Wal-Mart Stores, Inc. v. Tex. Alcoholic Beverage Comm'n

• Decision Date: 22 August 2016
• Docket Number: No. 16–50041,16–50041
• Citation: 834 F.3d 562
• Parties: Wal–Mart Stores, Incorporated; Wal–Mart Stores Texas, L.L.C.; Sam's East, Incorporated; Quality Licensing Corporation, Plaintiffs–Appellees, v. Texas Alcoholic Beverage Commission, et al., Defendants, Texas Package Stores Association, Incorporated, Movant–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

834 F.3d 562

Wal–Mart Stores, Incorporated; Wal–Mart Stores Texas, L.L.C.; Sam's East, Incorporated; Quality Licensing Corporation, Plaintiffs–Appellees,

v.Texas Alcoholic Beverage Commission, et al., Defendants,Texas Package Stores Association, Incorporated, Movant–Appellant.

No. 16–50041

United States Court of Appeals, Fifth Circuit.

Filed August 22, 2016

Neal Stuart Manne, Attorney, Alexander L. Kaplan, Michael Craig Kelso, Chanler Ashton Langham, Susman Godfrey, L.L.P., Houston, TX, Frederick W. Sultan, IV, Gardere Wynne Sewell, L.L.P., Austin, TX, for Plaintiffs–Appellees.

G. Alan Waldrop, Waldrop Firm, Ryan D. V. Greene, Terrill Firm, P.C., G. Alan Waldrop, Locke Lord, L.L.P., Austin, TX, for Movant–Appellant.

Before KING, JOLLY, and ELROD, Circuit Judges.

JENNIFER WALKER ELROD

, Circuit Judge:

The Texas Package Stores Association (“the Association”), a trade group representing holders of permits allowing liquor retailing in the state of Texas, seek to intervene in a lawsuit between Wal–Mart and the Texas Alcoholic Beverage Commission (“the Commission”). Wal–Mart alleges that the regulatory system administered by the Commission operates exclusively for the benefit of the Association's members in violation of the Equal Protection, Commerce, and Comity Clauses of the United States Constitution. The Association seeks to intervene in defense of the regulatory system. Because the Association satisfies the relevant requirements, we REVERSE and GRANT the Association's motion to intervene as of right.

I.

Texas has a comprehensive licensing and regulatory scheme governing the sale of alcoholic beverages. See Tex. Alco. Bev. Code §§ 22.01

–22.17. Only holders of a package store permit are allowed to market liquor at retail prices to consumers for off-premises consumption. Tex. Alco. Bev. Code § 22.01. Texas severely restricts ownership of package store permits. No individual or corporation may own more than five package store permits except that persons “related within the first degree of consanguinity” may consolidate legal entities under their control regardless of the number of permits held by those entities and may continue to hold as many permits in the combined entity as were held by the separate predecessor entities, Tex. Alco. Bev. Code §§ 22.04, 22.05. Public corporations are prohibited from owning package store permits and franchised businesses are effectively prohibited from holding permits. Tex. Alco. Bev. Code §§ 22.15, 22.16.

Wal–Mart's complaint alleges that this system is a protectionist scheme enacted for the benefit of existing permit holders. After the district court denied the Commission's motion to dismiss, and three months after Wal–Mart filed its Answer, the Association moved to intervene in the lawsuit. At the time the Association moved for intervention, discovery had opened but Wal–Mart had produced no documents and no depositions had been taken. The district court denied the Association's motion to intervene.

The Association appeals.

II.

Rule 24(a) permits a party to seek intervention as of right while Rule 24(b) allows a party to seek permissive intervention. Fed. R. Civ. P. 24

. “A ruling denying intervention of right is reviewed de novo .” Texas v. United States , 805 F.3d 653, 656 (5th Cir. 2015) (quoting Edwards v. City of Houston , 78 F.3d 983, 995 (5th Cir. 1996) ). “Although the movant bears the burden of establishing its right to intervene, Rule 24 is to be liberally construed.” Id. (internal quotation marks omitted). “Federal courts should allow intervention when no one would be hurt and the greater justice could be attained.” Sierra Club v. Espy , 18 F.3d 1202, 1205 (5th Cir. 1994) (internal quotation marks omitted).

To obtain intervention as of right, an intervenor must satisfy a four-prong test:

(1) the application ... must be timely; (2) the applicant must have an interest relating to the property or transaction which is the subject of the action; (3) the applicant must be so situated that the disposition of the action may, as a practical matter, impair or impede his ability to protect that interest; (4) the applicant's interest must be inadequately represented by the existing parties to the suit.

Texas , 805 F.3d at 657

(quoting New Orleans Pub. Serv., Inc. v. United Gas Pipe Line Co. , 732 F.2d 452, 463 (5th Cir. 1984) ).

