Liquor Store Co. Can’t Nix Wal-Mart Subpoena In TABC Row

Source: Law360

By Kali Hays

January 21, 2016

A Texas federal judge on Thursday refused to let a holding company with several liquor stores escape a subpoena by Wal-Mart in the retail giant’s suit over the constitutionality of a Texas Alcoholic Beverage Commission ban on public companies selling liquor, saying any communications regarding the ban are relevant.

U.S. District Judge Robert L. Pitman denied Gabriel Holdings LLC’s December arguments that a subpoena by Wal-Mart Stores Inc. sought irrelevant information, namely correspondence between the company, the Texas Legislature and the TABC regarding the ban, finding all of the information the retail giant is seeking has weight in the case.

Regarding the holding company’s contention that gathering information from as far back as 1994 when a Fifth Circuit decision led to the enactment of the ban presents an “undue burden,” Judge Pitman also disagreed.

“As plaintiffs point out, the time period is not arbitrarily long as it is based on the timing of the Fifth Circuit decision,” Judge Pitman said Thursday. ‘”While the court is not unsympathetic, it appears that Gabriel did not make any real effort to determine the difficulty it faces in attempting to comply with the subpoena prior to filing the motion to quash.”

The judge also pointed out that Gabriel, which is not a party to Wal-Mart’s suit, did not confer with the retailer before moving to quash the subpoena “or make any effort” to narrow its scope, according to the order, making Gabriel’s argument “less than wholly compelling.”

Wal-Mart, currently the largest retailer of beer and wine in Texas, launched its suit against TABC in early 2015, arguing the state’s prohibition on publicly traded corporations being permitted to sell liquor in the state violated its rights under the U.S. Constitution’s Commerce Clause and Equal Protection Clause.

The retailer claims exemptions under the ban for hotels and certain Texas-resident public corporations that held permits before 1995 further highlight its discriminatory nature.

Even if the public corporation ban were lifted, Wal-Mart could own only five package store permits, the limit under state law – except in the case of “consolidation,” in which close family members can pool their package store permits into a single entity and thus obtain a theoretically “unlimited” number of permits, according to the retailer.

Since at least one family member must own at least 51 percent of the company stock, however, Wal-Mart says it has no such single stockholder and thus is unfairly forced to compete with privately owned companies that can exploit the loophole.

In July, Judge Pitman rejected a bid by TABC to dismiss Wal-Mart’s suit saying the commission had so far been unable to adequately justify the rule and that its argument of “community involvement” had been successfully rebutted by the retailer.

However, the judge did toss Wal-Mart’s claim under the Privileges and Immunities Clause saying it is reserved for individuals, not corporations, under controlling precedent.

TABC has maintained the ban is “constitutionally sound” and that Texas has legitimate purposes for restricting the number of permits granted and to whom, including limiting access to beverages with high alcohol content.

Counsel for Wal-Mart, Gabriel and TABC could not be reached late Thursday for comment.

Wal-Mart is represented by Neal Manne, Alex Kaplan, Chanler Langham and Steven M. Shepard of Susman Godfrey LLP and Mark T. Mitchell and Frederick W. Sultan of Gardere Wynne Sewell LLP.

The Texas Alcoholic Beverage Commission is represented by Attorney General Ken Paxton and Charles E. Roy, James E. Davis, Robert O’Keefe, Maria Amelia Calaf and Adam N. Bitter of the Texas Attorney General’s Office.

Gabriel Holdings is represented by Leslie Sara Hyman and Randall A. Pulman of Pulman Cappuccio Pullen Benson & Jones LLP.

The case is Wal-Mart Stores Inc. et al. v. Texas Alcoholic Beverage Commission et al., case number 1:15-cv-00134, in the U.S. District Court for the Western District of Texas.