Appeals court to decide whether Monarch Beverage can sell liquor

Monarch Beverage Co., the largest wholesaler of beer and wine in the state, wants to also distribute liquor to retailers.

But state law says that if the company wants to sell liquor, it must not sell beer.

The Lawrence-based company is asking the Indiana Court of Appeals to declare unconstitutional the law that prohibits beer wholesalers from seeking a permit to also distribute liquor. Monarch argues that it violates the Equal Privileges and Immunities Clause of the Indiana Constitution.

A three-judge appeals court panel heard arguments Tuesday from attorneys representing Monarch and the state.

The hearing comes almost two years after Monarch filed a lawsuit in an effort to remove the law from the books. The lawsuit was filed against David Cook in his official capacity as commissioner of the Indiana Alcohol and Tobacco Commission in Marion Superior Court's civil division. Judge Timothy Oaks ruled against Monarch, which is now asking the appeals court to overturn the ruling.

Monarch's attorney, Kannon Shanmugam, of Washington, D.C.-based Williams & Connolly LLP, argued Tuesday that the law discriminates against beer wholesalers by treating them differently from everyone else, including retailers and wine wholesalers, who are able to distribute liquor.

He also said that the liquor wholesale market in Indiana is dominated by a small number of national distributors, "many of whom, ironically enough, are allowed to distribute beer in other states."

Indiana issues separate permits for wholesaling beer, wine and liquor. Wholesalers are allowed to have just one of three permits. They also can have permits to distribute wine and beer, or wine and liquor. But wholesaling beer and liquor isn't allowed — a prohibition that's unique to Indiana. Retailers, however, are allowed to sell wine, beer and liquor.

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Monarch argues that the General Assembly never provided any explanation for not allowing beer and liquor to be distributed by one wholesaler, and the restriction came from an antiquated law from the post-Prohibition era's patronage system, wherein state politicians gave away liquor licenses and county politicians doled out beer licenses.

Thomas Fisher, solicitor general for the Indiana attorney general's office, the agency that defends state laws and officeholders in court, said he does not believe beer wholesalers are treated differently, and that Monarch can choose not to sell beer in order to sell liquor if it wants to. He also said Monarch is challenging the law because of economic reasons, not because of disparate treatment.

"They have a very specific client that they are trying to please," Fisher said during the hearing.

Monarch already distributes wine manufactured by E. & J. Gallo Winery, and it wants to sell liquor produced by the California-based manufacturer.

Fisher also said there's a rational basis for keeping the barrier between beer and liquor on the wholesale level, saying one is more potent than the other and has to be dealt with differently.

Monarch has been a wholesaler of beer since 1947 and a wholesaler of wine since 1976. It distributes beer in 89 counties in Indiana and wine in all 92 counties.

Monarch filed a similar lawsuit and lost in federal court, where the company argued that the state law violates the Equal Protection Clause of the Constitution. But U.S. District Judge Sarah Evans Barker said Monarch was unable to show any other similar company that's being treated differently from Monarch.

The appeals court judges will issue a ruling at a later date.

Call Star reporter Kristine Guerra at (317) 444-6209. Follow her on Twitter: @kristine_guerra.