Cooper v. Tex. Alcoholic Beverage Comm'n

820 F.3d 730

Steve COOPER, Plaintiff

v.TEXAS ALCOHOLIC BEVERAGE COMMISSION, DefendantandFine Wine & Spirits of North Texas, L.L.C.; Southern Wine and Spirits of Texas, Incorporated, Intervenor Plaintiffs–Appellees

v.Texas Package Stores Association, Incorporated, Intervenor Defendant–Appellant.

No. 14–51343.

United States Court of Appeals, Fifth Circuit.

April 21, 2016.

James C. Ho, Esq. (argued), Bradley G. Hubbard, Prerak Shah, Assistant Solicitor General, Gibson, Dunn & Crutcher, L.L.P., Dallas, TX, Frederick W. Sultan, IV, Gardere Wynne Sewell, L.L.P., Austin, TX, Marie Roachy Yeates, Esq. (argued), James Lewis Leader, Jr., Christopher V. Popov, Vinson & Elkins, L.L.P., Houston, TX, for Intervenor Plaintiff–Appellees.

Leslie Sara Hyman, Esq. (argued), Randall Alan Pulman, Etan Z. Tepperman, Pulman, Cappuccio, Pullen, Benson & Jones, L.L.P., San Antonio, TX, for Intervenor Defendant–Appellant.

Appeal from the United States District Court for the Western District of Texas.

Before JONES and SMITH, Circuit Judges, and FITZWATER,^* District Judge.

JERRY E. SMITH, Circuit Judge:

The Texas Package Stores Association (“TPSA”) moved for relief from an injunction under Federal Rule of Civil Procedure 60(b). The district court denied the motion for want of jurisdiction. Because there is jurisdiction, we reverse the order denying the motion on jurisdictional grounds and render an order denying it on the merits.

I. Factual Background and Procedural History

More than twenty-five years ago, Richard Wilson and Steve Cooper (the “original plaintiffs”) tried to acquire K.S. Enterprises, Inc. d/b/a Baby Dolls, a nightclub, but were unable to complete the transaction because of provisions of the Texas Alcoholic Beverage Code (the “Code”). Texas regulates the sale and importation of alcoholic beverages through a three-tier distribution system. The first tier consists of producers such as distillers and wineries, which are required to sell their products to the second tier, made up of state-licensed wholesalers. The second tier, in turn, distributes products to the third tier, comprising state-licensed retailers, which sell to consumers. The problem for the original plaintiffs was that the Code imposes a durational-residency requirement—at the time three years, later changed to one year—on holders of mixed-beverage permits and majority shareholders of corporations with mixed-beverage permits.

The Texas Alcoholic Beverage Commission (the “Commission”) may refuse a permit to any applicant who has not been a citizen of Texas for at least one year before filing the application,¹ and it may cancel a permit if an applicant does not satisfy the residency requirement.² If there has been a change in corporate control, the Commission cannot renew the permit unless the new majority shareholders have satisfied all the requirements for a permit, including the residency requirement.³ Finally, the Code states,

No person who has not been a citizen of Texas for a period of one year immediately preceding the filing of his application therefor shall be eligible to receive a permit under this code. No permit except a brewer's permit, and such other licenses and permits as are necessary to the operation of a brewer's permit, shall be issued to a corporation unless the same be incorporated under the laws of the state and unless at least 51 percent of the stock of the corporation is owned at all times by citizens who have resided within the state for a period of one year.... Partnerships, firms, and associations applying for permits shall be composed wholly of citizens possessing the qualifications above enumerated. Any corporation (except carrier) holding a permit under this code which shall violate any provisions hereof, or any rule or regulation promulgated hereunder, shall be subject to forfeiture of its charter....⁴

Because the original plaintiffs were not Texas citizens,⁵ they could not acquire Baby Dolls without endangering the business's mixed-beverage permit and, in turn, its profitability. To avoid that harm, the original plaintiffs brought a 42 U.S.C. § 1983 suit against W.S. McBeath, the administrator of the Commission, seeking declaratory and injunctive relief.⁶ Three trade groups, among them TPSA, were granted leave to intervene as defendants.

On cross-motions for summary judgment, the district court determined that Texas's residency requirement was a protectionist provision invalid under the Commerce Clause and the Privileges and Immunities Clause and that the Twenty-first Amendment did not save the requirement. The court thus declared the residency requirement invalid and permanently enjoined the Commission from enforcing it.⁷

This court's affirmance was based only on the Commerce Clause, and we declined to address the Privileges and Immunities Clause. Cooper, 11 F.3d at 556 n. 10.

