CANаrchy Craft Brewery Collective, L.L.C. v. TEXAS ALCOHOLIC BEVERAGE COMMISSION; Kevin J. LILLY; HASAN K. MACK; JASON E. BOATRIGHT; MICHAEL S. Adkins; Deborah GRAY MARINO
No. 21-50195
United States Court of Appeals for the Fifth Circuit
June 20, 2022
Appeal from the United States District Court for the Western District of Texas USDC No. 1:20-CV-55
Before DENNIS, SOUTHWICK, and WILSON, Circuit Judges.
This is a case about beer. It turns on the meaning of the word “owned,” a pint-sized word with stout implications for craft brewers in Texas.
In 2019, the Texas Legislature amended the Alcoholic Beverage Code to allow brewers and manufacturers to sell malt beverages to consumers for off-premises consumption—a previously untapped market for craft beer-to-go. But in a bit of a buzzkill, the Legislature also limited beer-to-go sales to brewers and manufacturers that produced no more than 225,000 barrels annually “at all premises [they] wholly or partly owned.”
Frothy at the prospects, CANarchy Craft Brewery Collective, LLC began selling beer-to-go from its two Texas-based breweries. But the Texas Alcoholic Beverаge Commission (TABC) ordered CANarchy to cease and desist after TABC determined that CANarchy‘s facilities collectively exceeded the 225,000-barrel limit. Party over. CANarchy complied with the order but then filed suit, seeking a declaratory judgment that the 225,000-barrel threshold did not apply to barrels produced at leased premises. The district court agreed with CANarchy that “premises wholly or partly owned” do not include leased premises and granted it summary judgment. Party on. We agree with the district court‘s reading of the statutes and affirm.
I.
A.
One of the Texas Alcoholic Beverage Code‘s primary aims is “to prevent certain overlapping relationships between those engaged in the alcoholic beverage industry at different levels, or tiers.” Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm‘n, 518 S.W.3d 318, 322 (Tex. 2017); see also
Over time, the Texas Legislature has carved out exceptions to the three-tier system. The evolution of two such exceptions,
The Legislature amended sections 12.052(a) and 62.122(a) in 2017 to clarify that the 225,000-barrel cap encompassed barrels produced “at all premises wholly or partly owned, directly or indirectly, by the permit [or license] holder or an affiliate or subsidiary of the permit [or license] holder.”
B.
CANarchy is a collective of seven affiliated brewers that, in turn, operate ten breweries across seven states. Aside from one brewery in Michigan, CANarchy leases all the premises on which its breweries produce their beer. Two CANarchy brewers operate breweries in Texas: Oskar Blues Brewery in Austin and Deep Ellum Brewing Company in Dallas. CANarchy holds a brewer‘s permit and manufacturer‘s license from TABC for both premises.
After sections 12.052(a) and 62.122(a) were amended in 2019 to allow beеr-to-go sales directly to consumers, Oskar Blues and Deep Ellum began selling beer-to-go from their premises. TABC subsequently determined that CANarchy‘s “facilities both inside and outside of Texas collectively produce[d] over 225,000 barrels of malt beverages annually.” TABC sent cease and desist letters to CANarchy‘s Texas brewers, informing them that they did “not qualify to sell malt beverages to consumers for off-premise[s] consumption.”
Sоbered by TABC‘s cease and desist letters, CANarchy stopped selling beer-to-go. But CANarchy also brought the matter to a head by draughting a Texas state court complaint against TABC and its Chairman and Commissioners in their official capacities, seeking two forms of declaratory relief. First, CANarchy sought a declaratory judgment that TABC‘s application of sections 12.052(a) and 62.122(a)—i.e., extending the 225,000-barrel production threshold to include barrels produced at premises outside of Texas—violated the dormant Commerce Clause. Second, and relevant here, it sought a declaratory judgment that the 225,000-barrel production threshold in sections 12.052(a) and 62.122(a) only includes barrels produced at
TABC removed the case to federal court based on federal question jurisdiction, and the district court exercised supplemental jurisdiction over CANarchy‘s Texas statutory construction claim. Following discovery, both parties moved for summary judgment. CANarchy sought partial summary judgment on its statutory construction claim based on three primary arguments: first, that the ordinary meaning of the word “own” makes clear “that a leaseholder does not ‘own’ the property it leases“; second, that the Legislature‘s distinction between “owned” and “leased” in other parts of the Code establishes that the two terms are mutually exclusive; and third, that “partly owned” means owning “less than 100%” of the premises, not having a leasehold interest therеin.
