There was quite a hullabaloo back in 2009 when the Michigan Liquor Control Commission initially denied licensing approval to Flying Dog for Raging Bitch.  For those of you that don’t remember, the Commission denied Flying Dog’s label application for Raging Bitch reasoning that the label was “detrimental to the health, safety, or welfare of the general public”.  On March 25, 2011, Flying Dog brought this suit against the Commission seeking an injunction to prevent the Commission from enforcing its ruling and claiming that the Commission’s decision violated the First Amendment.

While the federal case was pending, the Commission revised its decision in light of the Supreme Court’s 2011 ruling in Sorrell v. IMS, (applying a higher standard of scrutiny and striking down a state law regarding pharmacies’ disclosure of doctor prescription statistics), and approved the Raging Bitch label for use in Michigan beer sales.  The Commission also rescinded the rule under which they had denied the approval and did the same for similar rules regarding the labeling of wine and spirits.  Because the Commission approved the use of the Raging Bitch label, Flying Dog withdrew its motion for an injunction, but the case remained because Flying Dog still sought claims for damages against commissioners in their individual capacities.

Well, the wait is over and the Court has decided that the individual commissioners have immunity from suit for their actions.  Particularly, in this opinion from the Court, the Court determined that the Hearing Commissioners who didn’t participate in any decision to deny the licensing approval to Flying Dog were off the hook.  The Court also held that the liquor control commissioners that did participate were entitled to both quasi-judicial immunity and qualified immunity for their actions from Flying Dog’s request for compensatory damages.  Quasi-judicial immunity because they were acting, in part, in a judicial function when they held the hearings on the labeling appeal that Flying Dog made and qualified immunity because the First Amendment right was not “clearly established” when the commissioner’s made their decision.  The application of the quasi-judicial immunity is relatively novel, as the Court recognized in its opinion.  But our readers may enjoy the less novel analysis and application of the qualified immunity doctrine in this Court’s opinion since the discussion is about the protection of their commercial speech, especially regarding evocative labels:

“The Court is unaware of any Supreme Court or Sixth Circuit precedent addressing the issue of whether state officials violate an individual’s clearly established right when they deny a license to sell alcohol based on the potential adverse effects on the “health, safety, or welfare of the general public” stemming from the name and label of the beverage—in this case, “Raging Bitch” beer. To find precedent sufficiently analogous to even arguably serve as the basis of a clearly established right, Plaintiff was forced to rely on the Second Circuit’s decision in Bad Frog Brewery, Inc. v. New York State Liquor Authority, 134 F.3d 87 (2d Cir. 1998), which arose from the defendant, New York Liquor Authority (“Liquor Authority”), disapproving beer labels depicting “a frog with the second of its four unwebbed ‘fingers’ extended in a manner evocative of a well known human gesture of insult.” Id. at 90. The Second Circuit concluded that the image of the frog was commercial speech, and the First Amendment Central Hudson framework applied. Id. Applying Central Hudson, the Second Circuit determined that the State had substantial interest in regulating the speech, but that the defendant did not show “that its denial of Bad Frog’s application directly and materially advance[d] . . . its state interests” and that the prohibition was more extensive than necessary to advance the State’s interests. Id. at 100–01. However, the Court concluded that qualified immunity barred Bad Frog’s damages claims against the Authority’s members in their individual capacity. Id. at 101.

Reliance on Bad Frog Brewery as clearly establish law prohibiting the Administrative Commissioner’s decision in this case is unavailing. First, Bad Frog involved a constitutional challenge to the statute on its face. In this case, Plaintiff has abandoned its damages claim against the Commissioners based on this legal theory because the Rule at issue was repealed, and the Commissioners did not pass the Rule in the first instance. Consequently, the Court declines to base personal liability on a Rule that is no longer in effect and which Commissioners had no say in its passage. Second, as noted above, the Central Hudson framework is an inherently complex, factually dependent inquiry. Bad Frog involves a different statute, different facts, and a different procedural posture. The Liquor Authority provided different reasons for their denial of Bad Frog’s license than the Commissioners in this case. There are simply too many distinctions between Bad Frog and this case to hold the Commissioners personally liable based on their failure to follow Bad Frog in their own decision-making process, particularly given that Bad Frog is non-binding Second Circuit precedent. Plaintiff has failed to demonstrate the Commissioners violated any “clearly established law,” and qualified immunity therefore applies.

What this may mean is that in the future, a similar denial could possibly result in an award of damages for the brewer, distiller or vintner making the First Amendment challenge.  And if Founder’s experience in Alabama is any indication of a trend, there will be plenty of opportunities to test out this theory in the future.