Case: 14-51343 Document: 00513475700 Page: 1 Date Filed: 04/21/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-51343 United States Court of Appeals
Fifth Circuit
FILED
April 21, 2016
STEVE COOPER, Lyle W. Cayce
Plaintiff,
Clerk
versus
TEXAS ALCOHOLIC BEVERAGE COMMISSION,
Defendant,
and
FINE WINE & SPIRITS OF NORTH TEXAS, L.L.C.;
SOUTHERN WINE AND SPIRITS OF TEXAS, INCORPORATED,
Intervenor Plaintiffs-Appellees,
versus
TEXAS PACKAGE STORES ASSOCIATION, INCORPORATED,
Intervenor Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Texas
Before JONES and SMITH, Circuit Judges, and FITZWATER,* District Judge.
JERRY E. SMITH, Circuit Judge:
The Texas Package Stores Association (“TPSA”) moved for relief from an
injunction under Federal Rule of Civil Procedure 60(b). The district court
denied the motion for want of jurisdiction. Because there is jurisdiction, we
* District Judge of the Northern District of Texas, sitting by designation.
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reverse the order denying the motion on jurisdictional grounds and render an
order denying it on the merits.
I. Factual Background and Procedural History
More than twenty-five years ago, Richard Wilson and Steve Cooper (the
“original plaintiffs”) tried to acquire K.S. Enterprises, Inc. d/b/a Baby Dolls, a
nightclub, but were unable to complete the transaction because of provisions
of the Texas Alcoholic Beverage Code (the “Code”). Texas regulates the sale
and importation of alcoholic beverages through a three-tier distribution
system. The first tier consists of producers such as distillers and wineries,
which are required to sell their products to the second tier, made up of state-
licensed wholesalers. The second tier, in turn, distributes products to the third
tier, comprising state-licensed retailers, which sell to consumers. The problem
for the original plaintiffs was that the Code imposes a durational-residency
requirement—at the time three years, later changed to one year—on holders
of mixed-beverage permits and majority shareholders of corporations with
mixed-beverage permits.
The Texas Alcoholic Beverage Commission (the “Commission”) may
refuse a permit to any applicant who has not been a citizen of Texas for at least
one year before filing the application, 1 and it may cancel a permit if an appli-
cant does not satisfy the residency requirement. 2 If there has been a change
1 TEX. ALCO. BEV. CODE ANN. § 11.46(a)(11) (West 2016) (“The commission or admin-
istrator may refuse to issue an original or renewal permit with or without a hearing if it has
reasonable grounds to believe and finds that . . . the applicant is not a United States citizen
or has not been a citizen of Texas for a period of one year immediately preceding the filing of
his application, unless he was issued a permit or renewal permit on or before September 1,
1948, and has at some time been a United States citizen . . . .”).
2 TEX. ALCO. BEV. CODE ANN. § 11.61(b)(19) (West 2016) (“The commission or admin-
istrator may suspend for not more than 60 days or cancel an original or renewal permit if it
is found, after notice and hearing, that . . . the permittee is not a citizen of the United States
or has not been a citizen of Texas for a period of one year immediately preceding the filing of
2
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in corporate control, the Commission cannot renew the permit unless the new
majority shareholders have satisfied all the requirements for a permit, includ-
ing the residency requirement. 3 Finally, the Code states,
No person who has not been a citizen of Texas for a period of one
year immediately preceding the filing of his application therefor shall
be eligible to receive a permit under this code. No permit except a
brewer’s permit, and such other licenses and permits as are necessary
to the operation of a brewer’s permit, shall be issued to a corporation
unless the same be incorporated under the laws of the state and unless
at least 51 percent of the stock of the corporation is owned at all times
by citizens who have resided within the state for a period of one year
. . . . Partnerships, firms, and associations applying for permits shall
be composed wholly of citizens possessing the qualifications above
enumerated. Any corporation (except carrier) holding a permit under
this code which shall violate any provisions hereof, or any rule or regu-
lation promulgated hereunder, shall be subject to forfeiture of its
charter . . . .[ 4]
Because the original plaintiffs were not Texas citizens, 5 they could not
acquire Baby Dolls without endangering the business’s mixed-beverage permit
and, in turn, its profitability. To avoid that harm, the original plaintiffs
brought a 42 U.S.C. § 1983 suit against W.S. McBeath, the administrator of
his application, unless he was issued an original or renewal permit on or before September 1,
1948, and has been a United States citizen at some time . . . .”).
3 TEX. ALCO. BEV. CODE ANN. § 28.04 (West 2016) (“(a) A mixed beverage permit held
by a corporation may not be renewed if the commission or administrator finds that legal or
beneficial ownership of over 50 percent of the stock of the corporation has changed since the
time the original permit was issued. . . . (d) This section does not apply to a change in cor-
porate control . . . (2) brought about when legal or beneficial ownership of over 50 percent of
the stock of the corporation has been transferred: (A) to a person who possesses the quali-
fications required of other applicants for permits and is currently an officer of the corporation
and has been an officer of the corporation ever since the date the original permit was issued;
or (B) if the permittee notifies the commission . . . of the proposed transfer prior to the date
the transfer is to become effective and the commission does not find that circumstances exist
that would be grounds for the denial of a renewal of the permit under Section 11.46 and
provided the ownership of the corporation immediately after the transfer satisfies the
requirements of this code. . . .”).
