INDIANA PETROLEUM MARKETERS AND COVENIENCE STORE ASSOCIATION et al v. HUSKEY et al

Filing 49

ORDER denying 22 Motion to Intervene by 21st Amendment, Inc. under Rule 24(a)(2) or, alternatively, with permission under Rule 24(b). (see Order for details). Signed by Magistrate Judge Debra McVicker Lynch on 12/11/2013. (PG)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
INDIANA PETROLEUM MARKETERS
AND COVENIENCE STORE
ASSOCIATION,
THORNTON’S INC.,
RICKER OIL COMPANY INC.,
FREEDOM OIL, LLC, and
STEVE E. NOE,
Plaintiffs,
vs.
ALEX HUSKEY in his official capacity
as Chairman of the Indiana Alcohol and
Tobacco Commission,
ALCOHOL AND TOBACCO
COMMISSION,
STATE OF INDIANA,
Defendants.

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Order Denying Motion to Intervene
This matter is before the court on a motion to intervene by 21st Amendment,
Inc. (“21st Amendment”) under Fed. R. Civ. P. 24. (Dkt. 22). 21st Amendment seeks
to intervene as of right under Rule 24(a)(2) or, alternatively, with permission under
Rule 24(b). For the reasons explained below, the court DENIES 21st Amendment’s
motion to intervene.
Background
Indiana’s alcoholic beverage laws make it unlawful for the holder of a beer
dealer’s permit to sell iced or cold beer, Ind. Code § 7.1-5-10-11, except if the holder
is the proprietor of a package liquor store. See Ind. Code § 7.1-3-5-3(d). Thus, cold

beer for off-premises consumption can be sold only at package liquor stores (whose
proprietors must be Indiana entities or residents); other establishments like grocery
and convenience stores that hold beer dealer’s permits can sell warm beer only. The
plaintiffs, who are an individual consumer and an association of truck stop
convenience store operators and three of its members, challenge the
constitutionality of Indiana’s differential treatment of holders of beer dealer’s
permits under the United States and Indiana constitutions and contend that the
laws run afoul of the federal Commerce Clause, the federal Equal Protection and
Privileges and Immunities clauses of the Fourteenth Amendment, and Indiana’s
Equal Privileges clause. The plaintiffs seek a judicial declaration that the
prohibition of sales of cold beer is unconstitutional as applied to the plaintiffs, and
they seek an order permanently enjoining the State of Indiana, its Alcohol and
Tobacco Commission (the state agency charged with enforcing Indiana’s alcoholic
beverage laws), and the Commission’s Chairman from enforcing the prohibition
against them. (The court will refer to all defendants as the “State” or “Indiana.”)
21st Amendment, Inc., the proprietor of 19 package liquor stores in the
Indianapolis area, wants to intervene in this case. It asserts that the statutory
exemption to liquor store proprietors is constitutional and reflects an economic
benefit given in exchange for the hardship of a panoply of burdens imposed on
liquor stores under Indiana’s overall statutory and regulatory scheme for the
delivery and sale of alcoholic beverages. 21st Amendment points out, for example,
that package liquor stores cannot sell anything but alcoholic beverages and closely

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associated goods, cannot be open on Sundays, cannot have employees under 21
years of age, and cannot allow onto the premises any persons under age 21.
Government-imposed quotas and restrictions on location also limit expansion of
liquor stores in ways not applicable to grocery stores, which can sell everything a
liquor store sells except chilled beer and which are also free from the laws and
regulations constraining day-to-day operations imposed on liquor stores. According
to 21st Amendment, package liquor store permits are valuable and fetch prices in
private transfers or at public auction far greater than those for a beer dealer’s
permit uncoupled with a liquor store—largely because of the ability to sell chilled
beer. (Liquor store permits can be privately sold and transferred with state
approval and are sometimes auctioned by the state.) In a 2011 state auction, the
average cost of a Type 217 package liquor store permit was $144,208, while the
average cost of a Type 115 grocery store permit was $6,103. (See Affidavit of James
A. James, Dkt. 23-B, ¶¶ 11, 13.)
21st Amendment seeks to intervene in this litigation to defend the
constitutionality of the exemption allowing package liquor stores to sell chilled beer.
If permitted to intervene, 21st Amendment also will file in this suit a claim against
the State asserting that, if the court grants relief to the plaintiffs, then the court
must declare Indiana’s statutory scheme unlawful unless the court requires the
State to impose the same operational burdens on all permittees that sell chilled
beer for off-premises consumption.

