Total Wine & More wins round in court fight to open in Indiana

Total Wine & More, the national alcohol retailer with more than 200 stores in 24 states, is a step closer to doing business in Indiana after a federal court has temporarily barred the Hoosier state from enforcing its statutory prohibitions that keep out-of-state businesses from holding liquor permits.

A lawsuit was filed by Indiana Fine Wine & Spirits LLC, which does business as Total Wine & More, after the Indiana Alcohol and Tobacco Commission denied the retailer’s application for transfer of an Indiana Beer, Wine, and Liquor Package Store Dealer Permit. The ATC turned down the application on the grounds that the owners, who all live in Maryland, did not satisfy the state’s residency requirements for an alcoholic dealer’s permit as established in Indiana Code section 7.1-3-21-5.4(b).

In an order issued Monday, the Southern Indiana District court granted IFWS a preliminary injunction preventing Indiana from enforcing its residency statute.

“On its face, Indiana Code section 7.1-3-21-5.4(b) discriminates against out-of-state limited liability companies,” Judge Tanya Walton Pratt wrote in in the case. “The ATC’s only proffered reasons to support the statute—curtailing alcohol abuse, preventing underage drinking, and collecting tax revenues—already have been determined to be constitutionally inadequate. Thus the Court determines that IFWS is highly likely to succeed on the merits and it has no adequate remedy at law.”

Section 5.4(b) mandates that an alcohol beverage dealer’s permit shall be granted to a limited liability company only when at least 60% of the owners have been “continuous and bona fide residents for Indiana for five (5) years.”

IFWS entered into an agreement with MH Nora HG, LLC for the purchase and transfer of a dealer’s permit. The retail chain wants to open a store in the Nora Corners Shopping Center along 86th Street in Indianapolis.

However, the purchase agreement and lease of the retail space was dependent on IFWS’s ability to obtain the approval of the Alcoholic Beverage Board of Marion County and the ATC for transfer of the Package Store Permit. IFWS asserts it paid about $40,000 to in design costs for the new store and paid in excess of $60,000 in legal expenses.

When the ATC denied its application at a hearing March 3, 2020, IFWS filed its lawsuit.

IFWS argued the Indiana residency statute violates the dormant Commerce Clause of the Constitution, which limits the power of states to discriminate against interstate commerce. In particular, the retailer relied on a case that found Tennessee’s residency requirements for obtaining an alcohol permit ran afoul of the Commerce Clause’s ban on states adopting protectionist measures that interfere with the national market for goods and services.

The Maryland residents asserted the Indiana residency requirements discriminates by favoring Hoosiers. IFWS maintained that the case and other legal precedents made it make clear the 21st Amendment, which gives states the ability to regulate “intoxicating liquors” within their borders, cannot overrun the nondiscrimination principle of the dormant Commerce Clause.

ATC countered the statute was not discriminating but rather served an important non-protectionist purpose—namely, mandating that a liquor store owner living in Indiana increases the likelihood the beverage retailers will curtail alcohol abuse and prevent underage drinking. Also, the state’s ability to collect tax revenue may be easier.

The federal court did not buy that argument.

“As noted by IFWS, the difficulty with ATC’s position is that if the true purpose of the statute is to protect the public health, then Indiana has other nondiscriminatory alternatives to serve that purpose, such as limiting the number of retail licenses and limiting the amount of alcohol that can be sold to an individual,” Walton Pratt wrote. “Indiana also can mandate training for managers and employees or monitor the practices of retailers and take action against those that violate the law.

“Moreover, if protecting the public health is the real purpose of the statute, then that purpose is undermined by the long list of exceptions to the in-state residency requirement for permittees. Indiana does not require residency for those operating drug stores, dining cars, boats, grocery stores, hotels, airplanes, gaming sites, horse tracks, satellite facilities, and certain large restaurants.”