4 TEX. ALCO. BEV. CODE ANN. § 109.53 (West 2016).
5 Wilson was a citizen of Tennessee, Cooper a citizen of Florida.
3
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the Commission, seeking declaratory and injunctive relief. 6 Three trade
groups, among them TPSA, were granted leave to intervene as defendants.
On cross-motions for summary judgment, the district court determined
that Texas’s residency requirement was a protectionist provision invalid under
the Commerce Clause and the Privileges and Immunities Clause and that the
Twenty-first Amendment did not save the requirement. The court thus
declared the residency requirement invalid and permanently enjoined the
Commission from enforcing it. 7 This court’s affirmance was based only on the
Commerce Clause, and we declined to address the Privileges and Immunities
Clause. Cooper, 11 F.3d at 556 n.10.
The present round began in 2014, when TPSA moved under Rule 60(b)
for relief from the injunction based on a significant change in decisional law.
The Commission did not join in TPSA’s motion, nor did the original plaintiffs
appear or file a response. Two out-of-state corporations—Fine Wine & Spirits
of North Texas, L.L.C. (“Fine Wine”), and Southern Wine and Spirits of Texas,
Inc. (“Southern Wine”)—moved to intervene as plaintiffs. After granting inter-
vention, the district court denied TPSA’s Rule 60(b) motion for lack of subject-
matter jurisdiction. It held that there was no case or controversy because the
original plaintiffs had not appeared and seemed to lack an ongoing interest
and because TPSA lacked standing. The court thus declined to reach the
merits but suggested that the Rule 60(b) motion should be denied on the
6 See Wilson v. McBeath, No. A-90-CA-736, 1991 WL 540043 (W.D. Tex. June 13,
1991), aff’d sub nom. Cooper v. McBeath, 11 F.3d 547 (5th Cir. 1994).
7 TPSA incorrectly contends that the injunction binds not only the Commission but
also TPSA. The district court granted “the Plaintiffs’ Application for a Permanent Injunc-
tion[.]” Wilson, 1991 WL 540043, at *11. The original plaintiffs’ application for a permanent
injunction, though, never sought relief against TPSA but instead requested an injunction
against “McBeath, his agents and employees from enforcing the challenged provisions”—in
other words, the Commission under the fiction of Ex parte Young, 209 U.S. 123 (1908). We
thus speak of the injunction as running against the Commission.
4
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merits.
II. Jurisdiction
The district court gave two reasons why it lacked subject-matter juris-
diction. First, TPSA had failed to establish that the original plaintiffs contin-
ued to have a stake in the case. Second, TPSA lacked standing to bring a
Rule 60(b) motion.
A. Mootness
The original plaintiffs have not appeared and may no longer possess any
direct stake in the outcome of this proceeding. Nevertheless, there remains a
live case or controversy because of the intervention of Fine Wine and Southern
Wine. Their intervention ensures that this proceeding involves an actual dis-
pute between adverse litigants.
Even if that intervention were not enough, a live case or controversy
would still remain on account of the injunction. An Article III case or contro-
versy requires at least two adverse parties. 8 For that reason, a federal judicial
proceeding generally becomes moot if all the plaintiffs or all the defendants
withdraw from or lose their concrete interest in the proceeding. That rule does
not hold, however, where a court has entered a permanent injunction or some
other equitable decree with prospective application. 9 The reason is that “fed-
eral courts have inherent equitable power to modify their own decrees.” League
8See 13 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3530,
at 673–75 (3d ed. 2008) (“The most elemental requirement of adversary litigation is that there
be two or more parties. There must be a real plaintiff at the inception of the suit, and there
may be some requirement that the plaintiff remain interested as the litigation proceeds.
There also must be an identifiable defendant . . . .” (footnotes omitted)).
9See Tory v. Cochran, 544 U.S. 734, 736–37 (2005) (holding that the ongoing
permanent injunction in a defamation suit prevented the plaintiff’s death from mooting the
defendant’s appeal).
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of United Latin American Citizens, Dist. 19 v. City of Boerne, 659 F.3d 421, 436
(5th Cir. 2011). “The power of a federal court that enters an equitable
injunction is not spent simply because it has once spoken. The federal courts
have always affirmed their equitable power to modify any final decree that has
prospective application.” Id.
The permanent injunction remains in effect, even absent the original
plaintiffs. The injunction continues to prohibit the Commission from enforcing
Texas’s residency requirement against not only the original plaintiffs but also
all other out-of-state persons who possess or wish to acquire a Texas mixed-
beverage permit or an interest in an entity with such a permit. The prospective
application of the injunction thus prevents this case from becoming moot.
