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The Texas Supreme Court is brewers’ last chance to get rid of 2013 beer law

Arianna Auber
Live Oak Brewing founder Chip McElroy opened a much larger brewery last year in East Austin, but he is once again having to fight a beer law he says unfairly takes away important capital from his business.

Texas craft brewers are facing a new blow from the courts, capping off a disappointing legislative year — but they plan on fighting back.

A reversal of a judge’s decision that gave them monetary compensation for distribution rights was announced Friday, leading a group of the brewers involved in the initial case to declare their intent to appeal the decision to the Texas Supreme Court.

Last year, Austin-based Live Oak Brewing and Dallas/Fort Worth-area Peticolas Brewing and Revolver Brewing successfully sued the state to regain valuable capital they said they can get from selling their distribution rights, which they were able to do prior to a 2013 law.

The law was part of a landmark bundle of legislation that was otherwise a boon for breweries in the state. But Senate Bill 639 required them to give their distribution rights to distributors, rather than sell them, and the brewers sued. Last August, state District Judge Karin Crump declared the law to be unconstitutional. Her decision was consequently reversed Friday by the Texas Third Court of Appeals.

Brewers only have step left: to hope the Texas Supreme Court will disagree with the appellate court. 

“It is well established that the Texas Constitution protects economic liberties, and these rights do not cease to exist when the government begins licensing and regulating individuals and businesses,” Institute for Justice’s managing attorney Arif Panju, whose firm represented the brewers in court, said in a news release.

The institute’s senior attorney Paul Sherman added that the law only benefits distributors.

“Texas’s prohibition on selling distribution rights was written by distributors, for distributors, at the expense of brewers. That sort of naked wealth transfer is unconstitutional,” he said in the release.

The reversal is just the latest disappointment for Texas brewers this year. When the state legislature was in session this spring, the brewers hoped to get laws passed that would, among other things, allow production breweries to sell beer to-go from their taprooms, something the country’s 49 other states permit in some capacity.

Instead, brewers were faced with a bill they see as detrimental to the industry and pushed, as with SB 639, by the state’s beer distributors. House Bill 3287, passed in May, prohibits breweries of a certain size from running an on-site taproom. 

Though nearly all breweries in the state make well below the barrel limit dictated in the bill, most of them view it as limiting their growth and continuing distributors’ stranglehold on their products.

Another case still winding its way through Texas courts is a lawsuit that Dallas-Fort Worth’s Deep Ellum Brewing and others have lodged against the Texas Alcoholic Beverage Commission to allow them to sell beer from their taprooms for off-premise consumption.