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California Grocers Association v. Department of Alcoholic Beverage Control

California Court of Appeals, Third District

September 19, 2013

CALIFORNIA GROCERS ASSOCIATION, Petitioner,
v.
DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL et al., Respondents

ORIGINAL PROCEEDINGS in mandate. Petitions granted and denied.

Pillsbury Winthrop Shaw Pittman, James M. Seff, Christopher R. Rodriguez and Carrie L. Bonnington for Petitioner.

Kamala D. Harris, Attorney General, Alicia M. B. Fowler, Senior Assistant Attorney General, Fiel D. Tingo, Supervising Deputy Attorney General and Michael D. Gowe, Deputy Attorney General, for Respondents.

BLEASE, Acting P. J.

This case involves the meaning of section 23394.7 of the Business and Professions Code, that regulates the sale of alcoholic beverages at any customer-operated checkout stands.[1] It provides: “No privileges under an off-sale license shall be exercised by the licensee at any customer-operated checkout stand located on the licensee’s physical premises.” (§ 23394.7, as added by Stats. 2011, ch. 726, § 2.) The principal question tendered is whether “customer-operated checkout stand” refers to the stand itself or to the function performed at the stand, and, accordingly, whether the members of petitioner California Grocers Association (Grocers) may sell alcoholic beverages at such a stand.

Grocers invokes our original jurisdiction in two writs of mandate to review the validity of an advisory issued by the respondent Department of Alcoholic Beverage Control (Department). (§ 23090.5.) The advisory interprets section 23394.7 as providing that “no alcoholic beverages may be sold through any checkout stand that is enabled to allow operation by the customer at the time the customer’s check-out transaction commences or at any point during the check-out process.”

The writ in case No. C070007 challenges the Department’s compliance with the Administrative Procedures Act (Gov. Code, §11340 et seq.; hereafter APA). The APA sets forth procedures for the adoption of an administrative regulation and provides that a failure to do so voids the agency action. (Gov. Code, § 11340.5 subd. (a).) A regulation is inter alia a general rule that interprets the law enforced by the agency. (Gov. Code, § 11342.600; Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 571 (Tidewater).) An interpretation is subject to the APA unless it is “essentially rote, ministerial, or... repetitive of... the [law’s] plain language.” (Morning Star Co. v. State Bd. of Equalization (2006) 38 Cal.4th 324, 336-337 (Morning Star).) A rule that violates the APA is void regardless that its interpretation is a correct reading of the law. (Morning Star, supra, at pp. 336-337.)

We shall conclude that the advisory is a regulation subject to the APA because it is directed to the general class of retail off-sale liquor licensees that employ checkout stands and because its interpretation of section 23394.7 is not “essentially rote, ministerial, or... repetitive....” (Morning Star, supra, 38 Cal.4th at p. 337.) This conclusion requires that we void the advisory.

However, this does not end our inquiry. “[A]lthough the court must void an interpretive regulation that does not comply with the APA procedures, it may resolve the ambiguity that gave rise to the agency interpretation if it is not required to defer to the agency construction.” (Capen v. Shewry (2007) 155 Cal.App.4th 378, 391.) As we explain below, we need not defer to the Department’s interpretation because the interpretation of section 23394.7 is well within the court’s competence.

The writ in case No. C070375 challenges the validity of the advisory as a violation of section 23394.7. The advisory describes a “customer-operated checkout stand” as a physical device that may be operated in whole or in part by a customer. It expresses the interpretive view of the Department that section 23394.7 prohibits the sale of alcoholic beverages at such a checkout stand even if the sale is approved by an employee of the licensee in a face-to-face transaction.

Grocers argues that a checkout stand that is programmed to lock the stand’s mechanism when an alcoholic beverage is scanned, and that can be unlocked only by an employee of the licensee after a face-to-face approval of the sale, complies with section 23394.7. Resolution of the claim turns on whether section 23394.7 refers to the checkout stand itself or the function performed at the stand. We find the answer in the grammar of the section.

Section 23394.7 prohibits the sale of alcoholic beverages “at any customer-operated checkout stand....” (Italics added.) The “at” refers to the checkout stand itself, and “customer-operated” modifies the term “checkout stand.” The phrase “customer-operated checkout stand” thus describes the kind of checkout stand “at” which the sale of alcoholic beverages is prohibited. By contrast, section 23394.7 does not use qualifying words that specify the function performed by the checkout stand, such as “when” or “by whom” the checkout stand is operated or “unless” a lock-out system is employed. Grocers argues that under section 23394.7 the exercise of privileges under an off-sale license occurs only at the point of sale of the alcohol and that occurs only when an employee authorizes the sale to proceed at a customer-operated checkout stand. Accordingly, at the point of sale the stand is not functioning as a customer-operated checkout stand. The argument is not responsive to the language of section 23394.7.[2] It makes no difference at what point the sale occurs in the checkout procedure since section 23394.7 bars any sale “at” a customer operated checkout stand. This view is amply supported by the legislative history of the section, as we explain below.

