Partial Victory for Beer in Texas!

by: Katherine Haenschen

Fri Dec 23, 2011 at 05:00 PM CST

There was some great news for craft beer in Texas last week as Federal Judge Sam Sparks ruled in favor of Jester King Brewery in a case pertaining to beer labeling and distribution laws. At issue: in Texas, beers have to label themselves as either a "beer" or an "ale" based on alcohol content rather than brewing process, which is absurd, and also small brewers could not list on their websites where their products are sold.

Unfortunately Sparks did NOT rule against current conservative laws restricting craft brewers from expanding distribution of their products. In the 82nd Session, three separate beer bills sought to remedy those problems, allowing for greater craft beer distribution, sales on the brewery premises, and bier gartens. It looks like a legislative fix may still be needed so that Live Oak, Real Ale, Rahr & Sons, Austin Beer Works, Jester King, Uncle Billy's, North by Northwest Brewery, Black Star Beer Co-Op (I could go on, and on, and on...) and other purveyors of really wonderful beer here in Texas can have more equal footing in the distribution world, to be able to increase their market share and get more of their fantastic products into the mouths of thirsty beer-loving Texans.

Lee Nichols, sudsy scribe of the delicious I Love Beer Blog has the story on the case:

Yesterday, U.S. Judge Sam Sparks handed down his ruling in the Jester King et al v. TABC case. Unfortunately, he did not rule in favor of craft brewers on the most important part of the case - the section seeking to allow brewers to better sell their products, giving them rights on par with wineries. However, he at least agreed with Jester King on the First Amendment issues, ending the practice of forcing brewers to inaccurately label their products and freeing them to finally tell consumers where their products may be found.

Pasted below the jump is Jester King's commentary on the decision, followed by comments from Texas State Senator John Carona of Dallas, chairman of the committee that oversees alcohol regulation in the Senate.

To read the full ruling, click here.

On a related note, congrats to Lee for his new gig working as State Senator Leticia Van de Putte's Communications Director! Read all about that here.  

Statement from Jester King:

Yesterday afternoon, Judge Sam Sparks of the United States District Court for the Western District of Texas issued his final judgment on the case that Jester King Brewery and our two co-plaintiffs, Authentic Beverage Company and Zax Restaurant & Bar, filed against the Texas Alcoholic Beverage Commission. With respect to all of the First Amendment challenges to the current state law, he ruled in our favor, declaring the statutes and TABC rules in question unconstitutional and therefore invalid. Congratulations and many thanks to our attorneys, Jim Houchins of Houchins Law and Pete Kennedy of Graves Dougherty Hearon & Moody for taking on this case and for all of the hard work that they put in. Thanks also to Pete's firm for supporting his efforts and to Jim's associate, Rachel Fisher, for all of her hard work and diligent research.

As of result of yesterday's ruling, beer in Texas may now be labeled as "beer" and ale may now be labeled as "ale", regardless of alcohol content. Breweries and distributors are also no longer prohibited from independently telling consumers where their products may be purchased, or from communicating truthful and accurate information about their alcohol content. That means Jester King will now be able to add a "Where to Buy" section to our website, as will all other breweries selling beer in Texas.

"In a remarkable (though logically dubious) demonstration of circular reasoning" Judge Sparks writes in his ruling, "TABC attempts to defend the constitutional legitimacy of the Code through an appeal to the statutory authority of the Code itself." Referring to the required use of the terms "beer", "ale", and "malt liquor", he writes "TABC's argument, combined with artful legislative drafting, could be used to justify any restrictions on commercial speech. For instance, Texas would likely face no (legal) obstacle if it wished to pass a law defining the word 'milk' to mean 'a nocturnal flying mammal that eats insects and employs echolocation.' Under TABC's logic, Texas would then be authorized to prohibit use of the word 'milk' by producers of a certain liquid dairy product, but also to require Austin promoters to advertise the famous annual 'Milk Festival' on the Congress Avenue Bridge.'"

We were disappointed, but not too surprised, that Judge Sparks ruled against our claims that Texas's disparate treatment of breweries and brewpubs violated the Equal Protection Clause and that its treatment of foreign breweries violated both the Equal Protection Clause and the Commerce Clause. The TABC never gave any reason why Texas should be able to prohibit craft brewers from selling beer to customers on-site, while allowing wineries to do so, or why Texas should be able to favor foreign wineries over foreign breweries, and Judge Sparks did not speculate on why that might be. But the legal standards are different and more demanding for challenges brought under the Equal Protection Clause than the First Amendment, and we were unable to persuade Judge Sparks to strike down these discriminatory laws. We were encouraged, however, by Judge Sparks's observation that "The State of Texas is lucky the burden of proof was on [the Plaintiffs] for many of its claims, or else the Alcoholic Beverage Code might have fared even worse than it has."

We're pleased to have helped to bring about at least a few long overdue changes in the antiquated and often inconsistent Texas Alcoholic Beverage Code, but small brewers still face many unjust and unnecessary obstacles that need to be removed before we can stand on equal footing with Texas winemakers and brewers in other states. Measurable progress was made with yesterday's decision, but much more is still needed. We don't yet know what, if anything, will happen next on the legal front. That's something that we'll need to discuss with our attorneys. In the meantime, though, it's not too early to start thinking about the 2013 legislative session, with the hope that this case will help to bring some momentum for further change. For the first time, Texas consumers finally have a well-organized grassroots organization that's working to modernize the Beverage Code. We, at Jester King Craft Brewery, will continue to do everything we can to support the efforts of Open the Taps and we encourage everyone who is reading this to do the same.

Statement from State Sen. John Carona:
"A Federal Court has ruled that Texas' laws regarding the advertising and labeling of beer are flawed. In the case of Authentic Beverages Co. vs. TABC, the Judge awarded a summary judgment that certain laws directing the labeling and advertisement of beer are unconstitutional. While the three-tier system of manufacturer, distributor, and retailer has served Texas well since the end of Prohibition, it is an open question how well the Texas Alcoholic Beverage Code reflects today's reality of Internet sales and the growth of the craft brewing industry. The Court's ruling suggests this is a topic that may be taken up by the 83rd Legislature."

Yay beer!