NA Main St. LLC v. Cook
| Decision Date | 22 December 2020 |
| Docket Number | No. 1:20-cv-01335-SEB-DML,1:20-cv-01335-SEB-DML |
| Citation | 508 F.Supp.3d 320 |
| Parties | NA MAIN STREET LLC, Earl F. Hamm, Jr, AFI Ventures, LLC, Tad Thomas, Plaintiffs, v. David COOK Chairman of the Indiana Alcohol and Tobacco Commission, Eric Holcomb Governor of Indiana, Curtis Hill Attorney General of Indiana, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
James E. Porter, II, Epstein Cohen Seif & Flora, James Alexander Tanford, Joseph Beutel, Robert David Epstein, Epstein Cohen Seif & Porter, Indianapolis, IN, for Plaintiffs.
Jefferson S. Garn, Jill Gagnon Haddad, Lauren Ashley Jacobsen, Indiana Attorney General, Indianapolis, IN, for Defendants.
ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR PRELIMINARY INJUNCTION
Plaintiffs NA Main Street LLC, Earl F. Hamm. Jr., AFI Ventures, LLC, and Tad Thomas (collectively, "NA Main Street," unless context requires otherwise) initiated this civil rights lawsuit pursuant to 42 U.S.C. § 1983 on May 7, 2020, against David Cook, Chairman of the Indiana Alcohol and Tobacco Commission; Indiana Governor Eric Holcomb; and Indiana Attorney General Curtis Hill (collectively, the "State") in their official capacities. NA Main Street challenges the constitutionality of Ind. Code §§ 7.1-3-21-5.4(a) and 7.1-3-21-6(a)(10)(B)(i), which require out-of-state limited liability companies operating Indiana retail establishments that serve alcohol by the drink to earn annual gross food sales exceeding $100,000, while not imposing any minimum food sales requirement on Indiana limited liability companies. NA Main Street contends that these provisions violate the dormant Commerce Clause of the United States Constitution.
Now before the Court is NA Main Street's Motion for Preliminary Injunction, [Dkt. 25],1 seeking an order enjoining enforcement of Ind. Code §§ 7.1-3-21-5.4(a) and 7.1-3-21-6(a)(10). For the reasons given below, this motion is granted in part and denied in part.
NA Main Street LLC owns and operates "The Earl," a restaurant and bar located in New Albany, Indiana. The Earl is a small operation run by one general manager and three part-time employees, all of whom reside in Indiana.
Prior to NA Main Street LLC's opening of The Earl, its premises were utilized to operate a retail ice cream shop. Earl F. Hamm Jr., a Kentucky resident who was, at that time, the sole owner of NA Main Street, LLC, developed a close relationship with the franchisee of the ice cream shop, an Indiana resident and the owner of the property in which the shop was housed. Following the closure of the ice cream shop, Mr. Hamm decided, along with the former ice-cream-shop-franchisee whose name has not been provided, to transform the 1600 square foot property into a "bar and/or restaurant."
The franchisee contributed various construction services to the renovation project but elected not to acquire any equity ownership of NA Main Street LLC. Though Mr. Hamm previously held 100% of NA Main Street LLC's ownership interest, since transitioning the ice cream shop into a bar and restaurant, Mr. Hamm has issued 40% of the ownership to AFI Ventures, LLC, a limited liability company comprised completely of individuals residing in Kentucky. Accordingly, NA Main Street LLC is currently owned entirely by Kentucky residents, and Mr. Hamm holds the majority of its shares.
Under Indiana law, a limited liability company desiring to operate a business which serves alcoholic beverages by the drink must obtain an alcoholic beverage retailer's permit from the Indiana Alcohol and Tobacco Commission (the "Commission"). Indiana Code §§ 7.1-3-21-5.4(a) mandates that such a permit can be issued to a limited liability company only if "at least sixty percent (60%) of [its] membership interest is owned by persons who have been continuous and bona fide residents of Indiana for five (5) years." Ind. Code § 7.1-3-21-6(a)(10) provides an exception for limited liability companies, such as NA Main Street LLC, that do not meet this threshold; , § 7.1-3-21-6(a)(10)(B)(i) states that the residency requirement set out in § 7.1-3-21-5.4(a) does not apply to the issuance of a permit to a limited liability company "whose annual gross food sales at the permit location ... exceed $100,000[.]"2
At the time this lawsuit was filed on May 7, 2020, NA Main Street held a valid permit to sell alcoholic beverages at The Earl, initially set to expire in October 2020. In its Complaint, NA Main Street alleges that it is unable to satisfy the monetary threshold required to renew its permit, especially in light of the COVID-19 pandemic, which has been declared a public health emergency throughout the state of Indiana as of March 6, 2020. See IND. EXEC. ORDER. 20-02.
