Sleepless in Olympia: I-1183 Transition

1. Sleepless in Olympia:I-1183 Transition Mary M. Tennyson, Sr. Assistant Attorney General Legal Counsel to Washington State Liquor Control Board March 7, 2012

2. How to support Board as Legal Counsel? • Implementation: What needs to be done? • Advice: What does Board need? • What level of involvement in agency planning • Advice: oral, written, both? • Reviewing agency work product (Q & A, etc) • Contract drafting/review (Buyback agreement, CLS contract changes) • How does I-1183 change Board’s authority? • Defending legal challenges to the Initiative

3. Implementation • Prioritizing requests, managing contacts • Who has ability to request AAG advice, participation in meetings, etc. • Board decision, or staff? • Agency’s work, or Attorney’s? • Public Forums (Contract Store Managers) • Learning about aspects of the law, agency policies • Coverage for legal work normally performed for other state agencies

4. Defending I-1183:First legal challenge filed • December 6, 2011 • King County Superior Court (Seattle) • Plaintiffs are: • Local 174 Teamsters (drivers for companies contracted to haul product to state stores) • UFCW Local No. 21 (state employees in stores and distribution center) • State and Governor named defendants • No motion for TRO or Preliminary Injunction filed

5. Second legal challenge filed • December 7, 2011 • Cowlitz County Superior Court (Kelso, WA) • Plaintiffs are: • Washington Association for Substance Abuse and • Violence Prevention, a nonprofit corporation • David Grumbois (landlord of state store in Cowlitz County) • Gruss, Inc. (corporation, owns two grocery stores in Kitsap County) • Defendant: State of Washington

6. Relief Requested (Unions) • King County complaint (Teamsters, et. al): • 13 pages • 80 paragraphs • 3 causes of action • I-1183 violates the “single subject” provision of article II, section 19 • I-1183 violates the “subject-in-title” provision of article II, section 19 • Injunction restraining further enforcement.

7. Relief Requested (WASAVP, et. al) • Complaint is 14 pages • 79 paragraphs • One cause of action (consisting of 9 paragraphs and several subparagraphs) • Asserts I-1183 violates single subject and subject-in-title provisions of article II, section 19.

8. Relief Requested is Identical • Statement of relief requested, in both cases: • Declaratory judgment that I-1183 violates Art. II §19 and is null and void, • Injunction to prevent further enforcement of I-1183.

9. Ballot titles, RCW 29A.72.050 • Ballot Title for initiatives is prepared by the Attorney General. • Statement of subject may be no more than 10 words • Brief description may contain no more than 30 words • Titles may be challenged in court • Title for I-1183 was challenged by sponsors and opposition, including plaintiff WASAVP • Superior Court made changes to ballot title • Superior Court decision may not be appealed

10. Legal Basis of Both Challenges:Article II, Section 19 • No bill shall embrace more than one subject, and that shall be expressed in the title. (Washington State Constitution, Article II, section 19) • Plaintiffs in each case assert that I-1183 contains more than one subject and at least one of the multiple subjects are not expressed in the title.

11. Motions: Cowlitz County case • With their complaint, Plaintiffs filed Motion for Preliminary Injunction, noted for hearing on December 16, 2011, 1 pm • State’s response brief due Wed. Dec. 14, 10 am • State filed Motion to Dismiss or Transfer the action (to King County, for consolidation with first case)

12. Motions, cont’d • State also filed Motion to Shorten Time, and Motion to Continue hearing on Motion for Preliminary Injunction, so Motion to Dismiss could be heard first. • Motion to Shorten Time granted on 12/13; hearing on Motion to Dismiss or Transfer set for 12/16, with Motion for P-I; state allowed until 3 pm on 12/15 to file its response brief. • Judge denied Motion to Dismiss or Transfer on 12/16, but continued hearing of Motion for Preliminary Injunction to 12/21/11.

13. Motions, cont’d • Motion to Intervene as defendants filed 12/19: Yes On 1183 Coalition; sponsors Bruce Beckett and John McKay; Costco; Safeway; Washington Restaurant Association; The Kroger Company; Family Wineries of Washington. • Motion to Intervene granted 12/21/11. • Motion for Preliminary Injunction argued on 12/21/11; Motion denied.

