EATX Coffee, LLC v. Texas Alcoholic Beverage Commission
04-16-00213-CV
| Tex. App. | Dec 7, 2016Background
- EATX Coffee, LLC holds a Texas Wine and Beer On‑Premise (BG) permit and sells beer on its premises. In late 2014 it began using a Crowler machine to fill and permanently seal single‑use cans ("crowlers") from its taps. EATX does not brew beer.
- TABC regional staff directed auditors to warn BG permit holders found with Crowler machines for "manufacturing" without a manufacturing permit; EATX received an administrative warning in July 2015 and resumed using the machine in August.
- TABC posted Q&A guidance on its website stating that permanent sealing/canning (crowlers) is a manufacturing activity reserved to manufacturing‑tier permit/license holders and brewpubs; the guidance applied to BG permit holders generally.
- TABC agents seized EATX’s Crowler machine and issued an administrative violation and notice of potential permit suspension/cancellation; EATX sought a formal administrative hearing but filed suit in Travis County under Tex. Gov’t Code § 2001.038 seeking declaratory and injunctive relief that TABC’s posted Q&A constituted an invalid or inapplicable rule.
- TABC filed a plea to the jurisdiction arguing (1) the posted Q&A are not a "rule" subject to § 2001.038 so sovereign immunity bars suit, and (2) EATX had not exhausted administrative remedies. The trial court granted the plea; EATX appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TABC’s posted Q&A constitute a "rule" under the APA (§ 2001.003(6)) and thus are subject to challenge under § 2001.038 | The posted Q&A are statements of general applicability that interpret the Alcoholic Beverage Code and affect BG permit holders’ rights; therefore they are rules that may be challenged | The Q&A are merely restatements/interpretations of statute or nonbinding guidance and not a rule subject to § 2001.038; sovereign immunity therefore applies | The court held the posted Q&A meet the APA definition of a "rule": they are of general applicability, interpret law, and affect private rights, so they may be challenged under § 2001.038 |
| Whether EATX must exhaust administrative remedies before seeking declaratory relief under § 2001.038 | § 2001.038 authorizes immediate district court review of a rule’s validity or applicability; exhaustion is not required for such a challenge | TABC argued EATX should first exhaust administrative remedies (e.g., administrative hearing challenging the notice of violation) before litigating in district court | The court held § 2001.038 does not require exhaustion; a plaintiff may immediately seek declaratory relief challenging a rule’s validity or applicability |
| Whether the posted Q&A are merely internal agency management not affecting private rights | EATX argued the Q&A affect private rights of BG permit holders and customers | TABC contended the guidance did not create external legal effects | The court rejected TABC’s characterization and found the Q&A affect private rights and are not merely internal management statements |
| Whether exhaustion would be excused if an agency acts beyond statutory authority | EATX asserted agency exceeded authority by treating crowling as manufacturing | TABC relied on exhaustion doctrine | The court noted exhaustion does not apply where an agency acts outside its statutory authority, supporting immediate judicial review (discussion of doctrine) |
Key Cases Cited
- Houston Belt & Terminal Ry. Co. v. City of Houston, 487 S.W.3d 154 (Tex. 2016) (standard of review and plea to the jurisdiction principles)
- Teladoc, Inc. v. Texas Medical Board, 453 S.W.3d 606 (Tex. App.—Austin 2014) (agency statements that interpret law can qualify as rules under the APA)
- El Paso Hospital Dist. v. Texas Health & Human Servs. Comm’n, 247 S.W.3d 709 (Tex. 2008) (definition and effect of statements of general applicability)
- Brinkley v. Texas Lottery Comm’n, 986 S.W.2d 764 (Tex. App.—Austin 1999) (informal agency statements are rules if the agency attempts to enforce them against private parties)
- Texas State Bd. of Pharmacy v. Witcher, 447 S.W.3d 520 (Tex. App.—Austin 2014) (agency policies dictating results without regard to individual circumstances affect private rights)
- Friends of Canyon Lake, Inc. v. Guadalupe‑Blanco River Auth., 96 S.W.3d 519 (Tex. App.—Austin 2002) (§ 2001.038 permits direct judicial challenge to rules without administrative exhaustion)