Appendix — Bronco Wine Co. v. Jolly

12a

107-108 [146 L. Ed. 2d 69, 120 S. Ct. 1135] (Locke);

Medtronic, Inc. v. Lohr (1996) 518 U.S. 470, 485 [135 L. Ed.

2d 700, 116 S. Ct. 2240] (Medtronic) oe. applies

both to the existence of preemption and the scope of

preemption]; Ray v. Atlantic Richfield Co. (1978) 435 U.S.

151, 157 [55 L. Ed. 2d 179, 98 S. Ct. 988] (Ray); Jones,

supra, 430 U.S. 519, 525, Florida Avocado, supra, 373 U.S.

132. 146; Allen-Bradley Local v. Board (1942) 315 U.S. 740,

749 [86 L. Ed. 1154, 62 S. Ct. 820); Napier v. Atlantic Coast

Line R. Co. (1926) 272 U.S. 605, 611 [71 L. Ed. 432, 47 S. Ct.

207], Savage v. Jones (1912) 225 U.S. 501, 533 et seq. [56 L.

Ed. 1182, 32 S. Ct. 715} (Savage), Reid v. Colorado (1902)

187 U.S. 137, 148 [47 L. Ed. 108, 23 S. Ct. 92].) As explained

in Jones, supra, 430 US. 519, 525, this venerable

presumption “provides assurance that ‘the federal-state

balance, . . . will not be disturbed unintentionally by

Congress or unnecessarily by the courts.” (Citation omitted;

see Olszewski v. Scripps Health (2003) 30 Cal.4th 798, 815

[135 Cal. Rptr. 2d 1, 69 P.3d 927} (Olszewski).)

The Department and the NVVA assert that the state

regulation at issue in this case directly implicates the

traditional police powers of the states to protect consumers

from deception in the marketing of food and beverages, and

to safeguard the integrity--and worldwide market--of a vital

California industry. (Sec, ¢.g., Florida Avocado, supra, 373

U.S. 132, 146 [sate police powers properly are employed

both to protect consumers’ health and to “prevent the

deception of consumers”); Pike v. Bruce Church, Inc. (1970)

397 US. 137, 143 [25 L. Ed. 2d 174, 90 S Ct. 844]

[recognizing a state's interest im protecting its reputation as a

reliable source of authentic, high-quality goods in al] markets

where its goods compete].) Indeed, we observed as much

conceming the California wire industry, more than 100 years

ago. (Ex parte Kohler (1887) 74 Cal. 38, 42-43 [15 P. 436]

{state wine labeling statute, designed to protect the health of

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consumers and the integrity of the wine industry, was a

proper exercise of the police power].)

Bronco and amici curiae on its behalf, Abundance

Vineyards et al.,'' assert, however, that no presumption

against preemption applies in this case because there is no

evidence that states traditionally have exercised their police

powers to regulate the labeling of wine.’ Specifically,

Bronco argues that prior to the August 1935 enactment of the

'' Counsel for am ci curiae represent, among other entities, more than 68

wineries m Alabama, Arizona, Arkansas, California, Georgia, Maine,

Massachusetts, Michigan, New Jersey, New Mexico, New York,

Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Virginia, and

Washington, as well as 47 wine grape growers in Califormia.

"? Bronco, relying upon two Eleventh Circuit Court of Appeals decisions

(Lewis v. Brunswick Corp. (11th Cir. 1997) 107 F.3d 1494, 1502, and

Taylor v. General Motors Corp. (1 lth Cir. 1989) 875 F.2d 816, 826), and,

to a lesser extent, two high court decisions (Geier v. American Honda

Motor Co. (2002) 529 U.S. 861, 870-874 [146 L. Ed 2d 914, 120 S. Ct

1913] (Geier), and Engine Manufacturers Association v. South Coast Air

Quality Management District (2004) US. ; [158 L. Ed 2d

529, 124 S. Ct. 1756, 1763) (Engine Manufacturers), also asserts, as a

preliminary matter, that the presumption against preemption is

categorically inapplicable in implied preemption cases such as this, in

which the question is whether state law would stand as an obstacle to the

accomplishment and execution of the full purposes and objectives of

Congress. The United States Supreme Court has not so heid, however,

and indeed has assumed otherwise. (Crosby, supra, 530 U.S. 363, 373-

374 & fn 8.) Geier, by contrast, did not even address the presumption-

against-preemption doctrine, and in Engine Manufacturers the court

simply found it unnecessary, because of its conclusion that the federal

legislation expressly preempted the relevant state law, to address the

presumption against preemption or even the legislative history of the

federa! statute. We disceri no persuasive reason why tne traditional

presumption against preemption should be categorically imapplicable m

the present circumstances, and until the high court directs otherwise, we

reject Bronco's view on this point. (See. e.g. Philip Morris Inc. v.

Harshbarger (ist Cir. 1997) 122 F.3d 58, 85-86 \applying a “strong

presumption against preemption” concerning state health and safety

regulations and finding those regulations not to frustrate congressional

purposes }.)

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FAA Act, 27 United States Code section 201 et seq., federal

regulation of wine labeling was “well-established,” whereas

the activity of the states in that enterprise was “limited.”

Bronco maintains that “although the states have played a

limited role in regu:ating wine labeling over the past century,

the federal government's presence in that field would negate

the application of any presumption against preemption in this

case.” Amici curiae assert, similarly and more emphatically,

that prior to enactment of the FAA Act in August 1935 “state

and lock}—authorities had exercised control over the

distribution and sale of liquor” but that “it was the federal

government that first comprehensively regulated the

packaging and labeling” of wine.

The Department and the NVVA, on the other hand, point

to early California statutes addressing wine labeling, isolated

statements in treatises and legal articles, and statements in

congressional reports and debates suggesting an intent by

Congress in 1935 that the FAA Act, including 27 United

states Code section 205(e) and the regulations that would be

expected to flow therefrom, would supplement state

regulation of wine labeling but not preempt it.

Prior to oral argument we solicited supplemental briefing

from the parties, asking them to address the effect, if any, of

numerous additional state statutes and regulations disclosed in

the course of our review of this case. Having considered

those materials and the parties’ supplemental briefs, we

conclude below that the historic record amply supports the

conclusion that a presumption against preemption applies in

this case because the protection of consumers from potentially

misleading brand names and labels of food and beverages in

general, and wine in particular, is a subject that traditionally

has been regulated by the states."”

'* At oral argument, as in the Department's briefs, the NVVA maintained

that the “relevant area” for purposes of determining whether the

presumption against preemption is applicable should be viewed as

consumer protection related to the labeling of foods and beverages in

15a

1. Regulation of wine labels prior to adoption of the FAA Act

in August 1935

Prior to the 20th century, federal legislation relating to

wine and alcohol focused essentially upon revenue collection-

-specifically, enforcement of federal tax laws. (See Byse,

Alcoholic Beverage Control Before Repeal (1940) 7 Law &

Contemp. Probs. 543, 552, fns. 57 & 58 (Alcoholic Beverage

Control Before Repeal).) By contrast, as disclosed below,

widespread legislation enacted by states in the mid to late

19th century, and continuing through adoption of the FAA Act

in August 1935, focused upon the substantive public problems

of “adulteration” and “misbranding™ (or “mislabeling™) of

wines and alcohol. This historic record supports the view that

prior to adoption of the federal act in 1935, states vigorously

exercised their police powers to regulate wine labeling.

a. The emergence of state “pure food” and labeling statutes

During the latter half of the 19th century, awareness

gradually increased throughout the nation concerning a

combination of related problems in the supply of food and

beverages. Some food and beverage products were mere

imitations or dilutions of what they purported to be; other

products, subject to spoilage, were “adulterated” by a

“soaring employment of chemical preservatives.” (Young,

Pure Food (1989) p. 126.) Many of these preservatives--such

as salicylic acid, employed as a preservative in wine (id., at p.

general or, more specifically, as consumer protection related to the

labeling of wines. Bronco, although generally challenging the

appropriateness of applying any presumption against preemption im this

case (see ante, fn. 12), does not contest the definition of the relevant area

for such an inquiry as proposed by the Department and the NVVA. For

purposes of this opinion, and consistently with the high court's approach

in such matters (see, ¢.g.. ARC America Corp. supra, 490 U.S. 93, 101 [in

addressing whether federal antitrust law preempts state law, defining the

relevant arca as “state common-law and statutory remedies against

monopolies and unfaiw business practices ’}), we view the relevant area as

being consumer protection related to food and beverage labeling, with

special emphasis upon wine labeling

16a

105)--were used in excessive quantities dangerous to health.

(/d., at pp. 110, 112, 126.) As a result, it was found that more

than “73 per cent of the milk in Buffalo [New York] was

watered, 69 of 171 samples of ground coffee collected in New

York were adulterated, 71 percent of the olive oils examined

in New York and Massachusetts were mixed with cotton seed

oil which had been shipped from the United States and

returned as ‘olive oil’[, and] [florty-six percent of candy

samples collected in Boston contained mineral pigments,

chiefly lead chromate.” (Hart, A History of the Adulteration

of Food Before 1906 (1952) 7 Food Drug Cosm. L.J. 5, 21);

see also McCumber, The Alarming Adulteration of Food and

Drugs (Jan. 5, 1905) The Independent, 28, 29-31 [listing

common adulterations of various products].) Wines too were

subject to abuses. Some were “made from cheap substances

and then doctored up.” (Regier, The Struggle for Federal

Food and Drugs Legislation (1933) 1 Law & Contemp.

Probs. 3, 8.) Others were mislabeled as to place of origin.

(Carosso, The California Wine Industry: A Study of the

Formative Years (1951) p. 25 (California Wine Industry); see

also Fanshawe, Liquor Legislation in the United States and

Canada (1892) p. 308.)

In response to the general threat to the food and beverage

supply, many if not most states exercised their traditional

police powers to regulate generally the marketing of impure

or deceptively labeled foods and beverages. (Sec, ¢.g., Digest

of the Pure Food and Drug Laws, Sen. Rep. No. 3, 57th

Cong., Ist Sess. (1901).)'* The vast majority of the resulting

general “pure food” statutes broadly covered liquors and

wines, as wel] as the mislabeling of those products.

* Some state laws of this era regulated the production and labeling of

specific items of food such as flour, butter, oleomargarine, and vinegar.

(E.g.. Hutt & Hutt, A History of Government Regulation of Adulteration

and Mishranding of Food (1984) 39 Food Drug Cosm. LJ 2, 42-44

(citing and describing early Virginia statutes}) During this same period,

Congress enacted similar laws concerning specific food ttems such as tea,

oleomargarine, and meats. (/d. af pp. 45-46.)

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For example, in 1879 Wisconsin enacted a general pure

food, drugs, and liquors statute, making it illegal to

manufacture or sell any food (defined to include “drink”),

accompanied by “any label, mark or device whatever, so as

and with intent to mislead or deceive as to the true name,

nature, kind and quality thereof... .” (1879 Wis. Laws, ch.

248, § 3, p. 502.) A similar labeling law was enacted in

North Dakota. (1903 N.D. Laws, ch. 6, §§ 1-2, pp. 9-10; 1905

N.D. Laws, ch. 11, §§ 1-2, pp. 19-20.) An Ohio statute,

enacted in 1884, made it illegal to manufacture or sell any

food (defined to include drink) “if by any means it is made to

appear better or of greater value than it really is,” or if it

contains any impure substance not “distinctly labeled” as

such. (1884 Ohio Laws, § 3, p. 67; 1890 Ohio Laws, § 3, p.

248.) Substantially similar labeling statutes were enacted in

Indiana, Massachusetts, Michigan, Pennsylvania, and

Washington. (1899 Ind. Acts, ch. 121, § 1, pp. 189-190; 1882

Mass. Acts, ch. 263, §§ 1-3, pp. 206-207; 1895 Mich. Pub.

Acts, No. 193, § 3, p. 358; 1895 Pa. Laws, No. 233, § 3, p.

317; 1899 Wash. Laws, ch. 113, §§ 1-3, pp. 183-184.) A

Maryland statute, enacted in 1890, required that food or drink

“be so manufactured . . . or sold, or offered for sale under its

true and appropriate name” and required that the purchaser be

“fully informed by the seller of the true name and ingredients

.. . Of such article of food or drink .. . .” (1890 Md. Laws,

ch. 604, § 1, p. 733.) Similar laws were enacted in

Connecticut, North Carolina, and Tennessee. (1895 Conn.

Pub. Acts, ch. 235, §§ 1, 2, p. 578; 1895 N.C. Sess. Laws, ch.

122, §§ 1, 2, 5, pp. 176-178; 1897 Tenn. Pub. Acts, ch. 45, §§

1, 4, pp. 177-178.) Finally, a New York statute (1893 N_Y.

Laws, ch. 338), subsequently amended in 1903 and 1905,

prohibited “adulterated or misbranded food.” The statute

defined as “misbranded”--and illegal--any food or beverage

“package . . . or label” that bore “any statement regarding the

ingredients or the substances contained therein, which

statement [is] false or misleading in any particular, or if the

same is falsely branded as to the state or territory in which it

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is manufactured or produced... .” (1903 N.Y. Laws, ch.

524, § 1, p. 1192, italics added; 1905 N.Y. Laws, ch. 100, § 1,

p. 141.) A substantially identical labeling law was enacted in

South Dakota. (§§ 1905 S.D. Laws, ch. 114, 6, 8 & 10, pp.

162-163.)"°

b. Early state wine labeling statutes

As early as 1860, California enacted a statute to penalize

the sale of “adulterated alcoholic or spirituous liquors, wines,

cider, beer, or other liquid used as a béVerage.” (Stats. 1860,

ch. 223, § 2, p. 186, currently Pen. Code, § 382.) But in the

face of rampant deception in the labeling of wines—including

the bottling of California wines under false foreign labels, and

the bottling of inferior foreign wines under California labels

(Cal. Wine Industry, supra, at p. 25) the California

Legislature in 1866 passed a resolution asking Congress to

enact nationwide legislation to curb the marketing of

“spurious” and “imitation” wines and alcohols. (Sen. Cone.

Res. No. 36, Stats. 1866 (approved Apr. 2, 1866) p. 908.)

After much effort during the ensuing two decades, this

endeavor ultimately failed in 1886. (See Cal. Wine Industry,

supra, at pp. 154-155.)

Congress's inability to adopt a nationwide wine regulation

and labeling statute induced the three primary wine-producing

states--California, New York, and Ohio'®--as well as other

'* Citing only the 1895 North Carolina law, Bronco asserts that “some” of

these state laws were intended to apply only to food and beverages sold

within a given state. The North Carolina provision, however, is the only

such law of which we are aware to have intimated or specified such a

limitation; none of the other laws cited above was so confined, and most

instead broadly applied to foods and beverages that were “manufactured

for sale’’--wherever that sale would occur. But in any event, the relevant

point is that the states (most of them broadly, and in the case of North

Carolina, narrowly) exercised their traditional police powers by

specifically regulating the labeling of food products and beverages,

including wines.

'* As of 1890, those three states produced approximately 60, 10, and 8

19a

states with lesser wine industries (such as Arkansas,

Colorado, and Oregon)'’ to enact, under their traditional

police powers, specific and detailed statutes tailored to the

problems of impurity and deception in the production and

labeling of wines.

California--then, as now, by far the leading producer of

wine in the nation,'* and an acknowledged leader in quality as

well'’--apparently was the first state to adopt such a statute, in

March 1887. (Stats. 1887, ch. 36, p. 46 et seq.; see Ex parte

Kohler, supra, 74 Cal. 38, 42-43.) The California statute

defined as “pure wine” that which was made from only pure

grapes. (Stats. 1887, ch. 36, § 1, p. 46.) The statute further

defined “[d)jry wine” as that produced by “complete

fermentation of saccharine contained in [grape] must”;

“{s]weet wine” as that which contains “saccharine appreciable

to the taste”; “[flortified wine” as “wine to which distilled

spirits have been added”; and “[pjure champagne, or

sparkling wine” as that which “contains . . . effervescence

produced only by natural fermentation of saccharine matter of

[grape] must, or partially fermented wine in bottle.” (/d., § 1,

p. 47.) The statute prevented the use or introduction of

percent, respectively, of the wine produced im the United States. (US.

Dept. of Interior, Census Off., Rep. of Statistics of Agriculture im the U.S.

at the | ith Census: 1890 (18°95) p. 602.)

"” See Pinney, A History of Wine in America (1989) pages 404-405, 420-

422 (describing early winemaking in Arkansas and Oregon).

"* As observed ante, footnote 16, by 1890 California produced most of the

vone grown and made in the United States. Today, according to the Wine

| astitute, Califorma produces more than 90 percent of the nation's wine.

(See<http //www wineimstitute org/communications/statistics/wine produ

ction key facts. him> [as of Aug. 5, 2004).)

See, generally, California Wine Industry, supra, at pages 26 (“the

French viticultural journal, Rewwe Viticole, m 1862, credited California

with being the only wine-producing area of North America capable of

competing with the product from Europe”) and 133 (noting that 35 medals

were awarded to California wines at the Paris Exposition Universelle im

1889).

20a

impure “substitutes for grapes” or coloring, or foreign fruit

juices “not the pure product of grapes,” and further barred the

use of preservatives such as “salicylic acid, glycerin, alum, or

other chemical antiseptics.” (/d., § 2, p. 47.) The statute also

provided for inspection of wine samples and for the use of

bottleneck seals and label certificates (id., § 7, pp. 48-49), and

required either the statement “Pure California wine”

(together with the maker's name) or the label certificate to be

affixed to each bottle of pure wine. (/d., § 8, p. 49.)° This

court’s decision in Ex parte Kohler, supra, 74 Cal. 38,

rejected constitutional challenges to the act and concluded

that, like legislation designed to ensure the marketing of

puremilk and safe meats, the statute was a proper exercise of

the state’s police powers. (/d., at pp. 41-42.)

