State liquor law challenged in federal court

story by Kim Souza
ksouza@thecitywire.com

The widely debated state liquor law that restricts liquor store ownership and multiple franchising interests will be heard in federal court next month.

Benton County resident Robert McCurry filed suit in August against the state’s Alcoholic Beverage Control Division after his application for a liquor store permit was denied. The case was filed Aug.13 in U.S. District Court Eastern District challenging state law liquor store limits after Benton County became "wet" and the hearings for liquor store permits were held in July.

Legal counsel for defendants Alcoholic Beverage Control of Arkansas filed a motion to dismiss with the court on Sept. 6. Since then the plaintiff’s counsel filed a response refuting the state’s motion to dismiss. But last week a bench trial date was set by the court for Oct. 20 in Little Rock.

McCurry’s complaint challenges the state’s restrictive liquor store law saying it violates the commerce clause and “substantially interferes with interstate commerce."

McCurry applied for a retail liquor store permit in April for The Fine Wine & Spirits Store which was to be located at 2503 S.E. J. Street in Bentonville. On that application, he stated that he had an interest in another liquor store in Missouri. McCurry was chosen in a lottery drawing and allowed to pursue his permit through a hearing process held last month in Little Rock.

During that hearing, the ABC asked McCurry if he held or owned an interest in Gild Corporation, which has liquor permit for Macadoodles in Springdale. McCurry told them he owns a minority interest in Gild Holdings and Gild Corporation. The ABC then denied his application on the basis that he already owned an interest in the Macadoodle franchise and state law prohibits anyone person from owning more than one liquor store in the state, and that includes fractional shares of franchises.

The plaintiff argues that if the law is truly applied as written than anyone who owns a share of Wal-Mart Stores Inc. or Walgreens could also be prohibited owning a liquor store in Arkansas. The suit states that Wal-Mart and Walgreens’s each own one liquor store permit in Fayetteville and West Memphis, respectively. Also, their shareholders have fractional financial interests in those operations.

The complaint states that the law interferes with interstate commerce as it prevents or restricts the trading of stock of publicly held corporations because it prevents people who own any interest in a retail liquor permit from owning any stock in a publicly traded corporation such as Wal-Mart or Walgreens. The compliant also charges the law is unconstitutionally vague and violates due process, which makes it suitable for federal court.

The state had previously argued that the federal court was outside the jurisdiction for this case.

If overturned, the law could have statewide implications because as it would reverse the protection it gives to a few owners such as Jim Phillips of the Springdale Liquor Association, which are exempt from the law because of a “grandfather clause."

Rep. Dan Douglas, R-Bentonville, said state liquor laws are a “major can of worms” for lawmakers who very seldom want to tamper with the status quo. He proposed a bill earlier this year he hoped would expand the law to allow franchising, but it died in committee.

Douglas and other insiders agree that some mom-and-pop operators don’t really want the store limit lifted because they fear larger retailers will could corner the market if they are also allowed to expand their reach. The law already gives retailers, large and small, unlimited permits to sell beer and wine, but that competition is not available for liquor, according to Douglas.

“Alcohol is alcohol and free enterprise is free enterprise, but right now it’s not a level playing field. The current law limits free enterprise for some people. But if the law gets changed, I think it will have to be in federal court,” Douglas said.

He said it doesn’t make sense that a dad who owns a liquor store can’t help one of his adult children get started in a like venture of their own with a shared interest, but that’s the law.

The first liquor store in Benton County opened last month – Star Liquor located along Southwest Regional Airport Boulevard in Bentonville.

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The county’s population allows for 55 liquor stores, the state handed out 39 permits in the July hearings. State officials said those applicants who were denied had the opportunity for appeal.

McCurry opted to make his appeal to federal court.

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