Opinion
SUCV2016809D
09-29-2017
Craft Beer Guild, LLC dba Craft Brewers Guild v. Alcoholic Beverages Control Commission
MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS
Douglas H. Wilkins Associate Justice, Superior Court
The plaintiff Craft Beer Guild, LLC d/b/a Craft Brewers Guild (" Craft" ) is appealing an adjudicatory decision, dated February 12, 2016 (" Decision" ) of the Alcoholic Beverages Control Commission (" ABCC" or " Commission" ) under G.L.C. 30A, § 14. After the ABCC filed the Administrative Record (A.R.) and a Supplemental Administrative Record (S.A.R.) on September 22, 2016, Craft filed its " Plaintiff Craft Beer Guild, LLC d/b/a Craft Brewers Guild's Motion for Judgment on the Pleadings" (" Motion" ) on June 29, 2017, pursuant to Superior Court Standing Order 1-96 as amended. After a hearing on the Motion on September 12, 2017, at which the Court heard from both parties, the Court DENIES THE MOTION.
Craft has not helped its cause by filing a brief with what appears to be less than 12-point font, in violation of Superior Court Rule 9A(a)(5). As predicted in the Court's endorsement of March 20, 2017, this added verbiage has only resulted in diverting focus and attention from Craft's strongest arguments.
BACKGROUND
Craft is a wholesaler of alcoholic beverages licensed under G.L.C. 138, § 18. It distributes about 200 craft beer brands to, among others, retailers such as restaurants and bars licensed under G.L.C. 138, § 12 for consumption of alcohol. In October 2014, one of the owners of a Crafts-distributed brand tweeted allegations that its brand had been removed from the tap at Boston location because Massachusetts suppliers and wholesalers were making unlawful payments to retail licensees in exchange for those retailers carrying Craft brands. The Commission began an investigation, which lasted about seven months and resulted in a Violation Report.
The Violation Report led to administrative charges against Craft for violation of the price discrimination law (G.L.C. 138, § 25A(a)) and of 204 Code Mass. Regs. § 2.04(1), quoted below. The ABCC had not previously brought such a proceeding against any licensee under § 2.08.
During the proceedings, Craft stipulated to the facts in the Violation Report. After adjudicatory hearings, the ABCC found that Craft violated 204 CMR 2.08 and G.L.C. 138, § 25A. Based on the stipulated facts, the Commission found that in 2013 and 2014, Craft negotiated and implemented a series of schemes between itself, numerous retail licensees and certain third-party management companies that managed the retail licensees. Craft negotiated payment arrangements with the third-party management companies in exchange for tap lines committed to Craft brands at retail licensees that those companies managed. Generally, the payments were either on the basis of $1,000 to $2,000 per draft line payable every six months or rebates paid every six months of $15 or $20 per keg. The third-party management companies issued invoices to Craft billing for fictitious services that were never performed. Once invoiced, Craft would pay the fictitious service fee to the management company. Craft paid at least $120,000 during the pendency of this scheme.
The rebates and payments were not reported to the Commission or reported in the Boston Beverage Journal. They were not available to all retail licensees. Even among those who received rebates, not all licensees received the same level of rebate or payment.
The ABCC found two violations, for which it imposed the following penalties:
On the first violation, 204 C.M.R. 2.08, the Commission suspends the license for fifteen (15) months, with ninety (90) days to be served and the balance of 12 months held in abeyance for two years provided no further violations of Chapter 138 of Commission Regulations occur.
On the second violation, M.G.L.C. 138, § 25A, the Commission suspends the license for fifteen (15) months with ninety (90) days to be served and the balance of 12 months held in abeyance for two years provided no further violations of Chapter 138 or Commission Regulations occur. This suspension is to run concurrently with the penalty imposed for 204 C.M.R. 2.08.
Craft avoided serving the suspension by paying a $2,623,466.70 fine in lieu of suspension pursuant to G.L.C. 138, § 23. It timely appealed the decision by filing a complaint in this court on March 10, 2016.
DISCUSSION
Under Section 14(7) of G.L.C. 30A, this Court may reverse, remand, or modify an agency decision if the substantial rights of any party may have been prejudiced because the agency decision is based on an error of law or on unlawful procedure, is arbitrary and capricious or unwarranted by facts found by the agency, or is unsupported by substantial evidence. G.L.C. 30A, § 14(7)(c)-(g). The appealing party bears the burden of demonstrating the invalidity of the agency decision. See Bagley v. Contributory Ret. Appeal Bd., 397 Mass. 255, 258, 490 N.E.2d 1177 (1986).
I.
Craft first challenges the finding that it violated 204 Code Mass. Regs. § 2.08. It argues that this finding was based on two errors of law and lacked substantial evidence. The substantial evidence argument depends heavily upon accepting Craft's view of the law.
A.
First, Craft argues that the Legislature withdrew any statutory authority for that regulation when it repealed G.L.C. 138, § 25A(b).
