Southern Wine & Spirits of America, Inc. et al v. Division of Alcohol and Tobacco Control, et al.,

Filing 39

ORDER entered by Judge Nanette Laughrey. Major Brands' Motion to Intervene [Doc. # 17] is DENIED. (Kanies, Renea)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
CENTRAL DIVISION

SOUTHERN WINE & SPIRITS OF
AMERICA, INC., SOUTHERN WINE &
SPIRITS OF MISSOURI, INC., HARVEY
R. CHAPLIN, WAYNE E. CHAPLIN,
PAUL B. CHAPLIN and STEVEN R.
BECKER,
Plaintiffs,
v.
DIVISION OF ALCOHOL AND
TOBACCO CONTROL AND
LAFAYETTE E. LACY, SUPERVISOR
OF ALCOHOL AND TOBACCO
CONTROL,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Case No. 11-CV-04175-NKL

ORDER

Pending before the Court is Major Brands, Inc's Motion to Intervene as a Defendant
to Count I of the Complaint [Doc. # 17]. Defendants Division of Alcohol and Tobacco, et
al., represented by the Attorney General, do not oppose Major Brands' Motion to Intervene.
Plaintiffs Southern Wine & Spirits of America, Inc.; Southern Wine & Spirits of Missouri,
Inc.; Harvey R. Chaplin; Wayne E. Chaplin; Paul B. Chaplin; and Steven R. Becker oppose
the Motion [Doc. # 20]. For the reasons stated below, the Motion is denied.
I.

Background

Chapter 311 of the Revised Statutes of Missouri creates a three-tier system for the
importation, distribution and sale of alcohol products in the state. Every participant in each
tier is subject to licensure or regulation by the Defendant Division of Alcohol and Tobacco
Control of the Missouri Department of Public Safety ("Division"). The three tiers refer to:
(1) the producer, or supplier; (2) the distributor or wholesaler; and (3) the retailer. Under the
three-tier system, a producer sells its wine to a licensed in-state wholesaler, who pays excise
taxes and delivers products to a licensed in-state retailer. There is no contact between
suppliers and retailers under this system. [Doc. # 18 at 6-8].
Major Brands is the largest wholesaler of wine and spirits in Missouri and has been
licensed by the Division for more than 75 years. [Doc. # 18 at 6]. Plaintiff Southern Wine
& Spirits of America, Inc. ("SWSA"), is a Florida corporation with its principal place of
business in Miami, Florida. SWSA is the largest distributor of wine, spirits, beer and various
non-alcoholic beverages in the United States, with operations in 32 states and the District of
Columbia. SWSA holds a Missouri license as a liquor solicitor. Pursuant to this license,
SWSA may sell all kinds of intoxicating liquors to wholesalers in Missouri. [Stipulation,
Doc. # 15 at 1-3].
Plaintiff Southern Wine & Spirits of Missouri, Inc. ("Southern Missouri"), a corporation
organized under the laws of the State of Missouri, is a wholly owned subsidiary of SWSA. Id. at
1. Southern Missouri was created for the purpose of operating as a wholesaler or distributor of
alcoholic beverages in the state of Missouri. Id. at 4. On or about July 1, 2011, Southern Missouri
filed an application for a Missouri Wholesaler Liquor License. On or about July 11, 2011, the
2

Division denied the Application on the grounds that Southern Missouri is not eligible for licensure
because it does not satisfy the residency requirement found in Mo. Rev. Stat. §311.060.2(3).
Answer, Doc. # 9 at 3].
Section 311.060.2(3) states that "[n]o wholesaler license shall be issued to a
corporation for the sale of intoxicating liquor containing alcohol in excess of five percent by
weight, except to a resident corporation as defined in this section." Mo. Rev. Stat. § 311.060.3
defines “resident corporation” as
a corporation incorporated under the laws of this state, all the officers and directors
of which, and all the stockholders, who legally and beneficially own or control sixty
percent or more of the stock in amount and in voting rights, shall be qualified legal
voters and taxpaying citizens of the county and municipality in which they reside and
who shall have been bona fide residents of the state for a period of three years
continuously immediately prior to the date of filing of application for a license,
provided that a stockholder need not be a voter or a taxpayer, and all the resident
stockholders of which shall own, legally and beneficially, at least sixty percent of all
the financial interest in the business to be licensed under this law...
As stipulated by Defendants, Southern Missouri currently meets all of the requirements for the
license it seeks, except for the residency requirements in Mo. Rev. Stat. § 311.060. [Doc. # 15 at
4].

In their complaint in this action, Plaintiffs challenge the constitutionality of Missouri’s
residency requirements. Count I of the complaint seeks a declaration that the Division is
estopped from enforcing Mo. Rev. Stat. § 311.060 against Plaintiffs and a declaration that
the residency requirement provisions of the Missouri Liquor Control Law, including, but not
limited to, Mo. Rev. Stat. § 311.060 are invalid and unenforceable under the Equal Protection
Clause, the Commerce Clause and the Privileges and Immunities Clause of the United States
Constitution.
3

Major Brands argues that it is entitled to intervene in this litigation as a matter of right
under Federal Rule of Civil Procedure 24(a)(2) or, alternatively, the Court should grant
permissive intervention under Federal Rule of Civil Procedure 24(b).
II.

Discussion
The purpose of intervention is to "promote the efficient and orderly use of judicial

resources by allowing persons, who might otherwise have to bring a lawsuit on their own to
protect their interests or vindicate their rights, to join an ongoing lawsuit instead." United
States v. Metro. St. Louis Sewer Dist., 569 F.3d 829, 840 (8th Cir.2009) (quoting Mausolf v.
Babbitt, 85 F.3d 1295, 1300 (8th Cir.1996)). Thus, a threshold matter is whether Plaintiffs
have standing to bring a lawsuit on their own to protect their interests. In the Eighth Circuit,
a party seeking to intervene must establish Article III standing in addition to the requirements
of Federal Rule of Civil Procedure 24. Id. at 833-34. For the following reasons, Major
Brands has not established that it has standing.
A.

