Flying Dog Brewery, LLC v. North Carolina Alcoholic Beverage Control Comm'n

603 F.Supp.3d 257

FLYING DOG BREWERY, LLC, Plaintiff,

v.The NORTH CAROLINA ALCOHOLIC BEVERAGE CONTROL COMMISSION, Alexander Duke "Zander" Guy Jr., Norman A. Mitchell Sr., Karen L. Stout, Terrance L. Merriweather, and Cindy Mesino, Defendants.

No. 5:21-CV-343-BO

United States District Court, E.D. North Carolina, Western Division.

Signed May 13, 2022

Filed May 16, 2022

Marc J. Randazza, Randazza Legal Group, PLLC, Las Vegas, NV, Thomas Gregory Doucette, The Law Offices of T. Greg Doucette, PLLC, Durham, NC, W. Michael Boyer, Greensboro, NC, for Plaintiff.

Robert J. Pickett, North Carolina Department of Justice Insurance Section, Raleigh, NC, Jeffrey B. Welty, Jeff Welty, Attorney at Law, Durham, NC, for Defendants.

ORDER

TERRENCE W. BOYLE, UNITED STATES DISTRICT JUDGE

This cause comes before the Court on defendants’ motion to dismiss, plaintiff's motion for summary judgment, and defendants’ motion for summary judgment. The appropriate responses and replies have been filed, or the time for doing so has expired, and a hearing on the matters was held before the undersigned on April 19, 2022, at Raleigh, North Carolina. In this posture, the matters are ripe for disposition.

BACKGROUND

Plaintiff commenced this action by filing a complaint on August 26, 2021. [DE 1]. Plaintiff alleged that its First Amendment rights were violated when defendants denied plaintiff's application to approve its Freezin’ Season Winter Ale label. Specifically, plaintiff's complaint challenged 14B N.C. Admin. Code 15B.1003(a)(2) both on its face and as applied to plaintiff as a prior restraint on protected expression and as inherently vague and ambiguous, implicating both due process and speech concerns.

Plaintiff also sought a temporary restraining order and a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure. The Court denied plaintiff's motion for temporary restraining order, finding that plaintiff had failed to sufficiently demonstrate that ex parte relief was warranted. [DE 7]. After a hearing, the Court denied plaintiff's motion for preliminary injunction in light of the ABC Commission having approved plaintiff's Freezin’ Season Winter Ale label after plaintiff initiated this action. [DE 20]. The Court further concluded that although there were no longer grounds on which to grant preliminary injunctive relief, plaintiff's case was not moot as it had raised both an as-applied and a facial challenge to the subject regulation.

Defendants then moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. [DE 22]. Plaintiff filed an amended complaint [DE 24] and its motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. [DE 27]. In its amended complaint, plaintiff alleges a single claim that 14B N.C. Admin. Code 15B.1003(a)(2) violates the First Amendment because it is invalid on its face as an unconstitutional prior restraint on protected expression, is invalid on its face as inherently vague and ambiguous, and is invalid as applied to bar the advertisement and sale of Freezin’ Season Winter Ale where defendants lack any valid interest which would justify censorship of plaintiff's Freezin’ Season label.

Defendants answered the amended complaint and filed a cross-motion for summary judgment. [DE 28 & 33]. Defendants’ motion provides that the parties have agreed to focus their pre-discovery summary judgment motions on the core issue in the case, namely the constitutionality of the challenged regulation, but that by doing so defendants do not waive any defenses not raised. Plaintiff's motion provides that it has conditionally stipulated that each defendant is liable for $1 in damages and that if, and only if, its motion is granted it will seek no additional actual damages, without waiving any right to attorney fees.

DISCUSSION

At the outset, the Court denies as moot defendants’ motion to dismiss the original complaint in light of the filing of an amended complaint. See Fawzy v. Wauquiez Boats SNC , 873 F.3d 451, 455 (4th Cir. 2017). Remaining for the Court's consideration are the cross-motions for summary judgment regarding the constitutionality of the challenged regulation.

