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Case 5:17-cv-00049-C Document 20 Filed 05/22/17 Page 1 of 38

IN THE UNITED STATES DISTRICT COURT


FOR THE WESTERN DISTRICT OF OKLAHOMA

RETAIL LIQUOR ASSOCIATION OF )


OKLAHOMA, an Oklahoma non-profit )
corporation; and JOSEPH P. RICHARD, an )
Oklahoma resident, )
)
Plaintiffs, )
Vs. ) Case No. CIV-2017-49-W
)
OKLAHOMA ALCOHOLIC BEVERAGE )
LAWS ENFORCEMENT COMMISSION; )
and A. KEITH BURT, IN HIS OFFICIAL )
CAPACITY AS DIRECTOR OF THE )
OKLAHOMA ALCOHOLIC BEVERAGE )
LAWS ENFORCEMENT COMMISSION, )
)
Defendants. )

DEFENDANTS MOTION FOR SUMMARY JUDGMENT

MITHUN MANSINGHANI, OBA #32453


Solicitor General
MICHAEL K. VELCHIK, VA Bar #91142
Assistant Solicitor General
OFFICE OF THE ATTORNEY GENERAL
313 N.E. 21st Street
Oklahoma City, OK 73105
Phone: (405) 522-4392
Fax: (405) 521-4518
Email: Mithun.Mansinghani@oag.ok.gov
Email: Michael.Velchik@oag.ok.gov

COUNSEL FOR DEFENDANTS


May 22, 2017
Case 5:17-cv-00049-C Document 20 Filed 05/22/17 Page 2 of 38

TABLE OF CONTENTS

STATEMENT OF UNDISPUTED FACTS............................................................................................. 1

STANDARD OF REVIEW..................................................................................................................... 9

ARGUMENT ...................................................................................................................................... 10

I. Article 28A of the Oklahoma Constitution Does Not Violate The Fourteenth
Amendments Equal Protection Clause. .......................................................................... 10

A. In order to prevail on their challenge, Plaintiffs bear the heavy burden of


showing that the People of Oklahoma ratified Article 28A of their Constitution
without any conceivable rational basis for doing so. ..................................................... 10

B. The People have rationally chosen to balance their desire to promote


competition in the retail alcohol industry while still more strictly regulating the
sale of the most potent forms of alcoholdistilled spiritsdifferently from
the sale of less potent forms of alcohol, such as fermented beverages. ...................... 12

C. The Peoples specific regulations of those licensed to sell spirits are rationally
related to legitimate government interests ....................................................................... 17

1. Limit on number of spirits licenses .................................................................... 18

2. Limit on sale of non-alcoholic items .................................................................. 20

3. Residency requirements and entity limitations .................................................. 23

4. Regulation of wholesalers .................................................................................... 25

5. Regulation of manufacturers ............................................................................... 26

II. Should any provision of Article 28A be deemed repugnant to the federal constitution,
the law requires that the offending part(s) be severed from the rest of the
Amendment. ........................................................................................................................ 28

Conclusion ........................................................................................................................................ 30

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TABLE OF AUTHORITIES

Cases

37712, Inc. v. Ohio Dept of Liquor Control,


113 F.3d 614 (6th Cir. 1997) ......................................................................................................... 16

Anderson v. Liberty Lobby, Inc.,


477 U.S. 242 (1986) .......................................................................................................................... 9

Armour v. City of Indianapolis, Ind.,


132 S. Ct. 2073 (2012)........................................................................................................10, 11, 16

Atlantic Richfield Co. v. Farm Credit Bank of Wichita,


226 F.3d 1138 (10th Cir. 2000) ....................................................................................................... 9

Authentic Beverages Co., Inc. v. Texas Alcoholic Beverage Comn,


835 F. Supp.2d 227 (W.D. Tex. 2011) ...................................................................... 10, 11, 17, 18

Birch v. Polaris Indus., Inc.,


812 F.3d 1238 (10th Cir. 2015) ....................................................................................................... 9

Brown Distrib. Co. v. Okla. Alcoholic Beverage Control Bd.,


1979 OK 101, 597 P.2d 324.................................................................................................... 23, 24

City of Cleburne, Tex. v. Cleburne Living Ctr.,


473 U.S. 432 (1985) ........................................................................................................................ 12

City of Spencer v. Rayburn,


1971 OK 38, 483 P.2d 735............................................................................................................ 29

Colson v. City of Shaker Heights,


880 F. Supp. 1161 (N.D. Ohio 1995) .......................................................................................... 17

Corr. Profl Assn, Inc. v. Jackson,


2012 OK 53, 280 P.3d 959............................................................................................................ 29

Dandridge v. Williams,
397 U.S. 471 (1970) ........................................................................................................................ 11

E. Pipeline Co. v. State of Oklahoma, ex rel. Commrs of the Land Office,


83 F.3d 1219 (10th Cir. 1996) ....................................................................................................... 28

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Elk City v. Johnson,


1975 OK 97, 537 P.2d 1215 ......................................................................................................... 29

F.C.C. v. Beach Commcns, Inc.,


508 U.S. 307 (1993) .................................................................................................................. 11, 17

Federal Distillers, Inc. v. State,


229 N.W.2d 144 (Minn. 1975) ...................................................................................................... 17

Fent v. Contingency Rev. Bd.,


2007 OK 27, 163 P. 3d 512 .......................................................................................................... 28

Gregory v. Ashcroft,
501 U.S. 452 (1991) ........................................................................................................................ 12

Harrison v. State,
687 P.2d 332 (Alaska Ct. App. 1984)........................................................................................... 17

Heath & Milligan Mfg. Co. v. Worst,


207 U.S. 338 (1907) ........................................................................................................................ 11

Heller v. Doe,
509 U.S. 312 (1993) ........................................................................................................................ 13

In re Application of the Okla. Dept of Transp.,


2002 OK 74, 64 P.3d 546 ............................................................................................................... 28

Jax Liquors, Inc. v. Div. of Alcoholic Beverages & Tobacco, Dept of Bus. Reg.,
388 So.2d 1306 (Fla. Ct. App. 1980) ............................................................................................ 17

Latu v. Ashcroft,
375 F.3d 1012 (10th Cir. 2004) ............................................................................................... 10, 11

Local 514 Transp. Workers,


2003 OK 110, 83 P.3d ................................................................................................................... 28

Lujan v. Defenders of Wildlife,


504 U.S. 555 (1992) ........................................................................................................................ 25

Maxwells Pic-Pac, Inc. v. Dehner,


739 F.3d 936 (6th Cir. 2014) ..................................................................................................passim

Metropolis Theatre Co. v. Chicago,


228 U.S. 61 (1913) .......................................................................................................................... 11

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Meyer v. Okla. Alcoholic Beverage Laws Enft Commn,


1995 OK CIV APP 11, 890 P.2d 1361........................................................................................ 24

Minnesota v. Clover Leaf Creamery Co.,


449 U.S. 456 (1981) .................................................................................................................. 10, 11

Monarch Beverage Co. v. Grubb,


138 F. Supp.3d 1002 (S.D. Ind. 2015) ......................................................................................... 16

Okla. Educ. Assn v. Alcoholic Beverage Laws Enft Commn,


889 F.2d 929 (10th Cir. 1989) ................................................................................... 10, 11, 16, 17

Peoples Super Liquor Stores, Inc. v. Jenkins,


432 F. Supp.2d 200 (D. Mass. 2006)............................................................................................ 19

Profutures Bridge Capital Fund, L.P. v. Thermoview Indus., Inc.,


64 Fed. Appx (10th Cir. 2002)...................................................................................................... 9

Ray v. Mortham,
742 So.2d 1276 (Fla. 1999) ............................................................................................................ 28

Riverfield Cty. Day School,


2007 OK 60, 163 P.3d 557............................................................................................................ 28

State Chiropractic Indep. Phys. Assn v. Fallin,


2011 OK 102, 290 P.3d 1 .............................................................................................................. 29

Taniguchi v. Kan Pacific Saipan, Ltd.,


132 S. Ct. 1997 (2012).................................................................................................................... 13

United States R.R. Retirement Bd. v. Fritz,


449 U.S. 166 (1980) ........................................................................................................................ 13

United States v. Carolene Prods. Co.,


304 U.S. 144 (1938) ........................................................................................................................ 10

Universal Underwriters Ins. Co. v. Winton,


818 F.3d 1103 (10th Cir. 2016) ....................................................................................................... 9

Vance v. Bradley,
440 U.S. 93 (1979) .......................................................................................................................... 11

Williamson v. Lee Optical of Okla., Inc.,


348 U.S. 483 (1955) ........................................................................................................................ 17

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Wilson v. Fallin,
2011 OK 76, 262 P.3d 741............................................................................................................ 29

Wine & Spirits of Am., Inc. v. Div. of Alcohol & Tobacco Control,
No. 11-CV-04175-NKL, 2012 WL 1934408 (W.D. Mo. May 29, 2012) .......................... 13, 24

Wine & Spirits Retailers, Inc. v. Rhode Island,


418 F.3d 36 (1st Cir. 2005) ............................................................................................................ 19

Statutes

28 U.S.C. 1441 ................................................................................................................................ 9

37A O.S. Supp. 2016 2-109 ......................................................................................................... 13

37A O.S. Supp. 2016 2-121 ......................................................................................................... 22

37A O.S. Supp. 2016 5-101 ..................................................................................................... 6, 18

37A O.S. Supp. 2016 6-102 .............................................................................................................

