In a decision that could soon allow Walmart to stock its retail shelves with whiskey, an Austin federal judge has struck down a Texas law prohibiting public corporations from obtaining permits to sell hard liquor in the state.
U.S. District Judge Robert Pitman ruled that the section of the Texas Alcoholic Beverage Code, which prevents public corporations from obtaining so-called “package store permits,” violates the dormant commerce clause of the U.S. Constitution. That doctrine forbids states from enacting laws that discriminate against interstate commerce.
Arkansas-based Walmart filed a suit challenging the law by suing the Texas Alcoholic Beverage Commission to prevent it from enforcing the public corporation ban. The Texas Package Stores Association, a trade organization that represents Texas owned liquor retailers who advocated for the public corporation ban law, later intervened in the case.
In his ruling, Pitman noted that the public corporation ban was passed by the Texas Legislature in the 1995 after the U.S. Court of Appeals for the Fifth Circuit had struck down a previous Texas law that required applicants to be a resident of the state in order to a obtain a package store permit.
“The credible evidence demonstrates that the public corporation ban disproportionately affects out-of-state companies. The law disproportionately burdens out-of-state companies’ ability to enter the Texas retail liquor market,” Pitman wrote.
“Certainly, the statute has the effect of preventing both some in-state and some out-of-state firms from entering the Texas retail liquor market. Yet, only a small percentage of the in-state firms that would otherwise serve this market are prevented from doing so by the public corporation ban,” Pitman wrote. “On the other hand, a very large percentage of the out-of-state companies that would otherwise serve this market are blocked.”
While Pitman concluded that the purpose of the public corporation ban was to discriminate against out-of-state companies, he ruled that the law did not have a discriminatory effect.
“The record indicates some Texas companies are blocked from selling liquor in the state, and, conversely, at least one significant out-of-state company has successfully entered the Texas market,” Pitman wrote. “Thus, the court finds that while the public corporation ban was enacted with discriminatory purpose, it does not have a discriminatory effect as defined by controlling precedent.”
Pitman stayed his order preventing the TABC from enforcing the public corporation ban for 60 days, pending a motion for appeal.
Lance Lively, executive director of the Texas Package Stores Association, said his organization would appeal the decision.
“The Texas Package Stores Association is disappointed in the trial court’s decision to overturn decades of Texas law regulating the sale of liquor in Texas. The Texas Legislature put a system in place to ensure safe access to alcoholic beverages in Texas, and that system has worked for over 80 years,” Lively said. “We will appeal the trial court’s decision and continue to fight for family-owned liquor store owners against the world’s largest corporate entities that seek to inflate their profits by upending sensible state laws that protect both consumers and small businesses.”
Neal Manne, the managing partner in Houston’s Susman Godfrey who represents Walmart in the case, said he was extremely happy with the decision but declined to comment further because he was not authorized to speak by his client. A spokesperson from the Texas Attorney General’s Office, which represents the TABC in the case, also declined to comment.