As amended by St. 1946, § 304, section 25A contained two clauses. The first, which remains in effect, prohibits price discrimination. The second, later repealed, provided:
No licensee authorized under this chapter to sell alcoholic beverages to wholesalers or retailers shall--
* * *
(b) Grant, directly or indirectly, any discount, rebate, free goods, allowance or other inducement, except a discount not in excess of two per centum for quantity of alcoholic beverages except wines, or a discount not in excess of five per centum for quantity of wines.
The overlap between clause (b) and the regulation in question is obvious:
No licensee shall give or permit to be given money or any other thing of substantial value in any effort to induce any person to persuade or influence any other person to purchase, or contract for the purchase of any particular brand or kind of alcoholic beverages, or to persuade or influence any person to refrain from purchasing, or contracting for the purchase of any particular brand or kind of alcoholic beverages.204 Code Mass. Regs. § 2.08. The ABCC enacted the predecessor of this regulation, then known as Regulation 47, at some time after enactment of St. 1946, c. 304, but before 1970. The Court agrees with Craft that it is logical to infer that the ABCC relied upon § 25A to adopt this regulation, although there is no reason to believe that it relied solely upon paragraph (b).
By its terms, Regulation 47 had the capacity to serve as a tool to implement the price discrimination prohibition of § 25A(a) if inducements were part of a price discrimination scheme. This was consistent with the entire legislative purpose in 1946. The emergency preamble to St. 1946, § 304 found that " [t]he practice of manufacturers and wholesalers in granting discounts, rebates, allowances, free goods and other inducements to favored licensees contributes to a disorderly distribution of alcoholic beverages" and that deferred operation of the amendment would " delay the proper regulation thereunder of the alcoholic beverage industry and be contrary to the interests of temperance . . ." [emphasis added]. The concept of inducements to favored licensees was therefore central to section 25A as amended. There is no reason to believe that this policy applied only to clause (b).
By St. 1970, c. 140, § 1, the Legislature struck out clause (b) of G.L.C. 138, § 25A. It did not strike or amend clause (a). The title of the 1970 amendment reads: " An act relative to the filing of schedules of prices of alcoholic beverages and repealing the law relative to discounts in the sale of such beverages." The title of this act may " act as an aid for the application of its test." Anheuser-Busch, Inc. v. ABCC, 75 Mass.App.Ct. 203, 208, 912 N.E.2d 1034 (2009). In the title the words " the law" refer to out clause (b) of G.L.C. 138, § 25A. The Legislature meant to repeal the rule against all discounts beyond those expressly allowed in that clause. There is no reason to believe that it intended to allow discounts (or rebates) employed in a price discrimination scheme. The decision not to repeal clause (a) of G.L.C. 138, § 25A proves that it did not. As amended, " Section 25A . . . " does not address the legality of discounts based on sales between a wholesaler and a retailer." See generally Van Munching Co. v. Alcoholic Beverages Control Commission, 41 Mass.App.Ct. 308, 310-11, 670 N.E.2d 401 (1996) (quoting motion judge). " The subject of § 25A is discrimination . . ." Id. (no allegation that the licensee in that case engaged in price discrimination).
There is apparently no other legislative history for the 1970 Act. No statement by the Legislature or the ABCC addresses the continued validity of 204 Code Mass. Regs. § 2.08. If complete repeal of that regulation were intended, it is strange that there is no record of any attempt to repeal it, or even any request by regulated industry members to do so. Silence may reflect an understanding by the public and private sectors most involved at the time that the 1970 Act did not require repealing the regulation. Nevertheless, the repeal of former G.L.C. 138, § 25A(b) would be meaningless if the ABCC could simply prohibit all discounts by regulation. See generally Van Munching Co., 41 Mass.App.Ct. 308, 310-11, 670 N.E.2d 401 (1996). The Court agrees with Craft that the 1970 Act therefore implicitly but necessarily withdrew all authority for a broad regulation that prohibited discounts generally.
Importantly, however, that conclusion arises not from any express legislative statement but only by implication. The scope of this implied repeal necessarily requires consideration not only of what was repealed, but also what was retained. In asserting complete invalidation of the regulation, Craft skips this logical step. Repeal does not necessarily mean that the Legislature intended to preclude application of the regulation as written to, for instance, § 25A(a) which was not repealed. The Court must ask whether implied repeal of the regulation was total or partial.
A regulation is invalid on its face only if it cannot be applied lawfully to any set of facts. Cf. Massachusetts Coalition for the Homeless v. Secretary of the Executive Office of Health & Human Servs., 422 Mass. 214, 226-27, 661 N.E.2d 1276 (1996) (distinction between validity of a regulation on its face and as-applied). The question is whether 204 Code Mass. Regs exceeded the ABCC's " statutory authority" and therefore is " arbitrary and capricious on [its] face in that [it] would by definition be unrelated to the achievement of any statutory goals." Mass. Fed'n of Teachers, AFT, AFL-CIO v. Board of Education, 436 Mass. 763, 776, 767 N.E.2d 549 (2002) (citation omitted; emphasis added). More precisely, the Court must determine whether 204 Code Mass. Regs. § 2.08 is related to achieving " any" statutory goals, not just whether it served the repealed statutory goals of former § 25A(b).