37A O.S. Supp. 2016 6-103 .............................................................................................................

Fla. Stat. 565.04............................................................................................................................. 22

Kan. Stat. 43-311(b) ..................................................................................................................... 25

OKLA. CONST. art. 28 ............................................................................................................... passim

OKLA. CONST. art. 28A ............................................................................................................ passim

Tex. Alco. Bev. Code 22.04 ........................................................................................................ 19

Tex. Alco. Bev. Code 22.16 ........................................................................................................ 25

Rules

Fed. R. Civ. P. Rule 56(a) ............................................................................................................. 1, 9

Regulations
27 C.F.R. 5.22(b).............................................................................................................................. 27

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Other Authorities

Exorcising the Ghosts of the Past: An Exploration of Alcohol Beverage Regulation in Oklahoma,
37 OKLA. CITY U.L. REV. 289 (2012) .................................................................................... 3, 4

Senate Joint Resolution 68 ........................................................................................................... 1, 7

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Pursuant to Fed. R. Civ. P. Rule 56(a) and LCvR56.1, Defendants the Oklahoma

Alcoholic Beverage Laws Enforcement Commission (ABLE) and A. Keith Burt, in his official

capacity as Director of ABLE, respectfully move this Court to grant Defendants summary

judgment, because there is no genuine dispute of any material fact and Defendants are entitled

to judgment as a matter of law.

STATEMENT OF UNDISPUTED FACTS

1. Since 1984, Oklahoma has regulated the sale of alcohol pursuant to Article 28

of the Oklahoma Constitution. Under Article 28, only licensed retail package stores, also

known as retail alcoholic liquor stores, can lawfully sell sealed packages of alcoholic

beverages with an alcohol content over 3.2% alcohol by weight (ABW). 1 But liquor stores are

subject to various restrictions: they cannot sell any other goods apart from alcohol; licenses to

own and operate liquor stores may only be given to individuals and general partnerships (i.e.

not corporations); these entities are limited to no more than one license; and the license holder

must be a resident of Oklahoma for at least ten years. 2 All other entities, including grocery and

convenience stores, may sell alcohol in the form of beer with 3.2% ABW or less. 3

2. On May 27, 2016, the Oklahoma Legislature passed Senate Joint Resolution 68,

which placed on the ballot the proposition of repealing Article 28 and replacing it with Article

28A, to be voted on as a referendum during the Nov. 8, 2016 general election as State Question

792 (S.Q. 792). The House voted 64-30 in favor. The Senate voted 30-14 in favor. 4

1 OKLA. CONST. art. 28, 4, 5. The one exception is for wineries selling their own wine. Id.
2 Id. at 4, 10.
3 Id. at 2.
4 Exhibit 1, Bill Information for SJR 68, Oklahoma State Legislature.

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3. This new regulatory framework strikes a different balance than the previous law.

Among many reforms, under the new Article 28A, a separate license is available for the retail

sale in packages for off-premises consumption of beer, wine, and spirits. 5 All persons,

including grocery store and convenience store owners, would be able to obtain a Retail Beer

or Wine License assuming they meet any requirements set forth by law. Those wishing to

obtain a Retail Spirits License, however, must meet certain constitutional requirements and

abide by certain constitutional restrictions, which are similar to the retail package store

requirements under the Article 28 regime. 6 At the same time, Article 28A also reduces some

of the limitations on those spirits-licensed liquor stores: increasing the number of licenses

available from one to two, reducing the residency requirement, and allowing the sale non-

alcoholic items (up to 20% of monthly sales). 7 Article 28A also prohibits the direct shipment

of alcohol to consumers from manufacturers, but contains an exception for the direct

shipment of wine by manufacturers to consumers in certain circumstances. 8

4. Proponents of S.Q. 792 argued that the new provisions would stimulate the

economy, create jobs, and improve consumer choice. 9 Proponents also argued that allowing

the direct shipment of wine would stimulate the growth of vineyards and increase jobs. 10

5. Proponents believed that S.Q. 792 would increase the variety and selection of

alcohol available to consumers, and thus Oklahoma residents would no longer have to cross

5 OKLA. CONST. art. 28A 3(A).


6 Id. at 3(A)(4)(A).
7 Id. at 3(A)(1).
8 Id. at 2(B).
9 See, e.g., Exhibit 2-A, Clark Jolley & Stephanie Bice, Oklahoma state senators: SQ 792 is a vote for

the free market, THE OKLAHOMAN (Sept. 25, 2016).


10 See, e.g., Exhibit 2-B, The Issue, YES ON 792 (last accessed May 19, 2017).

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state borders to obtain their preferred beverages. Instead, they could now enjoy shopping in

grocery stores and convenience stores for the lower-concentration forms of alcohol. 11

6. Advocates for S.Q. 792 also argued that Oklahomas prior regulatory

framework was archaic and out of line with other States. 12 The new constitutional provisions

would modernize its laws to keep it more in step with other States. 13 Some advocates

claimed that these changes were needed to help retain and recruit millennials from out-of-

state. 14 They argued that the new regulatory regime would update the prohibition-era laws,

reject protectionist regulations, and affirm support of the free market. 15

7. News articles published at the time acknowledged that Article 28A could reduce

demand for weak or low-point beer, which might no longer be profitable to make. 16 These

reports also noted that liquor stores would have to compete with larger retail stores in beer

and wine sales. 17 They could no longer enjoy their protected monopoly over these beverages. 18

8. Opponents of S.Q. 792, including lead Plaintiff, admonished that the new rules

would hurt small liquor stores, because mom-and-pop stores would not be able to compete

11 See, e.g., id.; Exhibit 2-A, Jolley & Bice, supra n.9.
12 See, e.g., Exhibit 2-A, Jolley & Bice, supra n.9; see also Exhibit 2-C Benjamin Grubb, Note,
Exorcising the Ghosts of the Past: An Exploration of Alcohol Beverage Regulation in Oklahoma, 37 OKLA.
CITY U.L. REV. 289, 290 (2012).
13 See, e.g., Exhibit 2-A, Jolley & Bice, supra n.9.
14 See, e.g., id.; Exhibit 2-D, Barbara Hoberock, Yes on 792 kicks off campaign to change state liquor

laws, TULSA WORLD (July 28, 2016).


15 See, e.g., Exhibit 2-B, The Issue supra n.10; Exhibit 2-C, Grubb, supra n.12 at 311.
16 See, e.g., Exhibit 2-E, Rick Maranon, Oklahoma state question passage may put final nail in low-point

beer coffin nationwide, FOX23 NEWS (Nov. 7, 2016).


17 See, e.g., Exhibit 2-A, Jolley & Bice, supra n.9; Exhibit 2-F, Patrick Riley, 7 Reasons to Vote No

for SQ 792 . . . (Oct. 31, 2016).


18 Exhibit 2-F, Patrick Riley, supra n.17.

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with large retailers. 19 Some opponents further argued that revenue from the sales of alcohol

would therefore go to big retail chains out of state. 20 Proponents of S.Q. 792 countered by

arguing that existing protectionist measures for liquor stores hurt consumer choice. 21

9. Beer, wine, and spirits are commonly recognized to have 5-7% alcohol by

volume (ABV), 12% ABV, and 40% ABV, respectively. 22

10. Spirits, having a higher concentration of alcohol, present greater public health

risks than other forms of alcohol. 23

11. Scholarly research has found that spirits are disproportionately associated with

heavy drinking, binge drinking, and drunk driving as compared to other forms of alcohol.

