9th Circuit Affirms California's Ban on Liquor Store Ads

Reversing its previous decision, the U.S. Ninth Circuit Court of Appeals affirmed California's ban on advertising by alcohol manufacturers and wholesalers in liquor stores.

The en banc court reversed an earlier three-judge panel in the case. Ruling 10-1 in Retail Digital Network v. Prieto, the majority said the ban did not violate the advertiser's commercial speech rights to place ads in liquor stores under California Business and Professions Code Section 25503(h).

"This is not the first time we have considered such a challenge Section 25503(h)," Judge Richard Paez wrote for the court. "Thirty years ago, in Actmedia, Inc. v. Stroh, 830 F.2d 957 (9th Cir. 1986), we rejected a First Amendment challenge to that provision."

Heightened Scrutiny

"My client is disappointed with the decision but looks forward to being vindicated by the Supreme Court," said attorney Olivier Tallieu.

The advertiser, which had seven-foot digital displays in more than 100 locations, sued for declaratory relief after several of its accounts wanted to pull back their advertisements. They were concerned about possible action from the state's Department of Alcoholic Beverage Control under the Business and Professions Code.

A trial judge declared the statute was constitutional, but the appeals panel reversed and remanded it to the trial judge with instructions to apply "heightened scrutiny" to the statute. The en banc panel then upheld the original conclusion, saying "intermediate scrutiny" was the appropriate standard.

Intermediate Scrutiny

In re-stating its position on the statute from 30 years ago, the court waded into the deeper water of commercial speech law, which has been muddied by decisions since then. The court said it was following rulings on intermediate scrutiny in the Second, Fourth, Sixth, and Eighth Circuits.

The court did not entirely endorse its own ruling in Actmedia, but upheld the "sound and well-reasoned conclusion that Section 25503(h) withstands First Amendment scrutiny because it directly and materially advances the State's interest in maintaining a triple-tiered market system, and because there is a sufficient fit between that interest and the legislative scheme."

Chief Judge SidneyThomas, in dissent, said the three-judge panel was right about heightened judicial scrutiny. Actmedia is outdated and irreconcilable with current law, he said.

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