Siesta Village Market, LLC v. Perry

530 F.Supp.2d 848

SIESTA VILLAGE MARKET, LLC, d/b/a Siesta Market, et al., Plaintiffs, v. Rick PERRY, Governor of Texas, et al., Defendants.

Civil Action No. 3:06-CV-0585-D.

Civil Action No. 4:06-CV-0232-D.

United States District Court, N.D. Texas, Dallas Division.

January 14, 2008.

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James A. Tanford (argued), Indiana University School of Law, Bloomington, IN, Michael J. Donahoe, Robert D. Epstein, Epstein, Epstein, Cohen, Donahoe & Mendes, Indianapolis, IN, William M. Boyd, Boyd & Veigel, McKinney, TX, for plaintiffs Siesta Village Market, LLC, Ken Travis, ken Gallinger, Maureen Gallinger, Dr. Robert Brockie.

Kenneth W. Starr (argued), James F. Basile, Tracy K. Genesen, Kirkland & Ellis, LLP, Los Angeles and San Francisco CA, Mark C. Harwell, Cotham Harwell & Evans, Houston, TX, Sterling W. Steves, Fort Worth, TX, for plaintiffs Wine Country Gift Baskets.com, K&L Wine Merchants, Beverages & More, Inc., David L. Tapp, Ronald L. Parrish, Jeffrey R. Davis.

Greg Abbott, Atty. Gen., of Texas, Kent C. Sullivan, David S. Morales, Robert B. O'Keefe, James C. Todd (argued), Office of Atty. Gen., Austin, TX, for defendants Rick Perry, Greg Abbott, John T. Steen, Jr., Gail Madden, Jose Cuevas, Jr., Alan Steen.

Dee J. Kelly (argued), Marshall M. Searcy, Jr., William N. Warren, Kelly, Hart & Hallman, LLP, Fort Worth, TX, fox'. intervenors Glazer's Wholesale Drug Co., Inc., Republic Beverage Co.

SIDNEY A. FITZWATER, Chief Judge.

These are consolidated actions in which plaintiffs challenge various provisions of the Texas Alcoholic Beverage Code ("Code") as unconstitutional under the dormant Commerce Clause because they preclude out-of-state wine retailers from selling and shipping wine to Texas consumers. Intervenors — two Texas-licensed wine wholesalers — defend the constitutionality of the challenged Code provisions, and they assert claims arising from an agreed preliminary injunction ("Agreed Injunction") entered into by certain plaintiffs and the Administrator of the Texas Alcoholic Beverage Commission ("TABC") that allows out-of-state retailers to ship wine directly to Texas consumers. The court concludes that Texas' ban on the sale and shipment of wine by out-of-state retailers to Texas residents is unconstitutional, but it also holds that the requirement that wine retailers — including out-of-state retailers — first purchase such wine from Texas-licensed wholesalers is constitutional.

I

Plaintiffs the Siesta Village plaintiffs¹ and the Wine Country plaintiffs² challenge the constitutionality of various Code provisions on the ground that they preclude out-of-state wine retailers from selling and shipping wine to consumers located in the state of Texas. The Code sections at issue are Tex. Alco. Bev.Code §§ 6.01, 6.03, 11.01, 11.03, 11.46(a)(11), 11.61(b)(19), 22.01, 22.03, 24.01, 24.03, 41.01, 54.12, 107.05(a), 107.07(a), 107.07(f), and 109.53 (Vernon 2007 & Supp.2007-08). Insofar as relevant to this litigation, these provisions ban the sale and shipment of wine by out-of-state retailers to Texas consumers, and they impose permit and citizenship requirements on wine retailers that plaintiffs maintain are unconstitutional as applied to out-of-state retailers. They also ban the importation of wine by Texas residents, except in limited quantities for personal use. The Siesta Village plaintiffs and the Wine Country plaintiffs contend that these laws discriminate against interstate commerce, in violation of the dormant Commerce Clause.

The defendants are John T. Steen, Jr., Gail Madden, and Jose Cuevas, Jr., who are sued in their official capacities as TABC Commissioners; Alan Steen ("Steen"), sued in his official capacity as Administrator of the TABC; and Rick Perry ("Governor Perry") and Greg Abbott ("General Abbott"), sued in their official capacities as Governor and Attorney General of Texas, respectively.

