Greenspoon Marder Hospitality, Alcohol & Leisure Blog: Case Update

Aug 28, 2019

By: Louis J. Terminello, Esq.

The inherent tension between the commerce clause and the 21st Amendment continues in the court system.

On August 15th the 5th Circuit Court of Appeals heard arguments in Wal-Mart Stores Inc. et al. v. Texas Alcoholic Beverage Commission et al.

The case concerned a specific type of retail license, called P licenses, which permit package liquor sales. The permit is offered to privately corporations only – public companies are explicitly prohibited from holding P licenses.

Wal-Mart brought an action against Texas Alcohol Beverage Commission (TABC) claiming that Texas law 22.16 violated the commerce clause and the equal protection clause of the US Constitution.

TABC relied on its authority under section 2 of the 21st Amendment claiming that the state had the authority to regulate the transport, sale and service of alcohol beverage within its borders.

The lower court ruled that the ban against public corporations had a discriminatory purpose and was a burden on interstate commerce. Wal-Mart appealed to the 5th Circuit.

The 5th Circuit, after rigorous analysis determined that even though Texas had a history of past discriminatory measures applied to beverage alcohol, because the ban prohibited in-state and out of state public companies from holding P licenses, that ban, on its face, is not violative of the commerce clause and remanded the case for further consideration under a Pike analysis (as well as other areas)(Pike v. Bruce Church, Inc. 397 U.S. 137, 142 (1970). The circuit court suggest that under Pike, the lower court should consider whether the law burdens interstate commerce, whether there is a legitimate local interest, and when both are present, if the extent of the burden should be tolerated based on the local interest involved.

The final outcome of this case is difficult to predict. On it’s face it does stand for the proposition that perceived protectionist beverage alcohol legislation will be increasingly confronted by stakeholders both on the legislative floor and in the Federal Courts.

Click here to view my recent Law360 article discussing this case.

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