author: PRICE, District Judge.

text:
    C. PAPPAS CO., INC., Plaintiff, v. E. & J. GALLO WINERY and McKesson Wine & Spirits Co., Defendants.
    No. CV F 83-296-EDP.
    United States District Court, E.D. California.
    May 22, 1985.

      Dean A. Bailey, Stammer, McKinght, Barnum & Bailey, Fresno, Cal., D. Peter Harvey, Horning, Janin & Harvey, San Francisco, Cal., and Robert D. Paul, Richard A. Oetheimer, Goodwin, Procter & Hoar, Boston, Mass., for plaintiff.
    Oliver W. Wanger, McCormick, Barstow, Sheppard, Wayte & Carruth, Fresno, Cal., Elliot S. Kaplan, John N. Love, Robins, Zelle, Larson & Kaplan, Minneapolis, Minn., and Wellesley, Mass., for defendant Gallo.
    Nickolas J. Dibiaso, Steven M. McClean, David M. Gilmore, Thoms, Snell, Jamison, Russell & Asperger, Fresno, Cal., for defendant McKesson.
   MEMORANDUM DECISION ON DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT.

PRICE, District Judge.

The defendants E. & J. Gallo Winery (hereinafter “Gallo”) and McKesson Wine & Spirits Co. (hereinafter “McKesson”) have filed a comprehensive motion for summary judgment.

FACTUAL BACKGROUND

Plaintiff C. Pappas Co., Inc. (hereinafter “Pappas”) is a Massachusetts corporation engaged in the wholesale distribution of beer, wine and spirits. Since 1967 they have served as distributor of certain Gallo products in the State of Massachusetts, principally in the Boston area. All during that period of time the distributorship was operated by Pappas pursuant to a series of written contracts. The contract which is in issue in the instant case was entered into on December 1, 1976. It provided in pertinent part, insofar as these motions are concerned, the following covenants:

1. It was agreed that Pappas was to be a nonexclusive distributor.

2. Pappas was to use its best efforts to develop the full potential for, and diligently sell, distribute and promote such products (the specific Gallo products specified in the contract) in all licensed retail premises in the State of Massachusetts.

3. Nothing in the agreement limited or intended to limit the area in which Pappas could sell said products.

4. Nothing in the agreement was intended to give Pappas any exclusive rights within any part of any area described above.

5. The agreement was personal in nature, was not assignable, and could be terminated as to all or any products by either party giving thirty (30) days advance written notice to the other party.

6. The agreement was entered into under the laws of the State of California and was to be construed thereunder, and any cause of action arising between the parties, whether under this agreement or otherwise, was to be brought only in a court having jurisdiction and venue at the home office of the Winery.

All of the parties concede that the home office of Gallo is situate in Modesto, Stanislaus County, and in the Eastern District of California.

For several years preceding this action, the Court finds that Pappas was the only Gallo distributor in the Boston, Massachusetts area. Further, several years prior to the events leading to this litigation, other Gallo distributors operating in Massachusetts began incursions into the Boston area. The evidence is undisputed that the matter was discussed between the principals of Gallo and the principals of Pappas at that time, and it was explained to Pap-pas that Gallo could not prevent such incursions. Indeed, the evidence clearly demonstrates that the principals of Pappas understood at all times that they did not have an exclusive distributorship for any area in Massachusetts.

At some point after signing the 1976 Agreement, Pappas began to experience financial trouble. In order to solve their problems, Pappas sought to sell all or a portion of their business or its assets to other distributors. They negotiated with both McKesson and a company not a party to these proceedings known as Whitehall Company, Ltd. (hereinafter “Whitehall”). There is no evidence that Pappas sought any counsel from Gallo as to the acceptability of either prospective purchaser during the negotiations.

The negotiations with Whitehall culminated in the parties signing a letter of intent wherein Whitehall would purchase all or substantially all of Pappas’ physical assets. Although neither party was unconditionally bound by the letter of intent, Whitehall took care to specify that their obligation under the letter of intent was expressly “conditioned and contingent upon our appointment by Gallo Wineries and its subsidiaries as a co-distributor of their products in Eastern Massachusetts.” Apparently Whitehall did not, at this juncture, reveal to Pappas that in 1977 they had sought a distributorship from Gallo, which request was rebuffed.

Arrangements were made for Whitehall to visit with the Gallo principals in Modesto in January of 1982. In preparation for this meeting, Gallo had instructed a Gallo employee to make a survey of Whitehall’s performance in the areas in which they operated in Massachusetts. On February 3, 1982, K.C. Bertsch, Gallo’s Vice President-Director of Sales, wrote Whitehall indicating that Gallo would not appoint Whitehall as a distributor of Gallo products. The concluding sentence of the Bertsch letter is quite pointed: “If Whitehall were to attempt to assume all or part of the distribution responsibilities of C. Pappas Company with regard to the Winery’s products, the Winery would exercise its contractual rights to terminate the Pap-pas distributorship and would not appoint Whitehall as a Winery distributor.” A copy of this letter was simultaneously forwarded to Pappas with a letter addressed solely to Pappas expressing Gallo’s displeasure at certain anticipated changes in their operation contemplated by Pappas. On June 16, 1982, Gallo entered into an agreement of distributorship with McKesson. The contract document entered into with McKesson is identical in text.

This litigation followed, being filed first in the United States District Court in Massachusetts. The matter was removed to this district on motion by Gallo. 565 F.Supp. 1015. After removal to this Court, McKesson’s motion to intervene as a defendant was granted on June 30, 1984.

After discovery was undertaken by the parties in this action, Gallo came into possession of certain knowledge with reference to the contract entered into between Pappas and Whitehall which caused them to terminate Pappas as a distributor. Apparently the propriety of that termination is still in litigation in Massachusetts. The Court does not consider the termination as being material to any of the issues raised in either Gallo’s or McKesson’s motions, or in Pappas’ response to the same, although the parties have referred to it in their moving and responding papers.

GALLO’S MOTION FOR SUMMARY JUDGMENT

Pappas’ complaint consists of thirteen (13) counts. The Court will discuss each count separately.

Count I

Count I is a straight breach of contract count.

Reading Pappas’ memorandum in opposition to Gallo’s motion, it is Pappas’ position that: First, Gallo owed an obligation to Pappas to appoint Whitehall as a distributor in Massachusetts in order to allow the proposed sale by Pappas to Whitehall to be consummated on the terms as originally contemplated; and second, Gallo owed an obligation to Pappas not to appoint a second distributor in the Massachusetts area.

As pointed out above, the contract clearly contains a choice of law clause, and the choice of law is California. Plaintiff concedes that California law is applicable in this case.

It has been the law in California for many years that even an exclusive distributorship not for an agreed or specified term is terminable. See A.B.C. Distrib. Co. v. Distillers Distr. Corp. (1957) 154 Cal.App.2d 175, 316 P.2d 71; Alpha Distrib. Co. of Cal., Inc. v. Jack Daniel Distillery, 454 F.2d 442 (9th Cir.1972). Clearly then, a manufacturer has the right to insert a competing distributor in an area already occupied by a nonexclusive distributor. The extended reference in Pappas’ opposing papers does not in any way change this fundamental rule.

Pappas argues that in this case, the “implied covenant of good faith and fair dealing” somehow overrules the foregoing precedent. None of the landlord-tenant cases cited by Pappas change the California law as applied to distributorship agreements. Indeed, the testimony of the Pap-pas’ executives clearly demonstrates a clear understanding that Pappas’ contract was neither exclusive nor assignable.

Count II

Count II of Pappas’ complaint alleges that Gallo’s actions constitute violations of the obligations of good faith and fair dealing in the performance and enforcement of contracts set forth in Sections 1-203 and 2-103(l)(b) of the Uniform Commercial Code.

