Court Opinion

ID: 2767545
Source: CourtListenerOpinion
Date Created: 2015-01-08 16:25:45.057386+00
Date Added: 2024-06-11T11:27:31.872240
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

ASSOCIATION OF WASHINGTON                            )
SPIRITS AND WINE DISTRIBUTORS,                       )
                                                     )               No. 90561-4
               Appellant,                            )
v.                                                   )                 En Bane
                                                     )
WASHINGTON STATE LIQUOR CONTROL                      )
BOARD,                                               )     Filed       JAN 0 8 2015
                                                     )
                Respondent,                          )
                                                     )
and                                                  )
                                                     )
WASHINGTON RESTAURANT ASSOCIATION,                   )
NORTHWEST GROCERY ASSOCIATION, and                   )
COSTCO WHOLESALE CORPORATION,                        )
                                                     )
                Intervenor-Respondents.              )
                                                     )
                                                     )

      WIGGINS, J.-We granted direct review of this challenge to the Washington

State Liquor Control Board's (Board) spirits distribution licensing fee structure brought

by Association of Washington Spirits and Wine Distributors (Association). The

Association, a trade group composed of distributors licensed under RCW 66.24.055,

challenges the Board's decision to exempt distillers who distribute their own

manufactured spirits and others acting as distributors pursuant to certificates of

approval from contributing to a shortfall of $104.7 million in licensing fees imposed on
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

persons holding spirits distributor licenses. The Association asks us to hold that the

distillers must contribute proportionately to eliminating the shortfall.

       We reject the Association's arguments. The plain language of Initiative Measure

No. 1183 (Initiative), supported by the context in which the language appears and the

overall scheme for licensing participants in the spirits industry, enables the Board to

impose the entire shortfall on the spirits distributors without contribution from the

distillers. We therefore hold that the Board acted within its authority and did not act

arbitrarily or capriciously. Additionally, the Board did not violate the privileges and

immunities clause of article I, section 12 of the Washington State Constitution. The

decision of the Thurston County Superior Court is affirmed.

                                          FACTS

  I.   History and Overview of Washington's Liquor Control Laws

       Washington adopted the Washington State Liquor Act (Liquor Act) to regulate

intoxicating liquors following the repeal of federal law prohibiting the manufacture,

sale, or transportation of alcoholic beverages. LAWS OF 1933, Ex. SEss., ch. 62; Title

66 RCW. The Liquor Act created the Washington State Liquor Control Board, RCW

66.08.012, and established distinct regulatory systems to control the distribution and

sale of different types of liquor. Wash. Ass'n for Substance Abuse & Violence

Prevention v. State, 174 Wash. 2d 642, 647, 278 P.3d 632 (2012). The legislature

enacted a three-tier system to govern the distribution and sale of beer and wine, which

provided different regulations and licensing requirements for manufacturers,

distributors, and retailers. /d. This three-tier system allowed the State to control the

prices at which manufacturers and distributors sold beer and wine. /d. at 648.

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Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

However, unlike the system that applied to beer and wine, only the State could

distribute and sell spirits. 1 /d. (citing former RCW 66.16.010 (2005); Wash. State

Liquor     Control    Bd.,   FY     2010     Annual     Report     9·-1 0,   available   at

http://www.liq. wa. gov/publications/20 10-annual-report-fi nal-web. pdf).

         In 2011, Washington voters passed the Initiative, which dramatically changed

the State's approach to regulating the distribution and sale of liquor in Washington. /d.

at 649. The Initiative ended the State's exclusive rights to distribution and retail sales,

allowing private distributors to become licensed to distribute spirits and permitting a

limited number of retail stores to sell spirits. The Initiative imposes licensing fees in

exchange for the ability to sell and distribute spirits. There are currently four different

licenses in Washington that allow the distribution of spirits.

         Petitioner Association is a trade group of distributors operating pursuant to

"[s]pirits distributor license[s]." RCW 66.24.055(1) (boldface omitted). A "spirits

distributor license" is the broadest grant of authority to distribute under the Initiative,

authorizing the licensee to purchase spirits from manufacturers, distillers, or other

suppliers and resell the spirits to a variety of establishments. /d. This license places

very few limits on the sources from which a licensee may purchase or distribute spirits.

