Peoples Super Liquor Stores, Inc. v. Jenkins

• Decision Date: 08 May 2006
• Docket Number: Civil No. 04-12219-PBS.
• Citation: 432 F.Supp.2d 200
• Parties: PEOPLES SUPER LIQUOR STORES, INC., Wine & Spirits Retailers, Inc. & John Haronian, Plaintiffs, v. Eddie J. JENKINS, in his capacity as Chairman of the Alcoholic Beverages Control Commission, et al., Defendants.
• Court: U.S. District Court — District of Massachusetts

432 F.Supp.2d 200

PEOPLES SUPER LIQUOR STORES, INC., Wine & Spirits Retailers, Inc. & John Haronian, Plaintiffs, v. Eddie J. JENKINS, in his capacity as Chairman of the Alcoholic Beverages Control Commission, et al., Defendants.

Civil No. 04-12219-PBS.

United States District Court, D. Massachusetts.

May 8, 2006.

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Evan T. Lawson, Michael Williams and Robert J. Roughsedge, Lawson & Weitzen, LLP, Boston, MA, for Plaintiffs.

Pierce O. Cray, Attorney General's Office, Place Boston, MA, for Defendants.

MEMORANDUM AND ORDER

SARIS, District Judge.

I. INTRODUCTION

Plaintiffs, two liquor retailers, and their owner, seek to invalidate parts of the Massachusetts statute governing ownership of retail liquor stores, Mass. Gen. Laws ch. 138, § 15 (2005), on numerous grounds, constitutional and statutory. Specifically, Plaintiffs argue that the statute violates their First Amendment rights to freedom of speech and freedom of association, their right to equal protection of the laws under the Fourteenth Amendment, and their right not to have property taken for public use without just compensation under the Fifth Amendment. Plaintiffs also argue that § 15 should be preempted by ERISA and that it violates the dormant Commerce Clause. Defendants, members of the Commonwealth's Alcoholic Beverage Control Commission ("ABCC"), move to dismiss the complaint. After hearing and review of the briefs, the motion is ALLOWED with respect to all claims except for the ERISA claim and the dormant Commerce Clause claim.

II. FACTUAL BACKGROUND

Plaintiff John Haronian ("Haronian"), an individual residing in Rhode Island, owns two corporations engaged in the liquor business in New England, both of which are plaintiffs in this action: Peoples Super Liquor Stores, Inc. ("Peoples") and Wine & Spirits Retailers, Inc. ("W & SR"). Peoples is a Massachusetts corporation holding licenses to operate three liquor stores within the Commonwealth, the maximum allowed under state law. Peoples currently operates stores in Fall River, Fairhaven, and New Bedford. W & SR is a Rhode Island corporation and is the franchisor of the three Peoples stores. Plaintiffs challenge various aspects of the Massachusetts statute governing liquor store licensing, Mass. Gen. Laws ch. 138, § 15, which was amended in July 2004. In part, § 15 prevents any entity from being granted an interest in more than three liquor "package store" licenses in the Commonwealth.

One of Haronian's daughters, Shirley Santoro ("Santoro") used money from a trust set up for her by her father to purchase a liquor store, Douglas Wine & Spirits-Fall River ("DW & 5"). Santoro subsequently applied to the Massachusetts ABCC for a license to operate a liquor store. After hearing on December 8, 2004, the ABCC granted Santoro's application on the grounds that her father was only an unpaid advisor". As such, the ABCC did not at that time believe that Santoro's purchase would result in Haronian having a direct or indirect interest in more than three liquor stores; his interest in Santoro's license would constitute the forbidden fourth for Haronian. Thereafter, DW & S sought to become a franchisee of W & SR, joining the three stores owned by Peoples.

The proposed franchise agreement between Santoro and W & SR included an intricate set of provisions. The agreement allowed Santoro the use of the name "Douglas Wine & Spirits," an area of protected territory, and a store design and layout. The agreement also provided computers and training for Santoro's use. Beyond these basic elements of structuring the business, the agreement also included an advertising fee of 1.2 percent of gross sales, which Haronian later stated at an ABCC hearing was mandatory. Also of note, the agreement allowed W & SR, as the franchisor, complete access to the financial records and tax returns for Santoro's store, including the right to inspect and audit those records without prior notice. `Moreover, the agreement included a right of prior approval for W & SR before any transfer of the interest in DW & S.

