The PLCB Vs. Everyone

Meet The Bryn Mawr Man Who Sued The PLCB – And Won

The PLCB Is One Of The Most Powerful Agencies In PA. Should It Be?

by Michele Gargiulo, Food and Wine Editor

This would be a David and Goliath story … if David was armed with a finely aged Cabernet instead of a slingshot. In this case, the Goliath is the Pennsylvania Liquor Control Board, which many hospitality professionals believe is an labyrinthine organization with power that is both unchecked and unnecessary.

The David is actually Jason – Jason Malumed, a mostly mild mannered, Main Line Millennial who grew up in Villanova and lives in Bryn Mawr. Malumed, a partner in MFW Wine Co., sells wine – “special order” wine, to use the PLCB’s exact term – to bars and restaurants. When Act 39 was passed in 2016, Malumed thought that the PLCB’s authoritarian control of his business would be lifted.

“When I pushed back, saying it was legally required, they flat-out refused. That’s when I told them: ‘Well, I’m going to sue you.’”

Act 39 allowed wine distributors to sell and deliver directly to restaurants, creating a wholesale tier that was privatized. “And, if we did that, the PLCB was not allowed to collect a handling fee on the wine,” Malumed said. “It was hailed as the largest modernization of the liquor code since Prohibition.”

Jason Malumed of MFW Wine Co.

But 2016 and 2017 came and went without the PLCB enacting that delivery system. In 2020, COVID forced the closure of PLCB stores and stopped the sale of liquor to restaurants and bars, leaving them without wine and a valuable source of income. “We were selling wine in New York and New Jersey during those weeks,” Malumed said. “But in Pennsylvania, restaurants were stuck. I reached out to the PLCB, reminding them that Act 39 had given us the right to sell directly to restaurants by 2017. Their response? The system wasn’t in place, and they wouldn’t allow it. When I pushed back, saying it was legally required, they flat-out refused. That’s when I told them: ‘Well, I’m going to sue you.’”

How Restaurant Wine Sales Work In PA

I’m not just an observer of this situation. It directly impacts my career as a professional sommelier. I vividly remember my first restaurant job and the additional headaches the PLCB placed on us. Working at a small, privately-owned business, I was responsible for driving my personal car to the state store to load cases of wine and liquor, then driving back to the restaurant to unload everything myself.

It wasn’t just time-consuming; it was inefficient and exhausting. The process made what should have been a simple transaction feel unnecessarily burdensome, especially when compared to how easily restaurants in neighboring states like New York or New Jersey can receive deliveries directly from distributors.

Cheers To Us: According to the PLCB’s 2022-2023 Annual Report, the top 10 booziest counties in PA are in the Delaware Valley.

Whenever I ran out of wines or liquors, I would heavily weigh if it was worth it to pick up more or to continue without. That would impact my guests at the restaurant who would be frustrated when I was either missing their vodka of choice, or I was missing because I had to run to the state store. I cursed the PLCB daily in my head … and sometimes out loud. Multiply this by a million and you get the picture that unfolds in bars and restaurants throughout Pennsylvania.

Inconvenience isn’t the only issue at hand. There are real financial impacts on restaurants and bars because the PLCB applied its full retail mark-up to wines. That’s roughly 55%. Wines were also levied with an 8% sales tax and a handling fee that has a name and a nifty acronym: LTMF. That stands for labor, transfer and marketing factor. It comes to approximately $1.75 per bottle.

The top five wines sold in PA in 2022-2023 according to PLCB’s annual report.

On top of that, restaurants ordering from distributors like MFW had to pay for orders in advance. “In New York and New Jersey, restaurants order cases and I deliver the wine directly to the restaurants. I give them invoices that are due in 30 days,” Malumed explained. “If payment issues arise, I can put them on COD – cash on delivery. But in PA, it is worse than COD. It is CBD: cash before delivery.”

Cut to March 2020, when COVID closed the PLCB stores. Restaurants, including the one where I worked, were suddenly and completely dependent upon what we had in our storage room. Unable to purchase anything from the store, we ran out of vodka within a week. Who wants to be out of vodka during a pandemic … or ever?

Power Of Attorney

Seeing the huge amounts of income that bars and restaurants were losing in 2020 because of the PLCB’s inaction convinced Malumed to take action. He turned to class action attorney John G. Papianou, a partner at Montgomery McCracken Walker & Rhoads. “According to Act 39, the PLCB should have created a direct delivery system to restaurants. There was no question about it,” Papianou said. “The PLCB was supposed to do this and didn’t.”

