RETAIL DIGITAL NETWORK, LLC, Plаintiff-Appellant, v. Ramona PRIETO, as Acting Director of the California Department of Alcoholic Beverage Control, Defendant-Appellee.
No. 13-56069
United States Court of Appeals, Ninth Circuit.
June 14, 2017
Argued and Submitted En Banc January 19, 2017
861 F.3d 839
Olivier Taillieu (argued) and Raffi V. Zerounian, The Taillieu Law Firm, Los Angeles, California, for Plaintiff-Appellant.
Warren David Postman (argued), Kate Comerford Todd, and Warren Postman, U.S. Chamber Litigation Center, Washington, D.C.; Helgi C. Walker and Chad R. Mizelle, Gibson Dunn & Crutcher LLP, Washington, D.C.; for Amicus Curiae Chamber of Commerce of the United States of America.
Michael Brill Newman, Holland & Knight LLP, San Francisco, California, for Amicus Curiae Wine and Spirits Wholesalers of California, Inc.
Carl L. Blumenstein, Nossaman LLP, San Francisco, California, for Amicus Curiae California Craft Brewers Association.
Scott L. Nelson, Allison M. Zieve, and Julie A. Murray, Public Citizen Litigation Group, Washington, D.C., for Amicus Curiae Public Citizen, Inc.
Michael D. Madigan and Brandt F. Erwin, Madigan Dahl & Harlan P.A., Minneapolis, Minnesota, for Amici Curiae National Beer Wholesalers Association and Wine & Spirits Wholesalers of America, Inc.
Cory L. Andrews, Richard A. Samp, and Mark S. Chenoweth, Washington, D.C., as and for Amicus Curiae Washington Legal Foundation.
Bеfore: SIDNEY R. THOMAS, Chief Judge, and STEPHEN REINHARDT, ALEX KOZINSKI, WILLIAM A. FLETCHER, RONALD M. GOULD, RICHARD A. PAEZ, JOHNNIE B. RAWLINSON, JAY S. BYBEE, MILAN D. SMITH, JR., MARY H. MURGUIA and PAUL J. WATFORD, Circuit Judges.
Dissent by Chief Judge THOMAS
OPINION
PAEZ, Circuit Judge:
In this appeal, we consider Plaintiff-Appellant Retail Digital Network, LLC’s (“RDN”) First Amendment challenge to
This is not the first time we have considered such a challenge to
RDN argues that Actmedia is no longer good law because the Supreme Court’s decision in Sorrell v. IMS Health Inc., 564 U.S. 552, 131 S.Ct. 2653, 180 L.Ed.2d 544 (2011), fundamentally altered the Central Hudson test by adopting a more demanding standard for assessing restrictions on commercial speech. We disagree. Reviewing de novo, we hold that Sorrell did not modify the Central Hudson standard. We reaffirm Actmedia’s core holding, but we disapprove of Actmedia’s reliance on Cali
I.
A.
RDN installed and operated seven-foot digital screen displays in one-hundred wine and spirit retail stores throughout Southern California. On its screens, RDN ran advertisеments on a two-minute loop comprised of fifteen-second advertisements. RDN sold advertising slots to various companies, and, in turn, agreed to share a portion of its revenue with the retail stores.
RDN agreed to run advertisements for two alcohol manufacturers, St-Germain and Moët Hennessy. Those agreements, however, were short-lived because St-Germain and Moët Hennessy feared that the ABC would enforce
As a result of its inability to secure advertisement placements frоm alcohol manufacturers and wholesalers, RDN filed this lawsuit against Prieto, seeking a declaration that
Prieto moved for summary judgment, arguing that RDN lacked standing and that even if standing existed, she was entitled to judgment under Actmedia, which rejected a similar First Amendment challenge. The district court concluded that RDN had standing, but that Prieto nonetheless was entitled to summary judgment because Actmedia was not clearly irreconcilable with Sorrell or other subsequent Supreme Court cases.
RDN timely appealed. A three-judge panel of this court reversed and remanded for further proceedings.4 Retail Digital Network, LLC v. Appelsmith, 810 F.3d 638, 642 (9th Cir. 2016). The panel held that “Sorrell requires heightened judicial scrutiny of content-based restrictions on non-misleading сommercial speech regarding lawful products, rather than the intermediate scrutiny applied to [
To understand the purpose of
To prevent the formation of tied-houses after Prohibition, California enacted laws, including
[I]t is necessary and proper to require a separation among manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages in order to prevent suppliers from dominating local markets through vertical integration and to prevent excessive sales of alcoholic beverages produced by overly aggressive marketing techniques.
