Judge in wine case sides with gro­cers

Al­co­hol panel to start is­su­ing per­mits

Arkansas Democrat-Gazette - - FRONT PAGE - LINDA SATTER

A fed­eral judge Tues­day gave the go-ahead to the state Al­co­holic Bev­er­age Con­trol Board to start is­su­ing gro­cery-store wine per­mits at its reg­u­lar meet­ing today.

That means that as early as Thurs­day, gro­cery stores and con­ve­nience stores that have been lim­ited to sell­ing only small-batch farm wines will be able to ex­pand their se­lec­tions to in­clude all the va­ri­eties of wine that for years only liquor stores have been au­tho­rized to sell in the state — as long as the board grants per­mits to the stores.

Mary Robin Cas­teel, di­rec­tor of the bev­er­age con­trol agency, said in court Mon­day that the agency had au­tho­rized stores with pend­ing per­mits to go ahead and stock up in an­tic­i­pa­tion of be­ing granted the newly

avail­able wine per­mits, to ward off a rush on sup­pli­ers. So for many stores, the ex­panded se­lec­tion is al­ready in place.

Al­though Act 508 of 2017, which cre­ated a gro­cery-store wine per­mit, ac­tu­ally took ef­fect Oct. 1, today’s meet­ing is the first chance the board will have to con­sider some 217 ap­pli­ca­tions for per­mits that have been wait­ing at least 30 days. An­other 11 ap­pli­ca­tions had been re­ceived by the board as of Mon­day, but Cas­teel’s man­dated 30-day wait­ing pe­riod hadn’t ex­pired on them.

A last-minute ef­fort to stop the is­su­ing of per­mits was de­nied Tues­day by Chief U.S. District Judge Brian Miller, who heard three hours’ worth of ar­gu­ments Mon­day on a re­quest from four cen­tral Arkansas liquor store own­ers to freeze the per­mit-grant­ing process un­til the le­gal­i­ties of the new leg­is­la­tion could be ex­am­ined in de­tail.

In a nine-page order filed early Tues­day af­ter­noon, Miller de­nied the liquor stores’ re­quest for a pre­lim­i­nary in­junc­tion and, say­ing they were un­likely to suc­ceed on their fed­eral claim, re­manded the case back to Pu­laski County Cir­cuit Court, where it was orig­i­nally filed Oct. 30, be­fore the state trans­ferred it to fed­eral court.

The fed­eral claim was that Act 508 vi­o­lated the Equal Pro­tec­tion Clause of the 14th Amend­ment, which re­quires that all sim­i­larly sit­u­ated peo­ple or en­ti­ties be treated alike.

Miller said the liquor stores had to show that the state’s vary­ing rules for wine-sell­ing gro­cery stores and liquor stores isn’t “ra­tio­nally re­lated to any le­git­i­mate gov­ern­ment in­ter­est.”

The liquor stores had ar­gued that the gro­cers were sub­ject to “sub­stan­tially less rig­or­ous re­quire­ments” con­cern­ing re­stric­tions on the num­ber of per­mits avail­able per pop­u­la­tion and per­mis­si­ble lo­ca­tions, among other things. But at Mon­day’s hear­ing, Cas­teel tes­ti­fied that liquor stores are sub­ject to stricter rules be­cause they sell hard liquor, which gro­cery re­tail­ers don’t.

She also said that in en­act­ing Act 508, leg­is­la­tors pur­posely re­quired each re­tail gro­cery lo­ca­tion to seek a sep­a­rate per­mit and pro­hib­ited chain stores from re­ceiv­ing dis­counts from whole­salers by or­der­ing for sev­eral lo­ca­tions at once. She said quan­ti­ta­tive dis­counts are al­lowed for each lo­ca­tion, as long as the dis­counts for gro­cery re­tail­ers are iden­ti­cal to those avail­able to liquor stores.

Miller said tes­ti­mony showed that the two types of busi­nesses sell dif­fer­ent prod­ucts; that liquor stores de­rive nearly 100 per­cent of their rev­enue from the sale of al­co­holic bev­er­ages, while gro­cery stores may not de­rive more than 20 per­cent of their gross sales from the sale of al­co­holic bev­er­ages; and that Act 508 was in­tended, in part, to raise rev­enue for the state, with 100 per­cent of fees for gro­cery-store wine per­mits be­ing used to sup­port Arkansas wine pro­duc­tion and tourism.

The liquor stores’ law­suit also in­cludes claims that Act 508 con­flicts with other state laws and the state’s “pub­lic pol­icy.” But Miller said those claims also aren’t likely to suc­ceed, be­cause the laws are re­quired to be in­ter­preted so as to “rec­on­cile pro­vi­sions to make them con­sis­tent, har­mo­nious and sen­si­ble in an ef­fort to give ef­fect to ev­ery part,” and be­cause a more re­cent statute al­ways pre­vails

over an older statute.

He also noted that un­der case law that ap­plies in the East­ern District of Arkansas, “a gen­eral statute must yield when there is a spe­cific statute in­volv­ing the same sub­ject mat­ter.”

He said the lan­guage of Act 508 “un­der­scores the Leg­is­la­ture’s choice that one per­mit al­lows wine to be sold at one phys­i­cal lo­ca­tion, with­out re­gard to own­er­ship.”

Miller also wrote: “The fact that Act 508 states, ‘An order of wine in­ven­tory for one (1) lo­ca­tion shall not be com­bined with an order for an­other lo­ca­tion in a man­ner that would re­sult in a cu­mu­la­tive dis­count or quan­tity dis­count, or both,’ fur­ther demon­strates the fact the leg­is­la­ture em­braced the abil­ity of mul­ti­ple dis­tinct lo­ca­tions of chain gro­cery stores to ob­tain wine per­mits. … Oth­er­wise, there would be no need to in­clude lan­guage aimed at

lev­el­ing com­pe­ti­tion be­tween chain gro­cery stores and liquor stores.”

Paul James, a Lit­tle Rock at­tor­ney who rep­re­sented the liquor stores, said Tues­day that he hadn’t yet had a chance to talk to all of his clients about the rul­ing, but, “We ap­pre­ci­ate Judge Miller giv­ing us a hear­ing, an op­por­tu­nity to be heard be­fore the ABC meets to­mor­row. We pre­sented proof, and we re­spect his opin­ion, but we are dis­ap­pointed.”

James said the plain­tiffs wouldn’t make an ef­fort to seek any other kind of le­gal re­lief to block the per­mit process be­fore today.

Al­though the case will still be “an ac­tive ac­tion” in Pu­laski County Cir­cuit Court, where it was orig­i­nally as­signed to Judge Alice Gray, James said he was un­sure Tues­day if and how the case will pro­ceed.

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