16:42.180 --> 00:16:43.890
so that we can stay in business.
347
00:16:43.890 --> 00:16:46.020
How long was it after you were cut off
348
00:16:46.020 --> 00:16:47.310
that you filed the petition?
349
00:16:47.310 --> 00:16:50.250
I thought it was, there was some separation in time.
350
00:16:50.250 --> 00:16:53.043
I don't believe it was more than a month or so.
351
00:16:58.320 --> 00:17:00.900
Further questions.
Oh, can I further
352
00:17:00.900 --> 00:17:01.920
address the commerce clause?
353
00:17:01.920 --> 00:17:04.920
Just, I just wanna address the similarly situated issue,
354
00:17:04.920 --> 00:17:05.753
just so it's clear.
355
00:17:05.753 --> 00:17:07.560
Give you a minute.
Thank you, Your Honor.
356
00:17:07.560 --> 00:17:09.930
So the similarly situated,
357
00:17:09.930 --> 00:17:12.390
the way that test works in the context
358
00:17:12.390 --> 00:17:14.010
of a dormant commerce clause,
359
00:17:14.010 --> 00:17:15.960
it's an economic market test.
360
00:17:15.960 --> 00:17:18.150
It's not a, in-state regulation versus
361
00:17:18.150 --> 00:17:19.710
out-of-state regulation test.
362
00:17:19.710 --> 00:17:22.320
The key questions are the in-state entities
363
00:17:22.320 --> 00:17:24.570
and the out-of-state entities selling the same
364
00:17:24.570 --> 00:17:26.640
product to the same market.
365
00:17:26.640 --> 00:17:28.650
And that's exactly what's going on here.
366
00:17:28.650 --> 00:17:31.710
In-state wholesalers sell alcoholic beverages
367
00:17:31.710 --> 00:17:33.570
to other state wholesalers.
368
00:17:33.570 --> 00:17:36.300
And my client, the out-of-state license wholesaler also
369
00:17:36.300 --> 00:17:39.390
sells alcoholic beverages to in-state wholesalers.
370
00:17:39.390 --> 00:17:42.033
But not to retailers.
Not to retailers.
371
00:17:43.154 --> 00:17:44.843
Thank you, counsel.
Thank you, Your Honor.
372
00:18:00.240 --> 00:18:02.027
Attorney Fimognari.
373
00:18:02.940 --> 00:18:03.990
Good afternoon, Your Honors.
374
00:18:03.990 --> 00:18:06.630
Assistant Attorney General Christine Fimognari
375
00:18:06.630 --> 00:18:08.100
on behalf of the Appellee,
376
00:18:08.100 --> 00:18:10.590
the Alcoholic Beverages Control Commission.
377
00:18:10.590 --> 00:18:12.720
The court should affirm the commission's decision
378
00:18:12.720 --> 00:18:15.450
below which held that petitions under general law,
379
00:18:15.450 --> 00:18:19.500
chapter 1 38, section 25E can only be invoked
380
00:18:19.500 --> 00:18:20.970
by Massachusetts wholesalers
381
00:18:20.970 --> 00:18:23.940
who are licensed under section 18.
382
00:18:23.940 --> 00:18:26.190
Because the commission's interpretation was based
383
00:18:26.190 --> 00:18:29.910
on the unambiguous statutory text, the court does not need
384
00:18:29.910 --> 00:18:32.217
to reach the canon of constitutional avoidance
385
00:18:32.217 --> 00:18:34.230
that the appellants propose.
386
00:18:34.230 --> 00:18:35.910
But even if the court were to find
387
00:18:35.910 --> 00:18:38.700
that the statute was ambiguous, the court should defer
388
00:18:38.700 --> 00:18:41.220
to the commission's reasonable interpretation
389
00:18:41.220 --> 00:18:44.160
because it's consistent with the statutory scheme,
390
00:18:44.160 --> 00:18:45.750
the statutory purpose,
391
00:18:45.750 --> 00:18:48.120
it does not violate the dormant commerce clause
392
00:18:48.120 --> 00:18:50.670
and it avoids the absurd result
393
00:18:50.670 --> 00:18:54.540
of having a Massachusetts State Agency regulate sales
394
00:18:54.540 --> 00:18:56.340
that occur entirely outta the state.
395
00:18:56.340 --> 00:18:57.173
I get that, I get that part.
396
00:18:57.173 --> 00:18:58.980
I'm just trying to understand.
