Cooper v. Texas Alcoholic Beverage Commission

Case: 14-51343 Document: 00513475700 Page: 1 Date Filed: 04/21/2016

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 14-51343 United States Court of Appeals

Fifth Circuit

FILED

April 21, 2016

STEVE COOPER, Lyle W. Cayce

Plaintiff,

Clerk

versus

TEXAS ALCOHOLIC BEVERAGE COMMISSION,

Defendant,

and

FINE WINE & SPIRITS OF NORTH TEXAS, L.L.C.;

SOUTHERN WINE AND SPIRITS OF TEXAS, INCORPORATED,

Intervenor Plaintiffs-Appellees,

versus

TEXAS PACKAGE STORES ASSOCIATION, INCORPORATED,

Intervenor Defendant-Appellant.

Appeal from the United States District Court

for the Western District of Texas

Before JONES and SMITH, Circuit Judges, and FITZWATER,* District Judge.

JERRY E. SMITH, Circuit Judge:

The Texas Package Stores Association (“TPSA”) moved for relief from an

injunction under Federal Rule of Civil Procedure 60(b). The district court

denied the motion for want of jurisdiction. Because there is jurisdiction, we

* District Judge of the Northern District of Texas, sitting by designation.

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reverse the order denying the motion on jurisdictional grounds and render an

order denying it on the merits.

I. Factual Background and Procedural History

More than twenty-five years ago, Richard Wilson and Steve Cooper (the

“original plaintiffs”) tried to acquire K.S. Enterprises, Inc. d/b/a Baby Dolls, a

nightclub, but were unable to complete the transaction because of provisions

of the Texas Alcoholic Beverage Code (the “Code”). Texas regulates the sale

and importation of alcoholic beverages through a three-tier distribution

system. The first tier consists of producers such as distillers and wineries,

which are required to sell their products to the second tier, made up of state-

licensed wholesalers. The second tier, in turn, distributes products to the third

tier, comprising state-licensed retailers, which sell to consumers. The problem

for the original plaintiffs was that the Code imposes a durational-residency

requirement—at the time three years, later changed to one year—on holders

of mixed-beverage permits and majority shareholders of corporations with

mixed-beverage permits.

The Texas Alcoholic Beverage Commission (the “Commission”) may

refuse a permit to any applicant who has not been a citizen of Texas for at least

one year before filing the application, 1 and it may cancel a permit if an appli-

cant does not satisfy the residency requirement. 2 If there has been a change

1 TEX. ALCO. BEV. CODE ANN. § 11.46(a)(11) (West 2016) (“The commission or admin-

istrator may refuse to issue an original or renewal permit with or without a hearing if it has

reasonable grounds to believe and finds that . . . the applicant is not a United States citizen

or has not been a citizen of Texas for a period of one year immediately preceding the filing of

his application, unless he was issued a permit or renewal permit on or before September 1,

1948, and has at some time been a United States citizen . . . .”).

2 TEX. ALCO. BEV. CODE ANN. § 11.61(b)(19) (West 2016) (“The commission or admin-

istrator may suspend for not more than 60 days or cancel an original or renewal permit if it

is found, after notice and hearing, that . . . the permittee is not a citizen of the United States

or has not been a citizen of Texas for a period of one year immediately preceding the filing of

2

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in corporate control, the Commission cannot renew the permit unless the new

majority shareholders have satisfied all the requirements for a permit, includ-

ing the residency requirement. 3 Finally, the Code states,

No person who has not been a citizen of Texas for a period of one

year immediately preceding the filing of his application therefor shall

be eligible to receive a permit under this code. No permit except a

brewer’s permit, and such other licenses and permits as are necessary

to the operation of a brewer’s permit, shall be issued to a corporation

unless the same be incorporated under the laws of the state and unless

at least 51 percent of the stock of the corporation is owned at all times

by citizens who have resided within the state for a period of one year

. . . . Partnerships, firms, and associations applying for permits shall

be composed wholly of citizens possessing the qualifications above

enumerated. Any corporation (except carrier) holding a permit under

this code which shall violate any provisions hereof, or any rule or regu-

lation promulgated hereunder, shall be subject to forfeiture of its

charter . . . .[ 4]

Because the original plaintiffs were not Texas citizens, 5 they could not

acquire Baby Dolls without endangering the business’s mixed-beverage permit

and, in turn, its profitability. To avoid that harm, the original plaintiffs

brought a 42 U.S.C. § 1983 suit against W.S. McBeath, the administrator of

his application, unless he was issued an original or renewal permit on or before September 1,

1948, and has been a United States citizen at some time . . . .”).

