Judge: State must pay legal fees in wine-delivery case

PROVIDENCE — The state is asking a federal judge to reconsider an order striking evidence and directing it to pay attorneys fees for failing to properly disclose new evidence in a lawsuit challenging the state’s ban on out-of-state retailers delivering wines to Rhode Islanders’ doorsteps.

U.S. District Chief Judge John J. McConnell Jr. late last month ordered the state to pay legal fees associated with the out-of-state wine interests’ motion urging the court to strike down the state’s retail liquor sales regime as unconstitutional. The judge found that the state’s failure to disclose statements from five new witnesses and 537 pages of new documents had rendered that motion “meaningless.”

Federal court rules require parties to “supplement written disclosures and discovery responses whenever a prior disclosure or response may be incomplete or incorrect, or when new facts come to light or change.”

McConnell observed that when he asked the parties at an Oct. 12 chambers conference if they would need to add evidence, “all parties said emphatically that the Court could decide the issue on remand ‘on the existing record.’”

“Here, not only did the state not timely supplement [the record], but it also did not inform the Court and opposing counsel that it intended to produce extensive undisclosed evidence into the record. The consequences of this failure by the State are that the Plaintiffs prepared and filed a meaningless memorandum because it was drafted without knowledge of the added evidence, which the state did not disclose,” McConnell wrote.

The wine interests urged the court to strike the undisclosed evidence.

“Such a sanction, which might otherwise seem to the Court to be a suitable sanction for this conduct, is too extreme in this case. The question of the constitutionality of a state statute is at stake here,” McConnell said.

McConnell struck the evidence, but directed the parties to determine a new discovery and briefing schedule, this time with any new witnesses and evidence properly disclosed.

The state now asks McConnell to reconsider based on the state’s “good faith” belief that they were permitted to submit supplemental evidence following the inchambers discussion.

“Counsel for the State stated that although the existing record was robust, especially as current counsel for the State was not yet fully familiar with that existing record, Defendants may wish to supplement the record and Defendants would want leave to be able to provide supplemental evidence or exhibits along with their supplemental submission,” Special Assistant Attorney General Lionel Joseph Dutreix IV wrote.

Dutreix cited his handwritten notes he took during the conference as he observed at that time in the capacity of a law clerk. Court records show that Dutreix was admitted to the bar Nov. 15 and entered an appearance in the case Jan. 22, the same day the new evidence was entered in the case.

The notes read “supplemental submissions with leave to attach exhibits,” the state said.

Dutreix, who was joined by Assistant Attorney General Katherine Connolly Sadeck, said the state “respectfully” disagreed with McConnell’s recollection that all parties emphatically stated the court could decide the issue “on the existing record.” Dutreix, instead, recalled the state expressly saying it would want leave to supplement its evidence, as he asserted is reflected in a court order.

Brian Hodge, spokesman for Attorney General Peter F. Neronha, did not respond to an inquiry about Judge McConnell’s order or the state’s motion.

Lawyers for wine enthusiasts: ‘We are not psychics’

Lawyers for wine enthusiasts Kambis Anvar, of East Greenwich, and Michelle Drum, a Newport resident, argue in objecting to the state’s motion that McConnell “appropriately exercised” his discretion in ordering the state to cover the fees.

Lawyer James A. Tanford noted that the undisclosed evidence doubled the size of the record, added five witnesses, and should have been disclosed to allow the wine interests to decide if rebuttal evidence was needed.

Tanford emphasized that McConnell could have struck the evidence altogether, but now the parties must engage in a new discovery and briefing process.

“The defendants had not disclosed any new evidence or witnesses that might require more discovery and we are not psychics. … The defendants’ error, whether intentional gamesmanship or inadvertence, caused a significant waste of the plaintiffs’ attorneys time preparing a brief based on an incomplete record, for which an award of attorneys’ fees is appropriate,” Tanford said.

McConnell had previously upheld the state’s threetier liquor regime as constitutional, concluding that the state’s wine sales framework was “grounded in its pursuit of public health and safety” and therefore did not violate the dormant Commerce Clause, which prohibits state protectionism.

A 1st U.S. Circuit Court of Appeals panel ruled in September that Rhode Island’s ban on bottles being shipped from out of state straight to buyers discriminated against retailers from other states.

The appeals panel, composed of three judges from Rhode Island, ruled that the state liquor law “facially discriminates” against out-of-state retailers by limiting retail licenses exclusively to state residents or instate businesses and by requiring that licensees maintain a physical presence in state.

The court sent the case back to McConnell to examine whether the state can prove that the law discriminating against out-of-state wine sellers is necessary to protect the health and safety of Rhode Islanders.

State asserts that liquor restrictions are a matter of public safety

In asking the court to uphold the liquor laws and regulations, the state argued in January they are necessary for public safety and health.

The state referenced a 2022 study that showed a precipitous climb in alcohol home delivery early in the COVID pandemic. The study, published in the Substance Abuse Journal, showed that online alcohol sales grew by 234% between March 1, 2020, and April 18, 2020, after states loosened their liquor laws.

With that climb came an increase in binge drinking across the board. Women, people with children, and Black Americans disproportionately increased their consumption, the study said.

The state also looked to national studies reflecting Rhode Island’s “well-documented” alcohol abuse problem, as compared with national trends. A 2021 study revealed that the estimated rate of alcohol and binge alcohol use in Rhode Island outstripped the national average, the state said.

“Rhode Island’s laws that restrict direct shipment of alcohol from out-of-state retailers are necessary to promote the health and safety of Rhode Islanders,” Dutreix IV wrote.