Basketscom v. Steen

612 F.3d 809

WINE COUNTRY GIFT BASKETS.COM; K&L Wine Merchants; Beverages & More, Inc.; David L. Tapp; Ronald L. Parrish; Jeffrey R. Davis, Plaintiffs-Appellants-Cross-Appellees,v. John T. STEEN, Jr., Commissioner of the Texas Alcoholic Beverage Commission; Gail Madden, Commissioner of the Texas Alcoholic Beverage Commission; Jose Cuevas, Jr., Commissioner of the Texas Alcoholic Beverage Commission, Defendants-Appellees-Cross-Appellants,Allen Steen, in his official capacity as administrator of the Texas Alcoholic Beverage Commission, Defendant-Appellee-Cross-Appellant,Glazers Wholesale Drug Company, Inc.; Republic Beverage Company, Intervenor Defendants-Appellees-Cross-Appellants.

No. 08-10146.

United States Court of Appeals Fifth Circuit.

July 22, 2010.

James F. Basile, Tracy K. Genesen, Kirkland & Ellis, L.L.P., San Francisco, CA, Susan Elisabeth Engel, Elizabeth Marie Locke, Soraya Prince Freed Rudofsky, Kirkland & Ellis, L.L.P., Washington, DC, Kenneth Winston Starr (argued), Kirkland & Ellis, L.L.P., Los Angeles, CA, Sterling W. Steves, Fort Worth, TX, for Plaintiffs-Appellants Cross-Appellees.

James C. Ho, Solicitor General (argued), Philip Andrew Lionberger, Assistant Solicitor General, Austin, TX, for Defendants.

Dee J. Kelly, Sr. (argued), Marianne Marsh Auld, David E. Keltner, Marshall M. Searcy, Jr., William Nolan Warren, Kelly, Hart & Hallman, L.L.P., Fort Worth, TX, for Intervenor Defendants-Appellees Cross Appellants.

Derek L. Shaffer, Charles Justin Cooper, Copper & Kirk, P.L.L.C., Washington, DC, for Specialty Wine Retailers Ass'n, Amicus Curiae.

Kent Martin Shimeall, Office of Atty. Gen., Columbus, OH, for Ohio, 17 Other States, Amici Curiae.

David Bruce Young, McGinnia, Lochridge & Kilgore, L.L.P., Austin, TX, for Wholesale Beer Distributors of Texas, Amicus Curiae.

Carter Glasgow Phillips, Sidley Austin, L.L.P., Washington, DC, for Wine and Spirits Wholesalers of America, Inc., Nat. Beer Wholesalers Ass'n, Sazerac Co., Amici Curiae.

Appeals from the United States District Court for the Northern District of Texas.

ON PETITION FOR REHEARING

Before JOLLY, PRADO and SOUTHWICK, Circuit Judges.

LESLIE H. SOUTHWICK, Circuit Judge:

Appellants' Petition for En Banc Review is DENIED. We withdraw the prior panel opinion, issued on January 26, 2010, and substitute the following.

This case primarily concerns a Texas law that allows alcohol retailers to ship to the door of their local consumers. Out-of-Texas wine retailers claim that the dormant Commerce Clause requires they be given a supposedly reciprocal right to make direct shipments to any Texas consumer. The district court partly accepted their argument. We hold that the statutes do not run afoul of the dormant Commerce Clause. We VACATE and REMAND for entry of judgment.

FACTUAL AND LEGAL BACKGROUND

There were several parties to this case, but they can be grouped easily. One plaintiff, Siesta Village Market LLC, who is a Florida wine retailer, has dismissed its appeal. Another, Wine Country Gift Baskets.com, is a California wine retailer. Wine Country's appellate brief describes the plaintiffs, present and past, as “a group of out-of-state wine retailers and Texas wine consumers.” We refer to the plaintiffs collectively as “Wine Country.”

Suit was filed by Siesta Village and a few Texas wine consumers on March 31, 2006, in the Dallas Division of the U.S. District Court for the Northern District of Texas. A nearly identical suit was filed by Wine Country, two other California retailers, and a few named Texas consumers in the Fort Worth Division. The suits were consolidated in the Dallas Division. The wine retailers located outside of Texas wish to ship wine directly to Texas consumers.

Defendants are Alan Steen, the Administrator of the Texas Alcoholic Beverage Commission, and three Commission members sued in their official capacities. They enforce the Texas Alcoholic Beverage Code (“TABC”). We will refer to the various Defendants as “the State” or “Texas.”

Two Texas alcoholic beverage wholesalers intervened. These companies are Glazer Wholesale Drug Company, Inc., and Republic Beverage Co.