In this case, unlike Van Munching, the relevant facts include ABCC's allegation and finding of price discrimination under G.L.c. 138, § 25A(a). The Legislature never intended to preclude regulatory enforcement of the anti-discrimination prohibition. The 1970 Act left § 25A(a) intact. When applied in the context of price discrimination, 204 Code Mass. Regs. § 2.08 therefore does not conflict with the 1970 repeal. On the contrary, when so applied, it regulates an area specifically preserved in 1970, even as the Legislature repealed clause (b) of the same section. As will be seen, it answers some of Craft's objections to the finding of a § 25A(a) violation. It serves an important and meaningful purpose, for example, in articulating what practices, by which licensees, qualify as methods by which licensees might perpetrate price discrimination. It makes clear that, for purposes of determining discrimination, the retail price may reflect discounts, deductions or credits. See, e.g., M.H. Gordon & Son, Inc. v. Alcoholic Beverages Control, 371 Mass. 584, 591, 358 N.E.2d 778 (1976) (" 'Price' means the actual amount paid to the supplier for goods furnished to the buyer" ); G.L.C. 138, § 25D(d) (calculation of price accounts for " all discounts . . . and all rebates" ). Section 2.08 is therefore not invalid in all its applications, even though it does lack any force independent of G.L.c. 138, § 25A(a) (and perhaps other specific statutes where discounts may provide the means to violate the law). The Court therefore rejects Craft's argument that 204 Code Mass. Regs. § 2.08 exceeds the ABCC's authority when, as here, the agency enforces the statutory prohibition on price discrimination.
For its part, ABCC attempts to save the entire regulation under its general regulatory authority. It is not clear that it needs to make this argument, or that the argument is consistent with the position that the Commission took in the Decision. The Decision states: " The Licensee was not charged with having a rebate program. If it had been, this would not have been a proper charge." Decision at 17 (A.R. 188). It appears that the ABCC, as an agency, has interpreted the Legislative amendments to eliminate a free-standing prohibition on rebates, unless tied to price discrimination (or perhaps some other existing statutory prohibition).
The ABCC has " general supervision of the conduct of the business of . . . selling alcoholic beverages." G.L.c. 10, § 71. See Howard Johnson Co. v. Alcoholic Beverages Control Commission, 24 Mass.App.Ct. 487, 491, 510 N.E.2d 293 (1987). It also has " comprehensive powers of supervision over licensees." Id. See also Cellarmaster Wines of Massachusetts, Inc. v. Alcoholic Beverages Control Commission, 27 Mass.App.Ct. 25, 27, 534 N.E.2d 21 (1989). Under G.L.c. 138, § 24 the ABCC has broad authority to adopt regulations " not inconsistent with the provisions of this chapter for clarifying, carrying out, enforcing and preventing violation of, all and any of [c. 138's] provisions for inspection of the premises and method of carrying on the business of any licensee . . . [and] for the properly and orderly conduct of the licensed business." When, as here an agency has broad statutory authority, it " has a wide range of discretion in establishing the parameters of its authority pursuant to the enabling legislation." Levy v. Board of Registration and Discipline in Medicine, 378 Mass. 519, 524, 392 N.E.2d 1036 (1979); Casa Loma v. Alcoholic Beverages Control Commission, 377 Mass. 231, 235, 385 N.E.2d 976 (1979).
The ABCC's interpretation of the broad authorizations in G.L.c. 10, § 71 and G.L.c. 138, § 24 is entitled to deference. The Supreme Judicial Court recently said:
We review the validity of a policy adopted by an agency charged with implementing and enforcing State statutes under the same two-part framework used to determine whether regulations promulgated by an agency are valid. Franklin Office Park Realty Corp. v. Commissioner of the Dep't of Envtl. Protection, 466 Mass. 454, 459-60, 995 N.E.2d 785 (2013). First, we employ " the conventional tools of statutory interpretation" to determine " whether the Legislature has spoken with certainty on the topic in question." Goldberg v. Board of Health of Granby, 444 Mass. 627, 632-33, 830 N.E.2d 207 (2005). Where the court determines that a statute is unambiguous, we will reject any agency interpretation that does not give effect to the Legislative intent. Franklin Office Park Realty Corp., supra at 460.
If we conclude that " the Legislature has not directly addressed the issue and the statute is capable of more than one rational interpretation, we proceed to determine whether the agency's interpretation may be reconciled with the governing legislation" (quotation and citation omitted). Biogen IDEC MA, Inc. v. Treasurer & Receiver Gen., 454 Mass. 174, 187, 908 N.E.2d 740 (2009). We defer to the agency's interpretation insofar as it is reasonable. Franklin Office Park Realty Corp., 466 Mass. at 460. Statutory interpretation, however, is ultimately the duty of the courts, and the " principle of according weight to an agency's discretion . . . is one of deference, not abdication, and this court will not hesitate to overrule agency interpretations of statutes or rules when those interpretations are arbitrary or unreasonable" (quotations and citation omitted). Moot v. Department of Envtl. Protection, 448 Mass. 340, 346, 861 N.E.2d 410 (2007), S.C., 456 Mass. 309, 923 N.E.2d 81 (2010).ENGIE Gas & LNG, LLC v. Department of Public Utilities, 475 Mass. 191, 197-98, 56 N.E.3d 740 (2016).