         In addition to the distribution rights granted to licensees through a "spirits

distributor license," RCW 66.24.055, licensed in-state distillers may distribute their

own products directly to retailers. RCW 66.24.640. Distillers who choose to distribute

1  "Spirits" means "any beverage which contains alcohol obtained by distillation, except
flavored malt beverages, but including wines exceeding twenty-four percent of alcohol by
volume." RCW 66.04.01 0(41 ).

                                             3
Ass'n of Wash. Spirits & Wine Oistribs. v. Liquor Control Bd.,. No. 90561-4

their own spirits enjoy limited distribution rights. See RCW 66.24.140, .640; WAC 314-

28-030(1 ). Importers and out-of-state spirits distillers may also act as distributors by

obtaining one of three "certificates of approval." RCW 66.24.640; WAC 314-23-030(2).

These certificates provide specific, limited distribution authority to manufacturers,

importers, or bottlers.    RCW 66.24.640; WAC 314-23-030(2).             We refer to the

certificate holders and the distiller distributors collectively as "distillers" because they

are treated similarly as to the fees at issue here.

       In addition to the basic licensing fees imposed on spirits distributors, distillers

distributing their own products, and other certificate holders, RCW 66.24.055(3)

created two fees designed to replace the revenue that the State lost when spirits

distribution was privatized. See. generally Wash. Ass'n for Substance Abuse &

Violence Prevention, 174 Wash. 2d at 671 (Wiggins, J., dissenting) (citing LAWS OF 2012,

ch. 2 § 101 (2)(k) (codified at RCW 66.24.055(3))). Subsection (3)(a)(i) imposes a 10

percent2 fee of all spirits sales by "spirits distributor licensee[s]" (subsection (3)(a)

percentage fee). Subsection (3)(c) provides that if the subsection (3)(a) percentage

fee did not generate $150 million in the first year under the new statute, the shortfall

between the collected fees and $150 million was to be equitably assessed against "all

persons holding spirits distributor licenses," according to rules to be promulgated by

the Board (subsection (3)(c) shortfall fee).

2 This fee drops to five percent of total revenue 28 months after licensure. RCW
66.24.055(3)( a)(ii).

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Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

      The entire dispute in this case comes down to who must contribute to payment

of the subsection (3)(c) shortfall fee. The Association argues the distillers must

contribute, and the Board argues the opposite.

      Acting under its rule-making authority under the Washington Administrative

Procedure Act, chapter 34.05 RCW, the Board determined that distillers distributing

their own spirits are subject to the subsection (3)(a) percentage fee. WAC 314-23-

030. The Board later adopted WAC 314-23-025 to enforce the subsection (3)(c)

shortfall fee. Although the Board had imposed the subsection (3)(a) percentage fee

on distillers, the Board did not require the distillers to contribute to subsection (3)(c)

shortfall fee. Rather, the Board determined that the shortfall fee would be imposed

only on "persons holding a spirits distribution license." WAC 314-23-025. Thus, while

the Board requires that both distributors and distillers pay the subsection (3)(a)

percentage fee, only distributors paid the subsection (3)(c) shortfall fee.

       In 2012, businesses holding spirits distributor licenses generated nearly $450

million in sales. The distillers generated approximately $15 million in sales arising from

their distribution rights; the $1.5 million fees collected from these sales did not

contribute to the $150 million statutory requirement. The combined fees assessed on

persons holding a spirits distributor license totaled just over $45.3 million, leaving a

$104.7 million shortfall. Pursuant to WAC 314-23-025, spirits distributor license

holders paid this entire amount. The overwhelming majority of sales in Washington

were from spirits distributors; had the distillers been required to pay the subsection

(3)(c) shortfall fee, the distillers would have been responsible for only $3 million of

what would have been a $103.2 million shortfall.

                                            5
Ass'n of Wash. Spirits & Wine Distribs.   v.   Liquor Control Bd., No. 90561-4

 II.   Procedural History

       The Association sought a declaratory judgment pursuant to the Washington

Administrative Procedure Act, RCW 34.05.570(2)(c), that WAC 314-23-025 is invalid.

After hearing oral argument, the superior court acknowledged that the Board had

taken arguably inconsistent positions with respect to the distillers. Nonetheless, the

court denied the petition, rejecting the Association's assertions that the Board

exceeded its statutory authority or violated the privileges and immunities clause. The

Association appealed, and we granted direct review.