2015 Cal. Stat. Ch. 408.
As we observed in Actmedia,
II.
A.
As noted above, in Actmedia we rejected a First Amendment challenge to
In response to the ABC’s action against Coors, Actmedia filed a lawsuit seeking a declaration that Coors’ conduct did not violate
We affirmed, and in doing so, relied on Central Hudson to hold that
At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.
Id. at 566. The Central Hudson analysis is commonly referred to as “intermediate scrutiny.” See Fla. Bar v. Went For It, Inc., 515 U.S. 618, 623, 115 S.Ct. 2371, 132 L.Ed.2d 541 (1995) (“Mindful of these concerns, we engage in ‘intermediate’ scrutiny of restrictions on commercial speech, analyzing them under the framewоrk set forth in Central Hudson....”); see also Ashutosh Bhagwat, The Test that Ate Everything: Intermediate Scrutiny in First Amendment Jurisprudence, 2007 U. Ill. L. Rev. 783, 784–85 (explaining that the Court has created three tiers—rational basis review, intermediate scrutiny, and strict scrutiny—“to structure constitutional analysis” in free speech cases).
In applying the Central Hudson factors in Actmedia, we noted there was no dispute that the Coors advertisements displayed by Actmedia concerned lawful activity and were not misleading, thus satisfying the first factor. 830 F.2d at 965. As to the second factor, we observed that “there is little question that California has a ‘substantial’ interest in exercising its twenty-first amendment powers and regulating the structure of the alcoholic beverage industry in California....” Id. at 965–66. The third and fourth factors, however, required a more complex analysis. See id. at 966–68.
Regarding the third factor—whether
We also held that
Regarding the fourth factor, we acknowledged that, arguably, California could prеvent illegal payments “by careful policing of any advertising agreements made between retailers and manufacturers or wholesalers,” but that “it would be impossible for an agency like [the] ABC to determine whether an advertising company had paid an inordinately high price to a retailer or to investigate whether a retailer had in fact provided more than merely advertising services.” Id. In addition, we noted that such policing could interfere in the advertising process itself, and thereby create other First Amendment problems. Id. On balance, we held that
B.
Actmedia was decided only six years after Central Hudson. In the years that have followed, the Supreme Court has engaged in considerable debate about the contours of First Amendment protection for commercial speech, and whether Central Hudson provides a sufficient standard. See, e.g., Greater New Orleans Broad. Ass’n v. United States, 527 U.S. 173, 197, 119 S.Ct. 1923, 144 L.Ed.2d 161 (1999) (Thomas, J., concurring in the judgment); 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 517, 116 S.Ct. 1495, 134 L.Ed.2d 711 (1996) (Scalia, J., concurring in part and concurring in the judgment); Rubin v. Coors Brewing Co., 514 U.S. 476, 493–97, 115 S.Ct. 1585, 131 L.Ed.2d 532 (1995)
What the Supreme Court repeatedly has declined to do, however, is to fundamentally alter Central Hudson’s intermediate scrutiny standard. See, e.g., Thompson, 535 U.S. at 367–68 (“Although several Members of the Court have expressed doubts about the Central Hudson analysis and whether it should apply in particular cases, therе is no need in this case to break new ground.”) (citations omitted); see also Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 554–55, 121 S.Ct. 2404, 150 L.Ed.2d 532 (2001). RDN argues that Sorrell imposed such a change.
Indeed, RDN argues that for content- or speaker-based regulations of commercial speech, Sorrell requires courts to apply a greater level of scrutiny than Central Hudson previously required. For support, RDN points to Sorrell’s references to “heightened scrutiny,” which it interprets to mean scrutiny greater than intermediate scrutiny. RDN further relies on the Sorrell Court’s statement that “the outcome is the same whether a special commercial speech inquiry or a stricter form of judicial scrutiny is applied,” 564 U.S. at 571, 131 S.Ct. 2653, to argue that the Court applied a heightened form of scrutiny without elaborating as to its form.