Colorado quickly followed in April 1887 with its own

statute regulating the “manufacture or sale” of wine and other

alcoholic beverages.” New York adopted its own wine

labeling statute in June 1887.” Two years later Ohio adopted

© In addition—and belying Bronco's claims that this and similar statutes

lacked detail—the statute contained various other provisions dealing

comprehensively with the production and labeling of wine. (See Stats.

1887, ch. 36, §§ 3-6, pp. 47-49.)

*' The Ex parte Kohler decision proceeded to construe the act's labeling

requirements as prohibiting the sale of wines not meeting the definition of

pure wines under the act, but as not subjecting to penalty a merchant who

sells wine that is pure but lacks the required labels. (£x parte Kohler,

supra, 74 Cal. at pp 44-45.\

= (1887 Colo. Sess. Laws, § 2, p. 18 et seq.) The legislation required that

wine be “pure”--defined as made from “the juice of the grape”--and

specified that “[njo vinous . . . liquors shall be offered or exposed for sale

in this State, unless the . . . package, containing such liquors, shall be

plainly” marked with “the we < ‘pure’ wine,” and displaying “the name or

brand of the particular kind of wine so offered or exposed.” (/d., §§ 3 &

4, pp. 18-19.)

* (1887 N.Y. Laws, ch. 603, p. 814 et seq.) The New York law was

designed to address its specific regional needs as reflected in the industry

practices of New York winemakers who, like those in Europe and other

areas of the United States but unlike those in California, often found it

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a law that expanded upon the three wine labeling statutes

described above.”“* Arkansas adopted a wine labeling statute

in 1897,”° and in 1905 Oregon adopted its own wine labeling

statute.”°

necessary to add sugar in the production of their wines. The law defined

and made illegal adulterated wine, and thereafter defined and required the

proper labeling of “pure wine,” “half wine,” and “made wine.” (/d., §§ |-

4, pp. 814-816.)

As Bronco observes, the New York provision, as codified in 1889 (N.Y.

Pub. Health Law, ch. 25, art. Ill, §§ 46-49 (Birdseye 1889)), referred, in

its definition of adulterated wines, to those “offered for sale or

manufactured with intent to sell within this state.” (/d., § 46.) Bronco

asserts this and similar phrasing in the statute's penalty provision (id., §

49) suggests the New York statute was intended to apply only to wines

sold within the state. There is no evidence that the similar California law

mentioned above, or the Ohio law mentioned below, was so confined or

intended. But in any event, the relevant point is that New York--like the

other states--exercised its traditional police powers by specifically

regulating the labeling of wines.

** (1889 Ohio Laws, p. 96 et seq.; 1891 Ohio Laws, p. 231.) As amended

in 1891, the Ohio law defined three versions of permitted wine: “pure

wine,” “wine,” and “compound wine,” and specifically allowed sugar to

be added to the latter two products. The statute provided that each type of

wine “shall be . . . labeled, designated and sold” as such and made it

illegal to label or package, in a manner “calculated to mislead or deceive

any person, or cause to be supposed that the contents thereof be pure

wine,” any product not meeting the definition of pure wine. (1891 Ohio

Laws, §§ 2-4, pp. 231-233.)

** (1897 Ark. Acts, act 42, § 4, p. 108.) As subsequently amended (1899

Ark. Acts, act 80, pp. 137-138) and codified (Stats. of Ark., ch. 103, §

5101 (Kirby 1904)), the statute provided: “Al) wine sold in this State shall,

before sale, be labeled so as to truly designate its kind and quality.

Nothing but the pure fermented juice of the grape shall be labeled ‘Natural

Wine." Wine to which sugar has been added before fermentation shall be

labeled “Sugared Wine.’ The label shall also state if the wine be

sweetened or unsweetened.”

* (1905 Or. Laws, ch. 209, p. 347 et seq.) The Oxegon law defined and

barred “adulterated wine,” allowed certain amounts. of sugar to be used in

the production of “pure wine,” and defined and permitted “half wine” and

“made wine,” so long as those products were labeled as such. (/d., §§ 54-

22a

c. Relevant federal law in the early 20th century: A failed

wine statute; adoption of the Pure Food and Drugs

and

1906; administrative “food standards”;

Inspection Decisions”

Far from supplanting these early efforts by the

Congress in 1906 at first attempted but failed

federal wine labeling statute similar to those adopted

states.”’ As explained below, later in the

Congress did enact a general pure food and beverage statute,

but the resulting federal scheme produced no enforceable

wine labeling regulation.

Congress's 1906 federal Pure Food and Drugs Act (Pub.

L. No. 59-384 (June 30, 1906) 34 Stat. 768 (hereafter

i

New York statute described above (ante, pt. ILLB.1.a), the

federal act defined as “misbranded”-and illegal--any food or

beverage “package .. . or label” that bore “any statement,

56, pp. 361-362.)

*” See Hearing before the House Commitice on Ways and Means on

House Resolution No. 12868, 59th Congress, Ist Session, at pages |-60

(Feb. |, 1906) (February hearings), Second Hearing before the House

Committee on Ways and Means, 59th Congress, | st Session, at pages 61 -

114 (Apr. 6 & 10, 1906) (April hearings). The proposed legislation would

have defined wine as “pure,” “carbonated,” or “artificial,” and required

labeling as such. (Feb. hearings, supra, at pp. 5-7.) During a second

committee hearing concerning the bill and a revised version of the bill, the

committee mace clear that im considering the proposed federal legislation

it had consulted the related wine laws of France, Italy, Germany, Ohio,

New York, “and other states.” (Apr. hearings, supra, at pp. 62, 73, 101,

109-112.) ,

A recurring theme during the hearings was the harm posed to the wine

industry by the sale of “sophisticated and fabricated wines.” The

proponents’ stated concern was that if the sale of such products were

“allowed or countenanced __. in time honest wine will be driven from the

market, .. . to the injury of the vincyardists... .~ (Apr. hearings, supra,

at p. 66; sce also id, at pp. 73-74, 102.) That wine labeling legislation,

however, died in committee.

23a

design, or device regarding . . . the ingredients or the

substances contained therein, which jis] false or misleading in

any particular, and [] any food or drug product which is

falsely branded as to the State, Territory, or country in which

it is manufactured or produced.” (Pub. L. No. 59-384, § 8

(June 30, 1906) 34 Stat. 770.)

Also like the previous general pure food and beverage

laws of the states, the 1906 federal Act applied to food and

“drink” (Pub. L. No. 59-384, § 6 (June 30, 1906) 34 Stat.

769), which in turn was construed to include wine. (Sec

United States v. Sweet Valley Wine Co. (N.D. Ohio 1913) 208

F. 85, 87 (Sweet Valley).) The 1906 Act directed three

department secretaries--the Secretary of the Treasury, the

Secretary of Agriculture, and the Secretary of Commerce and

Labor--jointly to adopt regulations “for carrying out the

provisions of this Act.” (Pub. L. No. 59-384, § 3 (June 30,

1906) 34 Stat. 768-769.)

As commanded by Congress, in October 1906 the three

department secretaries jointly adopted a set of regulations

under the 1906 Act. (See U.S. Dept. of Agriculture, Circular

No. 21, reprinted (as amended through 1909) in Thornton,

The Law of Pure Food and Drugs, National and State (1912)

pp. 843-860 (Law of Pure Food and Drugs), see generally

Hayes & Ruff, The Administration of the Federal Food and

Drugs Act (1933) | Law & Contemp. Probs. 16, 20

(Administration of the Federal Food and Drugs Act).) One

provision of those regulations governed the labeling of foods

and beverages and prohibited, among other things, false or

misleading statements concerning a product's “place [of]

origin.” (Circular No. 21, supra, Reg. 17(d), reprinted in Law

of Pure Food and Drugs, supra, at p. 851.)

implicitly acknowledging, as it must, that “[p)rior to the

repeal of Prohibition, no agency of the Federal Government

was provided with statutory authority to regulate the labeling

... Of alcoholic beverages specifically” (Russell, Controls

Over Labeling and Advertising of Alcoholic Beverages (1940)

24a

7 Law & Contemp. Probs. 645, 645 (Controls Over

Labeling)), Bronco’s supplemental brief points to (i) separate

“food standards” (including wine standards) adopted solely

by the Secretary of Agriculture in the two years prior to

enactment of the 1906 federal Pure Food and Drugs Act, and

(ii) two “Food Inspection Decisions” (hereafter sometimes

F.1.D.), one issued solely by the Secretary of Agriculture and

the other issued jointly by the three secretaries. (See

Standards of Purity for Food Products (June 26, 1906)

Circular No. 19, reprinted in Westervelt, American Pure Food

and Drug Laws (1912) pp. 61, 78-79 (American Pure Food

and Drug Laws); F.1.D. No. 109 (Aug. 21, 1909) & F.1D. No.

120 (May 13, 1910), both reprinted in American Pure Food

and Drug Laws, supra, at pp. 212-214.) As explained below,

under federal law the cited food standards (including the wine

standards) were merely advisory, and not legally binding, and

with respect to the cited Food Inspection Decisions, the first

was nonbinding and the second, even if binding, did not

demonstrate federal control over the labeling of wines.

The cited food standards had been created at the behest of

Congress, which in 1902 and 1903 directed the Secretary of

Agriculture to undertake numerous projects, including one “to

establish standards for purity of food products and determine

what are regarded as adulterations therein, for the guidance of

the officials of the various States and of the courts of justice

.. (Pub. L. No. 57-1008 (Mar. 3, 1903) 32 Stat. 1147, 1158,

italics added; see also Pub. L. No. $7-139 (June 3, 1902) 32

Stat. 286, 296.) The resulting detailed food standards

addressed more than 200 categories of food items, including

salted meats, oatmeal, lemon and vanilla extract, olive oil,

coffee, and--in part II.F.a.3 of the secretary's food standards--

what Bronco characterizes as “detailed and comprehensive”

standards for wine, dry wine, fortified dry wine, sweet wine,

fortified sweet wine, sparkling wine, modified wine (a low-

alcohol product made by the addition of sugar), and raisin

25a

wine (a product made from pomace--dried, evaporated, or

previously crushed grapes).

Contrary to Bronco’s suggestions and representations, the

Agriculture Secretary's food standards (and hence the wine

standards contained therein) were not enforceable under the

1906 federal Pure Food and Drugs Act (which, as noted,

required that enforcing regulations be adopted by all three

named secretaries), or indeed under federal law at all. (See

United States v. St. Louis Coffee & Spice Mills (E.D.Mo.

1909) 189 F. 191 [finding the food standards relating to

vanilla extract unenforceable under the 1906 Act].) In view

of the 1906 Act's “three secretaries” requirements for

regulations and the resulting case law, the food standards

proclaimed by the Secretary of Agriculture acting alone have

been described by authoritative commentators as merely

“advisory” and as being “for the guidance of officials and the

trade but not having the force and effect of |federal| law.”

(Salthe, State Food, Drug and Cosmetic Legislation and its

Administration (1939) 6 Law & Contemp. Probs. 165, 167,

italics added; see also Lee, Legislative and Interpretative

Regulations (1940) 29 Geo. L.J. 1, 4-17 (Interpretative

Regulations) [noting that despite many congressional attempts

in the course of three decades to make the food standards

enforceable, manufacturers “‘could take ‘em or leave ‘em’

without legal consequences” under federa/ law]; Alcoholic

Beverage Control Before Repeal, supra, 7 Law & Contemp.

Probs. 544, 553; cf. Administration of the Federal Food and

Drugs Act, supra, | Law & Contemp. Probs. 16, 32, fn. 71.)

Indeed, even the treatise upon which Bronco relies concurred

on this point, characterizing those same food standards as

“not controlling” under federal law. (See American Pure

Food and Drug Laws, supra, at p. 60.) In view of this history,

we must reject Bronco's suggestion that the cited food

standards, and the wine standards contained therein,

constituted enforceable federal regulations under the 1906

Act or were otherwise enforceable as a matter of federal law.

26a

We reach similar conclusions with respect to the two

Food Inspection Decisions cited by Bronco, issued in 1909

and 1910, respectively. The first Food Inspection Decision,

approved by the Secretary of Agriculture acting alone, stated

that Missouri and Ohio wines, which typically were produced

by adding substantial amounts of sugar, “would properly be

called a ‘sugar wine™’--and that when made by the mixture of

products should be called “imitation wine."” (F.1.D. No. 109,

reprinted in American Pure Food and Drug Laws, supra, at p.

212.) The second cited Food Inspection Decision, issued

under the signatures of the three department secretaries,

essentially retreated from and modified the first and stated

that in light of (and apparently in deference to) the fairly lax

Ohio wine statute (see ante, fn. 24), which had long permitted

the use of sugar in wine production, such “sugared” wines

properly could be called ““Ohio Wine," or ‘Missouri Wine,’

respectively, without further qualification.” (F.1.D. No. 120,

reprinted in American Pure Food and Drug Laws, supra, at p.

213.) Moreover, the decision stated, Ohio and Missouri

imitation wines could be labeled as ““Ohio Pomace Wine,’ or

‘Missouri Pomace Wine."” (/d., at p. 214.)

These decisions reveal that the federal agency, far from

exercising federal authority to control state practices by

requiring adherence to the “detailed and comprehensive”

wine provisions of the food standards cited by Bronco,

instead completely ignored those federal standards and, in the

second decision, actually deferred to the applicable state

wine statute, which in turn codified long-standing and lenient

regional winemaking practices.

In any event, contrary to Bronco's suggestion that these

Food Inspection Decisions evinced federal control, the first

cited decision, No. 109 (approved by the Secretary of

Agriculture acting alone), did not constitute a regulation

27a

under the 1906 Act and was merely advisory.” Because the

second cited Food Inspection Decision, No. 120, was signed

by all three secretaries it arguably qualified as an enforceable

federal regulation under the 1906 Pure Food and Drugs Act.

(See American Pure Food and Drug Laws, supra, at p. 17.)

As noted above, however, in substance this assumed

regulation merely acquiesced in and adopted fairly lax state

(Ohio) law. It does not, therefore, support Bronco’s implicit

argument that federal regulatory authorities during this period

exercised power to control wine labels in a manner different

from that of the states.

For these reasons we reject Bronco’s suggestion that the

Secretary of Agriculture’s food standards, including the

detailed and comprehensive wine standards, constituted

enforceable federal law, that F.1.D. No. 109 constituted an

enforceable federal wine labeling regulation, or that F.1D.

No. 120 evinced anything more than federal acquiescence in

state law. Based upon the material cited to us, we conclude

that whatever federal regulation of wine labeling existed

between the first decade of the 20th century and the advent of

Prohibition was achieved only indirectly, on a case-by-case

™ The very limited effect of such decisions was described by the issuing

entity itself as follows: “The opinions or decisions of this Department . . .

are . . . issued more in an advisory than in a mandatory spirit. It ts clear

that if the manufacturers, jobbers, and dealers interpret the rules and

regulations in the same manner as they are interpreted by this

Department, and follow that interpretation in their business transactions,

no prosecution will lic against them... . It may often occur that the

opinion of this Department is not that of the manufacturer, jobber, or

dealer. In this case there is no obligation resting upon the manufacturer,

jobber. or dealer to follow the line of procedure marked out or indicated

by the opinion of this Department. Each one is entitled to his own opinion

and interpretation and to assume the responsibility of acting in harmony

therewith... .” (F.1D. No. 44 (Dec. 1, 1906), reprinted in Gwinn, U.S.

Dept. of Agriculture, Food and Drugs Act (1914) pp. 35-36, italics added;

see also American Pure Food and Drug Laws, supra, at pp. 16-18;

Administration of the Federal Food and Drugs Act, supra, | Law &

Contemp. Probs. at pp. 20-21.)

28a

basis, through prosecutions under the general misbrandin

provisions of the 1906 federal Pure Food and Drugs Act.

That relatively limited federal activity, however, neither

erased nor eclipsed the previous quarter-century of state

regulation described above. (Ante, pt. II.B.1.a. & b.)

Moreover, at the same time federal activity in this area

was commencing, state activity was continuing and at least

keeping pace. By 1906, nearly all of the states had exercised

their traditional police powers to enact pure food and

beverage laws, almost all of which covered drinks, including

wine. Even more importantly, as explained below, within a

few years of 1906 the Secretary of Agriculture’s food

standards (including the detailed and comprehensive wine

standards)--although remaining merely advisory and

unenforceable under federal law--specifically were adopted as

part of the general food laws of most states (including

California). The perhaps ironic result was that the Secretary

of Agriculture’s wine standards were to become enforceable

* In addition to the federal prosecution under the 1906 Act that resulted

in the decision in Sweet Valley, supra, 208 F. 85 in which the federal

district court held that-thé challenged “pomace wine” product in that case,

labeled as German “Select Riesling” and “Hochheimer,” was misbranded

under both the 1906 Act and the Ohio wine statute--we are aware of one

similar wine mislabeling prosecution under the 1906 Act (Sixty Barrels of

Wine (D.C.Mo. 1915) 225 F. 846) and three similar federal prosecutions

concerning bottled “Champagne.” (Duffy-Mott Co. v. United States (3d.

Cir. 1923) 285 F. 737; Schraubstadter v. United States (9th Cir. 1912)

199 F. 568; United States v. Five Cases of Champagne (N.D.N.Y. 1913)

205 F. 817.) One might ask why the Duffy-Mott case arose during

Prohibition. The answer is that even during Prohibition, pharmacists were

permitted to sel] “prescription Champagne.” (See Byszewski, What's in

the Wine? A History of the FDA's Role (2002) 57 Food & Drug J. 544,

554.)

* See Hearings before the House Committee on Interstate and Foreign

Commerce on the Pure-Food Bills, 59th Congress, Ist Session (Feb. 13,

1906) page 308. Indeed, according to contemporancous assessments, those

states with adequate enforcement mechanisms (approximately 20 states)

were, by 1906, applying their laws “very rigidly.” (/bid.)