On October 5, 2005, the ABCC held a hearing regarding the legality of this franchise agreement, given W & SR's, and Haronian's, existing interests in the three Massachusetts stores owned by Peoples. The ABCC, on November 7, 2005, issued a decision declining to approve the agreement between W & SR and Santoro on grounds that it created a direct or indirect beneficial interest in a fourth liquor store license for Haronian under § 15. After an extensive review of the facts and the law, the ABCC denied the application, finding that the terms of the agreement, coupled with the familial ties between Haronian and Santoro, gave a combination of persons an interest in more than three licenses. The ABCC also cited a violation of the terms of the 2004 amendment to § 15, which prohibits any person or combination of persons from "receiv[ing] any percentage or fee derived from gross revenues in exchange for management assistance, or participate in any other action designed to effect common results of more than three licenses under this section." Mass. Gen Laws ch. 138, § 15 (2005).

III. DISCUSSION

A. The Statutory Scheme

The statute, which is now codified as § 15, was passed in 1933 following the repeal of prohibition and regulates the licensing of liquor stores in Massachusetts. It requires each license to be approved by the ABCC. Mass. Gen. Laws ch. 138, § 15 (2005). The statute has always contained a three-license limit for liquor store operators in the Commonwealth. Until 2004, this portion of the statute simply read:

No person, firm, corporation, association, or other combination of persons, directly or indirectly, or through any agent, employee, stockholder, officer, or other person or any subsidiary whatsoever, shall be granted, in the aggregate, more than three licenses in the commonwealth or be granted more than one such license in a town or two in a city.

Mass. Gen. Laws ch. 138, § 15 (2003).

In 2004, the statute was amended to prohibit certain specific behaviors, some of which the Supreme Judicial Court of Massachusetts had already cited as evidence of holding an interest in a liquor license. See, e.g., Johnson v. Martignetti, 374 Mass. 784, 787, 375 N.E.2d 290, 294 (1978) (citing as "indicia of common operations," participating in "a common scheme of advertising, bookkeeping, pension plans, liability and insurance policies, discounting techniques, pricing, hiring, and financing corporate debt"). Following the 2004 amendments, this portion of the statute now reads:

No person, firm, corporation, association, or other combination of persons, directly or indirectly, or through any agent, employee, stockholder, officer, or other person or any subsidiary whatsoever, shall be granted, in the aggregate, more than three such licenses in the commonwealth, or participate in decisions regarding the purchasing of alcoholic beverages or the purchasing of insurance or accounting or bookkeeping services, or receive any percentage or fee derived from gross revenues in exchange for management assistance, or participate in any other action designed to effect common results of more than 3 licensees under this section, or be granted more than one such license in a town or two in a city.

Mass. Gen. Laws ch. 138, § 15 (2005). Most of the plaintiffs' challenges attack this language in the statute.

Section 15 also contains a residency requirement for liquor store license holders, which Plaintiffs allege violates the dormant Commerce Clause. That portion of the statute reads:

The local licensing authorities ... may grant licenses for the sale at retail of such alcoholic beverages or wines or malt beverages, as the case may be, not to be drunk on the premises, to applicants therefor who are citizens and residents of the commonwealth, or partnerships composed solely of such citizens and residents, or to corporations organized under the laws of the commonwealth and whereof all directors shall be citizens of the United States and a majority residents of the commonwealth or to limited liability companies or limited liability partnerships organized under the laws of the commonwealth . .

Id.

Haronian, W & SR, and Peoples challenge § 15 on numerous grounds. The plaintiffs' challenges are "as applied."¹ Plaintiffs' challenges attack numerous aspects of § 15, some of which, like the three-license limit and in-state residency requirement for license-holders, existed before the statute's 2004 amendment. Some of the plaintiffs' challenges attack the statute as it was recently amended. The Court will note which part of the statute the plaintiffs attack in its discussion of each individual claim.

B. Standard of Review

For purposes of this motion, the Court takes as true "the well-pleaded facts as they appear in the complaint, extending [the] plaintiff every reasonable inference in his favor." Coyne v. City of Somerville, 972 F.2d 440, 442-43 (1st Cir.1992) (citing Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1st Cir.1990)). A complaint should not be dismissed under Fed. R.Civ.P. 12(b)(6) unless "`it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Roeder v. Alpha Indus., Inc., 814 F.2d 22, 25 (1st Cir.1987) (quoting Conley v. Gibson, 355 U.S. 41, 45-46; 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

Many of these facts are taken from the opinion of the ABCC dated November 7, 2005 which rejected the franchise agreement at issue in this case (hereinafter cited as ABCC Decision). As the ABCC opinion is a public record submitted to the Court by both parties, I take judicial notice of its contents under Fed.R.Evid. 201. See Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993) ("Ordinarily, of course, any consideration of documents not attached to the complaint, or not expressly incorporated therein, is forbidden, unless the proceeding is...