340 P.3d 849
Wash.2015Background
- In 2011 Washington voters passed Initiative 1183, privatizing spirits distribution and creating several license categories including a broad "spirits distributor license" (RCW 66.24.055) and more limited distiller distributor rights (RCW 66.24.140; 66.24.640).
- RCW 66.24.055(3) imposed a 10% percentage fee on spirits sales by spirits distributor licensees and required that if those fees did not total $150 million in year one, the shortfall be "equitably assessed against all persons holding spirits distributor licenses" (subsection (3)(c)).
- The Liquor Control Board (Board) promulgated rules: WAC 314-23-030 (applying the 10% percentage fee to distillers and certificate holders who distribute) and WAC 314-23-025 (assigning the subsection (3)(c) shortfall exclusively to holders of the statutory "spirits distributor license").
- Distillers’ direct distribution produced only about $15 million in sales (≈ $1.5 million in percentage fees); overall distributor fees collected left a $104.7 million shortfall, which the Board assessed entirely against spirits distributor license holders.
- The Association of Washington Spirits and Wine Distributors sued to invalidate WAC 314-23-025, arguing distillers who distribute must proportionately share the shortfall; the superior court upheld the rule and the Supreme Court granted direct review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether WAC 314-23-025 properly limits the subsection (3)(c) shortfall fee to "persons holding spirits distributor licenses" | Association: distillers who distribute are "spirits distributor licensees" for purposes of subsection (3)(c) and thus must proportionately pay the shortfall | Board: subsection (3)(c) unambiguously applies only to holders of the statutory "spirits distributor license"; distillers may pay the percentage fee but are not "persons holding spirits distributor licenses" for the shortfall | Court: Affirmed — statute is unambiguous; shortfall applies only to persons holding the defined spirits distributor license |
| Whether the Board’s separate rule applying the subsection (3)(a) percentage fee to distillers compels applying the subsection (3)(c) shortfall to distillers | Association: the Board previously argued distillers must follow distributor laws and thus the Board’s Costco position requires treating distillers as distributors for the shortfall | Board: the propriety of WAC 314-23-030 (percentage fee) is distinct and not controlling; subsection (3)(c) language controls | Court: Board’s prior interpretation of subsection (3)(a) does not govern interpretation of the unambiguous subsection (3)(c) |
| Whether WAC 314-23-025 is arbitrary and capricious | Association: rule is inconsistent with WAC 314-23-030 and Board’s earlier positions, making it arbitrary | Board: rule tracks the statutory language and was reasonably adopted | Court: Not arbitrary or capricious — rule follows statute and falls within agency authority |
| Whether assessing the shortfall only against spirits distributor licensees violates WA Const. art. I, §12 (privileges and immunities) | Association: differential treatment burdens the right to carry on business and is an unequal privilege | Board: selling spirits is a licensed privilege; differentiating license classes is permissible and not a protected constitutional privilege | Court: No violation — selling liquor is a licensed activity, not a fundamental privilege under art. I, §12; no special-privilege problem shown |
Key Cases Cited
- Wash. Ass’n for Substance Abuse & Violence Prevention v. State, 174 Wn.2d 642 (discussion of Initiative 1183 and prior regulatory scheme)
- W. Telepage, Inc. v. City of Tacoma Dep’t of Fin., 140 Wn.2d 599 (statutory ambiguity and plain-language interpretation)
- State v. Veliz, 176 Wn.2d 849 (de novo review for statutory interpretation)
- Dep’t of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1 (statutory context and intent in interpretation)
- Wash. Pub. Ports Ass’n v. Dep’t of Revenue, 148 Wn.2d 637 (scope of agency rule-making authority is a question of law)
- Waste Mgmt. of Seattle, Inc. v. Utils. & Transp. Comm’n, 123 Wn.2d 621 (no deference to agency interpretation that conflicts with statute)
- Grant County Fire Prot. Dist. No. 5 v. City of Moses Lake, 150 Wn.2d 791 (privileges and immunities clause framework)
- Ockletree v. Franciscan Health Sys., 179 Wn.2d 769 (two-step art. I, §12 analysis)
- Am. Legion Post No. 149 v. Dep’t of Health, 164 Wn.2d 570 (distinguishing fundamental privilege from narrower regulatory impacts)
- Ralph v. City of Wenatchee, 34 Wn.2d 638 (example of unconstitutional privilege granted to one business class over another)
- Randles v. Wash. State Liquor Control Bd., 33 Wn.2d 688 (no natural or constitutional right to sell liquor)