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Judge in Arkansas wine case sides with grocery stores, allows them to expand selections

Alcohol panel to start issuing permits by Linda Satter | November 15, 2017 at 4:30 a.m.

A federal judge Tuesday gave the go-ahead to the state Alcoholic Beverage Control Board to start issuing grocery-store wine permits at its regular meeting today.

That means that as early as Thursday, grocery stores and convenience stores that have been limited to selling only small-batch farm wines will be able to expand their selections to include all the varieties of wine that for years only liquor stores have been authorized to sell in the state -- as long as the board grants permits to the stores.

Mary Robin Casteel, director of the beverage control agency, said in court Monday that the agency had authorized stores with pending permits to go ahead and stock up in anticipation of being granted the newly available wine permits, to ward off a rush on suppliers. So for many stores, the expanded selection is already in place.

Although Act 508 of 2017, which created a grocery-store wine permit, actually took effect Oct. 1, today's meeting is the first chance the board will have to consider some 217 applications for permits that have been waiting at least 30 days. Another 11 applications had been received by the board as of Monday, but Casteel's mandated 30-day waiting period hadn't expired on them.

A last-minute effort to stop the issuing of permits was denied Tuesday by Chief U.S. District Judge Brian Miller, who heard three hours' worth of arguments Monday on a request from four central Arkansas liquor store owners to freeze the permit-granting process until the legalities of the new legislation could be examined in detail.

In a nine-page order filed early Tuesday afternoon, Miller denied the liquor stores' request for a preliminary injunction and, saying they were unlikely to succeed on their federal claim, remanded the case back to Pulaski County Circuit Court, where it was originally filed Oct. 30, before the state transferred it to federal court.

The federal claim was that Act 508 violated the Equal Protection Clause of the 14th Amendment, which requires that all similarly situated people or entities be treated alike.

Miller said the liquor stores had to show that the state's varying rules for wine-selling grocery stores and liquor stores isn't "rationally related to any legitimate government interest."

The liquor stores had argued that the grocers were subject to "substantially less rigorous requirements" concerning restrictions on the number of permits available per population and permissible locations, among other things. But at Monday's hearing, Casteel testified that liquor stores are subject to stricter rules because they sell hard liquor, which grocery retailers don't.

She also said that in enacting Act 508, legislators purposely required each retail grocery location to seek a separate permit and prohibited chain stores from receiving discounts from wholesalers by ordering for several locations at once. She said quantitative discounts are allowed for each location, as long as the discounts for grocery retailers are identical to those available to liquor stores.

Miller said testimony showed that the two types of businesses sell different products; that liquor stores derive nearly 100 percent of their revenue from the sale of alcoholic beverages, while grocery stores may not derive more than 20 percent of their gross sales from the sale of alcoholic beverages; and that Act 508 was intended, in part, to raise revenue for the state, with 100 percent of fees for grocery-store wine permits being used to support Arkansas wine production and tourism.

The liquor stores' lawsuit also includes claims that Act 508 conflicts with other state laws and the state's "public policy." But Miller said those claims also aren't likely to succeed, because the laws are required to be interpreted so as to "reconcile provisions to make them consistent, harmonious and sensible in an effort to give effect to every part," and because a more recent statute always prevails over an older statute.

He also noted that under case law that applies in the Eastern District of Arkansas, "a general statute must yield when there is a specific statute involving the same subject matter."

He said the language of Act 508 "underscores the Legislature's choice that one permit allows wine to be sold at one physical location, without regard to ownership."

Miller also wrote: "The fact that Act 508 states, 'An order of wine inventory for one (1) location shall not be combined with an order for another location in a manner that would result in a cumulative discount or quantity discount, or both,' further demonstrates the fact the legislature embraced the ability of multiple distinct locations of chain grocery stores to obtain wine permits. ... Otherwise, there would be no need to include language aimed at leveling competition between chain grocery stores and liquor stores."

Paul James, a Little Rock attorney who represented the liquor stores, said Tuesday that he hadn't yet had a chance to talk to all of his clients about the ruling, but, "We appreciate Judge Miller giving us a hearing, an opportunity to be heard before the ABC meets tomorrow. We presented proof, and we respect his opinion, but we are disappointed."

James said the plaintiffs wouldn't make an effort to seek any other kind of legal relief to block the permit process before today.

Although the case will still be "an active action" in Pulaski County Circuit Court, where it was originally assigned to Judge Alice Gray, James said he was unsure Tuesday if and how the case will proceed.

Metro on 11/15/2017

Print Headline: Judge in wine case sides with grocers

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