B. Standing
TPSA has standing to bring its Rule 60(b) motion. Because it is an
intervenor, its “right to continue a suit in the absence of the [Commission] is
contingent upon a showing by the intervenor that [it] fulfills the requirements
of Art. III.” Diamond v. Charles, 476 U.S. 54, 68 (1986). In other words, TPSA
must demonstrate that it has standing in its own right and cannot rely on the
Commission’s standing. 10
The question whether TPSA possesses standing turns ultimately on the
standing of its members. As a trade association, it must satisfy three criteria.
First, “its members [must] otherwise have standing to sue in their own right.”
Nat’l Rifle Ass’n of Am. v. Bureau of Alcohol, Tobacco, Firearms & Explosives,
700 F.3d 185, 191 (5th Cir. 2012). Second, “the interests [it] seeks to protect
10 See Goldin v. Barrow, 166 F.3d 710, 720 n.12 (5th Cir. 1999) (“[W]hile intervenors
may proceed under Rule 24 without meeting the standing requirements, if they are the sole
party to take an appeal they must independently satisfy Article III.”).
6
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[must be] germane to the organization’s purpose.” Id. Third, “neither the claim
asserted nor the relief requested [must] require[] the participation of individ-
ual members in the lawsuit.” Id.
There is no question that TPSA satisfies the second and third criteria for
associational standing. The interests of TPSA’s members in the enforcement
of the residency requirement are germane to TPSA’s purpose, and neither
TPSA’s claim for relief nor the relief it requests requires the participation of
its individual members. Thus the only issue is whether its members have
standing in their own right.
Under the traditional test for standing, a litigant must show (1) that it
has “suffered an ‘injury in fact,’” (2) the injury complained of is “fairly traceable
to the challenged action of the [opposing party], and not the result of the inde-
pendent action of some third party not before the court,” and (3) that it is
“‘likely,’ as opposed to merely ‘speculative,’ that the injury will be ‘redressed by
a favorable decision.’” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
The district court concluded, for two reasons, that TPSA had failed to make
that showing for its individual members. First, “having to compete in a free
and fair marketplace is not an injury[.]” Second, TPSA’s requested
relief―lifting the injunction―would not remedy the alleged injury, because
“[a]ll that would change is the origin of those men and women who controlled
[TPSA’s] competitors. TPSA’s members would not suddenly find themselves
in control of monopoly power. Other, different competitors would fill the
vacuum.” We disagree with the district court’s reasoning and conclusions.
1. Injury in fact
There is no question that TPSA has “a ‘direct stake in the outcome’ of the
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case.” 11 TPSA’s interest in Texas’s residency requirement is not that of a
person seeking to vindicate the constitutional validity of a generally applicable
law, but rather that of a market participant seeking the enforcement of a law
that, if not enjoined, would apply to both it and its competitors. The only ques-
tion with regard to the injury-in-fact prong of the standing inquiry is thus
whether TPSA’s alleged injury—increased economic competition from out-of-
state business—qualifies as an injury in fact. It does.
Economic competition in a free market is not ordinarily an injury in fact,
but it becomes so where, as here, a statute entitles members of an industry to
reduced competition. It is a “basic law of economics” that increased competi-
tion leads to actual economic injury. 12 For that reason, numerous courts have
upheld the standing of competitors to challenge official actions that change the
amount of competition in an economic actor’s market. 13
“[T]the regulatory allowance of increased competition in a plaintiff’s
market” qualifies “as a clear injury-in-fact.” 14 Because an injunction prohibit-
ing the enforcement of regulatory restrictions on competitors has the same
effect on the level of competition in a market as does an agency decision to lift
regulatory restrictions on competitors, an injunction in these circumstances
11Hollingsworth v. Perry, 133 S. Ct. 2652, 2662 (2013) (quoting Arizonans for Official
English v. Arizona, 520 U.S. 43, 64 (1997)).
12New World Radio, Inc. v. F.C.C., 294 F.3d 164, 172 (D.C. Cir. 2002); accord Adams
v. Watson, 10 F.3d 915, 923–24 (1st Cir. 1993).
13E.g., Inv. Co. Inst. v. Camp, 401 U.S. 617, 620 (1971); Ass’n of Data Processing Serv.
Orgs. v. Camp, 397 U.S. 150, 152–154 (1970); Sherley v. Sebelius, 610 F.3d 69, 72 (D.C. Cir.
2010) (“[E]conomic actors ‘suffer [an] injury in fact when agencies lift regulatory restrictions
on their competitors or otherwise allow increased competition against them.” (quoting La.
Energy & Power Auth. v. FERC, 141 F.3d 364, 367 (D.C. Cir. 1998))); Pac. Gas Transmission
Co. v. FERC, 998 F.2d 1303, 1307 n.4 (5th Cir. 1993).
14 Tex. Cable & Telecomms. Ass’n v. Hudson, 265 F. App’x 210, 217 (5th Cir. 2008)
(citing Envtl. Def. Fund v. Marsh, 651 F.2d 983 (5th Cir. Unit A July 1981); Hollingsworth v.
Harris, 608 F.2d 1026, 1028 (5th Cir. 1979)).
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also qualifies as an injury in fact. In both cases, there is real harm. There is
no principled basis for regarding the agency decision but not the court injunc-
tion as resulting in an injury in fact.