John Papianou, partner at Montgomery McCracken Walker & Rhoads

But a strongly worded letter wasn’t going to get it done. It would take legal action – maybe a lot of it. Papianou was up for it and, on behalf of MFW, filed a petition on April 15, 2020. “I said, ‘Let’s fight the PLCB,’” he remembered. “I wasn’t exactly sure how the PLCB would respond. But I was astonished at how intransigent the agency is. It was very disappointing.”

“A 9^th grader with basic coding knowledge could’ve implemented the system.

Within months, Pennsylvania’s Commonwealth Court ruled in favor of Malumed and MFW Wine Co. The court found that the PLCB had failed to implement the direct delivery system as required by law, and its inaction had caused real harm to wine distributors and restaurants alike. Instead of complying, the PLCB appealed the decision to the Pennsylvania Supreme Court.

The legal battle stretched on for years, winding its way through multiple courtrooms and legal filings. “It was so frustrating and it didn’t have to be this way,” Papianou said. “A 9^th grader with basic coding knowledge could’ve implemented the system. So, it wasn’t that the PLCB couldn’t create the system. It was that they didn’t want to.”

“The Court recognizes that the time established by the General Assembly for [the] PLCB to implement a direct shipment [SO] process has long passed. Nonetheless, based on the credible evidence adduced during the hearing, the Court is satisfied that implementing a new process for the direct shipment of [SOs] authorized by Act 39 is neither as simple as Petitioners suggest nor as complicated (or expensive) as [the] PLCB would have the Court believe. [The] PLCB must be afforded a reasonable amount of time to implement thoughtfully a process, perhaps even an interim one as Petitioners’ counsel suggested during the hearing, to provide licensed vendors, licensed importers, and customers a[n] [SO] direct shipment alternative. The Court is confident that [the] PLCB has the resources and ingenuity to do so without unreasonable delay.” – MFW Wine Co. v. Pa. Liquor Control Bd., 276 A.3d 1225, 1231 (Pa. Cmmw. Ct. 2022)

“A Rogue Agency”

For Malumed, the issue went beyond the computer system and even beyond alcohol itself. “The PLCB has proven that it can no longer be trusted to devise and execute strategies that are in the best interest of the people of Pennsylvania,” Malumed said. “The PLCB is a rouge agency. It will do whatever it thinks it can get away with to keep the power it has.”

The wines that Malumed’s company – and many other distributors – sell to PA restaurants fall into the PLCB’s Special Order category, one of the most profitable, according to the PLCB’s 2022-2023 annual report.

The courts agreed. In July 2024, the Pennsylvania Supreme Court rejected PLCB claims that “sovereign immunity” protected it against a class action lawsuit initiated by restaurants who, as an earlier Supreme Court decision upheld, had unnecessarily paid handling fees and taxes over a five year period.

Malumed was not part of the class action suit. His company filed a separate lawsuit against the PLCB that resulted in a verdict for Malumed and awarded MFW financial damages to the tune of $22,000.

PLCB was also ordered to pay MFW’s legal fees, a ruling for which, Papianou explained, there is a very high bar. “You have to have a clearly established legal right that is being violated,” he said. “It had been two years after the initial ruling – which was four years after the PLCB’s initial deadline. We said, ‘What can we do to get the PLCB to follow the law?’”

“This Court, having determined that the PLCB had a clear and unambiguous statutory duty to implement a procedure to process direct shipment SOs by June 1, 2017, see MFW I , and, given that this Court issued MFW I in May 2020, and the Pennsylvania Supreme Court affirmed that decision in March 2021, yet the PLCB has not yet fulfilled that duty, concludes that the PLCB’s initial inaction was, at the very least, arbitrary, and its ongoing refusal to implement a procedure to process direct shipment SOs and continuing to assess handling fees is dilatory and obdurate. Accordingly, MFW and A6 are entitled to attorneys’ fees from the PLCB related to their mandamus action.” – MFW Wine Co. v. Pa. Liquor Control Bd., 276 A.3d 1225, 1241 (Pa. Cmmw. Ct. 2022)

Next up: a class action law suit that could result in $50 million awarded to restaurants seeking reimbursement for the handling fees and taxes they were wrongly charged between June 2017 and June 2022. The PLCB has filed another motion to dismiss that case.

“They are trying to hold onto money they unlawfully collected,” Papianou said. “We’ll get folks the money they deserve. And we’re talking about restaurants and bars, which are small businesses that operate on a narrow profit margin. They need their money back. That’s who we are fighting for.”

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