California v. Washington – Oral Argument – October 15, 1958

Media for California v. Washington

Audio Transcription for Oral Argument – October 16, 1958 in California v. Washington

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Earl Warren:

Number 12, State of California, Plaintiff, versus the State of Washington.

Mr. Howland, you may proceed.

May it please the Court.

I speak on behalf of the motion made by the State of California.

California, as leave of the Court, with permission to file a complaint in the original jurisdiction of this Court, the defendant is in the State of Washington.

The two States are the only parties to the proceeding.

The case involves trade barriers between those two States.

Washington has discriminated and thus discriminate against interstate commerce in wine.

In so doing, Washington denies the citizens of other States, trade privileges, in the sale and distribution of wine, which it freely accords to its own citizens.

It does so in order to protect its own wine industry against the competition of out-of-state and foreign wines.

And for this, we submit, there is no sanction in the Constitution of the United States.

Violated by these statutes, another official acts of the State of Washington, are the constitutional rights of the State of California itself, as a State, in addition to the constitutional rights of its citizens and industry.

The purpose of this action is to enjoin official acts of the State of Washington which, we submit, violate the Federal Constitution.

Supporting the position taken by California in this case, the State of New York has filed a brief, amicus curiae.

This was (Inaudible) from a significant source, because second only to the State of California, the State of New York is the next largest wine-producing state in the union.

Washington opposes the filing of this complaint.

The principle argument is that California has no standing to sue, that it is not a proper plaintiff.

And that in filing — this seeking to file its complaint, the California is acting only as a nominal plaintiff on behalf of its wine industry and the members of its wine industry.

Issue has been joined on this point in the briefs which have been filed.

And with the Court’s permission, my main effort, in this oral argument, will be addressed to the proposition that — that California thus have standing to sue.

Indeed, I shall show that California is the only plaintiff legally capable of bringing this action.

And the reason is that the complaint amongst other things, alleges an injury to the State as — that is to say to the executive branch of the State Government.

The complaint in this case discloses two aspects to the case.

On the one hand, it is a case of the type which is some — has previously been before the Court, where a State sues his plaintiff in the role of parens patriae to assert its — to assert an injury to its quasi-sovereign rights and where it is suing on cause of — causes of action, which it derives from its citizens.

That is one aspect of the case.

But also very much in the case and which bears directly upon this question of California standing to sue is the fact that California alleges its own cause of action.

California has searched that it, as a State, independently of its citizens, has been denied constitutional rights which it enjoys.

Felix Frankfurter:

Did I understand you to say that you were — you do not intend to address yourself to the merits of the complaint?

No, sir.

I said that my — my principal effort in this argument, with the Court’s permission, would be to demonstrate California standing to sue.

Felix Frankfurter:

Yes, but I gathered that — that the merits are going to be strikingly treated the argument?

No, sir.

Felix Frankfurter:

You will be moved.

I will do it if he reminds.

Felix Frankfurter:

I beg your pardon.

Yes.

Felix Frankfurter:

(Inaudible)

In the — in — in establishing California standing to sue, I think that there’s no great disagreement concerning the applicable law.

In order to invoke the — the original jurisdiction of this Court, the complaint state must establish two things.

And I’m speaking now, particularly about the — the parens patriae aspects of this case.

The complainant’s state must show that it has an interest in the subject matter of the litigation which is independent of an — in — in addition to for whatever rights of its citizens maybe involved.

And, of course, complainant’s state must also show that there is an injury to the state interest, although which there is a judicial remedy.

If these two tests are met, then the complainant’s state has standing to invoke the original jurisdiction.

William O. Douglas:

Well, at the present time, the State — the California wine is the — is the wine that is sold in the state stores in Washington, isn’t that right?

That is correct.

Yes, sir.

William O. Douglas:

You’re not — it’s the only wine, I think, that’s sold, is it not, in the state stores of Washington?

The Washington State stores also deal in New York wine, the wine of other states and the wine of our nations.

William O. Douglas:

You know what percentage of the market in the — the state stores of Washington that California has?

Yes, sir.

I (Voice Overlap) —

William O. Douglas:

It’s a very large percentage, isn’t it?

