Commonwealth Journal

News Live

November 2, 2013

City’s case vs. ABC moves forward

Somerset — A ruling in favor of the City of Somerset moving ahead with their case against the state alcohol licensing board is a “big deal,” according to the city’s legal counsel.

Pulaski Circuit Judge David Tapp on Friday denied a motion by the Kentucky Department of Alcoholic Beverage Control to dismiss the city’s complaint against it.

Specifically, the key victories for Somerset include the ruling that the city has done everything it can to resolve the situation through the administrative process, and that the case will stay in Pulaski rather than going into another county’s court system.

“It’s pretty big at this point in the game,” said Carrie Wiese, Somerset City Attorney. “If (Tapp) determined that we didn’t have standing to bring the case, or that we hadn’t exhausted all administrative remedies, we wouldn’t have had anywhere to go to ask for relief for a review of how the (alcoholic beverage) cabinet picked the licenses that they did. This (ruling) keeps it alive.”

The City of Somerset is seeking clarification from the state ABC board on how they picked the particular stores to receive quota liquor licenses, and the rules for determining that Somerset would be awarded only five such licenses. The city has called the state agency’s decisions “arbitrary and capricious” in the past, and argues that the decisions made did not take into account the city’s own economic forecast that officials presented to the ABC board.

Wiese said that the state ABC will now have to comply with discovery rules, and that the city has already sent them interrogatories (or requests for information) and requests for production of documents.

“We’ll be able to put them under oath and have them explain to us why they picked who they picked (to receive quota licenses) and not some other applicants that would bring more money into the community and more jobs,” she said. “At least we get the opportunity to get them on record and get their testimony.

“I don’t know if anyone’s ever had the ABC board in a position where they’re forced to justify the decisions they’ve made by asking questions under oath, so it will be pretty interesting,” she added. “A lot of cities and counties across the state will be watching closely to see what happens in this case.”

Tapp’s response notes that ABC claims Somerset failed to exhaust administrative remedies for its issues, as parties must seek such avenues to solution before pursuing redress in courts. The state claimed that Somerset had the right under Kentucky Revised Statute (KRS) policy to make written comments on pending amendments and testify at a public hearing, but the KRS the state referenced didn’t deal with adjudication, and the proposed amendments dealt with quotas for licenses, not how the licenses are allocated as Somerset is questioning.

ABC also claimed that “Somerset’s lawsuit is a thinly veiled attempt to have the Court substitute its judgment for that of the Board’s discretion” while “Kentucky law prohibits such judicial encroachment on executive or legislative branch discretionary authority.”

However, Tapp wrote, “Somerset is not challenging the Board’s power to set the number of licenses. Somerset claims that the Board violated KRS 243.370 by granting LP (liquor package) licenses before Somerset’s city administrator approved the licenses. The Board’s compliance with KRS 243.370 is not discretionary. It is ministerial.”

Tapp also wrote that the statutes give city administrators “the legal right to approve licenses prior to state approval. This statue gives Somerset and its city administrator, Nick Bradley, a judicially recognizable interest in approving licenses.”

Also, while ABC argued that Franklin County Circuit Court — in which Frankfort, home of the agency’s offices, is located —  should take on the case because that’s where the respondents are, Tapp thought differently. Because the board issued the licenses to entities in Pulaski County, that makes this the county where the alleged harm occurred, noted Tapp.

“Further, Pulaski County is Somerset’s principle place of business,” wrote Tapp. “Therefore, under KRS 452.405, Pulaski County is a proper venue.”

Said Wiese, “Anytime you sue a state agency or entity, it’s preferable for them for it to be in Frankfort before Franklin Circuit Court. You have the option of suing them in Frankfort, or choosing to try to file in your home place. The judge agreed that we could have it here in Somerset.”

The two sides will likely have about 60 to 90 days for their discovery schedule, wherein each side has the opportunity to serve requests for documents from the other and do depositions. Once that’s done, both sides will have the chance to make motions once again.

“The ABC will want to get (the case) dismissed, and we’ll be wanting judgment in our favor,” said Wiese. “It’s another opportunity for the court to look at (the case) with all the discovery and evidence on the record. If (the judge) doesn’t want to make a ruling, it would start us on a schedule to get it to a trial date.”

Wiese noted that the ABC board is currently trying to pass certain regulations and get them through the approval of a state legislative committee.

“This will kind of call (the relevant issues) to the attention of general assembly members that, ‘Hey, we may need to look at the process the ABC used when they pick these (licensees) and maybe give local government more decision-making abilities since it’s these places where they’ll be going into business,’” said Wiese. “It’s really a big deal for the City of Somerset.”

Following the June, 2012 vote by Somerset citizens to allow legal alcohol sales within the city limits, Somerset had big plans for the expected liquor stores in town, including a proposed $5 million investment by regional business Liquor World to not only locate in the North Plaza shopping center but renovate it and even bring in a chain restaurant interest.

Instead, the ABC issued licenses to three smaller-inventory stores — Apple’s Wine and Spirits, First Stop Party Supply, and Wildcat Beer, Wine and Spirits (though the city has noted that the latter was more in line with their expectations) — and two pharmacy chains with a limited supply, Rite-Aid and Walgreens.

The city felt that the ABC didn’t take their needs and economic forecast into consideration, and even held up issuing licenses to some of the above businesses while they tried a two-fold approach to working out a deal for more licenses — both through the courts and more directly.

Somerset officials contended that the state had failed to follow Kentucky statutes in the application of the city’s ordinance, and that the existing quota system had no current regulations to limit the numbers beyond the guidelines of county population. The ABC had used Somerset’s population to arrive at the figure of five, based on a calculation of one liquor store for ever 2,300 residents. If they had gone by county population, Somerset could have qualified for over 25 such licenses, which allow for the operation of retail stores that sell distilled spirits and wine, rather than just beer.

Somerset Mayor Eddie Girdler felt like the two entities had reached a deal to grant Somerset five more potential licenses. However, when the subcommittee — of which Somerset’s own state representative Tommy Turner was a part — ruled the ABC’s regulations deficient, the agency went back to the drawing board.

In August, the City of Somerset re-filed its complaint against the ABC in an attempt to “(ask) the judge to clarify the law,” according to Girdler.

A hearing was held in late September, where Tapp opted not to rule from the bench on the state’s motion for dismissal, but indicated that he would be making a written ruling before long — the one that arrived this week.

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