3 TEX. ALCO. BEV. CODE ANN. § 28.04 (West 2016) (“(a) A mixed beverage permit held

by a corporation may not be renewed if the commission or administrator finds that legal or

beneficial ownership of over 50 percent of the stock of the corporation has changed since the

time the original permit was issued. . . . (d) This section does not apply to a change in cor-

porate control . . . (2) brought about when legal or beneficial ownership of over 50 percent of

the stock of the corporation has been transferred: (A) to a person who possesses the quali-

fications required of other applicants for permits and is currently an officer of the corporation

and has been an officer of the corporation ever since the date the original permit was issued;

or (B) if the permittee notifies the commission . . . of the proposed transfer prior to the date

the transfer is to become effective and the commission does not find that circumstances exist

that would be grounds for the denial of a renewal of the permit under Section 11.46 and

provided the ownership of the corporation immediately after the transfer satisfies the

requirements of this code. . . .”).

4 TEX. ALCO. BEV. CODE ANN. § 109.53 (West 2016).

5 Wilson was a citizen of Tennessee, Cooper a citizen of Florida.

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the Commission, seeking declaratory and injunctive relief. 6 Three trade

groups, among them TPSA, were granted leave to intervene as defendants.

On cross-motions for summary judgment, the district court determined

that Texas’s residency requirement was a protectionist provision invalid under

the Commerce Clause and the Privileges and Immunities Clause and that the

Twenty-first Amendment did not save the requirement. The court thus

declared the residency requirement invalid and permanently enjoined the

Commission from enforcing it. 7 This court’s affirmance was based only on the

Commerce Clause, and we declined to address the Privileges and Immunities

Clause. Cooper, 11 F.3d at 556 n.10.

The present round began in 2014, when TPSA moved under Rule 60(b)

for relief from the injunction based on a significant change in decisional law.

The Commission did not join in TPSA’s motion, nor did the original plaintiffs

appear or file a response. Two out-of-state corporations—Fine Wine & Spirits

of North Texas, L.L.C. (“Fine Wine”), and Southern Wine and Spirits of Texas,

Inc. (“Southern Wine”)—moved to intervene as plaintiffs. After granting inter-

vention, the district court denied TPSA’s Rule 60(b) motion for lack of subject-

matter jurisdiction. It held that there was no case or controversy because the

original plaintiffs had not appeared and seemed to lack an ongoing interest

and because TPSA lacked standing. The court thus declined to reach the

merits but suggested that the Rule 60(b) motion should be denied on the

6 See Wilson v. McBeath, No. A-90-CA-736, 1991 WL 540043 (W.D. Tex. June 13,

1991), aff’d sub nom. Cooper v. McBeath, 11 F.3d 547 (5th Cir. 1994).

7 TPSA incorrectly contends that the injunction binds not only the Commission but

also TPSA. The district court granted “the Plaintiffs’ Application for a Permanent Injunc-

tion[.]” Wilson, 1991 WL 540043, at *11. The original plaintiffs’ application for a permanent

injunction, though, never sought relief against TPSA but instead requested an injunction

against “McBeath, his agents and employees from enforcing the challenged provisions”—in

other words, the Commission under the fiction of Ex parte Young, 209 U.S. 123 (1908). We

thus speak of the injunction as running against the Commission.

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merits.

II. Jurisdiction

The district court gave two reasons why it lacked subject-matter juris-

diction. First, TPSA had failed to establish that the original plaintiffs contin-

ued to have a stake in the case. Second, TPSA lacked standing to bring a

Rule 60(b) motion.

A. Mootness

The original plaintiffs have not appeared and may no longer possess any

direct stake in the outcome of this proceeding. Nevertheless, there remains a

live case or controversy because of the intervention of Fine Wine and Southern

Wine. Their intervention ensures that this proceeding involves an actual dis-

pute between adverse litigants.