2. Redressability
The district court concluded that TPSA also failed the redressability
prong of the standing inquiry. The court reasoned that, even if the injunction
were lifted, none of TPSA’s members would obtain monopoly power, and its
members would still have to compete with new in-state entrants into the retail
liquor business.
We disagree. In other competitor-standing cases, where an economic
actor challenged an agency’s lifting of a regulatory restriction on competitors,
courts have held that reintroduction of the regulatory restriction can redress
the injury. 15 The same logic indicates that the injury complained of here—
increased competition with out-of-state permittees—can be redressed by dis-
solving the injunction. There is no requirement that TPSA show that it or its
members will acquire monopoly power in the retail liquor market.
We also disagree with the notion, urged by Fine Wine and Southern
Wine, that TPSA’s injury is not redressable absent the Commission’s participa-
tion in the proceeding. Fine Wine and Southern Wine maintain that a party
may not challenge an injunction when it is not the enjoined party. Many of the
cases they cite, however, merely stand for the proposition that a party does not
have standing to challenge a judgment by which it is not aggrieved. 16 That
15E.g., Sherley, 610 F.3d at 72; La. Energy, 141 F.3d at 367; Pac. Gas, 998 F.2d
at 1307 n.4.
16In Princeton University v. Schmid, 455 U.S. 100 (1982), the Court held that the
university lacked standing to appeal the conviction of the defendant where the State of New
Jersey did not urge reversal. The free-speech issue in which the school was interested was
moot because it had changed its regulations. The state-court judgment thus did not affect its
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line of cases does not apply here, because, as shown above, the injunction
causes TPSA injury in fact.
The other cases relied on by Fine Wine and Southern Wine deal with
limitations on a court’s ability to grant relief under the Federal Rules of Appel-
late Procedure. They cite K.C. ex rel. Africa H. v. Shipman, 716 F.3d 107 (4th
Cir. 2013), for the proposition that “a ‘judgment will not be altered on appeal
in favor of a party who did not appeal’—a rule that applies even if ‘the interests
of the party not appealing are aligned with those of the appellant.’” Id. at 116
(quoting 9 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE ¶ 204.11[4]
(2d ed. 1980)); accord Cabral v. City of Evansville, 759 F.3d 639, 643 (7th Cir.
2014). But that rule does not hold in the instant case.
To begin with, Fifth Circuit caselaw permits this court to alter a judg-
ment or order in favor of a non-appealing party. We may do so “when the
reversal ‘wipes out all basis for recovery against the nonappealing, as well as
against the appealing defendant; when the failure to reverse with respect to
the nonappealing party will frustrate the execution of the judgment in favor of
the successful appellant; or when the appealed decision could reasonably be
read as not being adverse to the nonappealing party.” Anthony v. Petroleum
Helicopters, Inc., 693 F.2d 495, 497–98 (5th Cir. 1982) (citations omitted).
legal rights. Moreover, the university “d[id] not claim standing on the ground that a private
party may intervene and challenge the reversal of a criminal conviction of another party.”
Id. at 103.
In Diamond, a pediatrician seeking to defend Illinois’s abortion law was held to lack
standing in his own right because “a private party whose own conduct is neither implicated
nor threatened by a criminal statute has no judicially cognizable interest in the statute’s
defense,” 476 U.S. at 56, and “Diamond [was] not able to assert an injury in fact,” id. at 65.
In Hollingsworth, the intervenors were found to lack standing, not because their claim
was unredressable, but because they lacked an injury in fact. “[P]etitioners had no ‘direct
stake’ in the outcome of their appeal. Their only interest in having the District Court order
reversed was to vindicate the constitutional validity of a generally applicable California law.”
133 S. Ct. at 2662.
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Second, numerous cases have permitted a non-enjoined party to appeal
an injunction when the enjoined party is the government. 17 Fine Wine and
Southern Wine cite Kendall-Jackson Winery, Ltd. v. Branson, 212 F.3d 995
(7th Cir. 2000), as authority to the contrary. “Because the [state alcoholic bev-
erage] Commission has not appealed, it remains bound by the injunctions no
matter what happens on the [intervenor defendants’] appeals, so it is not clear
what point the [intervenor defendants’] appeals can serve.” Id. at 997. Yet
Kendall-Jackson explicitly recognized that the appellants would have had
standing if they had possessed a private right of action. 18
Under Kendall-Jackson, there is no redressability problem where, as
17 E.g., Mausolf v. Babbitt, 125 F.3d 661 (8th Cir. 1997) (intervenors permitted to
appeal injunction of National Park Service regulations); Nat’l Wildlife Fed’n v. Lujan, 928
F.2d 453 (D.C. Cir. 1991) (intervenor defendants permitted to appeal order invalidating regu-
lations promulgated by the Secretary of the Interior).
