7th Circuit Upholds Indiana Law Restricting Different Types of Wholesaler Licenses

The 7th Circuit rejected an Equal Protection claim by a beer wholesaler prohibited from seeking a liquor wholesaler permit. In an opinion by Circuit Judge Sykes the 7th Circuit upheld the district court decision to reject the plaintiff’s claim. The court first noted, “We are again asked to decide whether an aspect of Indiana’s alcohol regulation system violates the Equal Protection Clause. Two years ago we upheld an Indiana law that prohibits grocery and convenience stores from selling chilled beer. See Indiana Petroleum Marketers & Convenience Store Ass’n v. Cook, 808 F.3d 318 (7th Cir. 2015). In this case Monarch Beverage Company challenges a feature of Indiana’s “prohibited interest” law that separates beer and liquor wholesaling by prohibiting beer wholesalers from holding an interest in a liquor-distribution permit. See IND. CODE §§ 7.1-3-3-19, 7.1-5-9-3, 7.1-5-9-6. Monarch contends that this component of the prohibited-interest law lacks a rational basis. A district judge rejected this argument and upheld the law. We affirm that judgment. Indiana’s policy of separating beer and liquor wholesaling survives review for rationality.”

The opinion outlined the standard for Equal Protection challenges and the long-standing deference the Supreme Court has shown to state legislative decisions.  In rejecting the plaintiff’s invitation for a higher level of scrutiny, the court noted that the state has plausible reasons for the policy of separating wholesaler license functions.   “The Supreme Court has never invalidated an economic regulation on rational-basis review because a more direct or effective policy alternative was available. Neither have we, and Monarch has given us no reason to change course. Indiana’s law separating beer and liquor wholesaling is rationally related to the state’s interest in encouraging temperance; that it serves this purpose indirectly does not make the law irrational.”

In an interesting concurrence, Judge Easterbrook noted that the Equal Protection claim seem to be more of a end-around for a substantive due process challenge, something that the Supreme Court has long disfavored.  “Monarch’s demand that the liquor‐distribution scheme be adequately justified even though it does not treat any person differently from any other person is a substantive‐due‐ process claim in disguise. And the Supreme Court has held that only persons whose “fundamental” rights have been abridged can maintain substantive‐due‐process claims. See Washington v. Glucksberg, 521 U.S. 702 (1997)  No one would be so bold as to contend that holding three kinds of alcohol wholesale licenses simultaneously is a fundamental right. Litigants should not be allowed to evade the limits on substantive due process by characterizing substantive objections to state‐law rules as equal‐protection claims.”

There remain several other related litigation matters related to these parties including pending matters in Indiana state court.

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