Filed 10/12/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
WISEMAN PARK, LLC, B266118
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC548599)
v.
SOUTHERN GLAZER'S WINE
AND SPIRITS, LLC,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los Angeles County.
Kenneth R. Freeman, Judge. Reversed and remanded.
Matthew E. Hess; Green & Noblin, James Robert Noblin for Plaintiff
and Appellant.
Korshak, Kracoff, Kong & Sugano, Keith R. Thorell, Clement Jon Kong
for Defendant and Respondent.
___________________________________________________
Wiseman Park, LLC (appellant) appeals from the judgment entered
following the trial court sustaining the demurrer of Southern Glazer’s Wine
and Spirits, LLC (respondent)1 to appellant’s complaint without leave to
amend. Appellant, the holder of a license to sell alcoholic beverages in its
restaurant, purchased alcoholic beverages from respondent, a licensed
wholesale distributor of alcoholic beverages. In this action, appellant seeks to
recover “carrying charges” it paid respondent on the theory that those
charges were not permitted by the Alcoholic Beverage Control Act (ABC
Act).2 The trial court ruled that the California Department of Alcoholic
Beverage Control (Department) has exclusive jurisdiction over appellant’s
claims because appellant’s allegations “directly implicate the sale of alcohol.”
The Department does have exclusive jurisdiction to issue, deny,
suspend and revoke alcoholic beverage licenses according to terms of the ABC
Act and regulations adopted pursuant to it. We hold, however, that the
consequences of committing a violation of the ABC Act by imposing charges of
the type collected by respondent from appellant in this case are not limited to
those which the Department may impose on its licensees and do not bar the
contract, unfair competition and declaratory relief claims alleged in
appellant’s complaint. Accordingly, we reverse the trial court’s order
sustaining respondent’s demurrer and remand this matter for further
proceedings.
1 During the trial court proceedings, respondent was known as Southern
Wine and Spirits of America, Inc. Following a corporate transaction, that
entity was renamed Southern Glazer’s Wine and Spirits, LLC.
2 The ABC Act is set out in division 9 of the Business and Professions
Code, commencing at section 23000. Further undesignated statutory
references are to that code.
2
BACKGROUND3
Appellant is a dissolved California limited liability company which
operated a restaurant in Los Angeles, California, from approximately
November 2003 through December 2010.4 During that time, appellant held
an “eating place” alcoholic beverage license issued by the Department. This
license permitted appellant to purchase alcoholic beverages at wholesale and
resell them at retail to patrons of its restaurant.
Respondent is a Florida corporation, authorized to transact business in
California, which holds importer and/or wholesale distributor alcoholic
beverage licenses issued by the Department.
In November 2003, appellant entered a credit agreement with
respondent to facilitate the purchase of alcoholic beverages. Paragraph 2 of
the standardized form used by respondent, which appellant signed, stated,
“All sales are made in accordance with state law, including provisions of the
Alcoholic Beverage Law mandating a one-percent (1%) penalty on all past-
due invoices from the forty-third (43rd) day from the date of delivery and
each thirty (30) days thereafter.” Paragraph 3 of the credit agreement stated,
“In addition to the state-mandated penalty charge, a one percent (1%)
carrying charge will be charged on all past-due invoices from the forty-third
(43rd) day from the date of delivery and each thirty (30) days thereafter.”
3 The facts are taken from those alleged in appellant’s complaint as, in
reviewing on appeal a judgment sustaining a demurrer without leave to
amend, the material facts of the complaint are taken as true. (Serrano v.
Priest (1971) 5 Cal.3d 584, 591.)
4 “A limited liability company that has filed a certificate of cancellation
nevertheless continues to exist for the purpose of winding up its affairs,
[including] prosecuting . . . actions . . . in order to collect . . . its assets.”
(Corp. Code, § 17707.6, subd. (a).)
3
The terms of paragraph 2 of the credit agreement are virtually identical
to text within section 25509, with the exception that the statute does not use
the word “penalty.” Section 25509 provides in pertinent part that a
wholesaler who sells alcoholic beverages to a retailer and who does not
receive payment “by the expiration of the 42nd day from the date of delivery
shall charge the retailer 1 percent of the unpaid balance for [the alcoholic
beverages] on the 43rd day from the date of delivery and an additional 1
percent for each 30 days thereafter.” There is no mention of a carrying
charge in section 25509.
After entering the credit agreement with respondent, appellant
purchased alcoholic beverages on credit from respondent from time to time.
When respondent delivered alcoholic beverages to appellant, respondent
presented appellant with its standard invoice. The invoice included the
following terms of payment: “This invoice is payable in thirty (30) days. A
one percent (1%) carrying charge will be added to the current statutory
charges of one percent (1%) (CA B&P Code 25509) on all balances unpaid
after forty-two (42) days and each thirty (30) days thereafter.”
On occasion, appellant paid invoices more than 42 days after their due
dates. Respondent then charged appellant both the 1 percent “penalty” and
the 1 percent “carrying charge.” Appellant paid both charges.
In June 2014, appellant filed this lawsuit seeking recovery of the
“carrying charges” it had paid to respondent; also seeking similar recovery on
behalf of all others similarly situated. Appellant’s complaint alleges that
section 25509 limits wholesalers to collecting the 1 percent statutory charge
on accounts not paid in full by the 42nd day (and collecting a similar charge
each 30 days thereafter) and that respondent’s “carrying charges” are not
permitted by section 25509. Appellant alleges five causes of action:
4
declaratory relief, breach of contract, money had and received, open book
account and violation of section 17200.
The trial court sustained without leave to amend respondent’s
demurrer to the complaint, accepting respondent’s contention that the
Department has exclusive jurisdiction over all matters relating to the sale of
alcohol.
