A judge puts the PLCB on the hot seat for its wine fees to restaurants

The Pennsylvania Liquor Control Board had a rough day in court Wednesday.

A Commonwealth Court judge pointedly asked a lawyer for the PLCB, “How do we get the government to stop violating the law?”

Judge Anne E. Covey was talking about the wine and liquor monopoly’s ongoing violation of a law requiring it to permit wine dealers to ship wines not carried by the agency directly to retailers and restaurants. The agency snags a fee for that, but was supposed to stop taking those payments by June 2017.

More than four years later, the PLCB still hasn’t stopped charging fees, despite a May 2020 Commonwealth Court order — upheld by the state Supreme Court — ordering the agency to allow direct shipments and to stop charging handling fees.

That was the backdrop for Commonwealth Court arguments Wednesday over whether the PLCB should pay unspecified damages, costs, and interest to the wine dealers, as well as lawyers’ fees.

A lawyer for the PLCB said the independent state agency has sovereign immunity and should not be on the hook, even for refunding millions in handling fees it has been collecting illegally since June 1, 2017, from restaurants and private retailers licensed to sell wine.

The five judges gave no indication of when they would rule, but three panel members seemed skeptical of the agency’s position. Tens of millions of dollars could be at stake for wine dealers and restaurants, the groups’ lawyer said.

Covey wondered aloud what could be done to get the agency to follow the law.

“You could carry on for the next 5 to 10 years, saying‚ ‘hey, we’re working on the procedure, haven’t got it finalized, it’s not just perfect,’ and continue to collect fees,” Covey said.

Wednesday’s hearing before the panel of judges was part of litigation started in April 2020, when two wine dealers, MFW Wine Co. LLC and A6 Wine Co., sued the PLCB in Commonwealth Court for allegedly violating a 2016 law that required the PLCB to allow direct shipments to restaurants and retailers and eliminate the handling fee.

The situation that month was acute for MFW and A6 and their customers because the PLCB had closed its stores early in the pandemic. That meant anyone trying to sell wine to go — a lifeline for many restaurants and bars during the pandemic — had no access to their preferred wines for about five weeks.

On May 1, 2020, Judge Kevin P. Brobson, who this month was elected to the state Supreme Court, agreed that the PLCB had violated the 2016 law, saying that the intent of lawmakers was “clear and unambiguous.”

Brobson ordered the PLCB to implement a procedure that bypasses state stores, but did not impose a new deadline. “The court is confident that PLCB has the resources and ingenuity to do so without unreasonable delay,” he wrote in his opinion.

The Pennsylvania Supreme Court upheld Brobson’s decision in March.

Still, the PLCB was in no rush to comply, not announcing until September that, as part of a $120 million revamping of its computer system, it would start allowing direct shipments in July 2022, five years after it was supposed to have done so.

In a related case, Bloomsday Cafe, of Philadelphia, and a Lancaster County restaurant are seeking class-action status for a Commonwealth Court lawsuit that would force the PLCB to repay millions in handling fees it illegally collected from restaurants.

The fee is as much as $1.75 per 750 milliliter bottle after taxes. The restaurants also want reimbursement for the cost of going to the state stores to pick up wine that would have been shipped directly to them if the PLCB had followed the law.

“The government is charging a fee that does not belong to them,” costing tens of millions of dollars, John Papianou, a Montgomery McCracken Walker & Rhoads lawyer representing the wine dealers and restaurants, told the judges. “They need to give it back.”

Brian Slipakoff, a Duane Morris LLP lawyer representing the PLCB, said the restaurants needed to start from scratch and win a second, effectively duplicate, order from Commonwealth Court finding the PLCB fees illegal.

Only then would they potentially be eligible for damages, he said.