In a Halloween opinion after a contested hearing earlier this month, the IL Liquor Control Commission decided NOT to revoke the license of the distributor entities that have a 30% interest from ABInbev. In a 4-2 opinion, the four Commissioners stated that the Law Division of the ILLCC had not met its burden to revoke the distributor licenses of City Beverage operations. Apparently these commissioners have placed great weight on the issue of ABInBev’s representations that they would not seek additional ownership in IL or within City Beverage. The Commissioners further urged the legislature to “clarify” this area of law. The dissenting commissioners noted that the opinion contradicts earlier rulings of the ILLCC and the terms of the law.
As part of this administrative process it was determined by the ILLCC that ABInBev has the majority of control of the operations of this entity with approval of three of four top operation management appointments while having two of five board members. The ILLCC opinion solely concentrates on ownership but no discussion of the operational control. With three of four management seats it is unclear what prism the ILLCC looked at to determine the spirit of the law the IL Legislature passed and Governor Quinn signed. This sets up an issue for future consdieration.
Interestingly in the last two weeks the issue of ABInBev ownership of branches was highlighted by two different wall street analysts as one possible remedy by the Justice Department for its review of the Modelo-ABI merger. An analyst from Morgan Stanley noted that disposal of ABInBev ownership of distributors (presumably including Chicago) could be a possible remedy from the Justice
Department to ensure competition in the beer market.
(earlier post) No Attorney Fees for ABInbev in Illinois
Judge Dow denied ABInbev’s motion for attorneys fees from their lawsuit seeking 100% ownership of the distribution tier in much of Illinois. Judge Dow noted that although ABInbev had a technical victory on the dormant commerce clause, it did not prevail on the main thrust of its opinion and ABI achieved a “Pyrric victory” only. A copy of Judge Dow’s opinion can be found here.
In sum, the Court concludes that this case presents one of those relatively rare instances in which a party “formally prevails” on at least a portion of its lawsuit, but “should receive no attorney’s fees at all.” Farrar, 506 U.S. at 115… Or, put another way, even if the litigation could be said to have “alter[ed] the legal relationship between the parties” in a way that (briefly and marginally) benefited Plaintiffs (see Farrar, 506 U.S. at 111-12), Plaintiffs’ overall lack of success in achieving their stated goal was so apparent that the only reasonable fee is zero.”
According to a statement reported in both Beer Business Daily and Beer Marketer’s Insights, ABI disagrees and is planning next steps. Recall there is still action at the liquor control commission to figure out what to do about the 30% stake of ABI in City Beverage. We’ll post it here if an appeal does develop.
(Earlier Post) 7th Circuit Clarifies Their Order of Dismissal in InBev v. Illinois
The 7th Circuit clarified their July 6 order with a new order clarifing that the appeal is moot because “Public-Law 97-005 eliminates the geographically disparate treatment of beer distributors. Appellees’ request to vacate the district court’s judgment is DENIED.”
(earlier post) 7th Circuit Dismisses ABInBev v. Illinois
The 7th Circuit has dismissed the appeal by ABInbev on its attempt to vertically integrate and own the distributor in Chicago. Recent legislation signed into law by Governor Quinn has mooted this matter. The order will be found here. The billion dollar question is whether ABInbev runs back to court to challenge the new law.
Well the Governor has not yet signed the previously mentioned legislation and the federal courts have their deadlines so any amicus brief in support of the state of Illinois position was due today. In a brief filed by the Association of Beer Distributors of Illinois and the Marin Institute, the parties urge the 7th Circuit to properly confine the remedy aspect of the litigation (the only issue on appeal) to nullification rather than extension. Actually the case law on this subject is interesting and someday the Supreme Court will clarify this issue. It is expected that the signing of this legislation will moot this pending case so this amicus brief may raise issues only to be solved by some future lawsuit. When a future court does face this issue they will have to deal with the current mischaracterization of remedy from the Heckler v. Mathews, 465 U.S. 728 (1983) case dealing with welfare policyand a stated goal of extension compared to alcohol policy and the 21st Amendment’s call for states to be making decisions on alcohol policy, not courts. It is a good reminder of what was said in the Federalist Papers: “The Courts must declare the sense of the law; and if they should be disposed to exercise will instead of Judgment, the consequences would be the substitution of their pleasure for that of the legislative body.” The Federalist 78
Will this case be mooted or proceed? I guess that is the next post.
(Earlier Post) Legislation on Way to Governor. What to Do About Pending Appeal?
This week the Illinois House Of Representatives passed without objection legislation that addresses the subject of this litigation. They have passed a law allowing all breweries under 15,000 barrels to self-distribute up to 7,500 barrels. This addresses the law that had been struck down in the district court that Anheuser-BuschInbev challenged.
