Court Opinion

ID: 9531123
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:07:43.606621+00
Date Added: 2024-06-11T13:28:21.062395
License: Public Domain

KIRSCH, J.,
dissenting.
I respectfully dissent.
I believe that the resolution of this case turns on the meaning of “control” as used in the statutes regulating the sale and distribution of alcoholic beverages in Indiana. IC 7.1-5-9-2 prohibits a brewer from holding, acquiring, possessing, owning, controlling, or having an interest, claim, or title, in or to an establishment, company, or corporation holding or applying for a beer wholesaler’s permit. (Emphasis added.) When interpreting words of a single section of a statute, the court must construe them with due regard for all other sections of the act and with regard for the legislative intent to carry out the spirit and purpose of the act. Campbell v. State, 714 N.E.2d 678, 682 (Ind.Ct.App.1999). Here, because IC 7.1-3-3-18 addresses financial control, I conclude that the prohibition on “control” in this statute encompasses a different concept.
This court has previously explored the meaning of “control” in IC 7.1-5-9-2 in Jos. Schlitz Brewing Co. v. Central Beverage Co., 172 Ind.App. 81, 359 N.E.2d 566 (1977), trans. denied. In that case, a wholesaler brought suit against a brewer for wrongful termination of a distribution agreement. Id. This court held that the efforts of Schlitz, a brewer, to require Central, a wholesaler, to adopt thirty internal controls on its business operations was an unlawful attempt by Schlitz to dominate and control the conduct and business of Central. Id. at 98-99, 359 N.E.2d at 578. This court determined that when IC 7.1-5-9-2 is read in conjunction with IC 7.1-3-3-18 “our legislature intended to prohibit brewer interference with management operations other than merely prohibiting brewers from having some financial interest in them wholesaler’s businesses.” Id. at 99, 359 N.E.2d at 578. In so holding, we looked to the definition of the word “control,” which we noted “has been defined as the exercise of restraining or directing influence over; or to regulate, restrain, dominate, hold from action, overpower, counteract or govern.” Id. at 100, 359 N.E.2d at 578 (citing Black’s Law Dictionary 399 (4th ed.1951)). We agreed with the trial court’s finding that Schlitz terminated its agreement with Central in an unlawful attempt to consolidate Schlitz wholesalers in Indiana. Id. at 104, 359 N.E.2d at 580. We explained that brewers can lawfully consolidate their wholesal*85ers, but that multi-county control over a beer wholesaler’s business had been proscribed by the legislature. Id. at 98, 359 N.E.2d at 578.
Thus, “control” embodies the concepts of governance, counteraction, overpowerment, and influence, and our legislature could have had any or all of these in mind in enacting the statute. Critically, however, Schlitz stands for the proposition that IC 7.1-5-9-2 is addressed to the brewer’s effect on the way in which the beer wholesaler conducts its business. Notably, Schlitz was decided on the basis of the statute alone, as Rule 28 had not yet been promulgated.
Later, after the promulgation of Rule 28, in Barco Beverage v. Ind. Alcoholic Beverage Comm’n, 563 N.E.2d 658 (Ind.Ct.App.1990), clarified on reh’g, 571 N.E.2d 306, trans. granted, 595 N.E.2d 250 (Ind. 1992), and in our opinion on rehearing, this court again addressed the term “control” in the statute. A panel of this court determined that distillers and rectifiers were improperly included in Rule 28 because IC 7.1-5-9-2, pertaining to brewers and vintners, includes the word “control,” but IC 7.1-5-9-8, the analogous provision relating to distillers and rectifiers, does not. We explained that Rule 28 was a valid expression of legislative intent because the statute was aimed at prohibiting control of any type: “it is the pernicious influence that is prohibited, not the avenue by which that influence is exerted.” Id. at 309.
Although our opinion in Barco was vacated when our supreme court granted transfer, its logic was not undermined when the court came to the same result on different grounds. In fact, the supreme court endorsed this court’s conclusion in its opinion on transfer. In Barco Beverage v. Ind. Alcoholic Beverage Comm’n, 595 N.E.2d 250 (Ind.1992), the supreme court, without examining the word “control,” found that Title 7.1 provided the ATC with authority to promulgate Rule 28. Id. at 255. The court noted that Rule 28 “fosters competitiveness between wholesalers- in that they must vie against each other statewide in the sale of their products.” Id. at 254.
