United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS June 26, 2003
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
__________________________
No. 02-21137
__________________________
C. A. DICKERSON; ROLAND R. PENNINGTON;
DAVID VUKOVIC,
Plaintiffs-Appellees,
v.
DOYNE BAILEY, in his official capacity
as administrator of the Texas Alcoholic
Beverage Commission,
Defendant-Appellant.
___________________________________________________
Appeal from the United States District Court for the
Southern District of Texas, Houston Division
___________________________________________________
Before WIENER and CLEMENT, Circuit Judges, and LITTLE*, District
Judge.
WIENER, Circuit Judge:
Defendant-Appellant Doyne Bailey, in his official capacity as
Administrator of the Texas Alcoholic Beverage Commission (the
“Administrator”), appeals from the district court’s grant of
summary judgment to Plaintiffs-Appellees C.A. Dickerson et al.
(“Plaintiffs”). Plaintiffs have challenged portions of the Texas
Alcoholic Beverage Code (“TABC”) that regulate the sale and
*
District Judge of the Western District of Louisiana, sitting
by designation.
importation of wine by citizens of the State of Texas from out-of-
state vintners, contending that Texas violates the Commerce Clause
by economically discriminating against out-of-state wineries in
favor of its own in-state wineries. As we determine that summary
judgment was properly granted and that the district court’s ordered
remedy was appropriate in light of its judgment, we affirm.
I.
FACTS AND PROCEEDINGS
Plaintiffs are oenophiles who reside in the Houston area. In
April 1999, they brought suit under 42 U.S.C. § 1983 against the
Administrator, contending that particular provisions of the TABC,
which he and the Alcoholic Beverage Commission enforce, violate the
Commerce Clause of the United States Constitution.1 The
uncontested predicate for Plaintiffs’ lawsuit was their attempt to
purchase wines directly from Wiederkehr Wine Cellars, a small
vintner in Arkansas, and have it shipped directly to Plaintiffs in
Texas. Because of the small size of the winery, Wiederkehr has
been unable to secure importation and distribution of its wines in
Houston, Texas, through the permitted wholesaler. Plaintiffs also
purchase wine while visiting out-of-state wineries, which produce
wine that is unavailable in Texas; and Plaintiffs’ efforts to have
their purchases shipped directly to their homes are frustrated by
Texas’s prohibition against out-of-state wineries selling and
1
See Dennis v. Hughes, 498 U.S. 439, 446 (1991) (holding that
“the Commerce Clause confers ‘rights, privileges, or immunities’
within the meaning of § 1983”).
2
shipping directly to Texas consumers.2 Wineries in Texas, however,
are permitted to sell and ship wine directly to Texas consumers.3
Thus, claim Plaintiffs in their complaint, Texas’s prohibition
against out-of-state wineries shipping their products directly to
Texas consumers constitutes a “significant burden on interstate
commerce and bars them and all other Texans from engaging in their
fundamental liberty of interstate commerce.”
After receiving cross-motions for summary judgment by the
parties, the district court granted summary judgment to Plaintiffs
(and, accordingly, denied summary judgment to the Administrator).
In its extensive Memorandum and Order the district court thoroughly
surveyed the extant case law, then held that (1) TABC § 107.07(a)
and § 107.07(f) facially violate the Commerce Clause, and (2) these
provisions are not saved by the powers granted to Texas under § 2
of the Twenty-First Amendment because their purpose is to protect
in-state economic interests, rather than promoting the legitimate
state policy of temperance. The Administrator filed a motion for
reconsideration.
Shortly thereafter, the Seventh Circuit issued its decision in
Bridenbaugh v. O’Bannon, reversing a district court’s ruling in the
2
See, e.g., TEX. ALCO. BEV. CODE ANN. § 107.07(f) (Vernon 2001)
(prohibiting any direct shipments to a Texas resident by an out-of-
state producer or seller of alcoholic beverages).
3
See, e.g., TEX. ALCO. BEV. CODE ANN. § 16.01(a)(4) (permitting
in-state wineries to sell directly to Texas consumers up to 25,000
gallons of wine annually).
3
Northern District of Indiana that the district court here had
relied on in its summary judgment order.4 In light of the Seventh
Circuit’s Bridenbaugh decision, the district court granted the
Administrator’s motion for reconsideration. The court also granted
Plaintiffs’ motion to amend their complaint, in which they
maintained that the Administrator raised new arguments in his
motion for reconsideration. All parties were ordered to rebrief
their motions for summary judgment.
In his second motion for summary judgment, the Administrator
relied heavily on Bridenbaugh and also insisted for the first time
that in-state and out-of-state vintners are treated equally under
§ 107.07. In their amended complaint and new summary judgment
motion, Plaintiffs urged that Texas’s discriminatory treatment of
out-of-state wineries was explicitly revealed by the Texas
legislature’s recent enactment of the Texas Wine Marketing
Assistance Program Act (“Texas Wine Marketing Act”),5 effective
September 1, 2001. Plaintiffs also challenged the Administrator’s
new claim of equal treatment for in-state and out-of-state wineries
under § 107.07, specifically highlighting § 107.12 as facially
discriminatory in favor of in-state wineries at the expense of out-
4
Bridenbaugh v. O’Bannon, 78 F. Supp. 2d 828 (N.D. Ind.
1999), rev’d, Bridenbaugh v. Freeman-Wilson, 227 F.3d 848 (7th Cir.
2000).
5
TEX. ALCO. BEV. CODE ANN. §§ 110.001–110.055.
4
of-state wineries.6 Finally, Plaintiffs expanded the scope of the
relief they sought, requesting that numerous “duplicative” statutes
in the TABC be adjudged as unconstitutional, either facially or as
applied.7
In its second, and equally comprehensive, Memorandum and
Order, the district court acknowledged that its prior summary
judgment ruling and the Bridenbaugh decision “motivated both sides
to reframe their claims.” 8 After exhaustively reviewing the case
law and the parties’ new arguments, though, the district court
again granted summary judgment in favor of Plaintiffs, determining
that (1) § 107.07(f) is facially unconstitutional, and (2) §§ 6.01,
11.01, 37.07, 107.05(a), and 107.07(a) are unconstitutional as
applied to Plaintiffs. The district court based this conclusion on
the same reasoning as in its first summary judgment order: These
statutes preclude Plaintiffs from purchasing wine directly from
out-of-state wineries and having it shipped directly to their Texas
6
See TEX. ALCO. BEV. CODE ANN. § 107.12 (providing that a person
who purchases wine at a winery in Texas may have it shipped
directly to a residence in Texas).
7
See TEX. ALCO. BEV. CODE ANN. § 6.01 (permitting, inter alia,
only importation of alcoholic beverages by persons who first
obtained a permit or license); § 11.01 (prohibiting the importation
of liquor, including wine, without a permit); § 37.03 (requiring a
seller’s permit for “any distillery, winery, importer, broker, or
person who sells liquor to permittees authorized to import liquor
into [Texas], regardless of whether the sale is consummated inside
or outside the state”); § 107.05(a) (prohibiting the import or
delivery of liquor to anyone not authorized to import it).
8
Dickerson v. Bailey, 212 F. Supp. 2d 673, 675 (S.D. Tex.
2002).