CONTENTION
Appellant contends the Department’s exclusive jurisdiction does not
extend to encompass this contract dispute between businesses; and, in any
event, California’s unfair competition statute affords appellant a remedy.5
DISCUSSION6
In sustaining respondent’s demurrer to appellant’s complaint without
leave to amend, the trial court ruled: “. . . because the allegations of the
Complaint directly implicate the sale of alcohol, and since the Department
has exclusive jurisdiction in this area, the Complaint cannot go forward in
this court. See B&P Code § 23090.5 (noting that ‘[n]o Court of this state,
except the Supreme Court, and the courts of appeal to the extent specified in
this article, shall have jurisdiction to review, affirm, reverse, correct, or annul
any order, rule or decision of the department or suspend, stay or delay the
operation or execution thereof, or restrain, enjoin, or interfere with the
5 We do not consider appellant’s arguments on appeal concerning any
impact of the trial court’s ruling on the class action allegations of appellant’s
complaint because these issues were neither presented to, nor addressed by,
the trial court in its ruling. Nor do we resolve the parties’ disparate readings
of section 25509 as they were not addressed by the trial court. (See post,
section IV.)
6 Respondent’s demurrer is not part of the record on appeal. We rely on
the trial court’s description of that document.
5
department in the performance of its duties . . . .’) (Emphasis added.)” The
trial court concluded, “Plaintiff’s remedy, if any, would be before the ABC,
with the right to seek redress before the Court of Appeal and California
Supreme Court under § 23090.5.”
I. Standards of Review
On appeal from a judgment dismissing an action after sustaining a
demurrer without leave to amend, the standard of review is well settled. The
reviewing court gives the complaint a reasonable interpretation, and treats
the demurrer as admitting all material facts properly pleaded. (Blank v.
Kirwan (1985) 39 Cal.3d 311, 318; Buckaloo v. Johnson (1975) 14 Cal.3d 815,
828.) The appellate court does not, however, assume the truth of contentions,
deductions or conclusions of law. (Moore v. Regents of University of
California (1990) 51 Cal.3d 120, 125.) The judgment must be affirmed “if any
one of the several grounds of demurrer is well taken. [Citations.]”
(Longshore v. County of Ventura (1979) 25 Cal.3d 14, 21.) However, it is error
for a trial court to sustain a demurrer when the plaintiff has stated a cause of
action under any possible legal theory. (Barquis v. Merchants Collection
Assn. (1972) 7 Cal.3d 94, 103.) And it is an abuse of discretion to sustain a
demurrer without leave to amend if the plaintiff shows there is a reasonable
possibility any defect identified by the defendant can be cured by
amendment. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318; Aubry v. Tri-City
Hospital Dist. (1992) 2 Cal.4th 962, 966–967.)
Review of the trial court’s judgment in this case will require us to
construe provisions of both our state Constitution and state statutes. The
applicable principles of construction are similar. Whether construing a
constitutional or statutory provision, our paramount task is to ascertain the
intent of those who enacted it. (Davis v. City of Berkeley (1990) 51 Cal.3d
6
227, 234; Thompson v. Department of Corrections (2001) 25 Cal.4th 117, 122;
Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205, 212;
Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409, 418.)
To determine the voters’ intent, courts look first to the constitutional text,
giving words their ordinary meanings. (Bighorn-Desert View Water Agency,
at p. 212; Richmond, at p. 418.) And, when a provision of the Constitution is
ambiguous, a court ordinarily must adopt the interpretation which carries
out the intent and objective of the drafters of the provision and of the people
by whose vote it was enacted. (Mosk v. Superior Court (1979) 25 Cal.3d 474,
495, superseded on other grounds in Adams v. Commission on Judicial
Performance (1994) 8 Cal.4th 630, 650.) New provisions of the Constitution
must be considered with reference to the situation intended to be remedied or
provided for. (The Recorder v. Commission on Judicial Performance (1999) 72
Cal.App.4th 258, 269; In re Quinn (1973) 35 Cal.App.3d 473, 483.) 7
The same principles guide our review of enactments of our Legislature.
“‘In construing a statute, our role is to ascertain the Legislature’s intent so as
to effectuate the purpose of the law. [Citation.] In determining intent, we
must look first to the words of the statute because they are the most reliable
indicator of legislative intent. [Citation.] If the statutory language is clear
and unambiguous, the plain meaning of the statute governs. [Citation.]’
(People v. Lopez (2003) 31 Cal.4th 1051, 1056.) In other words, if there is ‘no
ambiguity or uncertainty in the language, the Legislature is presumed to
have meant what it said,’ and it is not necessary to ‘resort to legislative
history to determine the statute’s true meaning.’ (People v. Cochran (2002)
28 Cal.4th 396, 400–401.)” (People v. Licas (2007) 41 Cal.4th 362, 367.) “We
7 As is discussed, post, the constitutional provision we construe was
originally adopted by initiative and the terms we construe were continued in
its present text.
7
begin by examining the statute’s words, giving them a plain and
commonsense meaning.” (People v. Murphy (2001) 25 Cal.4th 136, 142.)
“Finally, the court may consider the impact of an interpretation on
public policy, for ‘[w]here uncertainty exists consideration should be given to
the consequences that will flow from a particular interpretation.’ [Citation.]”
(Mejia v. Reed (2003) 31 Cal.4th 657, 663.)
II. Application
The fundamental issue presented in this appeal is the reach of the
Department’s regulation of the alcoholic beverage industry in this state.
Appellant contends that neither the state Constitution nor the ABC Act bars
private actions for breach of contract even when the gravamen of the claim is
bottomed on what appellant contends is the proper construction of a section
of the ABC Act, here, section 25509.8 Respondent argues, and the trial court
ruled, that the Department has exclusive jurisdiction over all matters
involving contracts for the sale of beverages subject to regulation of the
Department. This ruling was in error.9
8 Appellant’s fifth cause of action for unfair competition is separately
addressed, post, in section III of this opinion.
9 In our analysis, we do not consider an August 13, 2014 letter from the
General Counsel of the Department to the Executive Director of the Wine and
Spirits Wholesalers of California, stating the Department’s view of the proper
interpretation of section 25509. Respondent sought judicial notice of that
letter. In our view, the trial court correctly sustained appellant’s objection to
that request, pointing out that the letter “does not qualify as a regulation or
legislative enactment,” but is “merely a position letter by the Department on
the interpretation of § 25509.” The letter indicates it had been solicited by an
industry trade group to assist one party to the present litigation. Such
letters are akin to an agency interpretation of a statute prepared for
litigation, which is entitled to little, if any, weight. (Culligan Water
Conditioning v. State Bd. of Equalization (1976) 17 Cal.3d 86, 92; see also
8
A. Constitutional Bases for Jurisdiction of the Department
Article XX, section 22 of the state Constitution presently provides, in
pertinent part:
“The State of California, subject to the internal revenue laws of the
United States, shall have the exclusive right and power to license and
regulate the manufacture, sale, purchase, possession and transportation of
alcoholic beverages within the State, and subject to the laws of the United
States regulating commerce between foreign nations and among the states
shall have the exclusive right and power to regulate the importation into and
exportation from the State, of alcoholic beverages. . . .
