Cadena Comercial USA Corp. D/B/A Oxxo v. Texas Alcoholic Beverage Commission
518 S.W.3d 318
| Tex. | 2017Background
- Cadena Comercial USA Corp. (Cadena), a Texas subsidiary wholly owned by Mexican company FEMSA, applied for a Texas wine-and-beer retailer off‑premises permit; TABC protested based on FEMSA’s cross‑tier holdings.
- FEMSA owns ~20% of stock in Heineken holding companies that (through layers) own three brewers holding Texas nonresident brewer permits; FEMSA also wholly owns Cadena via intermediate holdings.
- FEMSA’s Corporate Governance Agreement allows limited board representation but disclaims any right of control or influence over Heineken management.
- TABC denied Cadena’s permit alleging violations of Texas tied‑house statutes (chapter 102), principally Tex. Alco. Bev. Code § 102.07(a)(1), which bars a person with an interest in a brewer’s business from having a direct or indirect interest in a retailer’s business.
- Administrative hearing, district court, and the court of appeals upheld the denial; the Texas Supreme Court reviewed statutory meaning, corporate separateness, and equal protection arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of “an interest in the business of a brewer” under §102.07(a)(1) | “Interest” should be read to require actual control/ability to manage (control‑based test); otherwise statute is vague and overbroad. | “Interest” is broad and includes commercial/economic stakes that give a financial stake in a brewer’s performance; legislature intended strict separation of tiers. | Court held “interest” covers commercial/economic interests that provide a stake in financial performance of a brewer (broad reading). |
| Effect of corporate separateness (parent/subsidiary) in tied‑house analysis | Corporate separateness and veil‑piercing principles prevent imputing FEMSA’s distant holdings to Cadena absent abuse of corporate form. | Chapter 102’s broad language authorizes the agency/courts to look beyond separate corporate forms for regulatory enforcement; Miskell precedent supports ignoring separateness when statute so indicates. | Court held corporate separateness may be disregarded for enforcement of §102.07; FEMSA’s ownership imputes interests that trigger the prohibition. |
| Equal protection challenge (selective enforcement) | TABC applied statute selectively despite widespread cross‑tier holdings (e.g., pension funds); denying Cadena was arbitrary and violated equal protection. | No evidence of any permittee similarly situated to Cadena with comparably significant cross‑tier investment; TABC’s action has a rational basis enforcing the Code. | Court held Cadena failed to show similarly situated comparators; equal protection claim denied. |
| One‑share / de minimis concern (scope and enforceability) | Broad reading yields absurd results (single‑share rule), arbitrary power for TABC; statute should be limited to avoid irrational outcomes. | The case does not present a one‑share question; agency has discretion and resource limits—enforcement will be practical. | Court declined to decide one‑share hypotheticals as advisory; held case-specific FEMSA holdings (large stake + ownership of Cadena) violate §102.07. |
Key Cases Cited
- Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm’n, 449 S.W.3d 154 (Tex. App.-Austin 2014) (court of appeals’ expansive interpretation of “interest” and affirmance of permit denial)
- Beneficial Fin. Co. of Midland v. Miskell, 424 S.W.2d 482 (Tex. 1968) (agency may disregard corporate separateness when statute’s language and purpose require it)
- R.R. Comm’n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619 (Tex. 2011) (agency statutory interpretation entitled to serious consideration when reasonable)
- State v. Pub. Util. Comm’n of Tex., 344 S.W.3d 349 (Tex. 2011) (scope of judicial review of agency decisions under APA)
- SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444 (Tex. 2009) (veil‑piercing principles require evidence of abuse, injustice, or inequity before disregarding corporate separateness)
- City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432 (1985) (standards for establishing an equal protection violation)