7th Circuit reinstates Monarch-linked liquor distribution suit

The legal battle over an Indiana law that prohibits companies from holding permits for both beer and liquor wholesaling will continue after the 7th Circuit Court of Appeals reversed the dismissal of a federal case that challenges the enforcement of Indiana’s prohibited-interest statute.

The case of E.F. Transit, Inc. v. David Cook, et al., 16-3641, traces back to 2009, when E.F. Transit — an Indiana motor carrier that warehouses and transports beer, wine and liquor — entered into a tentative agreement to provide services for Indiana Wholesale, a wine and liquor wholesaler. The agreement would have allowed E.F. Transit to transport Indiana Wholesaler’s products in tandem with its deliveries for E.F.’s largest customer, Monarch Beverage.

Monarch is licensed as a beer and wine wholesaler that shares both ownership and leadership with E.F. Transit. That relationship raised concerns at the Indiana Alcohol and Tobacco Commission, which found that E.F. had an indirect interest in Monarch’s beer wholesaling permit. Thus, there were concerns about violations of Indiana’s prohibited-interest statute if E.F.’s relationship with Indiana Wholesale, which had a liquor wholesaling permit, proceeded.

Indiana Wholesale eventually withdrew from the agreement after the ATC refused to give its stamp of approval to the arrangement, prompting E.F.’s instant suit against the commission and its individual commissioners. The transportation company alleged the Federal Aviation Administration Authorization Act preempted enforcement of Indiana’s prohibited-interest laws, but the U.S. District Court for the Southern District of Indiana dismissed the claim on ripeness grounds.

While E.F. Transit’s federal case was up on appeal, the Indiana Supreme Court issued a ruling in July in the related case of Indiana Alcohol and Tobacco Commission v. Spirted Sales, LLC, 79 N.E.3d 371, 379 (Ind. 2017). In that case, the justices — excluding Mark Massa, who did not participate, and Christopher Goff, who had not yet joined the court — overturned a ruling granting Spirited Sales, LLC a liquor wholesaling permit. Spirited is an affiliate of Monarch, so the justices concluded “Monarch and Spirited’s overlapping ownership … bars Spirited from obtaining the sought-after permit.”

The high court also concluded the “ties between EFT and Monarch (are) so extensive that EFT could reasonably be deemed to hold an interest in a beer wholesaler’s permit — an interest prohibited by a combined reading of (Indiana Code) sections 7.1-5-9-6 and 7.1-1-2-5.” That decision eliminates the ripeness concerns in the instant federal case, 7th Circuit Court of Appeals Judge Diane Sykes wrote in a Tuesday reversal of the district court’s dismissal.

“…(T)he Indiana Supreme Court has now construed the prohibited-interest statutes to forbid E.F. Transit from entering into an agreement like the one it negotiated with Indiana Wholesale (or any similar company),” Sykes wrote. “Although the penalty of a permit revocation would fall on Monarch, prosecution for a prohibited-interest violation is a standing threat against both it and E.F. Transit.”

“That’s easily enough for a ripe claim,” Sykes wrote.  

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