Youths have also shifted from beer to spirits as a preferred beverage linked to heavy drinking. 24

12. Research has also found that spirits consumption is associated with higher risk

of diabetes, cirrhosis, colds, heart disease, strokes, oral cancer, and negative self-reported

health statuses, relative to other alcoholic beverages. 25

19 See, e.g., Exhibit 2-G, Ryan Parker & Brandon Schmitz, State Question 792 proposes major alcohol
law changes, OCOLLY (Nov. 1, 2016); Exhibit 2-H, Aaron Brilbeck, Alcohol Modernization Supports
Rally To Supports In SQ 792, NEWS9 (July 27, 2016); Exhibit 2-I, Brian Hardzinski, Competing
Questions: Oklahomas 2 Alcohol Proposals Backed By Very Different Interest Groups, KGOU (July 31,
2016); see also Exhibit 2-C, Grubb, supra n.12 at 311.
20 See, e.g., Exhibit 2-J, Trevor Brown, Q&A on State Question 792, the Alcohol Measure,

OKLAHOMA WATCH (Oct. 6, 2016).


21 See, e.g., Exhibit 2-K, The Oklahoman Editorial Board, Might protectionism doom Oklahomas

liquor law reform?, THE OKLAHOMAN (Aug. 5, 2016).


22 Exhibit 3, Kerr Affidavit 4.
23 Id. 3.
24 Id. 4-5.
25 Id. 6-7.

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13. Spirits sales have been linked to higher risks of automobile accidents, homicides,

and suicides, as compared to the sales of other alcoholic beverages. 26

14. Beer and wine have longer traditions of cultural use than spirits in Europe and

America. The introduction of cheap and widely-available spirits was highly disruptive to

English society in the 18th century, while the advent of rum and whiskey in the United States

correlated with heavy drinking, increased mortality, and other issues that led to prohibition. 27

15. Almost half the States in the country regulate off-premises sales of spirits more

strictly than other forms of alcohol. In contrast, Oklahomas previous system of regulation,

whereby all alcoholic beverages are treated the same except for those with less than 3.2%

ABW, is adhered to by only three other States. Many European countries also have higher

minimum drinking ages for spirits than other types of alcoholic beverages. This reflects a

widespread belief that spirits pose greater risks to the public, and in particular to youths.

Recommendations from an international conference on harms from alcoholic beverages

include regulating spirits differently from other forms of alcohol because they are associated

with greater intoxication, heavier drinking patterns, and more severe harms. 28

16. Regulators have generally steered consumers toward less concentrated

beverages either by increasing prices through taxation or limiting availability by licensing

requirements, minimum drinking laws, hours of sales regulations, and other means. 29

26 Id. 8.
27 Id. 9.
28 Id. 13-16, 19.
29 Id. 11.

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17. Most States and countries, including Oklahoma, tax spirits more heavily than

wine and beer. 30 Absent taxes, spirits are the cheapest to produce per volume of alcohol. 31

18. Based on the above considerations, in the opinion of Dr. William Kerr, Article

28A is rational, prudent, and in line with the practices of other States and countries. This

includes rational residency and entity limitations on spirits license holders, as well as rational

limits on the number of spirits licenses a single person can hold. 32

19. Wine was a historically significant component of Oklahomas agricultural

economy in the 1920s. The ecological effects of the Dust Bowl, the national policy of

Prohibition, and State regulations have since suffocated the industry. 33

20. Most state wineries are small and rural, and therefore lack economies of scale

to be profitable without the ability to ship wine directly to consumers. 34

21. Direct shipment of wine benefits consumers, giving them access to products

they could not otherwise obtain, which is of particular importance to wine given the greater

emphasis on geographic provenance by wine consumers and collectors, compared to

consumers of other forms of alcohol. 35

22. In the opinion of Ms. Susan Boehrer, an experienced winemaker, beer is too

heavy to ship profitably; spirits are too flammable to ship safely. 36 The U.S. Postal Service

30 Id. 12. In Oklahoma, spirits are taxed at $1.47 per liter; wine at $0.19 per liter; beer at
$12.50 per barrel, which equals $0.11 per liter. 37A O.S. Supp. 2016 5-101.
31 Exhibit 3, Kerr Affidavit 12.
32 Id. 3, 20-22.
33 Id.
34 Id. 7.
35 Id. 8.
36 Id.

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forbids the shipment of all alcohol; UPS and FedEx permit direct shipments of wine to

consumers, but not beer and spirits. 37 As a result, direction shipment has become a significant

and emerging part of the market for wine, but not beer or spirits; and virtually every other

State allows the direct shipment of wine already. 38

23. In the opinion of Ms. Susan Boehrer, Article 28A 2(B) is a prudent and rational

regulation consistent with trends across the country. 39

24. Shortly after the passage of SJR 68 on May 26, 2016, the lead Plaintiff in this

case (Retail Liquor Association of Oklahoma) filed suit in this Court on July 20, 2016, together

with another party, alleging, inter alia, that Article 28A violated the Equal Protection Clause

and seeking a temporary injunction to prevent the vote on S.Q. 792. 40

25. Meanwhile, the same Plaintiffs began circulating an initiative petition for their

own proposed constitutional amendment. 41 Like the then-proposed Article 28A, the Plaintiffs

proposed amendment would also allow grocery and convenience stores to sell beer and wine,

but would limit those sales to 30% of all sales and phases-in the number of licenses an entity

could hold, starting with two and after ten years allowing an unlimited number of licenses. 42

37 Exhibit 2-L, Shipping Restrictions, USPS, available at https://www.usps.com/ship/shipping-


restrictions.htm; Exhibit 2-M, UPS Tariff/Terms and Conditions of ServiceUnited States, at 3.4
(updated April 3, 2017), available at https://www.ups.com/media/en/terms_service_us.pdf;
Exhibit 2-N, Service Guide, FEDEX, at 133 (updated April 28, 2017), available at
http://images.fedex.com/us/services/pdf/Service_Guide_2017.pdf.
38 Exhibit 2-O, BusinessWire, Direct Wine Shipments to Consumers Grow 4X Faster than Wine Retail

Market in 2015 (Jan. 25, 2016).


39 Exhibit 4, Boehrer Affidavit 9.
40 See generally Pls. Mot. for Temp. Inj. and Br. in Supp., Retail Liquor Assn of Okla. v. State, CV-

2016-1547 (Okla. Cnty. Jul. 20, 2016).


41 See Exhibit 5, Oklahoma Secretary of State, State Question 791 (filed May 6, 2016) [hereinafter

S.Q. 791].
42 Id. at 2, 10, & 12.

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Like Article 28A, Plaintiffs also would have allowed liquor stores to retain the exclusive

privilege to sell spirits; limited such licenses to individuals and general partnerships that have

been residents for at least five years; and allowed liquor stores to begin selling non-alcoholic

items (but increasing the limit on non-alcohol sales in liquor stores to 30%). 43 But, Plaintiffs

proposed amendment would insulate current liquor licensees from competition by prohibiting

wine and liquor licenses from being issued to any store within 500 feet of another. 44

26. The Court denied the Plaintiffs request for a temporary injunction, holding that

the Plaintiffs had failed to demonstrate that they would be irreparably harmed during the

pendency of litigation because Article 28A will not become effective until October 1, 2018. 45

Plaintiffs then voluntarily dismissed their action without prejudice. 46

27. S.Q. 792 was passed by popular vote on November 8, 2016, with 65.6% voting

yes and 34.4% voting no. 47

28. Plaintiffs filed this suit in the District Court of Oklahoma County for the State

of Oklahoma on December 19, 2016, again alleging that Article 28A of the Oklahoma

Constitution violates the U.S. Constitution, and again requesting a temporary injunction. 48

29. On January 9, 2017, Defendants filed a combined motion to dismiss and

response to Plaintiffs motion for a temporary injunction. 49

43 Id. at 4.
44 Id. at 10, 12.
45 Exhibit 6, Order Den. Pls. Mot. for Temp. Inj., Retail Liquor Assn of Okla. v. State, CV-2016-

1547 at 2-3 (Okla. Cnty. Aug. 29, 2016).


46 Exhibit 7 Pls. Mot. for Dismissal Without Prejudice, Retail Liquor Assn of Okla. v. State, CV-

2016-1547 (Okla. Cnty. Aug. 25, 2016).


