Liquor Lawsuit Filed

— The company behind Macadoodles has filed a lawsuit against the state’s Alcoholic Beverage Control Division seeking to overturn a state law limiting each person to just one liquor permit.

Macadoodles is a Missouri-based liquor store chain with a franchise location on Elm Springs Road in Springdale. Steven Cherry of Bentonville applied to the state agency for a liquor permit for a Macadoodles franchise in Bentonville in April.

According to the lawsuit, Cherry’s application was rejected by director Michael Langley without a hearing. Langley and the state are named in the lawsuit filed May 31 in U.S. District Court in Little Rock.

The lawsuit comes less than a year after Benton County residents voted the county wet, opening the door for 55 retail liquor permits for the county.

Cherry applied for a permit for a store at 1019 N. Walton Blvd. on April 25. Cherry had an agreement with Gild Holdings, the company behind Macadoodles, to franchise with Macadoodles if he obtained a retail liquor permit, according to the lawsuit.

The application was rejected by the state because the name of the business on the application was “Macadoodles Franchise.” State law forbids anyone to have an interest in more than one liquor permit in the state. A second application was rejected on the same grounds, and Cherry’s $2,000 application fee was returned.

A law was passed in 2011 by the state Legislature to exclude any person, firm or corporation from having any direct or indirect financial benefit from the sale of liquor at more than one location. The law clarifies a provision already in existence that limits permits to one person. It was written in such a way that it allows the Springdale Liquor Association to continue to operate its seven stores. It states any company active on July 19, 1971, that held more than one permit on Aug. 13, 1993, could continue to hold those permits.

The lawsuit contends allowing one company to receive financial benefit from liquor permits while prohibiting other companies from doing so is unfair.

“There is no rational relationship between an important governmental interest when the state allows one franchise and one chain store in the state to sell liquor, but not others,” the lawsuit states.

The lawsuit contends the provision “substantially interferes” with interstate commerce and violates the Commerce Clause of the U.S. Constitution. The lawsuit also claims Gild Holdings’ federal rights to franchise and use its trademark are violated by the law.

“These statutes are simply designed to alter the position of the parties that the state favors, i.e. those persons who had more than one permit at certain dates in the past and there is no rational basis for doing so,” the lawsuit states.

Rep. Dan Douglas, R-Bentonville, proposed a bill in this year’s legislative session to allow franchising in regard to liquor permits. The bill would still have limited permits to one per person but would have allowed companies to retain financial interest in more than one.

Douglas said he felt like the bill was good for free enterprise. Retail chains and franchises are allowed to sell beer and wine at all their locations, so he said it didn’t make sense to restrict liquor sales differently. The bill died in committee without a vote.

The lawsuit asks for a judgment declaring the laws unconstitutional and granting a retail liquor permit or requiring consideration of Cherry’s application.

Langley said the agency had no comment on the lawsuit. Jim Lyons, lawyer for Gild Holdings, didn't return messages seeking comment. But email between the two show their positions.

An email from Langley to Lyons on May 1 cites the statute and states it’s clear Cherry plans on doing business with Macadoodles. Lyons sent a letter to Langley appealing the denial of Cherry’s application. Langley replied the board didn't consider the matter, given what he called an unacceptable application, and therefore the rejection of the application wasn't appealable.

Lyons asked again May 15 the application be placed on the board’s agenda for a hearing or an appeal.

“There is already a Macadoodles franchise in Arkansas and to add another one will give the corporation an interest in two stores through the franchise agreement,” Langley said in an email to Lyons on May 15. “Neither the director nor the board is going to issue an order of denial because the application was never considered.”

At A Glance

Liquor Permits

Sixty-nine applicants are competing for 55 liquor store permits in hearings before the Alcoholic Beverage Control Division Board. Fifty-five hearings have already been held. Of those, 39 permits were approved July 16-18.

Source: Staff Report

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