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Monday, August 29, 2016

Ind. Decisions - "Monarch Beverage owners can sell liquor, judge rules" [Updated]

Vic Ryckaert reported this weekend for the Indianapolis Star:

Marion Superior Court Judge Heather Welch on Wednesday ordered the Indiana Alcohol and Tobacco Commission [ATC] to grant a liquor license to Spirited Sales, a company owned by the same people who own Monarch, the state's largest beer and wine distributor. * * *

In a 52-page order, the judge ruled that the ATC "acted in an arbitrary and capricious manner" when it denied Spirit's wholesale liquor permit last year.

Welch's ruling cites special privileges the ATC gave to Spirit's would-be competitors during the licensing hearings.

Two trade associations representing liquor sellers, Wine & Spirits and the Indiana Beverage Alliance, were allowed to cross examine witnesses, raise objections and make closing arguments "as if they were parties to the proceedings," Welch wrote.

Welch noted the ATC has granted licenses to at least 11 other companies with similar ownership circumstances.

Indiana is the only state that does not allow wholesalers to distribute both beer and alcohol. In the order, Welch cites the growing popularity of craft beer and noted that the "landscape of alcohol sales is radically different" than when the rules were drafted in 1973.

Monarch has been fighting, and losing, in court to change the law for several years.

In December the Indiana Court of Appeals ruled against Monarch's request to sell both beer and liquor.

That was the Dec. 17, 2015 COA opinion in Monarch Beverage v. ATC; see ILB summary here.

ILB: The ILB is seeking a copy of Judge Welch's opinion...

[Updated at 9:58 am] The ILB has now received a copy of the 52-page order in Spirited Sales v. ATC (49DOl-1502-PL-005520) [h/t Vic Ryckaert]. Here is some of the language in the order:

b. Prior Applicants * * *

50. In light of these previous decisions (which have been mentioned previously in this Court's Findings of Fact and Conclusions of Law) recognizing that corporate separateness would allow an owner to be involved in multiple ventures that hold different types of alcohol permits, it would appear that the Commission's denial of Spirited's application for a liquor wholesale permit was arbitrary and capricious. While not necessarily bound by precedent, the Commission would need to articulate a clear reason to distinguish Spirited's application from other owners who have sought and received alcohol permits.

51. Rather than distinguishing its rejection of Spirited's permit from the above examples, the Commission has instead argued that its past decisions were made in error. The Commission argues that these other applications should not have been awarded permits because their owners concurrently owned or managed entitles holding other alcohol permits. The Commission does not offer arguments as to why it may have earlier awarded permit; instead, the Commission wants this Court to discount its earlier decisions further by stating that they were incorrect. Indiana law prohibits this practice.

52. Despite the Commission's apparent remorse over their initial rulings, the agency has established a standard that corporate separateness can allow parties to own interests in multiple companies that hold different alcohol permits as long as the companies uphold and maintain separate corporate structures. This was not a one-time decision; the Commission has shown a clear pattern of interpreting the Prohibited Interest Provisions to allow parties to have concurrent interests in companies that hold different alcohol permits across tiers and types of alcohol. The Commission cannot eliminate this pattern by arguing now that all of these decisions were incorrect.

d. Legislative Action and Title 7.1 and Remonstrators' Participation

57. This Court recognizes that the business landscape of alcohol sales is radically different than when much of Title 7.1 was drafted in 1973. The emergence of the craft beer industry both locally and nationally has had tremendous impacts on the entire industry landscape that are only beginning to be understood. Laws written decades ago could not have accurately predicted this rapid expansion of brewing operations that has led to more breweries than ever in the United States. A similar paradigm shift could occur in the liquor industry as local and craft distillers begin to open. These new business models do not map neatly to the existing regulatory framework, and previously the Indiana legislature has responded by making adjustments to Title 7.1 that allow for industry innovation while ensuring that taxes are collected and consumers are protected.

58. This case, however, represents the ultimate shortcomings in Title 7.1 as it is written. The changes in the industry may have become too profound to rely on a framework written over forty years ago. It may be time for the legislature to study the major shifts in the industry and redraft provisions Title 7.1 to better and more fully articulate its motivations behind the threetier framework to assist members of the industry and their counsel to better understand the expectations of the Commission in order to allow the industry to grow and adapt well into the 21 st Century. However, this Court notes that modification of such statues is solely within the preview of the legislative branch.

59. In light of the Commission's past decisions under similar circumstances and its refusal to correct a known ambiguity, the Commission's disparate treatment of Spirited Sales, absent any substantial evidence to the contrary, amounts to an arbitrary abuse of discretion under I.e. § 4- 21.5-5-14, and I.C. § 7.1-3-23-30. Furthermore, the Court finds that there are not statutes which specifically address how Remonstrators should or should not be able to participate when addressing a wholesaler's permit but that the Commission might consider enacting administrative code establishing such procedures or at the very least treat all Remonstrators regarding wholesale's permits in the same fashion.

60. At this point, the Court would prefer to remand this case back to the Commission for further proceedings consistent with this ruling. However, i.e. § 7.1-3-23-41 removes that authority from this Court and requires the issuance of the liquor wholesaler's permit to Spirited upon a finding that the Commission acted in an arbitrary and capricious manner. The Court hereby GRANTS Spirited's Petition for Judicial Review and mandates the Commission to issue Spirited a liquor wholesaler's permit.

Posted by Marcia Oddi on August 29, 2016 08:50 AM
Posted to Ind. Trial Ct. Decisions