18 The Kendall-Jackson court, 212 F.3d at 998–99, explained that
the [intervenor defendants] miss the real problem: redressability. Sure the injunc-
tion injures them, but how can their appeal redress that injury given that the injunc-
tion will continue to bind the Commission? See Sea Shore Corp. v. Sullivan, 158
F.3d 51 (1st Cir. 1998); Associated Builders & Contractors v. Perry, 16 F.3d 688 (6th
Cir. 1994); McLaughlin v. Pernsley, 876 F.2d 308 (3d Cir. 1989). When a statute
creates a private right of action, it is possible to see how such a question may be
answered affirmatively. Consider Mausolf v. Babbitt, 125 F.3d 661 (8th Cir. 1997),
in which the district court enjoined the National Park Service from enforcing certain
regulations, and the Park Service did not pursue an appeal. Private parties that had
intervened in the case sensibly were allowed to appeal, not simply because the
injunction injured them (to the extent the regulations had helped them) but because
federal regulations may be enforced by private parties by suits against the agencies
(under the Administrative Procedure Act) and by suits against private parties under
the federal-question jurisdiction to the extent a statute or regulation creates a pri-
vate right of action, or under 42 U.S.C. § 1983 to the extent the defendant is a state
actor. See Maine v. Thiboutot, 448 U.S. 1 . . . (1980). Many cases are similar in spirit
to Mausolf, and we do not question their holdings. Likewise, a union or employer
that prevails before the National Labor Relations Board may ask the Supreme Court
to review a decision refusing to enforce that order, even though the Board’s General
Counsel has absolute prosecutorial discretion not to file a charge of unfair labor prac-
tices. After a charge has been filed, the Board has dual roles as prosecutor and
adjudicator, and private parties acquire rights in the Board’s final decisions that are
enforceable even if the Board is content to see its orders annulled. 29 U.S.C. § 160(f).
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here, the intervenor can sue the state to enforce the law at issue. The Code
gives “[a]ny package store permittee who shall be injured in his business or
property by another package store permittee by reason of anything prohibited
in [the residency requirements the right to] institute suit . . . to require enforce-
ment by injunctive procedures and/or to recover threefold the damages by him
sustained.” TEX. ALCO. BEV. CODE ANN. § 109.53. Consequently, TPSA’s mem-
bers, which are all package store permittees, have a private right of action and
may appeal an injunction of the residency requirement even if the Commission
does not appeal.
Third, the cases mentioned above do not concern a district court’s author-
ity under Rule 60(b) to grant relief that would simultaneously benefit a non-
moving party such as the Commission. Instead, those decisions deal solely
with an appellate court’s ability to grant relief on direct appeal under Federal
Rule of Appellate Procedure 4(a)(3), whose requirements have sometimes been
held to be jurisdictional, though not necessarily in this circuit. 19 The sole ques-
tion with regard to redressability here, however, is whether the district court
is able to grant relief to TPSA under Rule 60(b). Because that is possible, there
was no redressability problem in the district court, and there is none on appeal
either, given that we may redress TPSA’s injury by reversing. TPSA has
standing.
III. Merits
In light of the fact that both the district court and this court have subject-
matter jurisdiction, we can decide the Rule 60(b) motion now, on appeal, as
19 See 20 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE § 304.11[3][d] (3d
ed. 2015); id. at 304-32 n.28 (citing Fifth Circuit cases describing Rule 4(a)(3) as only a rule
of practice); Marine Indem. Ins. Co. of Am. v. Lockwood Warehouse & Storage, No. 98-20274,
1998 U.S. App. LEXIS 39029, at *5 & n.4 (5th Cir. Nov. 18, 1998) (unpublished) (questioning
the continuing validity of the rule-of-practice analysis).
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wholly an issue of law: whether continuing the injunction is unjust in light of
Granholm v. Heald, 544 U.S. 460 (2005). Under Rule 60(b)(5), a district court
has the discretion to “relieve a party or its legal representative from a final
judgment, order, or proceeding” if “applying it prospectively is no longer equita-
ble.” If the relief sought is dissolution or modification of an injunction, the
district court may “grant a Rule 60(b)(5) motion when the party seeking relief
. . . can show ‘a significant change . . . in [statutory or decisional] law.’” 20 “The
party seeking relief has the burden of establishing that changed circumstances
warrant relief, but once the party has done that, a court abuses its discretion
‘when it refuses to modify an injunction or consent decree in light of such
changes.” 21
The key question is whether Heald was a significant change in decisional
law warranting relief from the injunction under Rule 60(b)(5). It was not.
A. Dormant Commerce Clause
The Commerce Clause operates both positively and negatively. Posi-
tively and explicitly, it confers on Congress the power “[t]o regulate commerce
. . . among the several States[.]” U.S. CONST. art. I, § 8, cl. 3. Negatively and
by implication, it restricts the power of the states to regulate interstate com-
merce. This “dormant” aspect “prohibits economic protectionism—that is, reg-
ulatory measures designed to benefit in-state economic interests by burdening
out-of-state competitors.” New Energy Co. of Ind. v. Limbach, 486 U.S. 269,
273 (1988).
We use a two-pronged inquiry when determining whether a state
20 Agostini v. Felton, 521 U.S. 203, 215 (1997) (quoting Rufo v. Inmates of Suffolk Cty.
Jail, 502 U.S. 367, 384 (1992)).