397
00:18:58.980 --> 00:19:01.590
The US Supreme Court test on the dormant commerce clause
398
00:19:01.590 --> 00:19:05.130
as far as I can figure it out, is that it's,
399
00:19:05.130 --> 00:19:06.990
you can't discriminate,
400
00:19:06.990 --> 00:19:10.060
you can't discriminate against outta state entities
401
00:19:11.160 --> 00:19:13.110
who are doing, who are basically performing
402
00:19:13.110 --> 00:19:14.343
the same function.
403
00:19:16.980 --> 00:19:21.980
Here the only people who can become licensed wholesalers,
404
00:19:22.080 --> 00:19:24.480
right, are Massachusetts corporations.
405
00:19:24.480 --> 00:19:27.480
Is that ones with a domicile here, right?
406
00:19:27.480 --> 00:19:28.440
Is that right?
407
00:19:28.440 --> 00:19:31.500
Well, Your Honor, the residency requirement is no longer
408
00:19:31.500 --> 00:19:33.750
being enforced in light of Tennessee wines.
409
00:19:33.750 --> 00:19:36.960
Okay, so now back to Justice Wolohojian's question.
410
00:19:36.960 --> 00:19:40.230
So if they had applied, if S&H had applied
411
00:19:40.230 --> 00:19:44.880
to be a licensed wholesaler, they would've been given that?
412
00:19:44.880 --> 00:19:46.950
Only if they met the other requirements
413
00:19:46.950 --> 00:19:48.090
of section 18.
414
00:19:48.090 --> 00:19:49.200
And you'll see that section-
415
00:19:49.200 --> 00:19:51.120
Meaning that they set up a business here
416
00:19:51.120 --> 00:19:54.360
that you could make them tax, you know,
417
00:19:54.360 --> 00:19:56.370
subject to your taxation procedures
418
00:19:56.370 --> 00:19:57.900
and everything else, is that what you're saying?
419
00:19:57.900 --> 00:20:01.260
Yes, Your Honor, because section 18 has other requirements
420
00:20:01.260 --> 00:20:04.440
such as having a warehouse in the Commonwealth,
421
00:20:04.440 --> 00:20:09.440
only making purchases from the primary American source,
422
00:20:09.510 --> 00:20:12.030
only paying certain excise taxes.
423
00:20:12.030 --> 00:20:13.970
And if you look to the language and-
424
00:20:13.970 --> 00:20:16.680
So is Justice Wolohojian's question then dispositive
425
00:20:16.680 --> 00:20:17.520
of the whole case?
426
00:20:17.520 --> 00:20:18.870
Because they didn't,
427
00:20:18.870 --> 00:20:22.020
because you would've given them this if they sought it
428
00:20:22.020 --> 00:20:26.640
and they didn't seek it, the rest of this is kind
429
00:20:26.640 --> 00:20:29.370
of just academic.
430
00:20:29.370 --> 00:20:31.110
That could be one way to resolve the case, Your Honor.
431
00:20:31.110 --> 00:20:34.110
Yes, we would, we would agree that they didn't, you know,
432
00:20:34.110 --> 00:20:36.240
seek something that would be-
433
00:20:36.240 --> 00:20:38.580
And 'cause-
Is that a, sorry.
434
00:20:38.580 --> 00:20:41.430
Go ahead.
Is a quasi standing issue
435
00:20:41.430 --> 00:20:45.300
or is that a, some other kind of, or mootness
436
00:20:45.300 --> 00:20:50.300
or prematurity or what maybe rubric does that fall under?
437
00:20:50.940 --> 00:20:52.140
Well, Your Honor, it's difficult here
438
00:20:52.140 --> 00:20:56.965
because the case arose out of the 25E petition
439
00:20:56.965 --> 00:20:59.010
to the commission.
440
00:20:59.010 --> 00:21:02.460
And so the commission didn't develop a factual record
441
00:21:02.460 --> 00:21:04.494
as to the parties, you know,
442
00:21:04.494 --> 00:21:06.810
applications or things like that.
443
00:21:06.810 --> 00:21:10.020
So the case has proceeded through a comparison
444
00:21:10.020 --> 00:21:13.680
of the statutory definitions of licensed wholesalers.
445
00:21:13.680 --> 00:21:16.800
And so we've been speaking about it in the abstract.