RDN reads Sorrell too expansively. Contrary to RDN’s argument, Sorrell did not mark a fundamental departure from Central Hudson’s four-factor test, and Central Hudson continues to apply.8
Notably, the Sorrell Court referred to “heightened scrutiny” within the context of deciding whether
To the extent that Sorrell addressed whether the law at issue imposed a content- or speaker-based burden, that discussion also appeared in the Court’s consideration of whether
Further underscoring our conclusion, the Court cited Discovery Network, 507 U.S. at 418, for the proposition that “heightened judicial scrutiny” applies to content-based burdens on protected expression. Sorrell, 564 U.S. at 565. But Discovery Network did not adopt a new heightened standard for commercial speech; rather, the Court applied Central Hudson’s four-part framework for assessing restrictions on commercial speech. See Discovery Network, 507 U.S. at 416. In other words, it applied intermediate scrutiny. We are therefore not persuaded by RDN’s first argument that Sorrell’s references to “heightened scrutiny” mean something greater than intermediate scrutiny applies in commercial speech cases.
RDN’s second argument—that the Court implied a greater level of scrutiny applies by stating, “the outcome is the same whether a special commercial speech inquiry or a stricter form of judicial scrutiny is applied”—fares no better. See Sorrell, 564 U.S. at 571. In Sorrell, the Court entertained the potential application of a “stricter form of judicial scrutiny,” but ultimately applied Central Hudson, deeming it unnecessary to determine whether a stricter form of scrutiny would be appropriate because
Turning to the Central Hudson factors, the Court focused on the third and fourth factors, and described them thusly: “the State must show at least that the statute directly advances a substantial governmental interest and that the measure is drawn to achieve that interest.”10 Id. at 572 (citing Fox, 492 U.S. at 480–81; Central Hudson, 447 U.S. at 566). In analyzing those factors, the Court framed its discussion of
Moreover, in its analysis of the third and fourth factors, the Court relied on cases that applied Central Hudson. Sorrell, 564 U.S. at 573–79 (citing, e.g., Thompson, 535 U.S at 373–74 (applying Central Hudson, concluding that the regulation at issue failed to “directly advance” the government’s asserted interests, and rejecting as improper the government’s interest in suppressing “the dissemination of truthful commercial information in order to prevent members of the public from making bad decisions with the information”); Greater New Orleans Broad., 527 U.S. at 195 (applying Central Hudson and striking down an incoherent statute that failed to directly and materially advance the government’s asserted interest in limiting consumer demand for casino gambling); Edenfield, 507 U.S. at 767, 775 (observing thаt commercial speech is entitled to First Amendment protection, and articulating Central Hudson’s four-factor test); Discovery Network, 507 U.S. at 426, 428 (noting that “commercial speech can be subject to greater governmental regulation than noncommercial speech” but concluding that the city failed to establish Central Hudson’s fourth factor requiring a “fit” between the city’s goals and its chosen means)).
There is one other consideration that the Supreme Court acknowledged in Sorrell that persuades us that Central Hudson continues to set the standard for assessing restrictions on commercial speech. That consideration centers on one of the core principles that animates the Court’s approach to commercial speech—that commercial speech may be subject to greater regulation than non-commercial speech. See Sorrell, 564 U.S. at 579 (“[T]he government’s legitimate interest in protecting consumers from ‘commercial harms’ explains ‘why commercial speech can be subject to greater governmental regulation than noncommercial speech.’” (quoting Discovery Network, 507 U.S. at 426)). Requiring greater-than-intermediate yet lesser-than-strict scrutiny would both diminish that principle and impose an inscrutable standard. See Fox, 492 U.S. at 477 (“The ample scope of regulatory authority ... would be illusory if it were subject to a least-restrictive-means requirement, which imposes a heavy burden on the State.”).
In any event, because Sorrell applied Central Hudson, there is no need for us to “craft an exception to the Central Hudson standard.” Rubin, 514 U.S. at 482 n.2. “If a precedent of [the Supreme Court] has direct application in a case, ... the Court of Appeals should follow the case which directly controls, leaving to [the Supreme Court] the prerogative of overruling its own decisions.” Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989).
We are not alone in arriving at this conclusion. In commercial speech cases post-Sorrell, the Second, Fourth, Sixth, and Eighth Circuits similarly have, at bottom, continued to apply Central Hudson.12
C.
RDN contends that even if Sorrell did not fundamentally change the Central Hudson test, Actmedia incorrectly concluded that
To the extent that Actmedia upheld
Nonetheless, as we already have stated, disapproving the portion of Actmedia that relies on temperance does not negate the sound and well-reasoned conclusion that
AFFIRMED.
