Texas brewers win fight over distribution rights law

Updated Aug 25, 2016

If the legislative changes in 2013 that favored Texas’ craft beer industry felt good for brewers, then a court ruling Thursday in Travis County on one of those laws must have felt pretty sweet, too.

By declaring 2013’s Senate Bill 639 to be unconstitutional, state District Judge Karin Crump struck down a law that prohibited brewers from receiving monetary compensation from distributors for their distribution rights. The measure was part of a bundle of legislation that was otherwise a boon to Texas breweries.

In late 2014, Austin-based Live Oak Brewing and Dallas/Fort Worth-area Peticolas Brewing and Revolver Brewing decided to sue the state in the hopes of regaining the valuable capital they said they can get from selling their distribution rights, which they were able to do prior to 2013.

“My biggest asset, I can’t sell. I have to give it away,” Live Oak Brewing’s owner Chip McElroy said recently when the case went to court.

The state argued that the law helped to maintain strict boundaries within the three-tier system — the state’s regulatory system dictating that makers of beer, wine and spirits create their products, distributors sell them to retailers, and those places, in turn, peddle them to the public.

Lawyers for the breweries argued that the 2013 distribution rule hurt their businesses. A brewer should be able to use the value of its company “to help expand it, rather than hand over that value to a distributor for nothing in return,” according to a news release from the libertarian law firm representing the brewers in court.

“The Texas Constitution prohibits the legislature from passing laws that enrich one business at the expense of another,” Institute for Justice Senior Attorney Matt Miller, who represented the brewers in court, said in the release. “This ruling is a victory for every Texas craft brewery and the customers who love their beer.”

The office of Texas Attorney General Ken Paxton, which represented the Texas Alcoholic Beverage Commission in the case, didn’t comment Thursday. It was not immediately clear if the state would appeal the ruling.

Brewers and their fans might be rejoicing their victory right now, but they’re still holding their breaths over two other beer-related cases in Texas courts.

One case involves an issue that brewers unsuccessfully pushed for in the 2013 legislative session. As a result, Dallas’ Deep Ellum Brewing sued the Texas Alcoholic Beverage Commission last year to try and get breweries the ability to sell beer to-go from their facilities — something that wineries and distilleries in Texas are both able to do. (Operators of brewpubs, which sell food in addition to beer, also can sell their products to the public.)

Also, Cuvee Coffee decided to go to battle with the TABC over the issue of whether retailers can sell crowlers, which the TABC argues are one-use cans, rather than aluminum growlers, that only manufacturers of beer can sell.

Both cases are expected to be resolved within the next couple of weeks.