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Retail Liquor Association of Oklahoma v. Oklahoma Alcoholic Beverage Laws Enforcement Commission

United States District Court, W.D. Oklahoma

August 24, 2017

RETAIL LIQUOR ASSOCIATION OF OKLAHOMA, an Oklahoma non-profit corporation; and JOSEPH P. RICHARD, an individual, Plaintiffs,
v.
OKLAHOMA ALCOHOLIC BEVERAGE LAWS ENFORCEMENT COMMISSION; and KEITH A. BURT, in his official capacity as Director of Oklahoma Alcoholic Beverage Laws Enforcement Commission, Defendants.

          MEMORANDUM OPINION AND ORDER

          ROBIN J. CUTHRON, UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendants' Motion for Summary Judgment (Dkt. No. 20). Plaintiffs have responded and the Motion is now at issue.

         I. Background

         On May 27, 2016, the Oklahoma Legislature passed Senate Joint Resolution 68, which placed a proposition on the November 8, 2016, general election ballot called State Question 792 (“S.Q. 792”). S.Q. 792 reformed Oklahoma's alcohol regulatory framework by repealing Article 28 of the Oklahoma Constitution and replacing it with Article 28A. Plaintiffs circulated an initiative petition for another proposed constitutional amendment, State Question 791, but it did not receive enough support to be placed on the ballot. S.Q. 792 passed with 65.6% of the votes in favor of the measure and 34.4% against. Article 28A will become effective October 1, 2018.

         On December 19, 2016, Plaintiffs filed suit in the District Court of Oklahoma County to request injunctive and declaratory relief. Plaintiffs argued Article 28A is unconstitutional because it violates the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution. Defendants removed the case to this Court, which then denied a pending motion for temporary injunction (Mem. Op. & Order, Dkt. No. 15) and directed Defendants to file the present Motion (Order, Dkt. No. 14). A review of Oklahoma's alcohol regulatory framework and each proposed change is relevant to the subsequent arguments of both parties.

         A. Article 28

         Oklahoma follows a three-tier alcohol regulatory system. Manufacturers of alcohol are required to sell their product at the same price to each Oklahoma wholesale distributor that wishes to purchase it. These wholesalers supply Oklahoma's retail package stores and establishments offering alcohol for on-premises consumption. Currently, Article 28 of the Oklahoma Constitution regulates those who wish to sell alcoholic drinks containing more than 3.2% of alcohol by weight (“ABW”). The sale of beverages 3.2% ABW and below is not restricted by location or license. See Okla. Const. Art. 28 § 2; 37 Okla. Stat. § 163.1 (defining “low-point beer” as containing .5% - 3.2% ABW and setting out its regulation in the Oklahoma Alcoholic Beverage Control Act).

         Retail Package Licenses are available for retailers wishing to sell beverages above 3.2% ABW. Wholesale distributors must also obtain licenses through the state. Retail Package Licenses for the sale of alcoholic beverages and Wholesale Distributor's Licenses may only be issued to an individual or general limited partnership; these entities are without limited liability protections. See Okla. Const. Art. 28 §§ 4, 10. Applicants for Retail Package Licenses and Wholesale Distributor's Licenses must have lived in Oklahoma for at least ten years immediately preceding the date of license application and felons may not obtain a license. See Okla. Const. Art. 28 § 10. A person or partnership may only hold one Retail Package License and only alcoholic beverages may be sold on the premises. See Okla. Const. Art. 28 § 4.

         Article 28 permits winemakers to sell wine to a licensed wholesale distributor or directly to consumers present in the winery or at festivals and tradeshows. Winemakers who produce less than ten thousand gallons of wine per year may elect to ship their product directly to licensed retail package stores and restaurants within Oklahoma, but making the election prevents them from also using a licensed wholesale distributor. See Okla. Const. Art. 28 § 3(A).

         B. Article 28A

         Article 28A makes several changes to the regulatory system, beginning with the sale of alcohol. The state will issue Retail Spirits Licenses, allowing the sale of all refrigerated and non-refrigerated alcohol and any grocery store items, so long as the sale of nonalcoholic items does not exceed 20% of the store's monthly sales. See Okla. Const. Art. 28A § 3(A)(1). These licenses have a reduced five-year residency requirement and a person or partnership may hold two licenses. See Okla. Const. Art. 28A § 4(A).

         Retail Beer Licenses and Retail Wine Licenses will permit supermarkets, grocery stores, convenience stores, drug stores, warehouse clubs, and supercenters to sell refrigerated and non-refrigerated wine and beer. See Okla. Const. Art. 28A § 3(A), (B). Retail Wine Licensees may make agreements with corporations or other business entities if the corporation does not own more than 50% equity in the business. See Okla. Const. Art. 28A § 4(C). Winemakers may ship the wine they produce directly to consumers and the production restriction for direct shipment to retail stores and restaurants will be raised from ten thousand gallons to fifteen thousand gallons produced annually. See Okla. Const. Art. 28A § 2(A)(4). Wine and Spirits Wholesaler's Licenses will have a five-year residency requirement and the entity restrictions are similar to Retail Wine Licenses. Beer wholesalers will have no residency requirement or entity restrictions. See Okla. Const. Art. 28A § 4(D).

         II. Motion for Summary Judgment Standard

         The standard for summary judgment is well established. Summary judgment may only be granted if the evidence of record shows “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The movant bears the initial burden of demonstrating the absence of material fact requiring judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A fact is material if it is essential to the proper disposition of the claim. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). If the movant carries this initial burden, the nonmovant must then set forth specific facts outside the pleadings and admissible into evidence which would convince a rational trier of fact to find for the nonmovant. ...


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