March 29, 2016
from the United States District Court for the Southern
District of Indiana, Indianapolis Division.
l:13-cv-01674-SEB-MJD - Sarah Evans Barker, Judge.
Flaum, Easterbrook, and Sykes, Circuit Judges.
again asked to decide whether an aspect of Indiana's
alcohol regulation system violates the Equal Protection
Clause. Two years ago we upheld an Indiana law that prohibits
grocery and convenience stores from selling chilled beer.
See Indiana Petroleum Marketers & Convenience Store
Ass'n v. Cook, 808 F.3d 318 (7th Cir. 2015). In this
case Monarch Beverage Company challenges a feature of
Indiana's "prohibited interest" law that
separates beer and liquor wholesaling by prohibiting beer
wholesalers from holding an interest in a liquor-distribution
permit. See IND. CODE §§ 7.1-3-3-19,
7.1-5-9-3, 7.1-5-9-6. Monarch contends that this component of
the prohibited-interest law lacks a rational basis. A
district judge rejected this argument and upheld the law. We
affirm that judgment. Indiana's policy of separating beer
and liquor wholesaling survives review for rationality.
alcohol regulatory scheme, like that of many other states,
divides the market along two dimensions: three tiers of the
distribution chain (producers, wholesalers, and retailers)
and three kinds of alcohol (beer, liquor, and wine). A permit
is required to do business in any part of this market.
See id. §§ 7.1-3-2-1 to -5-5 (beer
producer, wholesaler, and retailer permits); 7.1-3-7-1 to
-10-13 (liquor); 7.1-3-12-1 to -15-3 (wine). With limited
exceptions, Indiana prohibits any person who holds a permit
in one tier of the distribution chain from also holding an
interest in a permit in another tier. For example, anyone
holding an interest in a beer producer's permit may not
also hold an interest in a beer wholesaler's permit.
See id. § 7.1-5-9-2. And anyone who holds an
interest in any kind of retailing permit is generally
prohibited from having any interest in a manufacturer's
or wholesaler's permit of any type. See id.
§ 7.1-5-9-10(a). (Small-scale brewers and distillers are
exempt from this restriction. See id. §
addition to restricting permits across the vertical tiers of
the distribution chain, Indiana also restricts the issuance
of permits within the wholesaling tier by type of
alcohol. The law allows some wholesaling permits to be
combined: a beer wholesaler can get a permit to wholesale
wine; a liquor wholesaler can also get a permit to wholesale
wine. See id. § 7.1-3-13-1. But the
prohibited-interest law requires the separation of beer and
liquor wholesaling: a beer wholesaler may not acquire an
interest in a liquor-wholesaling permit and vice
versa. See id. § 7.1-5-9-3, -6.
This aspect of Indiana's regulatory scheme is apparently
unique to the state.
holds permits to wholesale both beer and wine and would like
to expand its business to include liquor. Indiana doesn't
allow that combination of permits, so Monarch sued members of
Indiana's Alcohol and Tobacco Commission to invalidate
the law. (The defendants are sued in their official
capacities, so we'll refer to them collectively as
"Indiana.") The suit alleges that this aspect of
the prohibited-interest law facially discriminates against
beer wholesalers in violation of the Fourteenth
Amendment's equal-protection guarantee. U.S. CONST,
amend. XIV, § 1.
cross-motions for summary judgment, the district court
rejected Monarch's challenge and upheld the law. The
judge's decision proceeds along two lines of reasoning.
First, she ruled that the equal-protection claim failed at
the starting gate because Monarch could not identify a
similarly situated class of persons that receives better
treatment under the statute. Second, she applied
rational-basis review and upheld the law as a rational
regulatory measure. Monarch appealed.
separate litigation against the Commission is ongoing in
state court on a related question testing how the
prohibited-interest law applies to corporate alcohol
distributors with overlapping ownership interests. While
Monarch's appeal in this case has been pending, a Marion
County judge issued a ruling rejecting the Commission's
interpretation of the statute. Spirited Sales, LLC v.
Indiana Alcohol & Tobacco Comm'n, No.
49D01-1502-PL-5520 (Marion Cry. Super. Ct. Aug. 24, 2016).
The case is now before the Indiana Supreme Court, which heard
argument on February 23, 2017. Though the cases involve the
same statutory provisions, the question here is distinct and
seems unlikely to be affected by the outcome of Spirited
Sales, so we proceed to decision.
review a summary judgment de novo. Life Plans, Inc. v.
Sec. Life of Denver Ins. Co., 800 F.3d 343, 348-49 (7th
Cir. 2015). Indiana's prohibited-interest law doesn't
draw lines based on race or any other suspect classification,
it doesn't burden a fundamental right, and it raises no
federalism concerns under the Supreme Court's dormant
commerce-clause doctrine. So Monarch's equal-protection
challenge triggers only the most lenient form of judicial
review: the law is valid unless it lacks a rational basis.
Fitzgerald v. Racing Ass'n of Cent. Iowa, 539
U.S. 103, 107 (2003); Indiana Petroleum Marketers,
808 F.3d at 322. This deferential standard of review is a
notoriously "heavy legal lift for the challenger
." Indiana Petroleum Marketers, 808 F.3d at
devotes considerable attention to the origins of
Indiana's prohibited-interest laws, arguing that the
"uncontested historical evidence suggests that the
prohibition was enacted to protect and promote a patronage
system that operated to the benefit of state and local
politicians." That may be true; Indiana doesn't put
much effort into contesting Monarch's historiography. But
any disagreement about the genesis of this law can be left
unresolved. The Supreme Court has made it clear that under
rational-basis review, the challenger must "negative
every conceivable basis" that might support the
challenged law, and "it is entirely irrelevant ...