5
residences, but does allow them to purchase wine directly from in-
state wineries and have it shipped directly to them in Texas. This
is the kind of economic discrimination, the court explained, that
is proscribed by the Commerce Clause: The purpose of the state
scheme is economic discrimination against out-of-state interests
or, depending on one’s point of view, economic protectionism of in-
state competitors. Accordingly, the district court held that the
subject provisions of the TABC are not saved by the powers granted
to the states under § 2 of the Twenty-First Amendment to regulate
alcohol. The district court enjoined the Administrator from
enforcing the challenged statutory provisions because they
“depriv[e] Plaintiffs . . . of their right to engage in interstate
commerce by importing out-of-state wine for personal consumption
without the threat of criminal punishment if they violate the
statute[s].”9
The Administrator again filed a motion for reconsideration.
In response, the district court modified its second summary
judgment order, ruling that § 107.07(f) is unconstitutional only as
applied to the Plaintiffs, not facially. The court also stayed its
injunction pending any appeal to us. In all other respects, the
second summary judgment decision remained unchanged. The
9
Id. at 696 (enjoining enforcement of §§ 6.01, 11.01, 37.03,
107.05(a), 107.07(a), and 107.07(f)). See TEX. ALCO. BEV. CODE ANN.
§ 1.05(a) (providing that a violation is a misdemeanor that is
“punishable by a fine of not less than $100 nor more than $1,000 or
by confinement in the county jail for not more than one year or by
both”).
6
Administrator timely filed a notice of appeal.
II.
ANALYSIS
On appeal, the Administrator urges us to hold that the
provisions of the TABC that are challenged by Plaintiffs are
sanctioned by the power granted to the states under § 2 of the
Twenty-First Amendment. Under controlling precedent in this
circuit and in the Supreme Court, we are required to assess first
whether these statutes violate the Commerce Clause, and, if we so
determine, we must then ask whether they are saved by § 2 of the
Twenty-First Amendment.10 In the alternative, the Administrator
maintains, if we affirm the district court’s judgment, then we
should reform the ordered remedy. We will address these two claims
in order.
A. Standard of review.
We review a grant of summary judgment de novo, applying the
same standard as the district court.11 A motion for summary
judgment is properly granted only if there is no genuine issue as
to any material fact.12 In reviewing all of the evidence, we must
disregard all evidence favorable to the moving party that the jury
10
Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth.,
476 U.S. 573 (1986); Bacchus Imports, Ltd. v. Dias, 468 U.S. 263
(1984); Cooper v. McBeath, 11 F.3d 547 (5th Cir. 1994).
11
Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380
(5th Cir. 1998).
12
FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986).
7
is not required to believe, and should give credence to the
evidence favoring the nonmoving party as well as that evidence
supporting the moving party that is uncontradicted and
unimpeached.13 The nonmoving party, however, cannot satisfy his
summary judgment burden with conclusional allegations,
unsubstantiated assertions, or only a scintilla of evidence.14
B. Do the challenged provisions of the TABC violate the Commerce
Clause?
1. The dormant Commerce Clause analysis.
The U.S. Constitution empowers Congress “[t]o regulate
Commerce . . . among the several States.”15 The Supreme Court has
long recognized that this provision has a necessary, logical
corollary: If Congress has the power to regulate commerce among the
states, then the states lack the power to impede this interstate
commerce with their own regulations. As Justice Johnson explained
in Gibbons v. Ogden: “If there was any one object riding over every
other in the adoption of the constitution, it was to keep the
commercial intercourse among the States free from all invidious and
partial restraints.”16 More recently, the Supreme Court stated that
“[t]his ‘negative’ aspect of the Commerce Clause prohibits economic
13
Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133,
151 (2000).
14
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.
1994) (en banc).
15
U.S. CONST. art. I, § 8, cl. 3.
16
22 U.S. (9 Wheat.) 1, 231 (1824).
8
protectionism —— that is, regulatory measures designed to benefit
in-state economic interests by burdening out-of-state
competitors.”17 This “negative aspect” of the Commerce Clause,
which “prevent[s] economic Balkanization” among the states,18 is
commonly known as the “dormant Commerce Clause” doctrine.
The Supreme Court has adopted a “two-tiered approach to
analyzing state economic regulations under the Commerce Clause.”19
This approach entails classifying state statutes into one of two
categories: A state statute may (1) facially discriminate against
out-of-state economic interests, or (2) regulate evenhandedly and
thereby evince only an indirect burden on interstate commerce.
Stated differently, courts ask whether the state statute under
review reflects a “discriminatory purpose” or merely a
“discriminatory effect.”20 Although the Supreme Court has
acknowledged that there is no “clear line” of separation between
these two classes of statutes in close cases,21 the threshold
17
Wyoming v. Oklahoma, 502 U.S. 437, 454 (1992) (quoting New
Energy Co. of Indiana v. Limbach, 486 U.S. 269, 273-74 (1988)).
See also New Energy Co. v. Limbach, 486 U.S. 269, 273 (1988)
(noting that “the Commerce Clause not only grants Congress the
authority to regulate commerce among the States, but also directly
limits the power of the States to discriminate against interstate
commerce”).
18
Bacchus Imports, 468 U.S. at 276.
19
Brown-Forman Distillers Corp., 476 U.S. at 578-79.
20
Bacchus Imports, 468 U.S. at 270.
21
Wyoming, 502 U.S. at 544 n.12 (quoting Brown-Forman
Distillers Corp., 476 U.S. at 579).
9
determination is significant if only because it establishes the
constitutional standard of review.
In the first category —— facially discriminatory statutes ——
the Supreme Court has long held that “[s]tate laws discriminating
against interstate commerce on their face are ‘virtually per se
invalid.’”22 The only way in which a state may escape a
determination that it is engaging in constitutionally prohibited
economic protectionism is if it “can demonstrate, under rigorous
scrutiny, that it has no other means to advance a legitimate local
interest.”23 “At a minimum such facial discrimination invokes the
strictest scrutiny of any purported legitimate local purpose and of
the absence of nondiscriminatory alternatives.”24 Under this strict
scrutiny, we have held that the state bears the heavy burden “to
rescue its statutes.”25 This burden is stringent: “When a statute
directly regulates or discriminates against interstate commerce or
when its effect is to favor in-state economic interests over out-
of-state interests, we have generally struck down the statute
without further inquiry.”26
22
Fulton Corp. v. Faulkner, 516 U.S. 325, 331 (1996) (quoting
Oregon Waste Systems, Inc. v. Dep’t of Envtl. Quality of Ore., 511
U.S. 93, 99 (1994)).
23
C & A Carbone, Inc. v. Town of Clarkstone, New York, 511
U.S. 383, 392 (1994).
24
Hughes v. Oklahoma, 441 U.S. 322, 337 (1979).
25
Cooper, 11 F.3d at 553.
26
Brown-Forman Distillers Corp., 476 U.S. at 579.
10
In the second category —— evenhanded statutes that impose only
incidental burdens on interstate commerce —— a court should apply
a balancing test:
Where the statute regulates even-handedly to effectuate a
legitimate local public interest, and its effects on
interstate commerce are only incidental, it will be upheld
unless the burden imposed on such commerce is clearly
excessive in relation to the putative local benefits. If a
legitimate local purpose is found, then the question becomes
one of degree. And the extent of the burden that will be
tolerated will of course depend on the nature of the local
interest involved, and on whether it could be promoted as well
with a lesser impact on interstate activities.27
This is commonly referred to as the “Pike test,” and courts apply
it only when “other legislative objectives are credibly advanced
and there is no patent discrimination against interstate trade.”28
2. The challenged provisions of the TABC facially
discriminate against out-of-state economic interests.