At the outset, it should be noted that California did not adopt the Uniform Commercial Code per se, but adopted its own version of the same. However, the sections referred to in Pappas’ First Amended Complaint were adopted by the California legislature. See California Commercial Code § 1-203.

In approaching this subject in California, initially a distinction must be made between the above-cited provision of the California Commercial Code, which is an implied covenant in every contract, and the discussion in certain special relationship eases where the breach of such covenant may result in tort liability rather than merely a breach of contract. See Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 169 Cal.Rptr. 691, 620 P.2d 141 (1979); Tameny v. Atlantic Richfield Co, 27 Cal.3d 167, -164 Cal.Rptr. 839, 610 P.2d 1330 (1980). Our focus here is only on the aspects of this covenant as it applies to the law of contracts. The limitations of the covenant are well explained in 1 Within Summary of California Law, 8th Ed., § 576, at p. 493:

“There is implied in every contract a covenant by each party not to do anything which will deprive the other parties thereto of the benefits of the contract____ [T]his covenant not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own, but also the duty to do everything that the contract presupposes that he will do to accomplish its purpose.”

The limitations on the trial court’s use of the implied covenant of good faith and fair dealing to rewrite a distributorship contract were extensively discussed in Walnut Creek Pipe Distributors, Inc. v. Gates Rubber Co., 228 Cal.App.2d 810, 815, 39 Cal.Rptr. 767 (1964):

Respondent points to the unfairness of the situation to justify the finding of an implied covenant of repurchase. The courts cannot make better agreements for parties than they themselves have been satisfied to enter into or rewrite contracts because they operate harshly or inequitably. It is not enough to say that without the proposed implied covenant, the contract would be improvident or unwise or would operate unjustly. Parties have the right to make such agreements. The law refuses to read into contracts anything by way of implication except upon grounds of obvious necessity. “[Ijmplied covenants are not favored in the law; and courts will declare the same to exist only when there is a satisfactory basis in the express contract of the parties which makes it necessary to imply certain duties and obligations in order to effect the purposes of the parties to the contract made.” {Cousins Inv. Co. v. Hastings Clothing Co., 45 Cal.App.2d 141 at 143, 113 P.2d 878.)
The rules controlling the exercise of judicial authority to insert implied covenants require several concurrent conditions: (1) the implication must arise from the language used or it must be indispensable to effectuate the intention of the parties; (2) it must appear from the language used that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it; (3) implied covenants can only be justified on grounds of legal necessity; (4) a promise can be implied only where it may be rightfully assumed that it would have been made if attention had been called to it; and (5) there can be no implied covenant where the subject is completely covered by the contract. (Cousins Inv. Co. v. Hastings Clothing Co., supra, at p. 149 [113 P.2d at p. 882].) These conditions are required whether the contract involves real or personal property. (A.B.C. Distrib. Co. v. Distillers Distrib. Corp., 154 Cal.App.2d 175, 185, 316 P.2d 71.)
Where all of these requirements are met, one of the most commonly implied covenants is that of termination or performance within a reasonable time where the parties have failed to specify time (San Francisco Brewing Corp. v. Bowman, 52 Cal.2d 607, 343 P.2d 1. J.C. Millett Co. v. Park & Tilford Distillers Corp. (D.C.S.D.Cal.1954) 123 F.Supp. 484). One of the most commonly rejected covenants, regardless of hardship, is the implication that a distributorship agreement is exclusive where not so specified____

Accordingly, as to Count II, none of the evidentiary submissions relied upon by Pappas or the legal authorities cited by plaintiff demonstrate there is a triable issue of fact on this count.

Count III

In count Three, Pappas alleges the existence of and a breach by Gallo of the fiduciary duty arising from their business relationship and the community of interest between them. In support of this proposition, Pappas cites two Eighth Circuit cases involving service station operators whose franchise had been terminated by the franchiser oil company. The contention that a fiduciary duty existed between a manufacturer and his authorized dealers was soundly rejected in Rickel v. Schwinn Bicycle Co., 144 Cal.App.3d 648, 192 Cal.Rptr. 732 (1983). The California court noted the existence of the Eighth Circuit cases and drew a distinction between a franchiser/franchisee relationship and manufacturer/distributor relationship. To the same effect see Worldvision Enterprises, Inc. v. American Broadcasting Co., Inc., 142 Cal.App.3d 589, 191 Cal.Rptr. 148 (1983), hrg. denied. As pointed out in Rickel, the underlying basis of a confidential relationship is the preclusion of any nonmutual profit arising from the dealings of the parties. Clearly, the relationship of manufacturer/distributor cannot ordinarily meet this test.

For all of the foregoing reasons, Gallo’s motion as to Count Three must be granted.

Count IV and Count V

Counts IV and V are based upon the California tort of tortious interference by one party with an existing contractual or prospective contractual rights of another. Gallo’s alleged interference with the prospective sale to Whitehall forms the basis for Count IV, and the designation of McKesson as a distributor who then became a competitor of Pappas for Gallo products, forms the basis of Count V.

The parties agree that California law applies, or alternately that Massachusetts and California law are the same on this point.

There are five elements to this tort:

1. An economic relationship containing the probability of future economic benefits to the plaintiff;
2. Defendant’s knowledge of the existence of the relationship;
3. Defendant’s intentional commission of acts designed to disrupt the relationship;
4. Actual disruption; and
5. Damages.

See Institute of Veterinary Pathology, Inc. v. California Health Laboratories, Inc., 116 Cal.App.3d 111, 172 Cal.Rptr. 74 (1981); Olivette v. Frischling, 104 Cal.App.3d 831, 837, 164 Cal.Rptr. 87 (1980).

As pointed out above, when Whitehall representatives visited Gallo in Modesto in January of 1982, there was no valid enforceable contractual relationship then existing between them. See Pappas’ Exhibits 11 and 12. Neither is there any evidence in this case that Gallo was aware of the exact arrangement that had been entered into between Pappas and Whitehall, other than that Whitehall was a prospective purchaser. Significantly, Pappas points to no deposition testimony or facts discovered by interrogatories which they contend establishes either elements one or two. On the other hand, Gallo points to the exchange of letters between Pappas and Whitehall.

In answering Whitehall’s letter, Pappas wrote, in pertinent part:

However, due to the nature of this transaction and before any final documents are executed, we respectfully request that you receive prior approval from the E.J. Gallo Winery, such that Whitehall Company, Ltd., or its nominee, will be an acceptable replacement distributor in the marketing areas that C. Pap-pas Co., Inc. currently serves. Both must act in the best interests of the Gallo Winery, therefore, their blessing must be a precondition of our deal.

From the discussion contained above, it is abundantly clear that there is no triable issue of fact as to whether or not Gallo knew of the arrangement between Whitehall and Pappas, and Pappas, in their opposing papers, points to none.

The California Supreme Court recently addressed this area of the law in Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., 36 Cal.3d 752, 206 Cal.Rptr. 354, 686 P.2d 1158 (1984). At 767, 206 Cal.Rptr. at 360, 686 P.2d at 1164, the court observed:

Similarly, to prevail on a cause of action for intentional interference with prospective economic advantage, plaintiff must plead and prove “intentional acts on the part of the defendant designed to disrupt the relationship.” (citations omitted)
Only if and when plaintiff establishes “an attempt to interfere” does the issue of “justification” come into play.

A careful reading of the seminal decision of Buckaloo v. Johnson, 14 Cal.3d 815, 122 Cal.Rptr. 745, 537 P.2d 865 (1975), clearly demonstrates the level of knowledge that must be possessed by a defendant, as well as the defendant’s state of mind that must be proven by the plaintiff before the plaintiff may be entitled to recover on this theory-

Since Pappas does not cite any evidentiary material indicating Gallo’s prior knowledge or Gallo’s intentions are triable issues of fact, Gallo must prevail as to Count IV.

