WASHINGTON RESTAURANT ASSOCIATION, a Washington non-profit Organization; NORTHWEST GROCERY ASSOCIATION, a non-profit organization; and COSTCO WHOLESALE CORPORATION, a Washington corporation, Appellants/Cross Respondents,
WASHINGTON STATE LIQUOR CONTROL BOARD, a state agency; CHRIS MARR, SHARON FOSTER, and RUTHANN KUROSE, in their official capacities as members of the Washington State Liquor Control Board, Respondents, ASSOCIATION OF WASHINGTON SPIRITS AND WINE DISTRIBUTORS, Intervenor-Respondent/Cross Appellant.
parties in this case ask us to decide whether the Washington
State Liquor and Cannabis Board (Board) appropriately
promulgated certain rules implementing Initiative Measure No.
1183, now codified in Title 66 RCW. The Initiative provided for
the privatization of the distribution and sale of liquor in
the state. The rules at issue here are the 10 percent license
fee rules,  which impose a fee on the spirits revenue
of certain private distillers, the sell-and-deliver rules,
which require certain distributors to sell and deliver
spirits from their licensed premises, and the 24-liter rules,
which impose daily limits for selling wine and spirits to
certain retailers. The Washington Restaurant Association,
Northwest Grocery Association, and Costco Wholesale
Corporation (Association) brought a petition for judicial
review of these rules before the superior court. The
Association of Washington Spirits and Wine Distributors
(Distributors) intervened to defend the Board's rules.
superior court granted in part and denied in part the
Association's petition, ruling that the 10 percent
license fee rules and the sell-and-deliver rules were valid
but that the 24-liter rules were invalid. The Association
appeals, arguing that (1) the 10 percent license fee rules
are invalid because the Board exceeded its statutory
rule-making authority in adopting the rules and (2) the
sell-and-deliver rules are invalid because they are arbitrary
and capricious. On cross-appeal, the Distributors argue that
the superior court erred in determining that the Board
exceeded its statutory rule-making authority by adopting the
that the 10 percent license fee rules are invalid but
otherwise affirm the superior court's order.
the repeal of Prohibition, Washington adopted the Washington
State Liquor Act, Title 66 RCW. Ass'n of Wash.
Spirits & Wine Distribs. v. Wash. State Liquor Control
Bd, 182 Wn.2d 342, 346, 340 P.3d 849 (2015). Under the
Liquor Act, Washington regulated the sale and distribution of
spirits through state-owned liquor stores and distribution
centers. See Wash. Ass'n for Substance Abuse &
Violence Prevention v. State, 174 Wn.2d 642, 647, 278
P.3d 632 (2012).
November 2011, Washington voters passed Initiative No. 1183,
which privatized the distribution, sale, and promotion of
spirits in the state and created new licenses for private
distributors to sell and distribute spirits. The Initiative
imposed license fees on private distributors and distillers
who sell and distribute spirits. Ass 'n of Wash.
Spirits & Wine Distribs., 182 Wn.2d at 347. The
Initiative also imposed a limit on the retail-to-retail sale
of wine and spirits and allowed for retailers to sell liquor
either at its licensed premises or at its warehouse
facilities. The Initiative is now codified in Title 66 RCW.
66 provides four different licenses that allow for the
distribution of spirits and prescribes the licensing fees for
each license. 182 Wn.2d at 347. One such license is a spirits
distributor license. RCW 66.24.055. Licensed spirits
distributors may purchase spirits from instate and
out-of-state distillers, manufacturers, and suppliers and may
directly resell the spirits to other retailers. RCW
more specific, license that provides for the distribution of
spirits is a distiller's license. RCW 66.24.140, .640.
Under RCW 66.24.140, a distiller's license permits an
in-state distiller to blend, rectify, and bottle distilled
spirits. Distillers must pay an annual license fee of $2,
000. RCW 66.24.140(1). Additionally, a licensed in-state
distiller may distribute its own spirits directly to
retailers. RCW 66.24.140(2)(a)-(b), .640. Out-of-state
distillers may distribute their own spirits by obtaining a
spirits certificate of approval. RCW 66.24.140, .640. A
spirits certificate of approval allows out-of-state
distillers and importers to distribute their spirits directly
to in-state retailers. Ass'n of Wash. Spirits &
Wine Distribs., 182 Wn.2d at 348. Licensed distillers
and spirits certificate of approval holders distributing
their own spirits under RCW 66.24.640 are required to
"comply with the applicable laws and rules relating to
distributors." RCW 66.24.640.
66 also governs the manner in which liquor is sold in the
state. RCW 66.24.630(1) and RCW 66.24.360(2) limit the
quantity of spirits and wine that a licensed retailer can
sell to another retailer. Under RCW 66.24.630(1) and RCW
66.24.360(2), "no single sale [of spirits or wine] may
exceed twenty-four liters."
66 provides the Board with the power to prescribe fees
associated with licenses and to regulate the sale of liquor.
RCW 66.08.030(4), (6). Accordingly, the Board promulgated a
number of rules to implement Title 66. These rules include
WAC 314-23-030(3)(b) and WAC 314-28-070(3) (the "10
percent license fee rules"). The 10 percent license fee
rules impose a 10 percent fee on the spirits revenue of
distillers and spirits certificate of approval holders who
choose to distribute their own spirits. WAC 314-28-070(3).
The Board also promulgated WAC 314-23-020(2) and WAC
314-24-180(2) (the "sell-and-deliver rules")
and former WAC 314-02-103(2) (2012) and former WAC
314-02-106(1)(c) (2012) (the "24-liter rules").