However, it is unlikely the Governor will sign this law before Judge Dow’s May 31st deadline. Also, the briefing schedule for the 7th Circuit required the state to file its response brief this week. As a result, the Illinois Attorney General’s office filed its reply brief here. It disputes much of the assertions of Anheuser-BuschInbev, makes the case for a remedy of “levelling down” and also calls for an extension of the May 31 deadline. The Illinois Attorney General’s office maintains that the signed legislation will moot this case.
By most accounts, the legislation should moot this case. However, the state has got in its legal brief placeholder in should the 7th Circuit decide to rule on the matter anyway.
(Earlier Post) Update in 7th Circuit: Tension in Illinois About What Litigation Means To Legislative Session
As you may recall, Judge Dow stayed his decision until May 31, 2011. In the interim, scores of lobbyists have been retained and numerous articles have been written about the legislative sausage making in Springfield. In response to ABInbev’s motion for a stay, the IL AG has filed briefings noting its frustration over the lobbying tactics and representation of the status of the litigation to legislators. It is now up to Judge Dow to rule on ABInev’s motion for a stay.
If legislation is passed, it may moot the underlying case. If not, the 7th Circuit will have to rule on the issue of remedy. Level up or level down…That is the question….
(earlier post) ABInBev Files Brief in 7th Circuit
ABInBev filed its brief in the 7th Circuit. 13 pages of “facts” and 34 pages of “legal argument” in this “brief.” Now we know why ABInBev needed extra time to file this brief. It is interesting that in the thousands of words in this document, the 21st Amendment is cited just once. Here is a copy of the brief.
(earlier post) -ABInBev Playing Hardball On Attorney Fees in Illinois?
Although I don’t link to all the court filings in this matter, ABInBev is apparently trying the old full court pressure technique against the state AG office on attorney fees. On one hand ABInbev says their case was cut and dry and was an easy case to win, yet they also claim they need their attorney fees now despite their outstanding appeal of the portion they lost on remedy. Moreover, the state has balked at the size of these fees for the “simple” litigation. Normally a company with a $100 billion market cap could wait a few more weeks for all issues to settle or is it a part of the coorindated strategy of turning up heat on all fronts?
The judge has ruled that the attorneys fees portion will be decided earlier, however, he did express the beginnings of some thoughts that ABI may be disappointed in the amount they are entitled to in this “simple” litigation.
The order can be found here. In addition to the full court press with the lawyers, ABI apprently is throwing the kitchen sink in public and private negotiations as the clock ticks on this matter before the March deadline.
( Earlier Post) ABInBev Files Appeal to 7th Circuit on Chicago Branch Issue
ABInBev filed its appeal of the district court’s decision which did not allow ABI to vertically integrate the Chicago market. As a result, it is starting the process to appeal to the 7th Circuit. The notice of Appeal and docketing statement can be found here and here.
Apparently ABI will not be running a branch in Chicago, at least in 2010. District Judge Robert Dow has issued an orderin the Anheuser-Busch InBev lawsuit against Illinois. In his order he grants ABI’s partial motion for summary judgment on the Commerce Clause claim. However, for a remedy he has rejected ABI’s call to extend the self-distribution privilege to out-of-state brewers and has “nullified” the right of in-state breweries to self distribute. He has stayed his order and turned this back to the state legislature for a permanent solution by March 31, 2011. The opinion can be found here. At this point, it is unclear whether ABI will appeal this to the 7th Circuit, file a new case in state court, or just hire every lobbyist within a 100 mile radius of Springfield to try to change the law. Interestingly, Judge Dow stated in a footnote that treating small producers differently is permissible and cited to the use of volume caps. I am sure there will be more.
Updates in ABI Litigation against Illinois; Oral Argument on MSJ 6/16
The court issued a rulingtoday setting oral argument for ABI’s Motion for Summary Judgement for June 16. It the decision it denied the Wine and Spirits Wholesalers of Illinois attempt to intervene in the lawsuit. However it agreed to consider the arguments made by WSWI as well as those by the Associated Beer Distributors of Illinois in its Amcius brief as they raised isssues such as jurisdcition and constitutional avoidance that the court must consider. ABI will have a chance to respond to those arguments by June 8.
ABI has filed their response brief.
The state of Illinois has filed their brief opposed to ABI’s motion for summary judgement. Read it here.
AnheuserBuschInBev filed their motion for summary judgement read it here.
As you recall, the Illinois Liquor Control Commission handed down a declaratory ruling last month that Anheuser-Busch, as a non-resident dealer, cannot own a controlling interest in a distributorship in the state. It warned that City Beverage could lose its license if it attempts to proceed withthis deal with ABI.
The Illinois Wine and Spirit Wholesalers filed a motion to intervene in this matter. Read it here.