                                       ANALYSIS

  I.   Standard of Review

       The Washington Administrative Procedure Act governs the standard of review

of a challenge to an agency rule. Under RCW 34.05.570(2)(c), an agency rule may be

invalidated only if it (1) violates constitutional provisions, (2) exceeds the agency's

statutory rule-making authority, (3) is arbitrary and capricious in that it could not have

been the product of a rational decision-maker, or (4) was adopted without complying

with statutory rule-making procedures. Determining the extent of rule-making authority

is a question of law. Wash. Pub. Ports Ass'n        v.   Dep't of Revenue, 148 Wash. 2d 637,

645, 62 P.3d 462 (2003).

       '"We review questions of statutory interpretation de novo."' State v. Veliz, 176
Wash. 2d 849, 853-54, 298 P.3d 75 (2013) (quoting State v. Morales, 173 Wash. 2d 560,

567 n.3, 269 P.3d 263 (2012)). The court discerns legislative intent from the plain

language enacted by the legislature, considering the text of the provision in question,

the context of the statute in which the provision is found, related provisions,

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Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

amendments to the provision, and the statutory scheme as a whole. Dep't of Ecology

v. Campbell & Gwinn, LLC, 146 Wash. 2d 1, 9-10, 43 P.3d 4 (2002).
          Constitutional issues are questions of law that we also review de novo. State   v.
Gresham, 173 Wash. 2d 405, 419, 269 P.3d 207 (2012). We presume that statutes are

constitutional and place "'the burden to show unconstitutionality . . . on the

challenger."' In re Estate of Hambleton, _ Wn.2d _, 335 P.3d 398, 406 (2014)

(alteration in original) (quoting Amunrud   v. Bd. of Appeals, 158 Wash. 2d 208, 215, 143
P.3d 571 (2006)).

 II.      The Board Acted within Its Statutory Rule-Making Authority

          We hold that WAC 314-23-025 was properly promulgated pursuant to the

explicit directions of RCW 66.24.055(3)(c). The rule closely tracks the statutory

language and is consistent with the purpose and intent of the statute that it

implements. We therefore affirm the superior court.

       A. WAC 314-23-025 follows the plain language of the subsection (3)(c) shortfall
          fee

          RCW 66.24.055 establishes a "spirits distributor license" that grants spirits

distributors broad authority to purchase and distribute spirits. As the superior court

recognized, and the parties do not dispute, the statute is unambiguous. The statute

precisely defines the scope of the license that it creates, and it precisely defines the

fees attendant to obtaining that license. See W Telepage, Inc.    v. City of Tacoma Dep't
of Fin., 140 Wash. 2d 599, 609, 998 P.2d 884 (2000) (statute is not ambiguous if it defines

precisely the range of activity that falls within its purview). Courts are not obligated to

                                              7
    Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

    discern an ambiguity by imagining a variety of alternative interpretations. /d. at 608

    (citing State v. Tili, 139 Wash. 2d 107, 115, 985 P.2d 365 (1999)).

          To begin with, the language of RCW 66.24.055(3)(c) is clear: "[A]II persons

    holding spirits distributor licenses on or before March 31, 2013, must have paid

    collectively one hundred fifty million dollars or more in spirits distributor license fees."

    When a statute is clear on its face, we look only to the wording of the statute. W

    Telepage, Inc., 140 Wash. 2d at 609. Because the terms are defined within the statute,
1

    we need not look outside the statute to determine their meaning. State v. Smith, 117
Wash. 2d 263, 271, 814 P.2d 652 (1991) ('"Words are given the meaning provided by the

    statute or, in the absence of specific definition, their ordinary meaning."' (quoting State

    v. Standifer, 110 Wash. 2d 90, 92, 750 P.2d 258 (1988))).

           In addition to this clear and unambiguous language, the context of the statute

    also supports this interpretation. When we interpret a statute, we look to its placement

    within the entire statutory scheme. Campbell & Gwinn, 146 Wash. 2d at 9-10. Applying

    this principle, it is clear that the provisions of RCW 66.24.055 are geared specifically

    toward distributors.