In Count V a different problem is presented. Pappas points to evidence that McKesson has conceded that it solicited Gallo business from some major chain accounts that had formerly purchased some of their Gallo product requirements from Pappas. McKesson further admitted, says Pappas, that McKesson had reason to know at the time of the solicitation that the accounts being solicited were then customers of Pappas. There is further evidence, Pap-pas contends, that McKesson attempted to lure away the Pappas wine sales manager, one Ken Mitchell, and further that McKesson offered illegal quantity discounts to Pappas’ customers on Gallo products.

The Court has previously resolved the issue as to whether Gallo’s appointment of McKesson breached their contract with Pappas. The Court has further determined that the refusal to appoint Whitehall did not raise a triable issue of fact under the fourth count of Pappas’ complaint, i.e., interference with a prospective economic advantage.

Clearly, the appointment of McKesson by Gallo was motivated by a legitimate business purpose, i.e., to create stronger intra-brand competition among the persons authorized to distribute Gallo products in the Massachusetts market. In Charles Chapman Building Co. v. California Mart (1969) 2 Cal.App.3d 846, 82 Cal.Rptr. 830, the court pointed out that where no breach of contract is shown, the law recognizes a more extensive privilege to interfere with business relations than where a breach appears. Further, if the interference involves no more than recognized trade practices, such as advertising, solicitation or reduction of prices, a competitor’s loss as a result of the competition is not actionable. Significantly, Pappas nowhere demonstrates that the McKesson actions complained of were undertaken at the direction of Gallo. Indeed, as Chapman points out, citing earlier California authority, competition in business, though carried to the extent of ruining a rival, is not ordinarily actionable provided that the competition does not involve wrongful conduct such as fraud, misrepresentation, intimidation, coercion, obstruction or molestation of the rival or his servants or workmen, or the procurement of the violation of contractual relationships.

Pappas has cited no cases, and the Court has found none, that would indicate that any of the actions complained of by McKesson was wrongful except a quantity discount offer. Since the quantity discount had not been properly published according to Massachusetts law, the practice was terminated immediately by the Alcohol Beverage Control Commission, and as a result of the administrative action, no customer was ever allowed to claim that discount. As a result of withdrawing the discount offer, McKesson allegedly suffered damage in Massachusetts. This allegation by McKesson is not controverted.

The only manner in which Gallo is tied into these unilateral acts by McKesson is the rather fatuous statement that Gallo knew or should have known that McKesson would strongly compete with Pappas in the business of retail customers buying Gallo products. As pointed out above, this is precisely the condition that Gallo wished to create by the appointment of McKesson in the first instance.

(8] Pappas’ entitlement to recover from McKesson in their fifth count requires them to plead and prove precisely the same. elements of the tort discussed above. Pap-pas has failed to demonstrate the existence of the first element, i.e., the existence of a prospective economic advantage between Pappas and any of the retail outlets. Significantly, Pappas cites no authority and points to no evidentiary submission (except that noted above) that shows that McKesson acted other than as a competitor seeking to sell Gallo wine to retail wine accounts, including those previously served by Pappas.

Count VI

Pappas’ Count VI alleges that Gallo and McKesson conspired to cripple competition and destroy Pappas, which constitutes a violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.

Careful consideration of all of the evidence bearing on this issue reveals the following:

We learn from the affidavit of Rolf Peterson and the depositions of Gallo personnel, that for several years prior to McKesson’s appointment, Gallo was concerned with the performance of Pappas in the Boston area, as well as with Pappas’ financial stability. We also note from the Gillis deposition that.Gallo was not always enchanted with McKesson’s performance, and that Gallo had previously terminated McKesson distributorships in Florida. The adoption of and compliance with Gallo’s merchandising philosophy by the distributor was a condition precedent to being appointed a Gallo distributor in the late 1970’s and early 1980’s, and to the retention of such distributorship. The search for such distributors in the Boston area was constant.

The Ninth Circuit held in Seagrams & Sons v. Hawaiian Oke, 416 F.2d 71, at 81, “Surely a manufacturer and its national or regional distributor, whether a subsidiary or an independent, can agree to transfer their business from one wholesaler to another without running afoul of the group boycott per se rule, in the absence of some forbidden anti-competitive or monopolistic objective.”

This citation exposes the second flaw in Pappas’ position, i.e., where is the “anti-competitive” or “monopolistic” objective? The evidence relied on by Pappas demonstrates the opposite, that is, that Gallo was constantly striving to make its products more competitive in the Boston market.

Pappas argues inferentially that McKesson was a poor choice to accomplish Gallo’s objectives. It was never the purpose of Congress, by the passage of the Sherman Act, to empower federal judges to sit in judgment on the wisdom of business judgments, but only their legality! As was stated by the Supreme Court in Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752,104 S.Ct. 1464, 79 L.Ed.2d 775 (1984),

Thus, something more than evidence of complaints is needed. There must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently. As Judge Aldisert has written, the antitrust plaintiff should present direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others “had a conscious commitment to a common scheme designed to achieve an unlawful objective.” Edward J. Sweeney & Sons, supra [637 F.2d 105], at 111 [CA3 1980]; accord H. L. Moore Drug Exchange v. Eli Lilly & Co, 662 F.2d 935, 941 (CA 2 1981) cert. denied, 459 U.S. 880, 74 L.Ed.2d 144, 103 S.Ct. 176 (1982) cf. American Tobacco v. United States, 328 U.S. 781, 810, 90 L.Ed. 1575, 66 S.Ct. 1125 (1946) (Circumstances must reveal “a unity of purpose or a common design and understanding, or a meeting of the minds in an unlawful arrangement”).

The motion of Gallo and McKesson for summary judgment as to Count VI is granted.

Count VII

In Count VII, Pappas alleges that:

I. Gallo agreed, combined and conspired with McKesson to destroy the value of the agreement and Pappas’ distribution rights, and to deprive Pappas of the opportunity to sell and assign these rights at fair value; and

2. Gallo and McKesson undertook to carry out what they agreed and conspired to do.

As pointed out in 4 Witkin, Summary of California Law, 8th Ed., 2330:

Occasionally, in actions against joint tortfeasors, the defendants are charged with “conspiracy,” and the cause of action is some times described as one for “civil conspiracy.” {See, e.g., Neblett v. Elliott (1941) 46 C.A. [Cal.App].2d 294, 302, 115 P.2d 872.) Strictly speaking, however, there is no separate tort for civil conspiracy, and there is no civil action for conspiracy to commit a recognized tort unless the wrongful act itself is committed and damage results therefrom.
Hence, where the complaint charges a conspiracy and the commission of a wrongful act, the only significance of the conspiracy charge is that each member may be held responsible as a joint tortfeasor, regardless of whether or not he directly participated in the act.

As we have pointed out above, the Pappas’ agreement, not being freely assignable and not being exclusive, had no value in and of itself. Hence, the allegations of conspiracy add nothing to this count that give it substance.

Significantly, Pappas does not point to any evidentiary facts to support these contentions. The Court has disposed of Pap-pas’ contentions regarding a conspiracy in the antitrust context, supra. The same discussion is equally applicable here.

The second portion of Pappas’ allegations is apparently directed to a possible joint liability for intentional interference with a prospective economic advantage.

Having disposed of Gallo’s liability thereunder, we now turn to McKesson. Just as none of the requisite elements of the tort are satisfied as to Gallo, the same is equally true as applied to McKesson.

Gallo’s and McKesson’s motion for summary judgment as to Count VII is granted.