Intervening on behalf of the Texas regulatory scheme are TABC-licensed wholesalers Glazer's Wholesale Drug Company, Inc. ("Glazer") and, Republic Beverage Company ("Republic"). Glazer and Republic have also filed a cross-claim against Steen³ and counterclaims against plaintiffs. Essentially, they defend the constitutionality of the Code provisions that plaintiffs challenge, and they complain that defendant Steen has violated their rights under the Equal Protection Clause and Commerce Clause through a policy of, not enforcing the Code against out-of-state wine retailers and by entering into the Agreed Injunction.⁴

The sale, shipment, and delivery of wine in Texas is governed by the Code, Tex. Alco. Bev.Code §§ 1.01-251.82 (Vernon 2007 & Supp.2007-08). Like other states, Texas regulates the sale and importation of most alcoholic beverages — inducing wine — through a three-tier system. Producers of alcoholic beverages must be licensed by the TABC and are legally able to sell in Texas only to TABC-licensed⁵ wholesalers, who in turn may only legally sell to TABC-licensed, retailers, who may then legally sell to Texas consumers. The Code makes an exception for wine producers or for wineries who hold either a TABC winery permit or a TABC out-of-state winery direct shipper permit that allows them to sell directly to Texas consumers without selling first to a licensed wholesaler or retailer.

Various Code provisions forbid anyone from holding a TABC permit or otherwise selling wine in Texas who has not been a Texas citizen for at least one year. See Tex. Alco. Bev.Code §§ 6.03, 11.46(a)(11) 11.61(b)(19), 24.01(c), and 109.53. These provisions have been declared unconstitutional as applied to wholesalers located within the state of Texas for less than one year. S. Wine & Spirits of Tex. v. Steen, 486 F.Supp.2d 626, 633 (W.D.Tex.2007). As the court explains infra in § III(B), their constitutionality has not yet been determined as to out-of-state retailers.

Through provisions separate from the citizenship requirements, the Code also allows in-state retailers to sell and ship wine to Texas consumers, but the Code denies this right to out-of-state retailers. See Tex. Alco. Bev.Code §§ 22.03, 24.03, 54.12, and 107.07(f). With limited exceptions, the Code also forbids consumers from purchasing Wine from out-of-state retailers. See id. §§ 107.05(a) and 107.07(a).⁶

After the Wine Country plaintiffs filed their lawsuit, they and defendant Steen entered into the Agreed Injunction, which permits out-of-state retailers to ship wine directly to Texas consumers.⁷ In addition to siding with defendants in defending the regulatory scheme, intervenors Glazer and Republic complain that the Agreed Injunction is detrimental to the public interest of the State of Texas ("State"). They maintain that the Agreed Injunction undermines the State's temperance concerns, causes the State to lose tax revenues, and undermines the State's orderly markets by not requiring out-of-state retailers to comply, with the regulations imposed on instate retailers. Glazer and Republic also bring a cross-claim against defendant Steen, alleging that the TABC lacked authority to contradict the legislative requirements of the Texas three-tier system when the parties entered into the Agreed Injunction. Glazer and Republic contend that by not enforcing Texas law against out-of-state retailers, the TABC has compromised the business interests of alcoholic beverage wholesalers, and that the discriminatory enforcement of the Code against in-state retailers has only provided a competitive advantage to out-of-state businesses. Glazer and Republic complain that such conduct amounts to an unequal application of state law, and thus violates their rights under the Commerce Clause and Equal Protection Clause. Based on their cross-claim, they request that the Agreed Injunction be vacated. Glazer and Republic also bring counterclaims requesting that the court declare that the Code provisions that plaintiffs challenge as unconstitutional are in fact constitutional and valid components of the Texas three-tier system.

The following motions are pending for resolution and have been orally argued: (1) intervenors' April 26, 2007 motion to dissolve the Agreed Injunction; (2) the Siesta Village plaintiffs' May 29, 2007 motion (as corrected June 8, 2007) for summary judgment; (3) intervenors' June 28, 2007 motion (as amended June 29, 2007) for summary, judgment as to the consolidated plaintiffs' claims and as to intervenors' counterclaims; (4) intervenors' June 28, 2007 motion (as amended June 29, 2007) for summary judgment as to their cross-claim against defendant Steen; (5) defendants' June 29, 2007 motion for summary judgment on plaintiffs' claims; (6) defendant Steen's June 29, 2007 motion for summary judgment on intervenors' cross-claim; (7) the Wine Country plaintiffs' June 29, 2007 motion for summary judgment on the Wine Country plaintiffs' claims; and (8) the Wine Country plaintiffs' June 29, 2007 motion for summary judgment on intervenors' counterclaims.⁸

II

Before reaching the merits of plaintiffs' constitutional claims, the court must consider certain preliminary questions, the first of which is an Eleventh Amendment immunity defense that defendants raise on behalf of Governor Perry and General Abbott.

A

When state officials such as Governor Perry and General Abbott are sued in their official capacities, they assume the identity of the state that employs them and thus share the state's Eleventh Amendment immunity from private suits. See Hafer v. Melo, 502 U.S. 21, 26-27, 112 S.Ct. 358, 116 L.Ed.2d 301 (1991). The doctrine of Ex Parte Young carves, out a narrow exception to this general grant of immunity and permits private parties to obtain injunctive relief against state officers for violations of federal law. P.R. Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 146, 113 S.Ct. 684, 121 L.Ed.2d 605 (1993). But

[i]n making an officer of the state a party defendant in a suit to enjoin the...