446
00:21:16.800 --> 00:21:21.800
So, but is it, is my understanding correct
447
00:21:22.170 --> 00:21:26.193
that at the time they filed the 25E petition,
448
00:21:27.300 --> 00:21:32.300
ABCC had already changed its interpretation,
449
00:21:34.680 --> 00:21:39.680
let's say, of section 18B, I guess
450
00:21:41.280 --> 00:21:44.280
in light of the Tennessee case?
451
00:21:44.280 --> 00:21:45.113
Yes, Your Honor.
452
00:21:45.113 --> 00:21:46.560
But to be fair to the other side,
453
00:21:46.560 --> 00:21:49.590
there hadn't been a public pronouncement of that.
454
00:21:49.590 --> 00:21:51.540
And so the public pronouncement didn't come
455
00:21:51.540 --> 00:21:53.568
until the affidavit was filed in this case.
456
00:21:53.568 --> 00:21:56.610
Can I ask a further question along the same lines,
457
00:21:56.610 --> 00:21:59.370
was the opposite inference also out there
458
00:21:59.370 --> 00:22:01.890
that they couldn't get such a license
459
00:22:01.890 --> 00:22:03.420
because you had made it clear that
460
00:22:03.420 --> 00:22:05.820
that was not available to them?
461
00:22:05.820 --> 00:22:07.860
I'm just trying to figure out whether the reason
462
00:22:07.860 --> 00:22:09.570
they didn't make this argument
463
00:22:09.570 --> 00:22:13.470
or attempt to get themselves out of this bind was
464
00:22:13.470 --> 00:22:15.300
because they were being told
465
00:22:15.300 --> 00:22:18.063
they couldn't become a Massachusetts wholesaler.
466
00:22:19.230 --> 00:22:20.550
Your Honor, I have no knowledge of
467
00:22:20.550 --> 00:22:21.660
what they were or weren't told.
468
00:22:21.660 --> 00:22:23.580
I'm just asking about what the record shows.
469
00:22:23.580 --> 00:22:25.380
The record doesn't show anything about that, Your Honor.
470
00:22:25.380 --> 00:22:29.430
But at the time they filed a 25E petition,
471
00:22:29.430 --> 00:22:34.320
the agency was saying we are adhering
472
00:22:34.320 --> 00:22:38.370
to the residency requirements written
473
00:22:38.370 --> 00:22:42.090
into section 18 that there has been no change
474
00:22:42.090 --> 00:22:43.200
in that policy.
475
00:22:43.200 --> 00:22:46.260
The only change had come from the Supreme Court
476
00:22:46.260 --> 00:22:48.780
that said that is unconstitutional.
477
00:22:48.780 --> 00:22:49.980
That's correct Your Honor.
Okay.
478
00:22:49.980 --> 00:22:51.600
That's correct.
479
00:22:51.600 --> 00:22:54.303
When you say residency requirements,
480
00:22:55.710 --> 00:22:57.540
meaning having a warehouse here
481
00:22:57.540 --> 00:23:02.160
or meaning that you were a Massachusetts, you know,
482
00:23:02.160 --> 00:23:05.280
somehow satisfying that you're a Massachusetts corporation.
483
00:23:05.280 --> 00:23:07.140
I'm just trying to understand what.
484
00:23:07.140 --> 00:23:10.830
The latter, Your Honor, because in the Tennessee wine case
485
00:23:10.830 --> 00:23:13.110
and in the Granholm case, there's a distinction drawn
486
00:23:13.110 --> 00:23:16.380
between residency requirements in these three tier systems
487
00:23:16.380 --> 00:23:19.050
and in-state presence requirements.
488
00:23:19.050 --> 00:23:21.840
And so there's a difference between having, you know,
489
00:23:21.840 --> 00:23:23.250
a warehouse in Massachusetts
490
00:23:23.250 --> 00:23:25.230
where you store products in the state that's subject
491
00:23:25.230 --> 00:23:28.680
to inspections and being a resident of Massachusetts.
492
00:23:28.680 --> 00:23:32.190
And the Tennessee wine case, the Supreme Court said
493
00:23:32.190 --> 00:23:36.330
that the residency requirement was not a fundamental aspect
494
00:23:36.330 --> 00:23:38.610
of the three tier distribution scheme,
495
00:23:38.610 --> 00:23:41.430
but it didn't address in state
496
00:23:41.430 --> 00:23:43.020
physical premise requirements.
