Ind. Petroleum Marketers & Convenience Store Ass'n, Thornton's Inc. v. Huskey

• Decision Date: 16 June 2014
• Docket Number: No. 1:13-cv-00784-RLY-DML,1:13-cv-00784-RLY-DML
• Parties: INDIANA PETROLEUM MARKETERS AND CONVENIENCE STORE ASSOCIATION, THORNTON'S INC., RICKER OIL COMPANY, INC., FREEDOM OIL, LLC, and STEVE E. NOE, Plaintiffs, v. ALEX HUSKEY, in his official capacity as Chairman of the Indiana Alcohol and Tobacco Commission, Defendant.
• Court: U.S. District Court — Southern District of Indiana

INDIANA PETROLEUM MARKETERSAND CONVENIENCE STORE ASSOCIATION,THORNTON'S INC., RICKER OIL COMPANY, INC.,FREEDOM OIL, LLC, and STEVE E. NOE, Plaintiffs, v. ALEX HUSKEY, in his official capacityas Chairman of the Indiana Alcoholand Tobacco Commission, Defendant.

No. 1:13-cv-00784-RLY-DML

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

SO ORDERED: June 16, 2014

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

Plaintiff, the Indiana Petroleum Marketers and Convenience Store Association ("IPCA"); three of its members, Thorton's Inc., Ricker Oil Company, Inc. and Freedom Oil, LLC.; and an individual consumer, Steve E. Noe, challenge the constitutionality of the Indiana Code § 7.1-5-10-11, which prohibits the sale of cold beer by the holder of a beer dealer permit. An evidentiary hearing on the Plaintiffs' Motion for Preliminary Injunction was held on February 20-21, 2014. The witnesses included: Robin Lynn Poindexter, retired Major with the Indiana State Police; Matt Thornton, President and CEO of Thorton's, Inc.; Gregory J. Cobb, managing member of Freedom Oil, LLC.; Quinn B. Ricker, President and CEO of Ricker Oil Company, Inc.; Matthew Dublis, VicePresident of Operations at Thornton's; Karen Mitchener, Director of Human Resources at Ricker Oil; Steve Noe, a consumer; Travis R. Thickstun, Corporal of the Indiana State Excise Police; and Scot Imus, Executive Director of the IPCA.¹ Plaintiffs request the court to declare that Indiana's alcohol beverage law is unconstitutional under both the United States and Indiana Constitutions, and to enjoin its enforcement. Defendant, Alex Huskey, in his official capacity as Chairman of the Indiana Alcohol and Tobacco Commission ("ATC") or (the "State"), also moves for summary judgment. The briefs in support of both motions rely on the same facts and law; accordingly, the court will address the motion for summary judgment first.

I. FINDINGS OF FACT

A. The Parties

1. Plaintiff, IPCA, is an Indiana trade association, and its members are convenience stores that are located in Indiana. (Imus Test. at 420, 422).

2. IPCA's function is to provide advice to, and advocate on behalf of, its Indiana convenience stores. (Id. at 420, 424).

3. IPCA's current members are 115 convenience store entities. Those entities own and operate some 1,500 convenience stores in Indiana, and about 70% to 80% of those locations sell beer. (Id. at 412-14).

4. Plaintiff, Thornton's Inc., a Delaware corporation, began in the convenience store Industry in the 1980s. (Thorton Test. at 139-141, 151-52). Thornton's currently owns and operates 175 convenience stores in six states, 26 of which are in Indiana. (Dabulis Test. at 250). Of its 26 Indiana convenience store locations, Thornton's sells beer at 18 of them. (Id. at 250-51). Thornton's has been cited once for violating Indiana Code § 7.1-5-10-11. (Plaintiff's PI Ex. C).

5. Plaintiff, Ricker Oil Company, Inc., is an Indiana corporation and 100% of its stock is owned by long-time Indiana residents. (Ricker Dep. at 35).

6. Ricker began in the Indiana convenience store business in 1991/1992. (Ricker Test. at 220). Ricker currently owns 50 stores in Indiana, 46 of which sell beer. (Ricker Dep. at 211).

7. Ricker has never been cited for violating Indiana Code § 7.1-5-10-11. (Ricker Test. at 225).

8. Freedom Oil, LLC, is an Indiana limited liability company and 100% of its units are owned by long-time Indiana residents. (Cobb Test. at 192-93).

9. Freedom started in 2002, and currently owns 6 stores in Indiana, three of which sell beer. (Cobb Test. at 184).

10. Freedom has never been cited for violating Indiana Code § 7.1-5-10-1. (Id. at 195-96).

11. Plaintiff, Steve E. Noe, 49, is an individual who resides in Richmond, Indiana, near the Ohio border. (Noe Test. at 270).

12. Noe occasionally buys beer, and prefers to buy cold beer. To buy cold beer, he must either purchase it at an Indiana liquor store or drive to New Paris, Ohio. (Id. at 271-74).

13. Defendant, Alex Huskey, is the Chairman of the Alcohol and Tobacco Commission, and is sued in his official capacity.

B. Indiana Code § 7.1-5-10-11

14. The statutory provision at issue, Indiana Code § 7.1-5-10-11, provides:

"Sale of Cold Beer Prohibited. It is unlawful for the holder of a beer dealer's permit to offer or display for sale, or sell, barter, exchange or give away a bottle, can, container, or package of beer that was iced or cooled² by the permittee before or at the time of the sale, exchange or gift."