In — in order that the Court may understand the interest that the State has in this, I should like, for the next few moments, to explain the rather extraordinary situation or which exists in the State of Washington and I will deal directly —

William O. Douglas:

The — the only wines I’ve seen in the state stores in Washington are California wines.

And there’d be others.

There are others, sir.

Felix Frankfurter:

Is — Is Ohio an important state of production line?

May I answer that this way, Your Honor, California produces 85% of all the wine that is consumed in this country including foreign wine.

In the remaining 15 —

Felix Frankfurter:

All the wines consumed?

Yes, sir.

Including in the remaining 15%, the non-California 15%, New York, Ohio and Michigan and the State of Washington are the principal wine-producing states.

Felix Frankfurter:

I’m — you think it describes me and I heard, you — I understood you to say that of all the wines consumed in Continent of the United States, of all the wines, importation from the plants is relief (Inaudible) itself of all the wines.

85% of the total is California product.

Yes, sir, approximately that rate.

William O. Douglas:

Your complaint here is that you can’t sell in the grocery stores and — and other retail outlets in Washington, isn’t that right?

Our — our complaint of all three broad types of discrimination, one of them is the battle that you’ve touched on and that is that Washington wine is distributed in Washington entirely by private enterprise.

William O. Douglas:

In grocery stores.

From wholesaler, to — from — from winery to private wholesaler, to grocery store, tavern, hotel —

William O. Douglas:

As I — as I remember in the State of Washington, you can buy Washington wine in your corner grocery store, but you can’t buy California wine there.

Is that right?

You’ve can buy California wine, if your grocery store has gone to state liquor store and paid the same retail price per bottle, as if you went there yourself.

Then — and there are grocery stores in Washington, of course, that do carry California wine having purchased it already at a consumer price.

William O. Douglas:

If — if the retail stores in the same basis as Washington state wine, is that right?

It can’t — it can’t be carried by the retail grocery on the same basis as he can carry —

That is correct, sir.

William O. Douglas:

Washington —

Washington law places no restriction —

William O. Douglas:

Is that your —

— on the wine which a — any of the 4800 retailers can sell.

William O. Douglas:

Is that the complaint?

Is that the basis of the complaint here?

The complaint is, sir, that we cannot — that California wine does not have the same access to these 4800 licensed retail out — outlets that is freely accorded to Washington wine and its distribution.

William O. Douglas:

That — that it can’t — it doesn’t have the same access to the state liquor stores as —

No, sir.

That it doesn’t have the same access to the retail outlet.

William O. Douglas:

To the retail outlet?

Yes, sir.

California — pardon me.

Washington consumes about one million — about two million gallons of wine a year.

Earl Warren:

Are all the other states, New York, Michigan, Ohio and the foreign wines in the same —

They are in precisely —

Earl Warren:

(Voice Overlap) —

— the same situation as the California wine is, yes, sir.

The — the only distinction made in Washington law is between what they called domestic wine which is wine produced in the State of Washington from Washington ground fruits and all other wines.

Washington consumes about two million gallons a year and about half of it is Washington wines produced in that State.

The other half of it comes from out of the State.

Felix Frankfurter:

Is Washington — is Washington exporters, so to speak, for the other states?

For all practical purposes, no, sir.

Felix Frankfurter:

It’s all that the State consumes?

There is about 2500 gallons of certain types of fruit brandies that are — that are exported, but it’s — it’s miniscule.

Of the million gallons a year that is lawfully imported into the State of Washington, about 90% is California wine in excess of 900,000 gallons a year.

Charles E. Whittaker:

When you say California wine, you mean wine from California?

That is correct.

Charles E. Whittaker:

California doesn’t own its part of it?

No, sir.

By California wine, I mean wine that is produced in the State of California by private producers.

The State of California does not manufacture or sell or deal in any of these products in any capacity.

After this California wine has been lawfully transported into Washington, it is then subjected to three principal types of discrimination.

One is the discrimination of the channels of distribution by which it reaches the consumer.

The second is discrimination in the state controls which are exercised over the pricing of wine.

And the third is discrimination in the Washington laws and policies in connection with the promotion of the sale of the wine to retailers, who are authorized to sell it to the public.

