Appeals from the United States District Court for the District of Columbia
Before: Silberman, Sentelle and Henderson, Circuit Judges.
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Consolidated with No. 95-7168
Nathalie P. Gilfoyle was on the brief for amicus curiae Quality Brands, Inc.
Opinion for the court filed by Circuit Judge Sentelle.
Separate concurring opinion filed by Circuit Judge Silberman.
Separate dissenting opinion filed by Circuit Judge Henderson.
The District of Columbia appeals from an order of the United States District Court preliminarily and permanently enjoining it from enforcing the Storage Act, D.C. Code Section(s) 25-114(f), which generally forbids alcoholic beverage licensees from storing beverages outside the District. The district court, relying on a prior district court opinion affirmed by this court without published opinion, held the Act to be an unconstitutional violation of the Interstate Commerce Clause. We determine that the District is not collaterally estopped by the prior opinion from defending the constitutionality of its Act. We therefore reach the merits of the controversy.
The District defends the storage requirement on three grounds. First, that the District of Columbia Alcoholic Beverage Control Act ("ABC Act"), a congressional enactment, authorizes the local warehousing requirement; therefore, the requirement is constitutional as federal statutes are not subject to the restrictions of the Commerce Clause. Second, even if the ABC Act is subject to the restrictions of the Commerce Clause, the local warehousing requirement does not violate the clause. And third, even if the requirement would otherwise violate the Commerce Clause, the Storage Act is constitutional as a valid exercise of the District's core power under Section(s) 2 of the Twenty-first Amendment to the Constitution. We hold that, although the ABC Act authorizes the local warehousing requirement, the Act and any statute enacted pursuant to it are subject to the restrictions of the Commerce Clause; but we also hold that the storage requirement, although facially inconsistent with the Commerce Clause, is constitutional as a valid exercise of the District's core power under the Twenty-first Amendment.
In 1934, following the repeal of Prohibition, Congress enacted the ABC Act to regulate the importation and distribution of liquor within the District of Columbia. Act of Jan. 24, 1934, Section(s) 2; D.C. Code Section(s) 25-102. The Act created a three-tier system of distribution that, among other things, required manufacturers, wholesalers and retailers to obtain licenses before "manufactur[ing] for sale, keep[ing] for sale, or sell[ing] any alcoholic beverage" within the District of Columbia. ABC Act Section(s) 9(a), 12; D.C. Code Section(s) 25-109(a)(1), 113. The Act also established an Alcoholic Beverage Control Board, which was authorized to issue, transfer and revoke any license under the Act. ABC Act Section(s) 4, 6; D.C. Code Section(s) 25-104, 106.
In addition, the ABC Act authorized the Commissioners (now the Council of the District of Columbia) to adopt rules to "control and regulate the manufacture, sale, keeping for sale, offer for sale, solicitation of orders for sale, importation, exportation, and transportation of alcoholic beverages in the District of Columbia." ABC Act Section(s) 7; D.C. Code Section(s) 25-107(a). Acting pursuant to this provision, in 1986 the Council enacted the District of Columbia Wholesale Liquor Industry Storage Act ("the Storage Act"). The Storage Act amended Section(s) 13 of the ABC Act by adding a sentence requiring that no alcoholic beverage wholesaler licensed by the District shall "store beverages upon premises outside the District, except that licensed wholesalers permitted by the Board to store beverages outside the District as of January 1, 1986, may continue to do so until July 27, 1988." D.C. Code Section(s) 25-114(f). Appellee Milton S. Kronheim & Co., Inc. ("Kronheim"), a wholesaler of alcoholic beverages licensed under the ABC Act, distributing liquor, beer and wine to District of Columbia retailers, is authorized to store alcoholic beverages at two locations within the District. A Maryland affiliate of Kronheim, The Kronheim Company, Inc., is a licensed wholesale distributor of alcoholic beverages in Maryland. Kronheim desired to consolidate its warehousing operations in the District and Maryland by leasing a facility in Jessup, Maryland. Toward this end, Kronheim filed suit in district court on February 2, 1995, seeking to enjoin enforcement of the Storage Act.
In deciding this case, the district court relied upon an earlier district court decision in Quality Brands, Inc. v. Barry, 715 F. Supp. 1138 (D.D.C. 1989). In that case, Quality Brands, Inc., a licensed alcoholic beverage wholesaler in the District and a competitor of Kronheim, sought a declaratory judgment that the Storage Act was unconstitutional. The district court held that (1) the local warehousing requirement facially discriminated against interstate commerce in violation of the Commerce Clause, Quality Brands, Inc., 715 F. Supp. at 1139-40; (2) the articulated purposes given for the requirement could not withstand the "strict scrutiny" accorded facially discriminatory legislation, id. at 1140-42; and (3) the Twenty-first Amendment did not shield the District's discrimination against interstate commerce, id. at 1142-43. Consequently, the Quality Brands court concluded that the local warehousing requirement violated the Commerce Clause and enjoined its enforcement. We affirmed that decision without a published opinion. Quality Brands, Inc. v. Barry, 901 F.2d 1130, 1990 WL 51795 (D.C. Cir. 1990) (per curiam).