“All alcoholic beverages may be bought, sold, served, consumed and
otherwise disposed of in premises which shall be licensed as provided by the
Legislature. In providing for the licensing of premises, the Legislature may
provide for the issuance of [specified licenses] . . . .
“....
“The sale, furnishing, giving, or causing to be sold, furnished, or giving
away of any alcoholic beverage to any person under the age of 21 years is
hereby prohibited, and no person shall sell, furnish, give, or cause to be sold,
furnished, or given away any alcoholic beverage to any person under the age
of 21 years, and no person under the age of 21 years shall purchase any
alcoholic beverage.
“. . . .
“The Department of Alcoholic Beverage Control shall have the
exclusive power, except as herein provided and in accordance with laws
enacted by the Legislature, to license the manufacture, importation and sale
Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 8–
9.)
9
of alcoholic beverages in this State, and to collect license fees or occupation
taxes on account thereof. The department shall have the power, in its
discretion, to deny, suspend or revoke any specific alcoholic beverages license
if it shall determine for good cause that the granting or continuance of such
license would be contrary to public welfare or morals, or that a person
seeking or holding a license has violated any law prohibiting conduct
involving moral turpitude. It shall be unlawful for any person other than a
licensee of said department to manufacture, import or sell alcoholic beverages
in this State.
“. . . .
“Until the Legislature shall otherwise provide, the privilege of keeping,
buying, selling, serving, and otherwise disposing of alcoholic beverages in . . .
[specified premises and in] premises open to the general public shall be
licensed and regulated under the applicable provisions of the Alcoholic
Beverage Control Act, insofar as the same are not inconsistent with the
provisions hereof, and excepting that the license fee to be charged . . . shall be
the amounts prescribed as of the operative date hereof, subject to the power
of the Legislature to change such fees.
“. . . .
“The Legislature may . . . provide for the issuance of all types of
licenses necessary to carry on the activities referred to in the first paragraph
of this section, including, but not limited to, licenses necessary for the
manufacture, production, processing, importation, exportation,
transportation, wholesaling, distribution, and sale of any and all kinds of
alcoholic beverages.
“. . . .
10
“All constitutional provisions and laws inconsistent with the provisions
hereof are hereby repealed.
“The provisions of this section shall be self-executing, but nothing
herein shall prohibit the Legislature from enacting laws implementing and
not inconsistent with such provisions.”
This section has its origins in an initiative constitutional amendment,
and statutes, enacted in anticipation of, and in the years immediately
following, the repeal of Prohibition in 1933 by enactment of the Twenty-first
Amendment to the United States Constitution.10 In anticipation of regaining
control over “intoxicating liquors,” the state of California took two
intertwined actions: In 1932, our voters adopted an amendment to the state
Constitution, article XX, section 22, and, in 1933, the state Legislature
enacted a series of statutes, to implement the newly restored authority. (Art.
XX, § 22; Stats. 1933, ch. 658, §§ 1–39, pp. 1697–1707.)11
10 The Eighteenth Amendment to the United States Constitution,
effective January 17, 1920, had banned the “manufacture, sale, or
transportation of intoxicating liquors.” The Twenty-first Amendment, which
became effective on December 5, 1933, upon its ratification by a state
convention (that of the state of Utah), repealed the Eighteenth Amendment,
restoring the power of the states to regulate the manufacture, transportation
and sale of alcoholic beverages within their borders.
11 The early history of the adoption of the original version of article XX,
section 22 of the “Liquor Control Act” and of the regulation of alcoholic
beverages in California was set out in Sandelin v. Collins (1934) 1 Cal.2d
147: “Prior to the enactment of the eighteenth amendment to the
Constitution of the United States the right of regulation of traffic in alcoholic
liquors was exercised by the state or under the authority of the state by local
legislative bodies and by local option. These rights of regulation were
superseded by the federal law and the enactment of the State Prohibition
Enforcement Act, commonly known as the Wright Act. (Stats. 1921, p. 79.)
The Wright Act was repealed by an initiative measure [designated on the
ballot as proposition No. 1] approved at the general election held on
11
In 1934, article XX, section 22 was updated to recognize the repeal of
the Eighteenth Amendment, to vest authority for administering the state’s
regained control over alcoholic beverages in the State Board of Equalization
and to recognize the power of the Legislature to “otherwise provide” for “the
privilege of keeping, buying, selling, serving, and otherwise disposing of
intoxicating liquors [in specified places] . . . in so far as the same are not
inconsistent with the provisions hereof. . . .” (Ballot Pamp., Gen. Elec.
(Nov. 6, 1934), Intoxicating Liquors Initiative (Prop. 2), pp. 5–6.)
In 1954, article XX, section 22 was again revised, making two relevant
material changes: (1) transferring the power to license and regulate alcoholic
beverages from the State Board of Equalization to a newly created state
agency, the Department of Alcoholic Beverage Control, and (2) adding the
following as the penultimate paragraph of section 22: “The provisions of this
November 8, 1932. At the same election, also as an initiative measure
(designated on the ballot as proposition No. 2), section 22 was added to article
XX of the state Constitution. This section provided: ‘In the event of the
repeal of the State Prohibition Enforcement law commonly known as the
Wright Act, and if and when it shall become lawful under the Constitution
and laws of the United States to manufacture, sell, purchase, possess or
transport intoxicating liquor for beverage purposes within the United States,
the state of California, subject to the internal revenue laws of the United
States, shall have the exclusive right and power to control, license and
regulate the manufacture, sale, purchase, possession, transportation and
disposition of intoxicating liquor within the state, and, subject to the laws of
the United States . . . shall have the exclusive right and power to control and
regulate the importation into and exportation from the state of intoxicating
liquor; . . . ’ (Stats. 1933, p. lxxx.)
