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Affiliated Distillers Brands Corp. v. Sills

Decided: June 1, 1970.

AFFILIATED DISTILLERS BRANDS CORP., A CORPORATION OF THE STATE OF NEW YORK, RESPONDENT-CROSS-APPELLANT,
v.
ARTHUR J. SILLS, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, AND JOSEPH P. LORDI, DIRECTOR OF THE DIVISION OF ALCOHOLIC BEVERAGE CONTROL OF THE DEPARTMENT OF LAW AND PUBLIC SAFETY OF NEW JERSEY, APPELLANTS-CROSS-RESPONDENTS



For affirmance in part and reversal in part -- Justices Proctor, Hall, Schettino and Haneman and Judge Goldmann. Opposed -- None. The opinion of the court was delivered by Proctor, J.

Proctor

[56 NJ Page 253] Plaintiff, Affiliated Distillers Brands Corporation (Affiliated), is a wholly owned subsidiary of Schenley Industries, Inc., a Delaware corporation. The latter has been engaged for many years in distilling, blending, importing and marketing distilled spirits and wines. Affiliated brought this action in the Chancery Division seeking to

have Chapters 58 and 59 of the Laws of 1966 declared unconstitutional and enjoined as unenforceable. In the alternative, plaintiff sought a declaration that Chapter 58 is not applicable to it because it qualifies for an exception contained within the statute. The Chancery Division held that Chapter 58 was unconstitutional; it refused to pass upon the validity of Chapter 59 because the plaintiff failed to show a conflict between the latter statute and plaintiff's actions or plans. 106 N.J. Super. 458 (1969). The defendants, the State Attorney General and the Director of the Division of Alcoholic Beverage Control, appealed from the declaration of unconstitutionality of Chapter 58 and the plaintiff cross appealed from the ruling on Chapter 59. While these appeals were pending in the Appellate Division, we certified the matter on our own motion.

The two chapters which plaintiff attacks are amendments to certain statutes dealing with the regulation of the distribution of alcoholic beverages. Chapter 58 is an extension of New Jersey's "tied house" prohibition (N.J.S.A. 33:1-43) and deals with the manufacturer-wholesaler relationship. Chapter 59 deals with the separate problem of manufacturers discriminating among wholesalers. Affiliated's attacks on the legislation are primarily grounded on provisions of the United States and New Jersey Constitutions. It contends that the legislation is not in the public interest and was enacted for the "private, anti-competitive interests" of an organized group of wholesalers, the New Jersey Wine and Spirit Wholesalers Association (Association). In support of its claim, Affiliated produced evidence of the events leading up to the enactment of the challenged legislation.

For many years Affiliated has been the marketing agent for the various alcoholic beverages which Schenley manufactures and imports, and has held a plenary wholesale license under N.J.S.A. 33:1-11(1). The license allowed Schenley, through Affiliated, to promote the sales of its products with the various retail outlets. Had Affiliated filed a price list for the wholesale to retail sales of alcoholic

beverages, it could have sold directly to retailers, but it never filed such a list since its practice was to sell only to other wholesalers. In 1964, Affiliated became concerned about the deteriorating position of Schenley products in the New Jersey market. Affiliated's president testified that Schenley's share of sales in New Jersey had decreased from 22% to 6% between 1946 and 1964. It was his opinion that Schenley's position could be improved if Affiliated, through its current license, began selling on a wholesaler to retailer basis while at the same time retaining existing distributors. He believed that if Affiliated "operated our own wholesale house and put forth all of our own efforts, that we could stimulate retailer interest as well in our brands beyond that which we had and that using our own house as sort of a bell cow house, that the other distributors would be more alert and fight for the business and that our sales overall would show a considerable increase." He added that Affiliated did not intend to cut prices.

In accordance with its plan, Affiliated rented a warehouse, entered into a trucking contract, hired a sales manager, and began to interview prospective salesmen. On April 1, 1966, Affiliated submitted for filing to the Division of Alcoholic Beverage Control its "Price and Discount Listings" for sale from wholesaler to retailer so that it might begin selling Schenley products to retailers immediately. Association objected to the filing because the regular quarterly filing date had passed. The Director rejected the filing.*fn1

Prior to the next quarterly filing date, the Association's attorney drafted legislation to block Schenley and others from entering the wholesale to retail business. We need not recount the events leading up to the passage of

the legislation here attacked. These events are extensively set forth in the trial court's opinion. See 106 N.J. Super. at 461-470. It is enough to say that the Association sponsored and solicited support for the enactment of the legislation. As the trial judge correctly pointed out, however, the interest of the Association and its role in the passage of the legislation do not render the statute invalid if there is also a public need coupled with a reasonable attempt to satisfy that need. Id. at 470; Independent Electricians & Electrical Contractors' Association et al. v. New Jersey Board of Examiners of Electrical Contractors, 48 N.J. 413, 420-21 (1967). While the events preceding the enactment of this legislation impel us to examine it with a more critical eye, we must nonetheless determine, as in any other case of this nature, whether the legislation fulfills a public need. And in so determining, it must be remembered that because of its inherent evils liquor has always been dealt with as a subject apart. Borough of Fanwood v. Rocco, 33 N.J. 404 (1960); Paul v. Gloucester County, 50 N.J.L. 585, 595 (E. & A. 1888). Its sale may be prohibited entirely or severely curtailed. Borough of Fanwood v. Rocco, supra 33 N.J. at 411. While the constitutional protections of equal protection and due process are applicable to actions arising in this area, these protections must be viewed in the light of the broad power of the Legislature to regulate the sale of intoxicating beverages. Indeed, that power has been called "practically limitless." Blanck v. Mayor and Borough Council of Magnolia, 38 N.J. 484, 490 (1962); Meehan v. Excise Commissioners, 73 N.J.L. 382, 386 (Sup. Ct. 1906), aff'd 75 N.J.L. 557 (E. & A. 1908).

Chapter 58 (with the new language italicized) provides in pertinent part:

It shall be unlawful for any owner, part owner, stockholder or officer or director of any corporation, or any other person whatsoever interested in any way whatsoever in any brewery, winery, distillery or rectifying and blending plant, or any wholesaler of alcoholic beverages,

to conduct, own either in whole or in part, or be directly or indirectly interested in the retailing of any alcoholic beverages . . . .

It shall be unlawful for any owner, part owner, stockholder or officer or director of any corporation, or any other person or corporation whatsoever interested in any way whatsoever in any winery, distillery, or rectifying and blending plant, to conduct, own either whole or in part, or be directly or indirectly interested in the business of any licensee for the sale at wholesale to licensed retailers in New Jersey of any alcoholic beverages, other than malt alcoholic beverages, and such interest shall include any payments or delivery of money or property by way of loan or otherwise accompanied by an agreement to sell the product of said winery, distillery or rectifying and blending plant; except that the foregoing shall not apply in the case of a licensee for the sale at wholesale who on July 1, 1965, and thereafter until the effective date of this ...


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