Action Wholesale Liquors v. Oklahoma Alcoholic

• Decision Date: 15 November 2006
• Docket Number: No. CIV-06-0239-F.,CIV-06-0239-F.
• Citation: 463 F.Supp.2d 1294
• Parties: ACTION WHOLESALE LIQUORS, et al., Plaintiffs, v. OKLAHOMA ALCOHOLIC BEVERAGE LAWS ENFORCEMENT COMMISSION, et al., Defendants.
• Court: U.S. District Court — Western District of Oklahoma

463 F.Supp.2d 1294

ACTION WHOLESALE LIQUORS, et al., Plaintiffs, v. OKLAHOMA ALCOHOLIC BEVERAGE LAWS ENFORCEMENT COMMISSION, et al., Defendants.

No. CIV-06-0239-F.

United States District Court, W.D. Oklahoma.

November 15, 2006.

Amanda Leigh Maxfield, Robert G. McCampbell, Crowe & Dunlevy, Oklahoma City, OX, for Plaintiffs.

Sandra D. Rinehart, Sherry A. Todd, Oklahoma City, OK, for Defendants.

ORDER

FRIOT, District Judge.

This action requires the court to determine whether Oklahoma constitutional and statutory provisions governing the distribution of wine in Oklahoma violate the Commerce Clause of the United States Constitution (U.S. Const., Art. I, § 8, cl.3). Specifically, three Oklahoma liquor wholesalers have sued the Oklahoma Alcoholic Beverage Laws Enforcement Commission and individual members of that Commission,¹ alleging that the 2000 amendment to Article 28, Section 3 of the Oklahoma Constitution, and conforming state statutes, are unconstitutional.² The challenged state laws allow in-state wineries,³ but not out-of-state wineries, to ship wine directly to retailers and restaurants in Oklahoma. Plaintiffs contend that under the United States Supreme Court's decision in Granholm v. Heald, 544 U.S. 463, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005), this differential treatment of in-state and out-of-state wineries unconstitutionally discriminates against interstate commerce. Accordingly, plaintiffs seek declaratory and injunctive relief. Now pending and ripe for decision are the parties' cross-motions for summary judgment. "Plaintiffs Motion for Summary Judgment" was filed July 21, 2006 (doc. no. 21), and "Defendants' Cross-Motion for Summary Judgment" was filed August 21, 2006 (doc. no. 23). Both motions have been fully briefed, and oral argument was held on September 18, 2006.

I. Standards.

Under Federal Rule of Civil Procedure 56(c), summary judgment shall be granted if the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The moving party has the burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when "there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining whether a genuine issue of a material fact exists, the evidence is to be taken in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). All reasonable inferences to be drawn from the undisputed facts are to be determined in a light most favorable to the non-movant. United States v. Agri Services, Inc., 81 F.3d 1002, 1005 (10th Cir.1996). Once the moving party has met its burden, the opposing party must come forward with specific evidence, not mere allegations or denials, demonstrating that there is a genuine issue for trial. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.1983).

II. Undisputed Matters

The following matters are undisputed:

1. Article 28, Section 3 of the Oklahoma Constitution currently provides that:

Oklahoma winemakers may sell and ship the wine they produce at wineries in this state directly to retail package stores and restaurants in this state.

Okla. Const. Art. 28, § 3. (Complaint 119; Answer ¶ 9.)

2. The Oklahoma Statutes are consistent with this constitutional provision. See, 37 O.S.2001 § 518.1; 37 O.S. Supp. 2005 § 521.C., G., H. and V.; and 37 O.S Supp.2005 § 537. E.1. and G.1. (Complaint ¶ 10; Answer ¶ 10.)

3. All manufacturers of wine and spirits other than Oklahoma winemakers are required to sell their products to licensed wholesalers⁴ who, in turn, sell the wine to retailers and mixed beverage licensees. 37 O.S. Supp.2005 § 521. (Complaint ¶ 11; Answer ¶ 11.)

4. From statehood to the present, the State of Oklahoma has maintained strict control over the distribution of alcoholic beverages. At the time the Constitution of the State of Oklahoma was adopted, the people of this state separately adopted the Prohibition Ordinance, which prohibited every kind of commercial and noncommercial trafficking in alcoholic beverages. State v. Kollar, 17 Okla.Crim. 132, 186 P. 968, 969 (1920). Even though the United States Constitution was amended to end Prohibition in 1933, Oklahoma did not repeal the state's prohibition provision until 1959. In that year, Article 27 was added to the Oklahoma Constitution, establishing the Oklahoma Alcoholic Beverage Control Board and setting forth various restrictions on alcohol distribution. Oklahoma also enacted the Oklahoma Alcoholic Beverage Control Act, codified in Title 37 of the Oklahoma Statutes, which established what is generally referred to as a "three-tier" system of regulation. Title 37 has been amended and supplemented over the years by various legislative enactments and regulations, without changing the basic operation of the three-tier system — except, as described below, in recent years, with regard to Oklahoma winemakers. (Complaint ¶ 14; Answer ¶ 14.)

