Year-old monopoly lawsuit against North Myrtle Beach likely to drag into 2024
For more than a year, a family-run business and North Myrtle Beach have battled in federal court over a 1990 law restricting private commerce on the city’s shores.
Even as the docket grows in Cherry Grove Beach Gear LLC v. City of North Myrtle Beach, a possible trial remains months away, with U.S. Circuit Court Judge R. Bryan Harwell last month setting a March 11 deadline for jury selection.
Here’s what to know about a case that could change the future of commerce in a city that draws millions from tourism activity every year.
Cherry Grove Beach Gear accused the city of running a monopoly
Derek Calhoun and his wife, Jackie, launched their beach gear delivery business in 2019, allowing customers to rent chairs, umbrellas, surfboards and other goods that would be installed for them directly on the sand.
But a long-standing city ordinance prevented on-site setups by private firms unless they were franchised, with fines of up to $500 a day.
The Calhouns twice applied for a franchise tag and sought legal action after being denied both times.
Derek Calhoun filed a federal lawsuit accusing North Myrtle Beach of violating state and federal antitrust laws, his company’s 14th Amendment rights that promise equal protection and defamation.
The 20-page motion says city leaders are violating antitrust laws by refusing to consider them for a franchise allowing the installation of rental equipment on public shores. City officials, the suit argues, wrote a “sham” law “designed to restrict competitive business practices and monopolize business in order to maximize profits.”
North Myrtle Beach says its policy is about public safety and allowed under state law
Private commerce on the city’s beaches has been regulated since 1990, when officials first required vendors to obtain a franchise agreement. Since then, the rules have been adjusted several times, most recently in 2010 when authorized hours, placement and size of shading devices and removal of equipment was written into the law. Businesses can rent or sell gear online or deliver equipment to off-site locations.
City-managed rentals are a revenue stream that officials say helps keep taxes down and pay for lifeguards and beach patrols. In the 2022 budget, officials allocated $2.6 million in expected profits from the umbrella and chair rentals, with an additional $10,000 from food and drink purchases. Customers can rent umbrellas through the city for $30 a day each.
It costs $20 for chairs. Weekly rates are between $80 and $120, while seasonal prices — Memorial Day through Labor Day — are $900 for residents and $1,800 for visitors. City officials point to a 1962 portion of state law allowing municipalities to “grant franchises and make charges for the use of public beaches” as grounds for their policy.
The city has franchise agreements with three businesses that offer banana boats and parasailing, but officials have said in the past they won’t consider granting one to Cherry Gear as long as the company continues to dismiss the law.
Cherry Grove has racked up more than $40,000 worth of fines
Between June and post-Labor Day, the company was hit with $20,500 in total citations for continuing to set up recreation stations on the beach — or 41 days’ worth of fines. Despite North Myrtle Beach’s hard-line enforcement, Cherry Grove Beach Gear poked fun at city officials as the penalties continued to mount, even setting up a chair and umbrella set for Mayor Marilyn Hatley.
Harwell last September ruled the city can continue to slap Cherry Grove Beach Gear with daily fines as the lawsuit progresses. It’s not immediately known how much Cherry Grove has incurred in fines since then.
Both sides have already won concessions, but not enough for the case to be dropped
Near the end of 2022, Harwell said Cherry Grove Beach Gear can’t sue the city over defamation claims without bringing more evidence— one of seven grounds included in the company’s July 11 lawsuit. Harwell dismissed the claim “without prejudice,” meaning lawyers can try to prove it again.
But he tossed “with prejudice” arguments that North Myrtle Beach’s policies violated 14th Amendment equal protection laws — permanently removing it from the suit. But he sided with Cherry Grove Beach Gear’s ability to sue under other elements of the law, including:
Antitrust claims
Regulatory taking
Violation of state and federal contract clauses
Multiple city police officers could be among those called to the stand at trial
Cherry Grove’s witness list includes in the Calhouns and Stephen Dailey, listed in court documents as a company representative who has been ticketed by local police. Accountant Robert Milhous (incorrectly identified as Millhouse in court filings), city finance director Randy Wright, city attorney Chris Noury, every city police officer who’s issued the Calhouns a citation and an unidentified state Department of Revenue employee are also expected to be called on
Meanwhile, city manager Mike Mahaney will lead the defense’s slate of witnesses with other officials including Munro Reed — city’s beach patrol manager — and Graham Faris, who’s in charge of day-to-day beach operations. Several members of the city’s finance department are also listed as potential witnesses.