29a

substantive law in most states under sfate law, even while

they remained unenforceable as a matter of federal law.

d. Relevant state law in the early 20th century: Adoption of

California's place--name wine statute; California's Pure

Foods Act and adoption of the food standards, including the

wine standards; and corresponding labeling regulations

Nothing in the 1906 federal Pure Food and Drugs Act

implied that the existing and continuing state regulation of the

misbranding of food and beverages was preempted by that

federal legislation. Indeed, the act “disclose[d] very clearly

that it [was] not intended to trench upon the powers of the

States in any respect.” . (Cleveland Macaroni Co. v. State

Board of Health (N.D.Cal. 1919) 256 F. 376, 379; see also

Savage, supra, 225 U.S. 50] (upholding, against a claim of

preemption, Indiana food and drug labeling regulations]; see

generally Fisher, The Proposed Food and Drugs Act: A Legal

Critique (1933) | Law & Contemp. Probs. 74, 75 & fn. 4

(Proposed Food and Drugs Act) (noting case law holding that

states were permitted to prescribe “additional standards” and

that “[cJompliance with federal standards does not secure the

right to interstate transportation free from ‘reasonable’

regulation by the state™).)

Soon after passage of the 1906 federal act, the California

Legislature, in an apparent effort to combat the continuing

problem of the labeling of California wines as foreign wines,

adopted a statute requiring a “uniform wine nomenclature”

that, for the first time, specifically regulated the use of place

names on wine labels. The statute provided for “pure”

California wines to be labeled with the “prefix ‘Cal’ or ‘Cala’

.. . a8 for example, ‘Calclaret,’ “Calburgundy,’ *Calariesling,’

etc.,.. .” (Stats. 1907, ch. 104, § 1, pp. 127-128.) The statute

further prohibited the use of any such label on wines other

than pure California wines. It barred “labeling any vessel,

bottle, . . . or package containing any liquid other than pure

wine of California manufacture, . . . or any paper or brand in

similitude or resemblance thereof, or any paper or brand of

30a

such form and appearance as to be calculated to mislead or

deceive any unwary person or cause him to suppose the

contents thereof to be pure wine of California manufacture,

origin or production . . . .” (/d., § 2, p. 128.)

Following passage of the 1906 federal Pure Food and

Drugs Act, states left in place or expanded (or in other

instances enacted for the first time) their own statutes to

address the problems of adulteration, misbranding, and

mislabeling of food and beverages. (See generally American

Pure Food and Drug Laws, supra, at pp. 260-1450; Proposed

Food and Drugs Act, supra, | Law & Contemp. Probs. 74, 75

& fn. 4.) California, for its part, adopted such a general

scheme in March 1907, addressing the problem of

“adulterated, mislabeled or misbranded food, or liquor.”

(Stats. 1907, ch. 181, § 1, p. 208 (Pure Foods Act or 1907

Act).) That statute--like those of many other states--

specifically adopted under state law the food standards

(including the wine standards) that had been formulated by

the Secretary of the United States Department of Agriculture,

but which, as described above, were unenforceable under

federal \aw. (Stats. 1907, ch. 181, § 3, p. 209.) Further going

beyond anything set forth in the federal! law, the state statute

also made it illegal to, among other things, “falsely brand{}”

any food or liquor concerning the “county, . . . city, town, [or]

State . . . in which it is manufactured, or produced” (id., § 5,

p. 210, italics added),”” and provided that “{flood and liquor

shall be deemed mislabeled or mishranded within the

meaning of this act . . . [i]f the package containing it or its

label shall bear any statement, design or device regarding the

ingredients or the substance contained therein, which

statement, design, or device shal] be false or misleading in

*! In this respect, the author of the 1912 treatise relied upon by Bronco

observed that “the prohibitions im the California statute . . . against

misstatements as to geographical source” were “more detailed” than those

under federal law. (American Pure Food and Drug Laws, supra, at p.

339.)

3la

any particular.” (Stats. 1907, ch. 181, § 6, p. 210, italics

added.) ,

Accordingly, as of March 1907 and continuing through

the next three decades, California (like many other states)

had adopted specific and enforceabie wine standards that

exceeded federal law. During this same period--and indeed,

until repeal of the 1906 federal Pure Food and Drugs Act in

1938--the Secretary of Agriculture’s food standards remained

unenforceable under federal law despite periodic attempts to

In early 1908, California's Department of Public Health adopted

comprehensive regulations implementing the 1907 state Act, broadly

regulating “for domestic commerce” the labeling of foods and beverages

and specifically providing that “[{fjhe /abel shall be free from any

statement, design, or device regarding . . . place of origin, which is false

or misleading in any particular.” (Cal. Dept. of Pub. Health, Rules and

Regs. for Enforcement of Cal. Pure Foods and Drugs Acts (1909) Reg. 16,

p. 22, italics added.) Those regulations, as periodically amended,

continued in force through at least 1935. (Cal. Dept. of Pub. Health, Rules

and Regs. for Enforcement of Cal. Pure Foods and Drugs Acts (1928)

Reg. 13(d) & (e), p. 20 [providing as quoted above, and further providing

that food or beverages shall not be “labeled or branded in such a manner

as to deceive or mislead the consumer”); Cal. Dept. of Pub. Health, Rules

and Regs. for Enforcement of Cal. Pure Foods and Drugs Acts (1933)

Reg. 13(d) & (e), p. 18 [same].)

* See American Pure Food and Drug Laws, supra, listing, as of 1912, the

following additional states that had adopted the Secretary of Agriculture's

food (and wine) standards, or essentially identical standards: Alabama (at

p. 270), Delaware (at p. 418); Florida (at p. 438), Georgia (at pp. 468-

474). Idaho (at p. 499); Illinots (at pp. 524-525); Indiana (at p. 551);

Kansas (at pp. 604-605), Kentucky (at pp. 634-635); Louisiana (at pp.

661-662), Maine (at pp. 680-681): Maryland (at pp. 705-706), Mississippi

(at pp. 828-829); Missouri (at p. 851); Montana (at p. 880); Nevada (at p.

932), New Hampshire (at p. 952), New Jersey (at p. 980); North Carolina

(at p. 1051); Oklahoma (at p. 1128); Rhode Island (at pp. 1207-1208);

South Dakota (at p. 1241), Texas (at p. 1285); Utah (at p. 1306); Virginia

(at pp. 1350-1351); Wisconsin (at pp. 1416-1417), and Wyoming (at p.

1441). (See also /nierpretative Regulations, supra, 29 Geo. L.J. at p. 13 &

fn. 27.)

32a

provide otherwise. (See /nterpretative Regulations, supra, 29

Geo. L.J. 1, 6-17.)"*

e. California's post-Prohibition-repeal wine labeling

regulations

With the advent of Prohibition, which became effective

on January 29, 1920 (U.S. Const., 18th Amend), the

California wine industry fell into a dormant phase, awakening

upon repeal of Prohibition in December 1933 through

adoption of the Twenty-first Amendment to the federal

Constitution. At least two years prior to adoption of the FAA

Act in August 1935--and indeed before, and in anticipation

of, the repeal of Prohibition--the California Legislature,

exercising both its traditional police powers and its authority

under newly enacted article XX, section 22 of the state

Constitution,’ adopted as an interim measure the State

Liquor Contro] Act (Stats. 1933, ch. 178, p. 625 et seq.; id.,

ch. 658, p. 1697 et seq.) and thereafter adopted the California

Alcoholic Beverage Control Act (ABC Act), which went into

effect on June 13, 1935. (Stats. 1935, ch. 330, p. 1123 et seq.;

see Bus. & Prof. Code, § 23000 et seq.)

4 Effective through at least 1935, the state’s 1907 Pure Foods Act

continued to adopt--as minimum standards—the federal food standards

(including the wine standards). (Stats. 1933, ch. 758, § 10, pp. 2001-

2002.)

** In 1932, anticipating ratification of the repeal of Prohibition, California

voters passed a constitutional amendment, providing as follows: “The

State of California, subject to the internal revenue laws of the United

States, shai! have the exclusive right and power to license and regulate the

manufacture, sale, purchase, possession and transportation of alcoholic

beverages within the State, and subject to the laws of the United States

regulating commerce between foreign nations and among the states shall

have the exclusive right and power to regulate the importation into and

exportation from the State, of alcoholic beverages. . . .” (Cal. Const.. art

XX, § 22, italics added.)

© At that same time, the Legislature repealed the 1907 “Cala” wine

labeling statute. (See Stats. 1935, ch. 330, § 69, p. 1152; Caddow,

Permanent Wine Labeling Regulations, (Feb. 1936) Wines & Vines 10.)

33a

Meanwhile, in late December 1934--before adoption of

any federal regulation applicable to wine labels--California,

acting through its Department of Public Health, Bureau of

Food and Drug Inspections, and pursuant to its own 1907

Pure Foods Act (Stats. 1907, ch. 181, §§ 5 & 6, p. 210),

adopted regulations concerning “Definitions and Standards--

Wines.” (Cal. Dept. of Pub. Health, Bur. of Food and Drug

Inspection, Regs. adopted Dec. 31, 1934, amended April 13,

1935, as printed Jan. 18, 1936 (1934 Regulations).) A

preamble set forth in broad terms the purpose and scope of

the regulations. The stated goal was to protect both “the

consuming public” and “the wine industry as a whole.” (1934

Regs., at p. 1.)"’ To this end, the regulations adopted specific

chemical definitions for dry red wines, dry white wines, and

sweet wines (id, at pp. [-2), similar in substance to the

standards incorporated into the state’s 1907 Pure Foods Act,

and which, as explained ante, part I1.B.1.d, had by then been

in place in Califormia (and numerous other states) for nearly

30 years. The 1934 Regulations also established strict and

detailed labeling requirements for sparkling and artificially

carbonated wines (1934 Regs., at p. 2)" and for still wines

The 1887 state “pure wine” labeling statute (Stats, 1887, ch. 36, p. 46)

previously had been repealed in 1911. (Stats. 1911, ch. 587, § 1, p. 1110)

Of course, despite these repeals, the state's 1907 Pure Foods Act (Stats.

1907, ch. 181, p. 208 et seq.), which as noted above incorporated specific

wine standards, and the regulations adopted under the 1907 Act (all

described ante, pt. 11.B.1.d.), remained in effect and prohibited the

mislabeling of wine.

* Contrary to assertions in Bronco's supplemental briefs, there is no

indication that the scope of the 1934 regulations was limited to wine sold

to consumers in California and that the regulations did not address wines

destined for interstate commerce. 7

™ The regulation provided: “Champagne is a light white sparkling wine

identical with champagne as made in the Champagne district in France in

respect to composition and basic manufacturing principle. If the

secondary fermentation is not within the bottle, there shall be stated in

Fermentation in Bulk.’” (1934 Regs.. at p. 2.) The regulations also

34a

(id., at pp. 2-3). In the latter respect, the regulations

addressed the decades-old problem of California wines being

labeled with foreign place names such as “Burgundy.” The

state regulations allowed the unqualified use of that name and

similar French place names “only [for] products from

France,” and provided that a wine would be “regarded as

misbranded” (and hence in violation of the state's 1907 Act

and ensuing regulations described ante, pt. I1.B.1.d.) if the

label read “Burgundy” (or any other foreign place name) and

the wine was not produced there, unless the label also

“displayed with prominence equal to that” of the foreign

place name, “the name of the state or country where the wine

is produced.” (/bid., italics added.)

Bronco insists that these various state regulations, viewed

as a whole, “did not represent any innovation by California”

and that “similar, albeit more detailed and comprehensive . . .

standards already had been adopted nearly thirty years before

by federal regulators.” As explained ante, part II.B.1.c,

however, the historic record does not support Bronco’s claim.

The standards to which Bronco refers never were enforceable

under federal law, but in fact, by 1907, they had become part

of the substantive (and enforceable) law of California--and

within a short time, of most other states as well. In other

words, the touted innovation (enforceable wine labeling

standards) was accomplished by California and other states,

and not by the federal government.

f. Initial (and short-lived) federal wine labeling regulations

issued by the Federal Alcohol Control Administration

provided specific labeling requirements for artificially carbonated wines:

“The word ‘carbonated’ should be in the same color [and] style of type on

the same colored background as the wine described.” (/bid.)

* The regulations also restricted the use, on wine labels, of statements of

age and the word “old” (1934 Regs., at pp. 2-3), and further required that

any product made from pomace be labeled “IMITATION WINE/ Made of

Wine Pomace, Water and Sugar” (id., at p. 2).

35a

As Bronco emphasizes, a few months after adoption of the

1934 California wine labeling regulations, federal wine

labeling regulations (which, as explained below, proved to be

short-lived and never became effective) were for the first time

adopted in late March 1935 by the recently created Federal

Alcohol Control Administration (FAC Administration), which

had been established by executive order under the National

Industrial Recovery Act (/5 U.S.C. § 703). (See Harrison &

Lane (1936) After Repeal, p. 24 (After Repeal).) The FAC

Administration’s regulations, like the numerous similar state

food and beverage regulations that preceded them, were

directed against, among other things, “misbranding”--the false

or misleading labeling of alcoholic beverages. (See FAC

Admin., Misdranding Regs., Series 7, Regs. Relating to the

Labeling of Wine (Mar. 25, 1935), § 3(b\(3) (Misbranding

Regulations) [a wine bottle is misbranded if its label “tends to

create a misleading impression of the wine”]; see generally

O'Neill, Federal Activity in Alcoholic Beverage Control

(1940) 7 Law & Contemp. Probs. 570, 572; After Repeal,

supra, at pp. 27-29.) Nowhere in these nascent federal

regulations was there any suggestion that they preempted

stricter state regulations. In any event, within two months of

their adoption and prior to their effective date (see

Misbranding Regulations, supra, § 1(a)(3)\, the federal

regulations became unenforceable in late May 1935 after the

United States Supreme Court invalidated as unconstitutional

similar “fair competition” codes adopted under the National

Industrial Recovery Act. (Schechter Corp. v. United States

(1935) 295 U.S. 495, 541-542 [79 L. Ed. 1570, 55 S. Ct.

837].)

g. Continuing regulation by other states

Despite the initial failure of federal regulation of wine

labels, regulation by the states continued in and through 1935.

In addition to California’s then long-established genera) food

and beverage regulations, and its then recent specific wine

regulations, described ante, part II.B.1.d-e, the Ohio and

36a

Oregon wine labeling statutes, described above (ante, fns. 24

& 26), still were in effect” and most other states had food and

beverage statutes, the majority of which regulated mislabeling

or misbranding of beverages, including wine. As already

explained, many of those statutes adopted specific and

comprehensive wine standards that were enforceable only

under state, and not federal, law--and as of 1935, many had

been revised specifically to bar misrepresentations on labels

concerning the place of manufacture or production. *'

” The original Ohio wine law (1889 Ohio Laws, p. 96 et seq.) was, by

1938, codified in Page's Ohio Revised Code Annotated (Anderson 1938)

title Il, chapter |, sections 5795-5805. Oregon's 1905 wine labeling

statute (1905 Or. Laws, ch. 209, §§ 54-56, pp. 361-362) was reenacted a

decade later (1915 Or. Laws, ch. 343, §§ 41-43, pp. 570-571) and

apparently still was effective through mid-1937, when Oregon adopted

post-Prohibition-repeal wine labeling regulations. (See also Or. Liquor

Control Admin. (1937) Regs. Sic) [specifically enforcing the California

wine regulations discussed above) & 6 [setting forth labeling

requirements]. )

*' For example, the food and beverage labeling statutes of Massachusetts,

North Dakota, and Washington, described ante, part 11.B.).a, cach

remained in force in 1935, as revised, and cach defined as “misbranded™

any food or drink label bearing “any statement, design or device™ that was

“false or misleading in any particular,” or any item “falsely branded as to

the state or country where it was manufactured or produced,” or very

similar words to that effect. (Sce 1932 Mass. Gen. Laws, ch. 94, §§ 186,

187, 1923 N.D. Laws, ch. 222, §§ 4, 6, pp. 289-291; Rev. Stats. of Wash.

(Remington 1932) tit. 40, §§ 6145, 6147; see also Rev. Stats. of Wash.,

supra, § 6137 [adopting the federal food standards, including wine

standards, as minimum standards }.)

In New York, Colorado, and Arkansas, the previous wine-specific

labeling statutes described ante, part 11.B.1.b, had given way, by 1935, to

the states’ respective general food and beverage mislabeling/misbranding

regulations, all of which regulated both food and drink. (See N.Y. Agric.

& Mkts. Law, ch. 1, art. 17, § 200 (Cahill 1930), Ann. Stats. of Colo., ch.

1, § 6 (Courtright 1930), Stats. of Ark. ch. 69, § 4823 (1919).) There is

no indication, with respect to any of these changes in the various states’

laws, that any diminution of state regulatory authority over the labeling of

wines thereby was intended or effected.

a

37a

2. Propriety of imposing a presumption against preemption

in this case

In light of the history set forth above, we disagree with

Bronco's assertion, advanced in its origina] brief in this court,

that federal regulation of wine labeling prior to Congress's

adoption of the FAA Act in August 1935 was “well

established,” and that “[b]y contrast, the states’ regulation of

wine labeling . . . ranged from limited to none.” Nor do we

agree with the accusation of amici curiae Abundance

Vineyards et al. that the Department and the NVVA have

“suggested, misleadingly, that the States, and not the Federal

government, historically played the dominant role in the

regulation of the alcoholic beverage industry before

enactment of the FAA Act.” (Italics added.) Based upon our

review of the relevant history, we conclude that from the mid

to late 19th century until shortly after the repeal of

Prohibition, the states’ exercise of their traditional police

power to regulate the labeling of food--including wine and

other alcoholic beverages--was both extensive and dominant.

