Southern Wine and Spirits of Texas, Inc. v. Steen
| Decision Date | 16 May 2007 |
| Docket Number | No. A 06 CV 720 LY.,A 06 CV 720 LY. |
| Citation | 486 F.Supp.2d 626 |
| Parties | SOUTHERN WINE AND SPIRITS OF TEXAS, INC., Harvey R. Chaplin, Wayne E. Chaplin, Paul B. Chaplin, and Steven R. Becker, Plaintiffs, v. Alan STEEN, in his Official Capacity as Administrator of the Texas Alcoholic Beverage Commission, Defendant. |
| Court | U.S. District Court — Western District of Texas |
Christopher V. Popov, Vinson & Elkins, Gary Ewell, Oral Argument, Vinson & Elkins, LLP, Kimberly A. Frost, Jack Martin & Associates, Austin, TX, for Southern Wine and Spirits of Texas, Inc., Harvey R. Chaplin, Wayne E. Chaplin, Paul B. Chaplin, Steven R. Becker, Plaintiffs.
James Carlton Todd, Oral Argument, Office of the Attorney General, State of Texas, Austin, TX, for Alan Steen in his official capacity as Administrator of the Texas Alcoholic Beverage Commission, Defendant.
Before the Court is the above styled and numbered cause of action. Plaintiffs Southern Wine and Spirits of Texas, Inc. ("Southern Wine of Texas"), Harvey Chaplin, Wayne Chaplin, Paul Chaplin, and Seven Becker, all residents of Florida,1 commenced this action seeking declaratory and injunctive relief against Defendant Alan Steen in his official capacity as the Administrator of the Texas Alcoholic Beverage Commission ("TABC"). See 28 U.S.C. §§ 2201, 2202. Southern Wine of Texas contends that the TABC's refusal of Southern Wine of Texas's application for the permit and licenses necessary for it to operate as a wholesaler, general distributor, and importer of alcoholic beverages in Texas ("Application"), based solely on Texas's one-year durational residency and citizenship statutes,2 foreseeably deprived it of the right to engage' in interstate commerce in violation of the Commerce Clause of the United States Constitution, and further deprived it of the privilege of owning and engaging in business across state lines in violation of the Constitution's Privileges and Immunities Clause, for which it is entitled to relief.3 See 42 U.S.C. § 1983. Additionally, Southern Wine of Texas contends that the refusal of its Application is in direct contravention of Cooper v. McBeath, which held that the enforcement of Texas's durational residency and citizenship requirements violates the Commerce Clause and, as the Texas statutes "amount to simple economic protectionism," they are not within the ambit of the Twenty-first Amendment.4 11 F.3d 547, 548, 555-56 (5th Cir.1994).
This cause proceeded on joint exhibits and stipulated facts to a bench trial before this Court on February 20, 2007. Having considered the joint exhibits and stipulations of fact (Clerk's Document No. 10), the parties' briefs on the merits (Clerk's Document Nos. 8 & 9), the pleadings, the evidence admitted and arguments of counsel presented at the bench trial, and the applicable law, the Court finds that the provisions of the Texas Alcoholic Beverage Code at issue impermissibly impinge on the Commerce. Clause by mandating differential treatment for in-state and out-of-state wholesalers of alcoholic beverages, and concludes that Southern Wine of Texas's request for declaratory and injunctive relief should be granted.5
This Court has jurisdiction over this action because Southern Wine of Texas challenges the constitutionality of various Texas state statutes under the United States Constitution, and seeks redress for a deprivation, under color of state law, of rights, privileges, and immunities secured by the Constitution. See 28 U.S.C. §§ 1331, 1343(a)(3). Venue is proper in the Austin Division of the Western District of Texas, because a substantial part of the events or omissions that give rise to Southern Wine of Texas's claims arose within this district and because the TABC maintains its offices in the district. See 28 U.S.C. § 1391(a), (b).
