Gabriel Inv. Grp. v. Tex. Alcoholic Beverage Comm'n, 22-0062
| Court | Supreme Court of Texas |
| Parties | Gabriel Investment Group, Inc., Appellant, v. Texas Alcoholic Beverage Commission, Appellee |
| Docket Number | 22-0062 |
| Decision Date | 17 June 2022 |
Gabriel Investment Group, Inc., Appellant,
v.
Texas Alcoholic Beverage Commission, Appellee
No. 22-0062
Supreme Court of Texas
June 17, 2022
Argued March 24, 2022
On Certified Questions from the United States Court of Appeals for the Fifth Circuit
OPINION
JAMES D. BLACKLOCK JUSTICE
Retail liquor stores in Texas operate under "package store permits" governed by Chapter 22 of the Alcoholic Beverage Code. In 1995, the Legislature prohibited public corporations from owning or holding an interest in package store permits. Tex. Alco. Bev. Code § 22.16(a). At the same time, the Legislature exempted from this prohibition any public corporation that, as of April 1995, already had permits or had permit applications pending. Id. § 22.16(f). The Fifth
Circuit certified the following questions about the scope of this exemption:
1. If Texas Alcoholic Beverage Code Section 22.16(f) exempts a package store from section 22.16(a), and if the package store sells any, most, or all of its shares to a corporation that does not itself qualify under section 22.16(f), will the package store's package store permits remain valid
2. If yes to (1), can the package store validly accumulate additional package store permits by reason of section 22.16(f)
24 F.4th 503, 508 (5th Cir. 2022).
As is customary, the Fifth Circuit "disclaim[ed] any intention or desire that the Court confine its reply to the precise form or scope of the question certified." Id. The parties agree we should construe the certified questions to ask about a public corporation's package store permits, not a "package store's package store permits." We understand the questions to ask whether section 22.16(f) continues to exempt a public corporation if that corporation sells some or all its shares to a non-exempt corporation, and, if so, whether the exempt corporation can acquire additional package store permits.
We answer both questions yes. Subsection 22.16(f) provides that section 22.16 "shall not apply" to an exempt public corporation. Tex. Alco. Bev. Code § 22.16(f). The only way to answer either certified question "no" would be to "apply" section 22.16 to limit the rights of an exempt public corporation. Of course, applying section 22.16 as contemplated in the certified questions would also apply section 22.16 to a non-exempt corporation, as the statute otherwise permits. But this does not change the fact that section 22.16 cannot be used to restrict an
exempt corporation's ownership of package store permits without "applying" the section to the exempt corporation. Simultaneous application of the statute to two corporations-one exempt and one non-exempt-inescapably includes applying the statute to the exempt corporation, in violation of section 22.16(f). Although this result may lead to consequences many have not heretofore anticipated, we consider it to be dictated by the statute's text, and the Legislature is of course free to respond to our decision as it sees fit.
I.
The Alcoholic Beverage Code heavily regulates the ownership of package store permits. For instance, "a person may not hold or have an interest, directly or indirectly, in more than 250 package stores or in their business or permit."[1] Id. § 22.04(a). In a similar vein, the Alcoholic Beverage Commission (TABC) cannot issue more than 15 permits to one person in a calendar year, subject to exceptions. See id. §§ 22.04(c), 22.041. And no person "who holds a package store permit or owns an interest in a package store may have a direct or indirect interest" in:
(1) a brewer's, retail dealer's on-premise, or general or branch distributor's license;
(2) a wine and malt beverage retailer's, wine and malt beverage retailer's off-premise, or mixed beverage permit; or
(3) the business of any of the permits or licenses listed in Subdivisions (1) and (2) of this subsection.
Id. § 22.06.
In 1995, the Legislature added the following restriction regarding public corporations:
A package store permit may not be owned or held by a public corporation, or by any entity which is directly or indirectly owned or controlled, in whole or in part, by a public corporation, or by any entity which would hold the package store permit for the benefit of a public corporation.
