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Suit spawns liquor-distribution showdown

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Indiana’s largest beer distributor is mounting the latest legal challenge to the state’s arcane, Prohibition-era liquor laws.

Indianapolis-based Monarch Beverage Co. Inc. is suing officials of the Indiana Alcohol and Tobacco Commission in federal court, arguing the company should be granted the right to also supply liquor to bars, restaurants and retail outlets.

State law prohibits alcohol wholesalers from supplying both beer and liquor, forcing them to choose between the two. The system is so unusual that no other state in the nation regulates alcohol that way.

Monarch filed its first lawsuit in late October and followed up with a related complaint Dec. 6 from affiliate trucking company E.F. Transit Inc. Both suits argue Indiana’s restrictive alcohol laws violate parts of the U.S. Constitution.

“The General Assembly has never provided an official explanation for why it chose to prohibit beer wholesalers from holding a liquor permit,” Monarch argues in its suit. “The available evidence, however, suggests that this restriction was enacted to further a post-Prohibition patronage system that operated to the benefit of state and local politicians.”

The belief, at least according to Monarch’s argument, is that following Prohibition, statewide politicians doled out licenses for liquor, and county officials handled those for beer. Alcohol wholesaling has remained separate since.

“The argument that we’re making is rather simple and straightforward,” said Brian Paul, a lawyer at Ice Miller LLP representing Monarch. “There’s no rational reason for that distinction.”

Monarch maintains in its complaint that the system violates the equal protection clause in the 14th Amendment to the U.S. Constitution by treating beer wholesalers unfairly.

Grocery and convenience stores wanting to sell cold beer have raised a similar challenge on constitutional grounds. In August, the Indiana Petroleum Marketers and Convenience Store Association filed suit in federal court, arguing the law governing cold-beer sales violates the 14th Amendment, by favoring “one class of retail over another.”

The association won a partial victory Dec. 11, when federal magistrate Debra McVicker Lynch denied 21st Amendment Inc.’s request to intervene. 21st Amendment operates 19 liquor stores in the Indianapolis area.

Legislative action unlikely

In addition to pursuing the right to sell cold beer, grocery and convenience stores want to sell beer, wine and liquor on Sundays.

The convenience and grocery stores launched their legal effort to sell cold beer only after attempts to get the General Assembly to change the law fell on deaf ears.

Monarch, too, has failed to convince legislators in its efforts to distribute liquor. It has tried unsuccessfully the last four sessions to advance a bill supporting its position before resorting to federal court.

The likelihood that lawmakers will have a change of heart anytime soon seems slim, said Ed Feigenbaum, who publishes Indiana Legislative Insight.

“In the short session, it’s probably unlikely, particularly with a lawsuit pending,” he said.

Monarch’s suit, however, has caught the attention of liquor distributors who oppose the company’s attempts to compete with them.

On Dec. 3, the Wine & Spirits Distributors of Indiana trade group filed a brief to intervene in Monarch’s suit, arguing that a change to the laws would enable Monarch to create a monopoly. The Indiana Beverage Alliance, which represents Anheuser-Busch wholesalers, supports the filing.

Monarch already is the sole distributor of Miller and Coors products in 69 of Indiana’s 92 counties, and reaches the entire state when counting the wine and craft beers that it distributes, said Marc Carmichael, president of the Indiana Beverage Alliance

“It’s a zero-sum game for the Legislature to make a change that dramatic because all it would do is shift business from some wholesalers to Monarch,” Carmichael said.

Dueling arguments

Founded in 1947, Monarch has become the biggest beer distributor in Indiana, in part because of a decision by Miller about a decade ago to begin distributing its beer through larger suppliers. Monarch benefited from its central location and quick access to interstates.

By contrast, 18 Anheuser-Busch distributors operate in the counties where Monarch is the sole Miller and Coors distributor, Carmichael said.

Under Indiana law, beer wholesalers are granted franchise protections that require distributors that take business from others to compensate them for the lost business. Those same rights aren’t granted to liquor distributors.

So any business Monarch might take from a liquor distributor if it succeeds would not cost the company a dime in payments to its vanquished competitors.

Liquor distributors operating in Indiana include Dallas-based Glazer’s, Indianapolis-based Republic National Distributing Co. LLC and Miami-based Southern Wine & Spirits.

The sheer size of Monarch might tempt liquor brands to jump ship because Monarch would be better positioned to promote them, opponents of Monarch’s suit say.

