United States Court of Appeals

for the Fifth Circuit

No. 21-50322

In the Matter of Gabriel Investment Group, 

Incorporated and Gabriel GP, Incorporated.

Debtors,

Gabriel Investment Group, Incorporated, 

Appellant,

versus

Texas Alcoholic Beverage Commission, 

Appellee.

Appeal from the United States District Court

for the Western District of Texas

USDC No. 5:20-CV-1244

Before King, Costa, and Willett, Circuit Judges.

Don R. Willett, Circuit Judge:

Ever since Prohibition ended in 1933, states have enacted a byzantine 

patchwork of rules regulating alcohol. It took a global pandemic to ease some 

of them. During the early coronavirus lockdown, when on-site dining was off 

limits, the renowned marquee outside El Arroyo, an Austin Tex-Mex 

hotspot, posted this playful plea: “Now would be a good time to legalize 

United States Court of Appeals

Fifth Circuit

FILED

January 28, 2022

Lyle W. Cayce

Clerk

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2

drive-up margaritas.” The Texas Legislature obliged, and alcohol-to-go is

now legal in the Lone Star State.1

More entrenched booze rules, however, remain on the books. For 

example, retail liquor store sales remain strictly regulated in Texas. One 

bright-line restriction is that retailers must hold a “package store permit” to 

sell liquor at retail. And since 1995, Texas law has banned publicly traded 

corporations from obtaining such a permit. As with many Texas liquor laws, 

however, there’s a carveout for preferred players. Under certain

circumstances, a package store organized as a public corporation can hold the 

required permit.

Today’s dispute poses a spinoff question: What happens to the permit 

if an exempt corporation is sold to a non-exempt corporation? For the reasons 

discussed below, we CERTIFY to the Supreme Court of Texas.

I

A

Texas regulates retail alcohol sales through the Texas Alcoholic 

Beverage Code.2 And the Code does not treat all sales the same. Relevant 

here, it subjects sales of “liquor”—an “alcoholic beverage, other than a malt 

beverage, containing alcohol in excess of five percent by volume, unless 

otherwise indicated”3—to special rules. Chief among them: liquor retailers 

1 See Act of May 3, 2021, ch. 6, sec. 5, § 32.155, 2021 Tex. Gen. Laws ___.

2 See Tex. Alco. Bev. Code § 1.06 (“Unless otherwise specifically provided 

by the terms of this code, the . . . sale . . . of alcoholic beverages shall be governed 

exclusively by the provisions of this code.”).

3

Id. § 1.04(5).

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must hold a “package store permit.”4 And not all retailers are allowed to hold 

one.

Before 1995, the door for public corporations to hold package store 

permits was wide open. The Texas Legislature slammed that door shut, 

though, with its 1995 Amendments to the Code.

5 Part of the 1995 

Amendments, now codified under Section 22.16(a), expressly state that “[a]

package store permit may not be owned or held by a public corporation, or by 

any entity which is directly or indirectly owned or controlled, in whole or in 

part, by a public corporation, or by any entity which would hold the package 

store permit for the benefit of a public corporation.”6 What is a public 

corporation? Under Section 22.16(b), “any corporation or legal entity whose 

shares or other evidence of ownership are listed on a public stock exchange,” 

or “any corporation or other legal entity in which more than 35 persons hold 

an ownership interest in the entity.”7

To enforce the Code, the Legislature turned to the Texas Alcoholic 

Beverage Commission.8 The Code charges the Commission with deciding 

which retailers to “grant” or “refuse” new package store permits, and which 

retailers get theirs “suspend[ed]” or “cancel[ed].”9 Sometimes, though, a 

4

Id. § 22.01.

5 See Act of May 23, 1995, ch. 480, 1995 Tex. Gen. Laws 3202 (codified as amended 

at Tex. Alco. Bev. Code ch. 22). 

6 Tex. Alco. Bev. Code § 22.16(a).

7

Id. § 22.16(b).

8 See id. § 5.31(a) (charging the Commission to “inspect, supervise, and regulate 

every phase of the business of . . . selling . . . alcoholic beverages”).

9

Id. § 5.35.

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public corporation can still get past the Commission—but only if the public 

corporation is on the right list.