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The parties on both sides of this case—the plaintiffs and the State—oppose
intervention by 21st Amendment. The State defendants are represented by the
Attorney General of Indiana. The Attorney General maintains that he intends to
actively and vigorously defend the constitutionality of the statutes challenged by
the plaintiffs.
Analysis
A.

21st Amendment is not entitled to intervene as of right under Rule
24(a)(2).
Under Fed. R. Civ. P. 24(a)(2), a district court must permit a person to

intervene when the person shows that (1) his motion for intervention is timely; (2)
he has an “interest” in the property or transaction that is the subject of the
litigation; (3) disposition of the litigation may, as a practical matter, impede or
impair his ability to protect that interest; and (4) no existing party adequately
represents his interest. Security Ins. Co. v. Schipporeit, Inc., 69 F.3d 1377, 1380 (7th
Cir. 1995).
The court is satisfied that 21st Amendment’s motion is timely. Further, the
court accepts for purposes of its analysis that it has the requisite “interest” in the
subject of the litigation. But, as explained below, 21st Amendment has no right to
intervene because Indiana’s Attorney General is actively defending the
constitutionality of the laws challenged by the plaintiffs.

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1.

The court accepts for purposes of its analysis that
21st Amendment satisfies the “interest” element.

Neither Rule 24(a)(2) nor the decisions applying it precisely define the
“interest” element of the rule. Further, even though the rule states that the
“interest” must be an interest in “property” or a “transaction” that is the subject of
the litigation, courts have not limited intervention as of right to cases regarding
disputes about particular property or a specific transaction but have required only
that the proposed intervener have an interest relating to the “subject matter” of the
litigation. See Nissei Sangyo Am., Ltd. v. United States, 31 F.3d 435, 438 (7th Cir.
1994). That interest must be “direct, significant, and legally protectable,” and
something more than a “mere” economic interest, but it need not be a property
right. Security Ins., 69 F.3d at 1380-81 (interest must be “direct, significant, and
legally protectable” but need not be a property right); Flying J, Inc. v. Van Hollen,
578 F.3d 569, 571 (7th Cir. 2009) (anticipation of some economic benefit by a
judgment in favor of one of the parties is not necessarily sufficient).
21st Amendment asserts that its interest is the value of its package liquor
store permits under the current regulatory scheme, which would be significantly
impaired if the plaintiffs were allowed to sell chilled beer without also becoming
subject to the statutory burdens imposed on package liquor store permittees. Its
interest is similar, though not identical, to the kind of interest that the Seventh
Circuit described in Flying J. There, a gasoline retailer challenged a Wisconsin
statute (the Unfair Sales Act) that controlled the price of gasoline by creating a floor
below which the price was illegal. The plaintiff asserted that the Wisconsin statute
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was preempted by the Sherman Antitrust Act and sought to enjoin its enforcement.
The Wisconsin attorney general defended the lawfulness of the statute but lost in
the district court, “whereupon the state threw in the towel and decided not to
appeal.” Id. at 570. Before the deadline for filing a notice of appeal, an association
of Wisconsin gasoline retailers moved to intervene and asked the district court to
reconsider its decision, but the court denied the intervention motion.
On appeal, the Seventh Circuit stated that in litigation challenging the
validity of a state regulatory scheme, a proposed intervener has the kind of interest
required to intervene as of right if he is an intended beneficiary of the statutory
scheme. Id. at 572. The court found that gasoline retailers were direct beneficiaries
of the Unfair Sales Act because the statute expressly created a private right of
action allowing retailers who could show injury to sue persons who sold at prices
below the legal floor. Id. The statute contained a public enforcement mechanism as
well, allowing the state to sue to enjoin violations and collect civil penalties. The
retailers’ interest in preserving this remedial scheme was sufficient under Rule
24(a)(2), “provided that the retailers would be directly rather than remotely harmed
by the invalidation of the statute.” Id. Because the elimination of price controls
would harm smaller retailers whose prices could be undercut by their larger and
more efficiently run competitors to whom “they would lose much or even all of their
business,” the potential harm was direct and not remote. And, the court held, their
interest in avoiding that harm through validation of the Unfair Sales Act was the
kind of interest that could support intervention as of right under Rule 24(a)(2). Id.

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21st Amendment’s interest in the validity and enforcement of the State’s
prohibition of sales of chilled beer except by proprietors of package liquor stores is
similar to the interest of the gasoline retailers in Flying J in the validity of the
Wisconsin price control statutes. Although 21st Amendment has no private right of
action to enforce the restrictions on sales of chilled beer, it has made a threshold
showing that it directly benefits from the current regulatory scheme and that its
business and the value of its licenses would be significantly and directly impaired if
the State were unable to enforce its laws that allow package liquor stores the
exclusive ability to sell chilled beer. Though not necessary to the result in this case,
the court will assume that 21st Amendment has the requisite interest.
2.