“In 1933 the legislature enacted the present state Liquor Control Act to
become operative upon the repeal of the eighteenth amendment . . . . (Stats.
1933, p. 1697.) . . . .
“The State Liquor Control Act of 1933 appears to be a complete and
comprehensive plan for the license, regulation and control of the traffic in
intoxicating liquors in conformity with the constitutional provision now in
effect.” (Sandelin v. Collins, supra, 1 Cal.2d at pp. 151–152.)
12
section shall be self-executing, but nothing herein shall prohibit the
Legislature from enacting laws implementing and not inconsistent with such
provisions.” (Cal. Const., art. XX, § 22, as adopted Nov. 2, 1954; see Ballot
Pamp., Gen. Elec. (Nov. 2, 1954), analysis of Prop. 3 by Legis. Counsel, p. 3;
Sen. Const. Amend. No. 4, Stats. 1955 (1954–1955 1st Ex. Sess.) pp. cxiii–
cxv.) This is the text of section 22 effective at present and during the time
period at issue in this litigation.12
A fair reading of the text of article XX, section 22 as it is in effect at
present (which as to relevant clauses is very similar to that originally
enacted) is that the Department is charged in our Constitution with licensing
and regulating the “manufacture, sale [etc.] . . . of alcoholic beverages . . .” to
limit which businesses may engage in these functions, to control the
distribution of such beverages, and to control who may—and may not—
purchase them (e.g., by forbidding their purchase by minors (art. XX, § 22 &
§ 25658), but that the state has not also sought to specify the forum in which
businesses which are licensees adjudicate their ordinary commercial
(including contract) disputes. Such a fair reading recognizes the purpose of
section 22 was and remains to permit and regulate what had been forbidden
by the Eighteenth Amendment and to do so by requiring licensing of those
participating in the newly legal industry. Alcoholic beverages were to be
manufactured, distributed and sold only by those holding licenses. There is
no provision in the 1932 initiative or in any of its subsequent iterations that
12 In 1956, Senate Constitutional Amendment No. 2 made minor changes
in the language, as well as minor substantive changes, in article XX, section
22; however, those changes are not relevant to the issues in this appeal. (See
Ballot Pamp., Gen. Elec. (Nov. 6, 1956), analysis of Prop. 5 by Legis. Counsel;
Sen. Const. Amend. No. 2, Stats. 1957, pp. cxv–cxviii.)
13
either states or suggests a limitation on where or how commercial disputes
between licensees were or are to be resolved. Nor has our review of the Ballot
Pamphlet arguments for or against any of the iterations of article XX, section
22 revealed any such intent.13
Reference to two other provisions of our state Constitution validates
our determination, as they bear on the allocation of jurisdiction to determine
controversies and affect the fundamental rights of parties.
Article VI, section 1 of our Constitution vests the judicial power in the
Supreme Court, Courts of Appeal and the superior courts. Sections 10 and 11
of article VI allocate jurisdiction among those courts.14 Had there been any
intention to divest the superior court of jurisdiction to hear contract disputes
between entities subject to regulation by the Department, there would have
been express provision for that constitutional change in the text of the
13 See Ballot Pamp., Gen. Elec. (Nov. 8, 1932) Proposed Amends. to Cal.
Const. with arguments to voters, pp. 6–7; Ballot Pamp., Gen. Elec. (Nov. 6,
1934) Proposed Stats. and Amends. to Cal Const. with arguments to voters,
pp. 6–7; Ballot Pamp., Gen. Elec. (Nov. 2, 1954) Proposed Stats. and Amends.
to Cal. Const. with arguments to voters, pp. 3–4. Analyses and arguments
contained in official ballot pamphlets circulated prior to the elections at
which the amendments are voted on are appropriately used to resolve any
ambiguities in the language of propositions adopted. (Legislature v. Eu
(1991) 54 Cal.3d 492, 503; Kennedy Wholesale, Inc. v. State Bd. of
Equalization (1991) 53 Cal.3d 245, 250.)
14 At the time of adoption of article XX, section 22 in 1932, and when it
was amended in 1934, the judicial power was vested as set out in article VI,
section 1 and allocated as set out in sections 4, 4b and 5 of article VI in
relevant respects in a manner similar to the current provisions of the same
article.
14
proposed amendment (if not in the 1932 version, then in one of the versions
adopted since that year).15
Article I, section 17 of our state Constitution guarantees the right to
trial by jury—a right manifestly not available in administrative
proceedings.16 Neither respondent nor the trial court cited any portion of any
ballot proposition regarding article XX, section 22 which stated or suggested
that in adopting section 22 there was also an express or implied repeal of this
constitutional protection to litigants. Had there been any intention to remove
this “basic and fundamental part of our system of jurisprudence” (C & K
Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 8; Byram v.
Superior Court (1977) 74 Cal.App.3d 648, 654), again, there would be specific
reference to that intention both in the text of the section to be adopted and in
the ballot materials submitted to the voters for their consideration of such an
amendment.
Our independent review of the history of the adoption of article XX,
section 22 in 1932, and of its amendments in the decades since, reveals no
15 Nor is there any indication in the official ballot title and summary, in
the ballot label, in the arguments for and against the amendments, or in the
Legislative Analysis for any of the amendments to this section of any
intention to make an exception to the manner in which the judicial power is
allocated with respect to contract disputes of licensees; nor to deprive them of
the right to jury trial, as we next discuss. (See Elec. Code, former §§ 1401,
1403, 1451 (1954), now §§ 9050, 9051 [ballot title and summary]; former Pol.
Code, § 1979, subd. 3 (1931 & 1933).)
16 Article I, section 16 of the state Constitution provides: Trial by jury is
an inviolate right and shall be secured to all . . . .” (Formerly, this right was
set out in article I, section 7.) See In re Ratti (1978) 1978 Cal. PUC Lexis
1060, in which the Public Utilities Commission determined there was no
right to a jury trial in contempt proceedings before that administrative
agency.
15
such intention with respect to either constitutional provision. Indeed,
nothing in the text of article XX, section 22, nor in any ballot analyses of the
propositions presented to the voters in 1932, 1933 or 1954 states or suggests
the interpretation for which respondent contends. Since its first iteration in
1932, article XX, section 22 has authorized the licensing and regulation of
manufacturers, distributors and retailers of alcoholic beverages, and has,
since its amendment in 1954, vested in the Department the authority to
issue, discipline and revoke licenses of those so engaged. Nothing in the text
of this constitutional provision, or fairly implicated by that text, addresses,
concerns or limits the forum in which entities holding licenses issued by the
Department must or may litigate any contractual disputes they may have
between each other.
