Court Opinion

ID: 3163560
Source: CourtListenerOpinion
Date Created: 2015-12-17 16:04:12.220572+00
Date Added: 2024-06-11T12:02:18.802016
License: Public Domain

Dec 17 2015, 8:09 am

ATTORNEYS FOR APPELLANT                                   ATTORNEYS FOR APPELLEES
Richard A. Smikle                                         Gregory F. Zoeller
Derek R. Molter                                           Attorney General of Indiana
Ice Miller LLP                                            Thomas M. Fisher
Indianapolis, Indiana                                     Solicitor General
Barry S. Simon                                            Heather Hagan McVeigh
Kannon K. Shanmugam                                       Lara Langeneckert
Allison B. Jones                                          Deputy Attorneys General
Amy Mason Saharia                                         Indianapolis, Indiana
Katherine Moran Meeks
Williams & Connolly LLP                                   ATTORNEYS FOR AMICUS CURIAE
Washington, D.C.                                          WINE & SPIRITS DISTRIBUTORS OF
                                                          INDIANA
                                                          Michael P. Maxwell, Jr.
                                                          John B. Herriman
                                                          Clark Quinn Moses Scott &
                                                          Grahn, LLP
                                                          Indianapolis, Indiana
                                                          ATTORNEYS FOR AMICUS CURIAE
                                                          THE INDIANA BEVERAGE
                                                          ALLIANCE
                                                          Steven M. Badger
                                                          Matthew P. Thielemann
                                                          Badger Law
                                                          Carmel, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015                   Page 1 of 14
      Monarch Beverage Company,                                 December 17, 2015
      Inc.,                                                     Court of Appeals Case No.
      Appellant-Plaintiff,                                      49A02-1504-PL-245
                                                                Appeal from the
              v.                                                Marion Superior Court
                                                                The Honorable Timothy Wayne
      David Cook, in his official                               Oakes, Judge
      capacity as Chairman of the                               Trial Court Cause No.
      Indiana Alcohol and Tobacco                               49D02-1403-PL-6456
      Commission, et al.,
      Appellees-Defendants.

      Kirsch, Judge.

[1]   Indiana’s Alcoholic Beverages Law, which consists of several statutory

      provisions (“the Prohibited Interest Provisions”), prohibits alcohol wholesalers

      from holding interests in both beer and liquor permits. Monarch Beverage

      Company, Inc. (“Monarch”) filed a complaint against David Cook, in his

      official capacity as Chairman of the Indiana Alcohol and Tobacco

      Commission, et al. (“the State”), alleging that the Prohibited Interest Provisions

      violate the Equal Privileges and Immunities Clause of the Indiana Constitution

      because the statutes discriminate on their face against beer wholesalers by

      prohibiting beer wholesalers from seeking a permit to distribute liquor and such

      restraint is not based upon an inherent difference between beer and liquor

      wholesalers. The trial court granted summary judgment in favor of the State

      and against Monarch, finding the statutes to be constitutional. Monarch

      Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015           Page 2 of 14
      appeals the trial court’s order, alleging that the trial court erred in its

      determination that the statutes are not unconstitutional.

[2]   We affirm.

                                   Facts and Procedural History1
[3]   Indiana extensively regulates the alcoholic beverage industry in the state and

      has done so since the end of Prohibition. The general purposes of the

      regulation of alcohol in Indiana are: (1) “[t]o protect the economic welfare,

      health, peace, and morals of the people of this state”; (2) “[t]o regulate and limit

      the manufacture, sale, possession, and use of alcohol and alcoholic beverages”;

      and (3) “[t]o provide for the raising of revenue.” Ind. Code § 7.1-1-1-1. When

      Prohibition ended, Indiana, like most other states, adopted a three-tier system

      for regulating the production, distribution, and sale of alcohol. The first tier

      consists of brewers, vintners, and distillers, who manufacture alcoholic

      products. The second tier is comprised of wholesalers who purchase alcoholic

      products from the manufacturers and sell the products to the retailers and

      dealers. The third tier consists of retailers and dealers who sell alcoholic

      products directly to consumers.2 With limited exceptions, no business holding a

      1
       Oral argument was heard on this case on December 1, 2015 in the Indiana Supreme Court courtroom in
      Indianapolis, Indiana. We commend counsel on the excellent quality of their written and oral advocacy.
      2
       Retailers include bars and restaurants that sell alcohol for on-premises consumption; dealers include liquor
      and grocery stores that sell alcohol for off-premises consumption.

      Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015                       Page 3 of 14
      license for one of the three tiers may hold an interest in a license for any other

      tier. See Ind. Code §§ 7.1-5-9-2, 7.1-5-9-4, 7.1-5-9-6 to -10.

[4]   The focus of this litigation is on the second tier, the wholesalers of alcoholic

      products. Wholesalers are central to the alcohol regulatory system by creating a

      buffer between the manufacturers and retailers; they also serve as a port of entry

      for out-of-state alcoholic products imported into the state, collect excise taxes

      on alcohol, and ensure that alcoholic products are sold only to licensed retailers

      and dealers.

[5]   In order to wholesale or distribute alcohol in Indiana, one must obtain a permit

      issued for that limited purpose by the Indiana Alcohol and Tobacco

      Commission (“the Commission”). See Ind. Code §§ 7.1-3-3-1, 7.1-3-8-1. 7.1-3-

      13-1. The Commission authorizes the distribution of alcohol by type, i.e., beer,

      wine, liquor, and requires a separate permit to distribute each type of alcohol.

      Wholesalers are regulated by the Commission in several ways, including being

      prohibited from tying purchases of one type of alcoholic product to purchases of

      another, from imposing minimum purchase requirements on retailers and

      dealers, and from entering into exclusivity contracts with retailers and dealers.

      See Ind. Code § 7.1-5-5-7; 905 Ind. Admin. Code 1-5.1-1. Additionally,

      wholesalers must make their prices known in writing to their customers, and the

      prices must be made available to all retailers and dealers on a

      nondiscriminatory basis for at least seven days after they are publicized. See

      I.C. 7.1-5-5-7(a); 905 I.A.C. 1-31-2.

      Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 4 of 14
[6]   The Commission also regulates the type and number of permits a particular

      wholesaler may hold at any given time. The Commission issues separate

      permits for the wholesale distribution of beer, wine, and liquor. Beer wholesale

      permits are issued on a county-by-county basis, with a limit on the number of

      wholesale permits that can be issued by each county based on the county’s

      population. Ind. Code § 7.1-3-22-2. Wine and liquor wholesale permits,

      however, are issued statewide without any limit to the number of permits that

      can be awarded. See generally Ind. Code §§ 7.1-3-22-1 to -10. Under Indiana

      Code sections 7.1-5-9-3, 7.1-5-9-4, 7.1-5-9-6, and 7.1-3-3-19 (“the Prohibited

      Interest Provisions”), a wholesaler may obtain one of the three individual

      permits, both a wine and a beer permit, or both a wine and a liquor permit.

      However, a wholesaler may not hold both a beer and a liquor wholesale permit.

      I.C. 7.1-5-9-3(b). Despite this restriction, any wholesaler who holds permits for

      wine and for liquor may also distribute up to a million gallons a year of flavored

      malt beverages, which are a type of beer. Ind. Code §§ 7.1-3-8-3, 7.1-3-13-3(d).

      Likewise, a wholesaler who hold permits for wine and for beer may distribute

      brandy and certain cream-based liquors. Ind. Code §§ 7.1-3-3-5, 7.1-3-13-3.

[7]   Wholesalers who have acquired a permit for beer receive certain statutory

      franchise protections. One such franchise protection makes it unlawful for a

      manufacturer of beer to terminate an agreement or contract with a beer

      wholesaler “unfairly and without due regard for the equities of the other party.”

      Ind. Code § 7.1-5-5-9(c). Additionally, when a beer supplier obtains the rights

      to a particular brand of beer from another beer supplier, the new supplier

      Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 5 of 14
      cannot transfer the distribution right to a new wholesaler unless that new

      wholesaler compensates the existing wholesaler for the fair market value of the

      existing wholesaler’s right to distribute the beer. Ind. Code §§ 7.1-3-25-7. 7.1-3-

      25-9, 7.1-3-25-13. Under such statutory protection, a beer wholesaler that loses

      an account due to a transfer of rights in the supply tier will be protected from

      bearing the financial burden of the transfer. If a violation of these franchise

      protections is suspected, a beer wholesaler can report it to the Commission,

      who is required to investigate and enforce injunctions under the provisions.