The TABC is cast in the starring role in this dispute. The
TABC is a compilation of statutes that regulate the production,
distribution, sale, and consumption of all alcoholic beverages
within Texas. The Texas legislature first enacted this code in
1935, following the repeal of Prohibition and the adoption of the
Twenty-First Amendment, which returned regulation of alcoholic
beverages to the states.29 The TABC was first enacted, and amended
27
Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970)
(citation omitted).
28
Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978).
29
See TEX. ALCO. BEV. CODE ANN. § 6.03 (discussing the function
and purpose underlying the code and its requirements).
11
over the years, pursuant to “the police power of the state [of
Texas] for the protection of the welfare, health, peace,
temperance, and safety of the people of the state.”30
Similar to the regulatory regimes in many other states,31 the
TABC creates a three-tier system that strictly separates ownership
and operations between manufacturers, wholesalers, and retailers.
The vertical integration of the manufacture, distribution or sale
of alcoholic beverages is strictly prohibited.32 And, with rare
exceptions, manufacturers are permitted to sell only to
wholesalers; wholesalers only to retailers; and retailers only to
consumers.33 This tripartite functional division of firms that
participate in the alcoholic beverages industry is designed to aid
Texas in the regulation and control of alcohol consumption, and
“prevents companies with monopolistic tendencies from dominating
all levels of the alcoholic beverage community.”34
30
TEX. ALCO. BEV. CODE ANN. § 1.03.
31
Bridenbaugh, 227 F.3d at 851.
32
See TEX. ALCO. BEV. CODE ANN. § 102.01 (prohibiting “tied
house” arrangements, which consists of “overlapping ownership” of
the manufacture, distribution, and retail sale of alcohol); §
102.07 (prohibiting manufacturers, distributers, or retailers from
acquiring any financial interests in each other).
33
See generally TEX. ALCO. BEV. CODE ANN. § 11.01–53.009
(requiring permits for the activities of manufacturing,
distributing, and selling “liquor,” including wine); § 61.01–73.11
(requiring licenses for the activities of manufacturing,
distributing, and selling “beer”).
34
S.A. Discount Liquor, Inc. v. Texas Alcoholic Beverage
Comm’n, 709 F.2d 291, 293 (5th Cir. 1983).
12
The particular statutes at issue in this case —— principally
§ 107.07, but also, inter alia, § 16.01, § 107.12, and § 110.053 ——
contain some of the only exceptions to this three-tier system,
viz., these statutes permit in-state wineries to sell and ship wine
directly to in-state consumers, thereby providing in-state wine
manufacturers with an economic advantage by exempting them from
having to operate solely within the TABC’s otherwise mandatory
three-tier system. These exceptions are not available to out-of-
state wineries.
The Texas legislature has exempted in-state wineries from the
three-tier system by permitting them to engage in two types of
retail activity that are prohibited to out-of-state wineries: Texas
wineries may deal directly with Texas consumers in both selling and
shipping wines. Texas wineries may sell wine directly to Texas
consumers “in an amount not to exceed 25,000 gallons annually,”35
with no per-customer restrictions. In contrast, a Texas resident
is prohibited from “personally” bringing into the state more than
three gallons of wine purchased from an out-of-state vintner,36
which de facto restricts how much wine an out-of-state winery may
sell directly to Texas residents (or, conversely, restricts how
much wine a Texas resident may purchase while he is outside of the
jurisdiction of the TABC). Texas wineries are also permitted to
35
TEX. ALCO. BEV. CODE ANN. § 16.01(a)(4).
36
TEX. ALCO. BEV. CODE ANN. § 107.07(a).
13
ship directly to a Texas consumer any portion of the 25,000 gallons
of wine that they have sold to him,37 but out-of-state wineries are
prohibited, under the threat of criminal penalties, from shipping
“any alcoholic beverage directly to any Texas resident.”38
Although the contrast between § 107.07(a) and § 16.01(a)(4) is
the most striking —— three gallons versus 25,000 gallons in direct
sales to consumers being either permitted or prohibited depending
solely on the in-state or out-of-state status of the winery ——
Texas wineries are expressly exempted from the strictures of the
three-tier system in several other ways.39
In summary, even those out-of-state wineries that obtain a
permit to export their product to Texas are strictly bound to
deliver their product only to those Texas wholesalers who have
obtained permits to receive such imports.40 In diametric
37
TEX. ALCO. BEV. CODE ANN. § 107.12.
38
TEX. ALCO. BEV. CODE ANN. § 107.07(f) (emphasis added).
39
See TEX. ALCO. BEV. CODE ANN. § 16.08 (allowing a Texas winery
to sell unlimited quantities of wine directly to consumers at “wine
festivals” that are “organized to celebrate and promote the wine
industry in this state”); § 102.19 (providing that a winery “may
give one or more unopened bottles of Texas-made wine” directly to
consumers on the premises of a convention center or civic center in
Texas); § 110.053 (providing that a Texas consumer may order wine
directly from a Texas winery without being present at the winery;
the winery may ship the wine directly to a retailer without going
through a wholesaler; and the retailer may then physically deliver
or ship the wine to the consumer).
40
See supra note 7 (listing the other TABC provisions that
prohibit out-of-state wineries from selling and shipping wine to
Texas consumers).
14
opposition, in-state wineries are expressly accorded numerous
statutory privileges in skirting the three-tier system to sell and
ship substantial quantities of wine directly to Texas consumers.
In the face of these statutes, the Administrator baldly
asserted before the district court and re-asserts on appeal that
the TABC does not discriminate between in-state and out-of-state
wineries. It is clear beyond peradventure, however, that the TABC
permits in-state wineries to circumvent Texas’s three-tier system
and both sell and ship directly to in-state consumers; and it is
equally clear that the statutes prevent out-of-state wineries from
exercising the same privileges. To paraphrase the Bard, that which
we call discrimination by any other name would still smell as foul.
The numerous ways in which in-state wineries are exempt from
complying with the three-tier system establish that this
discrimination is neither evenhanded nor incidental. In fact, it
is difficult to label as “incidental” a difference of 24,997
gallons of wine available annually for direct purchase and delivery
from a winery by a consumer. The TABC statutes are pellucid: Texas
uniquely bestows regulatory exemptions and economic benefits on its
own in-state wineries that it does not grant to out-of-state
wineries —— for the undeniable purpose of promoting Texas’s
economic interests over those of other states.41 Most of these
41
Interestingly, in-state wineries appear to be the only
beneficiaries of such statutory exemptions in the TABC; the
manufacturers of beer and hard liquor remain strictly bound to
distribute their products through wholesalers and retailers.
15
statutory exemptions were adopted by the Texas legislature in
either 1995 or 2001,42 reflecting that the Texas legislature amended
the TABC in response to the recent explosion in domestic wine
production and consumption in the United States —— blatantly
promoting the economic interests of in-state wineries at the
expense of out-of-state wineries.43
The Texas legislature, though, has spared us from having to
infer circumstantially its discriminatory purpose in denying to
out-of-state wineries the exemptions to the three-tier system that
it has accorded the in-state wineries. The statement of
legislative intent that accompanies the Texas Wine Marketing Act
declares with candor that the purpose of these exemptions is “to
assist the Texas wine industry in promoting and marketing Texas
wines and educating the public about the Texas wine industry.”44
The Texas Senate Research Center —— the official public policy and
legislative analyst for the Texas Senate and Lieutenant Governor45
42
See, e.g., Texas Wine Marketing Assistance Program Act, 77th
Leg., R.S., ch. 1001, § 1.01, 2001 Tex. Gen. Laws 2177, 2177
(codified at TEX. ALCO. BEV. CODE ANN. § 110.053); Act of May 5, 1995,
74th Leg., ch. 135, § 1, 1995 Tex. Gen. Laws 970, 970 (codified at
TEX. ALCO. BEV. CODE ANN. § 107.07(f)).