Ind. Code § 7.1-5-10-11 (emphasis added).

15. This provision applies to grocery stores and drug stores. (Thickstun Test. at 327; Poindexter Test. at 136). The parties agree that the statutory definition of "grocery store" includes a "convenience store." Ind. Code § 7.1-1-3-18.5.

16. Violation of this provision may result in a civil fine, or the suspension or revocation of the permittee's permit. See Ind. Code § 7.1-3-23-2; (Poindexter Test. at 88-89, 101).

17. There have been very few citations issued for violating this provision since the excise police began mandatory reporting in 2007. For example:

In 2007, Thornton's placed various malt beverages in a cooler and was offering these for sale. Thornton's store manager was contacted by phone and stated that they mistakenly believed that these products could be sold cold as they believedthem to be wine. Notably, the items in the cooler were not Bud Light, Coors, Corona, or other beers. Thornton's General Counsel assured the State that "this mistake will not happen again." The judgment was deferred for a year.

In 2008 Mt. Etna Bait was selling cold beer and, in fact, the store representative confirmed that the business was selling cold beer. The store unplugged the cooler that was cooling the beer and took down the signs that were advertising cold beer.

In 2009, Speedway had attached beer to their cooler areas as a way of making the beer cold. During the citation process, the manager told the officer that "he thought that by attaching beers to their cooler doors that they would get cold." Speedway was fined $150.00.

In 2010, Geist Market was advertising cold beer and the officer asked for a cold 12-pack of Coors Light and the employee retrieved the cold 12-pack of Coors Light from a walk-in cooler area. The officers searched the walk-in cooler area and discovered various brands of beer being stored there and all of the beer was very cold. There was also a stand-alone glass front cooler in the back room that was full of beer and the beer was very cold. There were 600 units of cold beer; however, the total fine was $250.00.

In 2010, Pappy's was cooling and selling malt beverages other than beer. The store believed that these products were wine and, thus, could be cooled. Beer was not being cooled. The judgment was deferred.

In 2011, JK Deli was cooling and selling malt beverages other than beer. The store believed that these products were wine and, thus, could be cooled. Beer was not being cooled. JK Deli was fined $150.00.

(Thickstun Decl. ¶ 4. See also Thickstun Test. at 165, 358-62; Defendant's PI Exs. C, E, G).

18. An entity that wishes to sell beer in the State of Indiana must apply for a permit. The court's Findings of Fact address three permits at issue in this case: (1) the beer dealer permit (for convenience stores, grocery stores, and drug stores); (2) the dealer permit (for package liquor stores); and (3) the beer retailer permit (for restaurants, taverns, and the like).

C. Beer Dealer Permits/Beer Dealers

19. The business model of a convenience store is premised on convenience, and this convenience is achieved in several ways: (a) being open 24 hours a day 365 days a year; (b) having no age restriction on customers; (c) providing a variety of goods including many basic necessities; and (d) having products available for customers to pick up and take to the cash register. (See generally, Thickstun Test. at 151, 153-56, 160; Dabulis Test. at 254; Imus Test. at 416, 434-35; Ricker Test. at 225-26, 228-30, 232-33).

20. Convenience stores like Thornton's, Ricker, Freedom Oil, Speedway, Circle K; grocery stores like Marsh, Kroger, Meijer; drug stores like CVS and Walgreens; big-box stores like Walmart, Target, K-Mart, may sell beer (and if they contain a pharmacy, hard liquor) if they acquire the proper beer dealer permit, noted below. (Thickstun Test. at 326-27).

21. The types of permits that a convenience store (classified as grocery stores for permitting purposes) may acquire include: (a) a permit to sell beer only at a grocery store located in an incorporated area; (b) a permit to sell beer only at a grocery store located in an unincorporated area; (c) a permit to sell beer and wine at a grocery store located in an incorporated area; or (d) a permit to sell beer and wine at a grocery store located in an unincorporated area. (Thickstun Decl. ¶ 5).

22. These permits are issued with the following conditions: (a) all beer and malt products must be sold and stored non-cooled, non-chilled, and non-iced; (b) noalcohol may be sold on Sunday; (c) clerks must be 19 years of age to sell alcohol; and (d) on-premises consumption is forbidden. (Id. ¶ 6).

23. Indiana imposes a 25% cap on the amount of revenue convenience stores (and grocery stores) may raise from the sale of alcohol. (Imus Test. at 402; Poindexter Test. at 123-24; Ind. Code § 7.1-1-3-18.5 (b)). However, Indiana imposes no restriction on the amount of floor space a convenience store can dedicate to the display or sale of beer. (Ricker Dep. at 64-65; Cobb Dep. at 92; Imus Dep. at 63).

24. Currently, there are about 2,800 convenience/grocery/drug stores in Indiana that have beer dealer permits. Approximately 4,600 more beer dealer permits are currently available. (Thickstun Test. at 348).

D. Dealer Permits/Liquor Dealers

25. Package liquor stores sell cold beer for take-away pursuant to a "dealer permit" that allows these stores to sell beer, wine, and liquor for locations in incorporated areas. (Thickstun Decl.

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