Indiana lawsuit about cold beer sales faces uphill battle

A federal lawsuit seeking to change an arcane Indiana liquor law that allows grocery and convenience stores to sell warm beer, and liquor stores to sell it cold, likely faces an uphill battle, legal experts say.

Mounting the most serious challenge to the law yet is the trade group representing the convenience stores, the Indiana Petroleum Marketers and Convenience Store Association.

The group argues in its suit filed in U.S. District Court in May that the law governing cold-beer sales violates the equal protection clause in the 14th Amendment to the U.S. Constitution by allowing state regulators to act “in an irrational and discriminatory manner that favors one class of retail over another.”

The association filed the suit only after attempts to get the General Assembly to change the law fell on deaf ears, said John Maley, a partner at Barnes & Thornburg LLP who is representing the convenience stores.

In Indiana, “through this historic relic, you’ve got this result of where one beverage, beer, gets regulated on who can sell it based on temperature,” he said. “There’s no one else in the country who does that.”

Even so, legal observers say proving the convenience stores are protected by the 14th Amendment will be difficult.

That’s because under the equal protection clause, the state must only prove that the law prohibiting convenience stores from selling cold beer is “rational,” the lowest level of scrutiny under the clause.

A government entity is held to much stricter standards when a class of people is involved, such as the case involving Proposition 8, the California bill preventing same-sex marriage, said Kevin Betz, an Indianapolis lawyer whose practice includes constitutional law.

“They’ve put forth a really spectacular job of showing the arbitrariness and irrational basis for it,” Betz said of the convenience stores. “But what’s irrational and arbitrary to them may not be to the government and the regulators. The government only needs to meet a low threshold.”

Indiana’s constitution includes an equivalent of the equal protection clause, which the convenience stores claim in their suit the state also is violating.

But James Alexander Tanford, a law professor at the Indiana University Maurer School of Law in Bloomington, said that will be challenging, as well.

“It is very difficult to mount a constitutional challenge to a state law,” he said. “What’s the state going to say: ‘It doesn’t matter if it’s a silly law; we have lots of silly laws.’”

21st Amendment in play

Tanford is well-versed on alcohol laws, having helped litigate a Michigan case that led to the U.S. Supreme Court’s ruling in 2005 allowing wineries, including those in Indiana, to ship wine directly to out-of-state customers.

In the 5-4 decision, justices ruled in favor of the wineries on the basis of discrimination.

But here’s where Tanford thinks that case differs from the one brought by the convenience stores.

Under the 21st Amendment, which repealed Prohibition, states can regulate alcohol how they see fit, he said. The wineries fought out-of-state foes; the convenience stores are pitted against competitors within their borders.

“The 21st Amendment gives states the right to regulate alcohol anyway they want in-state,” Tanford said. “So this isn’t a matter for the courts; it’s a matter for the Legislature.”

The Office of the Indiana Attorney General, which is defending the Indiana Alcohol and Tobacco Commission and the state in the lawsuit, agrees.

“This subject has been debated in the Legislature for a number of years and it will be the state’s position that the Legislature is the proper forum for any changes to our laws and not the courts,” Attorney General Greg Zoeller said in an emailed statement.

Big changes

Indiana’s liquor laws have changed wildly since prohibition ended.

The 21st Amendment to the U.S. Constitution, ratified in 1933, repealed the 18th Amendment, which had prohibited the consumption of alcohol since 1920. Then:

• In 1935, the General Assembly passed the Liquor Control Act, which regulated the sale of alcoholic beverages but made no mention as to what temperature beer could be sold, according to the convenience store association’s lawsuit.

• In 1941, the Legislature amended the language of a beer dealer’s permit to prohibit the holder from selling cold beer.

• In 1953, the General Assembly allowed package liquor stores to begin selling only warm beer.

• In 1963, the Indiana Alcoholic Beverage Commission issued a bulletin allowing package liquor stores to sell cold beer. One year later, the Indiana Supreme Court upheld the decision.

The decision gives package liquor stores an unfair advantage, allowing them to sell cold beer at a premium price, the convenience stores argue in their suit.

The law also prevents certain craft beer, which often must be kept cold pursuant to a brewer’s specifications, from being sold anywhere but at package liquor stores, they say.

Conversely, opponents of cold beer sales at convenience stores argue that Hoosiers are more apt to drink and drive if they can open a cold beer immediately after filling up their gas tanks.

“The argument isn’t a very good one,” Tanford, the law professor, said. “But in federal court, it doesn’t have to be very good. It just has to be plausible enough for a legislator to agree with.”•

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Convenience stores also want to sell alcohol on Sundays

The law limiting cold beer sales isn’t the only Indiana alcohol law facing a challenge. Convenience and grocery stores also want to be able to sell beer, wine and liquor on Sundays.

Some lawmakers pushed to do away with the Sunday restriction during this year’s legislative session but ultimately shelved the issue.

A strong package liquor lobby for years has argued that their members, many of which are mom-and-pop-type stores, will go out of business due to sales lost to the convenience stores.

Many are staffed by just a few employees and, with Sunday often their only day off, they may not be able to match the convenience stores that have the manpower to work on Sundays and stay open longer.

As the issue comes before the Legislature and lawmakers become more familiar with the issues, Sunday sales may become reality, said David Orentlicher, a former state representative and professor at the IU Robert H. McKinney School of Law in Indianapolis.

“Casinos and the economic argument in terms of jobs overcame the opposition of expanding gambling,” he said. “It’s the same thing here, if the economic argument becomes compelling enough.”•

—Scott Olson