497
00:23:43.020 --> 00:23:47.010
And it in fact noted that the retailers that issue in
498
00:23:47.010 --> 00:23:49.410
that case had in-state physical premises,
499
00:23:49.410 --> 00:23:50.940
which would help for regulation.
500
00:23:50.940 --> 00:23:52.560
And that's part of why they rejected
501
00:23:52.560 --> 00:23:55.500
the residency requirement.
502
00:23:55.500 --> 00:23:56.850
But Your Honors, I'd like to-
503
00:23:56.850 --> 00:23:59.250
But I again, 'cause I just, I just wanna make sure
504
00:23:59.250 --> 00:24:00.720
I fully get this.
505
00:24:00.720 --> 00:24:04.650
So at the time they're seeking,
506
00:24:04.650 --> 00:24:07.440
at the time they're bringing this 25E,
507
00:24:07.440 --> 00:24:11.880
you have not been allowing someone to be
508
00:24:11.880 --> 00:24:16.050
a licensed wholesaler unless what?
509
00:24:16.050 --> 00:24:19.470
They had a warehouse and they were what?
510
00:24:19.470 --> 00:24:20.580
A resident of the Commonwealth.
511
00:24:20.580 --> 00:24:24.300
Okay, and that was unconstitutional
512
00:24:24.300 --> 00:24:27.150
once the Supreme Court issued that decision
513
00:24:27.150 --> 00:24:29.160
'cause they're saying it's okay
514
00:24:29.160 --> 00:24:31.560
to distinguish them based on having a warehouse,
515
00:24:31.560 --> 00:24:34.590
requiring them to have a warehouse was required
516
00:24:34.590 --> 00:24:36.510
but not making them a resident.
517
00:24:36.510 --> 00:24:38.370
Yes, Your Honor.
And when we look
518
00:24:38.370 --> 00:24:41.850
at this record, we're not gonna be able to discern
519
00:24:41.850 --> 00:24:46.180
whether these guys have been properly informed of this
520
00:24:47.790 --> 00:24:50.403
'cause it's a gonna be an ambiguous record.
521
00:24:51.900 --> 00:24:53.566
Yes, Your Honor. There's nothing in the record about
522
00:24:53.566 --> 00:24:55.080
whether they've been informed of this.
523
00:24:55.080 --> 00:24:58.560
But I would say that it's not relevant to the question
524
00:24:58.560 --> 00:25:00.626
before the court of whether
525
00:25:00.626 --> 00:25:05.626
the commission has jurisdiction under 25E over entities
526
00:25:06.030 --> 00:25:09.480
that are not licensed wholesalers in Massachusetts that goes
527
00:25:09.480 --> 00:25:12.330
to the residency requirement of section 18.
528
00:25:12.330 --> 00:25:14.100
And whether that's constitutional
529
00:25:14.100 --> 00:25:17.430
and the appellants are not challenging that here.
530
00:25:17.430 --> 00:25:19.560
They're challenging section 25E.
531
00:25:19.560 --> 00:25:23.040
And they attempt to inject ambiguity into the language
532
00:25:23.040 --> 00:25:26.670
any licensed wholesaler in section 25E by saying
533
00:25:26.670 --> 00:25:29.400
that must mean anyone anywhere in the country
534
00:25:29.400 --> 00:25:33.060
who has a wholesaler license.
535
00:25:33.060 --> 00:25:36.150
But we know that can't be the case based on common sense
536
00:25:36.150 --> 00:25:38.760
and the overall statutory scheme.
537
00:25:38.760 --> 00:25:40.350
The commission-
The phrase licensed
538
00:25:40.350 --> 00:25:43.410
wholesaler is not defined anywhere
539
00:25:43.410 --> 00:25:46.050
as a phrase licensed wholesaler.
540
00:25:46.050 --> 00:25:47.040
Am I correct?
541
00:25:47.040 --> 00:25:48.570
There's no definition, Your Honor,
542
00:25:48.570 --> 00:25:53.570
but section 18 is titled Wholesalers and Importers Licenses
543
00:25:53.820 --> 00:25:56.940
and it provides that licenses as wholesalers
544
00:25:56.940 --> 00:25:58.840
and importers may be provided.
