Texas brewers win fight over distribution rights law

Photo by Tyler Malone. Chip McElroy, founder of Live Oak Brewing, fought and won for breweries' distribution rights, along with Peticolas Brewing and Revolver Brewing.

Photo by Tyler Malone. Chip McElroy, founder of Live Oak Brewing, fought and won for breweries to be able to sell their distribution rights, a lawsuit he filed along with Peticolas Brewing and Revolver Brewing.

 

If 2013’s sweeping legislative changes mostly in favor of Texas’ craft beer industry felt good for brewers, today’s ruling about one of those laws feels pretty sweet, too.

Declaring it unconstitutional, a Texas state judge struck down the law that prohibited brewers from receiving monetary compensation from distributors for their distribution rights. The rule was part of the bundle of 2013 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 10 days ago, when the case went to court.

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

But lawyers for the breweries countered that the 2013 distribution rule hurt breweries, which “should be able to use the value of their company to help expand it, rather than hand over that value to a distributor for nothing in return,” according to a news release about the ruling today.

“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.”

Brewers and their fans are rejoicing this victory right now, but they’re still holding their breaths over two other beer-related cases in Texas courts. Soon, these should also have outcomes.

One involves an issue that brewers pushed for in the 2013 legislative session, to no avail. 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. (Brewpubs, which sell food in addition to beer, can as well.)

And before that lawsuit, 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. The results of the beer to-go lawsuit — less so, the crowlers — will affect what the Texas Craft Brewers Guild, the state’s trade group for craft breweries, pushes for during the 2017 legislative session.

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