Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowSpirited Sales LLC, an affiliate of Indianapolis-based Monarch Beverage Co., has lost its battle in the state Supreme Court to be allowed to distribute alcohol in Indiana.
The 3-0 decision from the Supreme Court, handed down Friday afternoon, could finally bring an end to the years-long fight by Monarch and Spirited to enter the liquor wholesaling business in Indiana. Under state law, beer wholesalers like Monarch are unable to also distribute liquor.
The court reversed a trial court’s order directing the Indiana Alcohol and Tobacco Commission to grant a liquor wholesaling permit to Spirited.
The justices said that state law plainly states that companies with overlapping ownership can’t hold interest in both liquor and beer wholesaler permits. They also found that the commission’s decision in 2014 not to grant a permit to Spirited wasn’t based on political grounds, as Spirited and Monarch alleged.
Spirited is a separate company, but it has a lot in common with Monarch. Besides sharing the same CEO and board of directors, Spirited is wholly owned by E.F. Transit Inc., which provides transportation services to Monarch and other companies. The same shareholders that own Monarch also own EFT.
However, the company’s financial books are separate, they have separate permits, maintain separate insurance, and have separate bank accounts, tax returns and payrolls.
But Justice Steve David wrote in the Supreme Court’s ruling that the ties between the businesses were too close.
“Here, ties between EFT and Monarch were so extensive that EFT could reasonably be deemed to hold an interest in a beer wholesaler’s permit–-an interest prohibited by a combined reading of [state statutes],” David wrote. “… Likewise, Monarch and Spirited’s overlapping ownership also bars Spirited from obtaining the sought-after permit.”
The ATC was ordered to grant Spirited a permit in 2016. Marion County Special Court Judge Heather Welch had found that the state agency was “arbitrary and capricious” in its decision to deny the company a liquor wholesaling permit back in 2014.
The 52-page decision criticized a “disturbing and inappropriate” relationship between the ATC, the Indiana Governor’s Office and Monarch’s rivals in the liquor wholesaling industry, all of which appeared to lobby the commission behind the scenes for the denial of the permit and other requests from Monarch dating back to at least 2009.
After Welch’s ruling, then-Attorney General Greg Zoeller petitioned the Supreme Court to hear the case.
The state argued the ATC rightly denied the Spirited Sales permit because state law prevents Indiana alcohol wholesalers “from directly or indirectly having an interest in both a beer wholesaler’s permit and a liquor wholesaler’s permit.” Indiana is the only state with that kind of restriction.
The Supreme Court agreed. It also found that the ATC’s denial of a permit for Spirited was not based on political grounds.
Contacted by IBJ on Saturday, Phil Terry, CEO of both Monarch and Spirited, declined to comment on the ruling and said no decision yet had been made about the firms' next steps in response to the decision.
Spirited had been allowed to operate while the Supreme Court heard the case, but "those operations ended upon learning of the Supreme Court's decision," Terry said.
Monarch, founded in 1947, is the state’s largest distributor of beer and wine. It operates from a 500,000-square-foot distribution center in Lawrence and delivers an average of 60,000 cases of product each day representing more than 500 brands. The company had about 700 employees and revenue of $333 million in 2015, the latest figures available.
Monarch lobbied the General Assembly unsuccessfully for years to change the state’s Prohibition-era laws keeping beer distributors from wholesaling liquor, and filed lawsuits to try to overturn them. When that didn’t work, Monarch’s shareholders created Spirited Sales.
Monarch's main opponents have been Wine and Spirits Distributors of Indiana, a group that represents Miami-based Southern Glazer’s Wine and Spirits and Houston-based Republic National Distributing Co., and the Indiana Beverage Alliance, which represents about 20 Anheuser-Busch beer distributors.
The companies’ competitors in the past have argued that if Spirited or Monarch could sell liquor, there is the “potential to do great harm” to the state’s alcohol-distribution system.
In the Supreme Court’s opinion, David took pains to note that the ruling was not necessarily an endorsement of the state’s laws.
“(W)e have not measured any public policy considerations or assessed the efficacy of prohibited interest laws on the goals outlined by the statute – doing so would be inappropriate,” David wrote.
“We recognize the businesses have long lobbied this very contentious point before our General Assembly, and will likely continue to do so, but deciding whether the regulatory scheme in place is still relevant or still necessary or in need of overhaul are matters to be resolved through the political process, which we trust would take into account the policy arguments made by opposing sides on this issue.”
Wine & Spirits Distributors of Indiana and the Indiana Beverage Alliance applauded the court's decision.
"We certainly hope this is the end of Monarch's efforts to undermine the legislature and create a regulatory environment where anything goes," a spokeswoman for both groups said. "We also hope this decision puts a stop to the company's attempts to bully the ATC by burying them in paperwork, intimidating them through wasteful and unnecessary public records requests requests, and condemning them for doing their job."
"Perhaps the state can finally spend its limited resources on more pressing issues than a company that's aiming to monopolize an industry," the spokeswoman added.
Please enable JavaScript to view this content.