Texas Craft Breweries Drink to Court Ruling

     AUSTIN, Texas (CN) — A Texas judge struck down a state law that prevented three craft brewers from selling their distribution rights, in a blow against what their attorney called “politically connected beer distributors.”
     Texas Senate Bill 639, the “Sale Restriction,” prohibited brewers from selling territorial rights on the open market to distributors.
     Live Oak Brewing Co., Revolver Brewing, and Peticolas Brewing challenged the law in Travis County Court in December 2014 by suing the Texas Alcoholic Beverage Commission.
     The law, codified in 2013 as TABC code 102.75(a)(7), states that “no manufacturer shall … accept payment in exchange for an agreement setting forth territorial rights.”
     Travis County Judge Karin Crump on Friday granted the brewers’ motion for summary judgment in part, and denied it in part.
     She granted the claim that the Sale Restriction violates the Due Course of Law clause of Article I, Section 19 of the Texas Constitution, and enjoined the TABC from enforcing it “against plaintiffs and all other producers of beer, ale, and malt liquor.”
     Crump dismissed the brewers’ claim that the Sale Restriction violates the Takings Clause of the Texas Constitution, and also dismissed their request for attorney’s fees.
     The TABC had no comment.
     The brewers’ attorneys at The Institute for Justice said in a statement Friday: “Raise a glass to freedom. Today, a Texas state judge struck down a 2013 law that made it illegal for brewers to receive compensation from distributors for their territorial distribution rights, declaring that it violated the Texas Constitution. The law has forced brewers to give up millions of dollars of valuable property to politically connected beer distributors.”
     Institute attorney Matt Miller, who represented the brewers in court, added: “The Texas Constitution prohibits the Legislature from passing laws that enrich one business at the expense of another. This ruling is a victory for every Texas craft brewery and the customers who love their beer.”
     Chip McElroy, who owns Live Oak Brewing, said: “It’s great to have my property back.”
     Michael Peticolas of Peticolas Brewing said: “I’m proud to have my constitutional rights returned to me. This is a great victory for Texas craft brewers.”
     Craft beer has grabbed more and more market share in recent years from giant breweries that sell what beer aficionados describe in unflattering terms.
     The Brewers Association reported in March 2015 that small and independent craft brewers had 12 percent market share of the U.S. beer industry, up from 5 percent in 2011. U.S. craft beer production has increased from 9.1 million barrels in 2009 to 24.5 million barrels in 2015.
     Craft beer has become so popular that some stores, such as WhichCraft in South Austin, sells exclusively craft beer. Its owner Jody Reyes said in an interview that craft beer is doing “fantastic” and that Friday’s ruling should help. He said, however, that craft-only stores like his cater to a niche market, as most retailers sell liquor and wine in addition to beer.
     The owner of another independent liquor store, who has been in the business for 28 years, told Courthouse News: “If you’d have told me 10 years ago that I’d be considering not even stocking Budweiser today, I’d have thought you were nuts.” But he said he’s considering it.
     Reyes said the increased sophistication of U.S. beer drinkers has forced major grocery stores to stock it along with mass-produced brands.
     Charles Vallhonrat, with the Texas Craft Brewers Guild, said the Guild was pleased with the ruling, and that “craft beer sales in Texas continue to grow steadily.”

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