Court battle heats up between state, Monarch Beverage affiliate

Kayleigh Colombo for www.theindianalawyer.com

The legal battle between the Indiana Alcohol & Tobacco Commission and Spirited Sales LLC — an affiliate of Monarch Beverage Co. — is escalating, despite a Marion County judge’s ruling last week that Spirit is entitled to become a liquor wholesaler in the state.

The state, represented by the Indiana Attorney General’s Office, filed a motion on Tuesday asking Special Judge Heather Welch to stay her decision while it appeals. In her Aug. 24 ruling, Welch ordered the ATC to grant Spirited a liquor permit, finding that the commission was “arbitrary and capricious” in its decision to deny Spirited Sales the permit in 2014.

The state argues that granting Spirited Sales a permit to wholesale liquor would “effectively grant Spirited Sales a competitive market advantage not enjoyed by all other similarly situated industry stakeholders.”

“The ATC will be placed in the impossible position of trying to evaluate and act on current and future permit applications which would have been unmeritorious … while the legal questions in this case remain undecided by an appellate court,” according to the state’s filing.

The parties — which have been at odds for years as Monarch and its affiliate tried to enter the liquor wholesaling business — are scheduled to face off at an emergency hearing scheduled for Wednesday.

In a filing Thursday, Spirited asked the court to hold the ATC in contempt, saying it is “deliberately delaying its execution of the court’s order and ultimately … failing to comply with it.”

Spirited said that after last week’s court decision, the ATC refused to grant the permit that would have allowed it to start its business — instead saying that first Spirited needed to comply with an inspection by the Indiana State Excise Police. Days after Spirited’s lawyers scheduled the inspection, the state filed the motion to stay the ruling.

“Based on the Commission’s and its counsel’s misleading representations, Spirited declined to seek the Court’s assistance with enforcing its Order, participated in good faith in the inspection, and was prevented at every turn from obtaining its permit and commencing business as a liquor wholesaler,” according to Spirited’s filing.

The filing added: “Despite the Court’s clear directive to the Commission, the Commission has ignored and misled Spirited’s counsel, reneged on its own counsel’s promises, and let the curtain slip on its ruse to further delay its obligation to issue Spirited the permit while it prepared its filings requesting a stay of the Court’s Order and noticing its appeal.”

The latest developments follow an already rocky history between Monarch, the state and Monarch’s competitors.

Monarch Beverage has for years tried to get into the spirits business — including unsuccessful lobbying attempts at the Legislature to change Indiana’s alcohol regulations that forbid a beer wholesaler from also wholesaling liquor.

Spirited contends it does not violate that prohibition because it is a separate corporate entity from Monarch.

The two firms do have a lot in common, however. The same shareholders who own Monarch also own EF Transit Inc., a transportation firm that owns Spirited Sales. Phil Terry is CEO of both Monarch and EF Transit.

The ATC shot down Spirited’s permit request in 2014, arguing that state law prevents wholesalers “from directly or indirectly having an interest in both a beer wholesaler’s permit and a liquor wholesaler’s permit.”

But in her ruling, Welch said the ATC’s decision seemed “disingenuous,” since it had a long history of granting various types of alcohol permits to companies in similar situations.

Emails released as part of the latest court case show how Monarch’s attempts over the years to wholesale liquor often met with disapproval by officials at the ATC and in the Indiana Governor’s Office.

In Welch’s ruling, the court called emails between the state, the ATC and Monarch’s competitors “disturbing and inappropriate,” and said they “challenge the integrity of the application process and raise questions about the [ATC’s] willingness to serve all citizens of Indiana equally, fairly, and without bias.”