47 See Exhibit 8, Oklahoma Secretary of State, State Question 792, at 26 (May 27, 2016).
48 Pls. Mot. for Temp. Inj. & Brief, D.E. #1, Exhibit 3 (Dec. 19, 2016).
49 Dfds Combined Mot. to Dismiss & Response, D.E. #1, Exhibit 9 (Jan. 9, 2017).

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30. On January 17, 2017, Defendants properly removed the case to this Court,

pursuant to 28 U.S.C. 1441. 50

31. On March 15, 2017, this Court recognized by Order that Defendants agreed to

withdraw their pending motion and to file a motion for summary judgment instead. 51

32. On March 17, 2017, this Court denied Plaintiffs motion for temporary

injunction. 52

STANDARD OF REVIEW

Summary judgment is proper if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a matter of law. 53 [T]he

substantive law will identify which facts are material. Only disputes over facts that might affect

the outcome of the suit under the governing law will properly preclude the entry of summary

judgment. 54 Generally, courts will view the evidence and draw all reasonable inferences

therefrom in the light most favorable to the party opposing summary judgment. 55 But on

rational basis review of economic regulations under the Equal Protection Clause, [t]he burden

is on [the plaintiff] to dream up possible rational bases for the [law]s classifications and varied

50 Notice of Removal, D.E. #1 (Jan. 17, 2017).


51 Order, D.E. #14 (March 15, 2017).
52 Mem. Opinion & Order, D.E. #15 (March 17, 2017).
53 Universal Underwriters Ins. Co. v. Winton, 818 F.3d 1103, 1105 (10th Cir. 2016) (quoting Fed.

R. Civ. P. 56(a)).
54 Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1251 (10th Cir. 2015) (quoting Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986)); see also Atlantic Richfield Co. v. Farm Credit Bank of Wichita,
226 F.3d 1138, 1148 (10th Cir. 2000).
55 Profutures Bridge Capital Fund, L.P. v. Thermoview Indus., Inc., 64 Fed. Appx 64 (10th Cir. 2002)

(citation omitted).
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regulations, and to present evidence negating them. 56 Meanwhile, the defendant need not

verify its legislative assumptions with empirical evidence in order to prevail, since

[c]ommon sense propositions can be sufficient to uphold social and economic legislation. 57

ARGUMENT

I. Article 28A of the Oklahoma Constitution Does Not Violate The Fourteenth
Amendments Equal Protection Clause.

A. In order to prevail on their challenge, Plaintiffs bear the heavy burden of


showing that the People of Oklahoma ratified Article 28A of their
Constitution without any conceivable rational basis for doing so.

Plaintiffs seek to invalidate the Peoples decision to amend their Constitution based on

the theory that the Oklahoma Constitution violates the U.S. Constitution. But they bear a

heavy burden to so.

Plaintiffs challenge economic and public health legislation. Absent any suspect

classification (which Plaintiffs do not allege), [i]t is well settled that economic and social

legislation generally is presumed valid and that courts will sustain such legislation if the

classifications drawn by the statute are rationally related to a legitimate state interest. 58 Under

this test, Plaintiffs have the heavy burden of proving that the legislative facts on which the

56 Authentic Beverages Co., Inc. v. Texas Alcoholic Beverage Comn, 835 F. Supp.2d 227, 248 (W.D.
Tex. 2011); see also Armour v. City of Indianapolis, Ind., 132 S. Ct. 2073, 2080-81 (2012); cf. Latu v.
Ashcroft, 375 F.3d 1012, 1020-21 (10th Cir. 2004) (upholding law where plaintiff failed to
negate all the rational bases identified by another circuit)
57 Okla. Educ. Assn v. Alcoholic Beverage Laws Enft Commn 889 F.2d 929, 934 (10th Cir. 1989)

(citation omitted). Although parties challenging legislation under the Equal Protection Clause
may introduce evidence supporting their claim that it is irrational, they cannot prevail so long
as it is evident from all the considerations presented to [the legislature], and those of which
we may take judicial notice, that the question is at least debatable. Minnesota v. Clover Leaf
Creamery Co., 449 U.S. 456, 464 (1981) (quoting United States v. Carolene Prods. Co., 304 U.S. 144,
154 (1938)).
58 Okla. Educ. Assn, 889 F.2d at 932.

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classification is apparently based could not reasonably be conceived to be true by the

governmental decisionmaker. 59 The State need not verify its legislative assumptions with

empirical evidence since [c]ommon sense propositions can be sufficient to uphold social

and economic legislation. 60 [R]ational speculation unsupported by evidence or empirical

data will suffice. 61 Nor must these explanations be perfect. The problems of government

are practical ones and may justify, if they do not require, rough accommodationsillogical, it

may be, and unscientific. 62 So long as there is any reasonably conceivable state of facts that

could provide a rational basis for the classification, the law must be upheld. 63 [T]he burden

is on the one attacking the legislative arrangement to negative every conceivable basis which

might support it. 64

Moreover, [i]n this case, we are dealing not merely with government action, but with

a state constitutional provision approved by the people of [Oklahoma] as a whole and that

reflects both the considered judgment of the state legislature that proposed it and that of the

59 Id. at 933 (citation omitted).


60 Id. at 934 (citation omitted); see also Clover Leaf Creamery Co., 449 U.S. at 464.
61 F.C.C. v. Beach Commcns, Inc., 508 U.S. 307, 315 (1993) (citing Vance v. Bradley, 440 U.S. 93,

111 (1979); Clover Leaf Creamery, 499 U.S. at 464).


62 Metropolis Theatre Co. v. Chicago, 228 U.S. 61, 69-70 (1913); see also Dandridge v. Williams, 397

U.S. 471, 485 (1970) (classification does not violate equal protection simply because it is not
made with mathematical nicety or because in practice it results in some inequality) (internal
quotation marks omitted); Heath & Milligan Mfg. Co. v. Worst, 207 U.S. 338, 354 (1907) (logical
appropriateness of the inclusion or exclusion of objects or persons and exact wisdom and
nice adaptation of remedies are not required).
63 Armour, 132 S. Ct. at 2080-81.
64 Id.; see also Latu, 375 F.3d at 1020-21; Authentic Beverages, 835 F. Supp.2d at 248.

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citizens of [Oklahoma] who voted for it. 65 Courts will not overturn such a law unless they

can only conclude that the peoples actions were irrational. 66

B. The People have rationally chosen to balance their desire to promote


competition in the retail alcohol industry while still more strictly regulating
the sale of the most potent forms of alcoholdistilled spiritsdifferently
from the sale of less potent forms of alcohol, such as fermented beverages.

All of Plaintiffs equal protection allegations rest on a flawed premise: that those who

intend to hold licenses to sell spirits (as well as wine and beer) under Article 28A are irrationally

being treated differently than those with licenses to sell only wine and beer. But the Equal

Protection Clause demands only that all persons similarly situated should be treated

alike. 67 Plaintiffs are not similarly situated as those who do not possess licenses to sell spirits

becauseunlike all othersPlaintiffs have been given the privilege by the State to sell spirits.

With that greater privilege comes greater responsibilities and restrictions.

The reason to treat sales of spirits differently from sales of wine and beer is self-evident:

as a general matter, spirits have a higher concentration of alcohol than wine or beer, and thus

pose different risks to public health and safety. 68 As a legal matter, the statutes that implement

Article 28Acodified in Title 37A of the Oklahoma Statutespermit Retail Beer License

holders to sell only beer with less than 9% ABV and permit Retail Wine License holders to

sell only wine with 15% ABV or less, while Retail Spirits License holders may sell spirits at any

65 Gregory v. Ashcroft, 501 U.S. 452, 471 (1991).


66 Id.
67 City of Cleburne, Tex. v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985) (emphasis added).
68 Exhibit 3, Kerr Affidavit 3.

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concentration. 69 And as a matter of plain and ordinary meaning, 70 it is commonly recognized

that beer generally contains between 5% and 7% ABV, wine about 12% ABV, while spirits

generally contain about 40% ABV. 71 Even if there are rare exceptions to this general rule, such

exceptions do not make a law unconstitutional under the rational basis test. 72

Products with high alcohol content exacerbate the problems caused by alcohol. 73

Laws that differentially regulate alcoholic beverages based on alcohol content thus ha[ve] a

rational basis given that greater risks of harm to the community may result from consumption

of beverages with higher alcohol content. 74 Because spirits have a higher content of alcohol,

they pose greater public health risks, 75 justifying legislation sensitive to this difference.