Even if that intervention were not enough, a live case or controversy

would still remain on account of the injunction. An Article III case or contro-

versy requires at least two adverse parties. 8 For that reason, a federal judicial

proceeding generally becomes moot if all the plaintiffs or all the defendants

withdraw from or lose their concrete interest in the proceeding. That rule does

not hold, however, where a court has entered a permanent injunction or some

other equitable decree with prospective application. 9 The reason is that “fed-

eral courts have inherent equitable power to modify their own decrees.” League

8See 13 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3530,

at 673–75 (3d ed. 2008) (“The most elemental requirement of adversary litigation is that there

be two or more parties. There must be a real plaintiff at the inception of the suit, and there

may be some requirement that the plaintiff remain interested as the litigation proceeds.

There also must be an identifiable defendant . . . .” (footnotes omitted)).

9See Tory v. Cochran, 544 U.S. 734, 736–37 (2005) (holding that the ongoing

permanent injunction in a defamation suit prevented the plaintiff’s death from mooting the

defendant’s appeal).

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of United Latin American Citizens, Dist. 19 v. City of Boerne, 659 F.3d 421, 436

(5th Cir. 2011). “The power of a federal court that enters an equitable

injunction is not spent simply because it has once spoken. The federal courts

have always affirmed their equitable power to modify any final decree that has

prospective application.” Id.

The permanent injunction remains in effect, even absent the original

plaintiffs. The injunction continues to prohibit the Commission from enforcing

Texas’s residency requirement against not only the original plaintiffs but also

all other out-of-state persons who possess or wish to acquire a Texas mixed-

beverage permit or an interest in an entity with such a permit. The prospective

application of the injunction thus prevents this case from becoming moot.

B. Standing

TPSA has standing to bring its Rule 60(b) motion. Because it is an

intervenor, its “right to continue a suit in the absence of the [Commission] is

contingent upon a showing by the intervenor that [it] fulfills the requirements

of Art. III.” Diamond v. Charles, 476 U.S. 54, 68 (1986). In other words, TPSA

must demonstrate that it has standing in its own right and cannot rely on the

Commission’s standing. 10

The question whether TPSA possesses standing turns ultimately on the

standing of its members. As a trade association, it must satisfy three criteria.

First, “its members [must] otherwise have standing to sue in their own right.”

Nat’l Rifle Ass’n of Am. v. Bureau of Alcohol, Tobacco, Firearms & Explosives,

700 F.3d 185, 191 (5th Cir. 2012). Second, “the interests [it] seeks to protect

10 See Goldin v. Barrow, 166 F.3d 710, 720 n.12 (5th Cir. 1999) (“[W]hile intervenors

may proceed under Rule 24 without meeting the standing requirements, if they are the sole

party to take an appeal they must independently satisfy Article III.”).

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[must be] germane to the organization’s purpose.” Id. Third, “neither the claim

asserted nor the relief requested [must] require[] the participation of individ-

ual members in the lawsuit.” Id.

There is no question that TPSA satisfies the second and third criteria for

associational standing. The interests of TPSA’s members in the enforcement

of the residency requirement are germane to TPSA’s purpose, and neither

TPSA’s claim for relief nor the relief it requests requires the participation of

its individual members. Thus the only issue is whether its members have

standing in their own right.

Under the traditional test for standing, a litigant must show (1) that it

has “suffered an ‘injury in fact,’” (2) the injury complained of is “fairly traceable

to the challenged action of the [opposing party], and not the result of the inde-

pendent action of some third party not before the court,” and (3) that it is

“‘likely,’ as opposed to merely ‘speculative,’ that the injury will be ‘redressed by

a favorable decision.’” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).

The district court concluded, for two reasons, that TPSA had failed to make

that showing for its individual members. First, “having to compete in a free

and fair marketplace is not an injury[.]” Second, TPSA’s requested

relief―lifting the injunction―would not remedy the alleged injury, because

“[a]ll that would change is the origin of those men and women who controlled

[TPSA’s] competitors. TPSA’s members would not suddenly find themselves

in control of monopoly power. Other, different competitors would fill the

vacuum.” We disagree with the district court’s reasoning and conclusions.