           When we consider context, the Initiative clearly created several different

    licenses; each licensee operates under a unique classification with unique rights and

    attendant responsibilities. For example, distiller licenses allow entities to "blend[],

    rectify[,] and bottl[e]" spirits. RCW 66.24.140. Likewise, "spirits importer licenses,"

    RCW 66.24.160, and "spirits ... certificate of approval" licenses, RCW 66.24.640,

    have their own specific legal definitions. The "spirits distributor license" is created and

    defined by RCW 66.24.055(1 ), and subsection (3)(c) requires "all persons holding

                                                 8
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

spirits distributor licenses" to pay "collectively one hundred fifty million dollars or more

in spirits distributor license fees." Thus, the plain language of the subsection (3)(c)

shortfall fee applies only to persons holding the specifically defined "spirits distributor

license" created in subsection (1 ).

       The organization of RCW 66.24.055 provides further support. Subsection (1)

defines the spirits distributor license as authorizing the sale of spirits purchased from

a variety of sources to retailers and a number of other entities. The subsection also

authorizes export of any of the spirits purchased by the distributor.

       Subsections (3) and (4) of RCW 66.24.055 describe the fee structure for the

spirits distributor license. Subsection (3)(a) imposes a fee of 10 percent (eventually

dropping to 5 percent) on the sale of spirits, and subsection (3)(b) clarifies that the fee

is imposed only if the distributor is the first distributor in the State to have received the

spirits for sale. Additionally, subsection (3)(d) clarifies that a retailer must pay the fee

on sales if no spirits distributor has paid the fee on the spirits sold. Subsection (4)

provides that a spirits distributor must pay an annual license fee of $1,320 for each

licensed location. Analyzing the subsection (3)(c) shortfall fee in this context, it is clear

that the subsection specifically applies to persons holding spirits distributor licenses

and that persons with that license must pay the shortfall fee.

       This interpretation of the subsection (3)(c) shortfall fee is also supported by the

Initiative when read as a whole. The Initiative specifically refers to "spirits distributor

licensees" when it imposes requirements on that class and uses the term "other

licensee[s] acting as a [spirits] distributor pursuant to [Title 66 RCW]" when it places

                                              9
Ass'n of Wash. Spirits & Wine Distribs.    v.   Liquor Control Bd., No. 90561-4

specific requirements on other licensees. 3 Different statutory language should not be

read to mean the same thing: "[w]hen the legislature uses different words in the same

statute, we presume the legislature intends those words to have different meanings."

In re Pers. Restraint of Dalluge, 162 Wash. 2d 814, 820, 177 P.3d 675 (2008) (Sanders,

J., dissenting).

    B. The Board's interpretation of the subsection (3)(a) percentage fee does not
       change the clear meaning of the subsection (3)(c) shortfall fee

       The Association responds to the plain language arguments by asserting that

RCW 66.24.055(3)(a) directs that "each spirits distributor licensee" pay a fee of 10

percent of sales. Subsection (3)(c) then provides that "persons holding spirits

distributor licenses" must contribute proportionately to any shortfall between the 10

percent fee and $150 million. The Association reasons that distillers who distribute

their spirits to retailers are acting as "spirits distributor licensee[s]" under subsection

(3)(a) and are therefore "persons holding spirits distributor licenses" under subsection

(3)(c). Thus, the Association reasons that distillers must contribute to the $150 million

shortfall proportionately based on their total distribution of their products. In making

this argument, the Association also points out that RCW 66.24.640 and RCW

66.28.330(4) requires that distillers who distribute their own spirits must comply with

the applicable statutes and regulations relating to distributors. Hence, the Association

3 For example RCW 66.28.330(1) reads, "No price for spirits sold in the state by a distributor
or other licensee acting as a distributor pursuant to this title may be below acquisition
cost .... " (emphasis added). For additional examples of statutory language placing specific
requirements on other licensees acting as distributors, see LAWS OF 2012, ch. 2 § 106,
codified at RCW 82.08.150(2), (3), (5), (6)(c).

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Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

argues, the shortfall provision of subsection (3)(c) is one of those "applicable laws and

rules relating to distributors" under RCW 66.24.640.