      Ind. Code § 7.1-2-3-26. A wholesaler who holds a permit for wine or liquor or

      both does not receive such protections by the Commission.

[8]   Monarch is a wholesaler of alcoholic products in Indiana and currently

      possesses permits to distribute both beer and wine. Monarch has been a

      wholesaler of beer since 1947, when it began operation, and a wholesaler of

      wine since 1976. Monarch distributes wine in all ninety-two counties in

      Indiana and beer in eighty-nine counties and is the exclusive distributor of

      MillerCoors beer in seventy of those eighty-nine counties. It distributes wine

      manufactured by E. & J. Gallo Winery (“Gallo”). Gallo also manufactures

      four liquor products, which Gallo would like Monarch to distribute as well;

      however, because Monarch holds a permit for the wholesale of beer, under

      Indiana law, it cannot also obtain a permit to wholesale liquor.

[9]   On March 5, 2014, Monarch filed a complaint against the State, alleging that

      Indiana’s restriction against the joint wholesaling of beer and liquor,

      specifically, the Prohibited Interest Provisions, violates the Equal Privileges and

      Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 6 of 14
       Immunities Clause of the Indiana Constitution. After discovery, the parties

       filed cross-motions for summary judgment. The State contended that Monarch

       could not maintain an Equal Privileges and Immunities claim because the

       Prohibited Interest Provisions treated all wholesalers alike and that, even if they

       did not, the statutes were justified as they are rationally related to the legitimate

       public purposes underlying Indiana’s regulation of the alcoholic beverage

       industry. Monarch asserted that an Equal Privileges and Immunities claim

       existed because the Prohibited Interest Provisions singled out beer wholesalers

       for disparate treatment and that such treatment is not justified by an inherent

       and substantial difference between beer wholesalers and liquor wholesalers.

[10]   On April 22, 2015, the trial court issued an order denying Monarch’s motion

       for summary judgment and granting summary judgment in favor of the State.

       In its order, the trial court did not agree with Monarch that the Equal Privileges

       and Immunities Clause supports its “challenge of a discriminatory restraint on

       beer wholesalers” because at the “time of election of which wholesaler to be,

       beer or liquor, the wholesalers stand equal.” Appellant’s App. at 11. The trial

       court stated its belief that the solution for Monarch “is a political one, best

       suited for the halls of the Statehouse, and not a constitutional one, found at the

       courthouse.” Id. Monarch now appeals.

                                       Discussion and Decision
[11]   “When a party claims that a statute is unconstitutional on its face, the claimant

       assumes the burden of demonstrating that there are no set of circumstances

       under which the statute can be constitutionally applied.” Meredith v. Pence, 984
       Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 7 of 14
       N.E.2d 1213, 1218 (Ind. 2013) (citing Baldwin v. Reagan, 715 N.E.2d 332, 337

       (Ind. 1999)). “[I]n reviewing the constitutionality of a statute, ‘every statute

       stands before us clothed with the presumption of constitutionality unless clearly

       overcome by a contrary showing.’” Id. (quoting Baldwin, 715 N.E.2d at 338).

               Our methodology for interpreting and applying provisions of the
               Indiana Constitution is well established. It requires a search for
               the common understanding of both those who framed it and
               those who ratified it. To determine this intent, we examine the
               language of the text in the context of the history surrounding its
               drafting and ratification, the purpose and structure of our
               constitution, and case law interpreting the specific provisions.
               We look to history to ascertain the old law, the mischief, and the
               remedy. A statute challenged under the Indiana Constitution
               stands before this Court clothed with the presumption of
               constitutionality until clearly overcome by a contrary showing.
               The party challenging the constitutionality of a statute bears the
               high burden of overcoming this presumption and establishing a
               constitutional violation, and any doubts are resolved in favor of
               the legislature.

       Paul Stieler Enters., Inc. v. City of Evansville, 2 N.E.3d 1269, 1272-73 (Ind. 2014)

       (internal citations and quotations omitted).

