37 F.4th 1069
5th Cir.2022Background:
- 2019 amendments to the Texas Alcoholic Beverage Code allowed brewers to sell malt beverages for off-premises consumption but limited that privilege to brewers whose annual production "at all premises wholly or partly owned" did not exceed 225,000 barrels.
- CANarchy operates multiple breweries; its two Texas breweries (Oskar Blues and Deep Ellum) lease their premises, and CANarchy produced well over 225,000 barrels in 2019 when counting production at leased sites.
- TABC issued cease-and-desist letters concluding CANarchy exceeded the 225,000-barrel cap; CANarchy stopped beer-to-go sales and sued for declaratory relief in state court (removed to federal court).
- CANarchy sought a declaration that the 225,000-barrel threshold counts only production at premises owned (not leased) by the brewer; TABC argued "owned" includes leased premises as a bundle-of-rights concept.
- The district court granted summary judgment for CANarchy on statutory interpretation (holding leased premises are excluded), entered final judgment, and CANarchy dismissed its dormant Commerce Clause claim; TABC appealed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "premises wholly or partly owned" includes leased premises | "Owned" means legal ownership/title; leaseholders do not own premises | "Owned" should be read broadly: leasehold possession is one stick of ownership, so leased premises count | "Owned" refers to ownership/title; leased premises are excluded from the 225,000-barrel aggregation |
| Whether common-law "bundle of rights" supports treating leaseholds as ownership | N/A (argues ordinary meaning and statutory context govern) | Common-law property analysis: possession/use are sticks of ownership, so lessees "partly own" | Court: Texas law does not treat ownership as any single stick; no settled common-law meaning supports TABC's view |
| Whether excluding leased premises produces an absurd result given other Code provisions (62.14/63.05) | Excluding leased premises is textually reasonable; statutory context distinguishes "owned" and "leased" | Exclusion would force breweries either to own premises or operate as alternating proprietorships—an absurd industry disruption | Court: TABC forfeited absurdity argument; even on merits, TABC's broad consequence is unsupported and speculative; no absurdity found |
Key Cases Cited
- Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm’n, 518 S.W.3d 318 (Tex. 2017) (statutory purpose and tiering in Alcoholic Beverage Code)
- Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433 (Tex. 2009) (when text is clear, text controls)
- Camacho v. Ford Motor Co., 993 F.3d 308 (5th Cir. 2021) (use of ordinary meaning and dictionary definitions in statutory interpretation)
- Rodriguez v. Fort Worth Transp. Auth., 547 S.W.3d 830 (Tex. 2018) (looking to dictionary for ordinary meaning of undefined statutory terms)
- Coming Attractions Bridal & Formal, Inc. v. Tex. Health Res., 595 S.W.3d 659 (Tex. 2020) (do not imply terms the Legislature omitted)
- TIC Energy & Chem., Inc. v. Martin, 498 S.W.3d 68 (Tex. 2016) (avoid rendering statutory language surplusage)
- Odyssey 2020 Acad., Inc. v. Galveston Cent. Appraisal Dist., 624 S.W.3d 535 (Tex. 2021) ("Property leased is not property owned")
- Molinet v. Kimbrell, 356 S.W.3d 407 (Tex. 2011) (court must follow Legislature's text absent absurdity)
- Morgan v. Plano Indep. Sch. Dist., 589 F.3d 740 (5th Cir. 2009) (summary judgment standard on cross motions)