GRAND RAPIDS — Five Michigan breweries are suing the Michigan Liquor Control Commission over the regulatory agency’s quashing of free bingo promotions at their taprooms.

The case, which was filed last week in Kent County Circuit Court, stems from a recent MLCC crackdown at several breweries and other licensed premises that offer free bingo as a way to attract customers on slow sales days. In shutting down the practice, the MLCC said the free bingo was a form of illegal gambling.

However, Grand Rapids-based Harmony Brewing Co. and City Built Brewing Co., Hudsonville-based Pike 51 Brewing Co., Springfield-based Territorial Brewing Co. and Ann Arbor-based Arbor Brewing Co. said in court filings that the MLCC’s position runs counter to a 1947 Michigan Attorney General opinion regarding bingo at licensed premises.

The opinion hinges on whether the bingo game comes with “consideration,” or a cost required to participate in an activity, one of the three elements — along with chance and reward — that are needed to meet the definition of illegal gambling.

“Of course you can do bingo; there’s no consideration here,” said Joseph Infante, principal in Grand Rapids at Miller, Canfield, Paddock and Stone PLC and chair of the firm’s alcoholic beverage regulation team. Infante is representing the breweries in the appeal.

The Michigan Attorney General opinion said a bingo game would be illegal if the licensed entity raised its prices for food or beverages during the game. In that case, the “excess charge above the ordinary cost” amounts to consideration.

Because the breweries did not charge patrons to play bingo, nor did they up-charge them for food or beverage for the privilege of playing, they argue there was no consideration involved, and therefore no illegal gambling.

Even so, the MLCC said in correspondence with the companies that purchasing food and beverage at regular prices during the free bingo game and participants’ presence at the premises amounted to consideration.

At its April 10 hearing, the MLCC denied a request for declaratory ruling that free bingo games are legal. The Circuit Court case appeals that denial, calling the MLCC’s legal position “frivolous” because it contrasts with existing statutes in state law.

“If the Commission’s position were true, McDonald’s will be disappointed to hear it can no longer run its popular Monopoly promotion in Michigan,” the companies wrote in the filing.

Infante said the MLCC’s position “makes so little sense that (the case) needed to be filed.”

“We filed originally for the declaratory ruling because in my conversations with enforcement, they took a position clearly contrary to state law,” Infante told MiBiz. “The commission should have issued a declaratory ruling that bingo is legal, but the commission didn’t do their job.”

The breweries have requested that the court hear oral arguments in the case, enter an order determining that the free bingo games do not constitute illegal gambling and award costs and attorneys fees “and any other relief that the Court deems appropriate under the circumstances.”

David Harns, communications manager for the Department of Licensing and Regulatory Affairs, which includes the MLCC, declined to comment on the pending litigation.

In the appeal, the breweries argue the MLCC has no authority to enforce Michigan’s gaming laws, powers that lie with the Michigan Bureau of State Lottery and the Michigan Gaming Control Board. As well, the breweries cite state law that was amended in 1996 to specifically create an exception for a lottery game such as bingo if the promotional activity is “clearly occasional and ancillary to the primary business.”

Stephen Guikema, one of the owners of Pike 51 Brewing Co., said in a sworn statement that the company used bingo “occasionally as a way to promote our business and products.” The brewery charged “ordinary prices” to customers who wanted to purchase food or beverages during the game, and gave away company merchandise or “knick-knacks that we get from a local thrift store that have little value.”

“Our bingo activities have typically been on Tuesday nights as a way to promote our business and our products. Tuesday nights had typically been a slow night for the business but the bingo helped with the slow nights,” Guikema stated. “Since MLCC demanded that we cease hosting free bingo activities, our Tuesday night business has decreased.”

CONSTITUTIONAL MATTERS

Another aspect of the appeal hinges on the MLCC’s reasoning for its denial of the request for declaratory ruling.

In its denial, the MLCC said the request “poses questions that have previously been resolved by the Commission” in a case involving Saugatuck Brewing Co.

“Allowing unlawful gambling devices, Bingo Cards, on the licensed premises and allowing unlawful gambling with Bingo Cards on the licensed premises constitute a violation of the Michigan Liquor Control Code as well as various provisions of the Michigan Penal Code,” Harns, the LARA spokesperson, said in an email to MiBiz.

Saugatuck Brewing, one of the companies that petitioned the MLCC for a declaratory ruling, previously did not dispute an enforcement action regarding its free bingo games and paid the fine imposed by the commission, thereby waiving its right to a hearing to contest the action.

The breweries filing the appeal in Circuit Court — to which Saugatuck Brewing was not a party — said the MLCC denied them their 14th Amendment rights to due process “to contest allegations against them.”

“The Commission misinterpreted the law as it relates to lotteries, and it did so considering only Saugatuck Brewing’s unwillingness to contest the allegations … The Commission contends that because Saugatuck Brewing did not contest its fines, every other entity licensed by the Commission is collaterally estopped from challenging the Commission’s position,” according to the filing.

Infante said the MLCC missed “an obvious ruling” in “deferring to enforcement.”

“And their reason for denying the request was unconstitutional. ‘Someone else didn’t challenge the fine, so it’s settled law and the others can’t challenge it.’ The commission is not the court system, and the courts would never do that,” he said.