[12]   When reviewing the grant of summary judgment, our standard of review is the

       same as that of the trial court. Seth v. Midland Funding, LLC, 997 N.E.2d 1139,

       1140 (Ind. Ct. App. 2013) (citing Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904

       N.E.2d 1267, 1269-70 (Ind. 2009)). We stand in the shoes of the trial court and

       apply a de novo standard of review. Old Utica Sch. Pres., Inc. v. Utica Twp., 7

       N.E.3d 327, 330 (Ind. Ct. App. 2014) (citing FLM, LLC v. Cincinnati Ins. Co.,

       Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 8 of 14
       973 N.E.2d 1167, 1173 (Ind. Ct. App. 2012), trans. denied), trans. denied. Our

       review of a summary judgment motion is limited to those materials designated

       to the trial court. Ind. Trial Rule 56(H); FLM, 973 N.E.2d at 1173. Summary

       judgment is appropriate only where the designated evidence shows there are no

       genuine issues of material fact and the moving party is entitled to judgment as a

       matter of law. T.R. 56(C). For summary judgment purposes, a fact is

       “material” if it bears on the ultimate resolution of relevant issues. FLM, 973

       N.E.2d at 1173. We view the pleadings and designated materials in the light

       most favorable to the non-moving party. Id. Additionally, all facts and

       reasonable inferences from those facts are construed in favor of the non-moving

       party. Id. (citing Troxel Equip. Co. v. Limberlost Bancshares, 833 N.E.2d 36, 40

       (Ind. Ct. App. 2005), trans. denied).

[13]   The party who lost in the trial court has the burden of demonstrating that the

       grant of summary judgment was erroneous. Id. We will affirm upon any

       theory or basis supported by the designated materials. Id. When a trial court

       grants summary judgment, we carefully scrutinize that determination to ensure

       that a party was not improperly prevented from having his or her day in court.

       Id. In this case, the parties filed cross-motions for summary judgment;

       however, the fact that cross-motions for summary judgment were made does

       not alter our standard of review. Mahan v. Am. Standard Ins. Co., 862 N.E.2d

       669, 676 (Ind. Ct. App. 2007), trans. denied. “Instead, we must consider each

       motion separately to determine whether the moving party is entitled to

       judgment as a matter of law.” Id.

       Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 9 of 14
[14]   Monarch argues that the Prohibited Interest Provisions are unconstitutional

       because the statutes violate Article 1, section 23 of the Indiana Constitution, the

       Equal Privileges and Immunities Clause. In Collins v. Day, 644 N.E.2d 72 (Ind.

       1994), our Supreme Court “engaged in a comprehensive review of the history

       and purposes animating the adoption of Section 23 as part of Indiana’s 1851

       Constitution and of the subsequent case law, particularly our early decisions

       that were contemporaneous with its adoption and which were ‘accorded strong

       and superseding precedential value.’” League of Women Voters of Ind., Inc. v.

       Rokita, 929 N.E.2d 758, 769 (Ind. 2010) (quoting Collins, 644 N.E.2d at 77).

       Combining history, text, and subsequent case law, the Court adopted a

       “superseding analytical formulation that, when statutes grant unequal privileges

       or immunities to differing persons or classes of persons, the Equal Privileges

       and Immunities Clause imposes two requirements”: (1) “‘the disparate

       treatment accorded by the legislation must be reasonably related to inherent

       characteristics [that] distinguish the unequally treated classes’”; and (2) “‘the

       preferential treatment must be uniformly applicable and equally available to all

       persons similarly situated.’” Id. at 769-70 (quoting Collins, 644 N.E.2d at 80).

       Additionally, in determining whether a statute complies with or violates Section

       23, we must exercise substantial deference to legislative discretion. Id. at 770.

[15]   Monarch argues that the Prohibited Interest Provisions are facially

       discriminatory, and the trial court erred when it determined that Monarch

       cannot sustain an Equal Privileges and Immunities claim because the

       Prohibited Interest Provisions subject all wholesalers to the same discriminatory

       Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 10 of 14
       restraint. Monarch contends that the Prohibited Interest Provisions are

       “quintessential examples of laws that classify” because the laws clearly

       designate a trait, the possession of a beer wholesaler permit, and impose

       burdens on those that hold such a trait. Monarch alleges that the Prohibited

       Interest Provisions specifically deny to anyone holding a beer wholesaler’s

       permit the privilege of holding a liquor wholesaler’s permit, and likewise,

       anyone holding a liquor wholesaler’s permit from holding a beer wholesaler’s

       permit, while affording that opportunity to everyone else.