Count VIII

In Count VIII Pappas attempts to state a cause of action under Chapter 93A of the Massachusetts General Laws, alleging that Gallo has, in fact, engaged in willful, unfair and deceptive acts and practices, and unfair methods of competition in violation of the Massachusetts General Laws, Chapter 93A, Section 2.

Section 2(a) of that Act declares that unfair methods of competition and unfair deceptive acts or practices in the conduct of any trade or commerce are unlawful.

Section 3(b) of the Act exempts from its operation any trade or commerce of any person of whose gross revenue of at least twenty percent (20%) is derived from transactions in interstate commerce, excepting however, transactions and actions which: “(i) occur primarily and substantially within the commonwealth.”

It is the contention of Gallo that they are exempted from the operation of the Act because more than twenty percent of their total commerce flows into interstate commerce. Further Gallo argues, all of the acts of which the plaintiff now complains, i.e., the decision not to appoint Whitehall as a distributor, the appointment of McKesson as a distributor, the execution by Gallo of the McKesson distributorship, and the filling of all of McKesson’s orders, occurred at Gallo’s home office in Modesto, California. Gallo’s position is buttressed by the citation of several authorities that concur in this result.

Pappas, on the other hand, argues that Pappas’ damage occurred in Massachusetts, and this is a significant factor in determining whether the actions forming the basis of this claim occurred primarily and substantially in Massachusetts. In support of this position, they cite Bushkin Assoc., Inc. v. Raytheon Co. (1985) 393 Mass. 622, 473 N.E.2d 662. The Bushkin case is not helpful to Pappas. First of all, on facts similar to the instant case, the Massachusetts Supreme Court had no difficulty in sustaining Raytheon’s contention that the acts being relied upon by Bushkin occurred primarily in New York. By dictum, the Massachusetts Supreme Court suggested that in a close case, the approach employed by the Bushkin court could be employed in determining the appropriate choice of law had that issue been certified to them by the First Circuit Court of Appeals, and could be used to determine the situs of the important transactions.

Because Gallo has sustained its burden with regard to its claimed exemption, the Court finds that Gallo is entitled to summary judgment on this count.

Count IX

In Count IX, Pappas alleges violations of Sections 17000, et seq., of the California Business and Professions Code. Specifically, Pappas alleges that the defendants have colluded with each other in violation of the Business and Professions Code, Sections 17046 and 17048.

Section 17046 provides that it shall be unlawful for any person to use any threat, intimidation or boycott to effectuate any violation of this chapter.

Section 17048 provides that it is unlawful for any manufacturer, wholesaler, distributor, jobber, contractor, broker or other vendor, or any agent of any such person, jointly to participate or collude with any other such person in the violation of this chapter.

Defendants argue that this statute applies only to price discrimination or price-related practices. They appear to be correct in this. Witkin notes that the unfair practices act chiefly prohibits selling articles below cost, or giving them away, for the purposes of injuring competitors and destroying competition.

In Uneedus v. California Shoppers, Inc. (1978) 86 Cal.App.3d 932, 150 Cal.Rptr. 596, the court noted that the act closely paralleled the Robinson-Patman Act in that each proscribed three basic types of business practices: Price discrimination in various forms; sales below costs; and the granting of rebates and discounts not made available to all buyers. It differs from the Robinson-Patman Act in that the state statute proscribes discrimination among different geographic localities only — it does not prohibit discrimination among different individual purchasers.

In Plotkin v. Tanners Vacuums (1975) 53 Cal.App.3d 454, 125 Cal.Rptr. 697, the holding stated that the intent of the legislature was to discourage practices that injure the seller’s (i.e. Gallo’s) competitors; that the act operated at a horizontal level, and not a vertical level.

Significantly, Pappas does not explain how the evidence before the Court makes out a cause of action under this Act.

The motion of Gallo and McKesson for summary judgment as to Count IX is granted.

Count X

In Count X, Pappas alleges unfair competition, stating simply that:

Gallo is and has, in fact, “engaged in acts of unfair competition in violation of ... California Business and Professions Code, Sections 17200, et seq.,” and as a result they seek injunctive relief.

Pappas again argues that the two acts here involved, i.e., failure to appoint Whitehall as a Gallo distributor, and the appointment of McKesson, are enough to bring them within the purview of the statute. Defendants argue that the statutory scheme clearly is designed to prohibit ongoing, continuing practices.

Pappas does not specify which particular sections it relies upon to establish the violation. As originally adopted Sections 17000 through 17200 specified a number of acts which were prohibited, the remedies for their violation, and procedural rules governing actions alleging such violations. Sections 17500 to 17930 govern the manner in which “representations” may be made to the public in a myriad of commercial activities.

Section 17200 (formerly a part of California Civil Code Section 3369) reads as follows:

As used in this chapter, unfair competition shall mean and include unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.

Pappas’ conclusionary statements that two actions are enough to support this cause of action are not supported by the authorities upon which they rely. Each California case cited by plaintiff or defendant clearly was concerned a continuing activity.

Whether Pappas would be entitled to damages, in addition to or in lieu of injunctive relief, is moot due to the fact that Gallo has demonstrated its entitlement to summary judgment on Count X.

Count XI

Count XI charges Gallo and McKesson with violation of California’s Cartwright Act.

All parties argue that:

1. California’s Cartwright Act is based on Section 1 of the Sherman Act.

2. The California courts have developed a large body of precedent under the Cartwright Act which did not involve interstate commerce, but where federal precedent was deemed applicable.

Pappas’ argument seems to suggest that although the federal antitrust issues may be decided against them, that Rolling v. Dow Jones & Co., 137 Cal.App.3d 709, 187 Cal.Rptr. 797 (1982) would give them separate standing under the Cartwright Act.

First, it should be noted that the in Rolling the court found that:

The Cartwright Act is patterned after the federal Sherman Anti-Trust Act (15 U.S.C. § 1, et seq.), so that decisions under the latter act are applicable to the former. (Corwin v. Los Angeles Newspaper Service Bureau, Inc., supra, 4 Cal.3d 842, 852 [94 Cal.Rptr. 785, 484 P.2d 953,]. Saxer v. Philip Morris, Inc. (1975) 54 Cal.App.3d 7, 19, 126 Cal.Rptr. 327.)

Rolling v. Dow Jones & Co., supra, at 717, 187 Cal.Rptr. at 802.

Second, it should be noted that the Court found sufficient evidence to support a finding that Rolling's termination was based in part on improper antitrust motives by Dow Jones, i.e., price fixing. Pappas has failed to supply evidence of any such illegal motive in this case.

Count XII

Count XII seeks punitive damages. Pappas’ entire argument in support of their entitlement to punitive damages consists of the following two paragraphs:

Gallo’s Motion for Summary Judgment must be denied with respect to Count XII of the Amended Complaint. There is evidence from which the Court may infer that Gallo is and has been guilty of oppression, fraud or malice, thereby entitling Pappas to an award of exemplary damages under Section 3294 of the California Civil Code.
Pappas has established that it is entitled to proceed to trial on the claims alleged in its Amended Complaint. It would be premature to decide now, prior to trial, that Pappas is not entitled to an award of exemplary damages. That determination should be made when all the evidence is in and when the trier of fact has had an opportunity to observe the demeanor of the witnesses.

Pappas’ counsel does not identify any evidence which would allow the trier of fact to draw the necessary inferences of malice and fraud to support an award of punitive damages. Suffice it to say, in considering the specific references to exhibits, depositions, transcripts, affidavits, etc., the Court finds no such evidence.

Gallo’s motion for summary judgment as to Count XII is granted.

      . The product "mix” of the two contracts may be different. The Court did not make a detailed comparison because that fact is not essential to the Court’s decision in this matter.

      . Pappas cites neither fact nor law to buttress this remarkable proposition.

