Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Washington Restaurant Association v. Washington State Liquor

Court of Appeals of Washington, Division 1

August 26, 2019

WASHINGTON RESTAURANT ASSOCIATION, a Washington nonprofit organization; NORTHWEST GROCERY ASSOCIATION, a non-profit organization; COSTCO WHOLESALE CORPORATION, a Washington corporation; and WASHINGTON LODGING ASSOCIATION, a Washington non-profit organization, Appellants,
v.
WASHINGTON STATE LIQUOR AND CANNABIS BOARD, a state agency, Respondent.

          DWYER, J.

         Following the enactment of Initiative 1183[1] (I-1183), best known for ending the state monopoly on the sale of spirits, the Washington State Liquor and Cannabis Board (the Board) promulgated new rules, set forth in WAC 314-23-060 through WAC 314-23-085, pertaining to the pricing of wine and spirits. Displeased with these rules and believing them to be directly contrary to RCW 66.28.170, which, as amended by I-1183, permits certain price differentials in the sale of wine and spirits, the Washington Restaurant Association, the Northwest Grocery Association, Costco Wholesale Corporation, and the Washington Lodging Association (collectively Costco) sought judicial review of WAC 314-23-065 through WAC 314-23-085. The superior court rejected Costco's challenge to the new rules.

         Costco appeals, asserting that the Board exceeded its authority by promulgating rules contrary to RCW 66.28.170 and that the rules are arbitrary and capricious. We conclude that the Board exceeded its authority when it promulgated WAC 314-23-065, WAC 314-23-080, and WAC 314-23-085 because these rules expressly prohibit pricing differentials in the sale of wine and spirits that are authorized by RCW 66.28.170. However, Costco does not establish the invalidity of WAC 314-23-070 and WAC 314-23-075. Accordingly, we affirm in part and reverse in part.

         I

         I-1183 "dramatically changed the State's approach to regulating the distribution and sale of liquor in Washington." Wash. Ass'n for Substance Abuse & Violence Prevention v. State, 174 Wn.2d 642, 649, 278 P.3d 632 (2012). I-1183 removed the government from the business of distributing and selling liquor, redirecting the State's focus to "the more appropriate government role of enforcing liquor laws and protecting public health and safety concerning all alcoholic beverages." Laws of 2012, ch. 2, § 101(2)(b). I-1183 also modified RCW 66.28.170[2] by legalizing "[p]rice differentials for sales of spirits or wine based upon competitive conditions, costs of servicing a purchaser's account, efficiencies in handling goods, or other bona fide business factors, to the extent the differentials are not unlawful under trade regulation laws applicable to goods of all kinds."[3] Laws of 2012, ch. 2, § 119; see also RCW 66.28.170; former RCW 66.28.170 (Laws of 2004, ch. 160, § 17).

         Following the passage of I-1183, the Board received a petition for rule making from the Washington Liquor Store Association seeking clarification as to which price differentials were authorized by RCW 66.28.170. The Board informed stakeholders of its intent to promulgate rules to clarify which price differentials were permissible under RCW 66.28.170 and invited comment. Following an extensive rule-making process involving numerous proposed draft rules and seven hearings held over the course of three years, the Board filed a Concise Explanatory Statement[4] (CES) and adopted a final version of the new pricing rules, set forth in WAC 314-23-060 through WAC 314-23-085. However, the day before the rules went into effect, the Board stayed the enforcement of the last sentence of WAC 314-23-085 and then removed it.[5] WSR 16-19-105. The remaining rules went into effect on October 22, 2015.

         Meanwhile, unsatisfied with the new rules, Costco filed a petition for judicial review in Thurston County Superior Court, requesting that the court declare WAC 314-23-065, [6] WAC 314-23-070, [7] WAC 314-23-075, [8] WAC 314-23- 080, [9] and WAC 314-23-085[10] invalid.[11] Costco made the following assertions pertinent to this appeal: (1) that the new pricing rules conflicted with RCW 66.28.170, (2) that the Board had exceeded its authority in promulgating the pricing rules, and (3) that the rules were arbitrary and capricious. The superior court rejected Costco's arguments, concluding that the pricing rules did not conflict with RCW 66.28.170, that the Board did not exceed its authority by promulgating the rules, and that the rules are not arbitrary and capricious. Costco appealed to Division-Two, which transferred the matter to us for decision.

