Grocery Industry v. City of Des Moines

Decision Date14 April 2006
Docket NumberNo. 04-1914.,04-1914.
PartiesIOWA GROCERY INDUSTRY ASSOCIATION, Appellee, v. CITY OF DES MOINES, Appellant.
CourtIowa Supreme Court

Mark Godwin, Des Moines, for appellant.

John F. Lorentzen of Nyemaster, Goode, West, Hansell & O'Brien, P.C., Des Moines, for appellee.

STREIT, Justice.

Arguments over government fees concerning liquor have swirled in a cocktail of political debate since the Whiskey Rebellion in 1794.1 Iowa grocers complain the administrative fees being charged by Des Moines on liquor licenses are illegal. The defendant, the City of Des Moines, appeals from the district court's judgment declaring a municipal ordinance imposing administrative fees on liquor licenses and beer and wine permits illegal. The City claims the district court erred when it determined the Iowa Alcoholic Beverage Control Act conflicts with, and thereby preempts the administrative fee ordinance. Because we find the ordinance conflicts with the statutory scheme created for application fees, we affirm.

I. Facts and Prior Proceedings

The plaintiff, the Iowa Grocery Industry Association (hereinafter "IGIA"), is a group of grocers, some of which operate grocery stores within the City of Des Moines. Pursuant to the statutory scheme provided by the Iowa Alcoholic Beverage Control Act (hereinafter "the Act"), applications for liquor licenses and beer and wine permits are filed with the local authority, which in this case is the Des Moines City Council. Iowa Code § 123.32(1) (2003). The local authority is authorized to make an initial decision whether to approve or disapprove the application. Id. § 123.32(2). The application, endorsed by the local authority as either approved or disapproved, is then forwarded to the Iowa Alcoholic Beverage Division of the Iowa Department of Commerce (hereinafter "Division"). Id. If the application is not approved by the local authority, the Division notifies the applicant of the disapproval and informs the applicant of its opportunity to appeal the decision to the administrator of the Division. Id. § 123.32(5)(a). If the application is approved by the local authority, the administrator makes any investigation it deems necessary and then affirms, reverses, or modifies the local authority's decision. Id. § 123.32(5)(b).

The Act assigns specific application fees for liquor licenses and beer and wine permits. The local authority collects these fees. For beer permit applications, the local authority forwards a certified receipt for the fees to the Division, but retains all of the application fees for itself. Id. § 123.143(1). In contrast, the fees on liquor licenses and wine permit applications are not retained by the local authority. The local authority sends these fees to the Division and then receives a percentage of the fees back. Id. § 123.36(8). In Des Moines, the fees retained by, or remitted back, to the City are placed in the City's general fund.

In 2003, the City of Des Moines adopted an ordinance requiring an additional "administrative fee" on applications for liquor licenses and beer and wine permits. Des Moines City Ordinance § 10-54(3) (2004). Although the City is already reimbursed for its role in the application process,2 the City passed this ordinance to cover its costs in processing and investigating the applications. The additional administrative fee for new permit applicants is a minimum of $420 for "on-premises" consumption permits (bars and restaurants) and a minimum of $320 for "off-premises" consumption permits (grocery stores and convenience stores). Unlike the state statutory license fee, the ordinance provides no mechanism to refund the administrative fee if the license application is not approved. See id.; Iowa Code § 123.32(5)(a).

The IGIA filed the present declaratory judgment action claiming the ordinance is illegal because the State regulation of liquor licensing under the Iowa Alcoholic Beverages Control Act preempts the imposition of additional fees. Before trial, IGIA and the City agreed upon a joint statement of facts, and then both filed motions for summary judgment. The court granted IGIA's motion for summary judgment, and the City filed this appeal.

II. Standard of Review

When reviewing a district court's decision to grant summary judgment, our task is to determine whether a genuine issue of material fact exists and whether the law was correctly applied. Junkins v. Branstad, 421 N.W.2d 130, 132 (Iowa 1988). In this case, the parties agree there is no dispute with respect to the material facts of the case; the disagreement centers on the interpretation of state law. Our role is to decide whether we agree with the district court's application of the law to the undisputed facts before us. Therefore, our review is for correction of errors at law. Campbell v. Delbridge, 670 N.W.2d 108, 110 (Iowa 2003) ("The standard of review of a district court's grant of summary judgment is for correction of errors at law.").