545
00:25:58.840 --> 00:26:00.993
Sure, so what I'm wondering is,
546
00:26:02.610 --> 00:26:04.200
I mean, licensed wholesalers,
547
00:26:04.200 --> 00:26:07.263
since it's not explicitly a defined term,
548
00:26:08.610 --> 00:26:11.430
I understand at least linguistically to mean
549
00:26:11.430 --> 00:26:14.460
a wholesaler who is licensed.
550
00:26:14.460 --> 00:26:15.360
Yes, Your Honor, I'd agree with that.
551
00:26:15.360 --> 00:26:17.760
Okay, so that would have two parts.
552
00:26:17.760 --> 00:26:21.237
One is, was this particular entity a wholesaler
553
00:26:21.237 --> 00:26:23.820
and is this particular entity licensed?
554
00:26:23.820 --> 00:26:26.520
We know it was not licensed.
555
00:26:26.520 --> 00:26:29.130
So then the question is, was it a wholesaler?
556
00:26:29.130 --> 00:26:31.560
What's your position on that question?
557
00:26:31.560 --> 00:26:35.040
Your Honor, if you look to the language
558
00:26:35.040 --> 00:26:39.030
of section 18B, it says no in the second paragraph.
559
00:26:39.030 --> 00:26:42.300
No person who sell holds a certificate under this section
560
00:26:42.300 --> 00:26:45.540
shall hold or be granted a license under section 18.
561
00:26:45.540 --> 00:26:47.370
So no person who is a certificate
562
00:26:47.370 --> 00:26:49.800
of compliance holder can hold a wholesaler
563
00:26:49.800 --> 00:26:50.910
license in Massachusetts.
564
00:26:50.910 --> 00:26:52.560
It can't be both.
It cannot be both,
565
00:26:52.560 --> 00:26:53.393
Your Honor.
566
00:26:53.393 --> 00:26:54.600
And they were not operating this both
567
00:26:54.600 --> 00:26:57.120
because they were not making a sale to a retailer
568
00:26:57.120 --> 00:26:58.960
and the appellants argued that-
569
00:26:58.960 --> 00:27:00.450
Could be both.
570
00:27:00.450 --> 00:27:04.470
So your answer is both a legal answer and a factual answer.
571
00:27:04.470 --> 00:27:05.790
The legal answer being
572
00:27:05.790 --> 00:27:09.240
because of 18B, they can't be both a certificate holder
573
00:27:09.240 --> 00:27:13.860
and a wholesaler license.
574
00:27:13.860 --> 00:27:16.410
And the factual question, the factual answer is,
575
00:27:16.410 --> 00:27:18.990
and they were never selling to retailers.
576
00:27:18.990 --> 00:27:21.180
So they're not a wholesaler.
577
00:27:21.180 --> 00:27:22.140
Yes, Your Honor.
Okay.
578
00:27:22.140 --> 00:27:25.330
And it's also worth mentioning that
579
00:27:26.370 --> 00:27:27.810
the statutory scheme of
580
00:27:27.810 --> 00:27:31.920
what the commission can regulate is entities doing business
581
00:27:31.920 --> 00:27:33.330
in the Massachusetts market.
582
00:27:33.330 --> 00:27:36.300
That's the operative transaction that 25E protects.
583
00:27:36.300 --> 00:27:41.300
And section 18 only allows wholesalers
584
00:27:41.520 --> 00:27:44.340
to make purchases from other licensees.
585
00:27:44.340 --> 00:27:47.130
It says, you know, those who are any manufacturer licensed
586
00:27:47.130 --> 00:27:49.020
under the provisions of section 19
587
00:27:49.020 --> 00:27:52.470
or holders of certificate of compliance under section 18B.
588
00:27:52.470 --> 00:27:55.830
So when the wholesaler is under section 18
589
00:27:55.830 --> 00:27:58.410
is making a purchase, that's a transaction
590
00:27:58.410 --> 00:27:59.700
that comes into Massachusetts.
591
00:27:59.700 --> 00:28:03.510
And we know that because section 18 also says that in order
592
00:28:03.510 --> 00:28:05.820
to ensure the necessary control of traffic
593
00:28:05.820 --> 00:28:08.490
and alcoholic beverages, et cetera, et cetera,
594
00:28:08.490 --> 00:28:11.640
the shipment of such beverages into this commonwealth
595
00:28:11.640 --> 00:28:13.590
except as provided in this section
596
00:28:13.590 --> 00:28:16.170
and two other sections is hereby prohibited.