         II

         Costco's primary contention on appeal is that the challenged rules conflict with RCW 66.28.170 and therefore exceed the scope of the agency's rulemaking authority. Specifically, Costco asserts that RCW 66.28.170 is unambiguous, that the challenged rules prohibit pricing practices expressly authorized by the statute, and that the Board therefore lacks the authority to promulgate the challenged rules. In response, the Board asserts that it has the authority to interpret RCW 66.28.170 because it is ambiguous, that the rules do not conflict with the statute, and that it has the authority to promulgate the challenged pricing rules as part of its broad authority to regulate the sale of liquor and wine. Costco's contention presents the following issues: (1) whether the Board retains any authority after the enactment of I-1183 to promulgate rules relating to the pricing of wine and spirits, (2) whether RCW 66.28.170 is ambiguous, and (3) whether the challenged pricing rules conflict with RCW 66.28.170.

         A

         The Washington Administrative Procedure Act (APA)[12] governs the applicable standard of review of a challenge to an agency rule. Ass'n of Wash. Spirits & Wine Distribs. v. Wash. State Liquor Control Bd., 182 Wn.2d 342, 350, 340 P.3d 849 (2015). We review the validity of an agency rule de novo. Wash. State Hosp. Ass'n v. Dep't of Health, 183 Wn.2d 590, 595, 353 P.3d 1285 (2015).

         Agency rules are presumed valid. St. Francis Extended Health Care v. Dep't of Soc. & Health Servs., 115 Wn.2d 690, 702, 801 P.2d 212 (1990). "The burden of overcoming this presumption rests on the challenger, and judicial review will be limited to a determination of whether the regulation in question is reasonably consistent with the statute being implemented." St. Francis, 115 Wn.2d at 702.

         An agency rule is invalid only if it "(1) violates constitutional provisions, (2) exceeds the agency's statutory rule-making authority, (3) is arbitrary and capricious in that it could not have been the product of a rational decision-maker, or (4) was adopted without complying with statutory rule-making procedures." Ass'n of Wash. Spirits, 182 Wn.2d at 350 (citing RCW 34.05.570(2)(c)). The extent of an agency's rule-making authority is a question of law reviewed de novo. Ass'n of Wash. Spirits, 182 Wn.2d at 350.

         Agencies lack the authority to "'amend or change legislative enactments.'" Dep't of Ecology v. Campbell & Gwinn. LLC, 146Wn.2d 1, 19, 43 P.3d 4 (2002) (quoting Dep't of Ecology v. Theodoratus, 135 Wn.2d 582, 600, 957 P.2d 1241 (1998)). Thus, "rules that are inconsistent with the statutes they implement are invalid." Bostain v. Food Express. Inc., 159 Wn.2d 700, 715, 153 P.3d 846 (2007). "A rule that conflicts with a statute is beyond an agency's authority. Invalidation of the rule is the proper remedy." Devine v. Dep't of Licensing, 126 Wn.App. 941, 956, 110 P.3d 237 (2005) (citing H & H P'ship v. Dep't of Ecology, 115Wn.App. 164, 170, 62 P.3d 510 (2003)).

         B

         We first consider whether the Board has the authority to promulgate any rules relating to the pricing of wine and spirits. Costco asserts that I-1183 stripped the Board of its power to regulate the price of wine and spirits because it removed the Board's general grant of authority to regulate the liquor market that had been set forth in former RCW 66.08.030.[13] Absent that general authority, Costco asserts, the Board is left with only the specific grants of authority set forth in RCW 66.08.030, which do not include an explicit grant of authority to regulate the price of wine and spirits. In response, the Board asserts that it retains broad authority to regulate the price of wine and spirits as part of its authority pursuant to RCW 66.08.030(12), which states that the Board may enact rules "[p]rescribing the conditions, accommodations, and qualifications requisite for the obtaining of licenses to sell beer, wines, and spirits, and regulating the sale of beer, wines, and spirits thereunder," and RCW 66.28.320, which states that the Board may enact rules "necessary to carry out the purposes and provisions of" chapter 66.28 RCW. The Board has the better argument.