5. The three-tier system of Title 37 was originally, mid is still, premised on a series of license categories and the basic provision that no person may manufacture, sell, or ship alcoholic beverages in Oklahoma except as authorized by a license issued by the ABLE Commission. 37 O.S. Supp.2005 §§ 518, 521. The statutes provide that licensed business entities in the first tier (i.e. manufacturers and producers) cannot sell or ship direct to consumers or retailers (i.e. the third tier). Instead, licensed businesses in the first tier are allowed to sell and ship only to licensed business entities in the second tier (i.e. wholesalers). Id. at § 521. Wholesalers, in turn, are not allowed to sell or ship direct to consumers. Instead, wholesalers are allowed to sell and ship only to licensed businesses in the third tier (i.e. retailers). Id. Finally, licensed retailers are only allowed to sell to consumers. Id. (Complaint ¶ 15; Answer ¶ 15.)

6. In 1984, Oklahoma repealed Article 27 of the Constitution and replaced it and the former ABC Board with Article 28, which established the Oklahoma Alcoholic Beverage Laws Enforcement Commission. Section 3 of the new article reinforced the three-tier system. It provides as follows.

[A]ny manufacturer, or subsidiary of any manufacturer who markets his product solely through a subsidiary or subsidiaries, a distiller, rectifier, bottler, winemaker, brewer, or importer of alcoholic beverages, bottled or made in a foreign country, either within or without this state, shall be required to sell such brands or kinds of alcoholic beverages to every licensed wholesale distributor who desires to purchase the same, on the same price basis and without discrimination, and shall further be required to sell such beverages only to those distributors licensed as wholesale distributors. Okla. Const. Art. 28, § 3 (emphasis added). (Complaint ¶ 16; Answer ¶ 16.)

7. One of the primary purposes of the three-tier system is to assure that alcoholic beverages in the State are channeled through duly licensed wholesalers, each of whom is readily answerable to the State for providing appropriate inventory control (including maintaining a bonded warehouse), prompt tax remittance, and an easy means of restraining sales to inappropriate or unlicensed persons or entities. Indeed, wholesalers report information on a monthly basis to the Oklahoma Tax Commission, including:

(1). Opening inventory of alcoholic beverages other than beer;

(2). Total receipts and acquisitions during month from every source. This shall be itemized showing imports and purchases from within and without this state separately; the kind, proof and quantity of each type of alcoholic beverage as shown by the shipper's or seller's invoices thereof; the date of each purchase; the amount purchased; the date received; the person from whom purchased; the manifest, bill of lading or delivery invoice number of each shipment, which number shall be the number used by the original seller as shown on the basic shipping records which accompany the shipment; and the point of origin and point of destination of each shipment;

(3). The kind and quantity of all alcoholic beverages sold or withdrawn from inventory for sale, use, or consumption during the calendar month; the date of each sale; and the kind, proof and quantity of alcoholic beverages in each sale; the name, address and Alcoholic Beverage Laws Enforcement Commission license number of each purchaser, and the manifest, bill of lading or delivery invoice number, which number shall be the number as shown on the basic shipping records which accompany the delivery;

(4). All nontaxable sales and dispositions made during said month, supported by evidence satisfactory to the Oklahoma Tax Commission;

(5). Closing inventory of alcoholic beverages as of the last day of the calendar month; and

(6). Such other information pertaining to the wholesaler's beginning inventory of alcoholic beverages, receipts or acquisitions thereof, sales and dispositions thereof, and closing inventory, as the Oklahoma Tax Commission may by form or regulation require.

37 O.S.2001 § 543. A. (Complaint ¶ 17; Answer ¶ 17.)

8. As demonstrated above, the current policy of the State of Oklahoma favors a closely regulated alcohol distribution system. Title 37 O.S.2001 § 503. A. states as follows: "The Oklahoma Alcoholic Beverage Control Act shall be deemed an exercise of the police power of the State of Oklahoma for the protection of the welfare, health, peace, temperance and safety of the people of the state, and all the provisions hereof shall be construed for the accomplishment of that purpose." (Complaint ¶ 18; Answer ¶ 18.)

9. In 2000, Article 28, Section 3, of...