Texas Alcoholic Beverage Commission v. Mark Anthony Brewing, Inc.
03-16-00039-CV
| Tex. App. | Dec 22, 2016Background
- Mark Anthony Brewing (MAB) sought to use the TGI FRiDAY’S trade name and trademarks on its malt beverage labels pursuant to a trademark licensing agreement with TGIF-MN, an affiliate of a Texas retail permittee.
- The Texas Alcoholic Beverage Commission (TABC) refused approval, arguing the licensing agreement allowed cross-tier control in violation of Tex. Alco. Bev. Code § 102.01(h) and that labels derived from that prohibited agreement were not entitled to First Amendment protection.
- MAB litigated to invalidate TABC rules and statutes it claimed violated its commercial-speech rights; the trial court issued rulings favorable to MAB, including a determination that § 102.01(h) violated the First Amendment (issue later contested on appeal).
- On appeal TABC filed this reply brief arguing the trial court erred: (1) MAB raised a First Amendment challenge to § 102.01(h) for the first time after trial, depriving TABC the opportunity to present evidence on state interests; (2) § 102.01(h) regulates conduct (cross-tier control), not speech; (3) MAB’s amended licensing agreement gives TGIF substantive control over MAB’s business and thus violates § 102.01(h); and (4) even if the labels were protected commercial speech, the challenged statutes and rules survive Central Hudson review.
- TABC emphasizes legislative purpose: strict separation of the manufacturing, wholesaling, and retail tiers to prevent tied houses and that forbidding a manufacturer’s use of a retailer’s name on products directly advances that interest.
Issues
| Issue | Plaintiff's Argument (Mark Anthony) | Defendant's Argument (TABC) | Held / Position in Brief |
|---|---|---|---|
| Whether MAB timely raised a First Amendment challenge to § 102.01(h) | MAB contends it asked for declaratory relief against any statute that must be read to prohibit the labels, implying §102.01(h) was timely challenged | TABC: MAB never timely alleged §102.01(h) is unconstitutional; the contention was raised after trial, prejudicing TABC | TABC: trial court erred to consider a post-trial First Amendment challenge to §102.01(h) |
| Whether § 102.01(h) restricts speech or conduct and thus whether labels are protected | MAB contends prohibiting trademark licensing (or its practical effects) would unduly burden commercial speech and that trademark quality-control norms make such agreements common | TABC: §102.01(h) regulates conduct (agreements granting cross-tier control); speech that is the product of illegal conduct is not protected | TABC: §102.01(h) governs conduct; labels derived from prohibited agreements are unprotected as speech related to illegal activity |
| Whether MAB’s amended licensing agreement violates § 102.01(h) | MAB asserts amended agreement only contains standard quality-control clauses and does not give TGIF control over MAB’s business | TABC: agreement (even as amended) grants TGIF approval rights, ongoing testing, withdrawal/destroy authority, advertising/marketing obligations, code-of-conduct and operational requirements — all amounting to indirect control | TABC: agreement allows cross-tier control or management and therefore violates §102.01(h) |
| If labels are protected commercial speech, whether statutes/rules pass Central Hudson | MAB argues the statutes are overbroad and less restrictive alternatives exist (voluntary compliance, post-hoc enforcement) and suggests heightened scrutiny | TABC: parties waived heightened-scrutiny claim; under Central Hudson the statutes directly advance a significant state interest (preserving three-tier separation) and are a good fit because banning retailer-name on manufacturer products removes incentives to enter prohibited agreements | TABC: even assuming protected speech, the statutes survive Central Hudson review |
Key Cases Cited
- Central Hudson Gas & Electric v. Public Service Comm’n, 447 U.S. 557 (commercial-speech intermediate scrutiny framework)
- Pittsburgh Press Co. v. Commission on Human Relations, 413 U.S. 376 (speech advertising illegal commercial activity is not protected)
- Giboney v. Empire Storage & Ice Co., 336 U.S. 490 (conduct made illegal may be restrained even if language is involved)
- Ford Motor Co. v. Texas Dep’t of Transp., 264 F.3d 493 (5th Cir.) (statute regulating conduct may incidentally restrict speech advertising that conduct)
- 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (state interests in alcohol regulation acknowledged)
- K Mart Corp. v. Cartier, Inc., 485 U.S. 176 (trademark rights are exclusionary private rights)
- Cadena Comercial USA Corp. v. Texas Alcoholic Beverage Comm’n, 449 S.W.3d 154 (Tex. App.–Austin 2014) (Chapter 102 supports strict tier separation)