Standing

To establish Article III standing, Major Brands must first clearly allege facts that show
an injury to a legally protected interest that is "concrete, particularized, and either actual or
imminent." Id. (quoting Curry v. Regents of Univ. of Minn., 167 F.3d 420, 422 (8th Cir.
1999)). Major Brands must also establish causation of the alleged injury and that a favorable
decision will likely redress the injury. Id.
In its briefing, Major Brands points to several injuries-in-fact it would suffer if the
residency requirements in Section 311 were declared unconstitutional. Major Brands states
4

that a ruling favorable to Plaintiffs would damage the company's 1) contractual interests and
business expectations with suppliers and retailers across the state, 2) investment of labor and
capital, and 3) market position.1 [Doc. # 18 at 10, 15; Doc. # 22 at 5]. Major Brands also
asserts a general interest in preserving the regulatory system, arguing that a ruling favorable
to Plaintiffs would allow suppliers to sell directly to non-resident wholesalers, weakening the
essential role of resident wholesalers in the regulatory system and producing a breakdown
of the current three-tiered regime of alcohol distribution. [Doc. # 18 at 8]. Major Brands
claims that any damage to its economic or regulatory interests can be avoided through a
decision rejecting Plaintiffs’ claims.
The Court finds that the interests which Major Brands seeks to protect are too vague
and contingent to support standing. An interest is cognizable under Rule 24(a)(2) only where
it is "direct, substantial, and legally protectable." United States v. Union Elec. Co., 64 F.3d
1152, 1161 (8th Cir.1995). Interests that are remote from the subject matter of this case or
that are contingent upon the occurrence of a sequence of events before becoming colorable

1

Among the specific concerns listed by Major Brands is the fear that non-resident
national wholesalers could use profits from other states to slash prices, use these lowered prices
to reduce or eliminate competition from Missouri wholesalers and subsequently raise prices for
retailers, using this revenue in order to execute the same scheme in another state. Major Brands
also points to the risk that a non-resident company would circumvent Missouri taxes by taking
product from a warehouse outside Missouri, on which Missouri taxes have not been paid, and
then selling it to Missouri retailers at a lower price than would otherwise be possible. Major
Brands also believes that non-resident companies would have less of an individualized presence
or stake in Missouri communities, and would thus be more likely to violate Missouri laws
against charging large and small retailers different prices, or giving large retailers free product or
volume discounts. Major Brands argues that such conduct as listed above could lead to price
competition in the wine and spirits business which would be contrary to the legislative intent to
reduce alcohol consumption. [Doc. # 17 at 5-6].
5

do not satisfy the rule. Med. Liab. Mut. Ins. Co. v. Alan Curtis LLC, 485 F.3d 1006, 1008
(8th Cir.2007). Mere economic interests are not sufficient to establish a legally protectable
claim. See Id. (citing Curry v. Regents of Univ. of Minn., 167 F.3d 420, 422 (8th Cir. 1999)
(economic interests staked solely on the outcome of litigation are too speculative to be direct
and legally protectable).
Here, Major Brands’ economic interest in preventing loss of contracts or market share
is essentially a desire to avoid the competition which would result if non-resident companies
such as Southern Missouri were allowed to enter as wholesalers into the Missouri liquor
distribution business. Such an interest fails to rise to the level of a legally protectable
interest, for purposes of standing.
Further, any harm to these economic interests, as well as Major Brands’ more general
interest in protecting the current three-tiered distribution scheme, is contingent not only upon
the outcome of this litigation but also upon the occurrence of other events. To inflict any
economic damage extending beyond simple competition, non-resident wholesalers would
have to enter the Missouri market with certain fundamental advantages which are not enjoyed
by resident wholesalers. In its motion, Major Brands discusses some of the alleged
advantages, such as the ability to avoid Missouri taxes and engage in predatory price
discrimination. However, it appears, at this stage of the litigation, that even upon a ruling
favorable to the Plaintiffs, Southern Missouri would still be a Missouri corporation subject
to all the same regulations applied to wholesalers whose officers and shareholders reside in
Missouri. Major Brands has not shown how such adverse consequences would come to pass
6

simply because the residency requirement would be removed. Occurrence of the harm
alleged by Major Brands thus rests on speculation and is also contingent upon Missouri
authorities ignoring or implicitly condoning any such behavior and failing to take action to
make alternative changes to the regulatory or licensing regime to protect resident
wholesalers. Further, whether Major Brands' own strengths as a business, such as its
currently dominant market position, decades of experience, and strong relationships with
suppliers and retailers are sufficient to outweigh any adverse consequence of non-residents
entering the wholesale market, depends on future, intervening events.
Pragmatic considerations also support the Court's conclusion. If the Court allowed
Major Brands to intervene, every resident wholesaler potentially subject to competition from
non-resident wholesalers could claim a right to intervene, as would potentially any retailers
or suppliers who might be affected from the potential entry of companies such as Southern
Missouri. This is contrary to promoting judicial efficiency, one of the primary purposes of
permitting intervention.
Therefore, the Court finds that Major Brands has not demonstrated that it has standing,
much less a right to intervene under Fed. R. Civ. P. 24(a), and therefore its request for
intervention is denied.

7

III.

Conclusion
Accordingly, it is hereby ORDERED that Major Brands' Motion to Intervene [Doc.

# 17] is DENIED.

s/ Nanette K. Laughrey
NANETTE K. LAUGHREY
United States District Judge
Dated: January 17, 2012
Jefferson City, Missouri

8