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

Decision Date09 December 2019
Docket NumberNo. 18-50299,18-50299
Citation945 F.3d 206
Parties WAL-MART STORES, INCORPORATED; Wal-Mart Stores Texas, L.L.C; Sam's East, Incorporated; Quality Licensing Corporation, Plaintiffs - Appellees Cross-Appellants v. TEXAS ALCOHOLIC BEVERAGE COMMISSION; Kevin Lilly, Presiding Officer of the Texas Alcoholic Beverage Commission; Ida Clement Steen, Defendants - Appellants Cross-Appellees Texas Package Stores Association, Incorporated, Movant - Appellant Cross-Appellee
CourtU.S. Court of Appeals — Fifth Circuit

Neal Manne, Alexander L. Kaplan, Michael Craig Kelso, Chanler Ashton Langham, Susman Godfrey, L.L.P., Houston, TX, Mark T. Mitchell, Foley Gardere, Austin, TX, Steven Shepard, Susman Godfrey, L.L.P., New York, NY, for Plaintiffs - Appellees Cross-Appellants.

G. Alan Waldrop, Ryan D. V. Greene, Terrill & Waldrop, Austin, TX, for Movant - Appellant Cross-Appellee.

Rance Craft, Assistant Solicitor General, Office of the Attorney General for the State of Texas, Austin, TX, for Defendants - Appellants Cross-Appellees.

Harry Arthur Herzog, Herzog & Carp, Katy, TX, for Amicus Curiae SPEC'S FAMILY PARTNERS, LIMITED.

Michael L. Navarre, Beatty Navarre Strama, P.C., Austin, TX, for Amicus Curiae WHOLESALE BEER DISTRIBUTORS OF TEXAS.

Michael Madigan, Madigan, Dahl & Harlan, P.A., Minneapolis, MN, for Amicus Curiae NATIONAL BEER WHOLESALERS ASSOCIATION.

Gregg R. Kronenberger, Kronenberger Law Firm, P.L.L.C., Austin, TX, Anthony Stanley Kogut, Willingham & Cote, P.C., East Lansing, MI, for Amici Curiae AMERICAN BEVERAGE LICENSEES, PRESIDENTS' FORUM OF THE DISTILLED SPIRITS INDUSTRY.

Jeff Rowes, Staff Attorney, Institute for Justice, Texas Chapter, Austin, TX, for Amicus Curiae INSTITUTE FOR JUSTICE.

Daniel Ortner, Counsel, Lawrence G. Salzman, Erin Elizabeth Wilcox, Attorney, Pacific Legal Foundation, Sacramento, CA, for Amici Curiae PACIFIC LEGAL FOUNDATION, RETAIL LITIGATION CENTER.

Before DAVIS, HAYNES, and GRAVES, Circuit Judges.

JAMES E. GRAVES, JR., Circuit Judge:

The petition for panel rehearing is GRANTED. We withdraw the previous opinion issued August 15, 2019, 935 F.3d 362, and substitute the following:

Plaintiff-Appellee Wal-Mart Stores, Incorporated and three of its subsidiaries (collectively, "Walmart"), brought 42 U.S.C. § 1983 claims against the Texas Alcoholic Beverage Commission and three of its commissioners (collectively, the "TABC"), to challenge four Texas statutes ( Tex. Alco. Bev. Code §§ 22.04, 22.05, 22.06, 22.16 )1 that govern the issuances of permits that allow for the retail sale of liquor in Texas (called "package store" permits, or "P permits"). Section 22.16 prohibits public corporations from obtaining P permits in Texas. Walmart argued that the ban violates the dormant Commerce Clause of the United States Constitution and the Equal Protection Clause of the Fourteenth Amendment. Later, we granted the Texas Package Store Association’s ("TPSA") motion to intervene as a matter of right, in defense of the statutes. See Wal-Mart Stores, Inc. v. Tex. Alcoholic Beverage Comm’n, 834 F.3d 562 (5th Cir. 2016).

We now consider the TABC and TPSA’s ("appellants") appeal of the district court’s conclusion that the public corporation ban offends the dormant Commerce Clause, and Walmart’s cross-appeal of the district court’s determination that the public corporation ban does not violate the Equal Protection Clause. Because the district court erred in its findings regarding the public corporation ban’s discriminatory purpose, we vacate and remand in part. Next, we reverse and render for Defendants on the ban’s discriminatory effect or burden under the Pike test. Lastly, we affirm that part of the district court’s judgment rejecting Walmart’s Equal Protection challenge to the public corporation ban.

I. Facts
A.

Texas regulates the sale and importation of alcoholic beverages through a three-tier system that requires separate licenses and permits for producers, wholesalers, and retailers who meet certain eligibility requirements. See Wine Country Gift Baskets.com v. Steen , 612 F.3d 809, 818–19 (5th Cir. 2010) (noting that Texas has a three-tier system "in which producers sell to state-licensed wholesalers, who sell to state-licensed retailers"). Liquor retailers must obtain a separate permit for each physical location where liquor is sold for off-premises consumption. The permits authorize an unlimited volume of sales from the permitted location. The TABC is the state agency responsible for issuing permits and enforcing the Texas Alcoholic Beverage Code. The TPSA is the trade association of Texas package stores that are majority-owned by Texans.

