CANarchy wins challenge to Texas ABC statute over limits on brewery production sizes for direct from taproom “beer-to-go” sales based on a statutory construction resulting from poor legislative drafting.
CANarchy brought two challenges to the Texas Alcoholic Beverage Code’s 225,000 barrel cap on brewery “beer-to-go” sales. The relevant portions of the statute authorize breweries in Texas to sell beer-to-go, provided they have a production rate below 225,000 barrels annually. This right was only recently added in 2019. The language of the statute empowering these “beer-to-go” sales reads:
[T]he holder of a brewer’s permit whose annual production of ale, together with the annual production of beer by the holder of a manufacturer’s license at all premises wholly or partly owned, directly or indirectly, by the permit holder or an affiliate or subsidiary of the permit holder, does not exceed a total of 225,000 barrels may sell ale produced on the brewer’s premises under the permit to ultimate consumers on the brewer’s premises . . . . Texas Alcoholic Beverage Code § 12.052(a) (emphasis added)
CANarchy owns and operates breweries in seven states, including Oskar Blues in Austin and Deep Ellum in Dallas. CANarchy leases the premises on which all of its breweries produced their beer, with the exception of a brewery in Michigan. Oscar Blues and Deep Ellum began selling beer to go in 2019 after the law went into effect. That same year, the Texas Alcoholic Beverage Commission ordered both breweries to cease and desist selling beer to go stating:
“Your facility and all affiliated, permitted or licensed facilities both inside and outside of Texas collectively produce over 225,000 barrels of malt beverages annually. You therefore do not qualify to sell malt beverages to consumers for off-premise consumption.”
The Commission based this assessment on the total sum of CANarchy breweries’ production in the seven states in which it has breweries, which totaled more than 480,000 barrels of beer in 2019.
CANarchy sued challenging the statute: 1) arguing that the dormant Commerce Clause precluded the TABC from including the beer produced at non-Texas breweries in the 225,000 limite; and 2) that the 225,000 threshold distinguishes between beverages produced on premises owned by the brewer versus produced in a business on leased land.
The parties moved for summary judgment. The Commerce Clause issue was a non-starter for the Court and it held there was no discriminatory effect in the law and that the allegations of a discriminatory purpose in enacting the law required further fact-finding and discovery.
But what came next in the Court’s decision in favor of CANarchy is the type of statutory construction over the words “leased” land versus “owned” land that makes people think lawyers can achieve stellar results based on technicalities. (Yes, sometimes, but not often.)
The Court agreed with CANarchy’s arguments that the word “owned” is not the same as the word “leased” pointing to some provisions of the Texas Alcoholic Beverage Code that make the distinction, like:
“In support of a distinction between “lease” and “own,” CANarchy cites to multiple other provisions in the Code that reflect a distinction between property owned and leased. (Pl.’s Mot. Summ. J., Dkt. 22, at 8). For instance, Section 45.01 of the Code previously applied to storing liquor in a “warehouse owned and operated by the holder,” and was amended in 2013 to apply to a “warehouse owned or leased by the holder and operated by the holder.” (Select Provisions of the Code, Dkt. 22-9) (emphasis added); see also, e.g., Tex. Alco. Bev. Code § 2.02(c) (imposing liability for serving alcohol to a minor “on the premises owned or leased by the adult”). As a result, CANarchy argues that reading premises “owned” in §§ 12.052(a) and 62.122(a) as including premises leased by CANarchy would render other references to leased land in the Code as surplusage. (Pl.’s Mot. Summ. J., Dkt. 22, at 9).”
And agreeing with CANarchy’s arguments that because it leases its properties, the 225,000 cap on breweries owned by the brewers should not apply:
“However, the Court finds that the distinctions in the Code between owned premises and owned businesses or other interests in premises support a finding that the terms have different meanings throughout the Code and are not all broadly included by the language in §§ 12.052(a) and 62.122(a). The Court finds it immaterial that other provisions in the Code that refer to multiple types of interest in land apply the same level of regulation to those interests. Instead, the other Code provisions demonstrates that, no matter how broadly the language in §§ 12.052(a) and 62.122(a) refers to ownership of premises, the provisions do not include language that refers to leaseholders, as used elsewhere in the Code. As a result, CANarchy has demonstrated that the statutory language “own” and “partly own” in §§ 12.052(a) and 62.122(a) unambiguously do not apply to CANarchy’s breweries on leased land.”…
“CANarchy has demonstrated that the statutory language in the provisions is not ambiguous, as it specifically refers to premises “wholly or partly owned,” which the Court concludes does not include leased land. Despite the legislature’s use of broad language, as TABC Defendants argue, that language is only broad in reference to owned premises. Whether the exclusion of leased land is in furtherance of the legislature’s intent is beyond the scope of this Order, as the statutory language before the Court is unambiguous. As a result, the Court grants CANarchy’s motion for summary judgment as to the statutory text of the provisions.”
An excellent win with clear and concise reasoning based on poor statutory drafting given that the Texas legislature likely intended to include all breweries, not just land-owning ones.
Can you guess what statute the Texas Legislature is likely to amend soon?
