Retail Digital Network v. Ramona Prieto
2017 U.S. App. LEXIS 10548
| 9th Cir. | 2017Background
- Retail Digital Network (RDN) placed digital advertising screens in liquor retail stores and shared revenue with those retailers; alcohol manufacturers/wholesalers refused to contract with RDN citing California Bus. & Prof. Code § 25503(f)–(h).
- Section 25503(f)–(h) bars manufacturers/wholesalers from providing anything of value to retailers for in-store advertising, a tied-house prevention measure supporting California’s triple-tier alcohol distribution scheme.
- RDN sued the Acting Director of the California Dept. of Alcoholic Beverage Control seeking declaratory and injunctive relief under the First Amendment (commercial speech challenge).
- The district court granted summary judgment to the state based on Ninth Circuit precedent in Actmedia v. Stroh; a three-judge panel initially reversed, prompting rehearing en banc.
- The en banc Ninth Circuit majority held Sorrell did not displace Central Hudson; it reaffirmed Actmedia’s central holding that § 25503(f)–(h) survives Central Hudson intermediate-scrutiny analysis, but disapproved Actmedia’s reliance on a temperance justification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sorrell altered Central Hudson so that content- or speaker-based commercial-speech restrictions receive greater-than-intermediate scrutiny | Sorrell requires heightened scrutiny beyond Central Hudson’s intermediate test for content- or speaker-based commercial speech | Sorrell applied Central Hudson and did not replace it; Central Hudson remains controlling for commercial speech | Sorrell did not fundamentally change Central Hudson; Central Hudson intermediate scrutiny continues to apply |
| Whether § 25503(f)–(h) is a permissible restriction on commercial speech under Central Hudson | RDN: § 25503(f)–(h) fails Central Hudson (esp. third/fourth factors) because it does not directly advance state interests and is not narrowly tailored | State: § 25503(f)–(h) directly/materially advances the substantial interest in preventing tied-houses and is sufficiently tailored; Actmedia controls | § 25503(f)–(h) survives Central Hudson as applied to preventing tied-houses; Actmedia remains controlling on that basis |
| Whether California’s temperance interest justifies § 25503(f)–(h) under Central Hudson | RDN: statute does not materially reduce alcohol advertising or consumption and thus fails to advance temperance | State: limiting point-of-purchase paid ads helps temperance directly/indirectly | Court: rejects temperance as a direct/material justification — temperance fails Central Hudson’s third factor |
| Whether Actmedia remains binding authority | RDN: Actmedia is irreconcilable with post-Central Hudson opinions, esp. Sorrell | State: Actmedia is consistent with Supreme Court precedent and controlling | Court: Reaffirms Actmedia’s core holding (validity of § 25503 for tied-house prevention) but disapproves its temperance rationale |
Key Cases Cited
- Actmedia, Inc. v. Stroh, 830 F.2d 957 (9th Cir. 1986) (upholding § 25503(h) under Central Hudson to prevent tied-houses)
- Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557 (1980) (four-part test for commercial speech restrictions)
- Sorrell v. IMS Health Inc., 564 U.S. 552 (2011) (addressing content- and speaker-based burdens on commercial speech; applied Central Hudson to strike statute)
- Bd. of Trs. of State Univ. of N.Y. v. Fox, 492 U.S. 469 (1989) (explaining tailoring/fit for Central Hudson’s fourth factor)
- Metromedia, Inc. v. City of San Diego, 453 U.S. 490 (1981) (analysis of sign and advertising regulation and tailoring)
- Discovery Network, Inc. v. City of Cincinnati, 507 U.S. 410 (1993) (applied Central Hudson in content-based commercial-speech context)
- Thompson v. W. States Med. Ctr., 535 U.S. 357 (2002) (applied Central Hudson; declined to abandon it)
- Rubin v. Coors Brewing Co., 514 U.S. 476 (1995) (struck regulation as irrationally underinclusive relative to asserted interest)
- Greater New Orleans Broad. Ass’n v. United States, 527 U.S. 173 (1999) (invalidated commercial restriction that failed to directly advance interest)
- Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, 425 U.S. 748 (1976) (commercial speech receives First Amendment protection)