21Horne v. Flores, 557 U.S. 433, 447 (2009) (citing Inmates of Suffolk Cty. Jail, 502
U.S. at 383, and quoting Agostini, 521 U.S. at 215) (internal citation omitted).
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economic regulation violates the Commerce Clause.
When a state statute directly regulates or discriminates against inter-
state commerce, or when its effect is to favor in-state economic interests
over out-of-state interests, [the Court] ha[s] generally struck down the
statute without further inquiry. When, however, a statute has only
indirect effects on interstate commerce and regulates evenhandedly,
[the Court] ha[s] examined whether the State’s interest is legitimate
and whether the burden on interstate commerce clearly exceeds the
local benefits.
Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579
(1986) (internal citations omitted). Because “[s]tate laws that constitute mere
economic protectionism are . . . not entitled to the same deference as laws
enacted to combat the perceived evils of an unrestricted traffic in liquor,”
Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 276 (1984), the Court applies this
framework regardless of whether the state regulation deals with alcohol.
Where alcohol is at issue, however, we further ask “whether the interests
implicated by a state regulation are so closely related to the powers reserved
by the Twenty-first Amendment that the regulation may prevail, notwith-
standing that its requirements directly conflict with express federal policies.”
Id. at 275–76 (quoting Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714
(1984)).
In Wilson and Cooper, both the district court and this court applied the
typical two-pronged inquiry from Bacchus, Brown-Forman, and other cases to
find that Texas’s residency requirement violates the Commerce Clause. The
instant Rule 60(b)(5) motion does not allow TPSA to relitigate the legal conclu-
sions on which Wilson and Cooper rest. 22 The current procedural posture does,
however, allow TPSA to urge that there has been a significant change in
22See Flores, 557 U.S. at 447 (2009) (“Rule 60(b)(5) may not be used to challenge the
legal conclusions on which a prior judgment or order rests[.]”).
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decisional law warranting relief from the injunction. The question is whether
TPSA correctly contends that there has, in fact, been that significant change.
We answer in the negative.
According to TPSA, Heald constitutes a significant change in decisional
law warranting relief under Rule 60(b)(5). Heald, however, did not expressly
alter the standard for reviewing Commerce Clause challenges to state alcohol
regulations. To the contrary, there the Court explicitly “declined” the invita-
tion to overrule or limit Bacchus, because “Bacchus does not stand alone in
recognizing that the Twenty-first Amendment did not give the States complete
freedom to regulate where other constitutional principles are at stake.” Heald,
544 U.S. at 488. “A retreat from Bacchus would also undermine Brown-
Forman and Healy [v. The Beer Institute, 491 U.S. 324 (1989)].” Id. The Court
was thus unwilling to undermine those precedents.
Notwithstanding the Supreme Court’s express refusal to question its
precedent on the interaction between the Commerce Clause and the Twenty-
first Amendment, TPSA opines that Heald implicitly changed the standard for
analyzing Commerce Clause challenges to state alcohol regulations. In the
course of addressing the constitutionality of residency requirements on out-of-
state producers, the Court addressed the objection “that any decision invalidat-
ing the[ states’] direct-shipment laws would call into question the constitu-
tionality of the three-tier system.” Id. at 489. The Court rejected that idea:
This does not follow from our holding. “The Twenty-first Amendment
grants the States virtually complete control over whether to permit
importation or sale of liquor and how to structure the liquor distribution
system.” [California Retail Liquor Dealers Ass’n v. Midcal Aluminum,
Inc., 445 U.S. 97, 110 (1980)]. A State which chooses to ban the sale
and consumption of alcohol altogether could bar its importation; and,
as our history shows, it would have to do so to make its laws effective.
States may also assume direct control of liquor distribution through
state-run outlets or funnel sales through the three-tier system. We
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have previously recognized that the three-tier system itself is “unques-
tionably legitimate.” North Dakota v. United States, 495 U.S. [423,] 432
. . . [(1990) (plurality opinion)]. See also id., at 447 (Scalia, J., concur-
ring in judgment) (“The Twenty-first Amendment . . . empowers North
Dakota to require that all liquor sold for use in the State be purchased
from a licensed in-state wholesaler”). State policies are protected under
the Twenty-first Amendment when they treat liquor produced out of
state the same as its domestic equivalent. The instant cases, in con-
trast, involve straightforward attempts to discriminate in favor of local
producers.
544 U.S. at 488–89 (last alteration in original)
TPSA interprets this dictum as essentially stripping away Commerce
Clause protections for state alcohol regulations that deal with the retailer or
wholesaler tiers rather than with the producer tier. All that the Commerce
Clause requires, TPSA says, is that a state treat liquor produced out-of-state
the same as liquor produced in-state. In support of that theory, TPSA points
to Southern Wine & Spirits of America v. Division of Alcohol & Tobacco Conrol,
731 F.3d 799 (8th Cir. 2013). That court upheld a Missouri statute imposing
residency requirements on wholesalers that was somewhat analogous to the
Texas residency requirement for retailers. Addressing the dictum in Heald,
the court reasoned that “[i]f it is beyond question that States may require
wholesalers to be ‘in-state’ without running afoul of the Commerce Clause,
then . . . States have flexibility to define the requisite degree of ‘in-state’
presence to include the in-state residence of wholesalers’ directors and officers,
and a supermajority of their shareholders.” Id. at 810.
