The 7th U.S. Circuit Court of Appeals said it will allow E.F. Transit Inc., which is owned by the owners of Indiana’s Monarch Beverage, to pursue a lawsuit against the Indiana Alcohol & Tobacco Commission.
The Commission twice noted concerns about a proposal under which Indiana Wholesale Wine & Liquor Co. would use E.F. Transit to deliver its goods. The problem: The Commission says Indiana law prohibits such a deal because of Indiana Wholesales’ common ownership with Monarch.
Indiana regulates alcohol distribution “along two dimension: three tiers of the distribution chain (producers, wholesalers, and retailers) and three kinds of alcohol (beer, liquor, and wine).” The state regulatory scheme generally prohibits permit holders in one tier of the distribution chain from holding an interest in a permit in another tier. Id. And state law also limits the issuance of permits within the distribution tier by type of alcohol. Id. As relevant here, Indiana’s prohibited-interest laws require the separation of beer and liquor wholesaling by prohibiting the holder of an interest in a beer permit from acquiring an interest in a liquor permit and vice versa.
E.F. Transit and Monarch are separate entities under Indiana law. But they share the same owners, management and warehouse. In a separate case, the Indiana Supreme Court ruled that E.F. Transit and Monarch are “not just … two separate entities conducting close business transactions” but are “practically one in the same” under the prohibited-interest laws.
That, the appeals court said, was enough to allow the lawsuit to proceed. “E.F. Transit need not violate the law and expose itself to punishment to raise its preemption claim,” the Indiana Supreme Court ruled in allowing the suit to proceed.