1. Injury in fact

There is no question that TPSA has “a ‘direct stake in the outcome’ of the

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case.” 11 TPSA’s interest in Texas’s residency requirement is not that of a

person seeking to vindicate the constitutional validity of a generally applicable

law, but rather that of a market participant seeking the enforcement of a law

that, if not enjoined, would apply to both it and its competitors. The only ques-

tion with regard to the injury-in-fact prong of the standing inquiry is thus

whether TPSA’s alleged injury—increased economic competition from out-of-

state business—qualifies as an injury in fact. It does.

Economic competition in a free market is not ordinarily an injury in fact,

but it becomes so where, as here, a statute entitles members of an industry to

reduced competition. It is a “basic law of economics” that increased competi-

tion leads to actual economic injury. 12 For that reason, numerous courts have

upheld the standing of competitors to challenge official actions that change the

amount of competition in an economic actor’s market. 13

“[T]the regulatory allowance of increased competition in a plaintiff’s

market” qualifies “as a clear injury-in-fact.” 14 Because an injunction prohibit-

ing the enforcement of regulatory restrictions on competitors has the same

effect on the level of competition in a market as does an agency decision to lift

regulatory restrictions on competitors, an injunction in these circumstances

11Hollingsworth v. Perry, 133 S. Ct. 2652, 2662 (2013) (quoting Arizonans for Official

English v. Arizona, 520 U.S. 43, 64 (1997)).

12New World Radio, Inc. v. F.C.C., 294 F.3d 164, 172 (D.C. Cir. 2002); accord Adams

v. Watson, 10 F.3d 915, 923–24 (1st Cir. 1993).

13E.g., Inv. Co. Inst. v. Camp, 401 U.S. 617, 620 (1971); Ass’n of Data Processing Serv.

Orgs. v. Camp, 397 U.S. 150, 152–154 (1970); Sherley v. Sebelius, 610 F.3d 69, 72 (D.C. Cir.

2010) (“[E]conomic actors ‘suffer [an] injury in fact when agencies lift regulatory restrictions

on their competitors or otherwise allow increased competition against them.” (quoting La.

Energy & Power Auth. v. FERC, 141 F.3d 364, 367 (D.C. Cir. 1998))); Pac. Gas Transmission

Co. v. FERC, 998 F.2d 1303, 1307 n.4 (5th Cir. 1993).

14 Tex. Cable & Telecomms. Ass’n v. Hudson, 265 F. App’x 210, 217 (5th Cir. 2008)

(citing Envtl. Def. Fund v. Marsh, 651 F.2d 983 (5th Cir. Unit A July 1981); Hollingsworth v.

Harris, 608 F.2d 1026, 1028 (5th Cir. 1979)).

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also qualifies as an injury in fact. In both cases, there is real harm. There is

no principled basis for regarding the agency decision but not the court injunc-

tion as resulting in an injury in fact.

2. Redressability

The district court concluded that TPSA also failed the redressability

prong of the standing inquiry. The court reasoned that, even if the injunction

were lifted, none of TPSA’s members would obtain monopoly power, and its

members would still have to compete with new in-state entrants into the retail

liquor business.

We disagree. In other competitor-standing cases, where an economic

actor challenged an agency’s lifting of a regulatory restriction on competitors,

courts have held that reintroduction of the regulatory restriction can redress

the injury. 15 The same logic indicates that the injury complained of here—

increased competition with out-of-state permittees—can be redressed by dis-

solving the injunction. There is no requirement that TPSA show that it or its

members will acquire monopoly power in the retail liquor market.

We also disagree with the notion, urged by Fine Wine and Southern

Wine, that TPSA’s injury is not redressable absent the Commission’s participa-

tion in the proceeding. Fine Wine and Southern Wine maintain that a party

may not challenge an injunction when it is not the enjoined party. Many of the

cases they cite, however, merely stand for the proposition that a party does not

have standing to challenge a judgment by which it is not aggrieved. 16 That

15E.g., Sherley, 610 F.3d at 72; La. Energy, 141 F.3d at 367; Pac. Gas, 998 F.2d

at 1307 n.4.

