Retail Digital Network v. Jacob Appelsmith
810 F.3d 638
9th Cir.2016Background
- California Business & Professions Code § 25503(f)–(h) (a tied-house provision) prohibits manufacturers/wholesalers (and their agents) from giving anything of value to retailers for advertising alcoholic products in retail premises. The law traces to post‑Prohibition concerns about vertical/horizontal integration and commercial bribery.
- Retail Digital Network, LLC (RDN) installs LCD advertising displays in stores and pays retailers a share of ad revenue; it alleges §25503 blocks alcoholic-beverage manufacturers from advertising on its displays in California and sued for a First Amendment declaration and injunction.
- The district court, relying on Ninth Circuit precedent Actmedia, Inc. v. Stroh, 830 F.2d 957 (9th Cir. 1986), held §25503 constitutional under Central Hudson intermediate scrutiny and granted summary judgment for the State.
- RDN argued intervening Supreme Court decisions (Rubin v. Coors Brewing Co., 44 Liquormart, and especially Sorrell v. IMS Health, Inc.) require heightened scrutiny of content- and speaker-based restrictions on non‑misleading commercial speech, rendering Actmedia obsolete.
- The Ninth Circuit (panel) held RDN had standing to bring the First Amendment challenge and concluded Sorrell altered the standard: content- or speaker-based restrictions on non‑misleading commercial speech about lawful products now require heightened judicial scrutiny, making Actmedia clearly irreconcilable with Sorrell.
- The Ninth Circuit reversed and remanded for the district court to apply heightened scrutiny on an open record, identifying evidentiary issues the State must address (whether paid point-of-sale ads actually risk tied-house evils or materially advance temperance and the fit/tailoring of §25503).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue over §25503 | RDN: threatened enforcement and criminal penalties enable RDN to challenge the law; its business is directly regulated | Appelsmith/State: (implicitly) challenge concerns third‑party speech and economic interests of others | Held: RDN has Article III and prudential standing to bring the First Amendment challenge because §25503 directly burdens its speech-conduct and threatens enforcement |
| Applicable level of scrutiny for §25503 | RDN: Sorrell requires heightened scrutiny for content- or speaker-based restrictions on non‑misleading commercial speech, so Actmedia’s Central Hudson intermediate review no longer controls | State: Actmedia remains controlling; Sorrell is consistent with Central Hudson and does not define/mandate heightened review beyond Central Hudson | |
| Validity of Actmedia after Sorrell | RDN: Actmedia is irreconcilable with Sorrell and must be overruled | State: Actmedia still valid; §25503 not a total ban and Sorrell does not clearly overrule Circuit precedent | Held: Actmedia is clearly irreconcilable with Sorrell; §25503 (a content- and speaker-based restriction) now must survive heightened judicial scrutiny |
| Remedy and next steps | RDN: requested relief declaring §25503 unconstitutional and enjoining enforcement | State: asked for summary judgment under Actmedia; wanted chance to develop facts if Actmedia disturbed | Held: Court reversed summary judgment and remanded on an open record for the district court to apply heightened scrutiny and allow the State to meet its burden on the third and fourth Central Hudson factors (fit/tailoring and material advancement) |
Key Cases Cited
- Actmedia, Inc. v. Stroh, 830 F.2d 957 (9th Cir. 1986) (upholding §25503 under Central Hudson; now held irreconcilable)
- Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011) (content- and speaker-based restrictions on non-misleading commercial speech require heightened scrutiny)
- Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557 (1980) (four‑part intermediate-scrutiny test for commercial speech)
- Coors Brewing Co. v. Miller, 514 U.S. 476 (1995) (commercial-speech limitation struck; government must show restriction materially advances its interest)
- 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996) (struck price‑advertising ban; skepticism toward paternalistic suppression of truthful commercial speech)
- Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, 425 U.S. 748 (1976) (recognition that truthful commercial speech proposing a transaction has First Amendment protection)