         It is well settled that an agency has "no inherent powers, but only such as have been expressly granted to it by the legislature or have, by implication, been conferred upon it as necessarily incident to the exercise of those powers expressly granted." State ex rel. Pub. Util. Dist. No. 1 of Okanogan County v. Dep't of Pub. Serv., 21 Wn.2d 201, 209, 150 P.2d 709 (1944) (citing Wishkah Boom Co. v. Greenwood Timber Co., 88 Wash. 568, 153 P. 367 (1915)).

         Prior to the passage of I-1183, RCW 66.28.320 authorized the Board to adopt any rules necessary to carry out the purposes of all of the provisions of chapter 66.28 RCW. Laws of 2009, ch. 506, § 9. This authority was not eliminated by I-1183 and is therefore retained by the Board. See Pub. Util. Dist. No. 2 of Pac. County v. Comcast of Wash. IV. Inc., 184 Wn.App. 24, 60, 336 P.3d 65 (2014) ("Each PUD commission retains its preexisting discretion with regard to rate-setting except as that discretion is restricted by the amended statute."). RCW 66.28.170 clearly addresses whether certain pricing practices are permissible.[14] The Board is authorized to enact rules necessary to carry out the provisions of that statute.[15]

         C

         We next analyze RCW 66.28.170 to determine if the statute is ambiguous. Again, this statute provides:

It is unlawful for a manufacturer of spirits, wine, or malt beverages holding a certificate of approval or the manufacturer's authorized representative, a distillery, brewery, or a domestic winery to discriminate in price in selling to any purchaser for resale in the state of Washington. Price differentials for sales of spirits or wine based upon competitive conditions, costs of servicing a purchaser's account, efficiencies in handling goods, or other bona fide business factors, to the extent the differentials are not unlawful under trade regulation laws applicable to goods of all kinds, do not violate this section.

RCW 66.28.170.

         Costco asserts that the meaning of RCW 66.28.170 is clear: any price differential in the sale of wine or spirits based on the business factors listed in the statute, or any other bona fide business factor, is lawful provided that such differential does not violate any trade regulation law generally applicable to all kinds of goods. The Board, in response, insists that Costco's interpretation must be mistaken because it would conflict with other statutory provisions of chapter 66.28 RCW. Furthermore, the Board contends that RCW 66.28.170 is therefore ambiguous, requiring interpretation to avoid conflicting with other provisions of chapter 66.28 RCW. We disagree.

         1

         "The basic rules of statutory construction applicable to legislative enactments also apply to direct legislation by the people in the form of an initiative." Seeber v. Wash. State Pub. Disclosure Comm'n, 96Wn.2d 135, 139, 634 P.2d 303 (1981) (citing State ex rel. Pub. Disclosure Comm'n v. Rains, 87 Wn.2d 626, 633 n.5, 555 P.2d 1368 (1976)). "The meaning of a statute is a question of law reviewed de novo." Campbell & Gwinn, 146 Wn.2d at 9 (citing State v. Breazeale, 144 Wn.2d 829, 837, 31 P.3d 1155 (2001); State v. J.M., 144 Wn.2d 472, 480, 28 P.3d 720 (2001)).

         When interpreting a statute, our "objective is to ascertain and carry out the Legislature's intent." Campbell & Gwinn, 146 Wn.2d at 9 (citing J.M., 144 Wn.2d at 480). "If a statute's meaning is plain on its face, we must 'give effect to that plain meaning as an expression of legislative intent.'" Broughton Lumber Co. v. BNSF Ry., 174 Wn.2d 619, 627, 278 P.3d 173 (2012) (quoting Campbell & Gwinn, 146 Wn.2d at 9-10). "To determine the plain meaning, we look to the text of the statute, as well as 'the context of the statute in which that provision is found, related provisions, and the statutory scheme as a whole.'" State v. Donaghe, 172 Wn.2d 253, 262, 256 P.3d 1171 (2011) (citing State v. Jacobs, 154 Wn.2d 596, 600, 115 P.3d 281 (2005)). A statute is ambiguous if it has at least two reasonable interpretations, but is not ambiguous merely because different interpretations are conceivable. Cerrillo v. Esparza, 158 Wn.2d 194, 201, 142 P.3d 155 (2006) (quoting Agrilink Foods, Inc. v. Dep't of Revenue, 153 Wn.2d 392, 396, 103 P.3d 1226 (2005)). When possible, a statute must be read together with related statutes to produce a "'harmonious total statutory scheme . . . which maintains the integrity of the respective statutes.'" Dep't of Revenue v. Fed. Deposit Ins. Corp., 190 Wn.App. 150, 157-58, 359 P.3d 913 (2015) (alteration in original) (internal quotation marks omitted) (quoting Employco Pers. Servs.. Inc. v. City of Seattle, 117 Wn.2d 606, 614, 817 P.2d 1373 (1991)).