597
00:28:16.170 --> 00:28:19.410
So the alcoholic product only enters Massachusetts
598
00:28:19.410 --> 00:28:22.770
once it is purchased by a licensed wholesaler.
599
00:28:22.770 --> 00:28:24.900
And Your Honors, the transaction
600
00:28:24.900 --> 00:28:28.320
that the appellants are trying to invoke the protections
601
00:28:28.320 --> 00:28:32.580
of 25 E here did not occur within the Massachusetts market.
602
00:28:32.580 --> 00:28:35.790
It's a section 18B certificate of compliance holder
603
00:28:35.790 --> 00:28:40.790
who is located in Colorado and California making a purchase
604
00:28:40.980 --> 00:28:45.330
and having sales relationships with an Austrian brewery
605
00:28:45.330 --> 00:28:47.340
that has nothing to do with Massachusetts.
606
00:28:47.340 --> 00:28:50.160
It's not until the section 18B certificate
607
00:28:50.160 --> 00:28:52.230
of compliance holder makes a sale
608
00:28:52.230 --> 00:28:54.210
to the section 18 licensed wholesaler
609
00:28:54.210 --> 00:28:56.370
that it comes within the Massachusetts market
610
00:28:56.370 --> 00:28:59.583
and then within the regulatory authority of the commission.
611
00:29:01.113 --> 00:29:06.113
Why can't a licensed wholesaler under 25E
612
00:29:06.300 --> 00:29:11.100
include 18B certificate holders?
613
00:29:11.100 --> 00:29:14.880
Because to be a certificate holder, you have to be licensed
614
00:29:14.880 --> 00:29:17.163
to sell in Massachusetts.
615
00:29:19.029 --> 00:29:19.862
I'm sorry, Your Honor,
616
00:29:19.862 --> 00:29:21.030
I'm not sure I understand your question.
617
00:29:21.030 --> 00:29:25.290
So it's convoluted, but, and I don't have a voice today,
618
00:29:25.290 --> 00:29:30.290
but licensed wholesaler, right, as a term
619
00:29:30.360 --> 00:29:34.170
could arguably include an 18B certificate holder
620
00:29:34.170 --> 00:29:37.140
because an 18B certificate holder
621
00:29:37.140 --> 00:29:40.233
is somebody who's has a license.
622
00:29:41.970 --> 00:29:44.640
I understand that that could be an interpretation,
623
00:29:44.640 --> 00:29:47.100
Your Honor, but it wouldn't be a reasonable interpretation
624
00:29:47.100 --> 00:29:48.990
here because it would require the commission
625
00:29:48.990 --> 00:29:51.660
to regulate activity outside of the state
626
00:29:51.660 --> 00:29:55.650
and that would first off create the risk of inconsistent.
627
00:29:55.650 --> 00:29:59.100
So when we read licensed wholesaler,
628
00:29:59.100 --> 00:30:03.870
it has to be a wholesaler licensed in Massachusetts.
629
00:30:03.870 --> 00:30:05.610
Yes, Your Honor. And if you look at the language
630
00:30:05.610 --> 00:30:09.000
of section 18B where the legislature intended to refer
631
00:30:09.000 --> 00:30:12.510
to licensees that had licenses granted in other states,
632
00:30:12.510 --> 00:30:14.160
they indicated that.
633
00:30:14.160 --> 00:30:16.230
The first section of, the first sentence
634
00:30:16.230 --> 00:30:18.870
of section 18B says you can issue a certificate
635
00:30:18.870 --> 00:30:21.360
of compliance to a licensee having a place
636
00:30:21.360 --> 00:30:23.490
of business located and a license granted
637
00:30:23.490 --> 00:30:25.650
outside the commonwealth.
638
00:30:25.650 --> 00:30:27.270
Your Honor, I see I've exceeded my time,
639
00:30:27.270 --> 00:30:30.570
but if I could just briefly address one more point.
640
00:30:30.570 --> 00:30:31.836
All right, you've got
641
00:30:31.836 --> 00:30:32.760
the same minute he did.
642
00:30:32.760 --> 00:30:33.600
Thank you, Your Honor.
643
00:30:33.600 --> 00:30:36.150
I just wanna direct Your Honor's attention
644
00:30:36.150 --> 00:30:37.560
to the Anheuser-Busch case,
645
00:30:37.560 --> 00:30:41.250
which is 75 Mass App Court 203, that's cited in the brief.
