South Carolina: High court ruling South Carolina liquor license laws as unconstitutional shakes local liquor sellers (Additional Coverage)

 

Source: Post & Courier

By John McDermott

Apr 2, 2017

 

The S.C. Supreme Court popped the cap on a vintage piece of liquor legislation last week.

 

It was anything but a celebratory occasion for purveyors of potent potables around the state.

 

The high court served up a sobering 4-1 decision to the mostly mom-and-pop industry Wednesday, ruling that a law limiting liquor licenses in South Carolina is unconstitutional. It went on to describe the decades-old statute it struck down as an example of good old-fashioned economic protectionism.

 

Store owners – most of them, at least – are hanging onto the hope that the justices will have a change of heart.

 

The exception is Total Wine & More, an expansion-bent regional chain looking to shake up the fragmented enterprise of buying and selling distilled spirits. It challenged the law after trying to open its fourth South Carolina store several years ago. Bigger retailers – and possibly future rivals – are surely applauding the company’s Palmetto State crusade.

 

Potomac, Md.-based Total Wine has been taking aim for several years at South Carolina’s hard-line, old-school limit on liquor licenses: three per store owner, including affiliates. The retail permits cost $1,400, and must be renewed every two years.

 

The litigation began to fly when Total Wine wanted to expand into Aiken County, having previously opened supersized outlets in Charleston, Columbia and Greenville. Informed by the Department of Revenue that it was being cut off, the retailer sued the state agency. It lost and quickly appealed. Because the case involved a constitutional question, the dispute went straight to the Supreme Court. The justices heard arguments in November 2015.

 

The ruling released last week reversed the lower court decision. The majority found that the previous ruling from 2014 was flawed because it “justified the three-license restrictions on corporations as ‘preserving the right of small, independent liquor dealers to do business.'”

 

“The licensing limits do not promote the health, safety, or morals of the state, but merely provide economic protection for existing retail liquor store owners,” acting Justice Jean Toal wrote. The ruling went on to say that “economic protectionism for a certain class of retailers is not a constitutionally sound basis for regulating liquor sales.”

 

The worry now for existing merchants is not so much about one competitor scoring a few extra licenses to sell booze in a few select locations. The bigger concern is the other deep-pocketed retailers – much larger than Total Wine – that have been sitting on sidelines. They’ll pounce if the ground rules change, said Columbia attorney Burnet Maybank III, a former director of the Department of Revenue.

 

“If the order stands you would have a bunch of stores applying for additional licenses … You’re going to see national chains … get into the liquor business here,” said Maybank, who represents ABC Stores of South Carolina, a trade group made up of small merchants that’s in the thick of the Total Wine case.

 

Lawmakers have debated the issue before. A 2013 bill would have allowed retailers up to seven liquor licenses each in South Carolina. It didn’t pass.

 

Maybank noted that last week’s ruling does not specify how many permits the state can issue, and that a “a legislative solution” could be required if the limits are lifted.

 

“Is five licenses more constitutional? Or is 15 more constitutional? The order is so broad that it can be reasonable to say no limit is constitutional,” he said. 

 

Maybank also suggested the decision could open the door to other legal challenges. For instance, a major grocery store chain or retailer that runs its stores around the clock could push for the right to sell hard liquor after 7 p.m. Or on Sundays.

 

“If the three-store limit is unconstitutional, a lot of other things could be unconstitutional as well,” Maybank said.

 

For now, mom-and-pop spirits shops are fixed on the Supreme Court’s next step. Its order doesn’t take effect until later this month, and Maybank said he will ask that it reconsider the ruling before then. The three-permit limit will remain the law of the land until the matter is resolved.

 

The local liquor merchants appear to have an ally in Justice John Kittredge. The sole dissenter in last week’s ruling, he argued that the U.S. Constitution gives states broad powers and discretion when regulating the liquor business. Whether he can persuade the rest of the court over to his side remains to be seen.

 

John Kelsey, president of ABC Stores of South Carolina and owner of the three-store Rollers chain in the Hilton Head Island area, called the order “unprecedented.”

 

“It will eliminate the successful and simple system South Carolina has worked under for nearly 80 years,” Kelsey said in a statement. “Time and time again, courts across the United States have upheld nearly identical regulations, emphasizing states’ legitimate interest in protecting morals, limiting excessive advertising, over-consumption and looking after the general public. We will ask the court to reconsider … and hope they will allow the state to continue the regulation of the sale of liquor in South Carolina.”

 

The Department of Revenue isn’t waiting, according to a spokeswoman. It’s accepting liquor license applications in light of the new ruling, even as the justices review the decision. In any event, “we will follow the guidance issued by the court,” the agency said.