Scholarly literature supports this conclusion. Research has found that distilled spirits

are particularly associated with heavy drinking, binge drinking, and driving after drinking. 76

Studies have also found spirits consumption to have higher risks of cirrhosis, diabetes, colds,

heart disease, strokes, oral cancer, and negative self-reported health statuses, relative to other

alcoholic drinks. 77 Spirits sales have also been linked to higher risks of automobile accidents,

69 See 37A O.S. Supp. 2016 2-109.


70 Taniguchi v. Kan Pacific Saipan, Ltd., 132 S. Ct. 1997, 2002 (2012) (When a term goes
undefined . . . , we give the term its ordinary meaning.) (citation omitted).
71 Exhibit 3, Kerr Affidavit 4.
72 See, e.g., Heller v. Doe, 509 U.S. 312, 321 (1993); United States R.R. Retirement Bd. v. Fritz, 449

U.S. 166, 179 (1980).


73 Maxwells Pic-Pac, Inc. v. Dehner, 739 F.3d 936, 940 (6th Cir. 2014).
74 So. Wine & Spirits of Am., Inc. v. Div. of Alcohol & Tobacco Control, No. 11-CV-04175-NKL,

2012 WL 1934408, at *6 (W.D. Mo. May 29, 2012).


75 Exhibit 3, Kerr Affidavit 3.
76 Id. 5.
77 Id. 6-7.

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homicides, and suicides, as compared to the sales of other alcoholic beverages. 78 Youths have

also shifted towards spirits as a preferred beverage linked to heavy drinking. 79

Nor is the differential treatment of distilled spirits without historical context and

justification. 80 Beer, wine, mead, and cider have much longer histories of cultural use and

regulation in Europe and America. 81 The advent of cheap, highly-concentrated, and widely-

available spirits was highly disruptive to English society in the 18th century; the advent of rum

and grain whiskey in the United States correlated with heavy drinking, increased mortality, and

the social ills that triggered the prohibition countermovement. 82

The nation ultimately ratified the Eighteenth Amendment prohibiting alcohol because

the free market for alcohol in the United States begot political corruption, prostitution,

gambling, crime, and poverty. 83 But [p]rohibition, it turned out, bred a new kind of

lawlessness, so the country repealed prohibition in the Twenty First Amendment and sought

a more middle-ground regulation of alcohol. 84 In so doing, the states relied on a study [that]

argued that a regulatory system must limit access to products with high alcohol content, such

as liquor, and should restrict the number and character of places selling liquor. 85 Thus, in

78 Id. 8.
79 Id. 4.
80 Id. 9.
81 Id. 9.
82 Id. 9.
83 Maxwells Pic-Pac, Inc., 739 F.3d at 938.
84 Id.
85 Id. The study was commissioned by John D. Rockefeller, Jr., and published in a book by

Raymond Fosdick and Albert Scott, which provided guidance to policymakers as they set up
regulatory systems for alcohol, and much of that framework still exists today, and which has
done more to shape modern alcohol policy than any other book except the Bible. See Center
for Alcohol Policy, Toward Liquor Control, http://www.centerforalcoholpolicy.org/toward-
liquor-control. In that book, Fosdick and Scott explain: Where shall the lines be drawn in
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enacting Article 28A, the People of Oklahoma have chosen a system of regulation that has

been proven effective by a hundred years of experience with every regulatory regime ranging

from laissez faire to absolute prohibition.

Oklahoma is not alone. The nationwide consensus on this matter further supports the

argument that the People of Oklahoma have not acted in a wholly irrationally manner in

making this distinction. Most states and countries around the world tax spirits more heavily

than wine and beer; 86 at least twenty-three other States regulate wine and beer differently from

spirits. 87 Ten European nations even have different minimum drinking ages for spirits than

for fermented beverages. 88 Plaintiffs simply cannot prevail on the notion that 63% of the State

Representatives, 63% of the State Senators, 66% of State population, nearly half of the United

States, and much of the World have chosen to structure their liquor laws based on a completely

irrational distinction between spirits on the one hand and wine and beer on the other. Indeed,

setting up such a plan of control? A natural and convenient division is between fermented
beverages and distilled liquors. The fermented drinks, consisting mainly of beers and wines,
have a range in alcoholic content up to 12 per cent. Distilled liquors, which include whiskey
and gin, usually contain from 30 to 45 per cent of alcohol. The distilled liquors are thus seen
to be in a class by themselves, with an alcoholic strength far in excess of wines and beers. This
difference should be made the basis of a radical difference in treatment under the law. . . .
[T]he experience and common sense of mankind have always recognized the difference
between the two . . . . RAYMOND FOSDICK & ALBERT SCOTT, TOWARD LIQUOR CONTROL
30 (1933).
86 Exhibit 3, Kerr Affidavit 12. In fact, the first act in the history of the federal Internal

Revenue Service (IRS) was Treasury Secretary Alexander Hamiltons imposition of an excise
tax on distilled spirits in order to defray Revolutionary debts; the IRS was established in order
to collect the new tax from distillers. RICHARD MENDELSON, FROM DEMON TO DARLING: A
LEGAL HISTORY OF WINE IN AMERICA 16 (2009).
87 Exhibit 3, Kerr Affidavit 13.
88 See Exhibit 3, Kerr Affidavit, 15-16.

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Plaintiffs own proposed alternative amendment would have also treated spirits differently

than other beverages 89a tacit admission that such a distinction is rational.

Finally, not only have State legislatures and citizenries affirmed the rationality of

regulating beverages differently based on their alcohol content, but so have courts. For

example, prior Oklahoma law treated beverages with greater than 3.2% ABW differently than

those with less, and the Tenth Circuit affirmed the constitutionality of that distinction. 90

Specifically, the Tenth Circuit held that treating beverages differently based on their alcohol

concentration does not violate the Equal Protection Clause because [t]he state has discretion

to define the categories of beverages that it will regulate pursuant to its powers under the

twenty-first amendment and it can choose to focus its resources on forms of alcohol more

potent than 3.2 percent beer. 91 Merely because the People have chosen to draw a different

line in amending their Constitution does not render regulating differently concentrated

alcoholic beverages differently irrational or unconstitutional. Rather, the Constitution does

not require the [State] to draw the perfect line nor even to draw a line superior to some other

line it might have drawn; it requires only that the line actually drawn be a rational line. 92

Courts in other jurisdictions have all reached the same conclusion: different kinds of alcohol

sales may be regulated differently in compliance with the Equal Protection Clause. 93

89 See Exhibit 5, S.Q. 791, supra n.41, at 7, 12.


90 Okla. Educ. Assn, 889 F.2d at 935.
91 Id.
92 Armour, 132 S. Ct. at 2083 (2012).
93 See, e.g., Maxwells Pic-Pac, 739 F.3d at 941-42 (upholding Kentucky law that prohibited the

sale of wine and liquor, but not beer, in grocery stores and gas stations); 37712, Inc. v. Ohio
Dept of Liquor Control, 113 F.3d 614, 620 (6th Cir. 1997) (Simply stated, distinct categories of
alcoholic beverage vendors, and sales of different categories of alcoholic beverages, may
reasonably and legitimately be subject to different regulations.); Monarch Beverage Co. v. Grubb,
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Plaintiffs various complaints may ultimately be distilled to the argument that, if the

alcohol regulations on wines and beers are sufficient for those beverages, they should also be

sufficient for spirits. But as the U.S. Supreme Court has previously instructed:

Evils in the same field may be of different dimensions and proportions, requiring
different remedies. Or so the legislature may think. Or the reform may take one step at
a time, addressing itself to the phase of the problem which seems most acute to the
legislative mind. The legislature may select one phase of one field and apply a remedy
there, neglecting the others. The prohibition of the Equal Protection Clause goes no
further than the invidious discrimination. 94

For these reasons, Oklahomas choice to regulate the sale of spirits more strictly than the sale

of wine and beer does not violate the Equal Protection Clause.

C. The Peoples specific regulations of those licensed to sell spirits are


rationally related to legitimate government interests.

