The Institute for Responsible Alcohol Policy v. State ex rel. Alcohol Beverage Laws Enforcement Commission, 012220 OKSC, 118209

Docket Nº:118209
Opinion Judge:Winchester, J.
Party Name:THE INSTITUTE FOR RESPONSIBLE ALCOHOL POLICY, SOUTHERN GLAZER'S WINE AND SPIRITS OF OKLAHOMA, LLLP, J.B. JARBOE II, CENTRAL LIQUOR CO. L.P. d/b/a RNDC OKLAHOMA, JUSTIN NAIFEH, E. & J. GALLO WINERY, SUTTER HOME WINERY INC., d/b/a TRINCHERO FAMILY ESTATES, DIAGEO AMERICAS, INC., LUXCO, INC., RIBOLI FAMILY OF SAN ANTONIO WINERY, INC., JENNIFER BLA...
Attorney:Mithun Mansinghani, Solicitor General, and Zach West, Assistant Solicitor General, Office of the Attorney General, Oklahoma City, Oklahoma, for Defendants/Appellants. Thomas G. Wolfe, Heather L. Hintz, Fred A. Leibrock, and Martin J. Lopez III, Phillips Murrah P.C., Oklahoma City, Oklahoma, for I...
Judge Panel:Gurich, C.J., Darby, V.C.J., Winchester, Edmondson, JJ., and Reif, S.J., concur. Kauger (by separate writing), Kane, JJ., Barnes, S.J. (by separate writing), and Goodman, S.J., dissent. KAUGER, J., with whom KANE, J. joins, dissenting: BARNES, S.J., with whom Goodman, S.J., joins, dissenting:
Case Date:January 22, 2020
Court:Supreme Court of Oklahoma
 
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2020 OK 5

THE INSTITUTE FOR RESPONSIBLE ALCOHOL POLICY, SOUTHERN GLAZER'S WINE AND SPIRITS OF OKLAHOMA, LLLP, J.B. JARBOE II, CENTRAL LIQUOR CO. L.P. d/b/a RNDC OKLAHOMA, JUSTIN NAIFEH, E. & J. GALLO WINERY, SUTTER HOME WINERY INC., d/b/a TRINCHERO FAMILY ESTATES, DIAGEO AMERICAS, INC., LUXCO, INC., RIBOLI FAMILY OF SAN ANTONIO WINERY, INC., JENNIFER BLACKBURN, d/b/a CELLAR WINE AND SPIRITS OF NORMAN, and DALE BLACKBURN d/b/a GRAND CRU WINE AND SPIRITS SUPERSTORE, Plaintiffs/Appellees,

v.

STATE OF OKLAHOMA, ex rel. ALCOHOLIC BEVERAGE LAWS ENFORCEMENT COMMISSION, and THE HONORABLE KEVIN STITT, GOVERNOR, in his official capacity, Defendants/Appellants, and BRYAN HENDERSHOT, individually, and d/b/a BOARDWALK DISTRIBUTION COMPANY, Intervenor/Appellant.

No. 118209

Supreme Court of Oklahoma

January 22, 2020

UNPUBLISHED OPINION

ON APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY The Honorable Thomas E. Prince, Trial Judge

Mithun Mansinghani, Solicitor General, and Zach West, Assistant Solicitor General, Office of the Attorney General, Oklahoma City, Oklahoma, for Defendants/Appellants.

Thomas G. Wolfe, Heather L. Hintz, Fred A. Leibrock, and Martin J. Lopez III, Phillips Murrah P.C., Oklahoma City, Oklahoma, for Intervenor/Appellant.

Robert G. McCampbell, Amelia A. Fogleman, and Travis V. Jett, GableGotwals, Oklahoma City, Oklahoma, for Plaintiffs/Appellees.

D. Kent Meyers, Crowe & Dunlevy, P.C., Oklahoma City, Oklahoma, for Plaintiffs/Appellees.

Winchester, J.

¶0 Senate Bill 608 mandates that manufacturers of the top 25 brands of liquor and wine sell their product to all licensed wholesalers. Appellees, a group of liquor and wine wholesalers, manufacturers, retail liquor stores, and consumers, challenged Senate Bill 608 as unconstitutional, contending it was in conflict with Okla. Const. art. 28A, § 2(A)(2)'s discretion given to a liquor or wine manufacturer to determine what wholesaler sells its product. The district court agreed and ruled Senate Bill 608 unconstitutional. Appellants appealed, and this Court retained the appeal.

DISTRICT COURT'S JUDGMENT AFFIRMED.

¶1 The Oklahoma Legislature passed Senate Bill 608 ("SB 608") which mandates that liquor and wine manufacturers of the 25 top-selling brands must sell their products to all licensed Oklahoma wholesalers. Appellees, The Institute for Responsible Alcohol Policy; Southern Glazer's Wine & Spirits of Oklahoma, LLLP; J.B. Jarboe II; Central Liquor Co. L.P., d/b/a RNDC Oklahoma; Justin Naifeh; E. & J. Gallo Winery; Sutter Home Winery, Inc., d/b/a Trinchero Family Estates; Diageo Americas, Inc.; Luxco, Inc.; Riboli Family of San Antonio Winery, Inc.; Jennifer Blackburn, d/b/a Cellar Wine and Spirits of Norman; and Dale Blackburn, d/b/a Grand Cru Wine and Spirits Superstore (collectively "Distributors"), 1 challenged SB 608 as unconstitutional, arguing it conflicts with the recently passed Article 28A, § 2(A)(2) of the Oklahoma Constitution (State Question 792).