Were there any intent to require that contract disputes between
holders of licenses issued by the Department be resolved in proceedings
conducted before the Department, it is reasonable to conclude that such a
requirement would have been specified in the text of the constitutional
provision—and discussed in the materials circulated to voters prior to the
elections.17 And, assuming arguendo the restriction on forum and the
limitation of rights which respondent asserts could be addressed by statute,
then we would find such authority in a statute. Instead, we find none, as we
next discuss.
B. Statutory Provisions and Their Application
1. Introduction
In its decision sustaining respondent’s demurrer, the trial court relied
on the text of section 23090.5, as well as that of article XX, section 22. In
17 No such intent is stated or suggested in the relevant ballot pamphlets.
(See fn. 13, ante, and the accompanying text.)
16
addition to arguing the trial court correctly analyzed this statute, respondent
relies on section 25750, which contains the grant to the Department of the
authority to adopt regulations “as may be necessary or proper to carry out the
purposes and intent of Section 22 . . . .” (§ 25750.) As we now discuss,
neither any section of the ABC Act, nor any regulation adopted thereunder,
creates or limits the right of a licensee to sue another licensee in court for
breach of contract.
2. Discussion
In 1933, anticipating repeal of Prohibition, and as authorized by article
XX, section 22, the Legislature enacted statutes to implement the state’s
regained authority to license the manufacture, distribution and retail sale of
alcoholic beverages (see Stats. 1933, ch. 658, §§ 1–39, pp. 1697–1707.),18
periodically revising them until, in 1954, the Legislature codified these
statutes in the Alcoholic Beverage Control Act, Statutes 1953, chapter 152,
sections 23000–23044, pages 955–958.19
Examining the ABC Act, we find extensive provisions focused on:
licensing of entities involved in the alcoholic beverage industry (sections
23300–23455 and 23770–23794); suspension and revocation of licenses
(sections 24200–24211); specifying labeling and container requirements and
prohibitions (sections 25170–25243); seizure and forfeiture of alcoholic
beverages manufactured or possessed in violation of the ABC Act and its
regulations (sections 25350–25375); forbidding the sale of alcoholic beverages
18 Section 39 of Statutes 1933, chapter, 658, page 1707, provided that
these statutes would become effective “[i]f and when it shall become lawful . .
. to manufacture, sell [etc.] intoxicating liquors for beverage purposes. . . .”
19 Additional legislative changes have been made since 1954; those
relevant to resolution of this matter are discussed in the text.
17
to minors (section 25658); controlling relationships between manufacturers
and distributors, on the one hand, and retailers on the other (contained in a
chapter entitled “Tied-House Restrictions,” sections 25500–25512); regulatory
provisions (sections 25600–25621); and administrative provisions (sections
25750–25762).20
Failure to comply with the ABC Act or with the regulations adopted
under its authority, carries with it the potential for “suspension or
revocation” of the license issued to the registrant by the Department for a
reason set out in sections 24200 et seq.”
Section 23090.5, a key to the ruling below, provides: “No court of this
state, except the Supreme Court and the courts of appeal to the extent
specified in this article, shall have jurisdiction to review, affirm, reverse,
correct, or annul any order, rule or decision of the department or to suspend,
stay, or delay the operation or execution thereof, or to restrain, enjoin, or
interfere with the department in the performance of its duties, but a writ of
mandate shall lie from the Supreme Court or the courts of appeal in any
proper case.”
The plain meaning of this statute limits its application to review of
matters first adjudicated in administrative proceedings before the
20 The statute upon which appellant relies in support of its complaint,
section 25509, is within the chapter on Tied-House Restrictions. These
provisions were enacted over time to limit any influence that manufacturers
and distributors may exert over retailers. (California Beer Wholesalers Assn.,
Inc. v. Alcoholic Bev. etc. Appeals Bd. (1971) 5 Cal.3d 402, 407–408
[discussing history of tied-house restrictions].)
18
Department.21 It does not concern in any way the allocation of jurisdiction in
the first instance.
Thus, this statute is not authority for the conclusion reached by the
trial court that this provision of the ABC Act confers jurisdiction on the
Department in the first instance to hear contract disputes between its
licensees; instead, it relates only to appeals from Department actions.
Further, we find no provision of the ABC Act which addresses the issue of the
proper forum in which a retailer, distributor or manufacturer may or must
seek resolution of any dispute which it may have with another licensee.
Case authority supports our conclusion. In Department of Alcoholic
Beverage Control v. Locker (1982) 129 Cal.App.3d 381, 390, Division Three of
this court held that section 23090.5 was “completely inapplicable” to
determine the forum for an action to abate a nuisance brought under section
25604 and Penal Code section 11200, and did not divest the superior court of
jurisdiction to adjudicate the matter there presented because it was not one
to “review, affirm, reverse, correct, or annul any order, rule, or decision” of
the department.” (Locker, at p. 390.) A fair reading of this statute is that it
concerns only appellate jurisdiction of matters that are otherwise properly
within the administrative jurisdiction of the Department and as to which the
Department has first issued an “order, rule or decision.”
Respondent’s reliance on cases that describe the broad powers of the
Department to regulate the “dispensation of liquor within its borders”
(California v. La Rue (1972) 409 U.S. 109, 120, fn. * (conc. opn. of Stewart J.),
21 Further, section 23090.5 is located in article 5 of chapter 1.5 of the ABC
Act, which is entitled “Judicial Review”; use of this phrase indicates its focus
is not on initial jurisdiction of the Department. (See People v. Garfield (1985)
40 Cal.3d 192, 200 [while not determinative, chapter headings do state the
subject of the legislative enactment].)
