KY Supreme Court Rules that Statute’s Separate Classification of Government for Purpose of Limiting Concentration of Retail Alcohol Licenses was Unconstitutional

This appeal arose from a challenge by O’Shea’s–Baxter, LLC, d/b/a Flanagan’s Ale House (“Flanagan’s”) to an order of the Alcoholic Beverage Control Board (“ABC Board”) upholding the Louisville/Jefferson County Government’s (“Louisville Metro”) denial of Flanagan’s application for a retail drink license. The issues concern KRS 241.075, which prohibits the issuance of a retail drink license to an applicant located in a “combination business and residential area” of a city of the first class or consolidated local government if another “similar establishment” is located within 700 feet of the applicant. Flanagan’s challenges the constitutionality of KRS 241.075 on the grounds that it (1) constitutes local and special legislation in violation of Sections 59 and 60 of the Kentucky Constitution, (2) exercises arbitrary power and fails to provide for equal protection under the law in contravention of Section 2 of the Kentucky Constitution, and (3) unconstitutionally delegates zoning powers vested in local governments to the state. The circuit court declined to declare KRS 241.075 unconstitutional, holding that an important public purpose was served by limiting the density of establishments authorized to serve and sell liquor in the “combination business and residential areas” of Louisville Metro. Accordingly, the circuit court denied Flanagan’s motion for summary judgment and granted summary judgment in favor of Louisville Metro and the ABC Board. The Court of Appeals ruled that the statute was unconstitutional local and special legislation in violation of Sections 59 and 60 of the Kentucky Constitution.

This court first noted that legislative enactments regulating alcohol are entitled to a particularly strong presumption of constitutionality. However, although Louisville Metro may have offered a compelling basis for separately classifying Louisville’s “downtown business area,” to insulate residential areas from the “evils of alcohol,” the separate classification of Louisville’s downtown was necessary only because of the application of KRS 241.075’s 700–feet rule to the rest of Louisville. In Louisville’s “downtown business area,” there was no 700–feet rule limiting the concentration of retail drink licenses, just as there was no such rule in Lexington or Bowling Green. Therefore, the court found, even if the separate classification of Louisville’s “downtown business area” was constitutional, it did not support a finding that the 700–feet rule is constitutional. Because the statute did not treat individuals and corporations across the state alike, and it unnecessarily discriminated against potential retail drink licensees in Louisville’s consolidated local government, the court found the restriction in violation of the letter and spirit of Sections 59 and 60 of the Kentucky Constitution.

Louisville/Jefferson County Metro Government v O’Shea’s-Baxter, LLC, 2014 WL 4116490 (KY 8/21/2014)

The opinion can be accessed at: http://opinions.kycourts.net/sc/2013-SC-000085-DG.pdf