¶2 The issues before the Court are (1) whether SB 608 is in conflict with Article 28A, § 2(A)(2), and (2) whether SB 608 is a proper use of legislative authority under the anticompetitive provisions of the Oklahoma Constitution. For the reasons stated herein, we hold SB 608 is "clearly, palpably, and plainly inconsistent" with Article 28A, § 2(A)(2)'s discretion given to a liquor or wine manufacturer to determine what wholesaler sells its product. See EOG Res. Mktg. v. Okla. State Bd. of Equalization, 2008 OK 95, ¶ 13, 196 P.3d 511, 519. We further rule that SB 608 is not a proper use of legislative authority as Article 28A, § 2(A)(2) is not in conflict with the Oklahoma Constitution's anticompetitive provisions. The district court did not err by granting Distributors' Motion for Summary Judgment and ruling SB 608 unconstitutional.

I. FACTS

¶3 Since the end of alcohol prohibition, Oklahoma has maintained strict control over the distribution of alcoholic beverages. See State ex rel. Hart v. Parham, 1966 OK 9, ¶ 11, 412 P.2d 142, 147. Beginning in 1984, Oklahoma regulated alcohol pursuant to Article 28 of the Oklahoma Constitution, which created Appellant Alcoholic Beverage Laws Enforcement Commission ("ABLE Commission"). The centerpiece of this regulation still in place today is Oklahoma's three-tier system for alcohol distribution: alcohol manufacturers (first tier) can only sell to licensed Oklahoma wholesalers (second tier); licensed Oklahoma wholesalers (second tier) can only sell to licensed retailers (third tier); and licensed retailers (third tier) can only sell to consumers. This case involves the relationship between the first and second tiers under the recently passed Article 28A. Until recently, the top two tiers operated under a "forced sale clause" that required a manufacturer to sell its products to every licensed Oklahoma wholesaler. See Central Liquor Co. v. Okla. Alcoholic Beverage Control Bd., 1982 OK 16, ¶ 4, 640 P.2d 1351, 1353 (discussing the forced sale clause). Now repealed Article 28 of the Oklahoma Constitution stated: Provided, that any manufacturer... shall be required to sell such brands... to every licensed wholesale distributor who desires to purchase the same, on the same price basis and without discrimination....

Okla. Const. art. 28, § 3(A) (repealed Oct. 1, 2018).

¶4 In 2016, the Oklahoma Legislature passed a joint resolution to place State Question 792 on the November 2016 ballot. State Question 792 repealed Article 28 of the Oklahoma Constitution, replacing it with Article 28A and fundamentally changed how Oklahoma regulates the sale and distribution of alcohol. The people of Oklahoma approved State Question 792 by a 65.62% vote, 2 and it went into effect on October 1, 2018. The Legislature also passed companion legislation in Title 37A of the Oklahoma Statutes to create Oklahoma's new alcohol regulatory scheme. The key provision in Article 28A at issue here permits how a liquor or wine manufacturer can sell products to a licensed Oklahoma wholesaler: A manufacturer... may sell such brands or kinds of alcoholic beverages to any licensed wholesaler who desires to purchase the same. Provided, if a manufacturer, except a brewer, elects to sell its products to multiple wholesalers, such sales shall be made on the same price basis and without discrimination to each wholesaler.

Okla. Const. art. 28A, § 2(A)(2). 3

¶5 After passage of State Question 792, Oklahoma's two largest wholesalers, Central Liquor and Jarboe Sales Company, each sold 49% of their respective businesses to the two largest national alcohol distributors, Southern Glazer's Wine & Spirits and Republic National Distribution Co. As a result, these two wholesalers--now known as Appellees Southern Glazer's Wine and Spirits of Oklahoma, LLLP and Central Liquor Co. L.P., d/b/a RNDC Oklahoma--obtained exclusive distribution contracts with the majority of liquor and wine manufacturers, including distribution of the top 25 brands at issue here. 4 The two largest wholesalers controlled the majority of all wholesale distribution in Oklahoma when Article 28A went into effect on October 1, 2018.

¶6 Intervenor/Appellant Bryan Hendershot, owner of Oklahoma's third-largest wholesaler, Boardwalk Distribution Company, and other wholesalers and liquor stores, advocated for a change to the statutory scheme. The Legislature took up what became SB 608: Any wine or spirit product that constitutes a top brand, as defined in this section, shall be offered by the manufacturer for sale to every licensed wine and spirits wholesaler who desires to purchase the same on the same price basis and without discrimination or inducements. 5

S.B. 608, 57th Leg., 1st Sess. (Okla. 2019) (codified as 37A O.S.Supp. 2019, § 3-116.4). The Legislature passed SB 608, and Governor Stitt signed the bill on May 19, 2019. Id.

II. PROCEDURAL HISTORY AND ARGUMENTS

¶7 Distributors previously requested this Court exercise its original jurisdiction and either issue a writ of prohibition against enforcement of SB 608 or declaratory relief that SB 608 is unconstitutional. This Court declined to exercise its concurrent jurisdiction and transferred the case to district court.

¶8 The parties moved for summary judgment in district court. Distributors claimed that SB 608 directly conflicts with Article 28A, § 2(A)(2), as SB 608 makes Article 28A, § 2(A)(2)'s discretion to select a single wholesaler a nullity. Had Article 28A allowed the Legislature's actions here, Distributors contended Article 28A would have said "shall sell," which the now-repealed Article 28 had required, not "may sell." Appellants, ABLE Commission, Governor Kevin Stitt, and Bryan Hendershot, individually and d/b/a Boardwalk Distribution Center (collectively "the State"), filed a cross-motion for summary judgment and countered that Article 28A must be read in conjunction with the...

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