Each of Plaintiffs specific contentions that particular provisions of Article 28A of the

Oklahoma Constitution violate the Equal Protection Clause fails as a matter of law. Each of

those features of Article 28A are well-established forms of regulating alcohol sales that

138 F. Supp.3d 1002, 1009 (S.D. Ind. 2015) (hold[ing] that beer wholesalers are not similarly
situated to wine and liquor wholesalers for purposes of . . . Equal Protection Clause); Colson
v. City of Shaker Heights, 880 F. Supp. 1161, 1167 (N.D. Ohio 1995), affd, 103 F.3d 129 (6th
Cir. 1996); Authentic Beverages, 835 F. Supp.2d at 247-49 (upholding differential treatment of
brewpubs, other malt beverage producers, wineries, and distillers, under Equal Protection
Clause); Federal Distillers, Inc. v. State, 229 N.W.2d 144, 156 (Minn. 1975) (holding that the
differences inherent in wine, beer, and liquor themselves justify the legislative decision to
include only distilled spirits within this act); Harrison v. State, 687 P.2d 332, 341-42 (Alaska Ct.
App. 1984) (upholding greater penalties related to distilled spirits than for wine and malt
beverages because [t]he potential for harm increases with the amount of alcohol consumed);
Jax Liquors, Inc. v. Div. of Alcoholic Beverages & Tobacco, Dept of Bus. Reg., 388 So.2d 1306, 1308
(Fla. Ct. App. 1980).
94 F.C.C. v. Beach Commcns, 508 U.S. at 316 (quoting Williamson v. Lee Optical of Okla., Inc., 348

U.S. 483, 489 (1955)); see also Okla. Educ. Assn, 889 F.2d at 935 (Oklahoma need not attack
every facet of a perceived evil. It can focus its resources on forms of alcohol more potent than
3.2 percent beer.).
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rationally relate to legitimate government interests. These regulations, like others that have

been upheld by courts, are sensitive to the myriad differences between malt beverages, wine,

and distilled spirits; the producers, resellers, retailers, and consumers thereof; and the

advertising, marketing, and overall business requirements peculiar to each. 95

The state indisputably maintains a legitimate interest in reducing access to products

with high alcohol content and the evidence cited above demonstrates that states may

rationally use their control systems to steer society to lower alcohol form[s] of products. 96

To achieve these larger goals, governments generally regulate alcohol consumption in two

ways: (1) increasing prices through taxation or (2) limiting the availability of alcohol through

regulating sales and distribution. 97 Consistent with other states, Oklahoma taxes spirits more

highly than wines and beer. 98 Also consistent with other states, Oklahoma regulates the

availability of spirits more strictly than fermented beverages.

1. Limit on number of spirits licenses.

Plaintiffs complain that it is irrational for the People of Oklahoma to limit the number

of spirits licenses to two per owner, while permitting those who hold wine and beer licenses

to possess an unlimited number of such licenses. 99 But residents may rationally wish to allow

a large number of retailers to sell beer and wine, so that consumers can enjoy lower prices and

greater convenience and selection, 100 while at the same time limiting the number of spirits

95 Authentic Beverages Co., Inc., 835 F. Supp.2d at 248.


96 Maxwells Pic-Pac, 739 F.3d at 940.
97 Exhibit 3, Kerr Affidavit 11.
98 37A O.S. Supp. 2016 5-101; see also Exhibit 3, Kerr Affidavit at 12.
99 OKLA. CONST. art. 28A, 4.
100 Exhibit 2-A, Jolley & Bice, supra n.9.

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retailers, keeping spirits prices relatively higher to steer consumers towards lower-concentrated

forms of alcohol. 101 It is true that this choice might result in less accountability on the part of

retailers of wine and beer, but voters may rationally believe that this loss is mitigated by the

lower risks associated with lower concentration beverages, and so is outweighed by the

benefits of lower prices and wider access for consumers. Yet in the case of the most highly

concentrated beverages, voters may prefer to tolerate higher prices and less convenience in

exchange for the knowledge that spirits retailers will be local shops whose owners are

embedded in the community, familiar with local patrons, in charge over a limited number of

establishments, and personally responsible for their sales.

Furthermore, residents may rationally encourage the proliferation of the types of stores

that hold beer and wine licenses, such as grocery stores, in their neighborhoods in order to

increase access to necessary foods. 102 Meanwhile, voters may at the same time rationally limit

the number of liquor stores on their streets, whether to reduce access to more potent alcoholic

beverages that pose the greatest public health risks, 103 or because they believe this policy will

reduce neighborhood decay, preserve community aesthetics, or lower criminal activity. 104

The rationality of this distinction is further substantiated by the fact that the same

system exists in other States 105 and a similar policy appears in Plaintiffs own proposal to

101 Exhibit 3, Kerr Affidavit 11-12, 22.


102 See id. at 22.
103 Cf. Wine & Spirits Retailers, Inc. v. Rhode Island, 418 F.3d 36, 53-54 (1st Cir. 2005) (holding

that liquor retail license limitation did not violate equal protection, although restaurants and
bars were exempt from the same limitation); Peoples Super Liquor Stores, Inc. v. Jenkins, 432 F.
Supp.2d 200, 212-213 (D. Mass. 2006) (same).
104 Cf. Exhibit 3, Kerr Affidavit 8.
105 See, e.g., Tex. Alco. Bev. Code 22.04 (limiting the number of spirit license interests to 5).

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amend the state Constitution. 106 In fact, Article 28A improves Plaintiffs position with respect

to the previous law, which only allowed them one license. 107

Plaintiffs only remaining complaint is that the lack of limits on beer and wine licenses

will cause a rapid influx of retail wine and beer license holders that will threaten the viability

of retail spirits licensees, who must now compete with others to sell wine and beer. But too

much competition is not an Equal Protection violation, and Plaintiffs retain a key competitive

advantage over grocery stores and convenience stores: the privilege of selling spirits. If they

truly believe that they will no longer be able to survive because of the license restrictions, they

are at liberty to give up their spirits licenses and obtain as many wine and beer licenses as they

please to compete with the rest of the market.

2. Limit on sale of non-alcoholic items.

Plaintiffs next argue that it is irrational to limit the amount of non-alcoholic items

liquors may sell to no more than 20% of monthly sales. 108 But the reason for this limitation is

straightforward: it ensures a robust separation between liquor stores, who alone may sell

spirits, and other outlets like grocery stores and conveniences stores. Without this limitation,

liquor stores would become grocery stores and grocery stores would become liquor stores.

Grocery stores would apply for spirits licenses and add highly-concentrated alcoholic

beverages to their shelves; liquor stores would begin stocking the wares of grocery stores and

convenience stores in order to attract consumers with one-stop-shopping. Regardless of which

metamorphosis transpires first, the end result will be spirits in grocery stores.

106 Exhibit 5, S.Q. 791, supra n.41, at 4-5, 6-7, 4, 10.


107 See OKLA. CONST. art. 28, 4.
108 Id. (3)(A).

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The State may rationally adopt policies aimed at influencing marginal choices toward

lower alcohol content beverages, including by restricting the availability of highly-concentrated

alcohol. 109 Oklahoma has made spirits less available than beer and wine, which can be sold in

more stores that sell a variety of productsincluding stores with later hours of operations and

more frequently visited stores, like supermarkets. 110 By making beer and wine more widely

available than spirits, the State curbs the problems associated with higher concentrated

beverages by steering consumers to less concentrated alternatives, while at the same time still

respecting the individual autonomy of those consumers set on purchasing spirits. 111

As other courts have found, such restrictions do not violate the Equal Protection

Clause because grocery stores and gas stations pose a greater risk of exposing citizens to the

most concentrated forms of alcohol than do other retailers since the People could

rationally believe that average citizens spend more time in grocery stores and gas stations than

in other establishments; people typically need to buy staple groceries (for sustenance) and gas

(for transportation) more often than they need to visit liquor stores. 112 The community can

choose to prohibit the sale of the most potent forms of alcohol in those places where all in

the community must come together. 113 As explained in the landmark study on alcohol

regulation by Fosdick and Scott, if beers and wines are more easily obtainable than distilled

109 Exhibit 3, Kerr Affidavit 11-12.


110 See id. at 22.
111 See generally RICHARD H. THALER & CASS R. SUNSTEIN, NUDGE: IMPROVING DECISIONS

ABOUT HEALTH, WEALTH, AND HAPPINESS (2008) (discussing the difference between
regulations which offend individual autonomy by prohibiting certain behaviors, and nudges
which steer citizens to better choices without forbidding any actions).
112 Maxwells Pic-Pac, 739 F.3d at 940-41.
113 Id. at 940; see also Exhibit 3, Kerr Affidavit 22.