There is one permit relevant to this appeal. P permits authorize the sale of liquor, wine, and ale for off-premises consumption. Tex. Alco. Bev. Code § 22.01. Texas liquor stores must hold a P permit.

At the time of this litigation, there were 2,578 active P permits issued by the TABC, and 574 were owned by a package store chain (a business holding six or more P permits). There were 21 active package store chains. Since 1944, package store chains have grown in size and volume of sales, although the total number of package stores has remained approximately the same. The package store chains have a significant share of the Texas market, but it is not clear how much. The largest package store chains control seven of the nine seats on the TPSA’s executive committee.

B.

Texas’ public corporation ban proscribes "any entity which is directly or indirectly owned or controlled, in whole or in part, by a public corporation" from obtaining a P permit. Tex. Alco. Bev. Code § 22.16(a). The statute defines a "public corporation" as a corporation "whose shares ... are listed on a public stock exchange" or "in which more than 35 persons hold an ownership interest." Id. § 22.16(b). Public corporations can hold any of the other seventy-five types of alcohol permits that Texas issues.

Walmart is a retailer that is the largest public company in the world.2 Operating approximately 5,000 stores in the U.S., Walmart currently sells beer or wine in forty-seven states, including 668 locations in Texas, and liquor in thirty-one states. Walmart’s goal is to increase its sales and profits from alcoholic beverages in Texas. Walmart has plans to open liquor stores adjacent to some of its existing Texas retail locations. However, because it is a publicly traded corporation without a majority shareholder, Walmart cannot implement its plan unless the public corporation ban is invalidated.

Walmart unsuccessfully lobbied the Texas Legislature to repeal § 22.16.3 After its failed attempt to obtain a legislative remedy, Walmart sued the TABC in federal court to have the judiciary neutralize the public corporation ban, and this court subsequently granted the TPSA’s motion to intervene.

After a week-long bench trail, the district court concluded, inter alia , that the public corporation ban: (1) has a discriminatory purpose and the ban’s burden on interstate commerce is clearly excessive when compared to the local benefits, and (2) does not violate the Equal Protection Clause. The district court enjoined the TABC from enforcing the public corporation ban. This appeal and cross-appeal followed. We consider whether the public corporation ban is unconstitutional under the dormant Commerce Clause and the Equal Protection Clause.4

II. Standards of Review

We review a district court’s judgment regarding the constitutionally of a statute de novo. Allstate Ins. Co. v. Abbott , 495 F.3d 151, 160 (5th Cir. 2007). The district court’s findings of fact relevant to the constitutional question are reviewed for clear error. Id. Because this case involves a dormant Commerce Clause challenge, one threshold issue is whether the public corporation ban was enacted with the purpose to discriminate against interstate commerce. Id. at 160–62. In Allstate , this court applied the Arlington5 factors to determine whether purposeful discrimination inspired a state legislature’s actions in violation of the dormant Commerce Clause.6 Therefore, we do the same.7 "[A] district court’s finding of fact on the question of discriminatory intent is reviewed for clear error." Abbott v. Perez , ––– U.S. ––––, 138 S. Ct. 2305, 2326, 201 L.Ed.2d 714 (2018). "If the district court’s findings are plausible in light of the record viewed in its entirety, we must accept them, even though we might have weighed the evidence differently if we had been sitting as a trier of fact." Veasey v. Abbott , 830 F.3d 216, 229 (5th Cir. 2016) (en banc) (quotation marks omitted). "However, when the district court’s ‘findings are infirm because of an erroneous view of the law, a remand is the proper course unless the record permits only one resolution of the factual issue.’ " Id. (quoting Pullman–Standard v. Swint , 456 U.S. 273, 292, 102 S.Ct. 1781, 72 L.Ed.2d 66 (1982) ). In the latter case, we should reverse and render a decision. Id.

III. Challenges
A.

The Supreme Court has long held that the Commerce Clause "prohibits state laws that unduly restrict interstate commerce." Tennessee Wine & Spirits Retailers Ass’n v. Thomas , ––– U.S. ––––, 139 S. Ct. 2449, 2459, 204 L.Ed.2d 801 (2019). This interpretation is known as the dormant Commerce Clause. " ‘This negative aspect of the Commerce Clause’ prevents the States from adopting protectionist measures and thus preserves a national market for goods and services." Tennessee Wine , 139 S. Ct. at 2459 (quoting New Energy Co. of Ind. v. Limbach , 486 U.S. 269, 273, 108 S.Ct. 1803, 100 L.Ed.2d 302 (1988) ).

"A statute violates the dormant Commerce Clause where it discriminates against interstate commerce either facially, by purpose, or by effect." Allstate , 495 F.3d at 160. Given that this case involves a law that regulates liquor retailers, the dormant Commerce Clause analysis must be considered in light of the Twenty-first Amendment. Section 2 of the Amendment grants states the authority to regulate the transportation, importation,...

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