This week, the Federal District Court for Southern Indiana issued a permanent injunction against Ind. Code § 7.1-3-21-5(a). This law prohibited possession of an Indiana alcoholic beverage retailer’s permit by Limited Liability Companies (“LLCs”) that contained more than 40% out-of-state ownership. There was an exception found in Ind. Code § 7.1-3-21-6(a)(10)(B)(i) that allowed out-of-state ownership if the establishment grossed more than $100,000 annually in food sales. To be consider an in-state owner under the statute an LLC member had to be a “continuous and bona fide resident[s] of Indiana for five (5) years.”
In practice, the statute prohibited the purchase of many bars and restaurants by out-of-state hospitality groups and new immigrants to the United States. Senior Judge Sarah Baker found that the statute ran contrary to the Dormant Commerce Clause of the US Constitution. Found in Article I, the Dormant Commerce Clause was first championed by James Madison, and ultimately named by Chief Justice John Marshall. The Dormant Commerce Clause prohibits states and municipal entities from implementing law that discriminate against out-of-state persons, particularly when such laws are born of protectionist impulses. The US Supreme Court recently weighed in on the issue, noting the long and complex history of the interplay between the Dormant Commerce Clause and the 21st Amendment, which traditionally gave states a free hand in regulating alcohol sales. The Supreme Court recently found that a similar 2-year residency requirement in Tennessee was unconstitutional as it violated the Dormant Commerce Clause.
If you are seeking to acquire an alcohol permit in Indiana, regardless of where you reside, the professionals at Bunger & Robertson can assist you with your legal needs.