      These arguments would have little appeal were it not for the fact that the Board

adopted a rule pursuant to RCW 66.24.055(3)(a) and WAC 314-23-030, imposing the

subsection (3)(a) percentage fee on distillers and raising the question as to why the

Board didn't also apply the subsection (3)(c) shortfall fee to the distillers. The

Association's reading of the subsection (3)(c) shortfall fee might be consistent with the

Board's representations regarding the subsection (3)(a) percentage fee to the

Superior Court in Costco Wholesale Corp.        v. Liquor Control Board, No. 12-2-01312-5
(Thurston County Superior Court June 14, 2013). In Costco, Costco challenged WAC

314-23-030, promulgated pursuant to RCW 66.24.055(3)(a). The Board asserted that

"distillers or certificate of approval holders acting as distributors must comply with all

laws applicable to distributors" as justification for its successful argument that

"distillers and certificate of approval holders who choose to distribute their products

are subject to the 10% distributor fee." Wash. Restaurant Ass'n v. Liquor Contr. Bd.,

No. 12-2-01312-5, Br. of Resp't at 20-21. The Board makes no serious attempts4 to

distinguish its conflicting positions interpreting the language of the subsection (3)(a)

percentage fee and the subsection (3)(c) shortfall fee, instead acknowledging that the

4 The Board now argues, contrary to its assertions in Costco, that its broad regulatory
authority to impose licensing fees justifies imposing a 10 percent fee on certificate of approval
holders. Br. of Resp't at 16. Whether or not this argument has merit, the propriety of WAC
314-23-030 is not at issue in this case. Furthermore, the point is irrelevant in addressing WAC
314-23-025: RCW 66.24.055(3)(c) unambiguously authorizes the Board to collect the shortfall
fee from "persons holding spirits distributor licenses."

                                               11
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

purpose behind the broad reading of the subsection (3)(a) percentage fee was to

maximize the State's revenue.

          The Association argues that the Board must adhere to its position in Costco and

apply the subsection (3)(c) shortfall fee to distillers just as it applied the subsection

(3)(a) percentage fee to distillers. Essentially, the Association argues that the Board

correctly interpreted subsection (3)(a) in promulgating WAC 314-23-030, and

incorrectly interpreted subsection (3)(c) when promulgating WAC 314-23-025. It then

presumes that we should give deference to the Board's interpretation of subsection

(3)(a) and that the Board's analysis should control our interpretation of subsection

(3)(c).

          This argument misses the mark: the propriety of WAC 314-23-025 does not

depend on the propriety of a separate regulation. We do not require agency expertise

in construing an unambiguous statute, and we do not defer to an agency

determination that conflicts with the statute. Waste Mgmt. of Seattle, Inc. v. Utils. &

Transp. Comm'n, 123 Wash. 2d 621, 628, 869 P.2d 1034 (1994 ). RCW 66.24.055(3)(c)

requires "all persons holding spirits distributor licenses on or before March 31, 2013,

[to pay] collectively one hundred fifty million dollars or more in spirits distributor license

fees," and WAC 314-23-025 explicitly assigns liability for the shortfall to "persons

holding a spirits distributor license." We hold that subsection (3)(c) is unambiguous,

and furthermore, we are not bound by the Board's interpretation of subsection (3)(a)

in promulgating WAC 314-23-030.

                                             12
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

      For these reasons, we decline to address the subsection (3)(a) percentage fee

and instead apply well-established rules to construe the issue before us-the

language of the subsection (3)(c) shortfall fee.

   C. The specific language of the subsection (3)(c) shortfall fee controls

       Having concluded that the Board's interpretation of RCW 66.24.055(3)(a) does

not control this case, we next address the Association's substantive argument that

that the subsection (3)(c) shortfall fee is one of the "applicable laws and rules relating

to distributors" under RCW 66.24.640. The Association is correct that RCW 66.24.640

and RCW 66.28.330(4) authorize distillers to act as distributors provided that they

comply with the applicable statutes and regulations relating to distributors. However,

this argument fails because the general statutory provisions of RCW 66.24.640 and

RCW 66.28.330(4) do not supersede the specific provisions of subsection (3)(c).

       A general statutory provision must yield to a more specific statutory provision.

Waste Mgmt. of Seattle, 123 Wash. 2d at 629-30; see also Kustura v. Dep't of Labor &

Indus., 169 Wash. 2d 81, 88, 233 P.3d 853 (201 0) (general statutory provisions

inapplicable in light of statutory provision that "specifically addresse[d] and definitively

establish[ed]" the question before the court). The parties agree with this legal principle;

their disagreement concerns whether the fees assessed pursuant to RCW

66.24.055(3)(c) are "applicable laws" "relating to distributors" or whether they are

specific provisions that should be considered separately. We hold that they are

specific fee provisions that relate only to "persons holding spirits distributor licenses."