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liquors, and are sold in different places and under different conditions, there is a reasonable

ground to expect that the taste of those who wish to drink will be diverted to the lighter and

less harmful beverages. 114 Such encouragement to steer clear of the highest concentrated

forms of alcohol is well within legitimate policy goals.

This is especially true for certain members of the public. [M]inors, inexperienced and

impressionable, require particular vigilance because, while they are allowed into grocery and

convenience stores and often work there, 115 they are generally prohibited from entering liquor

stores or selling liquor. 116 Allowing minors ready access to spirits by permitting spirits in

grocery stores (or by permitting liquor stores to become de facto grocery stores) poses greater

danger than allowing just wine and beer in grocery stores. Put another way, it is a much bigger

problem if a child in a grocery store breaks into a bottle of Jack Daniels than if he snags a

Coors Light. And although Oklahoma already reduces the access to spirits by capping the

number of places that supply it, the state can also reduce access by limiting the types of places

that supply itjust as a parent can reduce a childs access to liquor by keeping smaller amounts

in the house and by locking it in the liquor cabinet. 117

Not surprisingly, again, other States limit the sale of non-alcoholic items in liquor

stores; 118 a similar limit is present in Plaintiffs own proposed constitutional amendment (albeit

at 30% instead of 20%); 119 and the limit in the new Article 28A improves Plaintiffs previous

114 RAYMOND FOSDICK & ALBERT SCOTT, TOWARD LIQUOR CONTROL 30 (1933).
115 Maxwells Pic-Pac, 739 F.3d at 940-41.
116 See, e.g., 37A O.S. Supp. 2016 2-121, 6-102, 6-103(B).
117 Maxwells Pic-Pac, 739 F.3d at 941.
118 See, e.g., Fla. Stat. 565.04 (limiting non-alcoholic items available in Florida liquor stores).
119 Exhibit 5, S.Q. 791, supra n.41, at 4-5, 4.

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position under the repealed Article 28, which prohibited all sales of non-alcoholic items in

liquor stores. 120 Accordingly, the limits on non-alcohol sales by spirits license holders is

rational and serves legitimateand importantpublic policy interests.

3. Residency requirements and entity limitations.

Plaintiffs next complaint is with the requirements that spirits licenses be held only by

individuals and partnerships (not corporations), and that those individuals or partners must

have been residents of Oklahoma for at least five years. 121 As the Oklahoma Supreme Court

has held, and as Plaintiffs acknowledge, the rationale for these restrictions is to permit

enforcement and regulation of the liquor industry without the necessity for penetrating the

corporate shield. 122 The reason is obvious; because of the nature of the license, the conduct

of the business transacted thereunder becomes a matter for public concern, and the character

of the persons holding and using such a license becomes a basis for the granting or withholding

of such a license. There must be not only the personal integrity of character, which a

corporation, by its very nature lacks, but there must also, in the public interest, be the personal

responsibility which a corporation likewise lacks. 123 Accordingly, the Oklahoma Supreme

Court upheld the validity of these requirements:

The provision which refuses to issue liquor licenses to corporations is an


attempt to adequately control liquor licenses. As the law in this state now exists,
there are no means to scrutinize the corporations moral character or the
character of the individual stockholders. There is no effective way to assure the
maintenance of the distinct separation of interests. There is no effective way to
examine all stockholders for prior felony convictions or violations of federal or
state liquor laws. The issuance of a liquor license is a privilege granted an

120 See OKLA. CONST. art. 28, 4.


121 OKLA. CONST. art. 28A, 4(A).
122 Brown Distrib. Co. v. Okla. Alcoholic Beverage Control Bd., 1979 OK 101, 7, 597 P.2d 324, 32.
123 Id. (citation omitted).

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applicant as a matter of legislative grace. The state retains broad power to


control liquor traffic within its borders. 124

Similarly, the Oklahoma Court of Civil Appeals has acknowledged that the evident purpose

of these requirements was the assignment of personal responsibility for compliance with the

liquor laws and that the corporate form, with the benefit of limited liability, would be a shield

from the very responsibility and accountability that the constitutional provisions regarding

alcoholic beverage laws and enforcement sought to impose. 125

The need for greater accountability in liquor distribution is a primary reason for the

creation of the three-tier system in the first place. 126 Residency and entity requirements are

further mechanisms to achieve the same result. The choice to impose residency requirements

for sales of liquor containing more . . . alcohol by weight, but [] not [to] impose similar

restrictions on beer and wine, has a rational basis given that the greater risks of harm to the

community may result from consumption of beverages with higher alcohol content. 127

In short, the entity and residency requirements rationally advance the legitimate public

goals of guaranteeing that those who sell the highest concentrations of alcohol remain

personally responsible and fiscally liable for their actions to ensure strict compliance with laws

governing the sale of the most potent forms of alcohol, and ensuring that such licenses are

only issued to people who have a significant length of good history in the State (including a

lack of regulatory or criminal violations) and who can be found in the State. Plaintiffs complain

124 Id.
125 Meyer v. Okla. Alcoholic Beverage Laws Enft Commn, 1995 OK CIV APP 11, 13-14, 890
P.2d 1361, 1364.
126 So. Wine & Spirits of Am., 2012 WL 1934408, at *6.
127 Id.; see also Exhibit 3, Kerr Affidavit 20.

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that similar requirements are not imposed on wine and beer licensees, but as explained in

Section I.B. above, the People have a right to regulate those that sell spirits more strictly than

those that sell alcohol with lower concentrations of alcohol because of the greater risks to

public health and welfare posed by spirits. The Peoples judgment is that those who sell hard

liquor must be subject to special personal responsibility requirements, even if others are not,

and that judgment is not irrational. And again, such restrictions were already part of Oklahoma

law before Article 28A, 128 are part of Plaintiffs own proposed Constitutional amendment, 129

and are common throughout the States; 130 and Article 28A actually improves Plaintiffs position

over the previous law, which contained a ten-year, rather than five-year, residency

requirement. 131 Indeed, were this Court to enjoin these restrictions, Plaintiffs would only be

subject to more competition, as out-of-State corporations will come into the Oklahoma market

to sell spirits. For these reasons, the residency and entity requirements are constitutional.

4. Regulation of wholesalers.

Plaintiffs also challenge the regulations on certain wholesalers, who are subject to

similar entity restrictions as Plaintiffs, but who may also partner with a corporation in certain

circumstances. But Plaintiffs have no standing to challenge this requirement because it has no

effect on them: Plaintiffs are not wholesalers and do not compete with them, and therefore

are not injured by this regulation of wholesalers. 132 Nor do Plaintiffs state an Equal Protection

claim because they are not similarly situated with wholesalers.

128 OKLA. CONST. art. 28, 10.


129 Exhibit 5, S.Q. 791, supra n.41, at pp. 6-7, 10.
130 See, e.g., Tex. Alco. Bev. Code 22.16; Kan. Stat. 43-311(b).
131 Compare OKLA. CONST. art. 28, 10, with OKLA. CONST. art. 28A, 4(A).
132 See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).

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Even assuming Plaintiffs have standing, those regulations rationally advance legitimate

State interests. As noted above, the residency and entity requirements ensure personal

responsibility and greater vetting of those who seek to hold a license to distribute large

quantities of beverages with higher ABW. 133 While Article 28A allows for wholesalers to

partner with corporations, that exception contains restrictions aimed at maintaining a level of

responsibility and accountability in Oklahoma: the corporation (1) must be the holder of a

substantially equivalent license in another state for at least one year (demonstrating a level of

experience and responsibility in the industry); (2) will not maintain more than a 50% equity

interest in the license holder at any time (ensuring that ultimate responsibility remains with an

Oklahoma resident); and (3) must secure all necessary State permits. 134 Voters rationally

believed that this arrangement strikes the right balance between in-State accountability and

providing for greater access from national wholesalers, including those in Oklahoma, to take

advantage of national distribution chains and lower prices for consumers. Meanwhile, the State

is rational to not extend the same arrangement to retail sellers of spirits, because unlike

wholesalers, retailers have direct access consumers, creating the greatest risk of public harm

and thus demanding the most stringent levels of accountability.

