Louisville/Jefferson Cnty. Metro Gov't v. O'shea's-Baxter, LLC

• Decision Date: 21 August 2014
• Docket Number: No. 2013–SC–000085–DG.,2013–SC–000085–DG.
• Citation: Louisville/Jefferson Cnty. Metro Gov't v. O'shea's-Baxter, LLC, 438 S.W.3d 379 (Ky. 2014)
• Court: Supreme Court of Kentucky
• Parties: LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT, APPELLANT v. O'SHEA'S–BAXTER, LLC (D/B/A Flanagan's Ale House), et al., Appellees.

438 S.W.3d 379

LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT, APPELLANT

v.O'SHEA'S–BAXTER, LLC (D/B/A Flanagan's Ale House), et al., Appellees.

No. 2013–SC–000085–DG.

Supreme Court of Kentucky.

Aug. 21, 2014.

Held Unconstitutional

KRS 241.075

Michael J. O'Connell, David A. Sexton, for Appellant.

Kenneth Sidney Handmaker, Kevin Lee Chlarson, for Appellee, O'Shea's Baxter, LLC (d/b/a Flanagan's Ale House).

David A. Smith, Stephen Bryant Humphress, for Appellee, Commonwealth Of Kentucky, Alcoholic Beverage Control Board.

Opinion of the Court By Justice SCOTT.

This appeal arises from a challenge by O'Shea's–Baxter, LLC, d/b/a Flanagan's Ale House (Flanagan's) to an order of the Alcoholic Beverage Control Board (ABC Board) upholding the Louisville/Jefferson County Government's (Louisville Metro) denial of Flanagan's's application for a retail drink license. The issues involved in the present action concern KRS 241.075, which prohibits the issuance of a retail drink license to an applicant located in a “combination business and residential area” of a city of the first class or consolidated local government if another “similar establishment” is located within 700 feet of the applicant. Flanagan's challenges the constitutionality of KRS 241.075 on the grounds that it (1) constitutes local and special legislation in violation of Sections 59 and 60 of the Kentucky Constitution, (2) exercises arbitrary power and fails to provide for equal protection under the law in contravention of Section 2 of the Kentucky Constitution, and (3) unconstitutionally delegates zoning powers vested in local governments to the state. The Court of Appeals ruled that the statute was unconstitutional local and special legislation in violation of Sections 59 and 60 of the Kentucky Constitution. We affirm the Court of Appeals' ruling.

I. BACKGROUND

Flanagan's operates at 934 Baxter Avenue in Louisville, where it serves food and drink to the public. In April 2007, Flanagan's applied for a retail liquor drink license to replace its restaurant drink license. Louisville Metro's local ABC administrator denied the application, relying on the 700–feet restriction of KRS 241.075.

Thereafter, Flanagan's appealed the administrator's decision to the ABC Board. Citing KRS 241.075, the ABC Board entered a final order affirming Louisville Metro's denial of Flanagan's's application for a retail liquor drink license. Flanagan's appealed the ABC Board's decision to the Franklin Circuit Court, arguing that KRS 241.075 is unconstitutional because the statute's 700–feet requirement only applies to businesses in certain parts of first-class cities and consolidated local governments and, therefore, the statute is discriminatory and in violation of the proscription on special legislation found in Sections 59 and 60 of the Kentucky Constitution.

The circuit court declined to declare KRS 241.075 unconstitutional, holding that an important public purpose was served by limiting the density of establishments authorized to serve and sell liquor in the “combination business and residential areas” of Louisville Metro. Accordingly, the circuit court denied Flanagan's's motion for summary judgment and granted summary judgment in favor of Louisville Metro and the ABC Board.

Flanagan's again appealed, maintaining that KRS 241.075 is unconstitutional and that the circuit court erred by relying on the statute to rule in favor of Louisville Metro and the ABC Board. The Court of Appeals noted that KRS 241.075(1) authorizes the state board to divide cities of the first class or consolidated local governments into “downtown business areas” and “combination business and residential areas” for the purpose of regulating the location of retail package liquor and retail drink licenses. Further, the Court of Appeals observed that KRS 241.075(2) applies the requirement of a distance of 700 feet between retail liquor licenses only to licenses in “combination business and residential areas” and not to licenses in “downtown business areas.” The Court of Appeals also took notice that, as a practical matter, the classifications made by KRS 241.075 and the 700–feet rule could only apply to Louisville Metro since Louisville is the only city of the first class and the only consolidated local government in Kentucky.¹SeeKRS 67C.101; KRS 81.010 (repealed).

Finding no reasonable basis to presume that the circumstances associated with the concentration of liquor licenses in the “combination business and residential area” in Louisville Metro are any different than they are in the “downtown business area” of Louisville or in other cities throughout the Commonwealth, the Court of Appeals concluded that KRS 241.075 was unconstitutional special and local legislation in violation of Sections 59 and 60 of the Kentucky Constitution. This Court subsequently granted Louisville Metro's motion for discretionary review.