“Monarch’s claim actually seeks preferential treatment that would put Monarch in position to dominate the wholesale tier of the Indiana alcoholic beverage market, to the detriment of Wine & Spirits’ members,” the group said in its brief to intervene.

Seeking cost savings

Meanwhile, the complaint filed earlier this month by Monarch sister company E.F. Transit follows two failed attempts to merge some of its operations with Indiana Wholesale Wine & Liquor Co., owned by St. Paul, Minn.-based Johnson Brothers Liquor Co.

In 2010, the state alcohol and tobacco commission rejected a request from Indiana Wholesale to move its warehouse to E.F. Transit’s Pendleton Pike location. The two then entered into an agreement in which E.F. Transit trucks simply would pick up shipments from Indiana Wholesale’s existing warehouse.

The commission declined to weigh in, saying it would not render legal advice to an alcoholic beverage permit holder. Indiana Wholesale interpreted that to mean it could face a “substantial risk” of violations and backed out of the deal.

The E.F. Transit suit argues that the commission’s refusal to approve the agreement violates a federal transportation law as well as the supremacy clause of the U.S. Constitution.•
 

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  1. This law is troubling in two respects: First, why wasn't the law reviewed "with the intention of getting all the facts surrounding the legislation and its actual impact on the marketplace" BEFORE it was passed and signed? Seems a bit backwards to me (even acknowledging that this is the Indiana state legislature we're talking about. Second, what is it with the laws in this state that seem to create artificial monopolies in various industries? Besides this one, the other law that comes to mind is the legislation that governed the granting of licenses to firms that wanted to set up craft distilleries. The licensing was limited to only those entities that were already in the craft beer brewing business. Republicans in this state talk a big game when it comes to being "business friendly". They're friendly alright . . . to certain businesses.

  2. Gretchen, Asia, Roberto, Tonia, Shannon, Cheri, Nicholas, Sondra, Carey, Laura ... my heart breaks for you, reaching out in a forum in which you are ignored by a professional suffering through both compassion fatigue and the love of filthy lucre. Most if not all of you seek a warm blooded Hoosier attorney unafraid to take on the government and plead that government officials have acted unconstitutionally to try to save a family and/or rescue children in need and/or press individual rights against the Leviathan state. I know an attorney from Kansas who has taken such cases across the country, arguing before half of the federal courts of appeal and presenting cases to the US S.Ct. numerous times seeking cert. Unfortunately, due to his zeal for the constitutional rights of peasants and willingness to confront powerful government bureaucrats seemingly violating the same ... he was denied character and fitness certification to join the Indiana bar, even after he was cleared to sit for, and passed, both the bar exam and ethics exam. And was even admitted to the Indiana federal bar! NOW KNOW THIS .... you will face headwinds and difficulties in locating a zealously motivated Hoosier attorney to face off against powerful government agents who violate the constitution, for those who do so tend to end up as marginalized as Paul Odgen, who was driven from the profession. So beware, many are mere expensive lapdogs, the kind of breed who will gladly take a large retainer, but then fail to press against the status quo and powers that be when told to heel to. It is a common belief among some in Indiana that those attorneys who truly fight the power and rigorously confront corruption often end up, actually or metaphorically, in real life or at least as to their careers, as dead as the late, great Gary Welch. All of that said, I wish you the very best in finding a Hoosier attorney with a fighting spirit to press your rights as far as you can, for you do have rights against government actors, no matter what said actors may tell you otherwise. Attorneys outside the elitist camp are often better fighters that those owing the powers that be for their salaries, corner offices and end of year bonuses. So do not be afraid to retain a green horn or unconnected lawyer, many of them are fine men and woman who are yet untainted by the "unique" Hoosier system.

  3. I am not the John below. He is a journalist and talk show host who knows me through my years working in Kansas government. I did no ask John to post the note below ...

  4. "...not those committed in the heat of an argument." If I ever see a man physically abusing a woman or a child and I'm close enough to intercede I will not ask him why he is abusing her/him. I will give him a split second to cease his attack and put his hands in the air while I call the police. If he continues, I will still call the police but to report, "Man down with a gunshot wound,"instead.

  5. And so the therapeutic state is weaonized. How soon until those with ideologies opposing the elite are disarmed in the name of mental health? If it can start anywhere it can start in the hoosiers' slavishly politically correct capital city.

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