43
See Dickerson, 212 F. Supp. 2d at 695. The district court
notes here that Texas now ranks fifth in the country in terms of
states’ wine production, citing Michael A. Lindenburger, The Sweet
Smell of Growth: State’s Winemakers Say Legislative Compromise will
Help Business, DALLAS MORNING NEWS, Apr. 22, 2001, available at 2001
WL 18816339.
44
TEX ALCO. BEV. CODE ANN. § 110.002(a).
45
See http://www.senate.state.tx.us/SRC/Info.htm#top.
16
—— assessed the “purpose” of the Texas Wine Marketing Act as
follows:
The growth of the Texas wine industry has had a positive
impact on the Texas economy. California produces many times
the amount of wine Texas produces, but consumes only a
fraction more than Texas consumes. Texas is a significant
consumer of wine, but demand is not being supplied by Texas
wineries. H.B. 892 [i.e., the Texas Wine Marketing Act]
allows Texas wineries increased access to the Texas market and
provides consumers with better access to Texas wines.46
In other words, the Texas legislature became concerned that
increased “demand [for wine] is not being supplied by Texas
wineries”47 —— relative to California’s and other states’ wineries
—— and thus embarked on the plan to create special exemptions for
its in-state wineries to bolster their sales. The stated purpose
is unambiguous: To promote the sale and consumption of Texas wine
over those wines produced in other states.48 If there were any
doubt as to the reason for Texas’s discriminatory treatment of out-
of-state wineries, the Texas Wine Marketing Act removes it, making
clear precisely why Texas adopted these paternalistic exemptions
for in-state wineries.
46
Plaintiffs’ First Amended Complaint, Ex. A, available at
http://www.capitol.state.tx.us/cgi-bin/tlo/textframe.cmd?LEG=77&S
ESS=R&CHAMBER=H&BILLTYPE=B&BILLSUFFIX=00892&VERSION=5&TYPE=A.
47
Id.
48
Plaintiffs also submitted evidence from the legislative
history for the Texas Wine Marketing Act, in which Representative
Howard remarked that its ultimate function was to “force people [in
Texas] to sell [Texas] alcoholic beverages that they might not
otherwise choose to sell.” Plaintiffs’ First Amended Complaint,
Ex. B (emphasis added).
17
In this respect, the operable facts of this case are identical
to those resulting in the Supreme Court’s decision in Bacchus, the
foundational case that established the modern jurisprudential
framework for assessing state alcohol regulations under the
Commerce Clause.49 In Bacchus, the Court held that Hawaii’s
exemption of its in-state alcoholic beverages from an excise tax
that out-of-state liquor producers were required to pay ran afoul
of the Commerce Clause. In reaching this decision, the Supreme
Court quoted from the legislative history of the Hawaiian statute,
which stated that the purpose of the tax exemption was to
“encourage and promote the establishment of a new industry” in the
state, such as stimulating “the local fruit wine industry.”50 As
we may have today, the Supreme Court observed that it “need not
guess at the legislature’s motivation, for it is undisputed that
the purpose of the exemption was to aid Hawaiian industry.”51 The
Hawaiian statute expressly reflected a discriminatory purpose, and
thus failed to pass constitutional muster under the Court’s strict
scrutiny.52
Likewise here, the record makes clear the Texas legislature’s
49
See Brown-Forman Distillers Corp., 476 U.S. at 584 (citing
Bacchus for the proposition that state regulation of alcohol is
reviewable under the Commerce Clause).
50
Bacchus Imports, 468 U.S. at 270.
51
Id. at 271.
52
Id. at 273.
18
unabashed discriminatory intent, and, as Plaintiffs demonstrate,
the evidence of the impact of this discrimination on interstate
commerce is not challenged by the Administrator —— because it
cannot be. As the Supreme Court stated in Bacchus: “It has long
been the law that States may not ‘build up [their] domestic
commerce by means of unequal and oppressive burdens upon the
industry and business of other States.’”53
The Administrator nonetheless attempts to divert our
recognition of the essential similarities between the instant case
and Bacchus by misrepresenting the central legal issue of this
case. The Administrator insists repeatedly throughout his briefs
that Plaintiffs are challenging the legitimacy of Texas’s three-
tier system in their quest to establish an unregulated, national
market in wine. The Administrator’s strategy here is palpable: He
is seeking to cash in on the Seventh Circuit’s Bridenbaugh
decision, which rejected a challenge to Indiana’s three-tier system
by out-of-state wineries.54 “Just as in Bridenbaugh,” urges the
Administrator, “Texas ‘insists that every drop of liquor pass
through its three-tier system.’”55 This from one who must know
53
Id. at 272 (quoting Guy v. Baltimore, 100 U.S. 434, 443
(1880)).
54
The Administrator is also apparently hoping to benefit from
our having specifically approved of Texas’s three-tier system when
we previously rejected a Commerce Clause challenge to it. See S.A.
Discount Liquor, 709 F.2d at 293.
55
The Administrator is quoting Bridenbaugh, 227 F.3d at 853.
19
better than anyone the inaccuracy of that assertion, directly in
the teeth of the TABC’s explicit exception of domestic wine from
that very same three-tier system.
The Administrator’s contentions here are nothing short of
outright mischaracterization of both the statutes he is charged
with enforcing and the legal position unambiguously espoused by
Plaintiffs. First, it is revealing that, despite the
Administrator’s repeated allegations that Plaintiffs are seeking an
unfair advantage for out-of-state wineries in the creation of an
unregulated national market in wine, he cannot identify a single
statement by Plaintiffs that evidences this alleged goal. Instead,
he repeatedly quotes a single sentence fragment from the district
court’s introductory paragraph in its first summary judgment order,
apparently embracing the rhetorical tactic that repeating a
falsehood enough times will somehow establish its veracity. In
fact, precisely the opposite is true; Plaintiffs expressly disavow
this alleged purpose, and there is nothing implicit in their claims
for equal treatment under the TABC that requires such a result.
Second, it is patently false for the Administrator to claim
that, like Indiana in Bridenbaugh, Texas requires that “every drop
of liquor pass through its three-tier system.”56 The Bridenbaugh
decision, even though not controlling precedent here, directly
supports Plaintiffs’ position, not the Administrator’s. The
56
Id.
20
dispositive fact in Bridenbaugh was Indiana’s equal application of
its three-tier system to all alcoholic beverages, regardless of
where such beverages were produced. As the Seventh Circuit
succinctly summarized the issue:
Indiana insists that every drop of liquor pass through its
three-tier system and be subjected to taxation. Wine
originating in California, France, Australia, or Indiana
passes through the same three tiers and is subjected to the
same taxes. Where’s the functional discrimination?57
Thus, the Seventh Circuit recognized that the out-of-state wineries
in Bridenbaugh were attempting to highjack the dormant Commerce
Clause doctrine to obtain preferential treatment for themselves.
