Court Of Appeal Agrees $280 Pizza Oven Is Not A "Thing Of Value"

Not too long ago, the Third District Court of Appeal held that a bumblebee is a fish.  This week, the Third District Court of Appeal concluded that a pizza oven is not a "thing of value".  Dep't of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd.,2022 WL 3442549 (Cal. Ct. App. Aug. 17, 2022). 

Why is the Department of Alcoholic Beverage Control concerned about whether a pizza oven is a "thing of value"?  The Department has a rule which provides ". . . No licensee shall, directly or indirectly, give any premium, gift, free goods, or other thing of value in connection with the sale, distribution, or sale and distribution of alcoholic beverages, and no retailer shall, directly or indirectly, receive any premium, gift, free goods or other thing of value from a supplier of alcoholic beverages, except as authorized by this rule or the Alcoholic Beverage Control Act.”  4 CCR Sec. 106.  The rule implements California's statutory restrictions on so-called "tied houses".   The legislature enacted tied house prohibitions in order to prevent manufacturers and wholesalers from gaining economic influence over retailers.  Apparently, it was believed that permitting tied houses would result in a proliferation of bars and saloons and promote intemperance.  See Actmedia v. Stroh, 830 F.2d 957, 960 n.2 (9th Cir. 1986) (quoting S. Rep. No. 1215, 74th Cong., 1st Sess. 2, 6–7 (1935).

The current case involved a promotion of "pizza month".  Bogle Vineyards, Inc. purchased pizza ovens which were eventually placed in grocery store advertising displays.   Bogle paid nearly $300 per oven and the particular oven at issue was displayed in an inoperable condition.  The Department of Alcoholic Beverage Control charged Bogle with a violation of the tied house law and won its case before an administrative law judge.  However, Bogle successfully appealed to the Alcoholic Beverage Control Appeals Board, which labeled the Department's argument "absurd".  The Department then asked the Court of Appeal to review the Appeals Board's decision.

The Court of Appeal sided with the Appeals Board, finding that there was "no evidence that Raley’s [the retailer] utilized, derived any benefit from, or assigned any value to the pizza oven or pizza stone".  The Court's opinion does make two important observations about judicial deference to executive agencies.  First, the Court states that an agency's interpretation of its own rules is entitled to deference and a reviewing court generally will not depart from that interpretation unless it is clearly erroneous or unauthorized (citing Physicians & Surgeons Laboratories, Inc. v. Department of Health Services  6 Cal.App.4th 968, 986-987 (1992) and  Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd.  7 Cal.App.5th 628, 634 (2017)).  However, the interpretation of a statute is a question of law that is subject to de novo review by the courts.

Note to readers: The Department of Alcoholic Beverage Control was part of the California Business, Transportation & Housing Agency for which I served as Deputy Secretary and General Counsel from 1993 to 1996.