At the wholesale level, Washington has two distinct and separate discriminatory economic systems, as I call them, for the distribution of wine and I call them different economic systems.

Because it’s not only the rules and the regulations which are different, but under Washington law it is the very nature of the corporate entities and the business — business establishments which are permitted to exist.

This discrimination — this first discrimination has to do, as I said, over the channels of distribution.

Washington wine, the distribution and sale or marketing within that State is entirely a function of private enterprise, from winery, to wholesaler, to retailer to consumer.

The State of Washington does not deal in Washington wines at any level of its marketing or distribution.

There are 13 wineries in Washington.

And each one of them is given of a free choice by Washington law in two respects.

The Washington winery can choose its own channels of distribution.

It may decide — the winery may decide to sell directly to the 4800 licensed retailers, or the Washington winery may decide to use the — the services of private wholesalers.

And through the private wholesalers have distribution made on a statewide basis.

But —

William O. Douglas:

Can’t sell to the state liquor stores.

They are prohibited by law from doing so, Justice Douglas.

But since prior to 1948, at least, the state liquor stores have never dealt in Washington wine.

Felix Frankfurter:

Mr. Howland, would you be here if Washington decided to be a dry state?

In other words, to ban all liquors —

No.

Felix Frankfurter:

— domestically created or brought in from without?

No, sir.

I would not.

Felix Frankfurter:

But you say that if she — if she allows — if she (Inaudible) the liquor traffic, and she — then she can pay (Inaudible) are all producers, if we’re taking California and New York (Voice Overlap) —

I — I believe that Justice Frankfurter is almost paraphrasing his own words from the concurring opinion in Frankfurt Distilleries.

I quite agree.

Felix Frankfurter:

It would be my memory versus yours.

Earl Warren:

Mr. Howland, how does it happen that they sell California wines in the state stores, but not Washington wine?

That is a direct function of the Washington statute.

The Washington statute provides expressly as follows and I should like to read this, Mr. Chief Justice, because the discrimination to which we complain about is right — there’s apparent right on the face of the statutes.

All wines manufactured or produced in domestic wineries, that means Washington wineries, maybe sold by the manufacturer or producer thereof, direct to persons holding licenses entitling them to sell wine at retail, under the provisions of this title or to license domestic wine wholesalers or to license domestic wineries.

No wines except domestic wines shall be sold within the State except to the Liquor Control Board or by the Board or through the state liquor stores.

The exception for domestic wines, no wines except domestic wines, shall be sold within the State except to the State Liquor Control Board.

William O. Douglas:

I thought it was the — that it is — that the pressure of the interest of the Washington State wine liquors restrict California to the state liquor stores.

That was the reason.

Well, if I follow you, sir, I think it’s a very fair assumption that the pressure for this legislature and the — the legislation that did emanate in the Washington wine Industry.

Washington wine Industry is trying to isolate California wine from the lawful Washington market where different brands of Washington wine are competing on a private industry competitive business basis for the trade — the trade and custom of Washington consumers.

There are 135 private wholesalers of Washington wine.

There are wholesalers in the ordinary sense of the word.

They do not handle California wine or any out-of-state wine.

The very terms of their license calls them a domestic wine wholesaler.

These are the only private enterprise wholesalers of wine in the whole State of Washington, 135 of them.

And the wineries — that the Washington wineries have a free choice in selecting which of these wholesalers they want to distribute their respective brands and trade names of — of wine.

These wholesalers operate in limited areas of the State.

They have a territorial franchise from the winery that they represent.

And all of these wholesalers have substantial sales organizations.

They employ wine salesman who go out on regular routes and contact the retail trade and actively solicit the purchase of their Washington wine and promote it — promote its sale in other ways which I will also mention.

Then you have the 4800 licensed retailers, these — these private retailers, I’m not speaking now about the state liquor stores.

These are envisioned.

There are 4800 private businessmen in Washington, who are licensed to sell wine at retail, some are licensed to sell by the bottle.

These would be the grocery stores, the — the grocery stores, the supermarkets, the hotels and there are others license to sell wine by the drink.