This historic evidence demonstrates that when, as described

below, Congress finally entered the specific field of wine

label regulation in August 1935 by enacting the FAA Act,

under which the federal regulation here at issue was

promulgated, Congress was legislating in a field “traditionally

regulated by the States.” (ARC America Corp., supra, 490

U.S. 93, 101, ard cases cited.) Accordingly, a strong

“For the reasons set forth above, we also reject Bronco's related

assertion, pressed in its supplemental briefs and at oral argument, that no

presumption against preemption applies here because, Bronco claims, the

States’ regulatory activity was augmented in the carly 20th century by a

“significant federal presence.” (See Locke, supra, 529 US 89 108

[finding no presumption against preemption regarding regulation of

maritime vessels}.) As explained ante, part 11.B.1, prior to adoption of the

FAA Act in 1935, the federal role with respect to wine label regulation was

newther dommant nor particularly significant in comparison with that of

the states--and in any event, unlike the situation in Locke, federal activity

in the field of wine labe! regulation certainly was not “mansfest since the

beginning of our Republic.” (Locke, supra, at p. 99.)

38a

presumption against preemption applies, and a court should

not find-that the traditional police powers of the states to

regulate wine labels (in order to prevent the deception of

consumers) are superseded unless it is clear and manifest that

Congress intended to preempt state law.

We turn now to consider whether, as Bronco claims, there

was, at the time of the enactment of the FAA Act or thereafter,

a clear and manifest intent on the part of Congress to preempt

wine labeling regulation by the states such os is found in

section 25241. We find no such intent. We thereafter

consider whether, as Bronco claims, section 2524] is

impliedly preempted by federal law because it “stands as an

obstacle to the accomplishment and execution of the full

purposes and objectives of Congress.” (Hines, supra, 312

U.S. 52, 67.) As we explain, we find no such implied

preemption.

C. =

|. Whether Congress, when it enacted the FAA Act in 1935,

intended to preempt state wine labeling regulation

As explained below, contrary to Bronco’s assertions the

history of the 1935 FAA Act discloses no intent on the part of

Congress to supplant or preempt state efforts to regulate wine

labeling.

In late August 1935, Congress replaced the defunct FAC

Administration with the Federal Alcohol Administration Act.

(Pub. L. No. 74-401 (Aug. 29, 1935) 49 Stat. 977, presently

27 U.S.C. § 201 et seq.) The essential aspects of the FAA Act

exist today in substantially unamended form and remain the

basis for federal regulation of wine labeling. (See Benson,

Regulation of American Wine Labeling: In Vino Veritas?

(1978) 11] U.C. Davis L. Rev. 115, 154 et seq. (Regulation of

American Wine Labeling).)

Substantively, the FAA Act in large measure emulated the

main aspects of the invalidated FAC Administration. (After

39a

Repeal, supra, at p. 32; Regulation of American Wine

Labeling, supra, 11 U.C. Davis L. Rev. 115, 165.) The FAA

Act makes it illegal for any person to produce, sell, or ship

wine in interstate or foreign commerce unless that person is

licensed to do so by the Secretary of the Treasury.” (27

U.S.C. § 203(a) & (b).) Title 27 United States Code section

205(e)--the primary federal statutory provision for present

purposes--directs the Secretary of the Treasury to promulgate

such regulations “with respect to packaging, marking,

branding, and /abeling . . . (1) as will prohibit deception of the

consumer with respect to [alcoholic beverage] products . . .;

[and] (2) as will provide the consumer with adequate

information as to the identity and quality of the products . . .

.” (Italics added.) To enforce these requirements, this section

of the FAA Act also requires that any person who sells or

ships wine in interstate or foreign commerce first obtain from

the Secretary of the Treasury (or his or her designee) a

certificate of label approval, or COLA, for each wine, and

directs that no wine may be shipped or sold in interstate

commerce unless it bears a label that has been reviewed and

approved by the Secretary of the Treasury, through issuance

of a COLA. Finally, the section further provides that no wine

label may be removed or altered “except as authorized by

Federal law” or except pursuant to federal regulations

” As originally enacted, the statute referred to the “Administrator” of the

“Federal Alcohol Administration.” That agency was abolished, and its

functions were directed to be administered by the Secretary of the

Treasury through the Bureau of Internal Revenue (now the Internal

Revenue Service) in the Department of the Treasury. (See 27 U.S.C. §

201, Transfer of Functions.) Thereafter, the Bureau of Alcohol, Tobaccu

and Firearms ‘BATF) was established in 1972 and given the pertinent

functions / “ »% ‘ternal Revenue Service with regard to wine regulation.

(/hid.) Su ~e wently, the Homeland Security Act of 2002 (6 U.S.C. §

/01) trans « ed responsibility for the regulation of interstate commerce in

alcoholic beverages to a newly formed Alcohol and Tobacco Tax Trade

Bureau within the Department of the Treasury. (68 Fed Rey. 3744 (Jan.

24, 2003).) For convenience, and because the regulations here at issue

were adopted by the BATF, we shall continue to refer in this case to the

BATF as the responsible regulatory agency.

40a

“authorizing relabeling for purposes of compliance with the

requirements of this subsection or of State law.” (/bid.)

Testifying in support of the legislation that became the

FAA Act, Joseph H. Choate, former Chairman of the FAC

Administration, explained that the goal was to continue the

work of the recently invalidated FAC Administration.

Adverting to the regulations mentioned above that recently

had been adopted by the FAC Administration (ante, pt.

11.B.1.f.), Mr. Choate explained that the purpose of those

regulations--and of the new FAA Act--was to “to provide such

regulations, not laid down in statute, so as to be inflexible, but

laid down under the guidance of Congress, under general

principles, by a body which could change them as changes

were found necessary. These regulations were intended to

insure that the purchaser should get what he thought he was

getting, that the representations both on labels and in

advertising should be honest and straightforward and

truthful. . . . [The consumer) should be told what was in the

bottle, and all the important factors which were of interest to

him about what was in the bottle.” (Hearings before House

Com. on Ways and Means on H.R. No. 8539, 74th Cong., Ist

Sess., p. 10 (1935), testimony of Joseph H. Choate, italics

added.) Similarly, Representative Thomas Cullen of New

York, the author of the bill that betame the FAA Act (see 79

Cong. Rec. (1935) 11713 et seq., 11726), promoting his

legislation on the floor of the House, asserted that the

proposed bil] was necessary in order to “do something to

prevent the unfair trade activities of those in the industry who

chisel and take advantage of the ignorance of the consumer by

dishonest labeling ... .” (Remarks of Rep. Cullen on H.R. No.

8539, 74th Cong., Ist Sess., 79 Cong. Rec. (1935) 11714; see

generally Regulation of American Wine Labeling, supra, 11

U.C. Davis L. Rev. 115, 165-167.)

As with the 1906 federai Pure Food and Drugs Act, and

by contrast to other legislation passed only days prior to

4la

adoption of the FAA Act in August 1935,“ nothing in the

body of the FAA Act reveals congressional intent to supersede

concurrent (or more stringent) regulation of wine labeling by

the states under their traditional police powers. As already

explained, at the time Congress adopted the FAA Act in

August 1935, the states, led by California (see ante, pt.

I1.B.1.d. & e.), were continuing to exercise their traditional

police powers in this area. (See an/e, pt. 11.B.1.g., describing

the then extant statutes of various states.)

Consistently with this history and contemporaneous

practice, the bill’s author, Representative Cullen, while

promoting the bill embodying the FAA Act on the floor of the

House, emphasized the cooperative, as opposed to

preemptive, nature of the federal legislation. He asserted:

“(W]e must do something to supplement legislation by the

States to carry out their own policies. The liquor industry is

too big and the constitutional and practical limitations on the

States are so considerable that they alone cannot do the whole

job.” (Remarks of Rep. Cullen on H.R. No. 8539, 74th

Cong., Ist Sess., 79 Cong. Pec. (1935) 11714, italics added;

accord, H.R. Rep. No. 1542. 74th Cong., Isi Sess., pp. 2-3

* In the Tobacco Inspection Act (Pub. L. No. 74-314 (Aug. 23, 1935) 49

Stat. 731)--enacted six days prior to adoption of the FAA Act--Congress

used language making very clear its intent to adopt “uniform” national

standards that would displace state regulation, thereby revealing that when

the 74th Congress intended to make its regulation exclusive, it knew how

to do so. As observed in Florida Avocado, supra, 373 U.S. 132, 147,

with regard to the Tobacco Act, “Congress had declared ‘uniform

standards of classification and inspection’ to be ‘imperative for the

protection of producers and others engaged in commerce and the public

interest therein.’ [Citation.}] The legislative history was replete with

references to a need for ‘uniform’ or ‘official’ standards, which could

harmonize the grading and inspection of tobacco at all markets throughout

the country. Under the statute a single set of standards was to be

promulgated by the Secretary of Agricul <, ‘and the standards so

established would be the official standards of the United States for such

purpose.’ No such language or comparable provision appears in the FAA

Act, as adopted in 1935.

42a

(1935).)*° Representative Cullen also assured the House that

by enactment of the bill, “[n]o power is taken away from the

States to provide such safeguards as they deem best for their

own protection.” (79 Cong. Rec., supra, 11174.)

45

See also House of Representatives Report No. 1542 (74th Cong., Ist

Sess.), pages 13-14 (July 17, 1935) (citing the FAA Ac?'s “relabeling”

provision and noting that anticipated regulations would permit

“appropriate additional labeling requirements imposed by a State pursuant

to its own law not in conflict with the Federal requirements”). Bronco

asserts that by this relabeling provision (see >” C.F.R. § 4:30(b)(1)) and

the cited comment, Congress had in mind only the authority of states,

pursuant to the Twenty-first Amendment, to impose additional labeling

requirements on alcoholic products imported for sale from other states,

and did not contemplate that a state would be permitted to impose

additional labeling requirements on wines destined for interstate

commerce. We find no persuasive evidence of any such intent, however.

*° Although on occasion we have questioned reliance upon the views of

individual legislators as a basis upon which to discern the intent of the

state Legislature (e.g., People v. Dennis (1998) 17 Cal.4th 468, SOT, fn. 7

[71 Cal. Rptr. 2d 680, 950 P.2d 1035], and cases cited), in the present

case Bronco does not chailenge Representative Cullen's statements on that

ground, and we recently observed in Dowhal, supra, 32 Cal.4th 910, that

statements by a single member of Congress “‘can provide evidence of

Congress’ intent.”” (/d., at p. 926, fn. 6.) Moreover, in the present case

there are strong reasons to rely upon the quoted statements.

Representative Cullen was the author of the FAA Act, and was looked

upon as an authority during the House debates, fielding many questions

from his colleagues. (E.g., Remarks of Rep. Doughton, 79 Cong. Rec.

(1935) 11713 [Rep. Doughton, author of a prior version of the bill,

observing on the House floor that Rep. Cullen “is more familiar with the

provisions of this bill than myself or perhaps any other member .. . . He

has given much study to the bill and is better qualified to explain it than I

am .. ."}; id., pp. 11715-11718, 11727-11730, 11737, 11790, 11792-

11793, 11797, 11799 [Rep. Cullen's various responses to questions, etc.].)

In addition, Representative Cullen's comments essentially reiterated that

which was set out in the House Report of the Ways and Means

Committee, cited in the text above (and later incorporated into the Senate

Report of the Committee on Finance on House Resolution No. 8870--see

Fed. Alcohol Control Admin., Legis. History of Fed. Alcohol Admin. Act

(Sept. 15, 1935), appen. IV, at p. 166), and hence the cited comments did

not amount merely to expressions cf personal opinion. (/n re Marriage of

Bouquet (1976) 16 Cal.3d 583, 590 [128 Cal. Rptr. 427, 546 P.2d 1371].)

43a

Based upon this legislative history, and in light of the

backdrop against which Congress acted--the prior decades of

state legislation regulating the labeling or “misbranding” of

wine as a general food and beverage product, or of wine

specifically--we conclude that Bronco has failed to establish

that Congress, at the time it enacted the FAA Act, acted with

the “clear or manifest” purpose of preempting state statutes

regulating wine labels.

2. Post-1935 congressional and regulatory agency intent to

preempt state wine label regulation

Bronco further suggests that subsequent to the enactment

of 27 United States Code section 205(e) in August 1935 and

the adoption, by agencies within the Department of the

Treasury, of implementing regulations, both Congress and the

federal regulators manifested intent that the federal wine

labeling regulations would preempt more stringent state wine

labeling regulations. Applying again, as we must, a

presumption against preemption in this context, we inquire

whether Congress or the regulatory arm established within the

Department of the Treasury evinced a clear and manifest

intent to preempt state wine labeling regulations such as

California’s section 25241. In so doing, we keep in mind the

entire history of state regulation of wine labeling and the

history and language of the FAA Act described above. As

explained below, after reviewing (i) the early federal

regulations and early state regulations that imposed standards

higher than the federal regulations, (ii) subsequent federal

regulations and pronouncements recognizing the applicability

of state labeling law, and state wine regulations enacted in the

mid-1970s (especially certain Oregon regulations, one of

which is substantively similar to the challenged section

25241), and (in) a 1988 amendment to the FAA Act,

concerning health warnings on alcoholic beverages, we

continue to find no evidence of any clear or manifest intent on

the part of Congress or the responsible federal agency to

preempt state wine labeling regulation such as section 25241.

44a .

Indeed, the evidence demonstrates that the federal agency has

long contemplated or at least acquiesced in concurrent and

stricter state regulation.

a. Federal and California regulations issued after passage of

the FAA Act

As noted above, prior to adoption of the FAA Act

California had in place, by December 1934, specific and

detailed wine regulations restricting, among other things, the

use of place names on wine labels. (See ante, pt. I1.B.1.e.) In

bulletins and reports issued in the years immediately

thereafter, the California Department of Public Health touted

its enforcement of those state regulations, which it described

as requiring the “honest labeling of wines.””’

In late December 1935, four months after adoption of the

FAA Act, and one year after California’s adoption of its own

post-Prohibition-repeal wine labeling regulations, valid

federal wine labeling regulations were approved, and those

regulations became effective on March |, 1936. (U.S. Dept.

Treas., Fed. Alcohol Admin., Regs. No. 4 Relating to

Labeling and Advertising of Wine (Dec. 30, 1935) arts. I-VII,

| Fed.Reg. 83 (Apr. 1, 1936) (hereafter Regulations No. 4);

see, generally, Controls Over Labeling, supra, 7 Law &

Contemp. Probs. 645, 652, fn. 25 et seq.)

The federal labeling regulations, as amended in 1938 (see

3 Fed.Reg. 2093 (Aug. 26, 1938)) and thereafter, presently

are designated 27 Code of Federal Regulations, sections 4.20

through 4.39. One key provision--Code of Federal

Regulations section 4.25(b)(1){i) and (iii)--states that a wine

*” See California Department of Public Health, Weekly Bulletin (Feb. 19,

1938) page 14; id, at page 13 (describing enforcement of the California

wine quality standards and noting their adoption by the beverage contro!

authorities in Oregon, Virginia, and Arizona); see also Thirty-sixth

Biennial Report of the California Department of Public Health (Sept.

1940) page 177; Thirty-fifth Biennial Report of the California Department

of Public Health (Sept. 1938) at page 142; Thirty-fourth Biennial Report

of the California Department of Public Health (Sept. 1936) page 100.

45a

is “entitled” to be described with an appellation of origin if

“{a]t least 75 percent of the wine is derived from fruit ...

grown in the appellation area indicated” and “it conforms to

the laws and regulations of the named appellation area

governing the composition, method of manufacture, and

designation of wines made in such place.” (Italics added.)

Soon after the adoption of this federal provision in 1938, a

California statute was enacted, and two regulations were

adopted, all three of which » “osed more stringent California

wine labeling requirements. First, in 1939, the Legislature

amended the state ABC Act (Bus. & Prof. Code, § 23000 et

seq.) to prohibit the use on wine labels of the phrase

“California Central Coast counties dry wine,” unless the wine

was in fact made entirely from grapes grown in specified

Central Coast counties. (Stats. 1939, ch. 1033, §§ 1-4, p.

2838; see Bus. & Prof. Code, §§ 25236-25238.) Second, by

1942, a regulation had been adopted imposing a similar i100

percent grape origin requirement for any wine labeled as

** “Composition” refers to the ingredients used to make a wine (27 C.F.R.

§ 4.34) and generally consists simply of grapes. “Method of manufacture”

refers to approved wine treatment materials and processes. (27 C.F.R.

§ 24.175 et seq.) * Designation of wines” is a concept distinct from brand

name or appellation; it refers to the class or type of wine rather than the

source or origin of the wine. (27 C-F.R. §§ 4.32(a)(2), 4.34.) For

example, a wine may be designated by class as a grape wine, sparkling

grape wine, or carbonated grape wine (27 C_F.R. § 4.2/), or by the grape

varietal. (27 C.F_R. §§ 4.23, 4.24, 4.28.)

As Bronco concedes, California long has enforced regulations that differ

from the federal regulations with respect to method of manufacture. (See,

e.g., Cal. Code Regs., tit. 17, $§ 17005 |providing, concerning “cellar

treatment,” that “[ijn case of conflict between Federal and State laws or

regulations the California law or regulation shall take precedence”), /70/0

{adopting regulations more restrictive than those contained in federal

reguiations concerning the use of sugar in the production or cellar

treatment of wine].) Bronco contrasts what it asserts are these and similar

permissible and _ specifically sanctioned departures from federal

regulations with what it contends are impermissible deviations from

federal /abeling standards--especially federal regulations concerning the

use of brand names on labels.

46a

California’ or any geographical subdivision thereof.” (See

Cal. Dept. of Pub. Health, Regs. Establishing Stds. of

Identity, Quality, Purity and Sanitation and Governing the

Labeling and Advertising of Wine in Calif. (May 23, 1942)

art. I, § 2(aa)”” (hereafter 1942 Regulations), presently Cal.

Code Regs., tit. 17, § 17015, subd. (a)(1).) Third, by 1942, a

California regulation barred the “sale” of wines labeled with

so-called coined (or semi-generic) brand names if the “brand

designation resembles an established wine type name such as

... Madeira, ... Port, ... Claret, [or] Burgundy, etc. ... .” (See

1942 Regs., art. II, § 8.) Under this and subsequent versions

of the same regulation, a label such as “Burgundy brand” was

long barred in California.”

oes

The first two California labeling rules described above

plainly imposed (and still impose) a more stringent standard

than the 75 percent requirement set forth in the federal

appellation-of-origin regulation. (Regs. No. 4, § 25, as

revised, 3 Fed. Reg. 2093, 2096 (Aug. 26, 1938), presently 27

This requirement may have gone into effect earlier than 1942. A

predecessor to the regulations of 1942 had been adopted in April 1940.

