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Massachusetts Fine Wines & Spirits, LLC v. Alcoholic Beverages Control Commission

Supreme Judicial Court of Massachusetts, Suffolk

July 24, 2019

MASSACHUSETTS FINE WINES & SPIRITS, LLC
v.
ALCOHOLIC BEVERAGES CONTROL COMMISSION.

          Heard: April 2, 2019. [1]

         Civil action commenced in the Superior Court Department on January 31, 2017. The case was heard by Robert B. Gordon, J., on motions for judgment on the pleadings.

         The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.

          Samuel M. Furgang, Assistant Attorney General, for the defendant.

          Thomas R. Kiley (Meredith G. Fierro also present) for the plaintiff.

          Damien C. Powell, for Massachusetts Package Store Association, Inc., amicus curiae, submitted a brief.

          Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, & Kafker, JJ.

          GANTS, C.J.

         Under 204 Code Mass. Regs. § 2.04(1) (1993), a regulation promulgated by the alcoholic beverages control commission (commission), a licensed retailer of alcoholic beverages shall not "sell or offer to sell any alcoholic beverages at a price less than invoiced cost," with "[c]ost . . . defined as net cost appearing on the invoice for said alcoholic beverage."[2] Here, the licensed retailer at issue, Massachusetts Fine Wines & Spirits, LLC, doing business as Total Wine & More (Total Wine), sold bottles of liquor and wine at prices that were below the cost listed on the invoices for its purchase of those bottles from the wholesaler. For this reason, the commission found Total Wine in violation of § 2.04(1) . Total Wine contends that it was not in violation of this regulation because, after accounting for the "cumulative quantity discounts" (CQDs) that it obtained from its bulk purchases of these brands of liquor and wine -- which were credited in subsequent invoices -- its ultimate net cost per bottle was below its sales price to consumers.

         We conclude that the plain language of § 2.04(1) requires that the net cost of liquor or wine sold to a licensed retailer, including any credits applied to that sale from CQDs, be reflected in the invoice for that particular sale, and that it was reasonable for the commission to interpret the regulation in accordance with the regulation's plain language. We also conclude that the commission's interpretation of this regulation is reasonable in light of both its legislative mandate and the administrative demands of efficient and uniform enforcement. Where Total Wine sold liquor and wine purchased through the invoiced sales in the record at prices below the net price reflected in those invoices, the commission was justified in finding that Total Wine sold the liquor or wine "at a price less than invoiced cost," in violation of § 2.04(1). Accordingly, we reverse the Superior Court judgment allowing Total Wine's motion for judgment on the pleadings, and remand the case to the Superior Court with instructions to allow the commission's cross motion for judgment on the pleadings and to enter judgment in favor of the commission.[3]

         Background.

         We summarize the facts as found by the commission, which we conclude are supported by substantial evidence. See Craft Beer Guild, LLC v. Alcoholic Beverages Control Comm'n, 481 Mass. 506, 509 (2019) (Craft), citing G. L. c. 30A, § 14 (7) (e) .

         Total Wine is a retailer of alcoholic beverages licensed by the commission pursuant to G. L. c. 138, § 15, the statutory provision of the Liquor Control Act authorizing liquor stores to sell alcoholic beverages to be consumed off premises. Craft, supra at 509 n.4. In December 2015, the commission received numerous complaints that at least one Total Wine retail store was selling alcoholic beverages to consumers at prices below the invoiced cost to Total Wine, in violation of 204 Code Mass. Regs. § 2.04(1). The commission continued to receive complaints about Total Wine's pricing practices regarding at least two retail store locations in May and June of 2016. Pursuant to its authority to undertake "general supervision of the conduct of the business of . . . selling alcoholic beverages," G. L. c. 10, § 71, and to "enforc[e] and prevent[] violation of" its own regulations, G. L. c. 138, § 24, the commission initiated investigations into Total Wine's pricing practices.

         When the commission's investigators obtained invoices from the licensed wholesalers from whom Total Wine purchased its liquor, they discovered that, with respect to at least four brands of liquor and wine sold during November 2015, and at least eight brands of liquor sold during May and June 2016, Total Wine sold bottles to consumers at a price below its own invoiced per-bottle cost. For example, as to one brand of rum, Total Wine purchased cases from a wholesaler at an original cost of $19.99 per bottle. The invoice reflected a one percent "prompt payment" discount, because Total Wine paid for ...


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