These would be the taverns, the bars, and some types of licensee, or both types of license.

These 4800 retailers are solicited by salesmen representing every brand of Washington wine that is produced to please buy of these brands of Washington wine and can I take your order this morning.

Note that there is no restriction on the wine which the 4800 retail licensees are authorized to sell.

The retail licensee who is the man dealing with the consuming public, can sell California wine, Washington wine, New York wine, or foreign wine one, without any restriction based upon its source placed upon him or by the State of Washington.

And that’s why I say that the discriminations which we complain are all discriminations that bear on the wholesale distribution, because after the wine has reached the point of the retailer, then so far as the retailer is concerned, the State of Washington exercises no further control upon him.

The second type of discrimination involved in this case is the discriminatory of policies and laws of the State of Washington concerning the place of wine.

Concerning Washington wine, the State exercises no control over the level of the prices at which Washington wine is sold at any stage of its distribution, winery, wholesaler, retailer.

No control over the price of Washington wine.

There is one requirement that is significant, Washington law requires that Washington wineries post and specify a delivered price.

A price of Washington wine delivered to the retailer and that price must be uniform throughout the State.

The fact is that Washington wine is actually delivered to retailers’ establishments by the wholesaler.

The — the salesman and the delivery people come into the retail establishment.

They service the shelves.

They arrange the bottles of Washington wine on the retailer shelf.

They go in the back room, open up the cartons from the stock and bring it out and keep fresh and full stock on the retailer shelves.

The Washington winery set the price of their wine to the retailer by their own individual judgment and in the light of the market conditions from day-to-day — or that they find in the competitive situation in which they are brand-for-brand amongst the Washington wines.

And this privilege too, is denied of the California producers of wine.

California producers or any out-of-state producer of wine has nothing to say about the price at which his product shall be sold within the State of Washington.

William J. Brennan, Jr.:

Mr. Howland, in your position that California has standing to maintain these actions, there’s no suggestion you say that the California wine industry or members of it could not also maintain an action of their own and they challenge to these Washington statutes?

Oh, so far as the law is concerned, this is — this is quite true, Justice Brennan.

Their constitutional rights have been violated.

As far as the law is concerned, they are legally entitled to bring their own action.

William J. Brennan, Jr.:

But what else is concerned beside the law?

The fact that the Washington State Liquor Control Board is the only lawful customer for Washington wine anywhere in the State of Washington.

The threat of administrative reprisal just about getting to this, that so far as California wine is concerned, the Washington State Liquor Board has non-reviewable authority.

It used its own discretion as to what level or on what price it will put on every bottle of California wine with that it — that it imports and for which — which the State Liquor Board, of course, being the only lawful outlet in the State of Washington for California wine.

And so you have the — the remarkable situation that the — the regulatory agency against whose regulations as you might expect some form of protest, also happens to be the only lawful customer for your product in the whole State.

William J. Brennan, Jr.:

Well, Mr. Howland, if there were an action by members of the California wine industry which were successful on an attack on both of these statutes and the regulations in Washington, would there remain any other — anything else of the State of California be vindicated, any other interest?

That would depend entirely upon the details of the relief that were obtained in — in that kind of a (Inaudible) —

William J. Brennan, Jr.:

Well, I’m assuming that the relief on the merits that you’re insisting upon —

Well —

William J. Brennan, Jr.:

— obtained — that could be obtained, I take it, could it not, in a — an action by the members of the California —

It is possible.

William J. Brennan, Jr.:

And if so, then there’d be no remaining interests to California to vindicate this.

That is possible.

Felix Frankfurter:

Why do you say that?

In the Georgia — Georgia and Tennessee Copper.

I suppose the individual concern that were affected by the fumes Tennessee Copper would’ve brought some — assuming there was — could’ve bought suit against the Tennessee Copper on the —

The individual property owners who (Voice Overlap) —

Felix Frankfurter:

Yes.

Yes, certainly, they could.

Certainly they could’ve.

Felix Frankfurter:

The nuisance against them and individual —

Yes.

Felix Frankfurter:

Well, I suppose, indeed, the river in New Jersey and the case involving Delaware River, I suppose, the misuse of the river in individual riparian owner might as if the cause of action —

I don’t think there’s any question about it.