Clerk's Papers (CP) at 120-21. The sell-and-deliver rules
provide that wine and spirits distributors must sell and
deliver their products from their licensed premises. Former
WAC 314-23-020(2); former WAC 314-24-180(2). The 24-liter
rules impose a limit under which off-premises retailers, like
a grocery store, may sell only 24 liters of wine or spirits
to an on-premises retailer, like a hotel or restaurant, each
day. Former WAC 314-02-103(2); former WAC 314-02-106(1)(c).
the adoption of these rules, the Association filed a petition
for judicial review in superior court. The Association argued
that the 10 percent license fee rules, sell-and-deliver
rules, and 24-liter rules were invalid because they exceeded
the Board's statutory rule-making authority and because
the rules were arbitrary and capricious. The Distributors
intervened to defend the Board's rules. The superior
court determined that the 10 percent license fee rules and
the sell-and-deliver rules were valid because they were made
within the Board's broad regulatory authority. However,
the superior court determined that the 24-liter rules were
invalid because they exceeded the Board's statutory
rule-making authority. The Association appeals, and the
review of a challenge to an agency rule is governed by the
Washington Administrative Procedure Act (APA), chapter 34.05
RCW. Ass 'n of Wash. Spirits & Wine
Distribs., 182 Wn.2d at 350. Under the APA, an agency
rule may be invalidated only if it (1) violates
constitutional provisions, (2) exceeds the agency's
statutory rule-making authority, (3) was adopted without
complying with statutory rule-making procedures, or (4) is
arbitrary and capricious. RCW 34.05.570(2)(c). The validity
of an agency rule is a question of law we review de novo.
Kabbae v. Dep't of Soc. & Health Servs., 144
Wn.App. 432, 439, 192 P.3d 903 (2008).
10 Percent License Fee Rules
Association argues that the Board exceeded its statutory
rule-making authority by adopting the 10 percent license fee
rules because Title 66 does not provide for a 10 percent
license fee on distillers. We hold that the Board exceeded
its statutory rule-making authority in adopting the 10
percent license fee rules, and therefore, the rules are
agencies have only those powers expressly granted by statute
or are necessarily implied from the legislature's
statutory delegation of authority." Lenander v.
Dep't of Ret. Sys., 186 Wn.2d 393, 404, 377 P.3d 199
(2016). When an agency rule is reasonably consistent with the
statutes the rule implements, an agency acts within its
statutory rule-making authority, and the rule is presumed to
be valid. Wash. State Hosp. Ass 'n v. Dep't of
Health, 183 Wn.2d 590, 595, 353 P.3d 1285 (2015).
However, an agency cannot promulgate rules that amend or
change legislative enactments. 183 Wn.2d at 595. Rules that
are inconsistent with the statutes they implement are beyond
the agency's authority and are therefore invalid. 183
Wn.2d at 595.
the people approve an initiative measure, they exercise the
same power of sovereignty as the Legislature does when it
enacts a statute." McGowan v. State, 148 Wn.2d
278, 288, 60 P.3d 67 (2002). Accordingly, we interpret an
initiative according to the rules of statutory
interpretation. 148 Wn.2d at 288. Our primary goal is to
determine the collective intent of the people who enacted the
initiative measure. 148 Wn.2d at 288. We discern "intent
from the plain language enacted by the [people], considering
the text of the provision in question, the context of the
statute in which the provision is found, related provisions,
amendments to the provision, and the statutory scheme as a
whole." Ass 'n of Wash. Spirits & Wine
Distribs., 182 Wn.2d at 350. We do not add words to a
statute. Birgen v. Dep't of Labor & Indus.,
186 Wn.App. 851, 858, 347 P.3d 503, review denied,
184 Wn.2d 1012 (2015).
statute is unambiguous, we apply the statute's plain
language as an expression of legislative intent and do not
consider other sources of such intent. 186 Wn.App. at 857-58.
However, if a statute is subject to multiple reasonable
interpretations, the statute is ambiguous. 186 Wn.App. at
66 creates licenses permitting the distribution of spirits
and establishes the fees associated with each license.
Ass'n of Wash. Spirits & Wine Distribs., 182
Wn.2d at 347. Additionally, the Board has the power to make
regulations that extend to "[prescribing the fees
payable in respect of permits and licenses issued under
[Title 66] for which no fees are prescribed in [Title 66],
and prescribing the fees for anything done or permitted to be
done under the regulations." RCW 66.08.030(4).
described above, under RCW 66.24.140,  Title 66 provides
for a distiller's license. Under RCW 66.24.140(1),
licensed in-state distillers are permitted to blend, rectify,
and bottle spirits and generally must pay an annual licensing
fee of $2, 000. Under RCW 66.24.640,  a licensed
distiller "may act as a retailer and/or distributor to
retailers selling for consumption on or off the licensed
premises of spirits of its own production." A licensed
distiller "operating as a distributor and/or retailer
under [RCW 66.24.640] must comply with the applicable laws
and rules relating to distributors and/or retailers."
66 also establishes a spirits certificate of approval. RCW
66.24.140, .640; see also RCW 66.28.290(2). A
spirits certificate of approval permits an out-of-state
distiller or importer to distribute its own spirits to
Washington retailers. RCW 66.24.640. A spirits certificate of
approval holder may also "act as a . . . distributor to
retailers selling for consumption on or off the licensed
premises of spirits of its own production." RCW
66.24.640. Because the 10 percent license fee rules treat
distillers and spirits certificate ...