A panel of appellate court judges on Thursday ruled that Indiana’s system of issuing alcohol permits does not violate state law.

The decision is a blow to the Indiana Association of Beverage Retailers, which represents the state’s package liquor stores. It sought to stop the Indiana Alcohol and Tobacco Commission from issuing new permits until the judges could clarify state quota laws.

But Judge Carr Darden, writing for the majority, upheld a decision last year from a Marion Superior Court judge who denied a motion by the beverage retailers association for a temporary restraining order seeking to halt permits.

“Here, the IABR argues that without an injunction, its members’ ‘rights to fairly compete with other holders of lawfully obtained beer dealers’ permits will be harmed and diluted,’” Darden wrote. “We find no merit in this argument as we have found that the Commission’s interpretation of [state law] to be reasonable, and therefore its issuance of permits, is lawful.”

John Livengood, president and CEO of the beverage retailers association, said he didn't want to comment on the ruling until he had a chance to review it with lawyers.

The dispute arose from a legislative compromise in 2008 that rewrote beer permit rules and lowered the number of available alcohol permits based on population. The association agreed to the deal, provided that drugstores be classified as grocery stores when applying for an alcohol permit—in theory limiting competition.

But the commission has interpreted the law so that groceries and drugstores have separate quotas and, as a result, the association says permit numbers in some cities exceed what should be allowed.
 
Under the improper method for allowing separate quotas, the association argued, the commission is allowing up to twice the number of beer dealer permits under the quota limits.

The commission maintained, however, that since 1973, it has followed three separate quotas regardless of whether groceries or drugstores are lumped together. The quotas are for beer dealers, liquor dealers and package liquor stores.

Package liquor stores and drug stores are authorized to sell liquor and beer, while groceries are allowed to sell only beer and wine. The commission interprets the law as assigning permits to each quota—beer dealers, liquor dealers and package liquor stores.

“Because the Commission is the agency charged with the duty of enforcing [state law] by the promulgation of rules and regulations,” Darden wrote, “we defer to its interpretation of the statutes contained therein as long as the interpretations are reasonable.”

The commission’s interpretation of the law also is reasonable give the Legislature’s apparent intent to regulate and limit the sale of liquor to a greater extent than beer, Darden said.

Mark Massa, chairman of the Alcohol and Tobacco Commission, could not be reached for comment.

Before the appellate court heard oral arguments Jan. 31, he said: “We thought the trial court got it right. It’s been the custom and practice for nearly 40 years to count permits in this manner.”