(See 1942 Regs., cover page (“These regulations supersede the Definitions

and Standards--Wine., adopted December 1934, as amended, and Rules

Governing California Vintage Wines, adopted April 6, 1940"].) The

December 1934 regulations, as amended through January 18, 1936, have

been described ante, part I1.B.1.d. Despite the efforts of librarians

throughout the state, we have been unabie to locate the intervening

regulations--if indeed there were any--or the 1940 “Rules Governing

California Vintage Wines.”

Article Ill, section 12(1) of the 1942 Regulations also provided,

consistently with many of the prior statutes and regulations described

earlier, that wine labels “shall not contain (1) any statement, design,

device or representation which is false or misleading in any material

particular.” (Italics added.)

® That California regulation, as adopted in the early 1940s, was in force

until the mid-1980s. (See former Cal. Admin. Code, tit. 17, §§ 17001 (a)

& 17075(c\2) (1978).) Oregon as well had a similar “coined” brand-

name provision until the mid-1980s. (See Or. Admin. R. 845-10-

285(3)(a) (1978).)

47a

C.F.R. § 4.25(b)(1)(i).) The third provision described above

prohibited name types that the federal regulations have

permitted since 1941 upon a proper showing. (See 27 C.F.R

$ 4.33(b), as revised, 6 Fed.Reg. 2874 (June 13, 1941)

[disallowing such a geographic name un/ess a federa) officer

finds the name, either qualified by word “brand” or otherwise,

“conveys no erroneous impressions as to the ... origin ... of

the product”}.)

Although the parties dispute whether the first two state

rules cited above are sanctioned by Code of Federal

Regulations section 4.25(b)(/)(iii)--the federal provision that

expressly authorizes state regulation concerning the

“composition” (the grape ingredients) or “designation” of

wine (the ciass or type of wine, as distinct from its source or

origin)--the third California regulation, the “coined” brand-

name provision, cannot be so distinguished. That state

regulation plainly controlled, more strictly than the federal

rules, not the mere composition or designation of wines, but

the brand-name labeling of wines.

In any event, there is no indication that any question

previously has arisen concerning the authority or

enforceability of the California statute’’ or of either

regulation. Indeed, since mid-1939, the California

Legislature has authorized state wine regulations that are

stricter than federal wine regulations,** and for nearly the past

The appellation “California Central Coast counties” has since fallen

into disuse. (See Regulation of American Wine Labeling, supra, \1 U.C.

Davis L. Rev. at p. 143.)

* See Statutes 1939, chapter 60 (establishing the Health & Safety Code),

page 992 (enacting former § 2654/, requiring that certain state food and

distilled spirits regulations not impose a standard higher than certain

federal regulations--but mo requiring such conformity with regard to state

wine regulations); Statutes 1941, chapter 1042, section 3, page 2698

(enacting former § 26540.2, authorizing the State Board of Health to

promulgate wine regulations), and section 4, page 2699 (amending §

26541 to specify that the section's general prohibition on imposition of

higher state standards concerning food and distilled spirits “shail not apply

48a

35 years, the Legislature expressly has authorized state wine

regulations to “differ from or be inconsistent with” federal

wine regulations (Health & Saf. Code, § 110525, italics

added);° yet there is no indication the federal government has

taken issue with this long-standing assertion of broad state

authority.”

The history of the early post-Prohibition-repeal California

and federal wine labeling regulations reveals no evidence of

any Clear or manifest intent on the part of Congress, or the

to wine”). (Italics added.) Former section 2654!'s exemption of state

wine regulations from the general rule against imposition of higher state

standards relating to other foods and distilled spirits continued through

various amendments of that former section, until that exemption

ultimately was recast in 1970 as a positive right of state regulators to

“differ from or be inconsistent with” corresponding federal wine

regulations. (Stats. 1970, ch. 1573, § 5, p. 3255; see post, fn. 53 [quoting

current Health & Saf. Code, § 110525). cf. 44 Ops.Cal.Atty.Gen. 122, 125

(1964) [discussing similar history of Health & Saf. Code, former §

26542].)

> In 1970, Health and Safety Code former section 2651/5 was amended to

specify: “Standards of identity and quality for wine adopted pursuant to

this section may differ from or be inconsistent with the standards

promulgated by [the federal regulators in the Department of the

Treasury].” (Stats. 1970, ch. 1573, § 5, p. 3255, italics added.) The

statute today provides the same. (Health & Saf. Code, § 110525

[“Standards of identity and quality for wine adopted pursuant to this

section may differ from or be inconsistent with the standards promulgated

by the Secretary of the Treasury pursuant to the Federal Alcohol

Administration Act’}.)

“ Indeed, other jurisdictions, since 1976, expressly have recognized and

incorporated California's more stringent “100 percent rule” into their own

state wine regulations (see 16 Tex. Admin. Code, § 45.45(b) & (c) (eff.

Jan. 1976) [“all grape wine bearing labels showing ‘California’ as the

origin of such wine shall be derived 100 % from grapes grown and wine

from such grapes fermented within the State of California”]; Wash.

Admin. Code, § 314-24-003(5) [same]), and the federal regulating body

' itself has recognized California's “100 percent rule” as a valid exercise of

state regulatory power. (See 5& / ed Reg. 65295, 65297 (Dec. 14, 1993)

{acknowledging “California's authority- to enforce its own labeling

requirements within the area of its jurisdiction” }.)

49a

regulatory agency charged with executing the relevant law, to

preen’™ state wine labeling regulation such as section 2524].

This| \ ory suggests, instead, the opposite.

b. Modification of federal regulations in the 1970s and 1980s,

and adoption by Oregon of its more stringent wine labeling

regulations

Beginning in the mid-!970s, the BATF, which in 1972

had been delegated the task of creating and enforcing federal

regulations (see ante, fn. 43), began to consider proposals to

further define and regulate appellations of origin. In

connection with that inquiry, the BATF also began to

consider how better to regulate the use in brand names of

terms of “geographic or viticultural significance.” (42

Fed. Reg. 30517, 30518 (June 15, 1977). In 1978 the

BATF adopted, but then postponed enforcement of, new

brand-name rules, and it also adopted new regulations

** Under the then existing federal regulations, use of geographic brand

names was permitted if (i) the word “brand” appeared after the brand

name (27 C.F.R. § 4.33(b) (1976)) or (ii) at least 75 percent of the grapes

originated in the appellation suggested by the brand name (id., § 4.25

(1976)).

56

Although the BATF in 1978 adopted new rules regulating the use in

brand names of terms of geographic or viticultural significance, it delayed

implementation of those rules, first unti] 1983 and ultimately until 1986.

(43 Fed.Reg. 37672, 37674, 37678 (Aug. 23, 1978).) The brand-name

rules that were aclopted in 1978 (but that never became effective) would

have provided: “A brand name of viticultural significance may not be used

unless the bottling winery is located within the geographical area used in

the brand name, and the wine meets the appellation of origin requirements

for the area named” (meaning at least 75 percent of the grapes used to

make the wine must be from that area). (43 Fed. Reg. 37672, 37678 (Aug.

23, 1978).) Alternatively, the 1978 regulation, as initially adopted, would

have permitted use of a brand name of viticultural significance if “the

brand name is qualified by the word ‘brand’ immediately foilowing the

brand name in the same size of type and as conspicuous as the brand name

itself.” (/bid.)

As noted, implementation of the brand-name: aspects of the rules

repeatedly was delayed. (See 48 Fed Reg. 2762 (Jan. 21, 1983); 50

50a

concerning appellations of origin-- including a new

subcategory within appellations of origin known as

“viticultural areas.” (43 Fed Reg. 37672, 37674, 37678 (Aug.

23, 1978).)’ The 1978 federal appellations of origin

regulation expressly recognized the enforceability of state

laws in relation to placing a “viticultural area” designation on

a wine label, making the right to so label a wine contingent on

compliance with, among other things, “the laws and

regulations of all of the States contained in the viticultural

area.” (27 C.F.R. former § 4.25a(e)(3)(iv) (1978-1981); id.,

former § 4.25a(e)(3)(v) (1981-1986), italics added.)™*

Prior to and during this same period of federal regulatory

action and consideration of geographic brand-name

regulations (see ante, fn. 56), in 1977 the State of Oregon

departed from the federal tabeling regulations in substantia]

ways, imposing more stringent state rules concerning matters

Fed.Reg. 758 (Jan. 7, 1985).) Meanwhile, in 1984 the BATF retreated

from its 1978 proposal concemming the use of brand narnes and proposed

instead to address the issue by adopting either that plan, or one of three

alternative plans. (49 Fed Reg. 19330, 1933/-19332 (May 7, 1984); see

post, fn. 70 [describing the BATF's 1984 comments concerning proposed —

branding rules}.) As explained below, based upon further review and the

comments concerning its 1984 proposal, the BATF ultimately adopted,

effective July 7, 1986, the regulation at issue in the present case. (5/

Fed. Reg. 20480 (June 5, 1986).)

*” An “appellation of origin” was, and continues to be, defined as a

political division or subdision--for example, a state, or group of states,

cr a county, or group of counties—in which grapes used to make a wine

‘are grown. (See 27 CFR. § 4.25(a)(1)(i)-(vi).)_ A “viticultural area,” by

contrast, is a special subcategory within an appellation of origin (see 27

C.F.R. § 4.25(a)(1)(vi)) demarked not by political boundaries, but by

geographic terms and characteristics.

*® The other requirements for “viticultural area appellation” labeling were

(and remain) (t) that the area be recognized under part 9 of 27 Code of

Federal] Regulations, (ii) that the wine be made from at least 85 percent

grapes grown in that viticultural area; and (ii) that the wine be fully

“finished” within the state (or one of the states) of the viticultural area.

(27 C.F.R. § 4.25(eH 3), (i) & fiv).)

Sla

such as percentage content of Oregon appellation wines,” use

of “semi-generic” place names,” percentage content of

varietal wines,”' use of the term “estate bottled,” and the use

* An administrative regulation of the Oregon Liquor Control

Commission (former Or. Admin. R. 845-10-292(6)(c), eff. Mar. 1, 1977,

currently Or. Admin. R. 845-010-0920(1) & (2) (2004)), requires: “(1) An

appellation of origin must appear on every wine brand label in direct

conjunction with, and in lettering as conspicuous as, the wine's class or

type designation. The lettering must be at least two millimeters in height.

(2) No person may sell or offer to sell a wine, claiming or implying a

certain appellation of origin anywhere on its label, unless 100 percent of

the grapes used in its production grew within the legal boundaries of that

appellation of origin. .. .” The corresponding federal regulations, by

contrast, impose only a 75 percent rule for appellations of origin (27

C.F.R. § 4.25(b)(1)(i)), an 85 percent rule for American viticultural areas

(27 CFR. § 4.25(e)(3 Hii), and a 95 percent rule for individual vineyard

appeliations (27 C.F.R. § 4.39(m)).

60

Compare Oregon Administrative Rule 845-|10-292(5), effective

March |, 1977, currently Oregon Administrative Rule 845-010-0930

(2004) (barring use of “semi-generic” place names [such as Burgundy,

Chablis, and Chianti] on Oregon wine iabels) with Regulations 27 Code of

Federal section 4.24(b)(2) (permitting those same names on federally

approved labels).

*' Compare Oregon Administrative Rule 845-10-292(3)(a), effective

March |, 1977, currently Oregon Administrative Rule 845-010-0915(1)

(2004) (a varietal name [such as Chardonnay or Pinot Noir} may not be

used on an Oregon wine label unless at least 90 percent of the wine's

grapes are of that varietal) with 27 Code of Federal Regulations section

4.23(b) (permitting use of a varietal name on federally approved labels if

only 75 percent of the wine's grapes are of that varietal).

é>

Compare Oregon Administrative Rule 845-10-292(4\(c), effective

March |, 1977, currently Oregon Admumnistrative Rule 845-010-0925

(2004) (barring use of the term “estate bottled” on Oregon wine labels

unless, among other things, the wine's grapes were grown within five

miles of the winery) with 27 Code of Federal Regulations section 4.26

(permitting the term “estate bottled” on federally approved labels without

requiring that the wine's grapes have been grown within five miles of the

winery).

52a

of geographic brand names.” In each of these respects,

Oregon reserved the right to disapprove wine labels that had

been granted a valid federal certificate of label approval.”

For present purposes, the most relevant of these various

departures from federal wine labeling regulations concerns

Oregon’s geographic brand-name rule.

Effective March |, 1977, Oregon Administrative Rule

845-10-292(6)(e) provided that appellation names--including

the names of Oregon counties, and the names of Oregon

wine-producing regions Willamette Valley, Umpqua Valley,

and Rogue Valley--"shall not be used in a brand name, in the

name of a winery or in any other manner on a label unless

100 percent of the grapes used to produce the wine were

grown within the boundaries of that appellation of origin.”

(Italics added.) The regulation included a grandfather clause

permitting “use by a winery of a brand name which has been

in use by that winery on its approved labels prior to January

1, 1977.” (Or. Admin. R. 845-10-292(6)(e) (1977), italics

added.) Like the other Oregon labeling rules that

specifically exceed the federal regulations, this Oregon

*? See Oregon Administrative Rule 845-10-292(6)(e), effective March 1,

1977, currently Oregon Administrative Rule 845-010-0920(4)(f) (2004),

discussed in the text, post.

“ See Oregon Administrative Rule 845-10-290(2) (1977), currently

Oregon Administrative Rule 845-01 0-0290(2) (2004) (providing that each

wine label must (i) receive a federal COLA and (ii) comply with the more

stringent Oregon rules concerning percentage contents for appellations of

origin, semi-generic names, grape content of varietal wines, brand names,

and use of the term “estate bottled”).

** We note the narrowness of this grandfather provision compared with

the federal grandfather clause that we consider in the present case. In

addition to the earlier cutoff date (1977 under the state regulatidn, as

compared with 1986 under the federal regulation), the phrasing of the

provision suggests that the right of grandfathered use may not be

transferred to another entity, as wes done in the present case. (Cf.

Comment, On Vino Veritas? Clarifving the Use of Geographic References

on American Wine Labels (2001) 89 Cai. L. Rev. 1881, 1912-1913.)

53a

geographic brand regulation remains in force today, more

than a quarter-century after its adoption. (See Or. Admin. R.

845-010-0920(4)(f) (2004)).°°

We find these Oregon regulations relevant to our current

inquiry in three interrelated respects.°’ First, the state

“ As most recently amended, the regulation provides that appellation

names--again including the names of Oregon counties, and the names of

Oregon wine-producing regions Willamette Valley, Umpqua Valley, and

Rogue Valley or “words that may be mistaken for an approved appellation

of origin in a brand name [or] in a winery name, or in any other manner on

a wine label” may not be used “unless the wine meets the requirements for

use of that appellation of origin” (Or. Admin. R. 845-010-0920(4)(f)

(2004)), that is, “100 percent of the grapes used in its production grew

within the legal boundaries of that appellation of origin.” (/d., 845-010-

0920(2) (2004).) Like the original version of the regulation, the provision

also retains a restrictive grandfather clause: “A winery may continue to

use any brand name that it has used on its approved label since before

January |, 1977.” (d., 845-010-0920(4)(f) (2004), italics added.)

*’ We reject Bronco's preliminary argument, raised in its supplemental

briefs, that Oregon Administrative Rule 845-010-0280 implicitly nullifies

Oregon wine regulations discussed above, such as the estate-bottled

provision and the geographic brand-name provision.

The cited rule addresses “Standards of Identity and Prohibited Practices

Concerning Wine” and provides that Oregon regulations concerning those

two topics, set forth in Oregon Administrative Rule “845-010-0905

{definitions} and 845-010-0940 [use of water, wine spirits and other

sweetening agents],” shall prevail over any less stringent or restrictive

federal law. (Or. Admin. R. 845-010-0280 (2004), italics added.) As

Bronco observes, in an introductory sentence the regulation a/so states:

“The Commission adopts, by reference, 27 CFR [parts] 4 [the federal wine

labeling regulations} and 24{] [wineries and wine-making regulations]

(1986). These regulations of the Bureau of Alcohol, Tobacco [} and

Firearms of the United States Department of Treasury apply to all wine

sold in Oregon by a Commission licensee.” (/hid.)

Bronco reads this language as adopting generally the federal regulations

concermming, for example, the use of the term “estate bottled” and

geographic brand names for all Oregon wines sold in that state--and hence

as implicitly repealing or at least superseding those Oregon rules insofar

as in-state sales of Oregon wines are concerned. Bronco's interpretation of

the Oregon rules is belied by Oregon Administrative Rule 845-010-

54a

regulations-- especially the strict geographic brand-name rule,

and the estate-bottled rule--demonstrate that Oregon has long

imposed labeling rules that are both (i) more stringent than

the federal rules and (ii) go far beyond 27 Code of Federal

Regulations section 4.25(b)(1)(iii)’s authorization for states to

regulate the “composition, method of manufacture, [or]

designation of wines... .”

Second, it is clear that the BATF has long been aware of

these stricter Oregon rules and apparently views them as

enforceable. The Oregon regulations had been in place for

approximately 16 months at the time the RATF adopted its

1978 regulation concerning the use of “viticultural area”

appellations on wine labels. That 1978 BATF regulation, as

noted above, expressly acknowledged and _ required

compliance with “the laws and regulations of all the States

contained in the viticultural area.” (27 C.F.R. former §

4.25a(eX3\iv) (1978-1981); id, former § 4.25a(e)3\(v)

(1981-1986), italics added.) By so providing, the BATF, as

of 1978, acknowledged the propriety and enforceability of the

more stringent labeling rules promulgated by the states.

