Gnerich v. Rutter

Background

A group of licensed pharmacists running a drugstore in San Francisco obtained a federal permit to buy and sell intoxicating liquor for non-beverage medical purposes. The permit, issued under the National Prohibition Act, included a restriction limiting purchases to "100 gallons of distilled spirits and 5 gallons of wine per quarterly period." A local prohibition director refused to authorize purchases beyond those amounts. The pharmacists sued in federal court seeking an injunction to prevent the director from enforcing that restriction. The District Court dismissed the suit on the merits; the Circuit Court affirmed, reasoning the suit could not proceed because the Commissioner of Internal Revenue had not been made a party.

Reasoning

The Court addressed whether the suit could be maintained against the local director without joining the Commissioner of Internal Revenue. The Court explained that the prohibition commissioner and the local director are agents and subordinates of the Commissioner, and their acts are effectively the Commissioner’s acts. Because the principal official whose orders were challenged was not joined, the suit could not properly proceed. Citing earlier decisions, the Court held that an injunction aimed at controlling a principal official cannot be maintained against a subordinate alone. The Court therefore reversed the District Court’s merits decree and concluded the case must be dismissed for want of a necessary party.

Real world impact

Permitted holders and pharmacists cannot obtain an injunction against local enforcement of permit terms without including the Commissioner of Internal Revenue in the lawsuit. The Court did not rule on whether the restriction itself was lawful. The decision leaves lower courts to dismiss similar suits unless the federal Commissioner is joined.