Properly analyzed, the out-of-state wineries in Bridenbaugh were
seeking to obtain the same preferential benefits that Texas grants
to its in-state wineries: An exemption from the three-tier system
that is denied to their competitors. As there was no disparity in
regulatory compliance between in-state and out-of-state winery
interests in Indiana’s scheme, the Seventh Circuit rightly held
that there was no Commerce Clause violation.
The distinction between Indiana’s scheme as approbated in
Bridenbaugh and Texas’s scheme under the TABC supplies additional
comfort to our affirmance of the district court’s summary judgment
in this case. In relying on Bridenbaugh, the Administrator omitted
an essential element of the decision, in which the Seventh Circuit
observed that the Twenty-First Amendment “authorizes” Indiana’s
57
Id. at 853 (original emphasis).
21
regulation of alcohol through its three-tier system, “unless the
state has used its power to impose a discriminatory condition on
importation, one that favors Indiana sources of alcoholic beverages
over sources in other states, as Hawaii did in Bacchus.”58 There
was no such discrimination in Indiana’s regulatory regime, but
there certainly is such discrimination against out-of-state
wineries in the TABC’s regime. As the Bridenbaugh court
recognized, such discrimination is undeniably proscribed by Bacchus
—— a point that the Administrator neglects to mention when he
invokes Bridenbaugh.
Finally, the Administrator makes no attempt to identify the
unavailability of alternative means by which to achieve the policy
goals of the TABC. Although the Administrator does expound
conclusional assertions that the challenged provisions of the TABC
effectuate the regulation of alcohol consumption in Texas, he makes
no real effort either to offer up evidence for this proposition or
to show how these statutes are the only means by which to achieve
this goal. Under the two-tiered Commerce Clause analysis, however,
the Administrator must establish the absence of any available
alternative methods for enforcing any otherwise legitimate policy
goals of the TABC.59 In contrast, Plaintiffs submitted evidence to
58
Id. (emphasis added).
59
Cooper, 11 F.3d at 554. See also Maine v. Taylor, 477 U.S.
131 (1986) (holding that Maine’s ban on the import of baitfish is
constitutional because Maine has no other means to prevent the
spread of parasites to and the adulteration of its unique, native
22
show that Texas may enforce its temperance concerns under the
Twenty-First Amendment through innumerable other legitimate
statutes.60
Even if the Administrator had met the basic requirements of
the constitutional analysis in this Commerce Clause case, he would
fail in the end. We recognized in Cooper, when we struck down
other discriminatory provisions of the TABC, that the Administrator
“would be hardpressed to offer a justification substantial enough
to authorize a wall prohibiting equal competition of non-Texans in
the retail liquor business.”61 Just as in this case, the defendant
in Cooper —— an earlier administrator of the Alcoholic Beverage
Commission —— supported discriminatory licensing requirements with
only generalized, “boilerplate” references to Texas’s police power
to regulate alcohol, as sanctioned under § 2 of the Twenty-First
Amendment.62 We concluded that such arguments “hardly explain[] the
State’s particular restrictions on out-of-state ownership of
fish species).
60
See TEX. ALCO. BEV. CODE § 106.03 (providing for a Class A
misdemeanor to sell alcoholic beverages to a minor); § 106.06
(providing for a Class B misdemeanor to make alcoholic beverages
available to a minor); § 107.03 (prohibiting transporting or
delivering liquor in a dry area); § 101.31 (prohibiting
transportation, delivery or possession of any alcoholic beverage in
a dry area); § 102.01 (prohibiting “tied house” arrangements that
vertically integrate the manufacture, distribution and sale of
alcoholic beverages).
61
Cooper, 11 F.3d at 554.
62
Id. at 553.
23
various liquor licenses,” and thus dismissed these “purported
justifications as unpersuasive and insufficient.”63 The result in
Cooper was the same as in Bacchus: We determined that an in-state
residency requirement for issuing permits under the TABC was
economically discriminatory, and therefore constitutionally invalid
under the Commerce Clause.64
In not even attempting to provide the “substantial
justification” required by our precedent, the Administrator has
chosen instead to mischaracterize the nature of both the challenged
provisions of the TABC and the complaint actually filed by
Plaintiffs. At best, the Administrator has relied on conclusional
claims concerning his constitutionally sanctioned police power to
regulate alcohol importation under the Twenty-First Amendment.
When the issue of this case is properly framed, it becomes
clear that Cooper and Bacchus dictate our affirming the district
court’s determination that the TABC’s provisions that are
challenged by Plaintiffs violate the Commerce Clause. In purpose
and effect, TABC § 107.07 and related statutes discriminate against
out-of-state economic interests and thereby impede interstate
commerce in violation of the Commerce Clause. If anything, the
precedential value of Cooper and Bacchus is accentuated by the
Administrator’s patently obvious tactic of ignoring these two
63
Id. at 554 (emphasis added).
64
Id. at 555.
24
important cases in his arguments on appeal.
C. Are the economically discriminatory provisions of the TABC
saved by § 2 of the Twenty-First Amendment?
The Administrator propounds his belief that any juridical
determination that § 107.07 and related sections of the TABC impede
interstate commerce is ultimately moot, which may explain his half-
hearted effort to meet the requirements of the two-tiered Commerce
Clause test. The foundation of the Administrator’s position is
simple: § 2 of the Twenty-First Amendment. This section of the
Amendment states: “The transportation or importation into any State
. . . for delivery or use therein of intoxicating liquors, in
violation of the laws thereof, is hereby prohibited.”65
This constitutional provision, urges the Administrator,
empowers states to regulate the importation of alcohol absolutely,
so that statutes that serve this function simply cannot contain any
“fatal defect”66 under the Commerce Clause. Although he
acknowledges that alcohol regulations may be held to account under
other provisions of the Constitution and federal law, the
Administrator doggedly maintains that a state is free to regulate
“imports” of “intoxicating liquors” under the Twenty-First
Amendment regardless of its impact on interstate commerce.67 The
65
U.S. CONST. Amend. XXI, § 2.
66
Hughes, 441 U.S. at 337.
67
Accepting arguendo the Administrator’s premise, there
remains a colorable claim that the provisions of the TABC
challenged by Plaintiffs are unconstitutional under the Privileges
25
Administrator states his position: “[W]hen a state directly
regulates importation of alcohol under the explicit language of the
Twenty-first Amendment, that is effectively the end of the
constitutional inquiry.”
Although this point consumes almost the entirety of the
Administrator’s briefs, it is foreclosed by binding precedent of
the Supreme Court and this circuit that he largely evades in his
briefs. In Cooper, we quoted the Bacchus Court to the effect that
“[i]t is by now clear that the [Twenty-First] Amendment did not
entirely remove state regulation of alcoholic beverages from the
ambit of the Commerce Clause.”68 The Court explained further in
and Immunities Clause. See U.S. CONST. art. IV, § 2, cl. 1. As
amici have pointed out, the Privileges and Immunities Clause
compliments the role of the Commerce Clause in preventing “economic
Balkanization,” by intending “to place the citizens of each State
upon the same footing as citizens of other States.” Hicklin v.
Orbeck, 437 U.S. 518, 524 (1978). See also CONG. GLOBE, 39th Cong.,
1st Sess. 1836 (1866) (statement of Rep. Lawrence) (speaking of the
Privileges and Immunities Clause in Article IV, “[t]here it stands,
the palladium of equal fundamental civil rights for all citizens”).
