The U.S. Court of Appeals for the Second Circuit has unanimously upheld a lower court’s ruling that Connecticut liquor laws don’t constitute price-fixing.
The court ruled against Total Wine & More, the country’s largest retailer of wine and spirits, which argued that Connecticut’s laws were tantamount to price-fixing that hurt its business in the state. It had argued against some of the state’s pricing laws, such as minimum retail price provisions and the statutory prohibition on price discrimination.
However, other liquor retailers argued that Total Wine was the one that wanted to dictate pricing.
Several associations representing smaller liquor stores joined the state, arguing that many mom-and-pop shops would go under if Total Wine had prevailed.
The Second Circuit ruled in their favor on Feb. 20, finding the state’s pricing rules are constitutional and are not pre-empted by the federal antitrust law, the Sherman Antitrust Act of 1890. It upheld a ruling from U.S. District Judge Janet Hall in Connecticut, who’d found for the state and five intervenors, including four trade associations and a liquor distributor, against Total Wine.
Larry Cafero, executive director and general counsel of Wine and Spirit Wholesalers of Connecticut, represents seven wholesalers in the state and gave testimony for the defense. If the plaintiffs succeeded in court, that would have been devastating for small businesses, Cafero said.
“Total Wine wanted to be the big fish in the pond,” Cafero said Monday. “They wanted to be able to dictate to a wholesaler and a supplier, for that matter, the terms and pricing and quantities of a particular product to be sold to them. They wanted to change the rules, and because of their resources and size, they would have put the little guys out of business.”
Cafero continued: “It would have changed our pricing structure and would have seriously changed the way we do business and have done business here in Connecticut for decades.”
But in its August 2016 lawsuit, Total Wine argued that state statutes should not constrain it, and that it should be allowed to set its own prices. The company opened up its first retail beverage store in Norwalk in 2012 and now has stores in three other Connecticut cities.
After the Total Wine lawsuit was filed, several Connecticut trade associations, including the Connecticut Beer Wholesalers Association and the Connecticut Package Stores Association, joined with the state as intervenors.
“If Total Wine prevailed, it technically amounts to undoing the state statutes and, I think the package store folks would tell you, it would hurt package store owners the most,” said Robert Langer, a partner with Wiggin and Dana and one of the attorneys representing Connecticut Fine Wine and Spirits LLC, an intervenor for the defense. “If you have a problem with the statute, you are in the wrong place. If you want to change the law, then you should go to the state Legislature. Out of fairness, it’s not really an issue for the courts.”
Total Wine argued on appeal that under the so-called post-and-hold provisions “if a wholesaler were to drop its price on a particular product, its competitors would know immediately, and would have four days to match the posted price.”
But in writing for the court, Judge Paul Engelmayer found nothing that met the criteria to change Connecticut pricing laws that have been on the books for decades. The court ruled 3-0 on the matter.
Representing the plaintiffs were William Murphy, John Connolly and Adam Abelson, all with Zuckerman Spaeder. Also representing the plaintiffs were James Shearin and Edward Lefebvre, both with Pullman & Comley.
Shearin said Monday that Total Wine’s policy is to not discuss pending litigation. None of the other plaintiff attorneys responded to a request for comment.
Joining Langer for the defense were: Gary Becker, assistant attorney general; Deborah Skakel of Blank Rome; David Hardy and Damian Gunningsmith of Carmody Torrance Sandak & Hennessey; Benjamin Diessel of Wiggin and Dana; Meredith Diette of Siegel, O’Connor, O’Donnell & Beck; and Patrick Klingman of Klingman Law.
Now it’s up to the plaintiffs to decide whether to drop the case, petition the Second Circuit to hear the matter en banc, or to ask the U.S. Supreme Court to hear the case.