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Wal-Mart's efforts to sell distilled spirits and other hard liquors in Texas have run into yet another roadblock

by Kerana Todorov
August 20, 2019

The U.S. Court of Appeals for the Fifth Circuit in New Orleans on Aug. 15 ruled that a Texas law barring publicly traded corporations with 35 or more owners from owning package store permits did not violate the dormant commerce clause and other laws. The appeals judges overruled a lower court decision that had concluded the Texas law was unconstitutional in the case pitching Wal-Mart against the Texas Alcoholic Beverage Commission and the Texas Package Stores Association.

The appeals court dismissed Wal-Mart’s arguments, including that the Texas law was discriminatory under this year’s U.S. Supreme Court decision known as Tennessee Wine & Spirits Retailers Association v. Thomas. In that case, the U.S. Supreme Court ruled that Tennessee’s residency requirements on liquor store owners seeking a license or renew a permit to operate a store in Tennessee was unconstitutional.

An attorney for Texas Package Stores Association wrote in a court filing that Wal-Mart’s arguments that it was discriminated under Tennessee Wine & Spirits Retailers Association v. Thomas “incorrect or misleading.”
The case dealt with a different set of issues, the attorney, G. Alan Waldrop of Terrill & Waldrop in Austin, told Wine Business Monthly Monday.

The appeals court remanded the matter to the lower courts to further reconsideration of whether the ban in Texas was “enacted with a discriminatory purpose.”

The case began in 2015 Wal-Mart sued the Texas Alcoholic Beverage Commission in January of that year over a Texas law that prohibits publicly traded corporations like Wal-Mart from obtaining permits to sell distilled spirits at its Walmart and Sam’s Club stores in the state. Walmart alleged the ban against publicly traded corporations owned by 35 or more individuals was unconstitutional, according to court filings.

Wal-Mart planned to build separate entrances at its stores for its distilled spirits and hard liquors departments in compliance with state and local rules. These departments would not be directly accessible from the main retail area and closed to unaccompanied minors, Wal-Mart stated in court records.

As of 2015, Wal-Mart sold wine and beer at 546 stores in Texas at Walmart stores, Supercenters, Sam’s Clubs and Neighborhood Markets. The Arkansas-based retailer was licensed to sell distilled spirits along with wine and beer in 25 other states, according to the 2015 complaint.

Under Texas law, publicly traded corporations cannot own or hold the required permit known as a “package store permit,” according to the 2015 complaint. “Wal-Mart is therefore irrationally banned from competing with privately held companies that are, unlike publicly traded corporations, allowed to obtain package store permits,” according to the complaint filed in federal court in Austin, Texas. Wal-Mart also complained that hotels owned by publicly traded companies were excluded from the prohibition and may sell distilled spirts and obtain package store permits, according to the filing.

Wal-Mart also filed the lawsuit in 2015 over Texas’ law that prohibits a company like Wal-Mart from “owning or holding more than five package store permits,” a restriction that does not apply to family members who “pool package store permits” and then can obtain an “unlimited number of package store permits,” according to the complaint. Family members include parents and sons and daughters or siblings.

Walmart’s challenge to the five-permit limit and consanguinity exception became moot in this summer when the Texas State Legislature changed the law to repeal the consanguinity exception and allow stores to have 15 permits a year – or up to 250.

A US district judge sided Wal-Mart in March 2018. The Texas Package Stores Association, a trade association that represents liquor store owners in the state, and the Texas Alcoholic Beverage Commission appealed U.S. District Judge Robert Pitman’s decision.

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