In its motion, TABC argued that CANarchy‘s interpretation of the statutes would stand at odds with the legislative intent behind the beer-to-go provisions and their subsequent amendments, namely, “to encourage entrepreneurial and small business development opportunities.” Further, TABC argued that “owned” refers to “a ‘bundle of sticks’ or collection of rights with regard to [the] property, including the rights to possess, use, transfer, and exclude othеrs.” Thus, a lessee who possesses some of the sticks from that bundle “partly owns” the leased premises. TABC also moved for summary judgment on CANarchy‘s dormant Commerce Clause claim.
The district court granted partial summary judgment for TABC as to the dormant Commerce Clause claim.2 As for CANarchy‘s statutory construction claim, the court denied TABC‘s motion and instead granted summary judgment for CANarchy. In doing so, the court looked to the оrdinary meaning of “wholly or partly owned,” as used in sections 12.052(a) and 62.122(a), and concluded that the language “unambiguously [did] not apply to CANarchy‘s breweries on leased land.” The court reasoned that while “leaseholders certainly have some interest and rights associated with the leased premises, such an understanding does not equate to the leaseholder being an owner or part owner of the prеmises.”
In the wake of the district court‘s ruling, CANarchy asked the court to enter final judgment as to its statutory construction claim and to grant a voluntary dismissal of its surviving dormant Commerce Clause claim. The court obliged and entered a final judgment declaring that “the 225,000-barrel production threshold in
II.
The district court had original jurisdiction over CANarchy‘s dormant Commerce Clause claim under
“We review a district court‘s judgment on cross motions for summary judgment de novo, addressing each party‘s motion independently, viewing the evidenсe and inferences in the light most favorable to the nonmoving party.” Morgan v. Plano Indep. Sch. Dist., 589 F.3d 740, 745 (5th Cir. 2009) (citation omitted). Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
III.
The parties offer competing interрretations of the phrase “premises wholly or partly owned” in sections 12.052(a) and 62.122(a). Distilling their arguments, TABC asserts that the word “owned” includes leased premises, while CANarchy contends that it does not. We hop right to the analysis.
Under Texas law, the court‘s “fundamental goal when reading statutes ‘is to ascertain and give effect to the Legislature‘s intent.‘” Cadena Comercial, 518 S.W.3d at 325 (quoting Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 452 (Tex. 2012)). “We seek that intent first and foremost in the plain meaning of the text.” Greater Hous. P‘ship v. Paxton, 468 S.W.3d 51, 58 (Tex. 2015). And “[w]here text is clear, text is determinative.” Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009). “When faced with an undefined statutory term, our job is to apply the ‘common, ordinary meaning unless a more precise definition is apparent from the statutory context or the plain meaning yields an absurd result.‘” Camacho, 993 F.3d at 312 (quoting Fort Worth Transp. Auth. v. Rodriguez, 547 S.W.3d 830, 838 (Tex. 2018)). “To determine a term‘s common, ordinary meaning, we typically look first to dictionary definitions.” Rodriguez, 547 S.W.3d at 838; see also Tex. State Bd. of Exam‘rs of Marriage & Fam. Therapists v. Tex. Med. Ass‘n, 511 S.W.3d 28, 35 (Tex. 2017) (“To determine a statutory term‘s common, ordinary meaning, we typically look first to [its] dictionary definitions and then consider the term‘s usage in other statutes, court decisions, and similar authorities.“).
Here, “owned” is undefined in the Code. We can glean a somewhat “more precise definition ... from the statutory context,” Camacho, 993 F.3d at 312, because “owned” modifies “premises,” which the Code defines as “the grounds and all buildings, vehicles, and appurtenances pertaining to the grounds, including any adjacent premises if they are directly or indirectly under the contrоl of the same person,”
Black‘s Law Dictionary defines “own” in relevant part as “[t]o rightfully have or possess as property; to have legal title to.” Own, BLACK‘S LAW DICTIONARY (11th ed. 2019). Similarly, Merriam-Webster‘s Dictionary defines “own” as “to have or hold as property; to have power or mastery over.” Own, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/own (last visited Jun. 3, 2022). These definitions, while not conclusive, suggest that the ordinary meaning of “owned” involves an interest in property greater than—and
The broader statutory context puts to rest any lingering uncertainty. The Supreme Court of Texas has held that “[w]hen the Legislature uses a word or phrase in one part of a statute but excludes it from another, the term should not be implied where it has been excluded.” Cadena Comercial, 518 S.W.3d at 329; see also Coming Attractions Bridal & Formal, Inc. v. Tex. Health Res., 595 S.W.3d 659, 666 (Tex. 2020) (“We do not imply [a] term where the [L]egislature did not use it.“); R.R. Comm‘n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 628 (Tex. 2011) (same). That principle is significant here because, though the term “leased” is absent from sections 12.052(a) and 62.122(a), “leased” is expressly used—paired with “owned“—in at least nineteen other sections of the Code. See
TABC counters that the statutory context actually brews in its favor, citing sections 12.06, 13.04, 62.14, and 63.05 of the Code. Those sections reference brewers that “own [their] ... facilities” and that “own a fee interest in a... facility.”