II. LOCAL AND SPECIAL LEGISLATION

Flanagan's argues on appeal that KRS 241.075 constitutes local or special legislation in violation of Sections 59 and 60 of the Constitution of Kentucky and that Louisville Metro and the ABC Board cannot rely on the statute to deny Flanagan's's liquor license application. The application of constitutional standards is a question of law which we review de novo. Jacobsen v. Commonwealth, 376 S.W.3d 600, 606 (Ky.2012).

As mentioned above, KRS 241.075(1) provides that the ABC Board shall divide cities of the first class and consolidated local governments into separate “downtown business areas” and “combination business and residential areas.” ² The ABC Board made the division mandated by KRS 241.075(1) in 804 KAR 7:010(2), which designated a small portion of the City of Louisville as a “downtown business area.” ³ Additionally, KRS 241.075(2) requiresa minimum distance of 700 feet between retail drink licensees in “combination business and residential areas” in cities of the first class or consolidated local governments.⁴

Section 59 of our Constitution provides that “where a general law can be made applicable, no special law shall be enacted.” In like manner, Section 60 provides that “[t]he General Assembly shall not indirectly enact any special or local act by the repeal in part of a general act, or by exempting from the operation of a general act any city, town, district or county....” The primary purpose of Section 59, and by extension Section 60, is to “prevent special privileges, favoritism, and discrimination, and to [e]nsure equality under the law.” Ky. Harlan Coal Co. v. Holmes, 872 S.W.2d 446, 452 (Ky.1994). These two sections of our Constitution prevent the enactment of laws that do not “operate alike on all individuals and corporations.” Jefferson Cnty. Police Merit Bd. v. Bilyeu, 634 S.W.2d 414, 416 (Ky.1982) (citing City of Louisville v. Kuntz, 104 Ky. 584, 47 S.W. 592, 592–93 (1898)).

The question of whether an act constitutes local or special legislation often arises when a statute, such as KRS 241.075, treats classes of cities differently. Generally, classifications that are “favorable or unfavorable to particular localities, and rested alone upon numbers and populations, are invidious, and therefore offensive to the letter and spirit of the Constitution....” United Dry Forces v. Lewis, 619 S.W.2d 489, 491 (Ky.1981) (quoting James v. Barry, 138 Ky. 656, 128 S.W. 1070, 1072 (1910)).

However, an act is not necessarily rendered unconstitutional by the fact that there is only one city of the class to which the legislation is applicable. City of Louisville v. Klusmeyer, 324 S.W.2d 831, 834 (Ky.1959); Commonwealth v. Moyers, 272 S.W.2d 670, 673 (Ky.1954). Indeed, in Mannini v. McFarland, our predecessor Court developed a test for determining whether legislation on the basis of population is constitutionally sustainable. Mannini held that a legislative classification according to population and its density, and according to the division of cities into classes, will be constitutional under the framework of Sections 59 and 60 only if (1) the act relates to the organization and structure of a city or county government or (2) the classification bears “a reasonable relation to the purpose of the Act.” 294 Ky. 837, 172 S.W.2d 631, 632 (1943).

Louisville Metro does not assert that KRS 241.075 pertains to the organization and government of cities or counties. Id. In fact, it is well-settled that statutes governing the sale of alcoholic beverages have no relation to governmental organization or structure. Lewis, 619 S.W.2d at 492; Mannini, 172 S.W.2d at 634. Thus, in order for KRS 241.075 to be constitutional,the legislature's separate classification of Louisville on the basis of its population must bear “a reasonable relation to the purpose of the Act.” Mannini, 172 S.W.2d at 632.

The apparent purpose of KRS 241.075 is to limit the concentration of establishments with retail package licenses and retail drink licenses. Therefore, we must ask whether KRS 241.075's separate classification of the consolidated local government of Louisville bears a reasonable relation to the act's purpose of limiting the concentration of retail drink licenses. Mannini is instructive on this question because it contains an example of an alcoholic beverage control statute that was ruled unconstitutional for treating classes of cities differently when the classification of cities failed to bear any reasonable relation to the purpose of the Act.

In Mannini, the owner of a poolroom challenged the constitutionality of a law, applicable solely to cities of the fourth class, which prohibited the sale of alcoholic beverages in bowling alleys and poolrooms. Id. at 631–32. Holding the statute to be special legislation in violation of Sections 59 and 60 of the Kentucky Constitution, our predecessor Court found no reasonable relationship between the size or class of the cities and the purpose of the Act. Id. at 634. The Court concluded:

[T]he classification of fourth class cities set up in ...