14. Case Schedule (Cowlitz County) • Motions for Summary Judgment filed by 1/20/12 • Response Briefs due 2/10/12 • Reply Briefs due 2/17/12 • Oral Argument set for 3/5/12 (moved to 3/2/12) • Contingent trial dates: April 16-19, 2012

15. King County case (filed 12/6/11) • Motion to Intervene filed 12/16/11, granted without opposition, 12/28/11 • State filed Motion to Stay Proceedings, 1/4/12 • Motion granted, over Plaintiffs opposition, 1/13/12 • Plaintiffs filed Emergency Motion for Discretionary Review to Court of Appeals, 1/30/12 • Court of Appeals ordered state to respond by 2/6/12; petitioners reply due 2/10/12 • Court of Appeals denied discretionary review 2/13/12.

16. Applicable legal principles • Washington’s Constitution allows direct legislation, in the form of Initiatives • Initiatives, once adopted, are statutes with same standing as laws adopted by legislature • Initiatives are laws presumed to be constitutional • Initiatives subject to same rules as laws adopted by legislature • Burden of Proof: Party challenging statute on constitutional grounds must prove beyond a reasonable doubt that it is unconstitutional

17. Constitutional provision (article II, section 19) must be liberally construed in favor of finding statute constitutional.

18. What is the “subject” of I-1183? • Plaintiffs (Cowlitz) claim it is “privatization of liquor sales” • Intervenors describe subject as “liquor” • Other options: “reform of the liquor laws”; “changing the regulation of liquor sales”

19. Multiple subjects alleged to be included in I-1183--King County Plaintiffs • Privatization of sale and distribution of hard liquor by closing state stores and licensing private parties to sell and distribute liquor • 17% “tax” on gross revenues from spirits sales • Imposes taxes on sale of spirits by distributors (allegedly 15% and 10%) • Allows retail licensees to act as distributors, selling to on-premises licensees • Doubles fines for sales of spirits to minors

20. King County case “subjects” • Grants franchise protections to distributors • Allows non-uniform pricing of wine by distributors and allows central warehousing • Prohibits WSLCB from regulating price advertising of spirits, wine, and beer • Allocates $10 million to local governments to enhance public safety programs

21. “Subjects” found by Cowlitz County Plaintiffs (based on complaint and pleadings, to date) • Privatization of sale and distribution of “hard liquor” (spirits) by closing state stores and selling assets, and allowing private entities to distribute hard liquor • Creates franchise protection for spirits distributors (not briefed) • Deregulates marketplace and licensees by repealing or amending uniform pricing • Changes limited hours and locations for sale of spirits (presumably because of elimination of state stores) • Imposes 27% tax on hard liquor sales

22. Cowlitz County “subjects” cont’d • Changes 3-tier system for wine distribution • Uniform pricing requirement eliminated • Allows retailers to centrally warehouse wine • Creates fourth tier of distribution by allowing off-premises retailers to act as distributors for on-premise retailers • Uses new tax revenues to fund local public safety programs • Permits advertisement of spirits but prohibits WSCLB from restricting advertising of lawful prices of liquor

23. Cowlitz County “subjects” cont’d • Does not change separate licenses being issued for beer, wine, and spirits sales • In Motion for Preliminary Injunction, added allegation that removal of words in a policy statement changes the state policy of encouraging moderation in the consumption of alcohol • In Motion for Summary Judgment, allege that removal of words in the same policy statement changes policy of an orderly market.

24. What can the court consider? • Cases say: the ballot title, as published; text of the initiative • Parties often seek to introduce “legislative history” in the form of statements for and against (in the Voter’s Pamphlet) and advertisements, pro and con. • Cases where the meaning of an initiative is concerned have considered materials beyond text of the statute.

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29. What result? • Hearing held on March 2 • Details will be provided on March 7 • Regardless of result, likely expedited appeal directly to Washington Supreme Court • King County case may, or may not, be allowed to proceed

30. Questions?