      . The only difference between plaintiff's position as to the first and second causes of action appears to be that California’s adoption of a modified version of the Uniform Commercial Code brings into play authorities other than those decided on the basis of California precedents.

      . Actually, in one case, the Eighth Circuit upheld a finding of fiduciary duty, but in the second and later case, the Eighth Circuit panel found no fiduciary duty. Both cases turned on an interpretation of state law, i.e., the law of South Dakota in one instance, and the law of Missouri in the other.

      . In Rickel, supra, plaintiffs made the same complaint as does Pappas, i.e., that Schwinn interfered with the sale of their business, the assets of which included a Schwinn distributorship. Schwinn refused to grant their prospective purchaser a Schwinn distributorship.

      . In Wortdvision, supra, at 595, 191 Cal.Rptr. at 151, the court put the issue raised by Pappas' third count:
      The mere fact that in the course of their business relationships the parties reposed trust and confidence in each other does not impose any corresponding fiduciary duty in the absence of an act creating or establishing a fiduciary relationship known to law. (Hayward Union etc. School Dist. v. Madrid (1965) 234 Cal.App.2d 100, 124, 44 Cal.Rptr. 268. Gosnell v. Lloyd (1932) 215 Cal. 244, 254, 10 P.2d 45.) Plaintiff's assertion is insufficient to create a triable issue of fact which would preclude summary judgment.

      . Although not material to our holding, the Court has already noted:
      (1) That Whitehall apparently withheld from Pappas their unsuccessful attempt in 1977 to gain a Gallo distributorship in Massachusetts.
      (2) After Gallo’s refusal, Pappas and Whitehall altered their contractual relationship in an attempt to circumvent the nonassignability clause of the Gallo contract.

      . The Court is aware of the antitrust literature declaring that a “conspiracy” is the cornerstone of Section 1 violations. However, a close reading of the applicable cases demonstrates that the object of such conspiracies must be a prohibited antitrust activity.


source: Caselaw Access Project

author: SAND, District Judge.

license: Public Domain

text:
    JOSEPH E. SEAGRAM & SONS, INC., an Indiana Corporation on behalf of its division General Wine & Spirits Company and all other divisions, Plaintiff, v. Anthony V. GAZZARA, Chairman, Hugh B. Marius, Robert Doyle, Terrence Flynn and Frederick T. Pannozo, as Commissioners, and Barbara Joanni Lord, as Secretary of the State Liquor Authority, Division of Alcoholic Beverage Control, State of New York, Defendants.
    No. 83 Civ. 6825 (LBS).
    United States District Court, S.D. New York.
    May 22, 1985.
    As Amended May 28, 1985.

      Simpson Thacher & Bartlett, New York City, for plaintiff; David W. Ichel, Joseph F. Tringali, New York City, of counsel.
    Robert Abrams, Atty. Gen. of the State of N.Y., New York City, for defendants; Howard L. Zwickel, Maria Tepper, Asst. Attys. Gen., New York City, of counsel.
    Anderson Russell Kill & Olick, P.C., New York City, for Peerless Importers, Inc., Lawrence Kill, Steven M. Pesner, Daniel N. Sang, New York City, of counsel.
    Buehman, Buchman & O’Brien, New York City, for Capitol Distributors Corp., Knickerbocker Liquors Corp. and Star Industries, Inc.; Michael Newman, New York City, of counsel.
    Whiteman, Osterman & Hanna, Albany, N.Y., for The New York State Wholesale Liquor Ass’n; Michael Whiteman, Albany, N.Y., of counsel.
    Windels, Marx, Davies & Ives, New York City, for Charmer Industries, Inc., Anthony Dean, New York City, of counsel.
   OPINION

SAND, District Judge.

Plaintiff, Joseph E. Seagram & Sons, Inc., challenges the constitutionality of New York’s liquor price affirmation statute, N.Y.ABC Law § 101 — b(3), contending that it is violative on its face of the Commerce Clause. Plaintiff seeks a judgment declaring the statute unconstitutional and enjoining the defendant officials of the State Liquor Authority (hereinafter “SLA”) from enforcing it. Both sides have moved for summary judgment. The New York State Wholesale Liquor Association, together with various individual liquor suppliers, have intervened on behalf of the defendants. For the reasons set forth below, we conclude that the statute does not, on its face, offend the Commerce Clause.

Under New York’s affirmation statute, distillers who sell liquor to New York wholesalers must file a monthly schedule of the prices that will be charged for their products in New York State. N.Y. ABC Law § 101-b(3)(a). Those products may not be sold in New York except at the prices listed in the schedule “unless prior written permission of the [SLA] is granted for good cause shown and for reasons not inconsistent with the purpose” of the statute. Id. In addition, the schedule must be accompanied by an affirmation “that the ... price of liquor to wholesalers set forth in such schedule is no higher than the lowest price at which such items of liquor will be sold ... in any other state or in the District of Columbia ... at any time during the calendar month for which such schedule shall be in effect ...” Section 101-b(3)(d). The making of a false statement in an affirmation filed pursuant to § 101-b(3)(d) is a misdemeanor, punishable by fine or imprisonment or both. Section 101-b(3)(h). Failure or refusal to comply with any other aspect of the scheduling and affirmation requirements may result in revocation, cancellation or suspension of any license issued pursuant to that statute, and in the imposition of a fine. Section 101-b(6).

The statute, in its present form, has been in effect since 1967. An earlier version of the statute, which required the filing of an affirmation based on the preceding month’s prices, was upheld by the Supreme Court in Seagram & Sons, Inc. v. Hostetler, 384 U.S. 35, 86 S.Ct. 1254, 16 L.Ed.2d 336, reh’g denied, 384 U.S. 967, 86 S.Ct. 1583, 16 L.Ed.2d 679 (1966). Until recently, it was assumed that the amendment of the statute in 1967 did not affect its constitutionality. See, e.g., Affiliated Distillers Brands Corp. v. State Liquor Authority, 32 A.D.2d 336, 301 N.Y.S.2d 316, 319 (1st Dept.1969), affd, 26 N.Y.2d 982, 311 N.Y.S.2d 25, 259 N.E.2d 492 (1970).

Plaintiff now raises two challenges to the statute’s validity under the Commerce Clause. The first is directed toward the statute as amended, and is based upon the recent decision of the Court of Appeals for this Circuit in United States Brewers Ass’n v. Healy, 692 F.2d 275 (2d Cir.1982), affd w/o op., — U.S.-, 104 S.Ct. 265, 78 L.Ed.2d 248 (1983). The second challenge is, in essence, a challenge to the current validity of Seagram v. Hostetter, supra, a 1966 decision of the Supreme Court which held that liquor price affirmation statutes are a permissible exercise of the regulatory authority granted to the states by the Twenty-First Amendment. The basis for this challenge is the Supreme Court’s recent decision in Bacchus Imports, Ltd. v. Dias, — U.S.-, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984). We consider each challenge in turn.

The Statute As Amended

Plaintiff first contends that the decision in United States Brewers Ass’n v. Healy, supra, which invalidated the beer price affirmation provision of the Connecticut Liquor Control Act, requires invalidation of the current version of New York’s affirmation statute.

The statute at issue in Healy required the filing of a monthly beer price schedule together with an affirmation that the prices listed in the schedule were no higher than the lowest prices at which beer would be sold in the three states adjoining Connecticut during that month. The schedule was not subject to amendment, nor could beer be sold except at the price listed in the schedule. 692 F.2d at 276-78.

