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Beau v. Moore

November 1, 2007

SCOTT L. BEAU AND WYNCROFT, LLC PLAINTIFFS
v.
ROBERT S. MOORE, JR., IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE ARKANSAS ALCOHOLIC BEVERAGE CONTROL DIVISION, AND CARL E. KIRKLAND, IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE ARKANSAS ALCOHOLIC BEVERAGE CONTROL ENFORCEMENT DIVISION DEFENDANTS



The opinion of the court was delivered by: Susan Webber Wright United States District Judge

ORDER

Plaintiffs bring this action under 42 U.S.C. § 1983, challenging the constitutionality of laws included in the Arkansas Alcoholic Control Act. The parties have filed cross motions for judgment on the pleadings (docket entries #74, #78) and related responses and replies (docket entries #78, #79, #80, #81). After careful consideration, and for the reasons that follow, Plaintiffs' motion will be denied, Defendants' motion will be granted, and this action will be dismissed with prejudice.

I.

Plaintiff Scott L. Beau ("Beau") is an Arkansas resident, and Plaintiff Wyncroft, LLC ("Wyncroft") is a Michigan winery. Beau wants to purchase wine directly from Wyncroft and other out-of-state wineries and have his purchases delivered to his residence, and Wyncroft would sell and deliver its wine directly to Beau and other consumers in Arkansas, state law permitting. However, Arkansas's three-tier system for the distribution of controlled beverages prevents the proposed transaction. Under the three-tier system, manufacturers (tier one) may sell and ship controlled beverages only to licensed in-state wholesalers (tier two), and wholesalers may sell only to in-state retailers (tier three). See Ark. Code Ann. § 3-2-403. The transaction contemplated by Plaintiffs, direct-shipment sales to consumers, bypasses the wholesaler and retailer in violation of § 3-2-403.

When Plaintiffs filed suit, Arkansas law exempted in-state wineries from the three-tier distribution system. Under the Arkansas Native Wine Law in operation when this litigation began, in-state wineries were permitted to sell and ship wine directly to consumers and licensed retail wine dealers within the state. See Ark. Code Ann. §§ 3-5-401 through 3-5-607, repealed by Act 668 of 2007, § 3, Ark. Acts 668. In their original complaint, Plaintiffs charged that Arkansas law discriminated against out-of-state wineries with respect to direct sales and shipments to Arkansas consumers and retailers in violation of the Commerce Clause.

The Court stayed this case from July 11, 2006 through July 5, 2007.*fn1 During that time, the 86th Arkansas General Assembly passed Act 668 of 2007, which repealed the Arkansas Native Wine Law and struck the statutory provision that excluded Arkansas wine manufacturers from the State's three-tier distribution system. See Act of March 9, 2007, No. 668, 2007 Ark. Acts 668 (codified at Ark. Code Ann. §§ 3-5-1601 to -1609, 3-2-411). Additionally, Act 668 added a new sub-chapter to the Arkansas Alcoholic Control Act entitled "Small Farm Wineries." See Ark Code Ann. §§ 3-5-1601 through 3-5-1609.

The small farm winery law permits in-state and out-of-state small-farm wineries, defined as wineries that sell fewer than 250,000 gallons of wine per year, to apply to the Arkansas Alcoholic Beverage Control Board for a small farm winery license. See Ark. Code Ann. § 3-5-1602. The law provides that small farm winery licensees may sell, at retail, wine produced on the premises of a small farm winery if all sales occur in a wet territory and at "small farm winery off-premises retail sites" or at fairs and food and wine festivals. See Ark. Code Ann. § 3-5-1602(c)(1)(D). The small farm winery law also permits license holders to sell and transport wine produced on the premises of a small farm winery to wholesale and retail license holders and small farm winery holders, provided that the small farm winery obtains a wine wholesale permit. See Ark. Code Ann. § 3-5-1602(c)(1)(E).

Finally, the small farm winery law contains an on-premises, direct sales provision that reads as follows:

Notwithstanding any law to the contrary, small farm winery wine may be sold at any winery located in this state for on-premises or off-premises consumption on any day of the week.

Ark. Code Ann. § 3-5-1607.

Section 4 of Act 668 provides that in the event that a court determines that any part of that Act is unconstitutional, the Act "shall become void and all wines, including native wines, distributed for sale in Arkansas shall be distributed under § 3-4-401 et seq. and sold by licensed retailers under § 3-4-201 et seq." See Act of March 9, 2007, No. 668, § 4, 2007 Ark. Acts 668.

In light of Act 668, Plaintiffs sought and were granted permission to file an amended complaint. Plaintiffs believe that Act 668 eliminates any preferential treatment afforded to Arkansas wineries with respect to direct sales to retailers,*fn2 but they claim that Arkansas law continues to discriminate against interstate commerce by prohibiting out-of-state wineries from shipping wine directly to Arkansas consumers. According to Plaintiffs, the only way that an outof-state winery can sell wine in Arkansas is to use a wholesaler or a retailer, but in-state wineries may sell directly to consumers on the premises of an Arkansas winery without paying for a separate distributor. See docket entry #74, at 1.

Plaintiffs assert that four Arkansas statutes have the combined effect of discriminating against interstate commerce by prohibiting out-of-state wineries from making direct-shipment sales to Arkansas consumers: (1) Arkansas Code § 3-2-403, which codifies the State's three tier distribution system; (2) Arkansas Code § 3-5-1602, which provides for the licensing of in-state and out-of-state small farm wineries and grants certain privileges to small farm winery licensees; (3) Arkansas Code § 3-5-1607, which provides that small farm winery wine may be sold at any winery located in Arkansas for on or off-premises consumption any day of the week; and (4) Arkansas Code § 3-7-106, which prohibits any person to ship or transport intoxicating liquor and wines, other than Arkansas wines, from outside the state without first obtaining a permit.

Plaintiffs seek a declaratory judgment that the foregoing statutes, in combination, violate the dormant Commerce Clause to the extent that they prohibit out-of-state wineries from selling and delivering wine directly to Arkansas consumers. They also seek an injunction that would require Defendants to allow ...


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