The timeliness inquiry “is contextual; absolute measures of timelines should be ignored.” Espy , 18 F.3d at 1205

. Timeliness “is not limited to chronological considerations but ‘is to be determined from all the circumstances.’ ” Stallworth v. Monsanto Co. , 558 F.2d 257, 263 (5th Cir. 1977) (quoting United States v. U.S. Steel Corp. , 548 F.2d 1232, 1235 (5th Cir. 1977) ). Because the Association sought intervention before discovery progressed and because it did not seek to delay or reconsider phases of the litigation that had already concluded, the Association's motion was timely.¹ See Flying J. Inc. v. Van Hollen , 578 F.3d 569, 572 (7th Cir. 2009)

(concluding intervention after final judgment was timely because intervenor sought only to appeal and not to re-litigate issues already resolved); Espy , 18 F.3d at 1205–06 (concluding intervention to appeal after entrance of injunction was timely because inadequacy of representation did not become apparent until then even though intervenor had actual knowledge of suit).

We are also satisfied that the Association has an interest relating to the subject of the action and that disposition of the action may impair or impede the Association's ability to protect that interest. The Association asserts that the “property or transaction that is the subject of the action” in this case is the regulatory system governing package stores including the licenses held by the Association's members. Wal–Mart's case is premised on the argument that the system exists solely and illegally for the benefit of the Association—the lawsuit is premised on the assumption that the Association's members are the beneficiaries of this regulatory system.

Although “[t]here is not any clear definition of the nature of the ‘interest ...’ that is required for intervention of right,” our precedent has set guiding principles that dictate the outcome of this case. 7C Charles Alan Wright, et al., Federal Practice and Procedure § 1908.1 (3d ed. 2007)

.² The touchstone of the inquiry is whether the interest alleged is “legally protectable.” New Orleans Pub. Serv., Inc. v. United Gas Pipe Line Co. (NOPSI ), 732 F.2d 452, 464 (5th Cir. 1984) (en banc). “[A]n interest is sufficient if it is of the type that the law deems worthy of protection, even if the intervenor does not have an enforceable legal entitlement or would not have standing to pursue her own claim.” Texas , 805 F.3d at 659.

Because we must assess whether the Association has a “legally protectable” interest, we find helpful a recent decision holding that the Association—participating in a similar challenge to the regulatory system as an intervenor—has standing to continue that lawsuit without the participation of the Commission. Cooper v. Tex. Alcoholic Beverage Comm'n , 820 F.3d 730, 737 (5th Cir. 2016)

. Because the direct holding of Cooper is that the Association can legally protect this regulatory system, it likely has an interest in the subject matter of this litigation.³

Even without the guidance provided by Cooper

, our precedent dictates that the Association has a legally protectable interest in the regulatory scheme because, according to Wal–Mart, the Association is the scheme's beneficiary. This puts the Association in a position comparable to other successful intervenors in our circuit. For example, in Texas, women who potentially qualified for deferred action status sought to intervene in a lawsuit challenging the federal government's policies for granting deferred action. 805 F.3d at 660

. We permitted the intervention because the women were the “intended beneficiaries” of the policy under challenge even though the intervenors had neither applied for nor received the benefit. Id . We have also held that “public spirited” civic organizations that successfully petition for adoption of a law may intervene to vindicate their “particular interest” in protecting that law. City of Houston v. Am. Traffic Solutions, Inc. , 668 F.3d 291, 294 (5th Cir. 2012). Under American Traffic Solutions and Texas, the Association has an interest in protecting its legally prescribed market.

Our conclusion is in keeping with those of our sister circuits, which recognize that associations representing licensed business owners have a right to intervene in lawsuits challenging the regulatory scheme that governs the profession. In one such lawsuit the Second Circuit concluded that “clearly the [association] ha[s] an interest in the transaction which is the subject of the action” because “[t]here can be no doubt that the challenged prohibition ... affects the economic interests of members of the pharmacy profession. Pharmacists also have an interest in a regulation which they claim is designed to encourage ‘the continued existence of independent local drugstores by the prevention of destructive competition.... ’ ” N.Y. Pub. Int. Research Grp, Inc. v. Regents of Univ. of State of N.Y. , 516 F.2d 350, 351–52 (2d. Cir. 1975)

(quoting Urowsky v. Board of Regents , 76 Misc.2d 187, 349 N.Y.S.2d 600, 603 (N.Y. Sup. Ct. 1973) ) (emphasis added). In another lawsuit challenging state liquor licensing regulations, a federal court in Massachusetts concluded that the intervening association's had a sufficient interest in the litigation because

[e]limination of § 15's three license limit will affect MassPack members themselves, potentially enabling them to get licenses for more than three stores, and, more importantly for them, may change the number and nature of their competitors. MassPack's interest in this case is not a general one; the regulation in question governs its members directly, and their interests are different from those

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