Indeed, any doubt in this regard is dispelled by the

BATF’s action and comments seven years later (in late

January 1986) when, in the course of repealing as a federal

requirement 27 Code of Federal Regulations former section

4.2S5a(e\(3\(v)'s rule concerning compliance with state

regulations relating to viticultural areas, the BATF expressly

and repeatedly acknowledged both the existence and the

enforceability of Oregon's “more stringent” wine labeling

regulations.” The BATF explained that although it had

0910(2) (2004), which plainly states that Oregon Administrative Rules

“845-010-0905 through 845-010-0940 [i.e.. including Oregon's estate-

bottled and geographic brand-name provisions} apply to al] grape wines

produced or bottled in Oregon . . .”—that is, regardless where such wines

are sold-and that “[‘}hese rules prevail_in any conflict between . . . other

rules in Chapter 845, Division 010." (Ntalics added.)

“ As the BATF explained, prior to adoption of its 1978 appellation rules,

5Sa

decided, with regard to viticultural areas, to eliminate

compliance with state laws as a federal requirement, the

underlying substantive state law requirements relating to

viticultural areas would remain, to be enforced solely by the

respective states. The BATF observed: “State laws and

regulations of the state in which the wine was fermented or

finished will, of course, continue to apply to the producing

appellations of origin relating to American wines generally were

characterized as regions or places delimited by political boundaries, such

as states or counties. As served ante, at footnote 57, the 1978

appellation rules expanded the concept of appellations of origin by

additionally including under that term “viticultural areas”--that is, grape

growing regions--defined by geographic features, and not political lines.

Because some of these viticultural areas straddled states, a problem

eventually arose concerning the federal requirement, then set out in 27

Code of Federal Regulations former section 4.25a(e)(3)(v) (1981-1986),

ihat in order to employ a viticultural area designation, a winery must

“conform[] to the laws and regulations of all the States contained in the

viticultural area.” Specifically, the BATF noted (5/ Fed. Reg. 3773, 3774

(Jan. 30, 1986)), if a wine were to use the viticultural area designation

“Columbia Valley” (a federally recognized viticultural area straddling

Oregon and Washington), the winery producing the wine would be

required to comply with Oregon's state regulations, even if the grapes

were grown in the Washington part of the Columbia Valley and the wine

was made and finished only in Washington. Moreover, the BATF

observed, “regulations of Oregon and Washington differ greatly regarding

the production and labeling of wine. Oregon regulations are more

stringent than Federal regulations.” (51 Fed.Reg. 3773, 3774 (Jan. 30,

1986), italics added.) The BATF observed that because former section

“4.25a(e)(3\(v) required compliance with laws and regulations of all states

within a multistate viticultural area, regardless of where the wine is

fermented or finished, wine made from grapes originating and fermented

in Washington, and finished and bottled within Washington was,

nevertheless, subjected to Oregon law and regulations if the wine claimed

a multistate viticultural area appellation such as Columbia Valley.” (5/

Fed Reg. 3773, 3774 (Jan. 30, 1986).) And yet, the BATF determined,

“{a] Federal requirement for compliance with State laws and regulations

is both unnecessary and difficult for the Federal Government to enforce

due to the multitude of state and local laws and regulations.” (Jbid.,

italics added.) Accordingly, the BATF concluded, it did not “believe that

Federal regulation should impose the State laws or regulations of one state

upon transactions occurring in other states.” (/bid.)

56a

winery. These state laws and regulations are enforced by the.

state involved.” (51 Fed.Reg. 3773, 3774 (Jan. 30, 1986),

italics added. )” x

Third and finally, the Oregon geographic brand-name

regulation, in particular, sheds light upon the BATF’s

apparent understanding cf the grandfather clause at issue in

this case. Almost 10 years after Oregon adopted its restrictive

geographic brand-name labeling regulation, the BATF, after

considering various options over the preceding decade (sed

ante, fn. 56, and post, fn. 70), amended 27 Code of Federal

Regulations section 4.39(i)(1) in the manner at issue in this

case, to prohibit the use of labels with brand names implying

that a wine was made with grapes grown in the area suggested

by the brand name, unless at least 75 percent of the grapes

used to make the wine were in fact from that area. But, as

noted above, the new federal regulation also contained a

grandfather clause that lies at the center of the controversy in

this case, under which such otherwise misleading labels are

not prohibited, so long as the label was in use prior to July

1986 and the label discloses the true appellation of origin of

at least 75 percent of the grapes actually used to make the

wine inside the bottle. (/d., § 4.39(i)(2)(ii).)”°

* Underscoring this point, the BATF observed in the summary of its

decision that although “the requirement to comply with State laws and

regulations is removed as a Federal requirement,” still, “{t]he State laws

and regulations remain in effect and will continue to be enforced by the

agencies of the states involved in winemaking.” (51 Fed.Reg. 3773 (Jan.

30, 1986). italics added.)

Ww

See 27 Code of Federal Regulations section 4.39(i), quoted in full ante,

at footnote 7. As Bronco observes, in a notice of proposed rulemaking

issued in !984--two years prior to the BATF's adoption of the present

brand-name provision and its grandfather clause-the BATF stated that it

did not wish to adopt a regulation that “may be too restrictive.” (49

Fed Reg. 19330, 19331 (May 7, 1984).) After outlining four possible

regulatory responses to the brand-name problem, the BATF stated, in

reference to a possible rule strictly regulating the use of terms of

viticultural significance in brand names, its “belic|f that] the wine industry

should be allowed flexibility in selecting brand names under which to

S7a

In view of the BATF’s explicit acknowledgement, only

four months prior to its adoption of the provision at issue in

the present case, that the Oregon labeling regulations are

proper and enforceable (see 5/ Fed Reg. 3773, 3774 (Jan. 30,

1986)), it is reasonable to assume that the BATF, when it

adopted the grandfather clause, was aware of Oregon’s “more

stringent” geographic brand-name labeling rule. And yet the

BATF said nothing in its new provision or in its discussion of

that new rule to suggest that the new rule preempted Oregon’s

long-standing, closely related, and more stringent brand-name

labeling rule.

Accordingly, contrary to Bronco’s theory that the BATF

itself viewed or views its wine labeling regulations as

preempting more stringent state regulations, we conclude that

the history of the federal and Oregon wine labeling

regulations in the mid-1970s through the present reveals no

evidence of any such intent. Instead, that history strongly

indicates that the BATF has long contemplated that the states

will enforce their own stricter labeling requirements, and that

the agency did not and does not view its labeling regulations

aS preempting more stringent state regulations such as section

2524].

c. Amendment of the FAA Act in 1988, and corresponding

regulations, requiring health warning labels and expressly

preempting state regulation of such labels

market their products without having a whole class of brand names

become totally unusable.” (/d., at pp. 19331-19332, italics added.) As

explained post, part 11.D.1, Bronco suggests that this language supports a

conclusion that two years later, when the BATF adopted 27 Code o/

Federal Regulations section 4.39/i)(2)(ii) and concluded that the new rule

“will provide the industry with sufficient flexibility in designing their

labels, while at the same time providing consumers with protection from

any misleading impressions that might arise from the use of geographic

brand names” (5/ Fed Reg. 20480, 20482 (June 5, 1986)), the BATF, in

SO acting, engaged in a “careful balancing of federal policy objectives”

and intended to a//ow the kind of brand-name labeling here at issue.

58a

In 1988, Congress amended the FAA Act to require that

all wine labels (and the labels of other alcoholic beverages)

contain a warming on the back label, as follows:

“GOVERNMENT WARNING: (1) According to the Surgeon

General, women should not drink alcoholic beverages during

pregnancy because of the risk of birth defects. (2)

Consumption of alcoholic beverages impairs your ability to

drive a car or operate machinery, and may cause health

problems.” (27 U.S.C. § 2/5(a).) Congress gave the BATF

authority to issue appropriate regulations to enforce

Congress's will (id. § 2/5(b) & (d)), and, stressing the

perceived need in this particular area for Congress to

“exercise the full reach of the Federal Government's

constitutional powers in order to establish a comprehensive

Federal program” (27 U.S.C. § 2/3), further provided

expressly for federal preemption of such health warnings on

alcoholic beverage labels: ““No statement relating to alcoholic

beverages and health, other than the statement required by

section 215 of this title, shall be required under State law to

be placed on any container of an alcoholic beverage ... .” (/d.,

§ 2/6.) The BATF responded by adopting implementing

regulations (see 27 C.F.R. § 16.20 et seq.) as well as a

provision expressly reaffirming the preemptive effect of that

regulation. (/d., § 16.32.)

As the United States Supreme Court has observed, “‘an

express definition of the pre-emptive reach of a statute ...

supports a reasonable inference ... that Congress did not

intend to pre-empt other matters.”” (Lorillard Tobacco Co. v.

Reilly (2001) 533 U.S. 525, 541 [150 L. Ed. 2d 532, 121 S.

Ct. 2404], quoting Freightliner Corp. v. Myrick (1995) 514

U.S. 280, 288 [131 L. Ed. 2d 385, 115 S. Ct. 1483]; accord,

Bass River Associates v. Mayor, Tp. Com'r (3d Cir. 1984)

743 F.2d 159, 162 [“it is of some interest and no smal]

significance that a provision in the same title does provide for

federal preemption of state and local laws or regulations ...

A

59a

This inference and these observations are especially apt

here, in light of the history described above, which strongly

suggests (i) no intent on the part of Congress, in 1935 or

thereafter, to preempt any other category of state wine label

laws and (ii) the BATF’s acknowledgement of, and apparent -

acquiescence in, the more stringent wine labeling laws of the

states, and specifically those of Oregon. Indeed if Congress,

as Bronco asserts, by enactment of the FAA Act in 1935,

already had generally preempted state regulation of wine

labels, there would have been no need for any express

preemption clause or preemption regulation with respect to

the 1988 health warnings for wine labels.

Once again, this history reveals no evidence of any clear

or manifest intent on the part of Congress or the BATF to

preempt state wine labeling regulation such as section 25241.

Instead, the history supports an opposite inference that neither

Congress nor the BATF intended to preempt state wine

labeling laws such as section 25241.

D.

Having concluded that Bronco has failed to carry its

burden of establishing clear or manifest intent on the part of

Congress, or congressional intent as interpreted by the BA1F,

to preempt the traditional exercise of state police power such

as the wine labeling regulation found in section 25241], we

proceed under the presumption that no such preemption was

intended. We bear this presumption in mind when we

consider below Bronco’s assertion that section 25241, by

imposing a labeling requirement that is more exacting than

the federal requirement, is impiiedly preempted by federal

law.

1. Does section 25241, by prohibiting, with respect to Napa

County, what the federal grandfather clause does not

prohibit, stand as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress?

60a

In support of its assertion that section 25241 frustrates the

full purposes and objectives of federal law, Bronco cites

various cases in which courts have made such (or similar)

findings in other contexts. (Geier, supra, 529 U.S. 861, 881

[state tort action based upon failure to equip automobile with

airbags would frustrate federal highway safety standards

permitting car makers to employ passive restraint devices

other than airbags]; Barnett Bank, supra, 517 U.S. 25, 31

[state statute barring national bank from selling insurance

would obstruct federal statute that permitted, but did not

require, national banks to sell insurance]; Lawrence County,

supra, 469 U.S. 256, 260-268 [state law requiring certain

method of distribution of federal funds held to obstruct

federal statute that was designed to provide local governments

freedom to spend those federal funds “as they saw fit”);

McDermott v. Wisconsin (1913) 228 U.S. 115, 129 [57 L. Ed.

754, 33 S. Ct. 431] [state statute that required removal of

certain labels on syrup was preempted by federal statute

under which such labels had been approved}; Dowhal, supra,

32 Cal.4th 910, 929, 935 [state law warnings concerning

nicotine frustrated the purposes of the federal Food, Drug &

Cosmetic Act).)

The Department and the NVVA, by contrast, distinguish

each of these cases and rely instead primarily upon Sprietsma

v. Mercury Marine (2002) 537 U.S. 51, 68-70 [154 L. Ed. 2d

466, 123 S. Ct. 518], in which the high court declined to find

preemption of a state tort action seeking to impose standards

for boat propeller guards, even in the ace of a decision by

federal authorities not to impose any general or universal

propeller guard requirements. See also, e.g., California

Coastal Comm'n v. Granite Rock Co. (1987) 480 U.S. 572,

582-584 [94 L. Ed. 2d 577, 107 S. Ct. 1419] (Granite Rock

Co.) [federal approval of mining project was not frustrated by

California’s stricter environmental requirements; indeed, the

federal regulations assumed the applicability of the state

regulations}; Hillsborough County v. Automated Medical

6la

Labs. (1985) 471 U.S. 707, 720-721 [85 L. Ed. 2d 714, 105 S.

Ct. 2371] (Hillsborough County) {stricter local regulations

concerning plasma donors posed no serious obstacle to related

federal regulations}; cf. Exxon Corp. v. Governor of

Maryland (1978) 437 U.S. 117, 132 [57 L. Ed. 2d 91, 98 S.

Ct. 2207] (Exxon) (no preemption of state discriminatory

pricing regulations barring conduct that triggered a limited

defense under federal law].)

Bronco asserts that section 2524] frustrates the purposes

of Congress, or at least of the BATF’s regulation establishing

a grandfather clause (§ C.F.R. 4.39(i)(2)(ii)), in “four

interrelated ways.” Bronco argues: (i) Section 2524] prohibits

precisely what the regulation establishing the grandfather

clause “expressly and unambiguously authorizes”, (ii) the

regulation establishing the grandfather clause “embodies a

specific determination by federal regulators that the use of

established geographical brand names for wines from a

variety of appellation areas would not be misleading ifthe

labels also featured the true appellation of origin”; (iii) the

regulation establishing the grandfather clause “reflects a

careful balancing of federal policy objectives” and a

determination by the BATF that the regulations should not

render a “whole class” of established brand names “totally

unusable” (see ante, fn. 70); and (iv) the BATF, in adopting

its rule and regulation establishing a grandfather clause,

expressly rejected as “too restrictive” a general rule that

would have confined the use of established geographic brand

names to wines made from the region referred to in the brand

name.

-In reply, the Department and the NVVA assert that

section 25241 is in aid of, and consistent with, Congress's

general and overriding purpose in adopting United States

Code section 205(e) in 1935--namely, the prevention of

consumer deception relating to wine labeling. The

Department and the NVVA claim that Bronco has failed to

identify any congressional purpose with-which section 25241

62a

interferes. In this respect, the NVVA argues, “[t]he assertion

that the grandfather clause represents a ‘deliberate federal

policy determination’ or ‘regulatory balance’ assumes that

Congress or [the] BATF identified some affirmative reason

that the government of the United States wanted Bronco to be

able to sell wine made from non-Napa grapes under labels

saying “Napa.’” The Department asserts there is no support

for the proposition that federal regulators have concluded that

in all cases, the presence of a true appellation of origin dispels

the effects of misrepresentations reflected in a brand name.

Both the Department and the NVVA acknowledge that in

1984 the BATF, in discussing various options for addressing

the problems posed by geographic brand names, asserted that

it did not believe it appropriate to issue regulations that “may

be too restrictive” or render “totally unusable” a “whole

class” of brand-name labels. (See ante, fn. 70.) But, the

Department and the NVAA argue, those statements suggest at

most that the BATF did not believe it prudent to impose a

national, or total, ban on the use of existing brand labels that

suggested an origin of wine different from the a. ual origin of

the grapes used in making the wine. The Department and the

NVVA argue that the circumstance that the BATF did not see

fit “totally” to eliminate a “wh« — class” of existing labels on

a national basis without regard to the policies of a particular

state does not provide evidence establishing that section

25241 frustrates any significant federal purpose. In this

respect, the NVVA asserts that when, as here, the objectives

of the state legislature are identical to the overriding purpose

of section 205(e) of the FAA Act (protecting consumers from

misleading wine labels), “in the absence of preemptive intent,

the fact that [the] BATF may have balanced federal policies

and arrived at a particular result does not prevent California

from considering its own local policies and needs and passing

its own [more stringent} laws.” Finally, the Department and

the NVVA observe that the BATF apparently never

contemplated, much less rejected, any area-specific

63a

exemption from the federal grandfather clause, such as ts

found in section 2524/°s special Napa County labeling rule.

The NVVA concludes, “There is no evidence that [the] BATF

consicered the limited consumer protection provided by the

grandfather clause to be sufficient to protect consumers in alli

cases, or intended to prevent states from preventing the kind

of abuses which Bronco and other opportunistic winemakers

could perpetuate under the grandfather clause.”

In view of Bronco’s repeated suggestions that we should

be influenced in our assessment "y the circumstance that the

federal regulations at issue are part of a comprehensive

scheme, in resolving these conflicting views concerning

whether section 25241 stands as an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress we bear in mind the high court’s

admonition in Hillsborough County, supra, 471 U.S. 707,

717: “We are even more reluctant to infer pre-emption from

the comprehensiveness of regulations than from the

comprehensiveness of statutes. As a result of their

specialized functions, agencies normally deal with problems

in far more detail than does Congress. To infer pre-emption

whenever an agency deals with a problem comprehensively is

virtually tantamount to saying that whenever a federal agency

decides to step into a field, its regulations will be exclusive.

Such a rule, of course, would be inconsistent with the federal-

state balance embodied in our Supremacy Clause

jurisprudence. See Jones/, supra], 430 U.S. [519] at 525.

Moreover, because agencies normally address problems in a

detailed manner and can speak through a variety of means,

including regulations, preambles, interpretive siatements, and

responses to comments, we can expect that they will make

their intentions clear if they intend for their regulations to be

exclusive.” (Italics added.)

In addition, we are guided by the high court’s observation

in Crosby, supra, 530 U.S. 363, 373, that what constitutes a

“sufficient obstacle [for a finding of implied preemption] is a

64a

matter of judgment, to be informed by examining the federal

statute as a whole and identifying its purpose and intended

effects.” (Italics added.) The high court also has explained

that our inquiry in this regard “requires us to consider the

relationship between state and federal laws as they are

interpreted and applied, not merely as they are written.”