When the Legislature enacted Section 22.16, it expressly excluded

two types of public corporations from Section 22.16(a)’s flat prohibition on 

public corporations owning or controlling package store permits. The first

were hotels.10 The second were corporations that qualified for a so-called 

“Grandfather Clause.” That is, under Section 22.16(f), any corporation:

(1) which was a public corporation as defined by this section on 

April 28, 1995; and

(2) which holds a package store permit on April 28, 1995, or 

which has an application pending for a package store permit on 

April 28, 1995; and

(3) which has provided to the commission on or before 

December 31, 1995, a sworn affidavit stating that such 

corporation satisfies the requirements of Subdivisions (1) and 

(2).11

According to the parties, two—and only two—public corporations qualify for 

the Grandfather Clause today. One of them is Gabriel Investment Group, 

Inc.12

10 See id. § 22.16(d) (“This section shall not apply to a package store located in a 

hotel.”).

11 Id. § 22.16(f).

12 The other is Sarro Corp., a corporation affiliated with GIG.

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B

GIG sells liquor in 45 package stores throughout South Texas. 

Though it traces its historical roots to the late 1940s, GIG itself was not 

incorporated until April 13, 1995. At inception it had 41 shareholders. On 

April 25, three days before the magic date in Section 22.16’s Grandfather 

Clause, GIG applied for a package store permit. The Commission issued 

GIG the permit a few months later, on August 15.

Sometime that December, GIG filed an affidavit with the 

Commission. In the affidavit, GIG averred that it met the Grandfather 

Clause’s requirements. The Commission marked the affidavit as received on 

December 22. GIG has since consistently claimed that the Grandfather 

Clause exempts it from Section 22.16, and the Commission has consistently 

issued GIG package store permits.

So it went until 2019, when GIG filed for Chapter 11 bankruptcy

protection. As part of its reorganization plan, GIG explored selling itself to 

another public corporation. But questions abounded. If GIG sold all or some 

of its shares to a public corporation, would GIG remain exempt from Section 

22.16 under the Grandfather Clause? If so, could GIG continue to grow its 

collection of package store permits after the sale?

GIG sued the Commission to find out, requesting declaratory 

judgment in its favor. The bankruptcy court, after reviewing dueling motions 

for summary judgment, concluded that the answer to both questions is no.

GIG now appeals.

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II

A

The bankruptcy court framed GIG’s questions aptly: “this would 

make a great moot court question and law students could spend many hours 

researching, writing briefs and arguing this and it would be a very close 

issue.” We agree.

On the one hand, GIG insists the answer to both its questions is yes. 

As it correctly notes, Texas courts read statutes by “look[ing] first to the 

‘plain and common meaning of the statute’s words.’”13 And if the statute is 

“unambiguous,” then “its plain meaning will prevail.”14 Turning to Section 

22.16, then, GIG makes a simple argument: the Grandfather Clause 

expressly provides that “[t]his section”—Section 22.16—“shall not apply”

to a corporation satisfying its three-prong test;15 GIG satisfies the 

Grandfather Clause’s three-prong test; therefore, all of Section 22.16—to 

include its prohibition against public-corporation ownership or control, 

under Section 22.16(a)16—does not apply to GIG. Period. Full stop. End of 

discussion.

GIG’s argument certainly has an appeal of simplicity to it. And, as 

GIG further notes, other sections of the Code reinforce its reading. The 

Code generally requires package stores to operate on separate premises from 

13 In re J.J.R.S., 627 S.W.3d 211, 220 (Tex. 2021) (citation omitted). 

14 Leland v. Brandal, 257 S.W.3d 204, 206 (Tex. 2008).

15 Tex. Alco. Bev. Code § 22.16(f) (emphasis added).

16 Id. § 22.16(a).

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other kinds of businesses.

17 But there is an exception. Under Section 11.50, 

some holders of package store permits who had them “issued on or before 

April 1, 1971[] . . . may continue to operate a package store on premises 

comprising a portion of a building” without the kinds of physical-separation 

requirements the Code otherwise requires.18 And in Section 11.50, the 

Legislature expressly provided that its exception would no longer apply after 

any “change in ownership,” with a limited exception.19 Section 22.16’s 

Grandfather Clause, though, has no such change-in-ownership exception.20

On the other hand, the Commission insists the answer to GIG’s two 

questions is no. It argues structure: that 22.16(a)’s public-corporation 

prohibition is permit specific, while the Grandfather Clause is corporation

specific. Indeed, Section 22.16(a) does expressly provide that “[a] package 

store permit may not be owned or held . . . by any entity which is directly or 

indirectly owned or controlled, in whole or in part, by a public corporation, 

or by any entity which would hold the package store permit for the benefit of 

17 See id. § 22.14(a) (“The premises of a package store shall be completely 

separated from the premises of other businesses by a solid, opaque wall from floor to ceiling, 

without connecting doors, shared bathroom facilities, or shared entry foyers.”).