More generally, TABC urges a different analysis. It contends that “owned” should simply be given “its ordinary meaning under the common law,” rather than construed by reference to dictionaries or other Code sections. According to TABC, the longstanding “common law understanding of property ownership encompasses possession of any stick from the property rights bundle” (e.g., possession, use, exclusion, alienation). Possession, as one of those sticks, would be sufficient to construe CANarchy‘s leased premises as “owned” for purposes of the brewing production threshold. We disagree.
We have not found, and TABC does not cite, any case in which a Texas court has conceptualized ownership as just one, or a specific number, of “sticks” in a bundle of property rights. Instead, the few Texas cases to discuss the term “owned” or its variants demonstrate that “own” has no well-established meaning in common law. See, e.g., Realty Tr. Co. v. Craddock, 112 S.W.2d 440, 443 (Tex. 1938) (finding the “term owner ... has no definite legal mеaning“). Some decisions even directly contradict TABC‘s proposed interpretation. See Odyssey 2020 Acad., Inc. v. Galveston Cent. Appraisal Dist., 624 S.W.3d 535, 546 (Tex. 2021) (“Property leased is not property owned.“); Holt v. Giles, 240 S.W.2d 991, 993-94 (Tex. 1951) (“In its ordinary meaning an ‘owner’ is ‘one who owns; a rightful proprietor; one who has the legal or rightful title, whether he is the possessor or not.‘“). Regardless, judicial constructions are only instructive when determining a statutory term‘s ordinary meaning if that term has “acquired a technical or particular meaning,” or a well-established definition in common law. See
Finally, TABC assеrts that construing “premises wholly or partly owned” to exclude leased premises “would lead to absurd or unreasonable outcomes.” Cf. Combs v. Health Care Servs. Corp., 401 S.W.3d 623, 630 (Tex. 2013) (noting that “absurdity safety valve is reserved for truly exceptional cases“). TABC argues that reading “owned” to exclude leased premises in sections 12.052(a) and 62.122(a) will lead to absurd results because of the logical effect such a reading has on two other Code provisions, sections 62.14 and 63.05.4 Those sections discuss a license holder‘s ability to operate under an “alternating brewery proprietorship,” see
TABC contends that if we exclude leased premises from those “wholly or partly owned” in sections 12.052(a) and 62.122(a), then sections 62.14(b) and 63.05(b) “would require every brewery in Texas either to own its premises in fee simple or operate under an alternating brewery proprietorship.” And “[b]ecause relatively few Texas-based breweries operate under alternating proprietorship arrangements, [such a] reading could substantially disrupt the brewery industry in Texas.”
We are unpersuaded. As an initial matter, TABC did not argue absurdity—or cite to sections 62.14(b) and 63.05(b)—in the district court, so its argument on this issue is forfeited. See Templeton v. Jarmillo, 28 F.4th 618, 622 (5th Cir. 2022) (“[P]resenting the issue ‘face up and squarely in the trial court,’ is necessary” to preserve it. (quoting Alston v. Town of Brookline, 997 F.3d 23, 44 (1st Cir. 2021))); Rollins v. Home Depot USA, 8 F.4th 393, 397 (5th Cir. 2021) (“A party forfeits an argument by failing to raise it in the first instance in the district court—thus raising it for the first time on appeal ....“).
That party foul aside, the only way TABC‘s allegedly absurd consequence arises is if TABC‘s interpretation of sections 62.14 and 63.05 is correct. Count us skeptical. Here is the text of those statutes: “An entity is not required to own its brewing facilities if the entity operates under an alternating brewery proprietorship.”
IV.
“It is the Legislature‘s prerogative to enact statutes; it is the judiciary‘s responsibility to interpret those statutes according to the language the Legislature used, absent a context indicating a different meaning or the result of the plain meaning of the language yielding absurd or nonsensical results.” Molinet v. Kimbrell, 356 S.W.3d 407, 414-15 (Tex. 2011). The ordinary definition of “owned,” when applied to sections 12.052(a) and 62.122(a) of the Texas Alcoholic Beverage Code, establishes that the 225,000-barrel production threshold set in those statutes encompasses only barrels produсed at premises
AFFIRMED.