       RCW 66.24.640 and RCW 66.28.330(4) are general statutory provisions. RCW

66.24.640 provides in relevant part:

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Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

       Any distiller licensed under this title may act as a retailer and/or
       distributor to retailers .... An industry member operating as a distributor
       and/or retailer under this section must comply with the applicable laws
       and rules relating to distributors and/or retailers ....

Similarly, RCW 66.28.330(4) provides:

       A distiller holding a license or certificate of compliance as a distiller under
       this title may act as distributor .... The distiller must, to the extent
       consistent with the purposes of chapter 2, Laws of 2012, comply with all
       provisions of and regulations under this title applicable to wholesale
       distributors selling spirits to retailers.

        These statutes provide distilleries with the option of distributing some or all of

their products directly and require the distilleries to generally comply with the

requirements of distributors when they do so. However, neither statute requires the

distillery to receive a "spirits distributor license"-RCW 66.24.640 expressly

contemplates distillers' distributing either pursuant to a distiller's license, RCW

66.24.140, or pursuant to a more limited certificate of approval. Importantly, neither

statute addresses the licensing fee structure or imposes additional licensing fees on

distillers.

        In contrast, RCW 66.24.055(3) and (4) relate specifically to licensing fees for

"spirits distributor licenses." Each "spirits distributor licensee" must pay $1,320

annually for each licensed distribution location. RCW 66.24.055(4). Distilleries

generally pay $2,000 per annum, and other entities distributing pursuant to certificates

of approval pay $200 for each authorization. RCW 66.24.140; WAC 314-23-030(2). It

would make no sense to conclude that the distillers must pay the same annual license

fee as a distributor simply because the distiller distributes its own product. For this

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Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

reason, we conclude that the fees charged to each class of license are specific and

that the provisions of RCW 66.24.640 and RCW 66.28.330(4) are general.

       Because we hold that RCW 66.24.055(3)(c) specifically describes licensing

fees for the spirits distributor license, the specific language assigning liability for the

shortfall provision to "persons holding spirits distributor licenses" trumps the general

requirement that other licensees acting as distributors comply with "applicable laws"

"relating to distributors." 5 RCW 66.24.640.         We hold that subsection (3)(c) is

specifically applicable to "persons holding spirits distributor licenses" and that the

general provisions of RCW 66.24.640 and RCW 66.28.330(4) do not render the

subsection (3)(c) shortfall fee applicable to distillers distributing their own spirits.

       Furthermore, as discussed in part I(A) of this opinion, supra, other sections in

the Initiative explicitly distinguish requirements placed upon "persons holding a spirits

distributor license" and "other licensees acting as a spirits distributor pursuant to Title

66 RCW." Contrary to the Association's arguments, providing different meanings

based on these distinctions in the statutory language does not necessarily render the

term "applicable" in RCW 66.24.640 redundant or superfluous. Courts do not

woodenly apply limiting principles merely because the legislature includes both

general clauses and specific clauses. Ali v. Fed. Bureau of Prisons, 552 U.S. 214,

227, 128 S. Ct. 831, 169 L. Ed. 2d 680 (2008) (citing Harrison v. PPG Indus., Inc., 446
U.S. 578, 589 n.6, 100 S. Ct. 1889, 64 L. Ed. 2d 525 (1980). The Board's rule properly

5 In reaching this conclusion, we do not opine on the Board's interpretation of the subsection
(3)(a) percentage fee, as it is not properly before this court. The subsection (3)(a) percentage
fee uses different language than the subsection (3)(c) shortfall fee and is related to the
requirements of subsection (3)(b).

                                              15
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

harmonizes the general statutory provisions applicable to distillers with the specific

language of the subsection (3)(c) shortfall fee.

Ill.   The Board's Actions Were Neither Arbitrary Nor Capricious

       The Association asks the court to invalidate WAC 314-23-025 because the rule

is arbitrary and capricious. RCW 34.05.570(2)(c). A rule is arbitrary or capricious only

if it is willful, unreasoning, and taken without regard to the attending facts or

circumstances. Wash. lndep. Tel. Ass'n v. Wash. Utils. & Transp. Comm'n, 148 Wash. 2d
887, 905, 64 P.3d 606 (2003); D. W Close Co. v. Dep't of Labor & Indus., 143 Wn.