18 See id. § 11.50 (providing the other criteria for the exception to apply).

19 See id. § 11.50(a) (“This section does not apply to a permit if a . . . change in 

ownership has occurred, by majority stock transfer or otherwise, except by devise or 

descent where the holder of the permit died on or after April 1, 1971.”). GIG also points 

us to another of the Code’s provisions, Section 28.04, which also expressly treats changes 

in ownership as disqualifying under its grandfather clause. Seeid. § 28.04(a) (barring mixed 

beverage permit renewals “held by a corporation . . . if the commission or administrator 

finds that legal or beneficial ownership of over 50 percent of the stock of the corporation 

has changed since the time the original permit was issued”).

20 See, e.g., Mosley v. Tex. Health & Human Servs. Comm’n, 593 S.W.3d 250, 259 

(Tex. 2019) (“That the legislature has spoken clearly when . . . [making exceptions] 

suggests that silence . . . does not [provide an exception] . . . .”).

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a public corporation.”21 In contrast, the Grandfather Clause expressly 

provides that Section 22.16 “shall not apply to a corporation” meeting its 

three-part test.22 According to the Commission, then, GIG is free to sell its 

shares to whomever it likes. There’s only one catch: If GIG sells its shares

to a public corporation, then its package store permits become invalid.

Like GIG, the Commission is not without additional support for its 

argument. It argues that GIG’s reading would rewrite the Grandfather 

Clause, making it read that Section 22.16 “shall not apply to a permit held by

a corporation” that satisfies its three-prong test;23 that Section 22.16(d)’s 

express exemption for “a package store located in a hotel” counsels 

interpreting changes of ownership for hotels differently than corporations 

covered only under the Grandfather Clause;24 and that the Grandfather 

Clause’s statutory “context” belies looking to the Code’s other grandfather 

clauses to support GIG’s interpretation.25

We are, of course, in the day-to-day business of resolving textual 

ambiguities; this is our wheelhouse. But, as the bankruptcy court noted, this 

is no moot-court competition. The stakes here are very real. The 

Commission represented below that holding for GIG would eviscerate an 

“important consumer protection.” And a transferable license likely has 

significant economic value. Further, we are not the final arbiters of Texas 

21 Tex. Alco. Bev. Code § 22.16(a) (emphasis added).

22 Id. § 22.16(f) (emphasis added).

23 See In re Ford Motor Co., 442 S.W.3d 265, 284 (Tex. 2014) (orig. proceeding) 

(“[Courts] cannot rewrite the statute under the guise of interpreting it.”).

24 Tex. Alco. Bev. Code § 22.16(d).

25 See Marx v. Gen. Revenue Corp., 568 U.S. 371, 381 (2013) (“The force of any 

negative implication . . . depends on context.”); accord Forest Oil Corp. v. El Rucio Land & 

Cattle Co., Inc., 518 S.W.3d 422, 429 (Tex. 2017).

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law.26 That role belongs to the Supreme Court of Texas.

27 So the bigger 

question, at least at this point, is whether we should decide GIG’s questions.

B

The Texas Rules of Appellate Procedure provide that “[t]he Supreme 

Court of Texas may answer questions of law certified to it by any federal 

appellate court if the certifying court is presented with determinative 

questions of Texas law having no controlling Supreme Court precedent.”28

Our diligent state-court colleagues “are partners in our shared duty 

‘to say what the law is’—equal partners, not junior partners.”29 And as we 

recently observed, “federal-to-state certification is prudent when 

consequential state-law ground is to be plowed.”30

Specifically, we look to three factors in deciding whether to certify:

1. the closeness of the question and the existence of sufficient 

sources of state law;

2. the degree to which considerations of comity are relevant in 

light of the particular issue and case to be decided; and

26 See C.I.R. v. Bosch’s Estate, 387 U.S. 456, 465 (1967) (“[S]tate law as announced 

by the highest court of the State is to be followed. . . . [T]he underlying substantive rule 

involved is based on state law and the State’s highest court is the best authority on its own 

law.”).