When it comes to a general prohibition on any " discount, rebate, free goods, allowance or other inducement" within the meaning of former G.L.c. 138, § 25A(b), the " Legislature has spoken with certainty." Id. Since the 1970 repeal has no meaning if such a general prohibition may be adopted by regulation, the Legislature has directly addressed--and prohibited--such a general prohibition. To apply 204 Code Mass. Regs. § 2.08 to prohibit discounts regardless of price discrimination " would in essence improperly revive and write back into § 25A that which the Legislature chose to repeal." Van Munching Co., 41 Mass.App.Ct. at 310-11. It would exceed the ABCC's authority for that reason, and also because such a broad reinstatement of the repealed provision would be " inconsistent with the provisions of" G.L.c. 138 within the meaning of G.L.c. 138, § 24.
In fact, construing the ABCC's power in this fashion appears consistent with the Decision. The agency has justified continued reliance on 204 Code Mass. Regs. § 2.08 because " without it a wholesaler could otherwise bribe or otherwise unfairly influence a retailer to carry one product to the exclusion of another, which could result in a manipulation of the market by powerful wholesalers and distributors, hurting small businesses and resulting ultimately in a deterioration of the three-tier system." Decision at 20 (A.R. 191). This suggests that something more than discounting is required, such as a restraint of trade or other anti-competitive behavior, such as a boycott or price discrimination, which are independently unlawful. In those contexts, 204 Code Mass. Regs. § 2.08 survives. Nothing in the repeal of § 25A(b) implies otherwise or even addresses those contexts.
Because 204 Code Mass. Regs. § 2.08 is only valid in this case as a means to enforce G.L.c. 138, § 25A(a), however, the finding that Craft violated the regulation duplicates the finding that Craft violated the statute. It does not appear, however, that this duplication prejudiced Craft's. The ABCC imposed the same length of suspension for each violation, with the same amount of time to be served concurrently. The payment in lieu of suspension was calculated based upon a single 90-day suspension period. A single finding of violation would not have altered the impact upon Craft in any respect. A party may not prevail based on alleged procedural error if it cannot show that its " substantial rights . . . may have been prejudiced" due to the error. G.L.c. 30A, § 14(7). Solimeno v. State Racing Commission, 400 Mass. 397, 406, 509 N.E.2d 1167 (1987); New Palm Gardens, Inc. v. Alcoholic Beverages Control Commission, 11 Mass.App.Ct. 785, 787-88, 420 N.E.2d 8 (1981). The Court's ruling that, for all present and future purposes, ABCC must treat the statutory and regulatory violation as a single violation therefore suffices to make Craft whole, without need for a remand to recalculate any penalty.
In criminal cases, where the government imposes punishment based upon two, duplicative violations of law, the lesser finding and penalty are vacated unless each violation requires a proof of an element that the other does not. Cf. Commonwealth v. Vick, 454 Mass. 418, 910 N.E.2d 339 (2009) (relying not only upon double jeopardy but also due process). After repeal of § 25A(b), violation of 204 Code Mass. Regs. § 2.08 requires proof of price discrimination; violation of G.L.C. 138, § 25A(a) does not require proof of any element not included within the regulation.
B.
The discussion in part A above reduces the importance of Craft's next argument: that 204 Code Mass. Regs. § 2.08 was properly promulgated. To the extent that the regulation retains validity, the Court finds that it was duly promulgated, even though not re-promulgated in 1978 as the Decision claims, imprecisely (at 19; A.R. 190).
In 1973 and 1975, ABCC provided the Secretary of State's Regulations Division a compilation of agency regulations it believed were in effect. Among those regulations was " Regulation 47," which as noted above had the same language as 204 Code Mass. Regs. § 2.08. The special edition of the Massachusetts Register published by the Secretary in 1978 included Regulation 47, but re-designated it as 204 Code Mass. Regs. § 2.08. The Court agrees with Craft that this publication did not satisfy the notice, hearing and comment requirements for a new regulation. G.L.c. 30A, § § 2, 3. Rather, it fulfilled the mandate of G.L.c. 30A, § 6A, requiring that, " [p]rior to publication of the first issue of the Massachusetts Register the state secretary shall first cause to be published all currently effective agency regulations in a special publication of the Massachusetts Register to be designated as the " Code of Massachusetts Regulations."