TPSA’s interpretation of Heald is unconvincing. That Court did not pur-
port to change decisional law, and the statute at issue addressed the producer
tier of the three-tier distribution system. We thus expressly decline to follow
Southern Wine and instead adhere to the reading of Heald adopted in Wine
Country Gift Baskets.com v. Steen, 612 F.3d 809, 821 (5th Cir. 2010) (substitute
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opinion on petition for rehearing).
In Wine Country, we interpreted Heald as reaffirming the applicability
of the Commerce Clause to state alcohol regulations, but to a lesser extent
when the regulations concern the retailer or wholesaler tier as distinguished
from the producer tier, of the three-tier distribution system. Id. at 820–21. 23
State regulations of the producer tier “are protected under the Twenty-first
Amendment when they treat liquor produced out of state the same as its
domestic equivalent.” Heald, 544 U.S. at 489. But state regulations of the
retailer and wholesaler tiers are not immune from Commerce Clause scrutiny
just because they do not discriminate against out-of-state liquor.
Because of the Twenty-first Amendment, states may impose a physical-
residency requirement on retailers and wholesalers of alcoholic beverages
despite the fact that the residency requirements favor in-state over out-of-state
businesses. Wine Country, 612 F.3d at 821. The Twenty-first Amendment does
not, however, authorize states to impose a durational-residency requirement
on the owners of alcoholic beverage retailers and wholesalers. Id. (citing
Cooper, 11 F.3d at 555). Distinctions between in-state and out-of-state retail-
ers and wholesalers are permissible only if they are an inherent aspect of the
three-tier system. See id. at 818.
B. Privileges and Immunities Clause
Even if Heald and Southern Wine did represent a significant change in
decisional law for challenges to state alcohol regulations under the Commerce
Clause, TPSA’s Rule 60(b) motion should still be denied on the merits. In this
23 Cf. Heald, 544 U.S. at 472 (“Time and again this Court has held that, in all but the
narrowest circumstances, state laws violate the Commerce Clause if they mandate ‘differen-
tial treatment of in-state and out-of-state economic interests that benefits the former and
burdens the latter.” (quoting Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality of Ore., 511
U.S. 93, 99 (1994))).
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regard, TPSA has failed to address the district court’s holding that Texas’s
residency requirement violates the Privileges and Immunities Clause. As the
party seeking a remedy, TPSA has the burden to show that relief under
Rule 60(b)(5) is warranted. Frew v. Janek, 780 F.3d 320, 326–27 (5th Cir.
2015). To do that, TPSA must show that neither ground for the injunction—
violation of the Commerce Clause or the Privileges and Immunities Clause—
justifies prospective application of the injunction. TPSA has not done that but,
instead, has impermissibly attempted to shift the burden of proof to Fine Wine
and Southern Wine.
We REVERSE the order denying the Rule 60(b) motion for want of jur-
isdiction and RENDER an order denying it on the merits, thus avoiding the
need for remand.
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JONES, Circuit Judge, dissenting:
I respectfully dissent from the majority’s holding that TPSA has
standing to seek relief from an injunction that bound only state officials in their
enforcement of Texas law. As strangers to the original injunction, and parties
not directly affected by its continuance, I would hold that the association’s
claim lacked redressability for standing purposes. I would have dismissed this
appeal.
The panel correctly decides that TPSA had to demonstrate its Article III
standing to pursue an appeal from the district court’s judgment adhering to its
injunction against a Texas residency requirement for liquor distributors. See
Diamond v. Charles, 476 U.S. 54, 68-69, 106 S. Ct. 1697, 1706-07 (1986). Even
if TPSA could show two requirements of standing, injury and traceability, I
disagree with the majority’s conclusion that the association could show that a
favorable judgment from this court would relieve the TABC’s Commissioner
from his obligation to abide by the federal court's injunction.
The Seventh Circuit confronted a factually indistinguishable situation
involving a dispute between liquor suppliers and distributors, with the
constitutionality of a state regulation at its heart. In Kendall-Jackson Winery,
Ltd. v. Branson, 212 F.3d 995 (7th Cir. 2000), the court posited the following
“critical” question: “when a district judge enters an order creating obligations
only for Defendant A, may the court of appeals alter the judgment on appeal
by Defendant B when obligations imposed on A indirectly affect B?” Id. at 998.
The court answered, “No,” prefacing its explanation with the observation that
an affirmative answer would be “incompatible” with Diamond v. Charles. The
majority assert that the decisive issue in Diamond was merely the individual
standing of an Illinois physician who attempted to appeal an injunction against
state abortion laws despite the State’s refusal to appeal. Because the doctor
was not injured by the law, he lacked standing. I disagree with this narrow
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interpretation of Diamond; the physician’s injury was only a subsidiary point.