Id. § 22.16(a). The statute defines "public corporation" as: "(1) any corporation or other legal entity whose shares or other evidence of ownership are listed on a public stock exchange; or (2) any corporation or other legal entity in which more than 35 persons hold an ownership interest in the entity." Id. § 22.16(b).[2]
The prohibition on public-corporation involvement with package store permits never covered all public corporations. Instead, it contained two exemptions. First, "[t]his section shall not apply to a package store located in a hotel." Id. § 22.16(d). Second, the exemption at issue here provides:
(f) This section shall not apply to a corporation:
(1)which was a public corporation as defined by this section on April 28, 1995; and
(2)which holds a package store permit on April 28, 1995, or which has an application pending for a package store permit on April 28, 1995; and
(3) which has provided to the commission on or before December 31, 1995, a sworn affidavit stating
that such corporation satisfies the requirements of Subdivisions (1) and (2).
Id. § 22.16(f).
Gabriel Investment Group, Inc. (GIG) sells liquor at 45 stores in Texas under the trade names "Gabriel's" and "Don's & Ben's Liquor." See 24 F.4th at 504; 630 B.R. 216, 217 (W.D. Tex. 2021). GIG has been around since the 1940s but was not incorporated until April 13, 1995. 24 F.4th at 504. A little over a week after incorporating, and just before the statutory deadline in subsection (f), GIG applied for a package store permit. TABC issued the permit in August 1995. Id. In December 1995, GIG filed an affidavit with TABC attesting that it met the requirements of section 22.16(f). Id. The parties agree that GIG satisfied section 22.16(f)'s requirements and is thus covered by the subsection (f) exemption.
In September 2019, GIG filed for Chapter 11 bankruptcy. As part of its bankruptcy plan, GIG proposed to divide itself into two distinct entities: (1) a privately held corporation that would continue operating as a chain of 32 Texas liquor stores, [3] and (2) a public corporation that would continue, as GIG, to own and acquire package store permits under the subsection (f) exemption. 622 B.R. 213, 215-16 (Bankr.W.D.Tex. 2020); 630 B.R. at 218-19. Irrespective of the details of the proposed transaction, the parties agree we should assume that the public corporation known as GIG that may emerge from bankruptcy will
remain the very same public corporation known as GIG that qualified for the subsection (f) exemption in 1995.[4]
GIG has proposed to sell all or part of its shares to another public corporation, apparently a major publicly traded company. 630 B.R. at 219. Again, the parties ask us to assume that, after any such sale, GIG will remain a public corporation with an ongoing corporate identity distinct from that of its shareholder(s). GIG's value, of course, depends in large part on its continuing ability to acquire and maintain package store permits. See id. GIG therefore asked TABC if a stock sale to a public corporation that was not exempt under subsection (f) would affect GIG's exemption. See id. TABC answered that GIG would no longer enjoy the protections of subsection (f) if it sold shares to a non-exempt public corporation. See id.
After receiving this answer, GIG sought a declaration against TABC from the federal bankruptcy court that:
(1) GIG is and will remain exempt from the public-corporation ban set forth in section 22.16(a) regardless of whether any future direct or indirect owner(s) of all or any portion of the issued and outstanding stock of GIG is itself a public corporation; and (2) the rights and privileges associated with GIG's section 22.16(f) exemption from the public-corporation ban will continue unimpaired following any acquisition of all or any portion of GIG's issued and outstanding stock.
622 B.R. at 216. GIG and TABC filed cross-motions for summary judgment on this question.
The bankruptcy court sided with TABC. Id. at 221. GIG appealed to the district court, which affirmed. 630 B.R. at 217. The court held that only corporations that satisfy subsection (f) can own or control a package store permit. See id. at 228. Thus, "the exemption does not extend to a public corporation that directly or indirectly owns or controls an entity that holds a [] permit or would benefit from the [] permit, even if the entity that holds the [] permit is exempt." Id. GIG appealed. The Fifth Circuit certified the questions quoted above. 24 F.4th at 508. We accepted the certified questions.
II.
A.
This statutory-interpretation dispute requires us to focus on section 22.16 of the Alcoholic Beverage Code, reproduced here in full:
(a)A package store permit may not be owned or held by a public corporation, or by any entity which is directly or indirectly owned or controlled, in whole or in part, by a public corporation, or by any entity which would hold the package store permit for the benefit of a public corporation.
(b)For purposes of this section, a public corporation means:
(1) any corporation or other legal entity whose shares or other evidence of ownership are listed on a public stock exchange; or
(2) any corporation or other legal entity in which more than 35 persons hold an ownership interest in the entity.
(c) Before the commission may renew a package store permit, an individual who is an owner or officer of the permittee must file with the commission a sworn affidavit
stating that the permittee fully complies with the requirements of this section....
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