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State Supreme Court strikes down liquor law

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Oklahoma’s alcohol distribution system is set for yet another monumental change after the Oklahoma Supreme Court struck down a law regulating the sale of alcoholic beverages.

Under the law, the top 25 alcoholic beverages by sales in Oklahoma would be required by law to be sold equally to any alcohol wholesaler in the state, a result of the approval of SB 608 in the previous legislative session, which was later signed into law by Gov. Kevin Stitt.

The law was never practiced as it was ruled unconstitutional by a district court before taking effect.

The Oklahoma Supreme Court this week found this law to be unconstitutional, violating a recent amendment to the state’s constitution approved by voters as part of SQ 792.

"The court must always presume that a law is constitutional unless 'clearly, palpably and plainly inconsistent with the Constitution,'" the Supreme Court opinion states. "Here, SB 608 is clearly, palpably and plainly inconsistent with (Oklahoma's constitutional) grant of discretion to a liquor or wine manufacturer to determine what wholesaler sells its product."

SQ 792 is known among most Oklahomans for the retail-focused changes to the industry, beginning in October 2018, including allowing for the sale of wine and strong beer in grocery stores and chilled beer in liquor stores.

But the state question also tweaked the distribution model and allowed alcohol manufacturers to sell to a single wholesaler if desired. Wholesalers no longer had the benefit of a legally mandated equal opportunity to distribute alcoholic products and had to begin competing for exclusive contracts.

Many top wine and spirits brands chose to partner with one of two large wholesale businesses, which led to huge losses for one Oklahoma wholesaler.

Tulsa-based Boardwalk Distribution failed to land an exclusive distribution agreement with any of the top-100 alcohol brands, Boardwalk President Bryan Hendershot told The Oklahoman last year.

Unable to distribute as he did before, Hendershot said he expected to lose $100 million in sales the first year following the implementation of SQ 792 and was forced to lay off nearly 30 employees.

“It wasn’t that we got a few brands; it was zero,” Hendershot said.

Having failed to secure the distribution rights in the open market, Hendershot chose to pursue a partial legal reversal of SQ 792 through SB 608.

SB 608 was a hybrid between the old and current model, making the top 25 wine and spirits brands available to all distributors, while allowing the rest to still designate individual distributors if desired.

Hendershot threw the weight of his wallet behind the bill in an effort to regain access to those top brands. He and his wife cumulatively donated more than $104,000 to more than 50 state legislators last year, when the bill was working its way through the Legislature.

“I’m backed against the wall, I’m going to fight for that (distribution change),” Hendershot said at the time.

Hendershot said it was not simply his business that would benefit from the distribution change. In an interview with The Oklahoman, he claimed to have the support of hundreds of small businesses, but declined to disclose any names.

He did, however, have plenty of opposition.

Other wholesalers issued a joint statement in opposition of SB 608 and the claims being made by Hendershot.

“Basically, this bill caught us all off guard as I felt it was basically snuck in without consulting any of the other wholesalers,” said Tracia Forrest, of Artisan Fine Wine and Spirits. “None of the other wholesalers were consulted as far as I know, and I don’t want Boardwalk to be speaking on my behalf.”

SB 608 ultimately passed the Legislature and was signed into law by Stitt.

“It’s not going to affect anything with how consumers get their wine at the grocery store and the original changes that they voted on in (SQ 792),” Stitt said after signing the bill. “It basically opened up more of the wholesale side of it and gives those smaller stores an option on who to use on the wholesale level to deliver their products to them.”

It didn’t take long for the law to be challenged. Opposition to the changes came from other wholesalers doing business in the state as well as many alcohol manufacturers from around the nation.

Oklahoma County District Judge Thomas Prince ruled Aug. 12 that SB 608 violated the constitution.

That decision was then appealed to the Oklahoma Supreme Court, which heard the case in late 2019.

The court’s ruling was close, with justices voting 5-4 to affirm the lower court’s ruling that the bill violates the state’s constitution.

The State Chamber of Oklahoma, which is not a state funded entity, praised the decision on Wednesday.

“Today’s ruling from the Oklahoma Supreme Court affirms the State Chamber’s position: If a supplier wishes to utilize one wholesaler, they should be free to do so without government’s red tape,” State Chamber CEO Fred Morgan said. “Senate Bill 608 represented a law that no one wanted or needed, and we are glad the state Supreme Court affirmed the lower court’s ruling by declaring it unconstitutional.”

The Institute for Responsible Alcohol Policy also was against SB 608, and was relieved by the Oklahoma Supreme Court’s decision.

“From the beginning, the Institute for Responsible Alcohol Policy has said a statute cannot overrule voter-approved constitutional reforms,” IRAP President John Maisch said. “We are happy the Supreme Court agreed with the District Court, defended the voice of the people and put this issue to rest.”

Related Photos
<strong>The Oklahoma Supreme Court struck down a law regulating the alcohol distribution system Wednesday, leading to a return to the way things were within the industry for just a few months following 2018's historic changes to the industry. [OKLAHOMAN ARCHIVES]</strong>

The Oklahoma Supreme Court struck down a law regulating the alcohol distribution system Wednesday, leading to a return to the way things were within the industry for just a few months following 2018's historic changes to the industry. [OKLAHOMAN ARCHIVES]

<figure><img src="//cdn2.newsok.biz/cache/r960-c5b55ca22e43606991a17e9848f67758.jpg" alt="Photo - The Oklahoma Supreme Court struck down a law regulating the alcohol distribution system Wednesday, leading to a return to the way things were within the industry for just a few months following 2018's historic changes to the industry. [OKLAHOMAN ARCHIVES] " title=" The Oklahoma Supreme Court struck down a law regulating the alcohol distribution system Wednesday, leading to a return to the way things were within the industry for just a few months following 2018's historic changes to the industry. [OKLAHOMAN ARCHIVES] "><figcaption> The Oklahoma Supreme Court struck down a law regulating the alcohol distribution system Wednesday, leading to a return to the way things were within the industry for just a few months following 2018's historic changes to the industry. [OKLAHOMAN ARCHIVES] </figcaption></figure>
David Dishman

Business Writer David Dishman has worked as a journalist in Oklahoma since 2014 covering business, education, local government, healthcare and more. He worked as a reporter in southeast Oklahoma before joining the business team at The Oklahoman in... Read more ›

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