To qualify for publication under § 6A, Regulation 47 had to be a " currently effective" ABCC regulation. That publication, being in the Massachusetts Register, was entitled to a presumption of validity:
The publication in the Massachusetts Register of a document creates a rebuttable presumption (1) that it was duly issued, prescribed, or promulgated; (2) that all the requirements of this chapter and regulations prescribed under it relative to the document have been complied with; and (3) that the text of the regulations as published in the Massachusetts Register is a true copy of the attested regulation as filed by the agency.G.L.C. 30A, § 6 (eighth paragraph). Moreover, the " contents of the Massachusetts Register shall be judicially noticed . . ." Id. (tenth paragraph). See Mass. Guide to Evid. § 202(a)(1) (mandatory judicial notice).
Craft has adopted an argument made by Rebel in a parallel case arising out of the same facts that the use of the word " documents" in the eighth paragraph of § 6 distinguishes between the words " documents" and " regulation." According to this argument, a " document" does not include a regulation for this purpose, but instead limited to " all notices filed in accordance with sections two and three." This conclusion is said to flow from the reference in § 6 (second paragraph) to publication of " documents." While it may be that a pre-existing regulation published solely under § 6A does not meet the second paragraph's reference to " all regulations filed in accordance with section five," the second paragraph's clause (4) encompasses within the concept of " documents" " any other item or portion thereof which the state secretary deems to be of sufficient public interest." Certainly, a pre-existing, in-force regulation that must be published under § 6A qualifies as an " item" which is " of sufficient public interest." The words " which the state secretary deems" does not suggest otherwise; the fact that § 6A is mandatory simply means that the state secretary was required to deem the pre-existing regulation to be " of sufficient interest." It follows that Regulation 47, designated 204 Code Mass. Regs. § 2.08, was a document entitled to a rebuttable presumption under § 6 " that it was duly issued, prescribed, or promulgated" and to mandatory judicial notice by the Court. No evidence before the ABCC or the Court suggests any defect in adoption of Regulation 47 under pre-30A law. Through affidavit and research of the 1978 Massachusetts Register, Craft and Rebel have indeed rebutted the Decision's statement that 204 Code Mass. Regs. § 2.08 was actually promulgated under G.L.C. 30A, § § 2, 3 in 1978. They have presented no evidence, however, that the publication in the first edition of the Massachusetts Register in 1978 was erroneous or, in particular, that Regulation 47 was not then a " currently effective agency regulation[ ]." Without rebuttal evidence, the presumption of validity prevails. Therefore, 204 Code Mass. Regs. § 2.08 is a currently effective regulation with the limited scope described in part A, above.
That paragraph reads: " There shall be published in the Massachusetts Register the following documents: (1) executive orders, except those not having general applicability and legal effect or effective only against state agencies or persons in their capacity as officers, agents or employees thereof; (2) all regulations filed in accordance with section five; (3) all notices filed in accordance with sections two and three, except that the secretary may summarize the content of any notice filed; provided, however, that he indicate that the full text of the notice may be inspected and copied in the office of the state secretary during business hours; and (4) any other item or portion thereof which the state secretary deems to be of sufficient public interest."
II.
Craft also challenges the finding of a § 25A price discrimination violation on several grounds.
A.
Craft argues that the ABCC did not find sufficient facts to establish a violation of § 25A. That section provides in relevant part:
No licensee authorized under this chapter to sell alcoholic beverages to wholesalers or retailers shall:
(a) Discriminate, directly or indirectly, in price, in discounts for time of payment or in discounts on quantity of merchandise sold, between one wholesaler and another wholesaler, or between one retailer and another retailer purchasing alcoholic beverages bearing the same brand or trade name and of like age and quality; . . .
As Craft correctly observes, this offense has six explicit statutory elements:
1. A licensee;
2. Discriminated, directly or indirectly;
3. In price, in discounts of payment or in discounts on quantity of merchandise sold;
4. Between one wholesaler and another wholesaler or between one retailer and another retailer, purchasing alcoholic beverages;
5. Which bore the same brand or trade name; and
6. Were of like age and quality.
Craft claims that a seventh element is implied in the statute. Since a wholesaler may change prices for products at any time, it argues that " the two sales at two different prices must occur at the same time." Craft Mem. at 16. As an example, it claims that comparing transactions two weeks apart " would be of no moment because a wholesaler is entitled to change its prices." Id.
The concept of discrimination is not so limited. The discrimination must involve similarly situated retailers, but neither the statute, nor logic, sets any strict requirement of precisely contemporaneous sales. In this case, for instance, the ABCC found that rebates were not available to all retailers. No matter when the transactions occurred, then, some retailers had the benefit of a lower net price (after rebate) than other retailers. That is, by definition, discrimination. The ABCC also found that the rebates were intended as an inducement to favor particular brands. Though not conclusive, this intent supports an inference of price discrimination to produce that result. The ABCC's findings on these point rule out any suggestion that Craft simply raised its prices in neutral fashion.
In other contexts, the question is not whether comparators were treated differently on the same day, but whether circumstances were sufficiently similar to warrant an inference of unlawful discrimination. See Matthews v. Ocean Spray Cranberries, Inc., 426 Mass. 122, 130, 686 N.E.2d 1303 (1997) (For employment discrimination purposes, a comparator must be similarly situated with respect to performance, qualifications and conduct without differentiating or mitigating facts that would distinguish their situations).
