Orion Wine Imports, LLC v. Applesmith

440 F.Supp.3d 1139

ORION WINE IMPORTS, LLC and Peter E. Creighton, Plaintiffs,

v.Jacob APPLESMITH, in his official capacity as Director of the California Department of Alcoholic Beverage Control, Defendant.

No. 2:18-cv-01721-KJM-DB

United States District Court, E.D. California.

Signed February 19, 2020

Filed February 21, 2020

Robert D. Epstein, Pro Hac Vice, James A. Tanford, Pro Hac Vice, Kristina M. Swanson, Pro Hac Vice, Epstein Cohen Seif & Porter, LLP, Indianapolis, IN, Ravn Reece Whitington, Porter Simon, PC, James Ernest Simon, Truckee, CA, for Plaintiffs.

Lykisha Beasley, Office Of The Attorney General, Sacramento, CA, for Defendant.

ORDER

Kimberly J. Mueller, CHIEF UNITED STATES DISTRICT JUDGE

Plaintiffs Orion Wine Imports, LLC ("Orion") and Peter E. Creighton bring this action under 42 U.S.C. § 1983 challenging the constitutionality of California Business & Professions Code section 23661 and related California statutes, which permit alcoholic beverages to be imported into California only when consigned and delivered to a licensed importer at the importer's licensed premises or at a licensed public warehouse. Third Am. Compl. ("TAC"), ECF No. 53. Defendant Jacob Applesmith moves to dismiss plaintiffs' Third Amended Complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Mot., ECF No. 56-1. Plaintiffs filed an opposition, ECF No. 57, and defendant a reply, ECF No. 61. The court held a hearing on the motion to dismiss, at which James A. Tanford appeared for plaintiffs, Lykisha Beasley appeared for defendant, and Robert A. Brundage appeared for amici California Beer and Beverage Distributors ("CBBD") and Wine and Spirits Wholesalers of California ("WSWC"). As explained below, the court GRANTS the motion.

I. BACKGROUND

The facts of this case were laid out in the court's prior order on the original motion to dismiss, and the court reproduces them as necessary here. See Order, ECF No. 52 at 2–4. Plaintiff Orion Wine Imports, LLC is a Florida-based and -licensed importer and wholesaler of wine that would like to import, sell and deliver its products directly to California retailers. TAC ¶¶ 4, 22-23. Plaintiff Peter Creighton is a Florida resident and sole member of Orion Wine Imports, LLC. Id. ¶¶ 5, 29. As sole member of the LLC, Creighton collects all profits from Orion and reports them on his personal tax return. Id. ¶ 31. Creighton travels to various wine-producing foreign countries, buys wine from foreign wineries, imports the wine through Orion, and markets the wine to retailers, restaurants and hotels. Id. ¶¶ 5, 30. Creighton seeks to practice his profession and market, sell and deliver wine directly to California retailers. Id. ¶ 40. Defendant Jacob Applesmith is sued in his official capacity as the Director of the California Department of Alcoholic Beverage Control. Id. ¶ 6.

California Business and Professions Code section 23661 is a provision of California's Alcoholic Beverage Control Act ("ABC Act") regulating where alcoholic beverages imported from outside California are to be consigned and delivered upon arrival in the state. Plaintiffs seek a declaratory judgment that section 23661 discriminates against interstate commerce in violation of the Commerce Clause and the Privileges and Immunities Clause of Article IV of the U.S. Constitution. Id. at 9–10. Plaintiffs also seek to enjoin California from enforcing section 23661 and to require the State to permit plaintiffs to sell and deliver wine directly to California retailers without consigning it to a California importer. Id. at 9–10. Specifically, the challenged statute provides in pertinent part as follows:

[A]lcoholic beverages may be brought into this state from without this state for delivery or use within the state only by common carriers and only when the alcoholic beverages are consigned to a licensed importer, and only when consigned to the premises of the licensed importer or to a licensed importer or customs broker at the premises of a public warehouse licensed under this division.

Cal. Bus. & Prof. Code § 23661.

As a provision of the ABC Act, section 23661 is part of California's three-tiered licensing scheme for the sale and distribution of alcoholic beverages. The three tiers refer to: (1) manufacturers of alcoholic beverages, (2) wholesalers and (3) retailers. Id. § 23320(a). Under the three-tier system, a manufacturer generally sells its wine to a licensed wholesaler, who then sells and delivers the wine to a licensed in-state retailer. Id. §§ 23356(b), 23378. The retailer, in turn, sells the wine to consumers. Id. §§ 23026, 23394, 23402. Importers typically fit into this system at the manufacturer and wholesaler tiers. Id. § 23017. The holder of an importer's license cannot sell or deliver wine to retailers unless it also has a wholesaler's license. Id. §§ 23374, 23374.5, 23374.6, 23775. If an importer also holds a wholesaler's license, then the importer can transfer the imported beverages to itself under the wholesaler's license and use the wholesaler's license to sell to retailers. Id. §§ 23374, 23378, 23402. An LLC holding a license under the Act "shall maintain a record of its members at the principal office of the company in California and the record of its members shall be available to the department for inspection." Id. § 23405.2.

