TABC Issues Interim Guidelines After Jester King Verdict

As most craft beer lovers in Texas know, Austin's Jester King Brewing, Zax (a bar/restaurant), and Authentic Beverages (a distributor) recently won a partial victory in a lawsuit against the Texas Alcoholic Beverage Commission, in which a judge overturned laws that required brews to be arbitrarily labeled "beer" or "ale" according to alcohol content rather than brewing method and which banned brewers from informing consumers where their products could be purchased.

In light of that ruling, the TABC has issued a bulletin handing down interim guidelines on how brewers should label their products going forward, to be replaced by more permanent rules following a meeting on January 27.

The highlights: Brewers may either continue following the old labeling rules, or they may put the alcohol by volume on the label and "designate the product by the appropriate class or style that is recognized in the brewing industry." Also, 5.1% ABV will be the new dividing line for defining what "will be considered beer in Texas for regulatory purposes."

Also, brewers may now list ABV in advertising, and where their beer can be bought, as long as they don't receive money from the retail outlets listed in such ads.

The full bulletin may be downloaded at http://ow.ly/8kZh1

Partial Victory in Jester King 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 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: http://courtweb.pamd.uscourts.gov/courtwebsearch/txwd/08866076.pdf

Full disclosure: I am no longer an objective journalist (okay, I was never really all that objective) looking at this issue from the outside. I got laid off from The Austin Chronicle in August (although I continue to review beer for them on a freelance basis), and on Dec. 1, I began employment as the Communications Director for Sen. Leticia Van de Putte of San Antonio.

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.

And here is the statement from Sen. 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."

'Chronicle' on Jester King Suit

On Tuesday, I posted about the Jester King/Zax/Authentic Beverages lawsuit against the state of Texas. Today, my former Austin Chronicle news staff colleague Richard Whittaker had his own report. It is, of course, well written. I especially like this analogy from Richard, which perfectly sums up the stupidity of the Texas law requiring that any beer stronger than 4% alcohol be arbitrarily labeled as "ale":

"Unfortunately, that is like saying all large pies are apple – it is simply not true."

Jester King Sues TABC Over Freedom of Speech

Jester King Brewery has announced a lawsuit against the Texas Alcoholic Beverage Commission on grounds that the state has violated its free speech and equal protection rights. I don't know if it will succeed, but it's certainly justified. The parts I like best:

• They want to get rid of the stupid requirements that beer under 4% alcohol by volume be labeled as "beer" and over 4% as "ale." This results in the idiotic situation of lagers being labeled as "ale" or "malt liquor." Those are brewing style terminologies, not ABV. I once had a publicity guy give me an embarrassed apology as he handed me a review bottle of a dopplebock that was labeled "ale" because TABC required it. (A bock, of course, is a lager, not an ale.)
  
• They want Texas brewers to be able to list ABV on bottles, like out-of-state beers do. I would guess the rationale for banning that info on bottles is that the state doesn't want people seeking out strong beer to get wasted. I would argue that it's necessary to prevent people from getting wasted. If I'm drinking a strong beer, I need to know that. I've accidentally gotten plowed on beers that were stronger than I thought, and it's not fun. I guess I should have thanked TABC in between pukes those nights. I'd even go further than the suit and suggest that brewers and bars be required to list ABV.
• And most important of all, they want to do away with laws prohibiting production breweries from selling on-premises and brewpubs from selling off-premises. These are unreasonable restraints of commerce. Back in the spring I thoroughly documented failed attempts to legislate such change, so I guess it will have to be done in the courts.

Co-plaintiffs are distributor Authentic Beverage Co. and Austin restaurant Zax. If you want to read the full texts of the suit and TABC's response, go to BeerNews.org.