Cold beer sales fight in Indiana lands in federal court

The issue of cold beer sales in convenience stores is about to come to a head.

A two-day trial begins Thursday in federal court in Indianapolis over a lawsuit by the Indiana Petroleum Marketers and Convenience Store Association challenging the state's law prohibiting the sale of cold beer by gas stations, grocery stores and pharmacies.

The group's chances of winning its case are lukewarm at best, experts say.

Owners of those businesses say they are at a competitive disadvantage because bars, restaurants and package liquor stores can sell carryout cold beers. Indiana and Oklahoma restrict the sale of cold beer.

"Now is the time for common sense to be applied to Indiana's alcohol laws, which are irrational, discriminatory and outdated," said Scot Imus, executive director of the convenience store group.

The plaintiffs, which also include Thorntons Inc., Ricker Oil Co., Freedom Oil and customer Steve E. Noe, filed the lawsuit in May with the U.S. District Court for the Southern District of Indiana. The lawsuit alleges that the state law is unconstitutional and creates a "discriminatory regulatory regime" that prevents such stores from selling refrigerated beer, while allowing sales at liquor stores.

When they filed the suit, the plaintiffs cited a 2012 federal ruling that Kentucky's laws prohibiting liquor and wine sales in groceries, quick stores and gas stations violated the Equal Protection Clause of the U.S. Constitution. That ruling was overturned on appeal.

David Orentlicher, a law professor at the Indiana University Robert H. McKinney School of Law and a former Democratic state lawmaker, thinks Indiana will win the case. He said equal protection generally applies in a situation where a fundamental right is being denied to a racial or religious minority or a gender.

That's not the case here, Orentlicher said.

"The court allows legislatures a lot of freedom, so long as they have a legitimate goal," he said, "which in this case is to regulate the sale and consumption of alcohol."

Imus' group, though, hopes a ruling Feb. 12 involving Evansville's smoking ban adds strength to its case. The Indiana Supreme Court struck down an amendment to the city's ordinance that extended a city smoking ban to bars and restaurants because it exempted a casino.

But it's still unclear how that ruling will impact other smoking bans, Orentlicher said, much less alcohol regulations.

"Even if you get the state claim raised, given the nature of alcohol regulation ... I think the court would be reluctant to ... undo the balance the legislature has created (with alcohol regulation)," Orentlicher said.

Tony Kogut, an attorney with the Willingham & Cote law firm in East Lansing, Mich, who filed an amicus curiae brief in the case on behalf of the convenience store group in support of the state, said challengers to the law carry a heavy burden of proof.

"The state is given great deference under the 21st Amendment to deal with laws with alcohol regulation," he said. "I don't think the plaintiff in this case will be able to meet that burden."

The Indiana attorney general's office, as is often the case in trials, declined to comment.

The Indiana Petroleum Marketers and Convenience Store Association decided to file the lawsuit after failing for years to convince the state legislature to overturn the law.

Indiana has a hodgepodge of strict liquor laws that have been passed in the 80 years since Prohibition ended. Hoosiers, for instance, face the broadest restrictions in the country on the sale of beer, wine and hard liquor on Sundays. Breweries and wineries can sell carry-out alcohol on Sundays.

Lawmakers and lobbyists have tried hard to maintain the status quo, although a bill allowing beer sales during the Indiana State Fair is advancing.

The ban on cold beer sales, like the one on Sunday sales has faced stiffer resistance. Religious groups, such as the Indiana Conference of the United Methodist Church, argue against increased consumption. Social organizations, such as Mental Health America of Indiana, say loosening restrictions would lead to more underage drinking and drunken driving.

The powerful package liquor store lobby has said for years the stores it represents would go out of business if the bans on cold beer sales or Sunday sales were overturned.

Patrick Tamm, the association's new president, said keeping the status quo is a matter of fairness. State laws regulate where package liquor stores can locate, who can enter, and what items they can sell and require employees to hold special permits to sell alcohol.

"We believe that it's a good public policy to have controls in place," he said, "public policies and regulations that we have been abiding by and we have built our businesses around."

John Bodnovich, executive director of American Beverage Licensees in Bethesda, Md., said the state legislature should be left alone to regulate alcohol laws.

"The Supreme Court and numerous circuit courts of appeal have upheld states' rights to determine alcohol laws, and this case is no different," he said.

Convenience store owners, however, say they are the ones being treated unfairly.

Jay Ricker, who owns 46 convenience stores that sell liquor in Indiana, said changing the law will allow him to be more competitive. Nationally, he said, beer is a top seller at convenience stores, and it draws in customers who then buy other items.

"This is just a fairness issue," he said. "As a retailer based in Indiana, we want to get our fair share of business, and we are prevented from doing that by this outdated law from Prohibition."

The trial begins at 1 p.m. Thursday in the U.S. District Court for the Southern District of Indiana. Chief Judge Richard L. Young is presiding.

Call Star reporter Chris Sikich at (317) 444-6036. Follow him on Twitter: @ChrisSikich.

Here's a look at how Indiana's hodgepodge of alcohol-related laws evolved:

--1918: Indiana goes dry as a state.

--1920: 18th Amendment (national prohibition of alcohol) takes effect.

--1933: Prohibition is officially repealed with the passage of the 21st Amendment.

--1935: Indiana passes a liquor control act that says retail whiskey can be sold only in drugstores, but not for drinking on the premises. Beer and wine can be sold in drugstores and restaurants. Sales on Sundays, holidays and Election Day are prohibited. Drinking age is 21.

--1947: Alcohol sales are banned at the Indiana State Fair.

--1953: Package liquor stores are allowed to sell warm beer.

--1963: Package liquor stores are allowed to sell cold beer.

--1971: Sunday sales at wineries are allowed.

--1973: Sunday sales of alcohol are permitted by the drink at restaurants, bars, hotels and private clubs.

--2010: The prohibition of Election Day alcohol sales is repealed. Sunday carryout sales are allowed at microbreweries.

--2013: The General Assembly passes a law to allow craft artisan distilleries to sell locally made hard alcohol, such as bourbon or vodka, on site. The law had allowed only the wholesale of hard alcohol.

Source: Star archives