Texas’s economically discriminatory regulations against out-of-
state wineries clearly violate the “substantial equality” in
fundamental rights that is secured, under the Constitution, to all
citizens of different states. Toomer v. Witsell, 334 U.S. 385, 396
(1948). The Supreme Court has, at least implicitly, endorsed this
view in Dennis, where it recognized that “the Commerce Clause
confers ‘rights, privileges, or immunities’ within the meaning of
[a] § 1983 [claim].” 498 U.S. at 446 (quoting 42 U.S.C § 1983)
(emphasis added). We need not reach this issue to dispose of this
case, as Plaintiffs’ claims under the Commerce Clause clearly
reveal Texas’s unconstitutional discrimination in the TABC.
Nonetheless, this shows how the Administrator’s position is
constitutionally infirm even if we agreed with his defense of §
107.07 and related provisions in the TABC.
68
Cooper, 11 F.3d at 555 (quoting Bacchus, 468 U.S. at 275).
26
Bacchus that:
The central purpose of [§ 2 of the Twenty-First Amendment] was
not to empower States to favor local liquor industries by
erecting barriers to competition. It is also beyond a doubt
that the Commerce Clause itself furthers strong federal
interests in preventing economic Balkinization. State laws
that constitute mere economic protectionism are therefore not
entitled to the same deference as laws enacted to combat the
perceived evils of an unrestricted traffic in liquor.69
This is commonly referred to as the “core concerns” test, which
entails assessing whether state statutes reflect the “central
purpose” or the “core concern” of the Twenty-First Amendment, viz.,
the promotion of temperance.70 Some courts have also recognized the
prevention of monopolies or organized crime from (re)gaining
control of the alcohol industry and the collection of taxes as
other policies effectuated by the Twenty-First Amendment.71 When
a state’s regulation of alcohol falls outside the scope of these
core concerns of the Twenty-First Amendment, the Supreme Court
typically strikes them down as invalid intrusions on interstate
69
Bacchus Imports, 468 U.S. at 276.
70
See id. (promoting temperance); Quality Brands v. Barry, 715
F. Supp. 1138, 1142-43 (D.D.C. 1989), aff’d, 901 F.2d 1130 (D.C.
Cir. 1990) (same); Loretto Winery, Ltd. v. Gazzara, 601 F. Supp.
850, 861 (S.D.N.Y. 1984), aff’d sub nom., Loretto Winery, Ltd. v.
Duffy, 761 F.2d 140 (2d Cir. 1985) (same).
71
See North Dakota v. United States, 495 U.S. 423, 432 (1990)
(plurality opinion) (“ensuring orderly market conditions” and
“raising revenue”); Joseph E. Seagram & Sons, Inc. v. Hostetter,
384 U.S. 35, 47-48 (1966), overruled on other grounds, Healy v.
Beer Institute, 491 U.S. 324, 342-43 (1989) (preventing
monopolies); S.A. Discount Liquor, Inc., 709 F.2d at 293
(preventing monopolies).
27
commerce.72 We expressly adopted the “core concerns” test in
Cooper, and, following the teaching of Bacchus, noted that the
“core concerns of the Twenty-first Amendment are not entitled to
greater weight than the principle of nondiscrimination animating
the Commerce Clause.”73
The Administrator gives lip service to the “core concerns”
analysis under the Twenty-First Amendment, but tries to change the
substance of this constitutional test. Instead of assessing
whether his state’s regulation of alcohol serves its policy
preference of temperance, the Administrator maintains that the
“core concerns” test requires that a court ask only whether a state
statute controls the importation of alcohol. Because, according to
the Administrator, the statutes challenged by Plaintiffs impose
only import restrictions, we must employ something akin to a
rational-basis/Pike balancing test. He insists that we are limited
to assessing whether there is a reasonable justification for the
import restrictions on the out-of-state wineries. “Here,” asserts
the Administrator, “the challenged statutes meet this minimal
threshold of reasonableness.” This, concludes the Administrator,
outweighs any purported federal interest in establishing a
72
See Capital City Cable, Inc. v. Crisp, 467 U.S. 691, 712-16
(1984) (holding that Oklahoma’s ban on alcohol-related television
ads violated the Commerce Clause, and that it was not saved by the
Twenty-First Amendment because such a ban did not reflect the
“central power reserved by § 2 of the Twenty-First Amendment”).
73
See Cooper, 11 F.3d at 555 (citing Healy, 491 U.S. at 344
(Scalia, J., concurring)).
28
national, unregulated market in wine.74
As Plaintiffs rightly note, the Administrator has
impermissibly distorted the “core concerns” test through a two-step
legerdemain. First, the Administrator bases his arguments solely
on dicta in non-Commerce Clause cases, at the same time virtually
ignoring in their entirety the central modern Supreme Court cases
addressing the issue of the relationship between the Commerce
Clause and the Twenty-First Amendment. For instance, the
Administrator principally derives his novel version of the “core
concerns” test from dicta in the Supreme Court’s decision in
California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc.,75
which addressed the relationship between the Sherman Antitrust Act
and the Twenty-First Amendment. Yet, the Supreme Court’s holding
in Bacchus, and those Supreme Court cases that followed in its
wake, such as Brown-Forman Distillers Corp. and Healy, not to
mention our own decision in Cooper, are barely mentioned in the
Administrator’s briefs. We can count on one hand the number of
pages in his appellate briefs that the Administrator devoted to
discussing the holdings of Bacchus and Cooper. It is only by
outrightly ignoring the central Supreme Court and Fifth Circuit
74
As we noted earlier, the Administrator repeatedly
misrepresents the nature of Plaintiffs’ claims in this litigation.
Plaintiffs are not seeking to create a national, unregulated market
in wine; rather, they seek only equal treatment between in-state
and out-of-state wineries under Texas statutes.
75
445 U.S. 97 (1980).
29
cases addressing the constitutional nexus between the Commerce
Clause and the Twenty-First Amendment that the Administrator has
been able to fudge the analyses employed in these controlling
precedents.
Second, even assuming arguendo that Midcal Aluminum and
Bridenbaugh were controlling on our decision here, these cases do
not support the Administrator’s theme that Texas’s discriminatory
restrictions on out-of-state wineries are saved from all judicial
scrutiny under the Commerce Clause. The Midcal Aluminum Court
explicitly rejected the position adopted by the Administrator here,
quoting from its earlier decision in Hostetter v. Idlewild Liquor
Corp.:
To draw a conclusion . . . that the Twenty-first Amendment has
somehow operated to “repeal” the Commerce Clause wherever
regulation of intoxicating liquors is concerned would,
however, be an absurd oversimplification. If the Commerce
Clause had been pro tanto “repealed,” then Congress would be
left with no regulatory power over interstate or foreign
commerce in intoxicating liquor. Such a conclusion would be
patently bizarre and is demonstrably incorrect.76
Yet, before us, the Administrator advocates exactly this “patently
bizarre,” “demonstrably incorrect,” and “absurd
oversimplification”: He maintains that it matters not that Texas’s
regulation of wine explicitly discriminates between in-state and
out-of-state wineries, because the regulations concern alcohol
imports and this court’s inquiry ends there (per § 2 of the Twenty-
76
Midcal Aluminum, Inc., 445 U.S. at 109 (quoting Hostetter
v. Idlewild Liquor Corp., 377 U.S. 324, 331-32 (1964)).
