Barco Beverage Corp. v. Indiana Alcoholic Beverage Com'n
| Decision Date | 07 July 1992 |
| Docket Number | No. 49S02-9207-CV-531,49S02-9207-CV-531 |
| Parties | BARCO BEVERAGE CORPORATION, DeKalb Distributing Company, and Lincoln Hills Beverage Company, Appellants, (Plaintiffs Below) v. INDIANA ALCOHOLIC BEVERAGE COMM., Harry K. Wick, Individually and as Chairman of the Indiana Alcoholic Beverage Commission; Mary Jane McMahon, Individually and as Commissioner of the Indiana Alcoholic Beverage Commission; James E. Courtney, Individually and as Commissioner of the Indiana Alcoholic Beverage Commission; A. Vandeveer, Individually and as Commissioner of the Indiana Alcoholic Beverage Commission; Anheuser-Busch, Inc.; Miller Brewing Company; The Stroh Brewery Company; Indiana Liquor Stores Assn., Inc.; Indiana Retail Council, Inc.; Beermart, Inc.; Beerco., Inc.; and KEBE Enterprises, Inc., Appellees. |
| Court | Indiana Supreme Court |
The sole issue presented by this appeal is whether the Indiana Alcoholic Beverage Commission ("Commission") had authority to promulgate and enforce 905 I.A.C. 1-28-1(3) ("Rule 28"), which prohibits distillers, brewers, rectifiers, and vintners from restricting the sale or resale of their products to a given geographical area. 1 We conclude that the Commission does have such authority.
Three plaintiffs, Barco Beverage Corporation, DeKalb Distributing, and Lincoln Hills Beverage (collectively "Barco"), brought suit against the Commission in an attempt to have Rule 28 declared invalid. The suit quickly attracted a crowd, and the trial court allowed several trade associations and alcoholic beverage retailers (collectively "Intervenors") to intervene in the lawsuit as defendants. Eventually, cross motions for summary judgment were filed in which all parties concurred that no issues of material fact were presented and that the case could be decided by determining a question of law. The trial court entered judgment on its ruling that the Commission did not exceed its authority when it promulgated Rule 28.
Barco appealed. The Court of Appeals held that the Commission possessed the authority to promulgate Rule 28 as it relates to brewers, vintners, and wholesalers of beer and wine, but did not have the authority to include distillers, rectifiers, and liquor wholesalers within the scope of the rule. Barco Beverage v. Ind. Alcoholic Beverage (1990), Ind.App., 563 N.E.2d 658.
In reaching this conclusion, the Court of Appeals analyzed Indiana's statutory scheme of regulating the alcoholic beverage industry from the repeal of Prohibition in 1933 to the present. The court correctly concluded that (1) the legislature had neither expressly forbidden nor permitted the use of territorial limitations by alcoholic beverage wholesalers, and (2) although wholesalers had the right to sell alcoholic beverages anywhere in the state, the statutes did not guarantee that right or prohibit its alienation. 563 N.E.2d at 662. Although the statutes were silent as to territorial limitations, the court nonetheless determined that Article 7.1 enunciated a specific public policy supporting the promulgation of Rule 28 as it related to brewers and vintners, but not as to distillers or rectifiers. The court noted that Ind.Code Sec. 7.1-5-9-2(a)-(b) (1988) makes it unlawful for the holder of a brewer's permit or a vintner's permit to "hold, acquire, possess, own, or control, or to have an interest, claim, or title in or to an establishment, company, or corporation holding or applying for a beer (wine) wholesaler's permit under this title, or in its business." In contrast, Ind.Code Sec. 7.1-5-9-8, governing distillers and rectifiers, provides that they "may not own, acquire, or possess a permit to sell liquor at wholesale" and "may not have an interest in the business of a permittee who is authorized to sell beer, liquor, or wine at wholesale or retail." The difference between the statutes is that a brewer or vintner may not "control" a wholesaler, but a distiller or rectifier is not specifically prohibited from having "control" over a wholesaler. Thus, reasoned the Court of Appeals, the Commission could prevent brewers and vintners from "controlling" wholesalers by contractually limiting the territories in which wholesalers could sell the beverages, but could not prevent a distiller or rectifier from doing so. Therefore, the court concluded that Rule 28 was a valid regulation within the scope of the statute as to brewers and vintners, but not as to distillers, rectifiers, and liquor wholesalers. On rehearing, the Court of Appeals attempted to clarify the type of "control" that is prohibited, but denied the petitions for rehearing. Barco Beverage v. Alcoholic Bev. Com'n. (1991), Ind.App., 571 N.E.2d 306. Barco Beverage and several of the Intervenors now seek transfer. We accept transfer, vacate the opinions of the Court of Appeals, and affirm the trial court.