5. Regulation of manufacturers.

Finally, Plaintiffs challenge certain regulations on manufacturers, who generally cannot

ship alcohol directly to customers unless they are a winery that abides by certain

requirements. 135 Again, Plaintiffs have no standing to challenge this law, because they are not

133 See supra Section I.C.3.


134 See OKLA. CONST. art. 28A, 4(C).
135 See id. 2(B).

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a manufacturer and thus not regulated by Section 2(B) of Article 28A. Nor are they similarly

situated with wineries, since Plaintiffs are not manufacturers of alcohol. This challenge, thus,

fails on its face.

In any event, it is rational to allow wineries to ship their wines directly to consumers.

Unlike with other beverages, direct shipment laws help local wineries lacking economies of

scale to operate, and some would not be able to operate profitably without direct shipment

capabilities. 136 They also advance consumer choice, allowing citizens to obtain wines they

otherwise could not purchase in nearby stores. 137 Unlike with other alcoholic beverages, local

soil conditions are one of the primary determinants of a wines taste; for this reason, wine

collectors and consumers specifically solicit bottles from discrete geographic regions: Napa

Valley, Bordeauxor even a specific vineyard. 138 Meanwhile, beer and spirit products derive

their distinctive tastes not so much from unique local conditions, but rather from their recipes

and compliance with unique state regulations, such as with German beer, Kentucky bourbon,

Irish whiskey. 139 At the same time, the law balances public health effects by establishing limits

on the quantities of alcohol that may be shipped. 140

136 Exhibit 4, Boehrer Affidavit 7.


137 Id. 8.
138 Id.
139 Under the still applicable fifteenth-century German Beer Purity Law (Reinheitsgebot)

German beer can only be produced from three ingredients: water, barley, and hops. Bourbon
must be made from a grain mixture containing at least 51% corn, aged in new charred oak
containers, distilled to no more than 125 proof, and bottled at 80 proof or more. 27 C.F.R.
5.22(b). Irish Whiskey must be distilled from a mash of malted cereals to no more than 94.8%
ABV, matured in wooden casks not exceeding 700 liters for a minimum of three years, nor
contain additives other than water and caramel coloring. Regulation (EC) No 110/2008. Irish
Whiskey is also typically triple distilled.
140 OKLA. CONST. art. 28A, 2(B)(c-d) (allowing shipment to consumers who will not receive

by direct shipment more than six (6) nine-liter cases of wine from any single winery per year,
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In contrast with wine, voters rationally believe that beer is too dense to ship profitably,

and spirits are too flammable to mail safely. 141 In fact, UPS and FedEx only permit the delivery

of wine to consumers (but not beer or spirits), and the U.S. Postal Service forbids the shipment

of all forms of alcohol. 142 Direct shipment has accordingly become a significant and emerging

part of the market for wineries, but not breweries or distilleries; and virtually every other state

allows the direct shipment of wine already. 143

II. Should any provision of Article 28A be deemed repugnant to the federal
constitution, the law requires that the offending part(s) be severed from the rest
of the Amendment.

Severability analysis is a necessary process when some, but not all, provisions of an

enactment are to be condemned as unconstitutional. 144 Severability is an issue of state law. 145

Under Oklahoma law, [t]he cardinal principle of statutory construction is to save and not

destroy. 146 [C]onstitutional provisions are entitled to the same presumption of validity as

are statutes. 147 If, as here, state constitutional language is alleged to be contrary to the Equal

and who will not receive by direct shipment more than thirty (30) nine-liter cases of wine per
year).
141 Exhibit 4, Boehrer Affidavit 8.
142 See supra Statement of Undisputed Facts 22 & n.37.
143 See, e.g., Exhibit 2-O, Direct Wine Shipments to Consumers Grow 4X Faster than Wine Retail Market

in 2015, supra n.38 (noting that 43 out of the 50 states allow direct shipment of wine to
consumers, and these consumers continue to embrace this wine-by-mail option, with wineries
shipping over 4.2 million cases of wine in 2015, which represented $1.97 billion in sales).
144 Fent v. Contingency Rev. Bd., 2007 OK 27, 18, 163 P. 3d 512, 523.
145 E. Pipeline Co. v. State of Oklahoma, ex rel. Commrs of the Land Office, 83 F.3d 1219, 1229 (10th

Cir. 1996).
146 Okla. Corr. Profl Assn, Inc. v. Jackson, 2012 OK 53, 13, 280 P.3d 959, 965 (citing

Conaghan v. Riverfield Cty. Day School, 2007 OK 60, 23, 163 P.3d 557; In re Application of the
Okla. Dept of Transp., 2002 OK 74, 27, 64 P.3d 546).
147 Local 514 Transp. Workers, 2003 OK 110, 15, 83 P.3d at 839. Other states similarly apply

extend severability principles to state constitutions. See, e.g., Ray v. Mortham, 742 So.2d 1276,
1281 (Fla. 1999).
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Protection Clause of the Fourteenth Amendment to the United States Constitution, the invalid

language should not nullify the valid provisions, if they are severable. 148

Absent a provision to the contrary, every law containing a provision or having an

application that is held unconstitutional, shall remain valid in all other respects, unless:

a. the valid provisions or application of the act are so essentially and inseparably
connected with, and so dependent upon, the void provisions that the court cannot
presume the Legislature would have enacted the remaining valid provisions without
the void one; or
b. the remaining valid provisions or applications of the act, standing alone, are
incomplete and are incapable of being executed in accordance with the legislative
intent. 149

For example, the Oklahoma Supreme Court found severable an unlawful provision from an

act contain[ing] 88 sections and 149 pages seeking comprehensive reform . . . in view of the

scope and breadth the statutory changes in the . . . act because the Legislature would have

enacted the statute without the offending language and [t]he non-offending language [could]

stand alone. 150

Here, Article 28A constitutes a comprehensive regulatory reform of alcohol sales and

distribution that replaces its predecessor Article 28. The ratified constitutional amendment,

which runs 2774 words long (37% as long as the entire federal constitution), was considered

so encompassing that it was made its own Article in the State Constitution. Each of the various

provisions aims at the same goals of increased competition among sellers, greater access to

148 Wilson v. Fallin, 2011 OK 76, 16, 262 P.3d 741, 746 (citing City of Spencer v. Rayburn, 1971
OK 38, 6, 483 P.2d 735, 737; Elk City v. Johnson, 1975 OK 97, 12, 537 P.2d 1215, 1217).
149 75 O.S.2011 11a; see also Wilson, 2011 OK 76, 16, 262 P.3d at 747-48 (Laws are

considered severable [u]nless [the Court] determines[s] that the valid provisions are
dependent upon and inseparably connected to the invalid provision or that the valid provisions
standing alone are incomplete and incapable of being executed.) (citations omitted).
150 Okla. State Chiropractic Indep. Phys. Assn v. Fallin, 2011 OK 102, 12, 290 P.3d 1, 6.

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markets for manufacturers, wider choices for consumers, as well as more responsible drinking

by consumers; but each achieves these goals through a separate mechanism that operates

independently of the other provisions. This is evidence that the People would have ratified the

Article whether it contained all or a subset of these mechanisms. By comparison, if this Court

were to strike down Article 28A in its entiretyincluding not only the challenged provisions

but also unchallenged provisions governing certain taxes and the prohibition of sales to

minors 151this would directly contravene the expressed intent of the People who held a

referendum to effect comprehensive reform. It may even have the effect of either having

alcohol completely prohibited or completely unregulated in the Stateclearly not the Peoples

intent. Thus, should this Court find any provision of Article 28A unlawful, it should sever that

provision and leave the rest intact.

CONCLUSION

For the reasons stated above, Defendants request that this Court grant their motion

for summary judgment.

Respectfully submitted,

/s/Mithun Mansinghani .

MITHUN MANSINGHANI, OBA #32453


Solicitor General
MICHAEL K. VELCHIK, VA Bar #91142
Assistant Solicitor General
OFFICE OF THE ATTORNEY GENERAL
313 N.E. 21st Street; Oklahoma City, OK 73105
Phone: (405) 522-4392
Fax: (405) 521-4518
Email: Mithun.Mansinghani@oag.ok.gov
Email: Michael.Velchik@oag.ok.gov
COUNSEL FOR THE DEFENDANTS

151 OKLA. CONST. art. 28A, 5, 9.


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CERTIFICATE OF SERVICE

I hereby certify that on the 22nd day of May, 2017, I electronically transmitted the

attached document to the Clerk of the Court using the ECF System for filing, and that the

Notice of Electronic Filing will be transmitted to all parties by the ECF System.

/s/Mithun Mansinghani .
MITHUN MANSINGHANI
Solicitor General

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