The Second Circuit held that the Connecticut statute effectively set a minimum price for beer in a four-state area, and that in doing so, it ran afoul of the Commerce Clause. The Court noted that “it has been held repeatedly that where the practical effect of a state’s legislation is to control conduct in other states, the regulation violates the Commerce Clause,” id. at 279 (citations omitted), and that while the Twenty-First Amendment gives states broad powers to regulate importation and in-state traffic in alcoholic beverages, “nothing in the Twenty-First Amendment suggests that a state may regulate the sale of liquor outside of its own territory.” Id. at 281.

The Court in Healy distinguished Seagram v. Hostetter, supra, finding that the statute upheld there:

differed significantly from the Connecticut statute, because, unlike Connecticut’s beer price affirmation provisions which control brewers’ future conduct in the states surrounding Connecticut, the New York law in Seagram merely required that New York prices reflect what had been charged elsewhere in the past. Thus, the New York law, although it affected the prices that manufacturers would choose to set in other states, did not limit the freedom of a manufacturer at any given time to raise or lower prices in any other state.

Id. at 283.

Plaintiff suggests that Healy represents a holding that all “prospective affirmation” statutes — that is, those requiring an affirmation as to the prices that will be charged in other states — are invalid under the Commerce Clause. We do not read Healy so broadly. The Healy Court itself noted that “[gjiven the latitude allowed a state under the Twenty-First Amendment to regulate the sale of liquor within its own borders, the holding in Seagram might well validate beer price regulation less intrusive then the present Connecticut statute, such as a requirement simply that a brewer set its Connecticut prices at the lowest levels it chooses to set in the surrounding states ... leaving those out-of-state prices unregulated by Connecticut.” 692 F.2d at 283-84 (citation omitted). Cf. United States Brewers Ass’n v. Rodriguez, — U.S.-, 104 S.Ct. 1581, 80 L.Ed.2d 115 (1984) (Stevens, J., concurring in dismissal of appeal) (Healy does not undermine the validity of Seagram v. Hostetter).

We understand Healy to require invalidation of a prospective affirmation statute only when the practical effect of the statutory scheme is to prohibit a manufacturer from raising or lowering prices in another state for a given period of time. We are not persuaded that the New York statute has such an effect.

As is evident from our earlier summary of its provisions, the New York statute is not identical to the statute invalidated in Healy. The New York statute provides, as the Connecticut statute did not, that liquor may be sold in New York at a price other than the scheduled price provided that “pri- or written permission of the [SLA] is granted for good cause shown and for reasons not inconsistent with the purpose” of the statute. Section 101-b(3)(a). Thus, assuming that a mid-month price reduction in another state constitutes “good cause” and a “reason not inconsistent with the purpose” of New York’s statute, it would appear that a distiller could make such a reduction without violating the New York statute so long as he applies to the SLA for permission to make a corresponding reduction in his New York prices. If this is so, it cannot be said that the practical effect of the statute is to prohibit a distiller from lowering prices in other states.

Plaintiff raises a number of objections to this interpretation of the statute. First, it contends that the “good cause” provision relates only to the statute’s price scheduling requirement and “does not alter or modify the dictates of the affirmation provisions.” Plaintiffs Reply Mem. at page 7, note * (emphasis added). By this, we understand plaintiff to argue that even if a distiller receives permission to lower his New York prices on the ground that he has lowered them elsewhere, he is still subject to prosecution under Section 101-b(3)(h) for having filed a “false” affirmation as to what his prices would be in other states. However, plaintiff has not alleged that the Section in question has been so interpreted at any time during the eighteen years that it has been in effect, nor have we found any suggestion of such an interpretation in New York case law or the rules of the SLA. Nor do we consider that interpretation to be one that is sensible, or likely to be adopted by state authorities. Certainly, the possibility that it might be adopted is not grounds for invalidating the statute since it is well established that “statutes should be construed whenever possible so as to uphold their constitutionality.” United States v. Vuitch, 402 U.S. 62, 70, 91 S.Ct. 1294, 1298, 28 L.Ed.2d 601 (1971).

Plaintiff also contends that the “good cause” provision does no more than give the SLA power “to exempt parties from compliance with an otherwise facially unconstitutional statute” and accordingly does not validate the statute. Plaintiffs Reply Mem. at p. 7. So stated, the argument merely begs the question. If the “good cause” provision is construed to include price reductions in other states, then the statute is not unconstitutional on its face.

Once again, we note that plaintiff has not alleged that the SLA has refused or failed to so interpret the statute, nor has this Court found any indication that the statute is not so interpreted. Since the acknowledged purpose of the statute is to prevent New York wholesalers from being charged higher prices than their counterparts in other states, see Seagram v. Hostetler, supra, 384 U.S. at 38-40, 86 S.Ct. at 1257-1258, it is difficult to believe that a price reduction in other states does not come within the provision permitting an adjustment to New York prices “for good cause shown and for reasons not inconsistent with the purpose of” the statute.

Finally, plaintiff suggests that the “good cause” provision is discretionary and for that reason insufficient to validate the statute. See Plaintiffs Reply Mem. at pp. 7-8. We note, however, that the Supreme Court itself in Seagram v. Hostetter found the discretionary nature of the “good cause” provision no bar to reliance on it as a means of avoiding conflict with federal antitrust laws. 384 U.S. at 46, 86 S.Ct. at 1261. As the Court observed, we cannot presume that state authorities will not exercise their discretion in a manner that avoids conflict with federal law. Id.

Significantly, despite the fact that the amended New York affirmation statute has been in effect for eighteen years, plaintiff has not suggested how that statute has, in practice, proved more burdensome than the statute as originally enacted. The affidavit submitted by M. Jacqueline McCurdy, Vice President-Industry Relations for Seagram, is the only offer of proof on the statute’s effect on the liquor industry, and the effect which is discussed by that affidavit (namely, the industry’s inability to lower prices only in certain states to reflect seasonal preferences or to meet competition by regional brands) applies as much to the statute as originally enacted as to the statute as amended. Plaintiff’s offer of proof, in other words, is relevant to the question whether liquor price affirmation statutes in general are permissible (a question answered in the affirmative by the Supreme Court in Seagram v. Hostetter), but it does not support an argument that the New York statute as amended imposes a greater burden on interstate commerce than did the statute upheld by the Supreme Court in Seagram.

In sum, with respect to plaintiff’s first challenge to the constitutionality of New York’s affirmation statute, we find that United States Brewers Ass’n v. Healy does not call for invalidation of the statute as amended. The statute struck down in Healy was one whose practical effect was to prohibit manufacturers from raising or lowering prices in other states. The New York statute, in contrast, is susceptible of an interpretation which avoids that effect. We may not assume that the state authorities have adopted, or will in the future adopt, a different interpretation. Nor has plaintiff offered any proof that the statute as interpreted or applied by the SLA does in fact create the extraterritorial effect condemned in Healy. Indeed, the offer of proof submitted by plaintiff suggests that its complaint is with affirmation statutes generally, not simply with the amendment of the New York statute.

The Current Validity of Seagram v. Hostetter

Plaintiff’s second challenge to the New York statute does, in fact, challenge affirmation statutes generally. Plaintiff contends that price parity requirements constitute “protectionist” legislation, which is forbidden by the Commerce Clause, and that the statute is not saved by the Twenty-First Amendment since that amendment is inapplicable to protectionist legislation. In essence, plaintiff argues that the Supreme Court’s recent decision in Bacchus Imports, Ltd v. Dias, supra, overruled the Court’s earlier holding in Seagram v. Hostetter that a liquor price affirmation statute is a permissible exercise of the regulatory authority granted to the states by the Twenty-First Amendment.