19
overruled in part by 44 Liquormart v. Rhode Island (1996) 517 U.S. 484) and
the power of the Legislature to pass laws to prevent “improprieties” in
connection with the sale of alcoholic beverages (e.g., Sail’er Inn, Inc. v. Kirby
(1971) 5 Cal.3d 1, 20–21) for its contention that the claims asserted in
appellant’s complaint must be adjudicated in administrative proceedings
before the Department is also misplaced. These cases address the duty of the
Department to provide “strict, honest, impartial and uniform administration
and enforcement of the liquor laws throughout the State” in the context of
regulation of the conduct of licensees qua licensee. (Kirby v. Alcoholic Bev.
etc. Appeals Bd. (1973) 33 Cal.App.3d 732, 735.) These are regulatory issues
involving compliance with license requirements and the regulation of the
conduct of licensees to assure compliance with licensing statutes. The cases
respondent cites do not address in any manner issues of enforcing the terms
of contracts for purchase and sale of alcoholic beverages entered into by
licensees.
Indeed, the statement of legislative purpose contained in the ABC Act
differentiates between the requirements of licensing to engage in a trade or
business, on the one hand, and the elements of enforcing a contract between
two parties—whether or not licensed—on the other. This demarcation is
expressed in section 23001, which sets out the purpose of the ABC Act: to
“exercise the police powers of the State to eliminate the evils of unlicensed
and unlawful manufacture, selling and disposing of alcoholic beverages, and
to promote temperance . . . .” There is no mention in this statement of
legislative purpose of controlling litigation between licensees over matters of
contract between them.
Further, the ABC Act contains implicit recognition that the
Department is not the exclusive forum for matters affecting its licensees.
20
Section 24200, subdivision (b) expressly recognizes that other laws may apply
to entities holding its licenses. That section provides that “other penal
provisions of law of this state” may give rise to criminal prosecution and
punishment as well as to licensing action by the Department. And, while
section 25658 provides that sales of alcohol to minors is illegal, a violation of
that provision is not prosecuted in an administrative proceeding before the
Department, but in a criminal court and according to provisions of the Penal
Code.22
A second example further illustrates the error by the trial court in this
case in its holding that the Department has exclusive jurisdiction of this
matter. In People v Schlimbach (2011) 193 Cal.App.4th 1132, 1145, Division
Three of this court addressed the argument that the Department has
exclusive jurisdiction to seek to enjoin sales of alcohol to obviously intoxicated
persons under section 25602, subdivision (a), and, for that reason, the
Los Angeles City Attorney was supposedly precluded from seeking an
injunction under a different statutory plan, Penal Code sections 11200-
11207.23 In considering Schlimbach’s contention on appeal that the judgment
22 Nor does the circumstance that this penal offense is set out in the ABC
Act make state and federal constitutional provisions governing criminal
procedure inapplicable to persons charged with violating it. (See People v.
Smith (1949) 94 Cal.App.2d Supp. 975, 977; accord, People v. Johnson (1947)
81 Cal.App.2d Supp. 973, 975, both overruled on other grounds in Paez v.
Alcoholic Beverage Control Appeals Bd. (1990) 222 Cal.App.3d 1025, 1027.)
23 Section 25602, subdivision (a) provides: “Every person who sells,
furnishes, gives, or causes to be sold, furnished, or given away, any alcoholic
beverage to any habitual or common drunkard or to any obviously intoxicated
person is guilty of a misdemeanor.”
Penal Code sections 11200–11207 contain the terms of the Unlawful
Liquor Sale Abatement Act. That act declares places where liquor is
21
entered in that action “impeded on the exclusive jurisdiction of the
[Department]” (193 Cal.App.4th at p. 1139), our Division Three colleagues
acknowledged that section 25602.2 provides, “‘The director [of the
Department] may bring an action to enjoin a violation or the threatened
violation of subdivision (a) of Section 25602,’” but nevertheless rejected
Schlimbach’s argument that this provision of the ABC Act restricts the
authority to seek such an injunction to the Department director. In so ruling,
the court stated, “There is nothing in [ ] section 25602.2 which suggests it
provides the only remedy for violations of [ ] section 25602. Indeed, it does
not. . . . [¶] . . . [¶] Schlimbach’s second argument is that the administrative
jurisdiction of the ABC is exclusive, preventing the trial court from issuing an
injunction which imposes any restrictions on [the defendant’s] license to sell
alcohol. While it is undisputed that the California Constitution gives the
ABC exclusive jurisdiction to license and regulate the ‘manufacture,
importation and sale of alcohol,’ the ABC’s exclusive jurisdiction to do so does
not preempt an authorized party from seeking to enjoin a nuisance under the
Unlawful Liquor Sale Abatement Law. (See Covert v. State Board of
Equalization (1946) 29 Cal.2d 125, 130 [the Unlawful Liquor Sale Abatement
Law authorizes an abatement proceeding against the building or place used,
it does not permit any attack on the license].)” (Schlimbach, supra, 193
Cal.App.4th at pp. 1145-1146.)
Further, in the context of preemption of city ordinances, it has been
established that the exclusive grant of jurisdiction to the Department does
not preempt enforcement of ordinances which “may have some indirect
impact on the sale of alcoholic beverages” if they do not seek to control sales
unlawfully sold to be “a nuisance which shall be enjoined, abated and
prevented, whether it is a public or private nuisance.” (Pen. Code, § 11200.)
22
of alcohol. (Korean American Legal Advocacy Foundation v. City of Los
Angeles (1994) 23 Cal.App.4th 376, 389.) Indeed, “a city ordinance
addressing nuisance problems associated with alcoholic beverage sale
establishments does not improperly regulate preexisting . . . licensees.” (City
of Oakland v. Superior Court (1996) 45 Cal.App.4th 740, 747.) While the
ABC’s exclusive right to regulate the sale and purchase of alcohol may
prevent a city from enacting “‘“such regulatory measures as ‘restrictions as to
the class of persons to whom liquors may be sold, and as to the hours of the
day and the days of the week during which places of sale may be open,’”’” it
does not preempt an ordinance that “does not directly affect the licensee's
ability to sell alcoholic beverages to a willing purchaser.” (California
Restaurant Assn. v. City of Los Angeles (1987) 192 Cal.App.3d 405, 410–411.)
“[F]or example, an ordinance requiring the posting of health warnings where
alcoholic beverages are sold is not preempted. [Citation.]” (People v.
