The lawsuit by McLane Company against the Texas ABC for failing to approve their application for a wholesaler license has been dismissed without prejudice. This matter was scheduled to have experts identified this month before another round of dispositive motions. The Texas ABC had denied the permit for violations of cross tier ownership laws.
Recall McLane serves as a distribution company but it is owned by Berkshire Hathaway. Berkshire Hathaway owned several billion dollars of stock in Wal-Mart and Costco among other retailers at the time of the license application. McLane engaged in several legislative, public relations and legal efforts to try to secure a wholesaler license. Since the lawsuit, Berkshire Hathaway has purchased Pilot Flying J truck stops which is also a beer retailer in many states.
It is unknown at this time why McLane has dropped this lawsuit.
(earlier post) Texas Supreme Court Upholds Prohibition on Cross Ownership in Texas
The Texas Supreme Court ruled in favor of the Texas ABC decision not to grant an alcohol retailer permit to an entity owned by in part by an entity that owns 20% of Heineken. The 6-2 decision affirming the Texas ABC decision follows similar affirmance from the court of appeals, a district judge and a country judge in an administrative hearing.
Parties that filed amicus briefs in support of Cadena were the Texas Association of Business and McLane Company which has a similar problem with ownership in retailer and wholesaler tier. The Texas Public Policy Foundation and Murphy Oil, USA likewise supported Cadena. Amicus briefs filed in support of the state included briefs from the Center for Alcohol Policy, the Beer Alliance of Texas and the Wholesale Beer Distributors of Texas.
The Texas Supreme Court painfully went through the statute on prohibited interests to compare to the facts of this case and the purpose of these laws noting, “From all of this, the Legislature clearly was concerned no only with preventing paradigmatic, pre-Prohibition tied houses, but also with “related practices” that might negatively affect public health and safety.”
Noting the problems of judgement calls by government agency the Court notes “Experience teaches us that no regulatory or police agency has the resources to enforce every statute against every violation. But laws against speeding, jaywalking, even murder are not invalid because they are not perfectly enforceable.”
(Previous Post) Interesting Texas Decision On Cross-Ownership Prohibition Between Manufacturer and Retailer
Interesting case from the end of last year in Texas regarding the attempts of a brewery affiliated retailer trying to secure a license in Texas.
Cadena Commercial USA Corp. is ultimately owned by FEMSA (makers of Dos Equis among other beers). Cadena applied for a Texas wine and beer retailers off premise license. The Texas ABC rejected the application because it found that FEMSA had a sufficient interest in Heineken’s brewing subsidiary to be considered a manufacturer, which prohibited it from having an interest in a retailer under Texas law. On December 20, 2012, the Court agreed with the Texas ABC in this order.
A big thanks to Evan Lawson of Lawson and Weitzen in Boston for the heads up and background on this case. Evan served as an expert witness for the state of Texas on this case on the three tiered system and what constitutes a prohibited interest.
Also interesting to note that SCOTX did not rule on Cadena’s “one share rule” argument, with respect to how much cross tier ownership is too much. But sort of indicated there is some de minimis ownership, where surely TABC will not bother to litigate it.