In Long v. Liquor Control Comm’n, No. 16-069125-CC (Nov. 16, 2017), the Michigan Court of Appeals addressed an issue that we’ve been following — takings claims arising from government issued licenses or regulated industries. We wrote about these claims in sharing economy cases recently. See “Property” and Investment-Backed Expectations in Ridesharing Regulatory Takings Cases, 39 U. Haw. L. Rev. 301 (2017). These type of cases typically arise where the holder of a government license or permit claims that the government’s failure to require competitors similarly situated to obtain the same license or permit, or granting an additional license, is a taking. This case is among the latter.
Long possessed a liquor license entitling him to sell alcohol for off-premises consumption. But the Commission later issued a similar license to a nearby supermarket, and did so without abiding by the quota and distance restrictions which usually apply in these situations. The Commission did so under a provision in Michigan law which allows issuance of “resort” liquor licenses which allows liquor sales notwithstanding existing businesses nearby. But predictably, having a competitor nearby resulted in a loss of sales for Long, and, he alleged, a devaluation of his own license. He claimed he had a property interest in the Commission-issued liquor license, and that by issuing a competitor a similar license, the Commission inversely condemned Long’s license.
The court of appeals saw this as a question of the scope of the property interest which Long possessed, and concluded that Long’s license did not include the right to be free from increased competition. The court held that Long did not allege a taking of his license (after all, he continued to possess the rights granted under his license to sell liquor for off-premises consumption), only that the Commission diluted his exclusive rights to sell liquor within a certain area:
He contended that, by obtaining a license, the licensee received “part of the market share” with limits on “the level of competition” and that, in this case, the “status quo” consisted of only two SDD licenses in the market. In other words, plaintiff asserted that he had a property right, protected by the provisions of the Michigan Liquor Control Code of 1998, to a share of the liquor market based on there being only two SDD licenses in Boyne City. According to plaintiff, by allowing the introduction of a third competitor into the market, the LCC has taken plaintiff’s “property” by decreasing his share of the market, devaluing the resale value of plaintiff’s license, and reducing his sales of alcohol.
Fairly read, what plaintiff actually alleges is a loss of an oligopoly resulting from the increase of competition due to the issuance of a liquor license to Family Fare.
Slip op. at 4.
Having framed the issue that way, the court made short work of Long’s argument. A liquor license gives you a right to sell liquor under certain conditions, but it “does not provide property rights to be free from competition in the sale of liquor, to have a set share in the market, or to enjoy a particular level of alcohol sales or profitability.” Slip op. at 4-5. The court concluded the Commission properly adhered to the “resort” license provisions, and thus Long had received no assurances that he would not be subject to close-by competition. Slip op. at 5. (“Given that the law specifically allows for the issuance of additional SDD licenses, plaintiff cannot legitimately claim that he was entitled to retain a specific market share, to exclude competition from the market, or to enjoy a set level of sales or profits.”).
The opinion wrapped up by citing similar cases (some of them detailed in our article, above), which reached similar conclusions.
Long v. Liquor Control Comm’n, No. 16-069125-CC (Mich. App. Nov. 16, 2017)