In this case, the district court granted Kronheim's motion for a preliminary injunction, finding that Kronheim would suffer irreparable harm if its purchase of the Jessup warehouse did not go forward immediately. Milton S. Kronheim & Co., Inc. v. District of Columbia, 877 F. Supp. 21, 30 (D.D.C. 1995). The court held that the district court's decision in Quality Brands collaterally estopped the District from disputing the constitutionality of the Storage Act. Id. at 26-27. The court also determined against the District an issue left open in Quality Brands: whether Congress in the ABC Act authorized the District to require local warehousing or itself imposed such a requirement. Id. at 27-29.
The District filed an interlocutory appeal from this preliminary injunction. On summary judgment, the district court confirmed its findings, issued a declaratory judgment and permanently enjoined enforcement of the District's local warehousing requirement. The District appealed the final judgment and this court consolidated the two appeals. After the district court granted its preliminary injunction, Kronheim completed the Jessup warehouse transaction and is currently consolidating its inventory in the new warehouse.
The first question we must address is whether the District is collaterally estopped from defending the constitutionality of the Storage Act because of the district court's opinion in Quality Brands, Inc. Offensive collateral estoppel precludes a defendant "from relitigating identical issues that the defendant litigated and lost against another plaintiff." Jack Faucett Associates, Inc. v. AT&T Co., 744 F.2d 118, 124 (D.C. Cir. 1984), cert. denied, 469 U.S. 1196 (1985). Three conditions must be satisfied before a party can be estopped from relitigating an identical issue previously decided:
(1) [T]he issue must have been actually litigated, that is contested by the parties and submitted for determination by the court.
(2) [T]he issue must have been "actually and necessarily determined by a court of competent jurisdiction" in the first trial.
(3) [P]reclusion in the second trial must not work an unfairness.
Id. at 125 (quoting Otherson v. Department of Justice, INS, 711 F.2d 267, 273 (D.C. Cir. 1983)). The constitutionality of the Storage Act was certainly actually litigated, contested by the parties, and submitted for determination by the court in Quality Brands. Further, it was "actually and necessarily determined by a court of competent jurisdiction," at least at the district court level, in that litigation. However, our unpublished affirmance of the district court decision, we must confess, provided no clarity as to what was actually or necessarily determined on appeal. Although our memorandum accompanying the judgment in that matter recited that we affirmed that decision "substantially for the reasons articulated in the opinion of the district court," we expressly stated that at least one other "substantial argument" had not been properly raised and that we did not determine the Commerce Clause issue. Therefore, the district court, obviously unable to reverse our prior decision but receiving little guidance from it for precedential purposes, quite justifiably found the first two elements of collateral estoppel to be present. Also quite justifiably, the district court did not undertake a massive investigation of the further element, as that court would have been in no position to declare the Storage Act constitutional anyway in view of the circuit having reached the result we did in Quality Brands. We are not so constrained.
While we must follow existing circuit law as established in our precedent, "we are bound only by prior published opinions of this Circuit and not by other means of deciding cases." United States v. North, 910 F.2d 843, 881 (D.C. Cir. 1990) (emphasis in original). We are therefore free in this published opinion to depart from the conclusion reached in our earlier unpublished memorandum. Kronheim understandably offers our unpublished disposition for its preclusive effect. Our circuit rules, while forbidding the citation of unpublished opinions as precedent, nonetheless permit use of those dispositions for preclusion. D.C. Cir. R. 28(c). We do not, however, find preclusion here. Despite the presence of the first element of collateral estoppel, the presence of the second element is much less certain. The third element, that is, that "preclusion in the second trial must not work an unfairness," is not likely to be present where the first or second is unclear. That is, logically there is a fair probability of unfairness in estopping the relitigation of an issue where the fullness of its first litigation is uncertain. Because we have concluded that our decision in Quality Brands did not necessarily involve adjudication of the issue before us, and because we have concluded that the district court was misled by our disposition, we have reexamined the fairness of applying collateral estoppel. We hold that the District was not collaterally estopped from litigating the issues decided in Quality Brands. We will therefore proceed to examine the merits of the District's arguments on the constitutionality of the statute. *fn1
B. The Constitutional Issues
The constitutional considerations before us are not simple ones to decide, or even to express. Basically, Kronheim's position, tracking the position of the plaintiff in Quality Brands, is that the Storage Act, by discriminating against out-of-state storage of alcoholic beverages by wholesalers, unconstitutionally burdens interstate commerce under the Commerce Clause of the Constitution, Art. I, Section(s) 8, cl. 3. The Quality Brands decision held that it did, that the justifications offered for that discrimination did not pass strict scrutiny, and that the Twenty-first Amendment did not shield the District's Act from interstate Commerce Clause analysis. Because we have held that the Quality Brands decision does not have preclusive effect, we will consider the District's answers to Kronheim's arguments.
Before we analyze the merits of the question, we will briefly review the application of the Commerce Clause and the Twenty-first Amendment to enactments of the District of Columbia as it is not immediately apparent that either constitutional provision ...