App. 118, 130, 117 P.3d 143 (2008). '"[W]here there is room for two opinions, an action

taken after due consideration is not arbitrary and capricious even though a reviewing

court may believe it to be erroneous."' Rios v. Dep't of Labor & Indus., 145 Wash. 2d 483,

501, 39 P.3d 961 (2002) (alteration in original) (quoting Hillis v. Dep't of Ecology, 131
Wash. 2d 373, 383, 932 P.2d 139 (1997)). The scope of review under an arbitrary and

capricious standard is very narrow, and the party asserting it carries a '"heavy

burden."' King County Pub. Hasp. Dist. No. 2 v. Dep't of Health, 167 Wash. App. 740,

749,275 P.3d 1141 (2012) (internal quotation marks omitted) (quoting Alpha Kappa

Lambda Fraternity v. Wash. State Univ., 152 Wash. App. 401, 422, 216 P.3d 451 (2009)).

       The Association's arguments fail to carry this heavy burden. The language of

WAC 314-23-025 closely tracks the language of the statute it implements, and the

Association merely repeats its statutory interpretation arguments that WAC 314-23-

030 and WAC 314-23-025 are "logically inconsistent." We therefore hold that the

Association has not demonstrated that the Board's actions were arbitrary and

capricious.

                                           16
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

IV.   The Board did not violate the privileges and immunities clause

      Article I, section 12 of the Washington Constitution provides that "[n]o law shall

be passed granting to any citizen, class of citizens, or corporation other than

municipal, privileges or immunities which upon the same terms shall not equally

belong to all citizens or corporations." We interpret our privileges and immunities

clause independently of the federal clause. Grant County Fire Prot. Dist. No. 5 v. City

of Moses Lake, 150 Wash. 2d 791, 811, 83 P.3d 419 (2004 ). We apply a two-step analysis

to article I, section 12. Ockletree v. Franciscan Health Sys., 179 Wash. 2d 769, 776, 317
P.3d 1009 (2014 ). The first step is to determine whether the law in question involves

a privilege or immunity; if not, then article I, section 12 is not implicated. /d. (citing

Grant County, 150 Wash. 2d at 812). lfthere is a privilege or immunity, the second step

is to determine whether the legislature had a "reasonable ground" for granting the

privilege or immunity. /d. (citing Grant County Fire Prot. Dist. No. 5 v. City of Moses

Lake, 145 Wash. 2d 702, 731, 42 P.3d 394 (2002)).

       The Association cannot establish that the law involves a privilege or immunity.

The Association alleges that WAC 314-23-025 infringes on their '"right to ... carry on

business therein,"' a long-recognized privilege under our constitution. Grant County,
150 Wash. 2d at 812-13 (quoting State v. Vance, 29 Wash. 435, 458, 70 P. 34 (1902)).

We instead interpret the Association's argument to be that WAC 314-23-025 impacts

its members' ability to sell and distribute spirits and dismiss their privileges and

immunities claim.

       A "privilege" is an exception from a regulatory law that benefits certain

businesses at the expense of others. Am. Legion Post No. 149 v. Dep't of Health, 164

                                            17
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

Wn.2d 570, 607, 192 P.3d 306 (2008) (citing Jonathan Thompson, The Washington

Constitution's Prohibition on Special Privileges and Immunities: Real Bite for "Equal

Protection" Review of Regulatory Legislation?, 69 TEMP. L. REV. 1247, 1268 (1996)).

We have held that the "right to carry on business therein" is implicated by a municipal

ordinance that attempted to insulate resident photographers from out-of-state

competition by imposing prohibitive licensing fees and solicitation restrictions on

itinerant photographers. See Ralph v. City of Wenatchee, 34 Wash. 2d 638, 641, 209
P.2d 270 (1949). We have also rejected attempts to assert the right to carry on

business when a narrower, nonfundamental right is truly at issue. See, e.g., Am.

Legion Post No. 149, 164 Wash. 2d at 607-08 (rejecting an attempt to characterize

"[s]moking inside a place of employment" as the fundamental right to "carry on

business therein").

      Ralph involved an action to enjoin the enforcement of a municipal ordinance

that purposefully distinguished between resident and itinerant photographers. 34
Wash. 2d at 638-39, 643. The first challenged provision placed substantial licensing fees

on itinerant photographers; resident photographers were not required to have a

license. /d.   at 639. The second challenged provision, which prevented all

photographers from soliciting business in public places, private homes, and private

businesses, was admittedly designed to prohibit the otherwise lawful business

activities of itinerant photographers. /d. at 639-40, 643. We held that the ordinance

unreasonably discriminated against itinerant photographers by requiring licensing

fees when resident photographers were not subject to licensing fees. /d. at 641. We

further held that the second provision unfairly discriminated against a class of

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Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

businesses to the benefit of another class of the same business, depriving affected

class members of the '"common right to engage in trade."' /d. at 642-44 (quoting N.J.