27 Tex. Const. art. V, § 3 (“The Supreme Court shall exercise the judicial 

power of the state except as otherwise provided in this Constitution. . . . [I]ts

determinations shall be final except in criminal law matters.” (emphasis added)); see also

Brown v. Allen, 344 U.S. 443, 540 (1953) (Jackson, J., concurring) (“We are not final 

because we are infallible, but we are infallible only because we are final.”).

28 Tex. R. App. P. 58.1.

29 McMillan v. Amazon.com, Inc., 983 F.3d 194, 202 (5th Cir. 2020) (quoting 

Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803)).

30 Id.

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3. practical limitations on the certification process: significant 

delay and possible inability to frame the issue so as to 

produce a helpful response on the part of the state court.31

“This case checks every box.”32

The first factor—the closeness of the question and the existence of 

sufficient sources of state law—weighs in favor of certification. Above, we 

previewed the primary competing arguments of the parties. Both parties have 

solid textual and structural support for their positions. Likewise, the 

Commission does not challenge GIG’s contention that the disputes in this 

case are questions of first impression in any court. With no on-point caselaw 

to guide us, “any Erie guess would involve more divining than discerning.”33

But “why speculate when we can certify, letting state-court handiwork 

supplant federal-court guesswork?”34

The second factor—the degree to which considerations of comity are 

relevant in light of the particular issue and case to be decided—similarly 

weighs in favor of certification. The Legislature enacted its general ban on 

public corporations owning or controlling package store permits in 1995, over 

26 years ago. According to the parties, only two public corporations—GIG

and Sarro Corp., who is not a party to this case—qualify for Grandfather 

Clause treatment. That may not seem like many. But when you factor in that 

GIG and Sarro could control up to 500 package stores between the two of 

31 Silguero v. CSL Plasma, Inc., 907 F.3d 323, 332 (5th Cir. 2018), certified question 

accepted (Oct. 26, 2018), certified question answered, 579 S.W.3d 53 (Tex. 2019).

32 McMillan, 983 F.3d at 202.

33 Id.

34 Id.

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them,35 it threatens to blow a Texas-sized hole in the careful balance that the 

Legislature created.36

The third factor—practical limitations on the certification process—

also weighs in favor of certification. The questions that GIG asks are purely 

legal. And we are untroubled by any potential delay. “[B]y long tradition, the 

Texas Supreme Court graciously accepts and prioritizes certified questions 

from this circuit.”37 Just over a year ago, we certified a products-liability 

question in McMillan v. Amazon.com, Inc. to the Supreme Court of Texas.

38

The Court issued its scholarly opinion exactly three months after hearing 

argument.

39 Should the Court accept today’s certification, we have zero

doubt it will speak with similar sharpness and swiftness.

40

35 Cf. Tex. Alco. Bev. Code § 22.04(a) (“A person may not hold or have an 

interest, directly or indirectly, in more than 250 package stores or in their business or 

permit.”).

36 See Ritchie v. Rupe, 443 S.W.3d 856, 880 (Tex. 2014) (“As we consider existing 

statutory remedies, we are mindful of the principle that, when the Legislature has enacted 

a comprehensive statutory scheme, we will refrain from imposing additional claims or 

procedures that may upset the Legislature’s careful balance of policies and interests.” 

(citation omitted)).

37 McMillan, 983 F.3d at 203.

38 Id.

39 See Amazon.com, Inc. v. McMillan, 625 S.W.3d 101 (Tex. 2021).

40 Again, “[n]o pressure.” McMillan, 983 F.3d at 203 n.51; see also McMillan, 625 

S.W.3d at 105 n.5 (“Challenge accepted.”).

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III

“By any measure, this case hits the certification bull’s-eye,” posing 

close, weighty questions of first impression.41 Accordingly, we CERTIFY

the following questions of state law to the Supreme Court of Texas:

1. If Texas Alcoholic Beverage Code Section 22.16(f) exempts 

a package store from Section 22.16(a), and if the package 

store sells any, most, or all of its shares to a corporation that 

does not itself qualify under Section 22.16(f), will the 

package store’s package store permits remain valid?

2. If yes to (1), can the package store validly accumulate 

additional package store permits by reason of Section 

22.16(f)?

We disclaim any intention or desire that the Court confine its reply to the 

precise form or scope of the question certified.

QUESTIONS CERTIFIED.

41 McMillan, 983 F.3d at 203.

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