As do many other States, Texas has a three-tier system for regulating sales of alcoholic beverages. The first tier is the producer, who must sell its product to the second tier, which is a State-licensed wholesaler. The wholesaler distributes the product to the third tier, consisting of State-licensed retailers. Consumers purchase from the retailers. “[S]trict separation between the manufacturing, wholesaling, and retailing levels” of the alcoholic beverage industry must be maintained. Tex. Alco. Bev.Code § 6.03(i).

The challenged Texas laws fall into three principal categories. Almost all the relevant provisions apply to alcohol generally, though the complaint is from companies whose commercial interest is solely in wine.

First, some laws allow individuals to bring alcoholic beverages into Texas for their own use, known as a “personal import exception,” but limit the quantity. The district court held that this direct-purchase restriction was unconstitutional in part. “Texas cannot prohibit consumers from purchasing wine from out-of-state retailers who comply with the Code and TABC regulations,” the district court held. Siesta Vill. Mkt., LLC v. Perry, 530 F.Supp.2d 848, 868 (N.D.Tex.2008). It ordered Texas to allow out-of-state retailers to receive Texas-issued retailer permits. Therefore, any consumer who bought wine from an out-of-state holder of a Texas permit would not be subject to the quantity limit when entering the State with the beverages, though the limit for importing would apply to the same person's excessive purchases from out-of-state retailers that did not have Texas permits.

Second, and at the heart of this case, some of the laws allow in-state retailers to deliver alcoholic beverages to their customers within designated local areas, but forbid out-of-state retailers from delivering or shipping alcoholic beverages to customers anywhere in Texas.¹ Retailers may use common carriers licensed under the TABC, which include such companies as FedEx. Just before summary judgment motions were filed in the consolidated suits, the Texas legislature amended the prior law which had allowed holders of package store permits or wine-only package store permits to ship their beverages statewide. Tex. Alco. Bev.Code § 22.03 (Vernon 2006) (amended Sept. 1, 2007). The amendment drew in the boundaries of the area of permissible shipment from the entire State to basically the county in which the retailer has a store. Id. §§ 22.03 & 24.03 (Vernon 2009). The district court held that the statutes discriminated against Wine Country and granted relief.

Third, the suit challenged requirements that the holders of TABC retailer permits have been Texas citizens for one year. The decision in an earlier case declared those provisions unconstitutional insofar as they applied to wholesalers. S.Wine & Spirits of Tex., Inc. v. Steen, 486 F.Supp.2d 626, 633 (W.D.Tex.2007). The district court in the present case declared the requirements unconstitutional as applied to retailers. The State does not appeal the voiding of the requirement and advised the district court that it will not enforce the citizenship rule.

The parties agreed on a preliminary injunction blocking enforcement of certain provisions for the duration of the lawsuit. On summary judgment, the district court declared twenty-three TABC provisions to be unconstitutional. Siesta Vill. Mkt., 530 F.Supp.2d at 873.

The district court did not, however, provide the remedy Wine Country wanted. The court decided that other provisions of the TABC, though clearly regulating only in-state retailers, should be applied to out-of-state retailers. Thus, Wine Country had a right to make direct shipments to Texas consumers, but it was required to obtain a Texas retailer permit and purchase all wine shipped to Texas consumers from Texas-licensed wholesalers. Such a “victory” was, if not pyrrhic, apparently of no benefit.²

Wine Country's dissatisfaction is evident from the fact it was the first to appeal, thereby becoming the Appellant despite the general success of its arguments. It claimed error in the remedy. The State cross-appealed to argue that its statutes do not violate the dormant Commerce Clause. Siesta Village, the named plaintiff in one of the two consolidated cases, initially was an Appellant but has since dismissed its appeal.

DISCUSSION

The grant of a motion for summary judgment is reviewed de novo. Pasant v. Jackson Nat'l Life Ins. Co., 52 F.3d 94, 96 (5th Cir.1995). Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c)(2).

This appeal almost exclusively concerns questions of law.

Wine Country convinced the district court that numerous TABC provisions violated the dormant Commerce Clause. Wine Country's arguments as the Appellant center on the remedy imposed by the district court. Because we set aside the invalidation of the statutory provisions, issues about the remedial relief implementing the invalidation become moot. We thus do not discuss Wine Country's arguments on the remedy.

The State of Texas as Cross-Appellant does not contest the district court's invalidation of the requirement that retailers establish Texas citizenship. That part of the judgment was not included in any notice of appeal and therefore has not been brought to us for reversal or affirmance.

Texas vigorously does contest the holding that the dormant Commerce Clause interfered with what Texas considers to be a right granted by the Twenty-first Amendment to favor in-state retailers in some respects.

Texas also argues that the direct shipping laws are justified by legitimate state interests. It alleges valid local public interests exist and the law has only incidental effects on interstate commerce. Its policy justifications include the State's need...