Dickerson v. Bailey

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).

40
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