David Yates Jul. 22, 2015, 3:04pm


On July 24 a federal judge declines to dismiss Wal-Mart's suit against the state, which claims that an “irrational” law is keeping the mega-retailer from selling distilled spirits in the Lone Star state.

In May, the Texas Alcoholic Beverage Commission filed a motion to dismiss the suit.

On July 17 the parties filed a joint motion to limit discovery until the judge makes a decision.

Three days later, U.S. District Judge Robert Pitman granted the motion, limiting discovery until he makes a ruling, court records show.

On July 24 the judge refused to grant the motion to dismiss, saying that the TABC has not explained why the liquor ban does not violate the state's constitution. 

Wal-Mart and its subsidiaries, Sam’s East and Quality Licensing, filed their suit, which also names TABC Commissioners Jose Cuevas Jr., Steven Weinberg and Ida Clement Steen as defendants, on Feb. 12 in the U.S. District Court for the Western District of Texas, Austin Division.

Wal-Mart maintains it brought the action because its Texas customers want added convenience when shopping for adult beverages.

The current law, which Wal-Mart thinks contradicts the state’s belief in free enterprise, prohibits publicly owned businesses from offering spirits to its customers.

However, the TABC thinks Wal-Mart is trying to subvert the Texas legislature by filing a suit alleging constitutional violations, according to its motion to dismiss, filed May 5.

“This lawsuit is no more than a thinly-veiled attempt to substitute Wal-Mart’s policy preferences for the State’s long-standing regulatory framework governing package stores — the only type of retailer allowed to sell liquor in Texas,” the motion states.

“Indeed, Wal-Mart’s complaint can be distilled to one overarching theme: it disagrees with the Legislature’s decision to closely regulate the Texas retail liquor market and require Texans to purchase distilled spirits from package stores.”

Wal-Mart, a publicly traded corporation, is the largest retailer of wine and beer in Texas. Each of its Walmart and Sam’s Club stores that sell wine and beer do so only after first obtaining a permit from the TABC.

“Wal-Mart would like to also sell distilled spirits at its Walmart and Sam’s Club locations in Texas for off-premises consumption. However, it is forbidden from doing so because Texas law irrationally forbids any publicly traded corporation from owning or holding the permit needed to do that,” the suit states

“Wal-Mart is therefore irrationally banned from competing with privately owned companies that are, unlike publicly traded corporations, allowed to obtain package store permits.”

Wal-Mart says what’s worse is that Texas law irrationally excludes publicly traded hotel corporations from the prohibition against publicly traded corporations, and any publicly traded hotel with a hotel store may sell distilled spirits and hold package store permits irrespective of the public corporation ban.

The mega-retailer, which is the largest private employer in the U.S. and Texas, is licensed to sell liquor in 25 other states.

“As it does with its sale of wine and beer in Texas, and its sale of distilled spirits in other states, Wal-Mart would like to obtain permits and licenses from the TABC for the retail sale of distilled spirits in Texas,” the suit states. “It is unable to do so, however, because the Code and various TABC regulations prohibit Wal-Mart from obtaining the necessary permits.”

Wal-Mart alleges the state is discriminating against it and other public corporations by arbitrarily distinguishing between “private” corporations and “public” in the sale of distilled spirits.

“These arbitrary and irrational distinctions create separate classes of retailers with no rational difference or purpose. One class of retailers—public corporations—are denied an opportunity to compete in the distilled spirits market, while another class of retailers—private corporations and publicly traded hotel corporations—are allowed to compete without similar restriction,” the suit states.

“No other state in the nation allows private corporations to engage in the retail sale of spirits but prohibits some but not all publicly traded companies from doing so.”

Wal-Mart further contends the law limiting permits violates the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution and is seeking an injunction against the enforcement of the Texas law.

The TABC argues Wal-Mart’s constitutional challenges fails as a matter of law.

“In sum, Defendants respectfully submit that the Legislature, in deciding to restrict access to liquor by limiting the number and type of business authorized to sell this product, made a legitimate policy choice that is not forbidden by the United States Constitution,” TABC’s motion states. “Defendants therefore ask that this Court grant their motion and dismiss the lawsuit in its entirety.”

Wal-Mart is represented in part by attorneys Neal Manne, Alex Kaplan and Chanler Langham of the Houston law firm Susman Godfrey.

Attorney General Ken Paxton represents TABC.

Case No. 1:15-cv-00134-RP

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