We shall grant the writ in case No. C070007 because the advisory is more than a simple paraphrase of section 23394.7. We shall deny the writ in case No. C070375 because we find that the advisory correctly interprets section 23394.7. A sale “at” a “customer-operated checkout stand” unambiguously refers to a kiosk, a device that may be physically operated in whole or part by a customer.

Procedure

Grocers filed two petitions for a writ of mandate[3] and an allied complaint for declaratory relief invoking our original jurisdiction under section 23090.5.[4] (Schenley Affiliated Brands Corp. v. Kirby (1971) 21 Cal.App.3d 177.) We shall consider only the petitions for extraordinary relief.[5]

The writs seek different forms of relief. In case No. C070007 Grocers seeks the invalidation of the advisory on the ground its adoption did not comply with the procedural provisions of the APA. In case No. C070375 Grocers seeks the invalidation of the advisory on the ground it is not authorized by section 23394.7.

In case No. C070007 Grocers filed a petition for writ of mandate and a request for a stay of the advisory, together with supporting exhibits and a request for judicial notice and supporting briefs. We issued a stay of the effect of the advisory, issued an order granting an alternative writ, and granted the petitioner’s request for judicial notice. The Department filed a return to the writ, exhibits in support of respondent’s return, a motion in support of judicial notice, and supporting briefs. We granted the Department’s motion in support of judicial notice, with accompanying exhibits, consisting of the legislative history of section 23394.7 and declarations, except for exhibit Nos. 4, 7, and 12 (a bill analysis from Grocers; a letter analysis from the author of the legislation, Assemblymember Fiona Ma, to the Department; and a committee staff memorandum to Assemblymember Ma). Grocers filed opposing briefs. Department also submitted exhibits in support of respondent’s return to which Grocers filed objections to evidence regarding exhibit Nos. 14 through 16, consisting of the same exhibits denied admission pursuant to respondent’s motion in support of judicial notice.[6]

In case No. C070375 Grocers filed a second petition for writ of mandate and complaint for declaratory relief, invoking our original jurisdiction, claiming that the Department was continuing to enforce the advisory, a request for a stay, supporting points and authorities, a request for judicial notice, and a motion to consolidate the case with case No. C070007. We issued an alternative writ, granted the request for judicial notice, issued a stay of the enforcement of the statute on February 21, 2012, and consolidated the cases for all further appellate proceedings except for the retention of their case numbers.

Legislative History of Section 23394.7

Prior to the enactment of section 23394.7 there was no express statutory prohibition of the sale of alcoholic beverages at a customer-operated checkout stand. The Alcoholic Beverage Control Act (§ 23000 et seq.) prohibited the sale of alcohol to minors, and a violation subjected a licensee to the suspension or revocation of a license to sell alcoholic beverages or punishment as a misdemeanor.

In 2011 section 23394.7 was added to the Business and Professions Code by Assembly Bill No. 183 (2011-2012 Reg. Sess.). As introduced in the Assembly on January 25, 2011, the bill provided in relevant part as follows:

“Sec. 2. Section 23394.7 is added to the Business and Professions Code, to read:

“(a) No privileges under an off-sale license shall be exercised by the licensee at any checkstand, where the customer is able to scan and purchase alcoholic beverages using a point-of-sale system with limited or no assistance from an employee of the licensee.

“(b) For purposes of this section, ‘point-of-sale’ system means any

computer or electronic system used by a retail establishment such as, but not limited to, Universal Product Code scanners, price lookup codes, or an electronic price lookup system as a means for determining the price of the item being purchased by a consumer.”

The section was preceded by legislative findings, as follows:

“SECTION 1. The Legislature finds and declares that allowing customers to purchase alcoholic beverages through self-service checkouts:

“(a) Facilitates the purchase of alcoholic beverages by minors.

“(b) Permits customers who are in an advanced state of intoxication to purchase additional alcoholic beverages, in violation of state law.

“(c) Allows for greater theft of alcoholic beverages, thereby depriving the state of tax revenue.”

Assembly Bill No. 183 was amended in the Assembly on May 19, 2011, and in the Senate on June 22, 2011, to read as it now appears in the Business and Professions Code:

“No privileges under an off-sale license shall be exercised by the licensee at any customer-operated checkout stand located on the licensee’s ...


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