It Is Finally Over in Indiana. E.F. Transit Preemption Appeal Dismissed by 7th Circuit.

After nearly a decade of legislation, news stories, and litigation maneuvering between Monarch Beverage, E.F. Transit, and the state of Indiana,  the fights in Indiana over cross-tier ownership and preemption appear to finally be at a conclusion, at least for now with these entities.  The Seventh Circuit has granted the motion of E.F. Transit to voluntarily dismiss their appeal pursuant to Federal Rule of Appellate Procedure 42(b).

The Plaintiff E.F. Transit had brought a federal preemption claim against Indiana claiming that federal trucking laws preempted state prohibited interest laws.  After losing at the trial court, they had appealed to the 7th Circuit.  Later in the briefing, the 7th Circuit referred the case to the Justice Department for their views.   Oral argument for the 7th Circuit was held via teleconference on March 30, 2020.

E.F. Transit moved to dismiss the appeal earlier this month because E.F. Transit and its related Monarch Beverage Company were sold on December 6th to Reyes Holdings.

The state of Indiana opposed the motion as it was concerned about the impact of the form of dismissal on the the win Indiana secured at district court as well as underlying concern of backsliding on the legal theory they won at so it objected to the dismissal.

E.F. Transit clarified in its reply brief details on the transaction between Reyes and E.F. Transit and that latter retains no interest in alcohol business thus mooting the case.   E.F. Transit also clarified that it “has not moved for vacatur of the judgment below.”   That was good enough for the 7th Circuit as they granted the motion to dismiss the next day ending this litigation.

E.F. Transit and its related entity Monarch Beverage had previously lost lawsuits at the Indiana Supreme Court level and a separate constitutional challenge before the 7th Circuit attacking the same areas of law under different theories on its effort to engage in additional lines of business.

So the underlying sale as well as the dismissal of the case end for now this interesting debate about federal preemption conflicting with state alcohol laws.

(previous post) Oral Argument Held By Telephone Before 7th Circuit on E.F. Transit Preemption Challenge to Indiana Prohibited Interest Law

Due to COVID-19 a panel of the Seventh Circuit held oral arguments by telephone on the latest round of the E.F. Transit/Spirited Sales/ Monarch Beverage challenges to Indiana laws prohibiting wholesalers from being in wine, beer and liquor.  This case was under the E.F. Transit banner claims of preemption of Indiana laws due to their motor carrier status.

Judges Frank Easterbrook, Ilana Rovner and Diane Sykes sat on this Seventh Circuit panel.  To hear the arguments click here.

The judges were all actively involved and asked questions of each side.  The amicus brief of the Center for Alcohol Policy and its argument that the laws here are not preempted received a fair amount of discussion.   There seemed to be much interest on the facts of the case and the tools of the state to discipline violations of the law.

My normal statement that it is dangerous to predict how the judges will rule on this matter based on oral argument is even more amplified as there was no ability to read any body language or other non verbal clues of the distant judges.    We will wait for the decision later this year.

(previous post) Justice Department Declines to Intervene in 7th Circuit Preemption Spat

The Justice Department responded to the 7th Circuit’s request to consider this challenge.  I would classify it more as a “punt” than a call to action.  They suggest certifying a question to the Indiana Supreme Court (which already has ruled for Indiana on this matter and has interpreted the state’s definition of “interest” very broadly) rather than siding with either party.

Nevertheless,  I do not see the DOJ frothing at mouth and unleashing all the tools of the federal preemption nuclear weapons against Indiana here unlike other DOJ advocacy where they clearly want a state out of the way.

(previous post) Briefing Possibly Complete in 7th Circuit on Preemption Claim Against Indiana

E.F. Transit filed its reply brief for their appeal to the 7th Circuit.  They draw a bright line and essentially claim Congress expressly preempted state alcohol regulation and that speculative state interests in tied house laws are insufficient to overcome the “powerful” federal interest in deregulating the trucking industry.  They maintain that if a state proffers a 21st Amendment  defense the state must substantiate this interest.  E.F. Transit notes the recent Supreme Court case in Tennessee Retailers which was decided just a day before the E.F. Transit brief was filed and suggests more briefing may be necessary.

In the meantime the 7th Circuit rejected amicus briefs filed by the local wholesaler organizations and the International Municipal Lawyers Association but accepted the amicus brief of the Center for Alcohol Policy.

If there are no additional briefing on the recent Supreme Court decision, this matter will be scheduled for oral argument in the next few months.

(previous post) Indiana and Three Different Amici File in Support of Indiana Prohibited Interest Law Against Federal Preemption Claim

Recently the state of Indiana filed its brief in response to the E.F. Transit appeal to the 7th Circuit.  They were joined last week by three amicus briefs.

The appellant claims that the Federal Aviation Administration Act (FAAA) preempts Indiana alcohol laws that impact the business model set up by E.F. Transit.  The state and the various amici briefs note that this theory, if adopted, would create a huge hole in basic state alcohol regulation, argue that the Indiana law is not preempted, and highlight that appellant’s view would reduce the 21st Amendment to a dead letter.   Moreover a previous 7th Circuit opinion in Lebamoff v. Huskey rejected a FAAA challenge to Indiana alcohol law.   The concurring opinion of Judge Hamilton in that case was very prescient to the issues now before the 7th Circuit and all respondents encourage the 7th Circuit to adopt his view.

The friends of the court briefs were filed by the Center for Alcohol Policy, the International Municipal Lawyers Association, and a brief filed on behalf of the  Wine and Spirits Distributors of Indiana, Wine and Spirits Distributors of Illinois, The Wine and Spirits Wholesalers of America, Indiana Beverage Alliance, and the Associated Beer Distributors of Illinois.

Previously, E.F. Transit filed its appeal to the 7th Circuit.   They maintain that the FAAA preempts enforcement of Indiana’s prohibited interest laws which bar E.F. Transit from providing services to wholesalers in the state.  They reject any attempt to have the 21st Amendment impact the outcome of their preferred preemption analysis.

After they file a response to this new round of briefing, oral argument will be set for later this summer.

(previous post) Indiana District Court Rejects Preemption Claim Against Indiana

Judge Richard Young of the Southern District of Indiana today granted the state of Indiana’s motion for Summary Judgment in the challenge by E.F. Transit to the state’s denial of E.F. Transit’s transportation services.

This case has a long and tortured back story with a previous dismissal for being unripe being reversed by the 7th Circuit earlier this year.

The case is part of a long running gun fight between the state of Indiana and the related entities of E.F. Transit, Monarch Beverage, Spirited Sales, and its ownership seeking to engage in beer, wine and liquor wholesaler businesses despite Indiana law prohibiting the holder of a beer permit from engaging in liquor business and vice versa.   A related case with the liquor wholesaler entity Spirited Sales previously was resolved by the Indiana Supreme Court and the 7th Circuit previously rejected a direct Equal Protection challenge by many of the same entities in 2017.   Now that this case is ripe, the court has found that the federal interests in the Federal Aviation Administration Act, while normally strong, do not outweigh the substantial state interests of Indiana in this case.   The court noted that the interests that Indiana identified in justifying these prohibited interest laws protect “core powers” reserved to the state under the 21st Amendment and the court said “they are entitled to a strong presumption of validity.”

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