Court Opinion

ID: 6113815
Source: CourtListenerOpinion
Date Created: 2022-01-29 01:00:29.207505+00
Date Added: 2024-06-11T08:13:17.107946
License: Public Domain

Case: 21-50322     Document: 00516184627         Page: 1    Date Filed: 01/28/2022

           United States Court of Appeals
                for the Fifth Circuit                              United States Court of Appeals
                                                                            Fifth Circuit

                                                                          FILED
                                                                   January 28, 2022
                                  No. 21-50322
                                                                     Lyle W. Cayce
                                                                          Clerk

   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
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   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. See id. § 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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