The present round began in 2014, when TPSA moved under Rule 60(b) for relief from the injunction based on a significant change in decisional law. The Commission did not join in TPSA's motion, nor did the original plaintiffs appear or file a response. Two out-of-state corporations—Fine Wine & Spirits of North Texas, L.L.C. (“Fine Wine”), and Southern Wine and Spirits of Texas, Inc. (“Southern Wine”)—moved to intervene as plaintiffs. After granting intervention, the district court denied TPSA's Rule 60(b) motion for lack of subject-matter jurisdiction. It held that there was no case or controversy because the original plaintiffs had not appeared and seemed to lack an ongoing interest and because TPSA lacked standing. The court thus declined to reach the merits but suggested that the Rule 60(b) motion should be denied on the merits.

II. Jurisdiction

The district court gave two reasons why it lacked subject-matter jurisdiction. First, TPSA had failed to establish that the original plaintiffs continued to have a stake in the case. Second, TPSA lacked standing to bring a Rule 60(b) motion.

A. Mootness

The original plaintiffs have not appeared and may no longer possess any direct stake in the outcome of this proceeding. Nevertheless, there remains a live case or controversy because of the intervention of Fine Wine and Southern Wine. Their intervention ensures that this proceeding involves an actual dispute between adverse litigants.

Even if that intervention were not enough, a live case or controversy would still remain on account of the injunction. An Article III case or controversy requires at least two adverse parties.⁸ For that reason, a federal judicial proceeding generally becomes moot if all the plaintiffs or all the defendants withdraw from or lose their concrete interest in the proceeding. That rule does not hold, however, where a court has entered a permanent injunction or some other equitable decree with prospective application.⁹ The reason is that “federal courts have inherent equitable power to modify their own decrees.” League of United Latin American Citizens, Dist. 19 v. City of Boerne, 659 F.3d 421, 436 (5th Cir.2011). “The power of a federal court that enters an equitable injunction is not spent simply because it has once spoken. The federal courts have always affirmed their equitable power to modify any final decree that has prospective application.” Id.

The permanent injunction remains in effect, even absent the original plaintiffs. The injunction continues to prohibit the Commission from enforcing Texas's residency requirement against not only the original plaintiffs but also all other out-of-state persons who possess or wish to acquire a Texas mixed-beverage permit or an interest in an entity with such a permit. The prospective application of the injunction thus prevents this case from becoming moot.

B. Standing

TPSA has standing to bring its Rule 60(b) motion. Because it is an intervenor, its “right to continue a suit in the absence of the [Commission] is contingent upon a showing by the intervenor that [it] fulfills the requirements of Art. III.” Diamond v. Charles, 476 U.S. 54, 68, 106 S.Ct. 1697, 90 L.Ed.2d 48 (1986). In other words, TPSA must demonstrate that it has standing in its own right and cannot rely on the Commission's standing.¹⁰

The question whether TPSA possesses standing turns ultimately on the standing of its members. As a trade association, it must satisfy three criteria. First, “its members [must] otherwise have standing to sue in their own right.” Nat'l Rifle Ass'n of Am. v. Bureau of Alcohol, Tobacco, Firearms & Explosives, 700 F.3d 185, 191 (5th Cir.2012). Second, “the interests [it] seeks to protect [must be] germane to the organization's purpose.” Id. Third, “neither the claim asserted nor the relief requested [must] require[ ] the participation of individual members in the lawsuit.” Id.

There is no question that TPSA satisfies the second and third criteria for associational standing. The interests of TPSA's members in the enforcement of the residency requirement are germane to TPSA's purpose, and neither TPSA's claim for relief nor the relief it requests requires the participation of its individual members. Thus the only issue is whether its members have standing in their own right.

Under the traditional test for standing, a litigant must show (1) that it has “suffered an ‘injury in fact,’ ” (2) the injury complained of is “fairly traceable to the challenged action of the [opposing party], and not the result of the independent action of some third party not before the court,” and (3) that it is “ ‘likely,’ as opposed to merely ‘speculative,’ that the injury will be ‘redressed by a favorable decision.’ ” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The district court concluded, for two reasons, that TPSA had failed to make that showing for its individual members. First, “having to compete in a free and fair marketplace is not an injury[.]” Second, TPSA's requested relief—lifting the injunction—would not remedy the alleged injury, because “[a]ll that would change is the origin of those...