THOMAS, Chief Judge, dissenting:
I respectfully dissent. The key issue in this case is whether Actmedia Inc. v. Stroh, 830 F.2d 957 (9th Cir. 1986), is compatible with subsequent Supreme Court authority addressing commercial speech, culminating with Sorrell v. IMS Health, Inc., 564 U.S. 552, 131 S.Ct. 2653, 180 L.Ed.2d 544 (2011). Sorrell held that content-based restrictions on truthful, non-misleading commercial speech advertising lеgal goods and services require “heightened judicial scrutiny,” rather than traditional intermediate scrutiny under Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). Sorrell, 564 U.S. at 565–66, 131 S.Ct. 2653. Of course, the ultimate determination as to whether Sorrell altered the Central Hudson test is entirely up to the Supreme Court. However, I think the most reasonable reading of Sorrell is that it did.1 Therefore, I would hold that Actmedia is irreconcilable with Sorrell, expressly overrule Actmedia, and remand to allow the district court to conduct a purposive inquiry into the restricting statute, as required by Sorrell.
In previous decisions, the Supreme Court considered post-hoc rationalizations proffered by the government when assessing challenged restrictions. See, e.g., Edenfield v. Fane, 507 U.S. 761, 768, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993) (“Neither will we turn away if it appears that the stated interests are not the actual interests served by the restriction.”). Sorrell departs from this practice and requires a purposive inquiry into the restricting statute.2
Sorrell not only employed the phrase “heightenеd scrutiny” repeatedly in the opinion but also significantly added “drawn to achieve” language to the fourth prong of Central Hudson,3 as noted by Justice Breyer’s interpretation of the majority opinion. See, e.g., Sorrell, 564 U.S. at 588, 131 S.Ct. 2653 (Breyer, J., dissenting) (“Nor has this Court ever previously applied any form of ‘heightened’ scrutiny in any even roughly similar case.... The Court (suggesting a standard yet stricter than Central Hudson) says that we must give content-based restrictions that burden speech ‘heightened’ scrutiny.”) (both emphases in original). A contrary interpretation would effectively write out the “drawn to achieve” language, which Sorrell added to the Central Hudson test, and render the use of “heightened scrutiny” in the opinion entirely superfluous. Further, Sorrell’s two-step test would make no sense if intermediate scrutiny applies equаlly to content- and speaker-based regulations and non-content- and non-speaker-based regulations.
I therefore suggest that, under Sorrell, the purposive inquiry should be applied within the framework of the four-factor Central Hudson test, heightening the scrutiny historically applied at Central Hudson’s
The inquiry that I suggest does not test virtue—rather, it tests congruence. Thus, the first step is to discern the government’s purpose for regulating, and the second step is to determine whether there is “a fit between the legislature’s ends and the means chosen to accomplish those ends.” Sorrell, 564 U.S. at 572, 131 S.Ct. 2653 (citing Bd. of Trs. of State Univ. of N.Y. v. Fox, 492 U.S. 469, 480, 109 S.Ct. 3028, 106 L.Ed.2d 388 (1989)). A pretextual regulation could conceivably survive Central Hudson analysis (if it suppresses no more speech than necessary to vindicate an asserted substantial government interest), but fail Sorrell review (if the regulation’s underlying purpose was not to vindicate that substantial interest but rather to suppress a message disfavored by the government). In addition, in my view, a purposive inquiry means that the government cannot rely on post-hoc rationalizations to justify the statute.
Because the district court did not analyze the statute under the heightened scrutiny required by Sorrell, I would reverse and remand. Therefore, I respectfully dissent.
Tayler BAYER, Plaintiff-Appellant, v. NEIMAN MARCUS GROUP, INC., Defendant-Appellee.
No. 15-15287
United States Court of Appeals, Ninth Circuit.
June 26, 2017
Argued and Submitted February 13, 2017 San Francisco, California
Notes
No manufacturer, winegrower, manufacturer’s agent, California winegrower’s agent, rectifier, distiller, bottler, importer, or wholesaler, or any officer, director, or agent of any such person, shall do any of the following:
....
(f) Pay, credit, or compensate a retailer or retailers for advertising, display, or distribution service in connection with the advertising and sale of distilled spirits.
(g) Furnish, give, lend, or rent, directly or indirectly, to any person any decorations, paintings, or signs, other than signs advertising their own products as permitted by
(h) Pay money or give or furnish anything of value for the privilege of placing or painting a sign or advertisement, or window display, on or in any premises selling alcoholic beverages at retail.
The majority characterizes the addition of this language as “unremarkable,” but the fact that the Supreme Court has previously used various terms to describe the fourth factor does not mean that we should ignore its most recent formulation of the test.