16In Princeton University v. Schmid, 455 U.S. 100 (1982), the Court held that the

university lacked standing to appeal the conviction of the defendant where the State of New

Jersey did not urge reversal. The free-speech issue in which the school was interested was

moot because it had changed its regulations. The state-court judgment thus did not affect its

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line of cases does not apply here, because, as shown above, the injunction

causes TPSA injury in fact.

The other cases relied on by Fine Wine and Southern Wine deal with

limitations on a court’s ability to grant relief under the Federal Rules of Appel-

late Procedure. They cite K.C. ex rel. Africa H. v. Shipman, 716 F.3d 107 (4th

Cir. 2013), for the proposition that “a ‘judgment will not be altered on appeal

in favor of a party who did not appeal’—a rule that applies even if ‘the interests

of the party not appealing are aligned with those of the appellant.’” Id. at 116

(quoting 9 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE ¶ 204.11[4]

(2d ed. 1980)); accord Cabral v. City of Evansville, 759 F.3d 639, 643 (7th Cir.

2014). But that rule does not hold in the instant case.

To begin with, Fifth Circuit caselaw permits this court to alter a judg-

ment or order in favor of a non-appealing party. We may do so “when the

reversal ‘wipes out all basis for recovery against the nonappealing, as well as

against the appealing defendant; when the failure to reverse with respect to

the nonappealing party will frustrate the execution of the judgment in favor of

the successful appellant; or when the appealed decision could reasonably be

read as not being adverse to the nonappealing party.” Anthony v. Petroleum

Helicopters, Inc., 693 F.2d 495, 497–98 (5th Cir. 1982) (citations omitted).

legal rights. Moreover, the university “d[id] not claim standing on the ground that a private

party may intervene and challenge the reversal of a criminal conviction of another party.”

Id. at 103.

In Diamond, a pediatrician seeking to defend Illinois’s abortion law was held to lack

standing in his own right because “a private party whose own conduct is neither implicated

nor threatened by a criminal statute has no judicially cognizable interest in the statute’s

defense,” 476 U.S. at 56, and “Diamond [was] not able to assert an injury in fact,” id. at 65.

In Hollingsworth, the intervenors were found to lack standing, not because their claim

was unredressable, but because they lacked an injury in fact. “[P]etitioners had no ‘direct

stake’ in the outcome of their appeal. Their only interest in having the District Court order

reversed was to vindicate the constitutional validity of a generally applicable California law.”

133 S. Ct. at 2662.

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Second, numerous cases have permitted a non-enjoined party to appeal

an injunction when the enjoined party is the government. 17 Fine Wine and

Southern Wine cite Kendall-Jackson Winery, Ltd. v. Branson, 212 F.3d 995

(7th Cir. 2000), as authority to the contrary. “Because the [state alcoholic bev-

erage] Commission has not appealed, it remains bound by the injunctions no

matter what happens on the [intervenor defendants’] appeals, so it is not clear

what point the [intervenor defendants’] appeals can serve.” Id. at 997. Yet

Kendall-Jackson explicitly recognized that the appellants would have had

standing if they had possessed a private right of action. 18

Under Kendall-Jackson, there is no redressability problem where, as

17 E.g., Mausolf v. Babbitt, 125 F.3d 661 (8th Cir. 1997) (intervenors permitted to

appeal injunction of National Park Service regulations); Nat’l Wildlife Fed’n v. Lujan, 928

F.2d 453 (D.C. Cir. 1991) (intervenor defendants permitted to appeal order invalidating regu-

lations promulgated by the Secretary of the Interior).