Pursuant to the parties' stipulated facts, Southern Wine and Spirits of America ("Southern Wine of America") is the largest distributor of wine, distilled spirits, and beer in the United States. On May 12, 2006, the Individual Plaintiffs along with Southern Wine of America created Southern Wine of Texas, a Texas domestic for-profit corporation, for the purpose of operating as a wholesaler and distributor of alcoholic beverages in Texas. Southern Wine of Texas is a wholly owned subsidiary of Southern Wine of America. On June 27, 2006, Southern Wine of Texas applied to the TABC for the primary permit and licenses necessary to operate as a wholesaler, general distributor, and importer of alcoholic beverages in Texas-specifically a Wholesaler's Permit, a General Distributor's License, and an Importer's License.6 If Southern Wine of Texas obtains the permit and licenses necessary to do business in Texas, it intends to operate facilities physically located in Texas. By letter dated August 31, 2006, the TABC refused Southern Wine of Texas's Application for the sole reason that. Southern Wine of Texas, is ineligible for the necessary permit and licenses based on Texas's one-year durational residency and citizenship statutes. See Tex. Alco. Bev.Code Ann. §§ 11.46(a)(11); 61.42(a)(5), (8); 109.53 (West 2007); see also Tex. Alco. Bev.Code Ann. § 6.03 (West 2007) (statement of public policy for citizenship requirements). The parties agree that Texas's durational residency laws treat nonresidents engaged in interstate commerce less favorably than Texas residents engaged in intrastate commerce. By its action, Southern Wine of Texas seeks to prohibit the TABC from enforcing the one-year durational residency and citizenship statutes against it and to compel the TABC to review and process Southern Wine of Texas's Application on an equal footing with similarly situated Texas-resident applicants under other relevant provisions of the Texas Alcoholic Beverage Code.
Texas's one-year durational residency and citizenship statutes
Texas citizenship is a statutory requirement for alcoholic-beverage permit holders and licensees. "No person who has not been a citizen of Texas for a period of one year immediately preceding the filing of his application therefore shall be eligible to receive a permit under [the Texas Alcoholic Beverage Code]." See Tex. Alco. Bev. Code Ann. § 109.53 (West 2007). The TABC, in its discretion, may refuse to issue a Wholesaler's Permit with or without a hearing if it has reasonable grounds to believe that the applicant has not been a Texas citizen for a period of one year immediately preceding the filing of an application. See Tex. Alco. Bev.Code Ann. § 11.46(a)(11) (West 2007). Regarding a General Distributor's License and an Importer's License, Texas citizenship is mandatory. See Tex. Alco. Bev.Code Ann. § 61.42(a)(5) (West 2007).
Recognizing the factual difference between this case and Cooper-Southern Wine of Texas seeks a permit and the licenses that would allow it to do business in Texas's wholesale market, while the Cooper plaintiffs sought a permit and licenses that would allow them to do business in Texas's retail market-Southern Wine of Texas contends that Cooper unequivocally resolves the issue presented in this case: Texas's one-year durational residency and citizenship statutes do not pass constitutional muster, and the TABC erroneously enforced them against Southern Wine of Texas.
The TABC, in response, concedes that Texas's one-year durational residency and citizenship statutes are facially discriminatory and, therefore, the TABC bears the burden of establishing that the discriminatory statutes advance "a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives." New Energy Co. v. Limbach, 486 U.S. 269, 278, 108 S.Ct. 1803, 100 L.Ed.2d 302 (1988); Cooper, 11 F.3d at 553. The TABC contends that the Texas statutes are constitutional because: (1) they ensure that those who distribute a dangerous product, alcoholic beverages, have a stake in the welfare of the community in which they operate; (2) they provide a guard against the threats of organized crime; and (3) nonresident absentee owners have less incentive to refrain from practices that, although profitable, could expose the community to harm. See Tex. Alco. Bev. Code Ann. § 6.03. The TABC contends that this policy choice, made by the Texas Legislature, is valid and constitutional, and even if the Alcoholic Beverage Code provisions violate the Commerce Clause, Texas's interest in ensuring that alcoholic beverage wholesalers and distributors have a stake in the welfare of the community in which they operate is within Texas's core powers under the Twenty-first Amendment.7
The Twenty-first Amendment provides that, "[t]he transportation or importation into any State ... for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." U.S. Const. amend. XXI, § 2. In determining whether a state regulation is within the ambit of the Twenty-first Amendment, "[t]he chief question is whether the interests implicated by a State's regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding that its requirements directly conflict with express federal policies.'" Cooper, 11 F.3d at 555 (quoting Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984)). As the Cooper court noted,
[T]he central purpose of the [Twenty-first] Amendment was not to empower States to favor local liquor industries by erecting barriers to competition. It is also beyond doubt that the Commerce Clause itself furthers strong federal interests in preventing economic Balkanization.
Id. (quoting Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 270, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984)). Further, although courts recognize the need "to combat the perceived evils of an unrestricted traffic in alcoholic beverages" as a permissible if vague purpose of the Twenty-first...
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