[16]   As a threshold matter, before reaching the two-part test from Collins, it is

       necessary that an appellant identify two groups of people who are disparately

       treated by the statute the appellant challenges. Robertson v. Gene B. Glick Co.,

       960 N.E.2d 179, 185 (Ind. Ct. App. 2011) (citing Collins, 644 N.E.2d at 78-79),

       trans. denied. Therefore, before we can engage in the Equal Privileges and

       Immunities analysis, Monarch must demonstrate that the challenged statutes

       grant unequal privileges or immunities to differing persons or classes of persons.

       League of Women Voters, 929 N.E.2d at 769-70. In other words, Monarch must

       show that the Prohibited Interest Provisions allow for disparate treatment of

       beer wholesalers and another class of persons.

[17]   In its order granting summary judgment to the State and denying summary

       judgment to Monarch, the trial court did not agree with Monarch’s contention

       that the Prohibited Interest Provisions created a discriminatory restraint on beer

       wholesalers and that, therefore, the Equal Privileges and Immunities Clause

       analysis applied to Monarch’s challenge. The trial court stated that, “[a]t the

       Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 11 of 14
       time of election of which wholesaler to be, beer or liquor, the wholesalers stand

       equal [and] [o]nly after the election by statute do the subsequent and

       consequential restrictions apply.” Appellant’s App. at 11. Finding that Monarch

       had not met the threshold requirement that an appellant must identify two

       groups of people who are disparately treated by the challenged statute, the trial

       court did not reach the two-part test.

[18]   Under the Prohibited Interest Provisions, a wholesaler may obtain one of the

       three individual permits, both a wine and a beer permit, or both a wine and a

       liquor permit. However, a wholesaler may not hold both a beer and a liquor

       wholesale permit. I.C. 7.1-5-9-3(b). Therefore, the Prohibited Interest

       Provisions treat all persons and all wholesalers of alcohol exactly the same.

       Each person who wishes to become an alcohol wholesaler comes to the

       Commission with the same basic choice, whether to become a wholesaler of

       beer or a wholesaler of liquor. At the time the person makes a choice, they are

       treated equally, and the Prohibited Interest Provisions do not somehow force

       some persons to become beer wholesalers and others to become liquor

       wholesalers. After the person has made the choice to wholesale either beer or

       liquor, they are still treated equally as beer and liquor wholesalers are equally

       prohibited from obtaining permits to distribute any other alcohol except for

       wine. No one may hold an interest in both a beer and a liquor permit.

[19]   Monarch does not identify any similarly situated class that receives preferential

       treatment under the Prohibited Interest Provisions. Monarch contends that the

       Prohibited Interest Provisions “deny to anyone holding a beer wholesaler’s

       Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 12 of 14
       permit the privilege of holding a liquor wholesaler’s permit, and vice versa,

       while affording that opportunity to everyone else.” Appellant’s Br. at 17 (emphasis

       added). Monarch does not explain who the phrase everyone else refers to and

       identifies no particular class that is treated differently under the Prohibited

       Interest Provisions. Pursuant to the Prohibited Interest Provisions, all persons

       who seek to obtain a wholesaler’s permit from the Commission are treated

       equally and have an equal opportunity to choose to become either a beer

       wholesaler or a liquor wholesaler, and after a choice has been made, beer and

       liquor wholesalers are equally prohibited from acquiring a permit to distribute

       any other alcohol except for wine. There can be no Equal Privileges and

       Immunities claim where all classes of person are treated equally. Robertson, 960

       N.E.2d at 185. The Prohibited Interest Provisions preclude any person from

       acquiring permits to become a wholesaler of both beer and liquor and treat

       Monarch no differently than other persons.

[20]   Because Monarch has not identified any group of people who are disparately

       treated by the Prohibited Interest Provisions and allowed to obtain permits to

       distribute both beer and liquor, it has failed to meet the threshold requirement

       that the challenged statutes must grant unequal privileges or immunities to

       differing classes of persons. See League of Women Voters, 929 N.E.2d at 769-70.

       Therefore, we conclude that Monarch has not shown sufficient disparate

       treatment to invoke the Equal Privileges and Immunities analysis, and the

       Prohibited Interest Provisions are constitutional. The trial court did not err in

       Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 13 of 14
       granting summary judgment in favor of the State and in denying summary

       judgment to Monarch.

[21]   Affirmed.

       Najam, J., and Barnes, J., concur.

       Court of Appeals of Indiana | Opinion 49A02-1504-PL-245 | December 17, 2015   Page 14 of 14