The statute at issue in Bacchus was an Hawaii tax statute that exempted certain locally produced alcoholic beverages from its provisions. The acknowledged purpose of the exemption was to encourage development of the Hawaiian liquor industry. 104 S.Ct. at 3053. The Supreme Court held the tax to be discriminatory both in purpose and effect, and therefore invalid under the Commerce Clause. In addition, finding that the tax “violate[d] a central tenet of the Commerce Clause [and was) not supported by any clear concern of the Twenty-First Amendment,” the Court rejected a claim that the Twenty-First Amendment saved the statute. 104 S.Ct. at 3059. The Court observed that “[t]he central purpose of the [Amendment] was not to empower states to favor local industries by erecting barriers to competition,” that the Commerce Clause “furthers strong federal interests in preventing economic Balkanization,” and that as a result, “[s]tate laws that constitute mere economic protectionism are ... not entitled to the same deference as laws enacted to combat the perceived evils of an unrestricted traffic in liquor.” 104 S.Ct. at 3058.

Plaintiff contends that New York’s affirmation statute is similarly protectionist and therefore similarly invalid. An affirmation statute, however, is not protectionist in the sense in which that term has been used by the courts. It does not seek to promote local trade by forbidding or discouraging the importation of articles of commerce from another state. See, e.g., Hunt v. Washington State Apple Advertising Comm’n, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). Nor does it seek to give local residents preferred or exclusive access to the products of a state. See, e.g., New England Power Co. v. New Hampshire, 455 U.S. 331, 102 S.Ct. 1096, 71 L.Ed.2d 188 (1982).

Plaintiff cites Baldwin v. G.A.F. Seelig, 294 U.S. 511, 55 S.Ct. 497, 79 L.Ed. 1032 (1935) in support of its contention that price affirmation statutes such as New York’s are protectionist. However, a comparison of the statute at issue in Seelig with the New York statute merely confirms that the latter is not protectionist in the traditional sense of the term.

The statute in Seelig set a minimum price for the sale of milk in New York and prohibited the resale of milk in New York that had been purchased out of state at a price below the New York statutory minimum. The Supreme Court held that the statute was invalid under the Commerce Clause on the ground that it attempted to impose New York’s minimum price for milk on other states (an issue we have already discussed in connection with plaintiff’s challenge based on United States Brewers Ass’n v. Healy), and also on the ground that it sought to protect local dairy farmers by neutralizing the economic advantage which its out-of-state competitors had in the New York market. Justice Cardozo, writing for the Court, found the statute to be the functional equivalent of an import tax in the amount of the difference between out-of-state prices and the New York statutory minimum. 294 U.S. at 521-22, 55 S.Ct. at 499-500.

New York’s affirmation statute, by contrast, does not constitute state interference with competition between local and out-of-state industries. The statute instead requires members of a particular industry (whether they are local or out of state) to offer their products to New Yorkers at prices that are no higher than those offered to other states. Such a statute may have an effect on interstate commerce (arguably even a significant anti-competitive effect), but it does not seek to discourage interstate commerce, and thus cannot properly be characterized as protectionist.

Plaintiff would expand the definition of “protectionism” to include any statute that “solely seeks to benefit residents at the expense of residents in other states.” Plaintiffs Mem. at 19. However, such an expansion of the term is plainly inappropriate. It is a rare statute that does not seek to benefit local residents, and the qualifying phrase “at the expense of residents in other states” is far too vague to describe a category of statutes that are considered virtually unconstitutional per se. See City of Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S.Ct. 2531, 2535, 57 L.Ed.2d 475 (1978).

We believe that the term “protectionist” should be limited to its traditional usage — that is, to statutes which forbid or discourage interstate trade and thus conflict so fundamentally with the principles underlying the Commerce Clause that a per se rule of invalidation is appropriate. With respect to statutes which do not fall into that category, the appropriate approach is to balance the state’s interest in enacting the statute against its effects on interstate commerce. See Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970).

Indeed, that approach was the one taken by the Supreme Court in Seagram v. Hostetter, supra, when it upheld the constitutionality of New York’s original affirmation statute. The Court noted that the Twenty-First Amendment gave the states broad authority to regulate the importation and distribution of alcoholic beverages, 384 U.S. at 41-43, 86 S.Ct. at 1258-1260, and found that the alleged extraterritorial effects of the statute were “largely matters of conjecture.” Id. at 43, 86 S.Ct. at 1260. In particular, the Court observed that it “is by no means clear ... that [the statute] must inevitably produce higher prices in other states, as claimed by appellants, rather than the lower prices sought for New York.” Id.

We see no reason to question the conclusion of the Court in Seagram, and, in any case, have little authority to disturb it. Nonetheless, since the Supreme Court’s recent decision in Bacchus reflects a heightened concern that the purpose of a state’s regulatory enactments bear some relation to the purposes of the Twenty-First Amendment, we pause to note the relation that exists with respect to New York’s affirmation statute.

Although the New York statute was one of the first statutory enactments of its kind, New York was by no means one of the first states to impose a price parity requirement on liquor suppliers. At the time of the New York statute’s enactment, the seventeen states which operated state liquor monopolies imposed the same obligation in their contracts with liquor suppliers. See Joseph E. Seagram & Sons, Inc. v. Hostetter, 16 N.Y.2d 47, 57-58, 262 N.Y.S.2d 75, 209 N.E.2d 701 (1965), affd, 384 U.S. 35, 86 S.Ct. 1254, 16 L.Ed.2d 336 (1966); Seagram v. Hostetter, supra, 384 U.S. at 43-45, 86 S.Ct. at 1260-1261. These so-called monopoly states were able to induce liquor suppliers to undertake such an obligation by virtue of the leverage they possessed as high-volume purchasers. 384 U.S. at 44 n. 14, 86 S.Ct. at 1260 n. 14. Indeed, at the time Seagram v. Hostetter was decided, the State of Pennsylvania reportedly was the largest purchaser of liquor in the world. Id.

Both the New York Court of Appeals and the Supreme Court found the willingness of distillers to enter into price affirmation contracts to be an indication that the practice of requiring price affirmations did not impose an unreasonable burden on interstate commerce. 16 N.Y.2d at 57, 262 N.Y.S.2d 75, 209 N.E.2d 701; 384 U.S. at 43-45, 86 S.Ct. at 1260-1261. We believe that the affirmation requirements of the monopoly states are also relevant to the validity of a price affirmation statute as an exercise of the authority granted to the states by the Twenty-First Amendment.

As plaintiff has noted, by requiring a distiller to adopt a single, market-wide price for its products, an affirmation statute arguably could have an anticompetitive effect. See Affidavit of M. Jacqueline McCurdy at pp. 7-9. Indeed, with respect to commodities other than alcoholic beverages, it seems unlikely that a state could point to an interest sufficient to outweigh that potential effect. As suggested above, however, market conditions are significantly different with respect to alcoholic beverages.

By virtue of the unique authority which the Twenty-First Amendment grants to the states to control the importation and distribution of alcoholic beverages, state monopolies are permissible where they would not be otherwise. A side effect of that authority is a market in which monopoly states can exert disproportionate leverage. As a result, price affirmation statutes for alcoholic beverages can be justified (as they cannot be for other commodities) as a reasonable means of responding to the market irregularities created by the Twenty-First Amendment, and we believe it is in accord with the purposes of the Amendment to interpret it as authorizing such a response. Thus, with respect to price affirmation statutes, it is particularly appropriate to observe that the rules governing trade in liquor are simply not the same as those governing “trade in bicycles, or cosmetics, or furniture.” Seagram v. Hostetter, supra, 16 N.Y.2d at 56, 262 N.Y.S.2d 75, 209 N.E.2d 701.