30
First Amendment). Not so: In Bacchus, the Supreme Court turned its
dicta in Midcal Aluminum into a constitutional standard, which it
reaffirmed in Brown-Forman Distillers Corp.,77 and which we followed
in Cooper. The Seventh Circuit acknowledged this basic
constitutional truth in Bridenbaugh, when it recognized that the
Supreme Court’s Commerce Clause jurisprudence establishes that “§
2 enables a state to do to importation of liquor —— including
direct deliveries to consumers in original packages —— what it
chooses to do to internal sales of liquor, but nothing more.”78
The Administrator’s deferential reasonableness/balancing test
is, at best, a legal dinosaur that went extinct long ago in the
history of the Supreme Court’s Twenty-First Amendment
jurisprudence.79 As the Supreme Court further stated in Hostetter
(and again quoted in the Midcal Aluminum and Bacchus decisions):
Both the Twenty-first Amendment and the Commerce Clause are
parts of the same Constitution. Like other provisions of the
Constitution, each must be considered in the light of the
other, and in the context of the issues at stake in any
concrete case.80
Notably, this proposition served as an integral premise in the
77
476 U.S. at 578-79.
78
Bridenbaugh, 227 F.3d at 853.
79
See Cooper, 11 F.3d at 555 (discussing “[o]lder caselaw”
that states possessed “unfettered” authority under the Twenty-First
Amendment “to regulate commerce in intoxicating liquors”).
80
Hostetter, 377 U.S. at 332. See also Bacchus Imports, 468
U.S. at 275 (quoting Hostetter, 377 U.S. at 332); Midcal Aluminum,
445 U.S. at 109 (quoting Hostetter, 377 U.S. at 332).
31
Supreme Court’s holding in Bacchus. Thus, even if we agreed with
the Administrator (which we do not), we are nonetheless obligated
under the doctrine of stare decisis to follow Bacchus, Brown-Forman
Distillers, and Cooper, and the constitutional standards enunciated
therein. All of these cases plainly reject the constitutional
standard of review proffered by the Administrator in favor of a
“two-tiered” Commerce Clause test, which requires us to scrutinize
strictly whether a state’s statutes are tailored to the Twenty-
First Amendment’s “core concerns.”
As the Administrator denies that this is the valid
constitutional test, he rejects outright any requirement that he
proffer evidence connecting the disputed statutes to the “core
concerns” of the Twenty-First Amendment, such as furthering
temperance. Rather, the Administrator makes only conclusional
assertions that Texas’s import restrictions on out-of-state
wineries are “reasonable,” and thus constitutional under the
Twenty-First Amendment. As the Administrator mistakenly believes
that the challenged statutes are basically shielded from
constitutional review under the Commerce Clause, he has given us
nothing to suggest that summary judgment was inappropriate.
Not so for Plaintiffs. They have gone to great lengths ——
before the district court and on appeal —— to establish the
discriminatory intent and effect of the challenged statutes, the
availability of alternative means to enforce Texas’s core concerns
under the Twenty-First Amendment, and the absence of any safe
32
harbor for the challenged statutes under § 2 of the Twenty-First
Amendment. In stark contrast, the Administrator’s defense of §
107.07 and related sections of the TABC is “nothing but a
pretextual rationale . . . for economic protectionism.”81 Texas may
not use the Twenty-First Amendment as a veil to hide from
constitutional scrutiny its parochial economic discrimination
against out-of-state wineries. In the words of the Bacchus Court,
such “economic Balkanization”82 is absolutely proscribed by the
Commerce Clause.
D. Is enjoining the Administrator from enforcing the
discriminatory provisions of the TABC an appropriate remedy?
After determining that § 107.07 and related provisions of the
TABC unconstitutionally discriminate against out-of-state economic
interests, the district court enjoined the enforcement of these
statutes as applied to Plaintiffs (and, consequently, to out-of-
state wineries). On appeal, the Administrator argues that, even if
we affirm the district court’s decision concerning the
unconstitutionality of § 107.07 and related statutes, we should
reform that court’s ordered remedy. Essentially, the Administrator
81
Quality Brands, 715 F. Supp. at 1143. See also Bolick v.
Roberts, 199 F. Supp. 2d 397, 445 (S.D. Va. 2002) (holding that
Virginia’s “preference for in-state wineries . . . cannot by
sustained because it is but a pretext for exclusion”), vacated as
moot, Bolick v. Danielson, 2003 WL 21205840 (4th Cir. May 23, 2003)
(noting that Virginia’s amendment of its Alcoholic Beverage Code,
eliminating the discriminatory treatment of out-of-state wineries,
made plaintiff’s claims moot).
82
Bacchus Imports, 468 U.S. at 276.
33
insists that, if we determine that the challenged TABC provisions
discriminate against out-of-state wineries in violation of the
Commerce Clause, the appropriate remedy is an injunction against
the enforcement of the special benefits accorded to the in-state
wineries in the Texas Wine Marketing Act. We disagree.
The Supreme Court has held that “when the ‘right invoked is
that of equal treatment,’ the appropriate remedy is a mandate of
equal treatment, a result that can be accomplished by withdrawal of
benefits from the favored class as well as by extension of benefits
to the excluded class.”83 In some contexts, the Supreme Court
favors the extension of benefits to the excluded class, such as in
cases involving tax burdens deemed unconstitutionally unequal. As
the Supreme Court stated in its seminal case on this subject: “[I]t
is well settled that a taxpayer who has been subjected to
discriminatory taxation through the favoring of others in violation
of federal law cannot be required himself to assume the burden of
seeking an increase of the taxes which the others should have
paid.”84
The policy justification for extending benefits in tax cases,
rather than equalizing burdens, is apropos to those cases
addressing discriminatory burdens that have been placed on out-of-
83
Heckler v. Mathews, 465 U.S. 728, 740 (1984) (quoting Iowa-
Des Moines Nat’l Bank v. Bennett, 284 U.S. 239, 247 (1931))
(emphasis added).
84
Iowa-Des Moines Nat’l Bank, 284 U.S. at 247.
34
state economic interests in violation of the Commerce Clause.
Here, Plaintiffs sued to obtain equal benefits under the TABC,
i.e., direct sales and shipments of wine to Texas consumers. This
goal —— the extension of benefits, not the extension of burdens ——
is inherent in a claim under the Commerce Clause. “The Court has
often described the Commerce Clause as conferring a ‘right’ to
engage in interstate trade free from restrictive state
regulation.”85 Thus, it is not the function of litigants seeking
redress for violations of their constitutional rights under the
Commerce Clause to seek the imposition of affirmative burdens on
other parties competing in the marketplace. The constitutional
right the Plaintiffs here seek to protect is their right to
participate in interstate commerce that is unimpeded by
protectionist state policies.86
This is the reason why particular state statutes that courts
have adjudged unconstitutional under the Commerce Clause are
85
Dennis, 498 U.S. at 448.
86
Plaintiffs would likely have lacked standing to challenge
only § 16.01 and the other TABC provisions that grant special
benefits to in-state wineries. The reason: The right secured by
the Commerce Clause is the right to engage in interstate trade that
is free from discriminatory restrictions imposed by the states.
Id. Thus, a Commerce Clause claim can only be redressed in the
form of eliminating discriminatory restrictions that have been
imposed on out-of-state interests. This is in fact what the courts
have done when they have determined that state statutes have
imposed discriminatory restrictions on out-of-state interests. See
infra.
