Legal Issues:

MBWA LEGAL UPDATE AUGUST 24, 2015

Missouri Broadcasters Association et al. v. Lacy et al. - (Challenge to ATC Advertising Regulation)

Case #: 13-4034-CV-C-FJG, pending in the U.S. District Court for the Western District of Missouri (Jefferson City), District Judge Fernando Gaitan

Background:  The case was initiated in February 2013.  Plaintiffs filed an amended complaint on April 26 challenging Missouri regulations regarding discount advertising prohibitions and below cost advertising prohibitions and the statute regarding the single retailer advertising prohibition.  The complaint alleges that the laws prohibit commercial speech protected under the First Amendment and that they have a chilling effect on speech and advertising sales.  The complaint also alleges inconsistent enforcement, and seeks a declaration by the court that the laws are unconstitutional. 

Defendants filed a Motion to Dismiss, and Plaintiffs filed a Motion for Summary Judgment.  Defendants’ Motion to Dismiss was denied on August 26, and they filed an answer on September 9.  Plaintiffs’ Motion for Summary Judgment was denied as moot when the court ordered that further discovery be conducted.  The parties may file or resubmit dispositive motions by June 15, 2014.

On May 5, 2014, Plaintiffs’ motion for summary judgment was provisionally denied pending completion of discovery.  The parties have certified that discovery is complete.  On June 16, Plaintiffs filed their motion for summary judgment.  Defendants filed their suggestions in opposition on July 10, and Plaintiffs filed reply suggestions on July 25. 

Court Order:  On March 31, 2015, the Court issued its Order on Plaintiffs’ Motion for Summary Judgment.

After determining that Plaintiffs had standing to challenge the advertising rules, the Court turned to the merits of the constitutional claims.  The Court analyzed the challenged regulations separately from § 311.070.4(10), RSMo, indicating in a footnote that the statute is different in that it is not a ban on advertising discount prices, but instead, regulates the ways a manufacturer or producer may advertise on behalf of a retailer.

The Court determined that the proposed commercial speech would be constitutionally protected, and that the government’s interest in regulating the speech (responsible consumption, combat underage drinking, and maintaining an orderly marketplace) is legitimate.  In analyzing whether the regulations directly advance the government’s claimed interest, the Court noted that Plaintiffs would not have challenged the regulations and statute unless they believed that sales would increase if the regulations were lifted.  Basically, restrictions on discount alcohol advertising will alleviate the harms raised by the government.

However, the Court acknowledged that it was not clear from the record if there is a reason why manufacturers of intoxicating liquor other than beer are wine are treated differently in 11 CSR 70-2.240(5)(G), and it instructed the parties to further brief the issue.  In all other respects, though, the Court found that the Defendants established that the regulations directly advance the government’s interests.

The Court also found that the regulations have a reasonable fit to the harms they seek to alleviate.  And, therefore, the Court denied Plaintiff’s motion for summary judgment as to the two regulations, and granted Defendants’ motion to dismiss as to all claims related to the two regulations, with the exception of the issue related to 11 CSR 70-2.240(5)(G)’s treatment of manufacturers of intoxicating liquor other than beer or wine.

With regard to § 311.070.4(10), RSMo, Plaintiffs argued that it directs the content of advertising.  The Court determined otherwise, and stated that the statute is not compelled advertising but should be considered a limited allowance for some advertising paid for by producers or wholesalers that mentions the names of retailers.  As such, the Court denied Plaintiffs’ motion for summary judgment as to the statute, and granted Defendants’ motion to dismiss, as well.

In summary, Plaintiffs’ motion for summary judgment was denied, and all claims were dismissed with the exception of the sub-issue of 11 CSR 70-2.240(5)(G)’s disparate treatment of manufacturers of intoxicating liquor other than beer or wine, which shall be addressed by the parties in briefs filed by April 17, 2015.

Briefs:  In their briefs, Defendants argue that the exception in the regulation is solely to make it consistent with § 311.355, RSMo.  Defendants assert that the statute was introduced at the behest of the distilled spirits industry, and that the beer and wine industry was apparently not interested in the cash rebates.    Defendants also assert that Plaintiffs did not specifically attack the exception, and it is not so irrational that it is unconstitutional on its face.  Defendants characterize the failure of the exception to apply to beer and wine as a business or political decision, and state that the exception is consistent with the state’s goals.  In terms of a proposed remedy, Defendants argue that the constitutionality of the exception is outside the scope of the pleadings and cannot be reached in the litigation.  In other words, Defendants contend that no separate claim was made regarding the exception, and that there is no reason why the court shouldn’t dismiss Plaintiffs’ complaint.  Defendants also note that even if the exception is found to be unconstitutional, § 311.355 is still in effect and, similarly, it was not specifically alleged to be unconstitutional by Plaintiffs.

In their briefs, Plaintiffs argue that because of § 311.355, the Division had to carve out an exception for manufacturers other than beer or wine to avoid a conflict between its regulation and the statute.  Plaintiffs assert there is no way to justify the State’s discrimination.  Plaintiffs do not argue that the statute burdens speech and do not challenge it.  Plaintiffs also contend that the only workable remedy is to find the regulation unconstitutional and void the entire provision.   According to Plaintiffs, the statute will remain in force, and because it does not restrict truthful speech, its existence does no harm.

If the court follows Defendants argument, then it will not reach a decision on the constitutionality of the regulation, and it will stand.

If the court follows Plaintiffs argument, then 11 CSR 70-2.240(5)(G) will be voided in its entirety.

While a decision by the court will not invalidate § 311.355, it appears the parties may have different interpretations about what its existence means.

 

 

 

Updated May 2016
(MBWA News)

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