Like the internal controls in Schlitz, exclusive distribution territories allow a brewer to interfere with the management operations of a wholesaler. Instead of mandating merely how a wholesaler serves its customer, exclusive distribution agreements go one step further and effectively dictate which customers a wholesaler can and cannot serve.
In this case, the shift of substantial power over the business operations of wholesalers to A-B, the brewer,' was apparent almost immediately. Recognizing “significant shifts” in wholesaler sales, A-B instructed its wholesalers to “carefully review weekly their respective forecasting worksheet an submit sales forecast revisions ... as necessary....” Appellant’s Appendix at 263. It also mandated an extensive new product quality procedure which required wholesalers to complete various forms and undertake specified procedures for “close to code” and “out of code” products and unilaterally adjusted wholesalers’ inventory levels in December in anticipation of Rule 28’s sunset. Appellant’s Appendix at 264-65.
In light of our holding in Schlitz and our analysis in Barco, I believe that exclusive distribution territories impermissibly allow brewers to “control” the operations of beer wholesalers in contravention of Title 7.1 without regard to the status of Rule 28. Accord United Beverage Co. v. Indiana Alcoholic Beverage Comm’n, 566 F.Supp. 650 (N.D.Ind.1983), aff’d as modified, 760 F.2d 155 (7th Cir.1985) (“[cjlearly if this section protects a wholesaler’s managerial decision regarding internal controls, it also *86protects the wholesaler s business judgment as to who his customers will be.”) Id.
The majority holds that IC 7.1-5-9-2 does not prohibit exclusive distribution territories and point to the Barco decision for support. In Barco, the supreme court summarized this court’s decision in part as follows: “the legislature had neither expressly forbidden nor permitted the use of territorial limitations by alcoholic beverage wholesalers....” Id. at 252. In doing so, the court was merely observing that the legislature has not enacted legislation limiting the scope of beer wholesalers’ permits in any way and that IC 7.1-5-9-2 does not refer specifically to territorial restrictions, but rather speaks to a broad range of prohibited controlling arrangements.
The majority also quotes the following in support of its conclusion:
“Had the legislature believed that Rule 28 was not in conformance with its policy or was outside of the powers delegated to the Commission, it has had several opportunities either to repeal Rule 28 or to amend the statute so as to deny the Commission the power to promulgate such a rule.”
Id. at 255. This quote is better understood when read in context with the sentences that immediately follow it:
“Ultimately, the legislature has rejected these options, giving credence to the Commission’s argument that Rule 28 is valid because of legislative acquiescence. However, we need not rely on legislative acquiescence to determine that the legislature, in Title 7.1, established the general purposes of the act and conferred upon the Commission the authority not only to regulate the business of permit-tees, but also to exercise all powers necessary and proper to carry out those purposes.”
Id. Here, the court was merely explaining that the legislature would have repealed Rule 28 had it not conformed to the policy of Title 7.1, yet it chose not to. Moreover, Rule 28 was in conformance with Title 7.1 and was within the powers delegated to theATC. Id.
A regulation must be consistent with its statutory mandate in order to be valid. See State v. Driver, 511 N.E.2d 11, 11 (Ind.Ct.App.1987). Rule 28 was upheld by our supreme court in Barco as consistent with Title 7.1. Accordingly, by definition, the opposite of Rule 28, that is, the creation of exclusive distribution territories, cannot also be consistent with the text and the legislative intent of the anti-control provision of Title 7.1. See also Miller Brewing Co. v. Bartholemew County Beverage Co., 674 N.E.2d 193 (Ind.Ct.App.1996), trans. denied (1997) (“Rule 28 clearly embodies the policy which the General Assembly has consistently affirmed, that territorial restrictions have no place in Indiana.”). Rule 28 was promulgated in response to shifting federal law to clarify existing state law and to preserve the status quo. However, Rule 28 did not and in fact could not have changed the law. See Indiana Department of State Revenue v. Best Ever Cos., 495 N.E.2d 785, 787 (Ind.Ct.App.1986) (agency cannot add to law by its rules and regulations). Accordingly, the expiration of Rule 28 may not alter the statutory mandate against control, in this case manifested by exclusive distribution territories.
As to all other issues, I concur.