Big chains seek to intervene in lawsuit challenging new Arkansas law allowing grocers to sell wine

Posted: November 10, 2017 at 4:30 a.m.

Kroger, Wal-Mart and a Helena-West Helena grocery store are asking to intervene in a federal lawsuit challenging a new state law that allows grocery stores in Arkansas' wet counties to sell any brand of wine.

The lawsuit and an accompanying request for a preliminary injunction to block the law's implementation were filed to head off the Alcoholic Beverage Control Board's consideration on Wednesday of more than 200 applications for grocery store wine permits from hopeful sellers.

Before Act 508 of 2017 took effect Oct. 1, grocery stores in the state's 40 wet counties were limited to selling only wines from small farms that produce 250,000 gallons or less a year.

Many liquor stores across the state opposed the legislation, saying it will cause them to lose revenue and shed workers, while Kroger Co. and Wal-Mart Stores backed the legislation, saying it would allow them to improve their selection of wines and respond to customer demands.

Four liquor retailers -- two based in Pulaski County and two based in Saline County -- filed suit late last month, claiming the new law, codified as Arkansas Code Annotated 3-5-1801-1803, unfairly allows grocery stores to bypass restrictions that apply to liquor stores, making it in violation of the equal protection clause of the U.S. Constitution, and that it conflicts with existing state laws, making it unenforceable.

The retailers are 107 Liquor Inc. and AB Liquor LLC, doing business as Legacy Wine & Spirits, both in Pulaski County; and Saline County retailers Deborah Goolsby, doing business as Crossroads Wine & Spirits, and Bulloch Smith Holdings LLC, doing business as Longhills Wine & Spirits.

Chief U.S. District Judge Brian Miller has scheduled a hearing on the injunction requests for 1:30 p.m. Monday in his Little Rock courtroom. On Thursday evening, he ordered the motions to intervene "held in abeyance to give the parties an opportunity to be heard at the preliminary injunction hearing," and directed the proposed intervenors to appear at the hearing.

The motions to intervene were filed late Wednesday afternoon on behalf of Wal-Mart Stores Arkansas LLC and Sam's West, and Kroger Limited Partnership I. A third request to intervene was filed Thursday on behalf of Hays Food Town Inc. of Helena-West Helena. All the grocery retailers seek wine-selling permits and have applications pending before the board.

In the motions, the Quattlebaum, Grooms & Tull law firm in Little Rock and Springdale argue that the grocery retailers are entitled to intervene to defend their interests, which cannot be adequately represented by the Alcoholic Beverage Control agency, whose director, Mary Robin Casteel, and the five-member board that oversees the agency, are the named defendants.

Each of the grocery-selling businesses attached a representative application, all of which notes that the businesses currently hold permits to sell small-farm wines and beer. While each of the attached applications pertain to just one of the chain stores' locations, the motions note that Kroger entities have submitted 16 applications, Wal-Mart and Sam's have 73 applications pending and Hays has applications pending for three locations.

Attorney Joseph W. Price II argues on behalf of the grocers that the new law is valid and enforceable, and that the liquor retailers haven't stated a claim for which relief may be granted.

The attorney general's office will be defending the law on behalf of the state, but it hadn't filed an answer to the suit as of Thursday evening. Still, attorneys for the stores have said that attorney general's office lawyers have told them that they won't oppose the stores' requests to intervene.

In the motions to intervene, the permit seekers contend that Act 508 "is consistent with current law and constitutional," and vow to file responses in opposition to the preliminary-injunction request before Monday.

The attorneys who filed the suit on behalf of the liquor stores are Paul James and Deborah Riordan, both of Little Rock. In their motion seeking the injunction, they note that Act 508 applies to any single establishment that sells human consumable items and is located in a wet county, yet an existing statute -- Arkansas Code Annotated 3-4-201 -- establishes that the public policy of the state is to restrict the number of permits in the state to sell wine, spirits or malt liquor.

They say Act 508 further conflicts with Arkansas Code Annotated 3-4-101, which mandates that "no person shall sell vinous, spirituous, or malt liquors in this state, except as provided in this act."

The latter statute "limits the number of permits to sell vinous [wine] and other liquors to a ratio of one per five thousand residents per county or political subdivision," the motion points out, noting that several counties, such as Pulaski and Saline, have already obtained the maximum number of permits.

Despite the limitations on numbers of permits, the board has 44 applications pending from Pulaski County and 11 from Saline County, the motion states.

It cites four other state statutes that set out additional requirements and restrictions on the permit and sale of wine, other than small-farm wine, and notes pointedly, "Act 508 of 2017 did not repeal, amend, or alter any of these limitations."

Since the board began accepting applications for grocery store wine permits on Oct. 2, 234 applications have been filed with the board, beginning with 85 applications in the first four days, the attorneys for the liquor stores note. They say the "overwhelming number of these grocery store wine permit applications (91.45%) are from applications seeking permits at multiple locations."

They include Walgreens, which is seeking permits for 36 locations; Kum & Go, which has requested 26 permits; Harps, seeking 29 permits; and other grocery-selling retailers including Target, Brookshire, Edwards Food Giant, Mapco, Super1Foods, Gene Stimson's Big Star and The Fresh Market.

James and Riordan argue that those retailers don't meet the requirements of state laws that impose restrictions on who can sell wine in Arkansas and that limit the number of permits, nor do they meet the criteria of the new law, "as each of these applicants has more than one location."

Their motion for an injunction alleges that at least one of the applicants "has already stocked vinous that is not small farm wine on its shelves, contrary to the applicable statutes and [Alcoholic Beverage Control] rules."

The liquor retailers are asking Miller to enter a temporary order blocking the issuance of permits and "maintaining the status quo" until a trial can be held on the merits of the lawsuit.

The motion includes affidavits, such as one from John Akins III of AB Liquor, who said the months of October, November and December "signify the largest income-producing quarter" for wine sales.

An accompanying data analysis report says that if grocery store wine permits are issued, "the number of stores who sell wine within a 5-mile radius of Legacy Wine & Spirits will increase by 128.5 percent, from 14 stores to 32 stores."

It says Akins has testified that Legacy will lose more than $200,000 in wine sales annually, if grocery store wine permits are issued, "indicative of the irreparable harm suffered by other retail liquor permittees."

Metro on 11/10/2017