Felix Frankfurter:

That wouldn’t necessarily displace through either the State to sue, because of pervasive effect upon the state interest.

I’m not saying that this is this case, but I do not think the mere fact that individuals may impose rights to preclude the States from having an interest.

It exceeded those of the individuals put together.

Well, I — I quite agree with that because your — in your parens patriae case, the Court has insisted that the State must demonstrate an interest of its own.

And, of course, if the State has an interest of its own, it is — it is entitled to sue.

And actually in the — in the nuisance cases that you refer to, the air pollution case, Georgia and Tennessee Cooper and the sewage cases.

The causes of action of the State in those cases were technical point of view.

The legal cause of action is really the cause of action of the individual citizens.

We take the cases where the Court has said that the — that the State or the complaining state has an interest in the health, comfort, and welfare of its citizens.

It’s perfectly obvious that the State has no health.

This — you can’t be the health of the — of State Government.

State Government can’t have health.

State Government can’t have comfort.

What the cause of action that is sued upon is the injury to the health of the citizens, the injury to the comfort of the citizens, the interest — the injury to the prosperity of the citizens.

And what the Court has said in those cases is that the State — the complainant state has an interest of its own in presenting or pursuing these derivative causes of action.

Hugo L. Black:

I’d suppose prior with that, the fact the suits could be brought as they bring complete relief might be relevant consideration from the Court in determining whether (Inaudible) would it not (Inaudible)

Well, as I shall show, Mr. Justice Black, the — in this case when I get to the third of these discriminations, in the matter of — of the sales promotion program, the State of California has a — a direct interest of its own.

It has certain official functions which its law requires that if it discharge and there is no other plaintiff that is capable of getting relief to the State of California for the injury to — for the — for the frustration of its public policies for the restraints and the restrictions put upon its employees and officials in the pursuit of their — of their duties.

It might be that the — a private case, if a private case were brought, would in some way result in an injunction that would afford some relief to a practical point of view to the State of California.

But this is not securing redress to the legal injuries which the State of California itself had suffered and which gives rise to a controversy between two States of the very type that the original jurisdiction of this Court was created to determine.

The — I’ve mentioned that the authority of the Washington State Liquor Control Board gives a complete discretion over the prices of California wine.

And the Board has only one price and that is a retail price per bottle at which they sell to all commerce, be they retailers purchasing for resale, hotels, taverns or whether it’d be the individual consumer.

There is no trade discount on wine.

And I think it fairly significant that although Washington law prohibits the trade discount on wine, Washington law requires that the Board give not less than 15% trade discount on distilled spirits to what are known as Class H licensees, which are hotels, restaurants and other bars of that type, who sell mixed drinks.

But where — where they — they are mandated by the statute to give a 15% discount to a hotel who owns a bottle of whiskey to use for serving mixed drinks, the law forbid — forbids the State Liquor Board to give any trade discount on a bottle of wine to a hotel that wants to sell and has the authority to sell a wine by the Director.

The price levels which the Liquor Board has set before — for California and other out-of-state wines over a long period of time have been, according to the allegations of the complaint, arbitrary and unreasonably high.

The Board has purchased California wine at prices which is — have resulted in a markup of over 100% at the — taking into account of this — the — the price at which it was then put on the shelves of the retail stores for sale.

The board price is FOB state liquor store.

There is no delivery service for California wine from the state store.

The Washington retailers who want California wine must not only pay cartage from the state liquor store, but he has to go to the added inconvenience of arranging for cartage.

Whereas, as I’ve already said in connection with Washington wine, the — the Washington law requires that the Washington winery specify a delivered price — a price delivered at the retailer’s establishment.

The net effects of these pricing policies are simply this, that there are two retail markups, not one, but two retail markups on California wine.

First is the — the markup of anywhere from 68% to 100% which State Liquor Board puts on the wine as it goes through its store.

And the second is the markup that anyone of the 4800 retail licensees must necessarily put under his cost, if he wants to avoid selling at a loss and if he wants to even breakeven on his cost of doing business.

The retailer —

Earl Warren:

We’ll recess now, Mr. Howland.