35
typically nullified or their enforcement enjoined.87 In Bacchus,
for instance, the Court invalidated the discriminatory statute that
imposed the excise tax only on out-of-state liquor producers, and
remanded for a determination of the tax refund owed to these
producers.88 If the Bacchus Court followed the Administrator’s
proposed remedy here, it would have extended the excise tax to all
liquor producers, both in-state and out-of-state. But this was not
the goal of the litigants in Bacchus; neither is it the goal of
Plaintiffs here.
The Administrator’s request for reformation of the remedy asks
us, in essence, to act in a legislative capacity. If we were to
reform the district court’s remedies so that all in-state wineries
were required to use Texas’s three-tier system, the wholesale
revision of substantial portions of the TABC would be required.
The Administrator again mischaracterizes the nature and scope of
the discriminatory TABC statutes, incorrectly asserting that the
only statutes that discriminate against out-of-state wineries are
87
See, e.g., Camps Newfound/Owatonna, Inc. v. Town of
Harrison, 520 US. 564 (1997) (reinstating a trial court’s
nullification of property tax exemptions because the Supreme Court
held that such exemptions violated the Commerce Clause); Oregon
Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S. 93 (1994)
(invalidating state regulations providing higher surcharges for
out-of-state solid waste disposal vis-a-vis in-state disposal);
Brown-Forman Distillers Corp., 476 U.S. at 585 (invalidating state
affirmation law as violating the Commerce Clause); Bacchus Imports,
468 U.S. 276-77 (invalidating, under the Commerce Clause, state
statute that imposed excise tax on only out-of-state liquor
producers and remanding for determination of tax refund owed).
88
Id.
36
contained in the Texas Wine Marketing Act, only recently enacted in
2001. As we have already noted, however, many of the
discriminatory provisions in the TABC, including § 107.07, were
enacted in 1995 or earlier, not in 2000.89 The remedy requested by
the Administrator involves the nullification or enjoined
enforcement of many statutes that have been in effect for a
substantial time.
We must decline the Administrator’s invitation to assume the
mantle of super legislature, actively rewriting substantial
portions of the TABC under the guise of validating a Commerce
Clause challenge. If the Texas legislature wishes to impose
burdens equally —— as opposed to granting benefits equally —— then
that is its prerogative, not ours. In cases like this, our
constitutional role is clear: We should enforce the constitutional
right only by nullifying, or enjoining the enforcement of, the
offending statutes, particularly when such statutes are held
unconstitutional only as applied to the complainants at bar.
Thus, the limited remedy specifically requested by Plaintiffs
before the district court —— an injunction against the enforcement
of those statutory provisions that discriminate against out-of-
state wineries —— is the prudential way for federal courts to
89
See, e.g., Act of May 5, 1995, 74th Leg., ch. 135, § 1, 1995
Tex. Gen. Laws 970, 970 (codified at TEX. ALCO. BEV. CODE ANN. §
107.07(f)).
37
perform their constitutional surgery on the TABC.90 This properly
observes the separation of powers, leaving to Texas’s legislature
its freedom to act in its proper capacity in deciding whether to
restrict or further expand the benefits that it has already created
for in-state wineries. This will also permit the relevant parties
to engage in the public debate —— more realistically, the lobbying
—— that should and almost certainly shall occur when such decisions
are appropriately made through the democratic process.
III.
CONCLUSION
In Cooper, we concluded our analysis of the discriminatory
permit restrictions of the TABC by noting that the “statutory
barrier Texas has erected . . . results in shielding the State’s
operators from the rigors of outside competition. This rule
subjects such laws to the Commerce Clause’s insistence on
nondiscrimination.”91 As the district court recognized, that
precedent compels the same result in this case: Absent an identical
90
This likely explains the Fourth Circuit’s motivation for
choosing to extend burdens, rather than extend benefits, when it
struck down provisions of the North Carolina Alcoholic Beverage
Code (“NCABC”) as violating the Commerce Clause. Beskind v. Easley,
325 F.3d 506 (4th Cir. 2003). The Beskind court noted that
equalizing the regulatory burden required only enjoining a “single
provision,” id. at 519, but extending the privilege of direct sales
and shipments to out-of-state wineries required enjoining several
statutes. The NCABC also contained a specific purpose statement
that it should be “liberally construed” in favor of its regulation
and control of alcohol. Id. (quoting N.C. GEN. STAT. § 18B-100).
There is no such statement in the TABC.
91
Cooper, 11 F.3d at 555.
38
restriction on Texas wineries, Texas’s prohibition against out-of-
state wineries directly selling and shipping wine to Texas
consumers is constitutionally defective under the Commerce Clause.92
This is not even a close call. We need not consider the extensive
litigation on this issue that has burgeoned in recent years,
because we could not have asked for a case more directly on point
to the facts of Bacchus and Cooper.
The only complications in the adjudication arise from the
Administrator’s mischaracterization of almost every relevant point
—— from the proper constitutional test to the nature of the case
law to the gravamen of Plaintiffs’ legal position. Contrary to the
Administrator’s spin, the record clearly establishes that (1)
Plaintiffs are seeking only equal treatment under Texas law for
both in-state and out-of-state wineries in selling and shipping
wine directly to Texas consumers, (2) the legal issue before us is
Texas’s discriminatory treatment of out-of-state wineries vis-a-vis
in-state wineries, not the legitimacy of Texas’s three-tier system,
and (3) this discriminatory treatment entails the in-state
wineries’ being exempted from the three-tier system to which out-
of-state wineries are subjected. Setting aside the Administrator’s
questionable characterization of the issues, his claims concerning
the actual purpose and effect of the challenged statutes amount to
nothing more than unsubstantiated assertions and conclusional
92
Dickerson, 212 F. Supp. 2d at 694.
39
allegations. In Cooper, we held that similar conclusional and
unsubstantiated assertions were unavailing,93 and they remain so
when we are asked again to review other discriminatory provisions
in the same regulatory statutes that were before us in Cooper.94
Plaintiffs demonstrated before the district court that Texas’s
restrictions against direct sales and shipments by out-of-state
wineries to Texas residents are intended to —— and in fact do ——
discriminate to the benefit of in-state wineries, which are not
hamstrung by the economic constraints of having to sell their
products through Texas’s otherwise legitimate three-tier system.
As the record makes clear, small out-of-state wineries, which
constitute a substantial majority of the total number of wineries
throughout the country, are hurt by these discriminatory
restrictions, as Texas wholesalers (despite having permits to
import their wine) do not import their products because the
quantity of product and the consumer demand in each wholesaler’s
local market are too small to justify the wholesaler’s marginal
cost in importing and selling the product. The Texas legislature
thus achieves exactly what it sought: Texas wines are more
available for purchase by Texas consumers because these consumers
are essentially denied access to the products of out-of-state
93
11 F.3d at 554.
94
See Little, 37 F.3d at 1075 (holding that a nonmoving party
cannot satisfy his summary judgment burden with only conclusional
allegations, unsubstantiated assertions, or a mere scintilla of
evidence).
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wineries, and vice-versa. This is exactly the type of geographic
discrimination that is prohibited by the Commerce Clause and, as
applied, is a patent violation of Plaintiffs’ constitutional
rights.95 For these reasons, the district court’s summary judgment
order is, in all respects,
AFFIRMED.
95
Dennis, 498 U.S. at 448 (“The Court has often described the
Commerce Clause as conferring a ‘right’ to engage in interstate
trade free from restrictive state regulation.”).
41