If Clark’s Market would like to continue selling full-strength beer, it’s going to have to go back to the drawing board — on its lease agreement for its Puppy Smith Lane location.
So was the ruling Thursday in Pitkin County District Judge Chris Seldin’s virtual courtroom. In the yearslong legal dispute between neighboring Aspen Wine & Spirits and Clark’s Market, the former sued the latter, claiming that when the grocery store began selling full-strength beer, it encroached on the liquor store’s exclusivity rights as the only full-service liquor store allowed to operate on the premises.
In 2016, Colorado legislators allowed grocery and convenience stores to sell full-strength beer, a departure from the eight-decades-running regulations limiting such retailers to selling only “3.2 beer” — that is, alcohol with a 3.2% alcohol content.
But the definition of what constitutes “3.2 beer” came under scrutiny between parties during Wednesday’s testimony. Clark’s Market representation argued that the term is “language of art,” leaving room for interpretation. Witnesses for Aspen Wine & Spirits maintained it was a “common sense” term universally understood by consumers and sellers alike.
“That is simply more weight and more complexity than the humble 3.2 beer can bear,” Seldin said Thursday of the defense’s argument on the matter.
So, too, did the word “equivalent” come under semantic argument Wednesday.
According to a 2000 addendum to Clark’s lease, the grocery store was allowed to sell 3.2 beer or an equivalent product. Former Clark’s Market President and CEO Tom Clark testified that when the big-name beer producers pulled out of the 3.2 market, he began selling “the equivalent,” which were the products available from the brands the store has always carried.
Seldin didn’t find that argument compelling in his ruling — or even credible. On Thursday, he had some of Clark’s testimony stricken from the record in an acknowledgment that upon further reflection, he felt he should have sustained a few of Rick Neiley’s objections. Neiley represented Aspen Wine & Spirits in the case.
“Mr. Tom Clark’s testimony was essentially that 3.2 beer is a term of art designed by the parties to evolve over time such that it can include regular beer,” Seldin said Thursday. “The court finds that that interpretation conflicts with the plain language of the contract. Because in paragraph two in the 2000 addendum … it is clear that the contracting parties understood that 3.2 beer was one thing, and that is not regular beer. Otherwise, they would not have referred to them as two separate things in the same paragraph — in fact in the same sentence.”
Ultimately, Seldin ruled that because 3.2 beer is in fact still available on the market — albeit not by some of the more recognized brands with top market share — Clark’s broke its contract when it sold full-strength beer throughout 2019 and in 2020, with the exception of between July through April of this year. Seldin, in July, ordered the supermarket’s liquor license be reviewed by the Local Licensing Authority. When the LLA again approved Clark’s liquor license application in November, and in April the store received its reinstated liquor license. The store resumed sales of full-strength beer.
“It’s undisputed that Clark’s was selling full-strength beer. The court does find that violated the terms of the contractual documents unless the court finds that 3.2 beer is no longer brewed and available for the state of Colorado,” Seldin said.
The judge expressed compassion for Clark’s business position, but maintained that his position was limited to the language of the contracts involved in the case on which he was ruling.
“Those products, those low-alcohol products, were available, but they just were not popular with Clark’s customers. And moreover, the testimony from Tom Clark was that his customers want the marquee brands of beer. They want Coors. They want MGD — Miller Genuine Draft,” he said. “The testimony essentially from both parties was, ‘You can get it; it’s not a big category anymore. … There are not large producers making these kinds of products, but you can still get it.’ Because 3.2 beer is still brewed and available to purchase and carry in this state, Clark’s violated the contract by selling regular beer on its premises.”
Aspen Wine & Spirits sought more than $33,000 in damages from perceived profit losses to what it successfully argued in court should never have been its competitor for beer sales in 2020 and more than $38,000 for the same reason in 2019.
Seldin agreed with Tom Clark’s testimony that the grocery store didn’t make any meaningful profits from beer sales in 2020, and so there were no profits from which to pay damages.
However, the judge did award damages to the liquor store from the 2019 dynamic, albeit at a 25% reduction from the request. That reduction reflects what Seldin described as “inflated” hypothetic profits that the liquor store would have made had its neighbor not been selling full-strength beer. Just as the judge did not find Tom Clark’s testimony convincing regarding the definition of 3.2 beer or equivalent products, he also found Aspen Wine & Spirits’ argument that there would be no associated costs with the sale of more product — in this case, beer — credible.
“Even assuming the plaintiff’s testimony that all profits here would have been gravy, essentially, because all of its other costs were sunk costs, it was clear during cross-examination that that was not accurate,” Seldin said. He pointed to credit-card processing fees and the fact that the store’s rent considers a percentage of profits — that is, rent would have increased if the shop reported higher profits — as obvious would-be costs.
At the end of the day, Seldin noted that he didn’t think the damages paid was the point of the lawsuit — “the damages are probably going to be side show.”
The bigger question was whether Clark’s Market would be able to continue selling full-strength beer or not with its current lease agreement.
“According to the court’s ruling, the answer is ‘not,’” Seldin said.
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