United States District Court, S.D. Indiana, Indianapolis Division
E. F. TRANSIT, INC., Plaintiff,
INDIANA ALCOHOL AND TOBACCO COMMISSION, Defendant. E. F. TRANSIT, INC., Plaintiff,
DAVID COOK, in his official capacity as Chairman of the Indiana Alcohol and Tobacco Commission; DAVID COLEMAN, in his official capacity as Vice Chairman of the Indiana Alcohol and Tobacco Commission; DALE GRUBB, in his official capacity as Commissioner of the Indiana Alcohol and Tobacco Commission; and MARJORIE MAGINN, in her official capacity as Commissioner of the Indiana Alcohol and Tobacco Commission, Defendants.
ENTRY ON PENDING MOTIONS
RICHARD L. YOUNG, CHIEF JUDGE
E. F. Transit, Inc. (“Plaintiff” or
“EFT”), is a federally licensed motor carrier
engaged in transporting goods primarily for the alcoholic
beverage industry. Its largest customer, Monarch Beverage
Company, is a beer and wine wholesaler owned by the same
shareholders as EFT. EFT wishes to provide transportation
services to Indiana Wholesale Wine and Liquor Company, but
claims the Defendants, the Indiana Alcohol and Tobacco
Commission (“ATC” or “Commission”)
and its Commissioners, have blocked it from doing so pursuant
to state statutes that prohibit a beer wholesaler from having
an interest in a liquor wholesaler's permit. See
Indiana Code §§ 7.1-5-9-3, 7.1-5-9-4(2) and
7.1-5-9-6 (the “Prohibited Interest Statutes”).
action, EFT seeks declaratory and injunctive relief under the
Federal Aviation Administration Authorization Act
(“FAAAA”) to prevent Defendants from invoking
Indiana's Prohibited Interest Statutes to bar it from
providing transportation services to liquor wholesalers.
Presently, there are six motions before the court: (1)
Plaintiff's Motion for Summary Judgment; (2)
Plaintiff's Motion for Oral Argument on Motion for
Summary Judgment; (3) Defendants' Cross-Motion for
Summary Judgment; (4) Indiana Beverage Alliance's Motion
for Leave to Appear as Amicus Curiae and to File
Brief in Support of the State; (5) Wine & Spirits'
Motion for Leave to File Amicus Curiae Brief in
Support of Defendants' Cross-Motion for Summary Judgment
and in Opposition to Plaintiff's Motion for Summary
Judgment; and (6) Plaintiff's Motion for Leave to
Supplement Designations of Evidence in Support of Motion for
Summary Judgment and in Opposition to Defendants'
Cross-Motion for Summary Judgment. For the reasons explained
below, the court (1) GRANTS Plaintiff's Motion for Leave
to Supplement Designations of Evidence; (2) DENIES as MOOT
Plaintiff's Motion for Oral Argument; (3) DENIES the
Plaintiff's Motion for Summary Judgment; (4)
the Defendants' Cross-Motion for Summary Judgment; (5)
DENIES as MOOT Indiana Beverage Alliance's Motion for
Leave to Appear as Amicus Curiae and to File Brief
in Support of the State; and (6) DENIES as MOOT Wine &
Spirits' Motion for Leave to File Amicus Curiae
Brief in Support of Defendants' Cross-Motion for Summary
Motion for Leave to Supplement
addressing the facts relevant to the present motion, the
court will first address EFT's motion for leave to
supplement its designations of evidence with Exhibit 65,
which is an excerpt of a footnote in a brief filed by the ATC
in a judicial review state proceeding on April 26, 2016,
after the summary-judgment briefing in this case was
completed. According to EFT, Exhibit 65 shows that the
Commission actually “made a determination” that
EFT's proposed relationship with Indiana Wholesale would
violate the Prohibited Interest Statutes. In pertinent part,
the footnote reads:
This same type of evidence on ‘formal corporate
separateness' was presented by EFT in prior matters
before the Commission and was not considered material to the
Commission's determination that there would be prohibited
interests in the proposed arrangements.
(Filing No. 177-1, ATC's brief in Spirited Sales, LLC
v. Ind. Alcohol and Tobacco Comm., Cause No.
49D01-1502-PL-005220, Marion Super. Ct. April 26, 2016, at 15
n. 25). Defendants do not dispute the admissibility of the
footnote, but maintain the argument contained in the brief
“speaks for itself.” The court will therefore
GRANT Plaintiff's motion for leave.