646
00:30:41.250 --> 00:30:45.750
And in that case there's a discussion of the interpretation
647
00:30:45.750 --> 00:30:50.670
of the phrase a license under section 18.
648
00:30:50.670 --> 00:30:55.670
And in interpreting that section, the appeals court
649
00:30:56.370 --> 00:31:00.150
referenced specifically that section 18 wholesaler licenses,
650
00:31:00.150 --> 00:31:01.680
there's different types.
651
00:31:01.680 --> 00:31:02.730
If you look in section 18,
652
00:31:02.730 --> 00:31:04.920
there's one for all alcoholic beverages
653
00:31:04.920 --> 00:31:07.980
and there's some for just malt beverages and wine.
654
00:31:07.980 --> 00:31:10.350
And the court, the appeals court in that case said
655
00:31:10.350 --> 00:31:14.670
if the legislature had intended to include both types
656
00:31:14.670 --> 00:31:16.620
of licensed wholesalers under section 18,
657
00:31:16.620 --> 00:31:20.310
they would've used the word any license under section 18.
658
00:31:20.310 --> 00:31:21.960
So it's completely plausible
659
00:31:21.960 --> 00:31:24.900
and reasonable that the phrase any licensed wholesaler here
660
00:31:24.900 --> 00:31:27.390
is simply referring to the two types
661
00:31:27.390 --> 00:31:29.880
of wholesalers under section 18.
662
00:31:29.880 --> 00:31:34.150
And that would avoid the impermissible construction
663
00:31:35.760 --> 00:31:36.930
proffered by the appellants.
664
00:31:36.930 --> 00:31:39.984
And for those reasons, we'd ask the court to affirm.
665
00:31:39.984 --> 00:31:41.284
Thank you.
Thank you.
666
00:31:49.950 --> 00:31:50.940
Good afternoon, Your honors.
667
00:31:50.940 --> 00:31:52.080
May I please the court?
668
00:31:52.080 --> 00:31:56.288
Dennis McKenna, representing the other appellees,
669
00:31:56.288 --> 00:31:58.893
Winittoo Global Beer and Stiegl.
670
00:32:01.410 --> 00:32:05.250
In my time, I wanted to address the two questions
671
00:32:05.250 --> 00:32:10.250
Justice Wolohojian had, and that was the timing
672
00:32:10.680 --> 00:32:14.040
of the termination versus the timing of the filing.
673
00:32:14.040 --> 00:32:18.120
The notice of termination was January, 2019.
674
00:32:18.120 --> 00:32:22.953
The filing of the 25 petition was December, 2019.
675
00:32:23.880 --> 00:32:28.080
And the second question was, I believe referring
676
00:32:28.080 --> 00:32:32.983
to why can't the language of 25E meaning,
677
00:32:35.010 --> 00:32:37.860
actually it might have been Justice Wendlandt,
678
00:32:37.860 --> 00:32:40.830
be a certificate compliance holder
679
00:32:40.830 --> 00:32:44.160
who is a wholesaler in some other state.
680
00:32:44.160 --> 00:32:49.080
And that is because it, you have to be a wholesaler
681
00:32:49.080 --> 00:32:52.470
in Massachusetts for the three levels.
682
00:32:52.470 --> 00:32:57.470
So in this case, S&H was at the supplier level.
683
00:32:57.720 --> 00:33:02.220
They purchased from my client, Stiegl, an Austrian brewer.
684
00:33:02.220 --> 00:33:05.070
They purchased it to go somewhere else,
685
00:33:05.070 --> 00:33:06.870
not into Massachusetts.
686
00:33:06.870 --> 00:33:11.550
Stiegl would ship not into Massachusetts
687
00:33:11.550 --> 00:33:14.760
depending on whether it was east or west,
688
00:33:14.760 --> 00:33:19.760
but neither east nor west ever sold to a retailer.
689
00:33:20.610 --> 00:33:24.390
And in Massachusetts the three tiers are supplier,
690
00:33:24.390 --> 00:33:27.773
wholesaler, and then retail with-
691
00:33:27.773 --> 00:33:31.680
I guess my question was a little more basic
692
00:33:31.680 --> 00:33:36.680
and maybe unreasonable as your council on your side said.
693
00:33:37.020 --> 00:33:42.020
But 18B talks about people who are licensed, right?
694
00:33:43.650 --> 00:33:48.510
And then 25E also talks about people who are licensed.