The State adequately represents 21st Amendment’s interest.

The question whether 21st Amendment may intervene as of right thus turns
on the fourth inquiry under Rule 24(a)(2)—whether the State adequately represents
21st Amendment’s interest. 21st Amendment bears the burden of establishing
inadequacy. Security Ins., 69 F.3d at 1380.
Unlike the state in Flying J, the Indiana Attorney General has not “thrown
in the towel,” but is actively engaged in defending the constitutionality of the
challenged Indiana law. In Flying J, the court remarked that had the gasoline
retailers sought to intervene before the state decided not to appeal, “its motion [to
intervene] would doubtless (and properly) have been denied on the ground that the
state’s attorney general was defending the statute and that adding another
defendant would simply complicate the litigation.” 578 F.3d at 572.

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Forty years ago in Trbovich v. United Mine Workers of America, 404 U.S. 528
(1972), the Supreme Court, alluding to a prior version of Rule 24(a)(2) that
authorized intervention as of right where existing representation “is or may be
inadequate” (emphasis added), stated in a footnote that the inadequacy element is
satisfied if the would-be intervener shows that representation by existing parties
“may be” inadequate, and the burden of making that showing “should be treated as
minimal.” Id. at 538 n.10 (citing 3B J. Moore, Federal Practice 24-09-1(4) (1969)).
In Trbovich, the Secretary of Labor brought suit under the Labor Management
Reporting and Disclosure Act (LMRDA), alleging that the election of officers of a
labor union had not been conducted in accordance with the law. The Secretary
sought a judicial order requiring a new election. A union member who also
contended that the election had been unlawfully conducted sought to intervene.
The district court denied the motion on the ground that the LMRDA permitted only
the Secretary of Labor party status in a lawsuit challenging a union election. The
Supreme Court held that the LMRDA did not absolutely bar intervention by union
members and remanded the case to permit the union member to intervene, but only
for the limited purpose of presenting “evidence and argument” that supported the
claims of election illegality that the Secretary chose to include in his complaint. 404
U.S. at 537.
Even though the Supreme Court in Trbovich cited a prior version of Rule 24
that required only a minimal showing that representation “may be” inadequate, the
Seventh Circuit still applies Trbovich’s “minimal” adequacy showing to motions to

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intervene as of right generally. See Wisconsin Educ. Ass’n Council v. Walker, 705
F.3d 640, 659 (7th Cir. 2013) (citing Trbovich as requiring “only a ‘minimal’ showing
of inadequate representation”); Ligas ex rel. Foster v. Maram, 478 F.3d 771, 774 (7th
Cir. 2007) (same). Despite this “minimal” inadequacy standard, a presumption of
adequate representation arises when (1) a government entity is charged by law with
protecting the interests of the proposed intervener or (2) an existing party shares
the intervener’s “goal” or “ultimate objective.” Wisconsin Educ., 705 F.3d at 659;
Wade v. Goldschmidt, 673 F.2d 182, 186 n.7 (7th Cir. 1982).
When, as here, a government entity is charged with protecting the right of
the proposed intervener, the presumption that the government adequately
represents that interest can be overcome only upon a showing of bad faith or gross
negligence. Wisconsin Educ., 705 F.3d at 658-59. 21st Amendment does not suggest
it can meet that standard, but rather contends the standard does not apply here
because no law requires the State to protect 21st Amendment’s interest in the value
of its package liquor store licenses and exclusive ability to sell chilled beer. 21st
Amendment too narrowly defines the State’s role. The Seventh Circuit has ruled
that a governmental body attempting to uphold its own law deserves the
presumption of adequacy under the “charged by law” prong. American National
Bank & Trust Co. v. City of Chicago, 865 F.2d 144 (7th Cir. 1989); Keith v. Daley,
764 F.2d 1265 (7th Cir. 1985). Cf. Wisconsin Education, 705 F.3d 640 (ruling that
because the State of Wisconsin was not charged by law with protecting the First
Amendment free speech rights of union employees, the employees were not required