The Court primarily relied on the principle that “a private citizen lacks a
judicially cognizable interest in the prosecution or nonprosecution of another.”
476 U.S. at 64, 106 S. Ct. at 1704 (quoting Linda R.S. v. Richard D., 410 U.S.
614, 619, 93 S. Ct. 1146, 1149 (1973)). Characterizing the doctor’s interest as
“an effort to compel the State to enact a code in accord with [his] interests,” the
Court explained that, “the power to create and enforce a legal code, both civil
and criminal, is one of the quintessential functions of a State.” Id. at 65, 1705
(internal quotations and citations omitted). Only the State, in other words,
has standing to defend the standards embodied in that code. Id. I see no
distinction between Diamond and the position of TPSA in this case. Diamond
reifies that because only the State was bound by the Cooper injunction not to
enforce the residency requirement, and TPSA was not so bound, the outcome
of TPSA’s appeal cannot substitute for the State's failure to participate.
The Kendall-Jackson court articulated two other grounds for its
conclusion. First, the “Commission’s decision not to appeal leaves the
distributors in the position that they would have occupied had the Commission
not entered the orders in the first place.” 212 F.3d at 998. Here, by analogy,
TPSA’s members stand in no worse position now, when the TABC has failed to
appeal the district court’s Rule 60(b) order, than they occupied during the past
nearly twenty years while the injunction has lain unchallenged. The majority
does not seem to quarrel with this statement.
Second, because “Illinois does not recognize any private right of action to
contest such an enforcement decision by the Commission, it would not be sound
to allow the distributors to challenge that decision indirectly.” Id. In the
absence of this specific private right against the agency, Kendall-Jackson
denied the distributors’ claim effectively to step into the shoes of the regulatory
agency. Reinforcing that the court would have afforded standing only if Illinois
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law afforded them a claim against the Commission, the court later observes
that the distributors could have gone into state court seeking an order
requiring the Commission to appeal the federal court injunction. If the
distributors won, then “all issues will be presented for resolution on the
merits.” Id. at 1000. If, however, the distributors were “unable to persuade a
state court to direct [the Commission] to appeal, that will demonstrate how
similar this situation is to Diamond.” Id.
The majority here cling to the court’s dictum acknowledging that in
certain cases, third parties may challenge regulations enforced by public
agencies. As Kendall-Jackson opines, “federal regulations may be enforced by
private parties . . . by suits against private parties . . . to the extent a statute
or regulation creates a private right of action.” 1 Id. at 998. The majority
believe this exception to Kendall-Jackson's principal holding applies to TPSA
because a statutory provision allows “[a]ny package store permittee” to sue for
injury by “another package store permittee” for enforcement of code
requirements. TEX. ALCO. BEV. CODE ANN. § 109.53. Allowing suits between
competitors, however, is far different from waiving the State’s sovereign
immunity to allow a permittee to sue the Commission for affirmative
enforcement of state law (or to appeal the continuation of the instant
injunction). Texas requires a clear legislative statement to effectuate a waiver
of state sovereign immunity; this provision does not fill the bill. See TEX.
GOV’T. CODE ANN. § 311.034 (“[A] statute shall not be construed as a waiver of
sovereign immunity unless the waiver is effected by clear and unambiguous
language.”) Put otherwise, the majority’s attempt to fit Texas law within the
1 This dictum was distinguished by a recent 7th Circuit panel. Cabral v. City of
Evansville, 759 F.3d 639, 644 (7th Cir. 2014) (“West Side argues this dictum [quoted above]
provides it with standing. But a key element of that speculation is that the private party
could bring a suit against the agency or governmental actor . . . .”).
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narrow ambit of Kendall-Jackson's exception fails because a suit to enforce the
code’s provisions against another private party is wholly different from a suit
seeking Rule 60(b) relief from a federal court injunction that binds only the
Commission. Because TPSA isn’t bound by the injunction, it might even sue
Fine Wine and Southern Wine under § 109.53 for “violating” the same local
residency provision that was enjoined here! A state court might then have to
decide whether to defy the federal court’s ruling. This hypothetical proves the
point that TPSA’s indirect injury from the injunction is not redressable by this
court because any judgment in TPSA’s favor cannot remove the injunction
against the Commissioner. 2
TPSA’s effort on appeal is nothing less than to substitute itself, although
not bound by the Cooper injunction, for the state authorities who, for whatever
reason, did not appeal the continuation of the injunction. This is an end-run
around the State’s sovereign prerogative to “create and enforce a legal code.”
Diamond, 476 U.S. at 65, 106 S. Ct. at 1705. Texas law does not authorize
individuals to enforce the Alcoholic Beverage Code, in essence, against the
State. A judgment by this court favoring TPSA neither relieves TPSA of any
burden nor effectuates relief against the Commissioner. We lack jurisdiction
to adjudicate this appeal.
2 TPSA concedes that the injunction prevents the state Attorney General from
performing his nondiscretionary duty to enforce the code when a party like TPSA brings a
violation to his attention, TEX. ALCO. BEV. CODE ANN. § 109.53, but an injunction against the
enforcement authority simply does not run against TPSA.
22