         We show no deference to an agency's interpretation of an unambiguous statute. Ass'n of Wash. Spirits, 182 Wn.2d at 355. Similarly, we do not "'defer to an agency the power to determine the scope of its own authority'" under a statute. Ma'ae v. Dep't of Labor & Indus., 8 Wn.App. 2d 189, 197, 438 P.3d 148 (2019) (internal quotation marks omitted) (citing Wash. Fed'n of State Emps. v. Dep't of Gen. Admin., 152 Wn.App. 368, 377-78, 216 P.3d 1061 (2009)).

         2

         Costco asserts that the plain meaning of RCW 66.28.170 is clear: all price differentials in the sale of wine or spirits are lawful if they do not violate trade regulations applicable to all kinds of goods and are premised on the listed business factors in the statute or on any other bona fide business factor. In response, the Board does not offer an alternative interpretation but, rather, insists that Costco's interpretation must be mistaken because it conflicts with several other statutory provisions of chapter 66.28 RCW. Costco has the better argument.

         RCW 66.28.170 prohibits price discrimination, but allows certain price differentials, stating:

It is unlawful for a manufacturer of spirits, wine, or malt beverages holding a certificate of approval or the manufacturer's authorized representative, a distillery, brewery, or a domestic winery to discriminate in price in selling to any purchaser for resale in the state of Washington. Price differentials for sales of spirits or wine based upon competitive conditions, costs of servicing a purchaser's account, efficiencies in handling goods, or other bona fide business factors, to the extent the differentials are not unlawful under trade regulation laws applicable to goods of all kinds, do not violate this section.

         This section could not be clearer that it permits price differentials for wine and spirits premised on competitive conditions, costs of servicing a purchaser's account, efficiencies in handling goods, or any other bona fide business factor provided that such differentials do not violate trade regulations applicable to all kinds of goods.[16]

         This reading of the statute is further supported by consideration of the entire statutory scheme. First, we note that I-1183 directly states in its first section that its purpose is to eliminate then-existing restrictions on the distribution and pricing of wine and spirits.

The people of the state of Washington, in enacting this initiative measure, find that the state government monopoly on liquor distribution and liquor stores in Washington and the state government regulations that arbitrarily restrict the wholesale distribution and pricing of wine are outdated, inefficient, and costly to local taxpayers, consumers, distributors, and retailers. Therefore, the people wish to privatize and modernize both wholesale distribution and retail sales of liquor and remove outdated restrictions on the wholesale distribution of wine by enacting this initiative.

I-1183, § 101(1) (emphasis added).[17]

         Second, I-1183 also revised RCW 66.28.180, which had previously restricted discounts on the sale of wine. Former RCW 66.28.180 (Laws of 2009, ch. 506, § 10). I-1183 eliminated that section's prohibition of all quantity discounts for wine, although it left such a prohibition intact for beer. I-1183, § 121(1)(d). I-1183 further modified RCW 66.28.180 by adding a new subsection explicitly permitting the sale of wine at a discounted price if premised on grounds permissible under "applicable trade regulation laws," including "good faith meeting of a competitor's lawful price and absence of harm to competition." I-1183, § 121(4). The initiative also used this same language to authorize similar discounts on the sale of spirits. I-1183, § 120(5). Reading I-1183 as a whole supports our conclusion that RCW 66.28.170 means what it says: price differentials premised on competitive ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.