Indiana's Alcohol Regulation System
regulates the production, sale, and distribution of alcoholic
beverages through its Alcoholic Beverages Law, found at Title
7.1 of the Indiana Code. The ATC, through the Commissioners,
is charged with enforcing the law. See Ind. Code
§§ 7.1-2-3-2, 7.1-2-1-11.
most other states, Indiana adopted a three-tier system for
regulating the production, distribution, and sale of alcohol.
The first tier consists of brewers, vitners, and distillers
who manufacture alcoholic products. See Id.
§§ 7.1-3-2-7, 7.1-3-7-7, 7.1-3-12-2. The second
tier is composed of wholesalers who purchase alcoholic
products from the manufacturers and sell them to the
retailers and dealers. See Id. §§
7.1-3-3-5, 7.1-3-8-3, 7.1-3-13-3. The third tier is composed
of retailers and dealers who sell alcoholic products directly
to consumers. See Id. §§ 7.1-3-4-6,
7.1-3-10-7, 7.1-3-15-3. Except in certain specified
circumstances, no business may operate in more than one tier,
see Id. §§ 7.1-5-9-9, 7.1-5-9-10(a), and a
state-issued permit is required for every business at any
tier-whether as a manufacturer, wholesaler, or retailer of
alcohol, id. § 7.1-3 et seq.
case focuses on the second tier: the wholesalers. At the
wholesale level, the Commission issues three types of
permits: a beer wholesaler's permit, see Id.
§ 7.1-3-3-1; a wine wholesaler's permit, see
Id. § 7.1-3-13-1; and a liquor wholesaler's
permit, see Id. § 7.1-3-8-1. Under
Indiana's Prohibited Interest Statutes, a wholesaler may
possess (1) either a beer, wine, or liquor permit, (2) a beer
and wine permit, or (3) a wine and liquor permit. A
wholesaler may not, however, hold both a beer and a liquor
permit. Id. §§ 7.1- 3-3-19, 7.1-3-13-1,
7.1-5-9-4. Thus, the holder of a beer wholesaler permit
cannot hold a direct or indirect interest in a liquor
wholesaler permit and vice versa. Id. §§
7.1-5-9-3, 7.1-5-9-4(a)(2), 7.1-5-9-6, 7.1-1-2-5
(“[W]henever a person is prohibited from doing a
certain act or holding a certain interest directly, he shall
be prohibited from doing that act or holding that interest
indirectly.”). A beer wholesaler found to be in
violation of the Prohibited Interest Statutes faces mandatory
revocation of its permit. Id. § 7.1-3-23-23.
also regulates the warehousing facilities used by
wholesalers. Indiana prohibits beer and liquor wholesalers
from maintaining any warehouse other than the one described
in their permits. See Id. § 7.1-5-9-12. Thus,
if a wholesaler wishes to change the location of its
warehouse, it must apply to the Commission. In addition, wine
and liquor wholesalers may house their alcohol products in
the same warehouse so long as they have different
addresses-even if that means only different suites or rooms
in the building-and maintain physical separation of their
products. (See Filing No. 163-1, Deposition of Scott
Bedwell (“Bedwell Dep.”) at 119-20; Filing No.
163-2, Deposition of Brian Stewart (“Stewart
Dep.”) at 77-78; Filling No. 167-6, Deposition of David
Cook (“Cook Dep.”) at 110).
Indiana regulates motor carriers engaged in the
transportation and delivery of alcoholic beverages. Any motor
carrier that wishes to “haul, convey, transport, or
import alcoholic beverages” on state highways must
obtain a carrier's permit. See Ind. Code §
7.1-3-18-3. A carrier's permit enables a motor carrier to
transport all three types of alcoholic beverages. See
Id. § 7.1-3-18-2; (Bedwell Dep. at 127-28; Cook
Dep. at 100). Motor carriers may transport alcohol products
for more than one manufacturer or wholesaler. (Filing No.
163-3, Deposition of Robin Poindexter (“Poindexter
Dep.”) at 25-26).
a trucking company licensed by the ATC to transport beer,
wine, and liquor. (Filing No. 163-10, Deposition of Phillip
Terry (“Terry Dep.”) at 11, 25; Filing No.
163-15, Carrier's Permit). EFT has been in business since
1996 and employs approximately 380 people. (Terry Dep. at 11,
24). EFT also operates a 500, 000-square-foot warehouse at
9347 Pendleton Pike in Indianapolis. (Filing No. 163-53,
Declaration of Phillip A. Terry ¶¶ 4-5). It
subleases space in its warehouse to Monarch Beverage, a beer
and wine wholesaler, for which it also provides delivery
services. (Terry Dep. at 23).
Terry is CEO of both E.F. Trucking and Monarch. (Id.
at 10-11). Although EFT and Monarch are separate corporate
entities, the two companies share the same shareholders,
board of directors, and address. (Id. at 17-18,
35-36, 77-78). They also share approximately 20 employees.