695
00:33:48.510 --> 00:33:51.840
And my question was really why can't that license
696
00:33:51.840 --> 00:33:56.840
in 18B refer to the same license as 25E?
697
00:33:56.970 --> 00:33:58.740
Because-
And you're saying it's
698
00:33:58.740 --> 00:34:00.330
because of this three tier system?
699
00:34:00.330 --> 00:34:01.163
Is that your answer?
700
00:34:01.163 --> 00:34:02.940
Right, it's any licensed wholesaler,
701
00:34:02.940 --> 00:34:04.860
meaning wholesaler in Massachusetts
702
00:34:04.860 --> 00:34:07.350
because a wholesaler in Massachusetts is selling
703
00:34:07.350 --> 00:34:12.090
to the retail level sections 12 and 15.
704
00:34:12.090 --> 00:34:13.740
So section 18 at level two.
705
00:34:13.740 --> 00:34:15.480
Right, but it doesn't have to be that way.
706
00:34:15.480 --> 00:34:18.090
Maybe it's the most reasonable interpretation,
707
00:34:18.090 --> 00:34:21.000
but it could be any licensed wholesaler
708
00:34:21.000 --> 00:34:25.567
is somebody like S&H East or West who has a license
709
00:34:28.020 --> 00:34:30.570
and is a wholesaler, they're not really the supplier.
710
00:34:30.570 --> 00:34:32.583
Your client is the supplier, right?
711
00:34:33.540 --> 00:34:36.750
No, my client's the manufacturer
712
00:34:36.750 --> 00:34:40.410
who would be an 18B certificate
713
00:34:40.410 --> 00:34:42.720
of compliance holder.
714
00:34:42.720 --> 00:34:45.330
So they can sell to another certificate
715
00:34:45.330 --> 00:34:48.300
of compliance holder being their importer,
716
00:34:48.300 --> 00:34:51.090
which is S&H, not a wholesaler.
717
00:34:51.090 --> 00:34:55.590
So my client can't sell to a wholesaler.
718
00:34:55.590 --> 00:34:58.830
Okay, my client, my client sells to an importer,
719
00:34:58.830 --> 00:35:02.583
which is the certificate of compliance holder being S&H.
720
00:35:03.780 --> 00:35:07.470
And the other reason I came to, we joined the brief
721
00:35:07.470 --> 00:35:11.040
of the ABCC, we have nothing to add to the amicus.
722
00:35:11.040 --> 00:35:12.780
The real world implication is
723
00:35:12.780 --> 00:35:15.570
that which is particularly emphasized by the amicus,
724
00:35:15.570 --> 00:35:19.380
which is expanding the ABCC's interpretation
725
00:35:19.380 --> 00:35:22.050
in the jurisdiction, it becomes extraterritorial.
726
00:35:22.050 --> 00:35:24.000
And what's happening in the Superior Court
727
00:35:24.000 --> 00:35:26.760
between not including the ABCC,
728
00:35:26.760 --> 00:35:30.870
but including my clients, is exactly what's the threat,
729
00:35:30.870 --> 00:35:34.620
which is the claim in the Superior court against Stiegl
730
00:35:34.620 --> 00:35:39.620
by the S&H East and West is based upon 25E.
731
00:35:39.840 --> 00:35:41.280
You could not terminate us,
732
00:35:41.280 --> 00:35:43.950
even though from my Austrian brewer's perspective,
733
00:35:43.950 --> 00:35:46.860
they saw S&H as an at will relationship.
734
00:35:46.860 --> 00:35:50.730
There was no written contract terminable at will.
735
00:35:50.730 --> 00:35:52.080
And that's what happened
736
00:35:52.080 --> 00:35:56.430
after several years according to the theory
737
00:35:56.430 --> 00:35:59.100
that's bootstrapped in the Superior Court case,
738
00:35:59.100 --> 00:36:01.230
but which is being argued in this court,
739
00:36:01.230 --> 00:36:05.760
that breach by the Austrian brewer gives rise to a breach
740
00:36:05.760 --> 00:36:10.253
of contract claim and treble damages exposing Stiegl
741
00:36:11.970 --> 00:36:15.090
to millions of dollars of alleged damages.
742
00:36:15.090 --> 00:36:16.803
That's the real world implication.
743
00:36:17.940 --> 00:36:20.610
If there are no further questions, I rest.
744
00:36:20.610 --> 00:36:21.443
Thank you.