Craft also implies that there is yet another, eighth, requirement for a § 25A(a) violation, namely that " the alleged rebates and payments went to licensees, as opposed to marketing companies." The statutory language quoted above provides no support for any such element. Craft suggests that the ABCC applied this element when it ruled:
[Craft] admittedly offered rebates to retail licensees in the Briar Group, the Wilco Group, Glynn Hospitality Group, the Lyons Group, and two Jerry Remy's licensed establishments. No other retail licensees were offered this rebate.
The Commission elaborated on this finding by stating that Craft entered into transactions with " certain Retailers' management/marketing companies" and that there was a concerted effort to " create distance between the Retailers and Craft."
This argument does not exonerate Craft. For one thing, there is evidence and a finding that Rebel holds a retail license and that Craft paid Rebel $8,420 directly in a check made out to Rebel Restaurant Group but cashed by Rebel. To that extent, the finding of violation is uncontested. For another thing, monetary consideration paid to a closely-related third party in exchange for acts by the retailer is still consideration to both (as commonly recognized in, for instance the third-party beneficiary doctrine in contracts law). The ABCC was well within the concept of " price discrimination" and § 25A(a) in finding that this type of arrangement amounted to discrimination on the basis of price.
See Choate, Hall & Stewart v. SCA Services, Inc., 378 Mass. 535, 392 N.E.2d 1045 (1979) (recognizing right of an intended third-party beneficiary to sue on a contract). Cf. also Kartell v. Blue Shield of Massachusetts, Inc., 749 F.2d 922, 924-26 (1st Cir. 1984) (Breyer, J.) (A company who pays for services rendered to a third party is not a " third force" for purposes of anti-trust law, but is treated, along with the recipient, as the purchaser).
Finally, if there is any doubt about that economic and legal principle, 204 Code Mass. Regs. § 2.08 removes it. Perhaps confirming the ABCC's longstanding expertise on the typical structure of price discrimination schemes, the facts in this case align perfectly with the regulation's description of the participants in an unlawful transaction of this type: " No licensee [Craft] shall give or permit to be given money or any other thing of substantial value [rebates] in any effort to induce any person [certain Retailers' management/marketing companies] to persuade or influence any other person [retail licensees] to purchase, or contract for the purchase of any particular brand or kind of alcoholic beverages, or to persuade or influence any person to refrain from purchasing, or contracting for the purchase of any particular brand or kind of alcoholic beverages." As applied in this case, the regulation simply makes explicit the basic economic principle described in the preceding paragraph of this Memorandum. That application of the regulation is entirely reasonable and consistent with the statutory prohibition against price discrimination. Indeed, it closed the very loophole that Craft tried to employ. And it is consistent with the language of § 25A, which prohibits discrimination whether accomplished " directly or indirectly " (emphasis added), as, for instance, through a closely-related third-party management company.
Craft's last argument on this point is that payment of rebates does not constitute price discrimination. Its reasoning is an offshoot of the earlier argument about the 1970 repeal of § 25A(b), which explicitly prohibited, among other things, " rebates." Craft reasons that if rebates were prohibited by § 25A(b), then it would have been superfluous to prohibit price discrimination by rebate in § 25A(a). See Flemings v. Contributory Retirement Appeal Bd., 431 Mass. 374, 375-76, 727 N.E.2d 1147 (2000) (" In interpreting statutes, none of the words of a statute is to be regarded as superfluous, but each is to be given its ordinary meaning without overemphasizing its effect upon the other terms appearing in the statute . . . If a sensible construction is available, [the court] shall not construe a statute to make a nullity of pertinent provisions or to produce absurd results" ).
Among the flaws in this argument is that the Legislature could have concluded that repeal of § 25A(b) would not open the door to price discrimination because § 25A(a) was already broad enough to prohibit discrimination in price through the device of rebates. Another flaw is that discrimination in " price" ordinarily would include all aspects of price, including the net price after rebate. See M.H. Gordon & Son, Inc, 371 Mass. at 591 (quoted above). Thus, for instance, even credit terms are reasonably viewed as a component of price. Miller Brewing Company v. Alcoholic Beverages Control Commission, 56 Mass.App.Ct. 801, 806-07, 780 N.E.2d 80 (2002) (" Given the articulated purpose of eliminating differential treatment of 'favored licensees,' § 25A can reasonably be construed as prohibiting even seemingly minor discrepancies in prices offered by suppliers . . . to their wholesalers. The different credit terms offered by Miller to one of its six Massachusetts wholesalers fall within this category" ), citing St. 1946, c. 304, preamble (quoted above). Rebates easily fall within this concept. A third flaw in Craft's position stems from the obvious legislative purpose and historical policy to prohibit price discrimination, without limitation as to method. The principal rule is that " [i]n discerning a statute's meaning, '[w]e interpret the words used in a statute with regard to both their literal meaning and the purpose and history of the statute within which they appear.'" Atlanticare Medical Center v. Commissioner of the Division of Medical Assistance, 439 Mass. 1, 6, 785 N.E.2d 346 (2003). Finally, this is an area where the ABCC has substantial expertise warranting deference to its interpreting of the price discrimination that the Legislature trusted to the agency's supervision and enforcement.