Schlimbach, supra, 193 Cal.App.4th at p. 1146.)24
And, in People v. Deibert (1953) 117 Cal.App.2d 410, an appeal from a
conviction for selling alcohol to a minor in violation of former Welfare and
Institutions Code section 702, this court expressly rejected the contention
that article XX, section 22 and the ABC Act “cover the entire field of liquor
control and any violations thereof.” (Deibert, at p. 417.)25
24 Nor has respondent identified any specific provision of the ABC Act
that states or suggests it abrogates common law or other remedies available
to licensees under that statute.
25 In its ruling granting respondent’s demurrer, the trial judge relied in
part on Daniel v. Board of Police Commissioners (1961) 190 Cal.App.2d 566,
disapproved of on other grounds in Burton v. Municipal Court (1968) 68
Cal.2d 684, 693). In Daniel, Division One of this court upheld a city
ordinance forbidding the operation of a public place where food or beverages
were sold if the establishment also provided any form of live entertainment
23
Respondent’s reliance on the authority contained in section 25750,
authorizing the Department to adopt regulations necessary and proper to
carry out the purposes of article XX, section 22, for the assertion that
appellant can vindicate its contract dispute with respondent by filing an
accusation with the Department, ignores the nature of the proceeding that
would result, and that there are no regulations promulgated to provide for
the adjudication of any contract disputes between licensees. Neither any
provision of the ABC Act nor any regulation adopted pursuant to that act
addresses how such a claim for contract damages would be made, or how it
would be processed or adjudicated; nor does any statute or any regulation
indicate the source of the Department’s authority to order the payment of the
balance due, if any, to the successful claimant. (See Cal. Code Regs., tit. 4,
div. 1, arts. 2–24.)
III. The Cause of Action for Unfair Competition
In its fifth cause of action, appellant alleges respondent “has engaged in
unlawful, unfair, and deceptive business practices” based on its collection of
amounts in excess of the 1 percent charge which appellant contends is the
maximum charge permitted by section 25509. Appellant seeks restitution of
unless the proprietor had first obtained a permit. In the course of its opinion,
the court did state, “It is apparent that the state has preempted the field of
regulating the sale of liquor.” (190 Cal.App.2d at p. 570) Nothing in that
opinion, however, suggests that the state had barred private actions between
holders of licenses under the ABC Act from litigating in a court their contract
disputes. Indeed, the court upheld the city ordinance on the basis that “It is
apparent that the purpose of the [ordinance] is not to regulate the liquor
business but . . . to regulate the kind of ‘live’ entertainment that is furnished
in public places. . . . The state has not preempted the field or area covered by
[the ordinance].” (Daniel, at p. 571.) As applied to the present issue, it is at
least equally the case that the state has not barred litigation between
licensees covering the commercial aspects of their contractual relationships.
24
the amounts of carrying charges previously paid and an injunction against
respondent from collecting these charges in the future.
The trial court sustained respondent’s demurrer to this cause of action
on the same basis as it applied to the other causes of action in appellant’s
complaint, i.e., that “another statutory scheme provides the exclusive means
for resolving [such] disputes,” relying in part on our Supreme Court’s holding
in Loeffler v. Target Corp. (2014) 58 Cal.4th 1081.
Respondent argues on appeal that this ruling was correct because the
issue presented requires determination of the meaning of section 25509, and
that determination is within the “exclusive jurisdiction of an administrative
agency dedicated to uniformly deciding such questions (the Board of
Equalization in Loeffler, ABC here).” For the reasons we set out, ante, the
trial court erred in concluding that the Department has exclusive jurisdiction
over commercial disputes between licensees. Also contrary to respondent’s
assertion, the Department’s view of the meaning of the statutes at issue is
neither exclusive nor primary. (See, e.g., Yamaha Corp. of America v. State
Bd. of Equalization, supra, 19 Cal.4th at pp. 7–8 [agency power to construe a
statute is “contextual”].) In the present case, as in Yamaha, the court’s power
to determine the meaning of the relevant statutes is independent of any
construction by the agency.
As appellant argues, a viable claim for unfair competition may be based
on a violation of a statute, even when the power to enforce a particular
statute may also be entrusted by the Legislature to a state agency;
particularly so when the grant of jurisdiction to the agency is not exclusive,
as in this instance for reasons we have discussed, ante.
25
A. The Unfair Competition Law Encompasses Violations Based on
“Borrowed Statutes”
Appellant rightly focuses our attention on the scope of relief potentially
available to it under the Unfair Competition Law (UCL) set out in section
17200. Focusing on this statute’s prohibition of “any unlawful, unfair or
fraudulent business act or practice,” appellant points out that the scope of the
UCL is quite broad; because the statute is framed in the disjunctive, a
business practice need meet only one of the three criteria to be considered
unfair competition. (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949; South
Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861,
878.)
An action for unfair competition is viable if the underlying statute
constitutes an unlawful business practice. “Virtually any law or regulation—
federal or state, statutory or common law—can serve as [a] predicate for a
§ 17200 ‘unlawful’ violation.” (Stern, Bus. & Prof. Code, § 17200 Practice
(The Rutter Group 2017) ¶ 3:56, p. 3–14.) Examples of UCL claims properly
alleging “unlawful” conduct, while not boundless, are seemingly so. (E.g., the
UCL allows a private party to sue to recover unauthorized telephone charges
notwithstanding the similar (and more extensive) authority of the Public
Utilities Commission (Elder v. Pacific Bell Telephone Co. (2012) 205
Cal.App.4th 841, 854 [PUC did not have primary jurisdiction over action to
recover unauthorized charges].) As our Supreme Court stated in Korea
Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134: “Section 17200
‘borrows’ violations from other laws by making them independently
actionable as unfair competitive practices. [Citation.]” (Id. at p. 1143.)
Further, section 17205 specifically provides, “Unless otherwise
expressly provided, the remedies or penalties provided by [the UCL] are
26
cumulative to each other and to the remedies or penalties available under all
other laws of this states.” Under section 17204, a private appellant may
bring a UCL action even when “‘the conduct alleged to constitute unfair
competition violates a statute for the direct enforcement of which there is no
private right of action.’ [Citation.]” (Kasky v. Nike, Inc., supra, 27 Cal.4th at
p. 950, quoting Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17
Cal.4th 553, 565.) By enacting the UCL, and not by virtue of particular
predicate statutes, “the Legislature has conferred upon private plaintiffs
‘specific power’ [citation] to prosecute unfair competition claims.” (Stop Youth
Addiction, Inc., at p. 562, quoting People v. McKale (1979) 25 Cal.3d 626,
633.) Thus, even where a state agency may have jurisdiction over a licensee,
the UCL may provide a private remedy.