Entities such as NA Main Street LLC are not without some leniency from the state, however, in this regard. In response to the COVID-19 pandemic and its adverse effects on local and state businesses, Governor Eric Holcomb, on June 3, 2020, issued Executive Order 20-31, which modified various alcoholic beverage permit deadlines and requirements enforced by the Commission. In relevant part, § 7.1-3-21-6(a)(10)(B)(i) was temporarily amended to lower the statutorily-required annual gross food sales threshold from $100,000 to $66,000 for those permittees whose businesses were adversely affected by the economic impacts of the COVID-19 pandemic. However, we are informed that The Earl grossed only $10,406.58 in food sales during the relevant time period, and thus its alcoholic beverage retailer's permit is not spared by virtue of Executive Order 20-31.
On September 24, 2020, Mr. Hamm and AFI Ventures, LLC nonetheless submitted NA Main Street LLC's Application for Renewal of Alcoholic Beverage Permit, leaving unanswered the application's questions relating to residency and food sales. Despite these omissions, NA Main Street was granted an automatic renewal of its alcoholic beverage retailer's permit on October 6, 2020, thereby extending the life of the permit until October 2021. The Commission soon realized, however, that NA Main Street LLC's application had omissions of material information and, on November 24, 2020, transmitted a letter to Mr. Hamm explaining that his application had been approved in error. The letter further stated that the Commission would consider the issue of revocation of NA Main Street LLC's permit on December 15, 2020, and, if the Commission elected to issue a notice of intent to revoke, NA Main Street would be notified and provided with an opportunity to be heard pursuant to Indiana law. Consistent with Ind. Code. § 7.1-3-23-6, the Commission must provide an applicant with no fewer than ten days of notice prior to an administrative hearing on a proposed revocation.
On December 17, 2020, the Commission transmitted a second letter to Mr. Hamm. Despite the Commission's earlier notice to Mr. Hamm indicating that he would receive notice and an opportunity to be heard if the Commission "elect[ed] to issue notice of intent to revoke," this December 17, 2020 letter informed Mr. Hamm that the Commission had, on December 15, 2020, rejected his renewal application. This letter also stated that he had fifteen days from the receipt of the correspondence in which to appeal this decision.3
According to NA Main Street, it is currently impossible for The Earl to generate the requisite food sales needed to maintain its alcoholic beverage retailer's permit. NA Main Street has detailed the harms it will incur if Ind. Code §§ 7.1-3-21-5.4(a) and Ind. Code. 7.1-3-21-6(a)(10) are not enjoined and its alcoholic beverage retailer's permit consequently revoked. Unless rescinded, says NA Main Street, these requirements will force The Earl to close its doors. Having invested significant time and money into researching New Albany's food and beverage market, negotiating a lease in an area that (in a non-pandemic society) has a healthy mix of day and night traffic inviting regular business, and opening and growing The Earl in a community that is reflective of its owners’ value, NA Main Street maintains that The Earl's owners and employees, as well as the New Albany community, will suffer from the loss of The Earl. In this lawsuit, NA Main Street challenges the constitutionality of the Indiana statutes whose enforcement is threatening the continued existence of The Earl.
To obtain a preliminary injunction, the moving party must demonstrate: (1) a reasonable likelihood of success on the merits; (2) no adequate remedy at law; and (3) irreparable harm absent the injunction. Planned Parenthood of Ind., Inc. v. Comm'r of Ind. State Dep't of Health , 699 F.3d 962, 972 (7th Cir. 2012). If the moving party fails to demonstrate any one of these three threshold requirements, the injunctive relief must be denied. Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States, Inc. , 549 F.3d 1079, 1086 (7th Cir. 2008) (citing Abbott Labs. v. Mead Johnson & Co. , 971 F.2d 6, 11 (7th Cir. 1992) ). At this stage of the analysis, "the court decides only whether the plaintiff has any likelihood of success—in other words, a greater than negligible chance of winning[.]" AM Gen. Corp. v. DaimlerChrysler Corp. , 311 F.3d 796, 804 (7th Cir. 2002).
If these threshold conditions are met, the Court must then assess the balance of the harm—the harm to NA Main Street if the injunction is not issued against the harm to the State if it is issued—and determine the effect of an injunction on the public interest. Girl Scouts , 549 F.3d at 1086. "The more likely it is that [the moving party] will win its case on the merits, the less the balance of harms need weigh in [its] favor." Id. at 1100.
The United States Constitution allocates to Congress the power to "regulate Commerce .... among the several States." U.S. CONST. art. I, § 8. Though its terms "do not expressly restrain ‘the...
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