Section 23661, the statute at issue here, requires imported alcoholic beverages to be consigned only to licensed importers and delivered to licensed importers either at their licensed premises or at a licensed public warehouse. Id. § 23661. The statute thus regulates where in the three-tier structure alcoholic beverages are to be consigned and delivered upon arrival in California, funneling imported alcoholic beverages into California's three-tier system at the manufacturer or wholesaler levels. The statute also regulates where imported alcoholic beverages may be physically delivered: to a licensed importer either at its licensed premises or at a licensed public warehouse. A public warehouse is "any place licensed for the storage of, but not for sale of, alcohol, or alcoholic beverages, for the account of other licensees." Id. §§ 23036, 23375 ("A public warehouse license authorizes the storage of alcoholic beverages for the account of another licensee...."). California law allows an "out-of-state business" to obtain a license to have alcoholic beverages come "to rest, [be] stored, and [be] shipped from" a licensed public warehouse. Id. § 24041.

Plaintiffs allege California's three-tiered scheme discriminates against out-of-state wholesalers and importers of wine. TAC at 2. They allege a business located within California can obtain a combination of licenses allowing it to import, sell and deliver wine directly to California retailers, while a business located outside California cannot obtain the same combination of licenses and must instead sell its wine to in-state importers or wholesalers, who may then deliver the wine to California retailers. Id. ¶¶ 7–10. They allege the statute requires all wine from out-of-state distributors "must be consigned to a California-based importer with premises in the state." Id. ¶ 9. They further allege if Orion wanted to obtain California importer and wholesale licenses, it would have to open a physical office in California to meet the requirement that records of "sales, inventory, taxes, and ownership be maintained and available for inspection in California," that Orion claims is mandated by section 23405.2. Id. ¶ 19.

Defendant contests plaintiffs' characterization of the effect of the law. He points out there is no requirement in the statutes at issue that any licensee be "California-based" as Orion alleges. Mem. P. & A., ECF No. 56-1 at 4. He also contends plaintiffs fail to address the alternative provided for in section 23661 to consigning wine to a licensed importer: namely, consigning it to a licensed public warehouse. Id. Defendant asserts Orion, as an out-of-state business, can obtain the importer's and wholesaler's licenses and consign its wine at a licensed public warehouse. Id. at 5.

On August 16, 2019, the court granted defendant's motion to dismiss plaintiffs' Second Amended Complaint. Order, ECF No. 52. At the same time, the court granted plaintiffs leave to amend their Commerce Clause claim to clarify whether and to what extent they must establish a physical presence in California to obtain the licenses they seek. Order at 11. The court also granted plaintiffs leave to amend their Privileges and Immunities claim to establish Creighton's standing as an individual with an injury distinct from that alleged by Orion, if possible. Order at 15.

Plaintiffs filed their Third Amended Complaint shortly thereafter, ECF No. 53, and defendant filed the instant Motion to Dismiss, ECF No. 56. Plaintiffs oppose.

ECF No. 57. Amici CBBD and WSWC ("the amici") filed an amicus brief. ECF No. 58. Plaintiffs filed a motion to strike the amicus brief, ECF No. 59, which the court granted only insofar as amici purported to offer evidence, but denied as to the balance of the brief. ECF No. 60. Defendant filed a reply brief. ECF No. 61. Plaintiffs filed a reply to the amicus brief. ECF No. 62. Amici replied to plaintiffs' reply. ECF No. 63. As allowed by the court, defendant replied to plaintiffs' reply. ECF No. 64.

II. LEGAL STANDARD

A. Rule 12(b)(1)

The U.S. Constitution "limits the jurisdiction of federal courts to ‘Cases’ and ‘Controversies.’ " Lujan v. Defs. of Wildlife , 504 U.S. 555, 559, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). "Standing to sue is a doctrine rooted in the traditional understanding of a case or controversy." Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S. Ct. 1540, 1547, 194 L.Ed.2d 635 (2016) ; see also Lujan , 504 U.S. at 560, 112 S.Ct. 2130 ("[T]he core component of standing is an essential and unchanging part of the case-or-controversy requirement of Article III.").

A plaintiff possesses Article III standing only if he or she has "(1)...