(Jones, supra, 430 U.S. 519, 526, italics added.)

We question Bronco's characterization of the state statute

as prohibiting “precisely what [the regulation establishing the

grandfather clause] authorizes.” (Italics added.) As the

NVVA asserted at oral argument and as we observed in Cel-

Tech Communications, Inc. v. Los Angeles Cellular

Telephone Co. (1999) 20 Cal.4th 163, 183 [83 Cal. Rptr. 2d

548, 973 P.2d 527], “[t}here is a difference between (1) not

making an activity unlawful, and (2) making that activity

lawful.” In our view it is more accurate to characterize the

State statute as prohibiting--with respect to Napa County--

what the federal regulation’s grandfather clause does not

prohibit.

In any event, Bronco's repeated emphasis upon an alleged

federal “authorization” presents a myopic and oversimplified

analysis. The crucial question is, instead, whether the state

rule would stand as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress.

Tuming to that question, we agree with the Department and

the NVVA that section 2524/ is consistent with Congress's

overall purpose in enacting 27 United States Code section

205(e)--that is, to “insure that the purchaser should get what

he thought he was getting, [and] that the representations both

on labels and in advertising should be honest and

straightforward and truthful.” (Hearings before House Com.

on Ways and Means on H.R. No. 8539 [Fed. Alcohol Control

Act] (1935), testimony of Joseph H. Choate, former Chairman

of the FAC Admin., 74th Cong., Ist Sess., at p. 10; H.R. Rep.

No. 1542, 74th Cong., Ist Sess., p. 3 (1935) [highlighting

deceptive labeling practices}; 79 Cong. Rec. (1935) 11714

65a

[same].) The state statute also is consistent with the

recognition that the FAA Act was necessary in order to “do

something to supplement legislation by the States to carry out

their own policies” because the states “alone cannot do the

whole job.” (Remarks of Rep. Cullen on H.R. No. 8539, 74th

Cong., Ist Sess., 79 Cong. Rec. (1935) 11714.) For the

reasons set forth above by the Department and the NVVA, we

find that section 2524] does not stand as an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress.

In reaching this determination, we also are persuaded by

the apparent congressional and regulatory acquiescence in

California's long-standing regulations applicable to the

labeling of wines produced in California. This acquiescence

militates against concluding that California’s section 25241,

enacted in 2000, constitutes a “sufficient obstacle” supporting

a finding of implied preemption based upon a theory of

frustration of federal purpose. Indeed, any doubt that we may

have had in this regard is dispelled by the related history of

Oregon's corresponding geographic brand-name labeling

regulation, which, as explained above, since 1977 has

imposed a rule far stricter than the federal rule that existed in

the mid-1970s and, like the California statute now under

review, also established a regulation far more stringent than

that set forth, effective in 1986, under the federal grandfather

clause. In other words, like the California statute, the Oregon

brand-name regulation prohibits for certain Oregon names

what the federal grandfather does not prohibit.

As explained above, the BATF long has been aware of

these stricter state law brand-name labeling regulations, and,

far from suggesting that their enforcement would frustrate any

federal purpose, the BATF expressly has stated its

understanding that such labeling regulation will be enforced

”” We note that the BATF has not been reluctant to commit its thoughts to

public view through publication of proposed rules and related comments

in the Federal Register

66a

by the states. In this setting, the BATF’s failure to question

the enforcement of these more stringent state regulations

while instead acknowledging generally the propriety of such

regulations--suggests that the BATF, the expert body charged

with the enforcement of 27 United States Code section

205(e), does not view these state regulations as being

preempted by federal law, and also does not view them as

posing an obstacle to the accomplishment and execution of

the full purposes and objectives of Congress. (See, ¢.g.,

Hillsborough County, supra, 471 U.S. 707, 721 [because “the

agency has not suggested that the county ordinances interfere

with federal goals, we are reluctant in the absence of strong

evidence to find a threat to the federal goal of ensuring

sufficient plasma™]; accord, Granite Rock Co., supra, 480

U.S. 572, 582-583 [“If, as Granite Rock claims, it is the

federal intent that Granite Rock conduct its mining

unhindered by state environmentai regulation, one would

expect to find the expression of this intent in these Forest

Service regulations” ].)

We find nothing in the history of the underlying federal

statute or the federal regulations suggesting that, although the

BATF may have determined that as a general matter its

grandfather clause was appropriate so as to avoid destroying

an “entire class” of brand-name labels, states would or should

be precluded from adopting more stringent brand-name

labeling requirements as necessary to address local concerns.

See Olszewski, supra, 30 Cal.4th 798, 815 [the presumption

against preemption “‘reinforces the appropriateness of a

narrow reading of” assertedly preempting language]; accord,

Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504, 518

[120 L. Ed. 2d 407, 112 S. Ct. 2608]; Medtronic, supra, 518

U.S. 470, 485; cf. Exxon, supra, 437 U.S. 117, 132 [“it is

illogical to infer that by excluding certain competitive

behavior from the general ban against discriminatory pricing,

Congress intended to pre-empt the States’ power to prohibit

any conduct within that exclusion”].) or the reasons set forth

67a

above, we conclude that the state labeling rule in question

does not frustrate Congress's intent or stand as an obstacle to

the accomplishment and execution of the full purposes and

objectives of Congress.”

2. Does section 25241, by imposing additional conditions not

required for the issuance of a federal COLA, stand as an

obstacle to the accomplishment and execution of the full

purposes and objectives of Congress?

Bronco also asserts that section 2524/ is impliedly

preempted because, it is claimed, the statute imposes

additional conditions not required by federal COLAs and

thereby nullifies an asserted “right” or federal “license” to

market wine in interstate and foreign commerce. In support,

Bronco relies upon numerous cases holding, on the facts

presented, that a state may not, by its own regulations, impair

rights granted under a federal license or permit. E.g.,

Gibbons v. Ogden (1824) 22 U.S. 1 [6 L. Ed. 23] {federal

steamboat license preempted New York statute barring

passage between New Jersey and New York]; Ray, supra, 435

U.S. 151, 164-165 [federal permit authorizing a vessel to

carry cargo in United States waters prevails over the contrary

state judgment); Sperry v. Florida (1963) 373 U.S. 379, 385

[10 L. Ed. 2d 428, 83 §. Ct. 1322, 1963 Dec. Comm'r Pat.

211] (state statute barring unauthorized practice of law could

not be applied to nonlawyers licensed under federal law to

prosecute patents]; Leslie Miller, Inc. v. Arkansas (1956) 352

U.S. 187, 188-190 [1 L. Ed. 2d 231, 77 S. Ct. 257] {state

licensing law could not be applied so as to effectively allow

" For similar reasons, we find unpersuasive the related arguments of

amici curiae on behalf of Bronco, that section 25241] stands as an obstacle

to the accomplishment and execution of the full purposes and objectives

of Congress, because the statute assertedly (i) “impairs the long-standing

national policy favoring uniform and consistent federal wine labeling

regulations,” (ii) “impairs the consistent federal policy permitting

continued use of established brands,” and (iii) “will frustrate the United

States’ ability to protect established brands and trademarks in ongoing

trade nego’. . ons.”

68a

state to declare “irresponsible” a contractor certified by the

federal government as “responsible”)}; Castle v. Hayes Freight

Lines, Inc. (1954) 348 U.S. 61, 64 [99 L. Ed. 68, 75 S. Ct.

191] {state could not bar federally licensed truck driver from

its roads for repeated violations of state traffic laws]; First

lowa Coop. v. Power Comm'n (1946) 328 U.S. 152, 164-167

[90 L. Ed. 1143, 66 S. Ct. 906] [federal permit issued for

interstate utility project precluded state attempt to proscribe

project}.)

The Department and the NVVA, asserting that these cases

are distinguishable, rely upon other high court cases holding

that, in certain circumstances, possession of a federal license

does not confer immunity “from the operation of the normal

incidents of local police power.” (Huron Cement Co. v.

Detroit (1960) 362 U.S. 440, 447 [4 L. Ed. 2d 852, 80S. Ct.

8/3] [upholding enforcement of city’s smoke abatement

ordinance against federally licensed vessels]; see also

Florida Avocado, supra, 373 U.S. 132, 141 [upholding

California’s right to enforce regulations prohibiting the sale of

certain federally approved Florida avocados]; Medtronic,

supra, 518 U.S. 470, 492-494 [federal approval of medical

device did not preempt state action claiming the approved

device was defectively designed]; Granite Rock Co., supra,

480 U.S. 572, 582-583 (federal approval of mining project did

not preempt California’s _ stricter environmental

requirements]; Pacific Gas & Elec. v. Energy Resources

Comm'n (1983) 461 U.S. 190, 222-223 [75 L. Ed. 2d 752.

103 S. Ct. 1713] (federal nuclear power plant license did not

preempt stricter state licensing requirements].)

These licensing cases in essence present the same issue

discussed above, namely, whether the state regulation stands

as an obstacle to the accomplishment and execution of the full

purposes and objectives of Congress. But as both the

Department and the NVVA observe, it is quite doubtful that a

federal COLA issued pursuant to 27 United States Code

section 205(e) and the corresponding wine label certificate

-69a

regulations (27 C.F.R. § 4.50 et seq.) are equivalent to the

licenses or permits at issue in the cases upon which Bronco

relies, and Bronco does not provide any convincing authority

suggesting that a COLA constitutes a license or permit as

understood in those cases. Indeed, it is apparent from the

FAA Act itself, and from the corresponding regulations, that

both Congress and the BATF well understand the distinction

between a license or permit, on one hand, and a COLA, on -

the other. Congress requires wine importers, producers, and

wholesalers to secure a “basic permit” (27 U.S.C. § 203(a)-

(c); see also id., § 204 (setting forth permit procedures]), and

the BATF has adopted extensive corresponding regulations

concerning such permits (27 C.F.R. §§ /.20-1.59). By

contrast, nowhere in the separate COLA procedures set forth

in 27 United States Code section 205(e), or the extensive

COLA regulations (27 C.F.R. §§ 4.50-4.52, 13.1-13.92), does

Congress or the BATF even imply that a COLA constitutes a

license or permit. Quite the contrary.

As explained above, it is evident that the BATF envisions

that states will enforce their own labeling laws to the extent

they impose more stringent requirements, and that BATF

generally views its role as being confined to ensuring

compliance with the bare terms of federal labeling law. (See,

e.g., 51 Fed Reg. 3773, 3774, discussed ante, at pt. I1.C.2.b.)

As the NVVA observes, the BATF itself has confirmed this

view of its enforcement authority and of any resulting COLA

that it issues by noting, on its COLA application form, that

the BATF uses the form only for its own federal enforcement

duties but that it may share the information supplied to state

regulators “to aid in the performance of their duties.” (Dept.

of Treas., Alcohol and Tobacco Tax Trade Bur., Application

for and Certification/Exemption of Label/Bottle Approval,

TTB F 5100.31 (4/2004), p. 3 <http://www.ttb.gov/forms/

5000.htm # alcohol> [as of Aug. 5, 2004].)

Nor, contrary to the assertions of Bronco and suggestions

by the Court of Appeal below, can a COLA properly be

70a

viewed as conferring a “right” on the holder to market wines

in interstate or foreign commerce so long as the bare BATF

labeling regulations are satisfied. The BATF itself has

observed that a “certificate of label approval was never

intended to convey any type of proprietary interest to the

certificate holder” and that a certificate “‘is issued for

[BJATF use only...’ The certificate of label approval is a

statutorily mandated tool used to help the [B]ATF in its

enforcement of the labeling requirements of the FAA Act.”

(64 Fed. Reg. 2122, 2123 (Jan. 13, 1999).) As the New Jersey

Supreme Court observed in a related context, a COLA “goes

no further than evidencing compliance with [federal

regulatory} standards imposed only for the purposes

mentioned in the valid exercise of federal authority.” (Boller

Beverages, Inc. v. Davis (1962) 38 N.J. 138 [183 A.2d 64,

69].)

Ill.

Bronco has failed to carry its burden of demonstrating

federal preemption of a long-established and legitimate

exercise of state police power with respect to the subject

regulated by section 2524]. As we have seen, there is no

express preemption in the present context, and Bronco’s

assertions of implied preemption are contradicted by the long

history we have described of concurrent state and federal

regulation of wine labels including, historically, the

“epresentations appearing on labels suggesting the place of

origin of the grapes used to make wine. Nor has “ronco

succeeded in providing any persuasive indication that this

long-standing concurrent regulatory scheme no longer is

compatible with Congress’s overall purposes which have

been to support the states’ efforts to protect consumers from

misleading labeling, not to permit the type of labeling at issue

here. Finally, Bronco has not established that, by purchasing

a brand name that had been used prior to 1986, it acquired a

federally recognized right or license exempting it from stricter

State regulation.

Tla

California is recognized as a preeminent producer of

wine, and the geographic source of its wines reflecting the

attributes of distinctive locales, particularly the Napa Valley--

forms a very significant basis upon which consumers

worldwide evaluate expected quality when making a

purchase. We do not find it surprising that Congress, in its

effort to provide minimum standards for wine labels, would

not foreclose a state with particular expertise and interest

from providing stricter protection for consumers in order to

ensure the integrity of its wine industry.

For the reasons set forth above, we reverse the judgment

of the Court of Appeal and remand the case to that court to

enable it to address Bronco’s remaining claims.

Kennard, J., Baxter, J., Chin J., Brown, J., Moreno, J., and

Swager, J.P.T., concurred.

APPENDIX

72a

APPENDIX B

29 Cal. Rptr. 3d 462

IN THE COURT OF APPEAL OF THE STATE OF

CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

BRONCO WINE COMPANY et al.,

Petitioners,

Vv.

JERRY R. JOLLY, as Director, etc., et al.,

Respondents: ,

NAPA VALLEY VINTNERS ASSOCIATION,

Intervenor.

| No. C037254.

May 26, 2005.

OPINION ON REMAND

AS MODIFIED ON DENIAL OF REHEARING, JUNE 20,

2005

PETITION FOR REVIEW DENIED, AUGUST 24, 2005

ORIGINAL PROCEEDING: Application for Writ of

Mandate. Writ denied.

Howard, Rice, Nemerovski, Canady, Falk & Rabkin,

Jerome B. Falk, Jr., Steven L. Mayer; Ropes & Gray, Peter

M. Brody, for Petitioners.

Bill Lockyer, Attorney General, Miguel A. Neri, Fiel

Tigno, Supervising Deputy Attorneys General, Terry Senne,

Deputy Attorney General, for Respondents.

Dickenson, Peatman & Fogarty, Richard P.

Mendelson and Deborah E. Quick; Horvitz & Levy, Ellis J.

Horvitz; Kathleen M. Sullivan, for Intervenor.

73a

Bronco Wine Company and Barrel Ten Quarter

Circle, Inc. (collectively Bronco) filed a petition for writ of

mandate, invoking our origina! jurisdiction. It seeks

declaratory and injunctive relief barring application of the

labeling requirements of Business and Professions Code

section 25241 to wines produced by Bronco that are destined

for interstate commerce because the section is in conflict with

Bronco’s federally approved certificates of label approval

(COLA). '

Bronco possesses COLAs for the brand names “Napa

Ridge,” “Rutherford Vintners,” and “Napa Creek Winery,”

which authorize the distribution in interstate commerce of

wine bearing these brand names if the true appellation of

origin of the grapes used in making the wine appears on the

label.”

Section 25241 prohibits the use of a brand name with

the word “Napa,” or any federally recognized viticultural

region within Napa County, on the label, packaging material,

or advertising of wine produced, bottled, labeled, offered for

sale or sold in California, unless at least 75 percent of the

grapes used to make the wine are from Napa County, or 85

percent of the grapes used to make the wine are from a

viticultural region within Napa County. The statute applies to

wine destined for both intrastate and interstate commerce.

We issued a judgment invalidating section 25241 as

preempted by federal law because it was in conflict with

Bronco’s federally approved COLAs. The Supreme Court

reversed the judgment and remanded the case for

consideration of Bronco’s remaining claims that section

25241 violates the free speech provisions of the state and

' All further section references are to the Business and Professions Code

unless otherwise specified.

2

An appellation of origin specifies the geographic area where the grapes

used to produce the wine are grown. (Bronco Wine, supra, 33 Cal.4th at

p. 951.)

74a

federal constitutions and the commerce and takings clauses of

the federal constitution. Bronco Wine Company v. Jolly

(2004) 33 Cal.4th 943 (hereafter Bronco Wine).)

We shall deny Bronco’s free speech claims on the

ground section 25241 is a valid regulation of inherently

misleading commercial speech.

We shall deny Bronco’s claim the commerce clause

invalidates section 25241 on two allied grounds. First, as

construed by Bronco Wine, supra, the federal law authorizes

or contemplates that California may establish stricter wine

labeling requirements for wine destined for interstate

distribution. Second, the state’s interests in protecting

California wine consumers from misleading brand names of

viticultural significance and in preserving and maintaining the

reputation and integrity of its wine industry in out-of-state

and foreign markets outweigh the indirect effect of section

25241 on interstate commerce.

Failing its commerce clause and free speech claims,

Bronco claims section 25241 effects a total taking of its

federal COLAs, in violation of the takings ciause of the

federal constitution, because it effectively nullifies the total

value of the COLAs issued for any brand name that contains a

true appellation of origin outside Napa County. We shall

deny the challenge because section 25241 does not bar

Bronco from using its brand names under all circumstances

and because Bronco has failed to establish the statute has

destroyed the substantial economic value of the brand names.

Factual and Procedural Background

According to Bronco, it specializes in “premium

wines at affordable prices.” Some of Bronco’s wine is bottled

at its wineries in Ceres and Sonoma County; other Bronco

wines are bottled under contract by Barrel Ten Quarter Circle,

Inc. at a recently completed winery in Napa, California.