We hold that applying principles of administrative law to Title 7.1 of the Indiana Code (Alcoholic Beverages) results in a determination that the legislature's grant of power to the Commission is sufficiently comprehensive to grant the Commission authority to promulgate and enforce Rule 28.
A brief history of the law of territorial limitation in Indiana may help in understanding the conception and life of Rule 28. Between 1933, the repeal of Prohibition, and 1967, Indiana statutes at various times either prescribed or proscribed territorial limitations on wholesalers of alcoholic beverages. In 1967, the United States Supreme Court decided United States v. Arnold Schwinn & Company (1967), 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249. In Schwinn, the Supreme Court determined that any contractual agreement that restricted dealers and distributors (including alcoholic beverage wholesalers) to a geographic territory was illegal and a per se violation of the Sherman Antitrust Act. Thus, the Sherman Antitrust Act was held to prohibit territorial restrictions, and such restrictions found in the contracts between alcoholic beverage manufacturers and wholesalers were conceded to be unenforceable.
In 1973, the Indiana General Assembly enacted Title 7.1, Alcoholic Beverages. Although Ind.Code Sec. 7.1-2-3-7 gave the power to establish rules and regulations to effectuate the purposes of Title 7.1 as enunciated in Ind.Code Sec. 7.1-1-1-1, the Commission did not promulgate any rule dealing with exclusive territorial arrangements until after the United States Supreme Court overruled the Schwinn holding in Continental TV, Inc. v. GTE Sylvania, Inc. (1977), 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568. Thereafter, the Commission promulgated Rule 28 to become effective March 1979. In that same year and again in 1981, House Bills imposing geographic territories on beer wholesalers were defeated.
In 1982, the Commission held a well-attended hearing to consider the continuation or repeal of Rule 28. At that hearing, retailers testified that during Indiana's experience with exclusive territories, they were receiving virtually identical prices for comparable brands, and that price increases occurred "across the board". Retailers further testified that under exclusive territories product freshness was not a consideration and wholesalers failed to check code dates. Following these hearings, the Commission voted unanimously against repeal of Rule 28.
During the 1983 legislative session, an attempt was made to amend House Bill 1690. This amendment would have effectively removed the Commission's authority to promulgate Rule 28. This amendment was voted down in the House, and the bill was then passed without the amendment. Two years later, in 1985, another bill was introduced in the House seeking to invalidate Rule 28. It also failed to pass. In 1986, an attempt was made in the Senate to amend a Senate Bill in order to provide for exclusive territories for beer wholesalers. The present lawsuit was filed August 10, 1987, as an attempt to invalidate Rule 28, and the trial court's judgment refusing that attempt was entered July 13, 1988. Following that, during the 1989 legislative session, both houses passed a bill that would have overruled Rule 28 except as applied to liquor. This bill was vetoed by Governor Bayh and was defeated when again presented to both houses following the Governor's veto.
Barco does not question the constitutionality of Title 7.1. Instead, Barco argues that if Rule 28 is allowed to stand, it represents an unconstitutional violation of the separation of powers required by Article 3 Section 1 of the Indiana Constitution. Article 3...
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