A motion for summary judgment may not be granted unless there are no genuine issues of material fact for trial and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If that burden has been met, the non-moving party must then come forward and establish the specific material facts in dispute to survive summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In determining whether a genuine issue of material fact exists for trial, a trial court views the evidence and the inferences in the light most favorable to the nonmoving party. Scott v. Harris , 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). However, "[t]he mere existence of a scintilla of evidence" in support of the nonmoving party's position is not sufficient to defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

"A dispute is genuine if a reasonable jury could return a verdict for the nonmoving party.... and [a] fact is material if it might affect the outcome of the suit under the governing law." Libertarian Party of Virginia v. Judd , 718 F.3d 308, 313 (4th Cir. 2013) (internal quotations and citations omitted). Speculative or conclusory allegations will not suffice. Thompson v. Potomac Elec. Power Co. , 312 F.3d 645, 649 (4th Cir. 2002). When deciding cross-motions for summary judgment, a court considers each motion separately and resolves all factual disputes and competing inferences in the light most favorable to the opposing party. Rossignol v. Voorhaar , 316 F.3d 516, 523 (4th Cir. 2003). The court must ask "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson , 477 U.S. at 251, 106 S.Ct. 2505.

A. Statement of the facts

The following material facts appear to be undisputed. [DE 27-1; 41]. Plaintiff is a brewery with its headquarters and principal place of business in Frederick, Maryland. Plaintiff creates, brews, and sells craft beer, shipping over 1.3 million cases of beer annually for distribution to corporate customers in the retail, bar, and restaurant business. Plaintiff currently distributes its beer for sale in North Carolina.

Plaintiff has collaborated with the artist Ralph Stedman who produces, under license, illustrations for plaintiff's corporate imaging, including beer labels, beer packaging, posters, and clothing. Mr. Stedman created the image at issue in this case which appears on plaintiff's Freezin’ Season Winter Ale twelve-ounce beer bottle label. The image on the label consists of a nude cartoon figure standing next to a campfire. See [DE 24 p. 5].

North Carolina state laws governs "the sale, purchase, transportation, manufacture, consumption, and possession of alcoholic beverages in North Carolina." N.C. Gen. Stat. § 18B-100. All advertising of alcoholic beverages must comply with the North Carolina Alcoholic Beverage Control Commission's (hereinafter "ABC Commission") rules, which may include rules prohibiting or regulating advertising of alcoholic beverages contrary to the public interest. Id. § 18B-105(a)-(b). The ABC Commission adopted the challenged rule, 14B N.C. Admin. Code 15B.1003, in 1982 and it was readopted effective July 1, 2018. The rule provides that "An advertisement or product label on any alcoholic product sold or distributed in this State shall not contain any statement, design, device, or representation" which "depicts the use of alcoholic beverages in a scene that is determined by the [ABC] Commission to be undignified, immodest, or in bad taste". 14B N.C. Admin. Code 15B. 1003(a)(2) (hereinafter "challenged regulation").

In June 2021, plaintiff sent samples of beer labels and keg collars to the ABC Commission, including its label for its Freezin’ Season Winter Ale. On July 23, 2021, an ABC Commission employee, defendant Mesino, sent an email informing plaintiff that its Freezin’ Season Winter Ale beer label would not be approved. In response to plaintiff's inquiry as to why, the employee cited the challenged regulation, highlighting the words "bad taste" in yellow and stating "[a]s you can see below the image below is seen as inappropriate to many here." [DE 32 pp. 8-11].

Plaintiff then filed this First Amendment challenge to the regulation at issue. On September 7, 2021, the ABC Commission sent a letter to plaintiff approving its Freezin’ Season Winter Ale beer label. Since 1993, the ABC Commission has rendered administrative denials of 318 alcoholic beverage labels. Since 2009, 19 labels have been formally rejected as being undignified, immodest, or in bad taste.

B. Analysis

(1) Plaintiff's beer label is commercial speech.

Whether speech is commercial or non-commercial impacts the degree of protection provided by the First Amendment. Bolger v. Youngs Drug Prod. Corp. , 463 U.S. 60, 65, 103 S.Ct. 2875, 77 L.Ed.2d 469 (1983). Commercial speech is that expression which is "related solely to the economic interests of the speaker and its audience." Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of New York , 447 U.S. 557, 561, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980) (Central Hudson ).

The only case of which the Court is aware that has squarely considered whether beer labels constitute commercial or non-commercial speech is Bad Frog Brewery, Inc. v. New York State Liquor Authority , 134 F.3d 87, 97 (2d Cir. 1998). The court in Bad Frog Brewery held that the beer label at issue was...