III. Merits
A. Home Rule Authority

The City argues the ordinance is valid because, under the "Home Rule Amendment," the City has the power to determine its own local affairs and government. In essence, the City argues it can charge the fee because the Act does not explicitly limit its right to do so.

Article III, section 38A of the Iowa Constitution provides:

Municipal corporations are granted home rule power and authority, not inconsistent with the laws of the general assembly, to determine their local affairs and government, except that they shall not have power to levy any tax unless expressly authorized by the general assembly.

The rule or proposition of law that a municipal corporation possesses and can exercise only those powers granted in express words is not a part of the law of this state.

This provision of the Iowa Constitution, known as the "Home Rule Amendment," grants municipal corporations broad authority to regulate matters of local concern. City of Des Moines v. Gruen, 457 N.W.2d 340, 341 (Iowa 1990). However, this authority is limited by the fact that a city's exercise of power must not "be inconsistent with the laws of the general assembly." Iowa Const. art. III, § 38A.

"A municipal ordinance is inconsistent with a law of the general assembly and, therefore, preempted by it, when the ordinance prohibits an act permitted by statute, or permits an act prohibited by a statute." Gruen, 457 N.W.2d at 342 (internal quotations and citations omitted). A municipal ordinance is also preempted by state law when the ordinance invades an area of law the legislature reserved to itself. Id. Stated another way, municipalities do not have authority to act if a particular power has been denied them by statute. Goodell v. Humboldt County, 575 N.W.2d 486, 492 (Iowa 1998); see also Sam F. Scheidler, Implementation of Constitutional Home Rule in Iowa, 22 Drake L.Rev. 294, 305 (1973).

The district court concluded the Act preempted the City's authority to charge the administrative fee because the fee conflicted with the general assembly's specific directions for governance in the area of alcoholic beverage permits. After reviewing the controlling statutes, we agree with the district court.

B. The Iowa Alcoholic Beverages Control Act

The first section of the Iowa Alcoholic Beverages Control Act establishes that the general assembly chose to reserve to itself the power to regulate the traffic of alcoholic beverages:

This chapter shall ... be deemed an exercise of the police power of the state, for the protection of the welfare, health, peace, morals, and safety of the people of the state, and all its provisions shall be liberally construed for the accomplishment of that purpose. It is declared to be public policy that the traffic in alcoholic liquors is so affected with a public interest that it should be regulated to the extent of prohibiting all traffic in them, except as provided in this chapter.

Iowa Code § 123.1 (emphasis added). A subsequent section defining the term "local authority" also supports the conclusion that, subject to a handful of exceptions, the general assembly reserved in itself the power to regulate Iowa's alcoholic beverage industry. Section 123.3(21) states a local authority is empowered

to approve or deny applications for retail beer or wine permits and liquor control licenses; empowered to recommend that such permits or licenses be granted and issued by the division; and empowered to take other actions reserved to them by this chapter.

(Emphasis added.) More pertinent to the case at hand, the general assembly "exclusively" reserved in itself the "power to establish [liquor] licenses and [beer and wine] permits and levy taxes as imposed in [the Act]." Id. § 123.37.

While the general assembly reserved to itself the general authority to regulate the alcoholic beverage industry in Iowa, it also gave limited regulatory powers to local authorities. For example:

Section 123.30(2) allows the local authority to refuse to issue a license or permit for premises which do not conform to applicable local laws.

Section 123.32(3) allows the local authority to "define ... licensed premises" for festivals, fairs and the like.

Section 123.32(4) allows the local authority to require an applicant's security personnel "to be trained and certified in security methods."

Section 123.38 allows the local authority to authorize the transfer of existing permits from one location to another, so long as the location remains within the same city or county.

Section 123.39(1) allows the local authority to suspend a license or permit "for a period not to exceed one year" or impose a civil penalty "not to exceed one thousand dollars per violation."

Section 123.39(2) allows the local authority to "suspend any retail wine or beer permit or liquor control license for a violation of any ordinance or regulation adopted by the local authority." It also allows local authorities to "adopt ordinances or regulations for the...

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