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to show bad faith and grossly negligent representation by the State, but the State’s
representation was adequate nonetheless).
In American Nat’l Bank, real estate developers and associated plaintiffs sued
the City of Chicago, challenging a newly enacted zoning ordinance designed to
reduce the use of potentially toxic construction materials. 865 F.2d at 145-46. The
City defended its ordinance, but a labor union sought intervention with the goal of
better protecting the ordinance’s promise of improved conditions for health and
safety. Id. The court ruled that because the City was “charged with the duty of
defending the City’s interests under both state and local law,” there was a
presumption of adequacy that the interveners could not overcome. Id. at 148. In
Keith v. Daley, the State of Illinois defended the constitutionality of new legislation
restricting access to abortions in a challenge brought by physicians who opposed the
law. A lobbying organization supporting the restrictions sought to intervene as of
right. The court applied a presumption of adequacy, noting that the defendants
were “required to defend and enforce the law of Illinois, including” the relevant
statute. 764 F.2d at 1269. See also Ligas, 478 F.3d at 774-75 (because the state
defendants were responsible for administering the state laws challenged by the
plaintiffs, the proposed intervener was required to show gross negligence or bad
faith).
The court sees no distinction between the State of Indiana and its agency and
state official who enforce the alcoholic beverage laws and the government
defendants in Ligas, Keith, and American National Bank, which the Seventh Circuit

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presumed were adequate representatives of persons whose interest lay in the
enforcement the challenged laws. Accepting the narrow “interest” 21st Amendment
defines here would render the presumption virtually meaningless; a proposed
intervener can almost always articulate its interest more specifically or terms of
some different motivation.
Even if 21st Amendment is not required to demonstrate gross negligence or
bad faith, the State still is presumed an adequate representative of 21st
Amendment’s interest under the second prong of the applicable analysis because
both the State and 21st Amendment share the same objective—to defend the
constitutionality of the alcoholic beverage laws challenged by the plaintiffs. To
overcome the presumption of adequacy in this instance, 21st Amendment must
demonstrate some conflict between it and the State that renders the State’s
representation inadequate. Wisconsin Educ., 705 F.3d at 659. See also
Massachusetts Food Ass’n v. Massachusetts Alcoholic Beverages Control Comm’n,
197 F.3d 560, 567 (1st Cir. 1999) (“[T]he courts have been quite ready to presume
that a government defendant will ‘adequately represent’ the interests of all private
defenders of the statute or regulation unless there is a showing to the contrary.”)
21st Amendment cannot identify any conflict that suggests the State may not
vigorously defend its alcoholic beverage laws. That 21st Amendment may have
motives, political goals, or economic interests that would drive its participation in
the litigation that the State does not share is not a conflict that rebuts the
presumption of the State’s adequacy. See American Nat’l Bank, 865 F.2d at 148

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(different political goals between City and would-be intervener does not rebut
presumption of government as adequate representative); Keith v. Daley, 764 F.2d at
1270 (conflict because of different moral justifications supporting constitutionality
of statute does not rebut presumption); NBD Bank, N.A. v. Bennett, 159 F.R.D. 505,
508 (S.D. Ind. 1994) (fact that government does not share the intervener’s financial
interests does not rebut presumption). See also 6 Moore’s Federal Practice §
24.03[4][a][iv][A] (3rd ed. 2011) (cited in Stuart v. Huff, 706 F.3d 345, 351 (4th Cir.
2013)):
[T]he business of government could hardly be conducted if, in matters
of litigation, individual citizens could usually or always intervene and
assert individual points of view.
In sum, the court finds that 21st Amendment has not met its burden of
demonstrating that the State is an inadequate representative of its interest.
Whether the burden is described as minimal or not, 21st Amendment has not
rebutted the presumption that the State, with which 21st Amendment shares the
ultimate goal of upholding the constitutionality of the legislature’s prohibition of
retail sales of chilled beer except by package liquor store proprietors, adequately
represents 21st Amendment’s interest.

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B.

The court will not permit intervention under Rule 24(b).
The court denies 21st Amendment’s alternative request to intervene with

permission under Rule 24(b). 21st Amendment plans to file a claim against the
State that presupposes the court first rules against the State on the plaintiffs’
claims. This demonstrates that allowing its participation as a party would
unnecessarily complicate this litigation and threaten to delay its resolution, to the
prejudice of the existing parties. Security Ins., 69 F.3d at 1381 (7th Cir. 1995)
(permissive intervention is an entirely discretionary decision which may be guided
by whether existing parties would be prejudiced).
Denial of 21st Amendment’s motion to intervene does not foreclose 21st
Amendment from later seeking to participate as amicus curiae in the context of
summary judgment briefing.
Conclusion
For the foregoing reasons, the motion (Dkt. 22) by 21st Amendment, Inc. to
intervene as of right or, alternatively, with permission, is DENIED.
So ORDERED.
12/11/2013
Date: _________________

____________________________________
Debra McVicker Lynch
United States Magistrate Judge
Southern District of Indiana

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