(Id. at 36).
2009 Tentative Agreement with Indiana Wholesale
2009, EFT reached a tentative agreement to lease additional
space in the warehouse and to provide transportation services
to Indiana Wholesale Wine & Liquor Company, an Indiana
liquor and wine wholesaler. (Filing No. 163-18, 2009 Lease
Agreement; Filing No. 163-19, 2009 Services Agreement).
Pursuant to the Services Contract, EFT would obtain product
from manufacturers and suppliers and take the product to the
warehouse on Pendleton Pike, where it would be placed in
storage and then loaded into sorting equipment. (Terry Dep.
at 55-56; 2009 Services Agreement). The product would be
packaged with Monarch's product that was going to the
same retailer or dealer. (Terry Dep. at 92-93).
22, 2009, Melissa Coxey, Staff Attorney for the ATC,
evaluated the proposed agreement. The overlapping ownership
of EFT and Monarch was noted as an area of concern:
“Would this provide an indirect prohibited interest
between Monarch as a beer wholesaler and Indiana Wholesale as
a liquor wholesaler? That is a question for the
commission.” (Filing No. 163-25, Coxey Email dated May
learning of the proposed Services Agreement, Jim Purucker,
executive director of Wine and Spirits Distributors of
Indiana, contacted ATC Chairman Thomas Snow to express
opposition to the proposed agreement. (Filing No. 163-26,
Email from Chairman Snow dated July 2, 2009). At
Chairman's Snow's request, Purucker submitted a
memorandum, with citations to the Indiana Code, outlining the
legal reason why the Services Agreement would contravene the
Prohibited Interest Statutes and the public policy of
Indiana. (Filing No. 163-28, Purucker Email with attached
letter dated July 16, 2009). Apparently after reading the
Purucker memorandum, Jessica Norris, the Policy Director for
Regulatory & Administrative Affairs for the Office of the
Governor, informed the Commission that the Governor's
Office was opposed to Commission approval of the proposed
agreement. (Bedwell Dep. at 249-52; Deposition of Melissa
Coxey (“Coxey Dep.”) at 53-54; Filing No. 163-32,
Email from Chairman Snow dated Sept. 16, 2009) (stating
“the gov's office is flat out against this
happening”)). On September 15, 2009, Chairman Snow
informed Norris, “[W]e know with certainty where you
folks stand and will honor your position.” (Filing No.
163-27, Email from Chairman Snow dated Sept. 15, 2009).
September 22, 2009, Indiana Wholesale submitted an
application to transfer its permitted location to the
warehouse at 9347 Pendleton Pike as required by Indiana law.
(Filing No. 163-33, Indiana Wholesale's Application for
Transfer Permit). Excise Officer Alexander Ray conducted an
inspection of the area Indiana Wholesale would occupy in the
Pendleton Pike warehouse. (Filing No. 163-34, Memo from
Master Officer Alexander Ray dated Oct. 9, 2009). In a
memorandum to ATC Executive Secretary Edward Dunsmore,
Officer Ray described the area Indiana Wholesale would use as
their warehouse space, the manner in which the beverages
would be placed onto a conveyor and combined with
Monarch's beverages for delivery, the manner in which
Monarch and Indiana Wholesale would be invoiced, and the
location of Indiana Wholesale's office space.
ATC's December 1, 2009 meeting, Chairman Snow informed
Indiana Wholesale's counsel, Peter Rusthoven, that he
“was intending to order an investigation at least after
today's proceedings.” (Filing No. 35, Meeting
Transcript at 1). A more thorough investigation by Indiana
State Excise Officer Richard Swallow, however, did not occur
until March 2010-nearly six months after Indiana
Wholesale's application was filed. (Filing No. 163-9,
Deposition of Richard Swallow (“Swallow Dep.”) at
53-54; Filing No. 163-37, Excise Police Report from Officer
Swallow dated March 4, 2010). Officer Swallow was of the
opinion that, because Monarch and EFT “operate as one
entity, ” the Services Agreement with Indiana Wholesale
would violate the Prohibited Interest Statutes. (See
generally Excise Police Report). Specifically, he
[I]t is clear that Monarch Beverage and EF Transit operate as
one entity even though they have different corporation names.
All of the documents state Indiana Wholesale Wine &
Liquors is entering into an agreement with EF Transit, but in
truth they are entering into an agreement with Monarch
Beverage. If this transfer is allowed to occur, Monarch
Beverage would have an interest in Indiana Wholesale Wine
& Liquor, which is prohibited by IC ...