Good Humorv. Bd. ofComm'rs, 124 N.J.L. 162, 168, 11 A.2d 113 (1940)).

       However, we have rejected arguments that the right to carry on business is

infringed by regulations that infringe only on narrower privileges. 6 In American Legion

Post No. 149, we considered a challenge to the smoking in public places act (Act).

164 Wash. 2d 570. The Act limited smoking in both public places and '"in any place of

employment'" but specifically exempted "'private facilities"' and '"private enclosed

workplace[s], within a public place"' from the smoking ban. !d. at 581-82 (alteration in

original) (quoting former RCW 70.160.020(2) (1985)). The petitioner argued that

because the Act permitted smoking in some facilities but prohibited it in their facility,

that the Act violated its fundamental "'right to ... carry on business therein."' !d. at 607

(quoting Grant County, 150 Wash. 2d at 812-13). We rejected this characterization

because the Act did not "prevent any entity from engaging in business." /d. at 608.

Instead, we held that the Act "merely prohibits smoking within a place of employment."

/d. (citing RCW 70.160.030). We therefore characterized the right at issue as

"[s]moking inside a place of employment" and found that there was no constitutional

privilege involved. !d.

       The Association's argument that the assignment of different licensing fees for

different abilities to sell and distribute spirits burdens its fundamental right to carry on

6 Much of our article I, section 12 jurisprudence has narrowed the classification of the rights
asserted. See, e.g., Grant County, 150 Wash. 2d at 815 ("right" to petition for annexation, which
is not a privilege, does not invoke the right to vote or the right to petition the government for
a redress of grievances).

                                               19
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

business is overbroad. Unlike the statute at issue in Ralph, 34 Wash. 2d 638, WAC 314-

23-025 does not unfairly discriminate against a class of businesses to the benefit of

another class of the same businesses; it merely assigns a uniform fee to the class of

individuals in Washington who sell spirits with all the rights and responsibilities

assigned to a "spirits distribution licensee." The rule also impliedly excludes from the

fee persons who sell spirits pursuant to some other, more limited, license. Thus, the

Association is more accurately asserting that WAC 314-23-025 impacts their ability to

sell and distribute spirits.

       The ability to sell and distribute spirits does not implicate a "privilege" under

article I, section 12. This court has explicitly recognized the distinction between

privileges and rights granted only at the discretion of the legislature when considering

claims of disparate treatment of businesses. See Randles v. Wash. State Liquor

Control Bd., 33 Wash. 2d 688, 694, 206 P.2d 1209 (1949) ("the distinction between a

lawful business which a citizen has the right to engage in and one in which he may

engage only as a matter of grace of the state" must be considered). Here, the only

right asserted is the right to sell liquor under the authority of a license issued pursuant

to the State's police power. See RCW 66.08.010 (Title 66 RCW is an exercise of the

police power of the state). Liquor is different; we have never held that the right to sell

liquor is a fundamental right or privilege. Randles, 33 Wash. 2d at 694 ("there is no

natural or constitutional right to engage in the business of selling or dispensing

intoxicating liquor"). The Association does not distinguish the Randles holding, and it

does not argue that it is inapposite to this case. We therefore hold that there is no

constitutional privilege involved and thus no violation of article I, section 12. Because

                                            20
Ass'n of Wash. Spirits & Wine Distribs. v. Liquor Control Bd., No. 90561-4

this case does not involve a constitutional privilege, we need not analyze the second

prong of our article I, section 12 test-whether the legislature had a reasonable

ground for distinguishing between two classifications.

                                     CONCLUSION

      We affirm the superior court and hold that the Board acted within its authority

and did not act arbitrarily or capriciously in promulgating WAC 314-23-025. Nor did

the Board violate the privileges and immunities clause of article I, section 12 of the

Washington State Constitution. The $104.7 million shortfall was properly assessed

against, and paid by, distributors holding spirits distributor licenses.

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Ass'n of Wash. Spirits & Wine Distrib. v. Liquor Control Bd., No. 90561-4

      WE CONCUR.

                                         22