III.
Craft argues that the ABCC was arbitrary and capricious in exonerating retailers while finding Craft liable based upon the same scheme. See Retirement Board of Somerville v. Contributory Retirement Appeal Board, 38 Mass.App.Ct. 673, 676-77, 651 N.E.2d 1241 (1995) (" an agency final adjudication that essentially contradicts an earlier interim determination made on the same record, with no reason cited, or subsidiary findings made, explaining or supporting the change" is arbitrary and capricious).
There is no contradiction here. In the case of Rebel, the ABCC did find a violation, based upon its receipt of $8,420 from Craft. The decisions regarding the other retailers turned upon whether any of those licensees were " [permitted] to be given" money. The distinction between Craft and those retailers was fundamental: Craft paid or allowed to be paid money; the four retail licensees did not. There is nothing arbitrary and capricious about this. Nor is there any legal inconsistency. As the ABCC held (170 Milk Street Decision at 10), " An essential element of 204 CMR § 2.08 is that a licensee gives or 'permit[s] to be given,' in this case, money, as part of the inducement." The fact that Craft violated the law by giving money to marketing managers without giving money to retailers does not mean that the retailers themselves paid money or permitted money to be paid. Each case properly turned upon the proof, or lack thereof, concerning the licensee's own conduct.
IV.
Craft argues procedural error by the ABCC, which took administrative notice of certain records in its files without complying with G.L.C. 30A, § 11(5), which provides in relevant part:
Agencies may take notice of any fact which may be judicially noticed by the courts, and in addition, may take notice of general, technical or scientific facts within their specialized knowledge. Parties shall be notified of the material so noticed, and they shall be afforded an opportunity to contest the facts so noticed. Agencies may utilize their experience, technical competence, and specialized knowledge in the evaluation of the evidence presented to them.See Police Dep't of Boston v. Kavaleski, 463 Mass. 680, 691, 978 N.E.2d 55 (2012). The ABCC does not (and could not) seriously contest its violation of this provision, because it never gave the parties notice and an opportunity to contest the facts of which it took notice. It is no small thing to deprive private parties of their rights under this law.
Despite the violation, Craft is not entitled to relief without showing prejudice to its substantial rights. The Court set forth the governing principles in part I, above. Here, as Craft concedes, " the ABCC never expressly made findings on this point . . ." It claims that the ABCC apparently inferred that all payments went to § 12 licensees, but that is speculation. What is clear is that, as a matter of law, the Decision does not turn on whether payments went to retailers, as opposed to the parent companies, as discussed above.
Craft also claims, without sworn support, that it " very well may have chosen to proceed with a full evidentiary hearing" if it had known that ABCC intended to consider the documents in its files. The Court does not accept this unsupported assertion, particularly where the administratively-noticed facts did not bear on the facts supporting the violations. While Craft points to some discrepancies between the Commission's files (as described in the Decision) and those of the Secretary of State, those discrepancies are literally footnotes to a Decision that survives without those footnotes. Craft does not argue that any of the judicially-noticed facts were materially wrong or that a contested hearing had any real prospect for a different outcome. Nor, even as to discrepancies does it assert an interest in arguing that it was the Commission's files that were in error, and not those in the Secretary of State's office. The most basic point is that, if Craft had a substantial basis to contest the inculpatory facts, it would not have stipulated to them, and nothing before this Court suggests that prior notice about the Commission's use of its own files would change that.
V.
Craft argues that the fifteen-month suspension, with 90 days to serve, was " arbitrary and capricious and a violation of due process because it was the only time in at least 25 years that 204 CMR § 2.08 was enforced against a wholesaler and was a total departure from its past enforcement and penalty practice." Mem. at 26. That rationale does not even address the finding of price discrimination. As noted above, striking the finding of violation of 204 CMR § 2.08 would not affect Craft's substantial rights, because the ABCC imposed precisely the same sanction, concurrently, for price discrimination.
As a penalty for violation of § 25A, the Decision appears unassailable. An agency has " particularly broad" powers when it is " fashioning remedies and setting enforcement policies." Boston Preservation Alliance, Inc. v. Sec'y of Env. Affairs, 396 Mass. 489, 498, 487 N.E.2d 197 (1986) (non-30A case). Where an agency imposes a penalty for violation of a law it is charged with enforcing, the reviewing court cannot " interfere with the imposition of a penalty by an administrative tribunal because in the court's own evaluation of the circumstances the penalty appears to be too harsh" ; rather it may interfere " only . . . in the most extraordinary of circumstances." Vaspourakan, Ltd. v. ABCC, 401 Mass. 347, 355, 516 N.E.2d 1153 (1987), quoting Levy v. Board of Registration in Medicine, 378 Mass. 519, 529, 392 N.E.2d 1036 (1979). See also Sugarman v. Bd. of Registration in Medicine, 422 Mass. 338, 662 N.E.2d 1020 (1996). Fitzgerald v. Board of Registration in Veterinary Medicine, 399 Mass. 901, 907, 507 N.E.2d 712 (1987) and cases cited; Bill v. Board of Registration of Chiropractors, 394 Mass. 779, 782-83, 477 N.E.2d 589 (1985).