In sum, we find no basis for disturbing the Supreme Court’s holding in Seagram v. Hostetter with respect to the constitutionality of the liquor price affirmation statutes. Such statutes are not “protectionist” in the sense in which that term has been used in constitutional analysis, and thus their constitutionality is not called into question by the Supreme Court’s recent decision in Bacchus Imports, Ltd. v. Dias. Nor is the Supreme Court’s ruling in Seagram now questionable in light of the heightened emphasis placed by Bacchus on the purposes of the Twenty-First Amendment since liquor price affirmation statutes are in accord with those purposes.

Accordingly, for the reasons stated, plaintiff’s motion for summary judgment is denied; defendants’ motion is granted,

SO ORDERED.

      . The present motion is a further stage in proceedings which were the subject of this Court's Opinion and order of September 29, 1983, declining to issue a preliminary injunction against the application of New York's affirmation statute to plaintiff's Chivas Regal Quantity Discount Plan for October, 1983. An application for a stay of that order was argued before Judge Kearse of the Court of Appeals for the Second Circuit but was withdrawn before a decision was rendered. See Transcript of oral argument before this Court, October 11, 1984, p. 5. Plaintiff subsequently amended its complaint to seek declaratory and injunctive relief on the ground that New York's affirmation statute is, on its face, violative of the Commerce Clause.
      Plaintiff's amended complaint claims, in passing, that New York’s affirmation statute is unconstitutional both “on its face and as applied." First Amended Complaint, paragraph 12 (emphasis added). However, plaintiff has not identified either in its amended complaint or in its motion for summary judgment, any particular interpretation of the statute by the SLA with which it takes issue. Moreover, both in its papers filed with the Court and at oral argument, plaintiff has consistently characterized its amended complaint as a challenge to the facial
        constitutionality of the statute. As a result, we do not regard the issue of the statute’s constitutionality as applied as having been presented to this Court for resolution.
      Defendants have challenged the amended complaint on the ground that it fails to state a case or controversy. That challenge, however, is clearly without merit since it is conceded that the statute in question is being enforced and that plaintiff is subject to its requirements. See, e.g., Steffel v. Thompson, 415 U.S. 452, 94 S.Ct. 1209, 39 L.Ed.2d 505 (1974); Lake Carriers' Ass’n v. MacMullan, 406 U.S. 498, 92 S.Ct. 1749, 32 L.Ed.2d 257 (1972).

      . Last month, in Brown-Forman Distillers Corp. v. State Liquor Authority, 64 N.Y.2d 479, 490 N.Y.S.2d 128, 479 N.E.2d 764 (1985), the New York Court of Appeals reached a similar conclusion, though on grounds differing from those relied on by this Court. See infra, note 4.

      . The statute was amended because its requirement of an affirmation based on the preceding month’s prices had proven unworkable in a number of respects. Among them was the effect such a requirement had on a distiller's ability to raise prices in other states with affirmation requirements. A distiller could not raise prices in any state with an affirmation requirement based on current prices unless it simultaneously discontinued sales for a month in each state having an affirmation requirement based on the preceding month's prices. Nor could a distiller raise prices in any state with an affirmation requirement based on the preceding month’s prices unless it first discontinued sales for a month in all other states having that requirement. At the urging of numerous distillers, among others, the law was amended to require an affirmation based upon current prices. See generally N.Y.L.1967 ch. 798, Governor’s Bill Jacket.

      . In Brown-Forman Distillers Corp. v. State Liquor Authority, supra, the New York Court of Appeals found the statute struck down in Healy to be distinguishable from New York’s affirmation statute on grounds of purpose and degree of control over pricing in other states. Neither ground is relied upon by this Court.
      With respect to purpose, the Brown-Forman court suggested that “the Connecticut statute was designed to discriminate against out-of-state businesses” and thus was protectionist, "while the intent of the New York statute was to prevent continued discrimination against in-state consumers” and thus should not be characterized as protectionist. Brown-Forman at 487, 490 N.Y.S.2d 132, 479 N.E.2d 768. As plaintiff notes, however, the Court in Healy clearly held that it need not determine the permissibility of the Connecticut statute’s purpose since its extraterritorial effect would invalidate it in any case. See Healy, 692 F.2d at 281-82. Moreover, we do not believe that either statute can be said to "discriminate” against out-of-state businesses in the sense in which that term has been used in constitutional analysis. See infra, at 489 & n. 8.
      The second basis upon which the Court in Brown-Forman distinguished Healy is similarly problematic. The New York court suggested that the impact of the New York statute was "slight” in comparison with that of the Connecticut statute because the former was "nationwide in scope and imitated by approximately 20 other states throughout the nation,” and because liquor, unlike beer, is already subject to state and federal price control and therefore less "susceptible to free price fluctuation." Brown-Forman, 64 N.Y.2d at 488, 490 N.Y.S.2d 132, 479 N.E.2d 768.
      The inquiry required by Healy, however, is whether a statute effectively regulates pricing in other states; the number of states involved is irrelevant. Similarly, while we share the New York court's reluctance to invalidate a statute on the basis of an amendment that, as a matter of practical effect on interstate commerce, appears to have done more good than harm, see infra, p. 486 and note 6, nonetheless, as a matter of constitutional theory, we doubt that the validity of a statute under the Commerce Clause can depend upon how many states have enacted it.

      . Indeed, the facts underlying plaintiff's suit provide some indication that the statute is interpreted with appropriate flexibility. After the SLA disapproved plaintiffs proposed Chivas Regal Quality Discount Plan for October 1983, it did not insist that Seagram forgo the Plan in other states. Instead, it offered to grant approval for Seagram to offer a cash discount in New York equivalent to the product discounts it would offer in other states. See Joseph E. Seagram & Sons, Inc. v. Gazzara, et al., 83 Civ. 6825, slip op. at 5, (S.D.N.Y. September 28, 1983).

      . Given the effect of the original statute, see supra, note 3, it would seem that the amended version is, if anything, less of a burden on interstate commerce.

      . Plaintiffs memorandum in support of its motion for summary judgment cites cases involving commodities other than liquor for the proposition that price parity requirements are “protectionist," and Bacchus for the proposition that the Twenty-First Amendment is inapplicable to protectionist legislation. No mention of Seagram v. Hostetter is made, presumably because plaintiff believes it to have been impliedly overruled by Bacchus.

      . If that language were adopted as the standard, it arguably would invalidate statutes such as a property tax abatement intended to encourage businesses to relocate to a state, a statute establishing a commission to take measures to increase a state’s share of the tourist trade, or any other statute that sought to draw business away from another state. Such statutes may be "discriminatory" or "protectionist” in a colloquial sense, but not in the sense in which courts have used these terms in constitutional analysis. The statutes cannot be said to discriminate against trade among the states. Cf. City of Philadelphia v. New Jersey, supra, 437 U.S. at 623-28, 98 S.Ct. at 2535-38.

      . Certainly, Bacchus does not support a broader definition of “protectionism.” The statute invalidated in that case fell squarely within traditional usage of the term, and the Court emphasized that it was dealing with a statute that violated “a central tenet” of the Commerce Clause. Bacchus, 104 S.Ct. at 3059; see abo Loretto Winery, Ltd. v. Gazzara, 601 F.Supp. 850 (S.D.N.Y.1985), aff'd, 761 F.2d 140 (2d Cir.1985) {Bacchus requires invalidation of a statute that permitted a particular wine product to be sold in supermarkets as well as liquor stores, provided that it was made exclusively from New York State grapes).

      . Moreover, by counterbalancing a monopoly state's disproportionate leverage in the liquor market, affirmation statutes arguably serve the interests of the Commerce Clause as well since they are more likely to relieve than to exacerbate the " ‘mutual jealousies and aggressions of the States' ” which concerned the Framers of the Commerce Clause. Baldwin v. G.A.F. Seelig, supra, 294 U.S. at 522, 55 S.Ct. at 500 (quoting Farrand, Records of the Federal Convention, Vol. II, p. 308).