7Sa

Bronco sells its wine to wholesalers and much of it is destined

for interstate commerce.

Bronco’s wines are bottled and distributed under some

30 labels or brand names. All of the labels have been

reviewed and approved by federal regulators from the Bureau

of Alcohol, Tobacco, and Firearms (BATF) and COLAs were

issued authorizing the use of the labels. (27 C.F.R. §§ 13.1-

13.92 (2002)’.) We discuss the nature of a COLA in greater

detail in Part [I] of the Discussion.

Among Bronco’s brands that fall within the class of

“brand names of viticultural significance” are “Napa Ridge,”

“Napa Creek Winery,” and “Rutherford Vintners” (hereafter

Brands). The Brands collectively appear on hundreds of

federally approved labels. Examples of current labels used by

petitioners bearing these Brand names can be seen in the

appendix to Bronco Wine, supra, 33 Cal.4th at page 998. The

brand name appears prominently at the top of each label.

Below the brand name appears the designation of the wine,

i.e. the grape varietal (White Merlot, Chardonnay, and Merlot

respectively), and below that appears the appellation of origin

of the grapes used in the wine (Lodi, Lodi, and Stanislaus

County respectively).

Bronco acquired the Brand names and the labels on

which they appear from predecessor owners. The Napa

Creek Winery brand name was introduced in 1981 and was

acquired by Bronco in 1993. Rutherford Vintners originated

in the early 1970s and was acquired by Bronco in 1994. The

Napa Ridge brand name has been in trade since the early

1980's. Bronco purchased that name from Beringer Wine

Estates in January 2000 for over $40 million.

Beringer was granted COLAs -for Napa Ridge and

* All further citations to the Code of Federal Regulations are to the 2003

edition unless otherwise noted.

* Bronco owns federal trademark registrations for “Napa Ridge” and

“Napa Creek Winery.”

76a

used that name with wines made from grapes grown in the

Central Coast, North Coast, and Lodi appellation areas, as

well as the Napa Valley appellation area.’ The labels on the

Beringer wines displayed a true and correct appellation of

origin disclosing the place where the grapes used to produce

the wine were grown. The wine sold by the prior owner of

the Napa Creek Winery brand name and most of the wines

previously sold by the prior owner of the Rutherford Vintners

brand name had been made from Napa County grapes. (See

Bronco Wine, supra, 33 Cal.4th at p. 951.)

By contrast, Bronco has marketed its wine under all

three Brands with wine made from grapes grown entirely

outside Napa County. (Bronco Wine, supra, 33 Cal.4th at pp.

951-952.) Bronco’s annual sales of wines under these Brands

amount to 300,000 cases with annual gross revenues of $17

million. Of this amount, approximately 28 percent is

attributable to sales within California and the remaining 72

percent is attributable to sales outside California.

More recently, the Bronco bottling facility in Napa

County was completed and will have an annual production

capacity of 44.8 million gallons of wine or 18 million cases

when the facility is at full capacity. Although that level has

not yet been reached, the potential output is double the 9

million cases of wine produced annually by Napa Valley

wineries. (See Bronco Wine, supra, 33 Cal.4th at p. 950.)

Prior to 2000 California generally incorporated the

federal standards for wine labels for all purposes. (Cal. Code

Regs. tit. 17, § 17075. In 2000, the Legislature enacted

section 25241 after receiving substantial public comment and

conducting public hearings. (Stats. 2000, ch. 831, § 1.) The

operative provision states in pertinent part: “No wine

* At oral argument counsel for Bronco asserted that Beringer marketed a

high volume of wine made from non-Napa County grapes under the Napa

Ridge label. However, counsel failed to provide a citation to the record to

confirm thts claim. We decline to consider it.

77a

produced, bottled, labeled, offered for sale or sold in

California shall use, in a brand name or otherwise, on any

label, packaging material, or advertising, any of the names of

viticultural significance listed in subdivision (c), unless that

wine qualifies under Section 4.25a (now section 4.25°} of

Title 27 of the Code of Federal Regulations for the

appellation of origin Napa County and includes on the label,

packaging material, and advertising that appellation or a

viticultural area appellation of origin that is located entirely

within Napa County, subject to compliance with Section

25240.” (§ 25241, subd. (b).)

In support of this enactment, the Legislature made the

following findings: “(a)(1) . . . for more than a century, Napa

Valley and Napa County have been widely recognized for

producing grapes and wine of the highest quality. Both

consumers and the wine industry understand the name Napa

County and the viticultural area appellations of origin

contained within Napa County (collectively ‘Napa

appellations’) as denoting that the wine was created with the

distinctive grapes grown in Napa County. [{] (2) The

Legislature finds, however, that certain producers are using

Napa appellations on labels, on packaging materials, and in

advertising for wines that are not made from grapes grown in

Napa County, and that consumers are confused and deceived

by these practices. [§] (3) The Legislature further finds that

legislation is necessary to eliminate these misleading

practices. It is the intent of the Legislature to assure

consumers that the wines produced or sold in the state with

brand names, packaging materials, or advertising referring to

Napa appellations in fact qualify for the Napa County

appellation of origin.” (§ 25241, subd. (a).)

6

Under the federal regulations, an American Viticultural Area (AVA) is

defined as “{a] delimited grape growing region distinguishable by

geographical features, the boundaries of which have been recognized and

defined... . (27 C.F.R. § 4.25(e)(1){i).) To qualify to use an AVA ona

wine label, no less than 85 percent of the wine must be made with grapes

grown within that viticultural avea. (27 C.F.R. § 4.25(e)(3)(11).)

78a

The Legislative history discloses that section 2524]

was designed to halt the sale and advertisement of wine

bearing the prohibited Brands by closing a so-called

“loophole” created by an exception in the federal wine

labeling regulatory scheme, referred to as the “grandfather

clause.” (Bronco Wine, supra, 33 Cal.4th at p. 953.) While

the federal regulations governing brand names are generally

coextensive with the prohibition expressed in section 2524]

(see 27 C.F.R. § 4.39(i)(1) [“ . . . a brand name of viticultural

significance may not be used unless the wine meets the

appellation of origin requirements for the geographic area

named”}), the federal regulations except from this rule “brand

names used in existing certificates of label approval issued

prior to July 7, 1986.” (27 C.F.R. § 4.39(i)(2).) These

excepted brand names may be used as long as the label states

the correct appeliation of origin or some other statement that

is “sufficient to dispel the impression that the geographic area

suggested by the brand name is indicative of the origin of the

wine.” (27 C.F.R. § 4.39(i)(2)(B)(iii).) Petitioners’ labels

comply with this exception by specifying the correct

appellation of origin, i.c., Lodi or Stanislaus County.

Pursuant to an inquiry by Bronco made after passage

of section 25241, the Department of Alcoholic Beverage

Control (the Department) advised Bronco that it intended “to

enforce Section 25241 pursuant to its terms” and that if

Bronco continues to use its labels in violation of section

25241, “the Department may take disciplinary action against

the license of Bronco Wine Company, up to and including

revocation of [Bronco's] license.”

On December 22, 2000, Bronco filed an original

petition for writ of mandate in this court seeking to enjoin

respondents (the Department and its then Interim Director,

Manuel R. Espinoza, currently Jerry R. Jolly, Director) from

’ The legislative history is repicte with statements regarding the

worldwide reputation of Napa Valley wines and the necessity of closing

the federa! loophoie to protect that reputation.

79a

enforcing section 25241. Bronco asserted that section 25241

was preempted by the grandfather clause of 27 Code of

Federal Regulations section 4.39(1)(2), and that it violated its

rights of free speech under the California and United States

Constitutions, the commerce clause, and the takings clause of

the Fifth Amendment to the United States Constitution.

Without addressing the last three claims, we issued a

peremptory writ of mandate after finding that section 25241 is

preempted by federal law.

On respondent's petition for review, the California

Supreme Court reve the judgment, finding that section

25241 prohibits what| federal law does not prohibit and

concluding the section does not stand as an obstacle to the

accomplishment and execution of the purpose and objectives

of federal law because there is a long history of concurrent

state and federal regulation of wine labels, including the

regulation of brand names that suggest the place of origin of

the grapes used in making the wine. (Bronco Wine, supra, 33

Cal.4th at pp. 992, 995-997.) The court reversed the

judgment and remanded the case to this court to address

Bronco’s remaining constitutional claims. (Bronco Wine,

supra, 33 Cal.4th at p. 997.)

We do so.

Discussion

I

Free Speech

We begin with the free speech claims because the

analysis of the interests served by the California legislation

are a predicate to the analysis of the commerce clause and

takings claims.

Bronco contends section 25241 violates its free speech

rights under the United States and California Constitutions.” It

* Citing few California cases and without engaging in any meaningful

analysis under California law, Bronco claims section 25241 violates its

80a

argues the Legislature had insufficient evidence before it to

reasonably conclude that its brand names of viticultural

significance are misleading or ihat Bronco’s labels are

inherently misleading. It further argues that section 25241 is

a content-based regulation subject to strict scrutiny, but also

fails the less rigorous test applied to commercial speech under

Central Hudson Gas & Electric Corporation v. Public

Service Commission of New York (1980) 447 U.S. 557 [65

L.Ed.2d 341] (Central Hudson).

Respondents contend section 25241 is a regulation of

deceptive and misleading commercial speech that is not

entitled to First Amendment protection. We agree with

respondent.

Under the First Amendment to the United States

Constitution,’ commercial speech is entitled to protection

from governmental regulation (Virginia State Board of

Pharmacy v. Virginia Citizens Consumer Council (1976) 425

U.S. 748, 762 [48 L.Ed.2d 346, 358-359]), although it is

entitled to less protection than other constitutionally

guaranteed speech. (Central Hudson, supra, 447 U.S. at pp.

563, 566 [65 L.Ed.2d 349, 351]; Lorillard Tobacco Company

v. Reilly et al. (2001) 533 U.S. 525, 555 [150 L.Ed.2d 532,

559] (Lorillard Tobacco Co.)

Commercial speech is “expression related solely to the

economic interests of the speaker and its audience” (Central

free speech rights under the California Constitution. While the California

provision protecting free speech rights (art. I, § 2, subd. (a)), has been

construed as “*more definitive and inclusive than the First Amendment"

(Robins v. Pruneyard Shopping Center (1979) 23 Cal.3d 899, 908, quoting

Wilson v. Superior Court (1975) 13 Cal.3d 652, 658), Bronco cites no

California cases holding the California provision broader with respect to

false, deceptive, or misleading commercial speech. Because this case

involves inherently misleading commercial speech, we will confine our

analysis to petitioners’ First Amendment claims.

* The First Amendment provides in pertinent part: “Congress shall make

no law . . . abridging the freedom of speech . . . (U.S. Const., Ist Amend.)

8la

Hudson, supra, 447 U.S. at p. 5€ [65 L.Ed.2d at p. 348]) and

“does no more than propose a .ommercial transaction... .”

(Va. State Ed. of Pharmacy v. Va. Citizens Consumer

Council, supra, 425 U.S. at p. 776 [48 L.Ed.2d at p. 367].)

To that end, it serves the economic interests of the speaker,

while assisting consumers and furthering the societal interest

in the free flow of commercial information. (/d. at pp. 765 [p.

360].)

The court in Central Hudson set forth a four-part

analysis for evaluating the constitutionality of restrictions on

commercial speech. The first inquiry is “whether the

expression is protected by the First Amendment. For

commercial speech to come within that provision, it at least

must concern lawful activity and not be misleading. Next, we

ask whether the asserted governmental interest is substantial.

If both inquiries yield positive answers, we must determine

whether the regulation directly advances the governmental

interest asserted, and whether it is not more extensive than is

necessary to serve that interest.” (Central Hudson, supra, 447

U.S. at p. 566 (65 L.Ed.2d at p. 351].)

As the Supreme Court has recently made clear,

commercial speech is not subject to the test of strict scrutiny.

(Lorillard Tobacco Company, supra, 533 U.S. at pp. 554-555

[150 L.Ed.2d at p. 559].) “{Tjhe leeway for untruthful or

misleading expression that has been allowed in other contexts

has little force in the commercial arena.” (Bates v. State Bar

of Arizona (1977) 433 U.S. 350, 383 [53 L.Ed.2d 810, 835].)

“The First Amendment’s concern for commercial speech is

based on the informational function of advertising. [Citations

omitted.] Consequeritly, there can be no constitutional

objection to the suppression of commercial messages that do

not accurately inform the public about lawful activity. The

government may ban forms of communication more likely to

deceive the public than to inform it... .” (Central Hudson,

supra, 447 U.S. at p. 563 [65 L.Ed.2d at p. 349], italics

added.)

82a

Thus, our inquiry is whether the speech regulated by

section 25241 is unlawful or misleading. Where it is claimed

the speech is misicading, the Supreme Court has

distinguished between “inherently misleading” speech and

“potentially misleading” speech. (/n Re R.M.J. (1982) 455

U.S. 191, 203 [71 L.Ed.2d 64, 74]; Zauderer v. Office of

Disciplinary Counsel of the Supreme Court of Ohio (1985)

471 U.S. 626, 638 [85 L.Ed.2d 652, 664) (Zauderer).) If

“advertising is inherently likely to deceive or where the

record indicates that a particular form or method of

advertising has in fact been deceptive,” the speech is

unprotected. (/n Re R.M.J., supra, at p. 202 [71 L.Ed.2d at p.

73}.) If the speech is only “potentially misleading,” because

“the information also may be presented in a way that is not

deceptive,” the regulation must satisfy the remaining three

factors specified in Central Hudson. (/d. at p. 203 [p. 74].)

Once it is determined that commercial speech is

inherently misleading, our inquiry ends. (Central Hudson,

supra, 447 U.S. at p. 566 [65 L.Ed.2d at p. 351); In Re R. MJ,

supra, 455 U.S. at p. 203 [71 L.Ed.2d at p. 74); Zauderer,

supra, 47\ U.S. at p. 638 [85 L.Ed.2d at p. 664); Friedman v.

Rogers (1979) 440 US. 1, 9 [S9 LEd2d 100, 110)

(Friedman).) in such a case there is no First Amendment

interest at stake and the tests which measure the validity of

the state's interest in regulating free speech do not apply.

Friedman, supra, 440 US. | [59 L.Ed.2d 100], is

instructive. The court held that Texas could prohibit the

deceptive use of trade names by optometrists. It said the use

of a trade name in connection with an optometrical practice is

a form of commercial speech that has no intrinsic meaning.

This is so because a trade name conveys no information about

the price or nature of the services offered until it acquires

meaning over time when the public forms associations

between the name and some standard of price or quality. (/d.

at pp. 11-12 [pp. 111-112].) For that reason “the restriction

on the use of trade names has only the most incidental effect

83a

on the content of the commercial speech .. . .” (/d. at pp. 15-

16 (pp. 113-114.]

The court in Friedman found the possibilities for

deception numerous, citing as an example the fact that a trade

name of an optometrical practice may remain unchanged

despite changes in staff whose degree of skill and care

patients have come to rely upon. “[T]he public may be

attracted by a trade name that reflects the reputation of an

optometrist no longer associated with the practice.” (440 U.S.

at p. 13 [$9 L.Ed.2d at p. 112].) The court found the concerns

of the Texas legislature about the deceptive and misleading

use of trade names were not speculative or hypothetical but

were based upon specific practices that the legislature was

familiar with. (/bid_)

Bronco does not dispute that brand names are

commercial speech. Indeed, brand names, like the trade

names at issue in Friedman, supra, have no intrinsic meaning.

Since they are transferable they do not necessarily reflect the

continued quality of the product offered and need not convey

information about the nature, quality, or origin of the product

unless associations have been made by the public over time.

(Friedman, supra, 440 U.S. at p. 12 [S9 L.Ed.2d at p. 111.)

While a brand name generally does not have intrinsic

meaning, a brand name of geographic or viticultural

significance conveys information about the geographic source

of the grapes used to make the wine. For that reason a orand

name of geographic significance is entitled to First

Amendment protection as commercial speech only if the

information about the source of the wine is accurate. To the

extent a brand name of geographic significance is more likely

to deceive the public than to inform it because it is suggestive

of a false or misleading source of the grapes used in making

the wine, it is inherently misleading and its use may be

prohibited. (Central Hudson, supra, 447 U.S. at p. 563 [65

L.Ed.2d at p. 349]; Lorillard Tobacco Company, supra, 533

U.S. at pp. 554-555 [150 L.Ed.2d at p. 559].)

84a

Section 25241 imposes restrictions on brand names by

prohibiting the use of the word “Napa,” or the name of any

federally recognized viticultural area within Napa County in a

brand name unless the wine is sourced with grapes from Napa

County. (§ 25241, subd. (b).) In enacting the section, the

Legislature found that‘Napa Valley and Napa County have

been widely recognized for producing grapes of the highest

quality” and that “consumers and the wine industry

understand the name Napa County and the viticultural area

appellations of origin contained within Napa County . . . as

denoting that the wine was created with the distinctive grapes

grown in Napa County.” (§ 25241, subd. (a)(1).) The

Legislature further found that consumers are confused and

deceived by wine labels, packaging, or advertisements that

bear Napa appellation brand names on wines not made from

grapes grown in Napa County. (§ 25241, subd. (a)(2).) Thus,

the purpose of section 25241 is to eliminate the use of

inherently misleading geographic brand names.

Bronco contends the Legislature had no evidence of

consumer confusion when it enacted section 25241. It would

require trial-type evidence as the measure whether Bronco’s

labels are misleading. Bronco has misunderstood the posture

of the case. This is a facial attack on a statute. The test is

whether the Legislature could reasonably conclude, on the

basis of the record before it, that the particular brand names of

geographic or viticultural significance concerning Napa

County “are more likely to deceive the public than inform it”

about the origin of the grapes used to produce the wine when

the grapes are not grown in the area signified.

It is true that facts about Bronco’s purchase and use of

brand names and COLAs were at the center of the

Legislature’s concerns when it enacted section 25241.

However, that does not change th

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