For that matter, these same principles would apply to the violation of the regulation as well.
There is nothing extraordinary about this case. While it is true that the ABCC had not enforced 204 Code Mass. Regs. § 2.08 in recent memory, this was a price discrimination case. Craft does not contest that the prohibition on price discrimination is well-known and actively enforced. Craft was on notice of its exposure. The imposition of a 90-day suspension is not shown to be out of line with other suspensions. The argument that Craft's payment in lieu of suspension was much higher than in other cases merely reflects the economic reality that Craft's business was much larger than other licensees who served 90 days suspensions. Craft was under no obligation to make the payment as opposed to serving the penalty. The Court has no good reason--let alone a showing of " extraordinary circumstances" --to vacate the penalty in this case.
Indeed, as the ABCC found, Craft's employees initially disclaimed knowledge of the rebates before finally admitting the truth. The scheme itself involved invoices for fictitious services. There was no serious question that Craft knew about the illegality of price discrimination and sought to hide it.
VI.
Finally, Craft challenges the method of calculating the payment in lieu of suspension on the ground that it should not have had to include gross receipts from out-of-state (New Hampshire) operations along with its Massachusetts revenues. The Legislature has authorized payment of a financial penalty in lieu of suspension on the following terms:
The commission may accept from any licensee or holder of a certificate of compliance under this chapter an offer in compromise in lieu of suspension of any license or certificate of compliance previously suspended by the commission. A licensee or holder of certificate of compliance may petition the commission to accept such an offer in compromise within twenty days following notice of such suspension. The fine in lieu of suspension, when an offer in compromise is accepted, shall be calculated in accordance with the following formula: Fifty per cent of the per diem gross profit multiplied by the number of license suspension days, gross profit to be determined as gross receipts on alcoholic beverage sales less the invoiced cost of goods sold per diem. No such fine, in any event, shall be less than forty dollars a day. Any sums of money so collected by the commission shall be paid forthwith into the general fund of the state treasury.G.L.C. 138, § 23. The statute does not specify whether " gross profit" and " gross receipts on alcoholic beverages" is limited to Massachusetts profits and receipts.
The ABCC never took a position on that question. Craft never asked it to. Instead, Craft contacted the ABCC's general counsel, who instructed Craft to include gross profits from both Massachusetts and New Hampshire operations. Craft decided to pay the fine without asking the full commission to take a position on this question. To be sure, time was short, but Craft could, at a minimum, made a request for Commission action and, in the event of an adverse decision (or failure to decide) could have asked the Court for a stay or other relief. See Massachusetts Fine Wines & Sprits, LLC v. Alcoholic Beverages Control Commission, Suffolk Superior Court Civil Action No. 2017-3120-C (Memorandum of Decision and Order On Plaintiff's Motion for Stay of Suspension; February 6, 2017) (Wilkins, J.) (staying suspension and requiring payment of § 23 amount into escrow unless ABCC refused to stipulate to terms of escrow) at 12-14.
The Court only has authority to review a " final decision" in an adjudicatory proceeding under G.L.C. 30A, § 14. Town of East Longmeadow v. State Advisory Commission, 17 Mass.App.Ct. 939, 940, 457 N.E.2d 636 (1983) (rescript); See Fitchburg v. DPU, 394 Mass. 671, 677, 477 N.E.2d 372 (1985) (discussing " final" in G.L.C. 25, § 5). The statements of agency counsel are not an agency decision, let alone a final one. Samuels Pharmacy, Inc. v. Board of Registration in Pharmacy, 390 Mass. 583, 591, 458 N.E.2d 728 (1983) (statements of the Board's executive secretary did not amount to action by the Board warranting declaratory judgment review); Stop & Shop Companies, Inc. v. Board of Registration in Pharmacy, 394 Mass. 1008, 476 N.E.2d 215 (1985) (rescript). That rule applies not only to c. 30A, but also to certiorari and declaratory judgment actions. The Court therefore lacks jurisdiction to consider this issue.
Even if the Court has jurisdiction, one thing is clear. The amount of a fine for violation of Massachusetts law does not raise questions of extraterritoriality or effect upon the license to do business in another state, as Craft suggests. Calculations of a penalty that account for the licensee's overall ability to pay are rationally related to imposing a sufficiently stiff sanction to deter misconduct.
CONCLUSION
For the above reasons:
1. The Plaintiff Craft Beer Guild, LLC d/b/a Craft Brewers Guild's Motion for Judgment on the Pleadings is DENIED.
2. The Defendant's Cross Motion for Judgment on the Pleadings is ALLOWED.
3. Judgment shall enter for the defendant dismissing the complaint and affirming the Decision of the Alcoholic Beverages Control Commission, dated February 12, 2016.