B. Cases Relied on by Respondent Are Unpersuasive
Respondent asserts that the present case is not governed by the
principles just discussed. Rather, in respondent’s view, appellant’s cause of
action for unfair competition is barred by the holding in Loeffler v. Target
Corp., supra, 58 Cal.4th 1081. We disagree.
The constitutional and statutory plan at issue in Loeffler is materially
different from that presented in this case. First, the state constitutional
provision at issue in Loeffler (article XIII, section 32) expressly bars any court
action prior to payment of the tax being disputed. Thereafter, a taxpayer is
allowed to sue to recover any tax claimed to be illegal; and must do so
according to procedures set out in our statutes.26 Our Supreme Court
26 Article XIII, section 32 of the state Constitution provides: “No legal or
equitable process shall issue in any proceeding in any court against this State
or any officer thereof to prevent or enjoin the collection of any tax. After
payment of a tax claimed to be illegal, an action may be maintained to
27
explained in Loeffler that “the policy behind the provision is to ensure that
the state may continue to collect tax revenue during litigation in order to
avoid unnecessary disruption of public services that are dependent on that
revenue. [Citation.] We have observed that delay in tax collection ‘“may
derange the operations of government, and thereby cause serious detriment
to the public.”’ [Citation.]” (Loeffler, supra, 58 Cal.4th at p. 1101.)
To implement that constitutional mandate, our Legislature has enacted
an “exceedingly closely regulated, complex, and highly technical” set of
statutes and a “comprehensive administrative scheme . . . to resolve these
and other tax questions and to govern disputes between the taxpayer [the
business entity] and the Board.” (Loeffler, supra, 58 Cal.4th at p. 1103.)
Neither the constitutional nor statutory provisions applicable in this
case contain any similar proscriptions. Indeed, there are many significant
differences between the constitutional and statutory provisions governing
taxes, on the one hand, and those regulating the manufacture, distribution
and retail sale of alcohol beverages, on the other. They include vastly
different constitutional mandates: Article XX, section 22 contains no
command regarding where and when a licensee under the ABC Act may sue
at all, let alone in any way similar to that in article XIII, section 32. The ABC
Act itself is silent on provisions for litigation by licensees concerning their
contractual relations, while the massive Revenue and Taxation Code
(comprised of 41,001 sections) and the extensive regulations adopted
thereunder (Cal. Code Regs., tit. 18) contain specific provisions concerning
litigation by taxpayers seeking refunds. (E.g., Rev. & Tax Code, §§ 5148
[property taxes], 19381 [franchise and income taxes], 19382 [same].) The
recover the tax paid, with interest, in such manner as may be provided by the
Legislature.”
28
very subject matters differ materially; for example, there is no danger to the
pubic fisc in a retailer of alcoholic beverages seeking to regain amounts it
claims it overpaid to a distributor. That may not be the case when a retailer
sues the state seeking return from the state treasury of sales taxes previously
paid.
And in closely regulated and other fields in which parties are licensed
and subject to supervision by boards and departments, there are numerous
cases affirming the ability of persons to seek redress by utilizing statutes
regulating licensees in those fields through unfair competition actions. (E.g.,
Zang v. Superior Court (2013) 57 Cal.4th 364 [insured sued insurer for unfair
competition for its advertising claims promising to provide timely insurance
coverage notwithstanding Insurance Code ban on private actions for false
insurance practices]; Stevens v. Superior Court (1999) 75 Cal.App.4th 594
[affirming right of individual to sue to enforce provisions of Insurance Code
requiring agents, brokers and auto dealers to hold insurance licenses when
transacting business of insurance].)
Relying on Loeffler, respondent argues that interpretation of section
25509 must first be committed to determination by the Department because
“there is exclusive jurisdiction before an administrative agency dedicated to
uniformly deciding such questions (the Board of Equalization in Loeffler, ABC
here).” Respondent errs for at least two reasons. First, we established in
section II of this opinion that the jurisdiction of the Department is not
exclusive. And, as just discussed, respondent’s argument is based on a
supposed analogy between the Department and the State Board of
Equalization which is erroneous.
Second, as noted ante, while determinations of administrative agencies
as to the meanings of statutes may be given weight under appropriate
29
circumstances, the starting point is that a court may exercise its independent
judgment when the issue presented is one of statutory interpretation. When
not adopted as a formal regulation, an agency’s interpretation of statutory
language is entitled to little deference. (Yamaha Corp. of America v. State
Bd. of Equalization, supra, 19 Cal.4th at pp. 6–8; see Culligan Water
Conditioning v. State Bd. of Equalization, supra, 17 Cal.3d 86, 92; Mackey v.
Bristol West Ins. Services of Cal., Inc. (2003) 105 Cal.App.4th 1247, 1263
[agency interpretation in informational booklet entitled to less weight than
formal regulation].)
Appellant’s claim under the UCL is not foreclosed by laws regulating
the licensing of distributors of alcoholic beverages, including respondent, and
may be based on violations of statutes (and regulations) applicable to such
licensees.
IV. Unresolved Statutory Issue
Because the trial court concluded the Department had exclusive
jurisdiction over the issues raised in appellant’s complaint, it did not address
appellant’s contention concerning the proper construction of section 25509.
That issue is critical to appellant’s causes of action. On remand, the trial
court will have the opportunity to make a determination on this issue. (See
City of Rancho Cucamonga v. Warner Consulting Services, Ltd. (1989) 213
Cal.App.3d 1138, 1346.)27
27 Also on remand, the trial court will have the opportunity to address
appellant’s first cause of action, which seeks a declaration of rights with
respect to section 25509.
30
DISPOSITION
The judgment is reversed and the matter is remanded for further
proceedings. Appellant shall recover its costs on appeal.
CERTIFIED FOR PUBLICATION.
GOODMAN, J.*
We concur:
ASHMANN-GERST, Acting P.J.
CHAVEZ, J.
* Retired judge of the Los Angeles Superior Court assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
31