18 The Kendall-Jackson court, 212 F.3d at 998–99, explained that

the [intervenor defendants] miss the real problem: redressability. Sure the injunc-

tion injures them, but how can their appeal redress that injury given that the injunc-

tion will continue to bind the Commission? See Sea Shore Corp. v. Sullivan, 158

F.3d 51 (1st Cir. 1998); Associated Builders & Contractors v. Perry, 16 F.3d 688 (6th

Cir. 1994); McLaughlin v. Pernsley, 876 F.2d 308 (3d Cir. 1989). When a statute

creates a private right of action, it is possible to see how such a question may be

answered affirmatively. Consider Mausolf v. Babbitt, 125 F.3d 661 (8th Cir. 1997),

in which the district court enjoined the National Park Service from enforcing certain

regulations, and the Park Service did not pursue an appeal. Private parties that had

intervened in the case sensibly were allowed to appeal, not simply because the

injunction injured them (to the extent the regulations had helped them) but because

federal regulations may be enforced by private parties by suits against the agencies

(under the Administrative Procedure Act) and by suits against private parties under

the federal-question jurisdiction to the extent a statute or regulation creates a pri-

vate right of action, or under 42 U.S.C. § 1983 to the extent the defendant is a state

actor. See Maine v. Thiboutot, 448 U.S. 1 . . . (1980). Many cases are similar in spirit

to Mausolf, and we do not question their holdings. Likewise, a union or employer

that prevails before the National Labor Relations Board may ask the Supreme Court

to review a decision refusing to enforce that order, even though the Board’s General

Counsel has absolute prosecutorial discretion not to file a charge of unfair labor prac-

tices. After a charge has been filed, the Board has dual roles as prosecutor and

adjudicator, and private parties acquire rights in the Board’s final decisions that are

enforceable even if the Board is content to see its orders annulled. 29 U.S.C. § 160(f).

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here, the intervenor can sue the state to enforce the law at issue. The Code

gives “[a]ny package store permittee who shall be injured in his business or

property by another package store permittee by reason of anything prohibited

in [the residency requirements the right to] institute suit . . . to require enforce-

ment by injunctive procedures and/or to recover threefold the damages by him

sustained.” TEX. ALCO. BEV. CODE ANN. § 109.53. Consequently, TPSA’s mem-

bers, which are all package store permittees, have a private right of action and

may appeal an injunction of the residency requirement even if the Commission

does not appeal.

Third, the cases mentioned above do not concern a district court’s author-

ity under Rule 60(b) to grant relief that would simultaneously benefit a non-

moving party such as the Commission. Instead, those decisions deal solely

with an appellate court’s ability to grant relief on direct appeal under Federal

Rule of Appellate Procedure 4(a)(3), whose requirements have sometimes been

held to be jurisdictional, though not necessarily in this circuit. 19 The sole ques-

tion with regard to redressability here, however, is whether the district court

is able to grant relief to TPSA under Rule 60(b). Because that is possible, there

was no redressability problem in the district court, and there is none on appeal

either, given that we may redress TPSA’s injury by reversing. TPSA has

standing.

III. Merits

In light of the fact that both the district court and this court have subject-

matter jurisdiction, we can decide the Rule 60(b) motion now, on appeal, as

19 See 20 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE § 304.11[3][d] (3d

ed. 2015); id. at 304-32 n.28 (citing Fifth Circuit cases describing Rule 4(a)(3) as only a rule

of practice); Marine Indem. Ins. Co. of Am. v. Lockwood Warehouse & Storage, No. 98-20274,

1998 U.S. App. LEXIS 39029, at *5 & n.4 (5th Cir. Nov. 18, 1998) (unpublished) (questioning

the continuing validity of the rule-of-practice analysis).

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wholly an issue of law: whether continuing the injunction is unjust in light of

Granholm v. Heald, 544 U.S. 460 (2005). Under Rule 60(b)(5), a district court

has the discretion to “relieve a party or its legal representative from a final

judgment, order, or proceeding” if “applying it prospectively is no longer equita-

ble.” If the relief sought is dissolution or modification of an injunction, the

district court may “grant a Rule 60(b)(5) motion when the party seeking relief

. . . can show ‘a significant change . . . in [statutory or decisional] law.’” 20 “The

party seeking relief has the burden of establishing that changed circumstances

warrant relief, but once the party has done that, a court abuses its discretion

‘when it refuses to modify an injunction or consent decree in light of such

changes.” 21

The key question is whether Heald was a significant change in decisional

law warranting relief from the injunction under Rule 60(b)(5). It was not.

