Down Goes Frazier

I’m a boxing fan.  Or at least I was – there hasn’t been much good boxing to enjoy for several years.  But I have fond memories of watching some great bouts over the years – many of which I enjoyed with my future father-in-law.  I’m a bit too young to have seen Ali in his prime.  But I certainly appreciated Tyson, Holyfield and others of their generation.

I’m not sure I can bring myself to watch the upcoming debacle between the guy who is an exquisitely boring boxer and a guy who isn’t a boxer at all.  Both of them seem to be the kind of people you might cross the street to avoid interacting with.  Their (and their affiliates’) manner of promoting the event has been – to put it mildly – reprehensible.  But if you told me that I must pick a side – must choose a preferred outcome in this fight between an openly homophobic favorite and an openly racist underdog – I guess I’d pick the underdog.  I regularly root for the underdog – and in a sport where anything can happen the underdog can and often does come out on top (though I highly doubt that will be the case in Las Vegas on August 26th).

It is this preference for the underdog which brings me to an appellate decision – announced two days ago – in a case brought against the Washington State Liquor and Cannabis Board.  Specifically, the case involves a challenge to rules made by the LCB following Washington Initiative Measure No. 1183 – which provided for the privatization of the distribution and sale of spirits in Washington.

Under these rules (specifically, the “10 percent license fee rules” –  WAC 314-28-070(3)), distillers are obligated to pay to the LCB a fee equal to 10% of their “gross spirits revenue . . . on sales to a licensee . . . during the first two years of licensure and five percent of their gross spirits revenues . . . in years three and thereafter.”  What does this mean?  It means that if you were a distiller operating in Washington state and choosing to self-distribute your product, the LCB charged you a 10% (or 5%) fee for doing so.

The trouble with this fee is that the LCB didn’t really have any authority to require it. Nothing within the Initiative gave the LCB the authority to charge the fee.  And the LCB had no pre-existing authority to charge the fee prior to the Initiative.

The Court of Appeals has recognized this, and declared the 10 percent license fee rules to be invalid.  The underdog won.

Where does this leave distillers who have paid the 10 percent license fee for the past several years?  The short answer is that they should be able to receive a refund.  The LCB has procedures in place allowing for the refund of overpayments made by licensees in connection with their monthly reports, and certainly if the rules imposing the fee are invalid now then they were invalid when promulgated.  If they were invalid when they were promulgated, then any payments made pursuant to the rules were – by extension – payments which were not required (i.e., overpayments).

The astute reader will note that I said “should” rather than “will” above.  That is intentional.  When I called the LCB yesterday morning to inquire about the best way for distillers to go about seeking a refund of overpayments, the staff indicated they were unaware of the Court’s decision and had no immediate response.  They’ve promised me a call back.

Stay tuned.