Retailers win one, lose one in Texas court

Sovos | January 16, 2008

Judge Sidney Fitzwater of the U.S. District Court for the Northern District of Texas handed down a very important decision on Monday. In the Siesta Village Market Opinion, Judge Fitzwater said the following

The court concludes that Texas’ ban on the sale and shipment of wine by out-of-state retailers to Texas residents is unconstitutional, but it also holds that the requirement that wine retailers——including out-of-state retailers——first purchase such wine from Texas-licensed wholesalers is constitutional.

We’ll have much more to say about this case in the future, but this opinion is important because, for the first time, Judge Fitzwater said effectively that the principals of Granholm v. Heald should apply not only to wine producers, but also to wine retailers. In other words, just as Texas must treat in-state and out-of-state wineries evenhandedly, it must also treat in-state and out-of-state retailers evenhandedly. The following sentence in the opinion highlights this claim.

Because the retailer-plaintiffs and in-state wine retailers are engaged in the same business——the sale of wine to retail consumers——and seek access to the same market——Texas consumers——they are potential competitors and are therefore similarly situated for purposes of dormant Commerce Clause analysis.

Unfortunately for retailers, the good news also came with a new twist. The decision upheld the constitutionality of the Texas requirement that both in-state and out-of-state retailers that wish to ship to Texas consumers first purchase the wine from a wholesaler licensed in the state of Texas. A California wine retailer, therefore, must first purchase wine from a licensed Texas wholesaler before shipping it to Texas consumers. Tom Wark, Executive Director of the Specialty Wine Retailers Association, had the following to say about the new twist.

Not only is it illegal under California law and other state’s law, but I believe it’s illegal under Texas law, Wark said. We won on everything but there’s that little unfortunate part the judge got wrong. I feel sorry for Lou Bright (who heads the Texas ABC). How is he going to implement this?

Prior to this decision, the parties had agreed to a preliminary injunction that allowed out-of-state retailers to ship wine into Texas without a permit. We’ll now wait for administrative guidance from the Texas ABC. In parallel, the decision will likely be appealed.

Click here to read the full Siesta Market Opinion