Total Wines and More was denied a liquor license by the Oklahoma Alcoholic Beverage Law Enforcement Commission (ABLE).

The denial was justified by Article 28A §4(A) of the Oklahoma Constitution which states:

“A. A Retail Spirits License shall only be issued to a sole proprietor who has been a resident of this state for at least five (5) years immediately preceding the date of application for such license, or a partnership in which all the partners have satisfied the same residency requirement. A Retail Spirits License shall not be issued to a corporation, limited liability company or similar business entity, and no person shall have an ownership interest in more than two (2) Retail Spirits Licenses.”

The astute reader will notice some glaringly unconstitutional language in this statute, specifically that license eligibility is based on being a resident of Oklahoma for 5 years preceding the application date. In Tennessee Wine, the Supreme Court found a similar two-year durational residency requirement unconstitutional.

There is no reason to believe or evidence presented that the five-year durational residency requirement would survive constitutional scrutiny. That part of the Oklahoma law is dead on arrival!

I think the Supreme Court was clear on the residency requirement, so I think any residency requirement would be deemed unconstitutional.

But suppose Oklahoma could get a way with a residency requirement just not a durational residency requirement (I don’t know how you separate the two), or that on appeal, the statute was read in isolation and each element was looked at individually.

The main issue becomes whether Oklahoma can limit the issuance of licenses to a sole proprietor or a partnership and exclude corporations or LLC.

On its face there is nothing that would seem to discriminate against an out-of-state entity as Oklahoma in-state corporations, LLCs, or similar business entities would be subject to the same restrictions.

However, there is ambiguity on how the statute applies. There is no doubt that sole proprietors are eligible for a retail spirit’s license, but it also seems partnerships would be. Partnerships eligibility is based on residency of its members, and additionally that its business structure is not similar to a corporation or LLC. In other words, a partnership owned by individuals is permissible, a partnership that has non-individual partners like a corporation could not obtain a license.

Although the statute limits who can obtain a liquor license, and it may not be sound business practice, there may be nothing unconstitutional about this provision from a Commerce Clause perspective, unless an applicant can show that the statute is discriminatory in effect and it serves no legitimate purpose.

In the end, Oklahoma’s fight to deny Total may fail because the glaring 5 year durational residency requirement will not stand constitutional muster. But it remains to be seen on appeal whether this provision strikes the whole Oklahoma constitutional provision or whether the remaining parts of the provision stand?

If the remaining provisions are allowed to stand, then this becomes a more legally murky case. And we are in for another interesting liquor battle.