A. Dormant Commerce Clause

The Commerce Clause operates both positively and negatively. Posi-

tively and explicitly, it confers on Congress the power “[t]o regulate commerce

. . . among the several States[.]” U.S. CONST. art. I, § 8, cl. 3. Negatively and

by implication, it restricts the power of the states to regulate interstate com-

merce. This “dormant” aspect “prohibits economic protectionism—that is, reg-

ulatory measures designed to benefit in-state economic interests by burdening

out-of-state competitors.” New Energy Co. of Ind. v. Limbach, 486 U.S. 269,

273 (1988).

We use a two-pronged inquiry when determining whether a state

20 Agostini v. Felton, 521 U.S. 203, 215 (1997) (quoting Rufo v. Inmates of Suffolk Cty.

Jail, 502 U.S. 367, 384 (1992)).

21Horne v. Flores, 557 U.S. 433, 447 (2009) (citing Inmates of Suffolk Cty. Jail, 502

U.S. at 383, and quoting Agostini, 521 U.S. at 215) (internal citation omitted).

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economic regulation violates the Commerce Clause.

When a state statute directly regulates or discriminates against inter-

state commerce, or when its effect is to favor in-state economic interests

over out-of-state interests, [the Court] ha[s] generally struck down the

statute without further inquiry. When, however, a statute has only

indirect effects on interstate commerce and regulates evenhandedly,

[the Court] ha[s] examined whether the State’s interest is legitimate

and whether the burden on interstate commerce clearly exceeds the

local benefits.

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579

(1986) (internal citations omitted). Because “[s]tate laws that constitute mere

economic protectionism are . . . not entitled to the same deference as laws

enacted to combat the perceived evils of an unrestricted traffic in liquor,”

Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 276 (1984), the Court applies this

framework regardless of whether the state regulation deals with alcohol.

Where alcohol is at issue, however, we further ask “whether the interests

implicated by a state regulation are so closely related to the powers reserved

by the Twenty-first Amendment that the regulation may prevail, notwith-

standing that its requirements directly conflict with express federal policies.”

Id. at 275–76 (quoting Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714

(1984)).

In Wilson and Cooper, both the district court and this court applied the

typical two-pronged inquiry from Bacchus, Brown-Forman, and other cases to

find that Texas’s residency requirement violates the Commerce Clause. The

instant Rule 60(b)(5) motion does not allow TPSA to relitigate the legal conclu-

sions on which Wilson and Cooper rest. 22 The current procedural posture does,

however, allow TPSA to urge that there has been a significant change in

22See Flores, 557 U.S. at 447 (2009) (“Rule 60(b)(5) may not be used to challenge the

legal conclusions on which a prior judgment or order rests[.]”).

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decisional law warranting relief from the injunction. The question is whether

TPSA correctly contends that there has, in fact, been that significant change.

We answer in the negative.

According to TPSA, Heald constitutes a significant change in decisional

law warranting relief under Rule 60(b)(5). Heald, however, did not expressly

alter the standard for reviewing Commerce Clause challenges to state alcohol

regulations. To the contrary, there the Court explicitly “declined” the invita-

tion to overrule or limit Bacchus, because “Bacchus does not stand alone in

recognizing that the Twenty-first Amendment did not give the States complete

freedom to regulate where other constitutional principles are at stake.” Heald,

544 U.S. at 488. “A retreat from Bacchus would also undermine Brown-

Forman and Healy [v. The Beer Institute, 491 U.S. 324 (1989)].” Id. The Court

was thus unwilling to undermine those precedents.

Notwithstanding the Supreme Court’s express refusal to question its

precedent on the interaction between the Commerce Clause and the Twenty-

first Amendment, TPSA opines that Heald implicitly changed the standard for

analyzing Commerce Clause challenges to state alcohol regulations. In the

course of addressing the constitutionality of residency requirements on out-of-

state producers, the Court addressed the objection “that any decision invalidat-

ing the[ states’] direct-shipment laws would call into question the constitu-

tionality of the three-tier system.” Id. at 489. The Court rejected that idea:

This does not follow from our holding. “The Twenty-first Amendment

grants the States virtually complete control over whether to permit

importation or sale of liquor and how to structure the liquor distribution

system.” [California Retail Liquor Dealers Ass’n v. Midcal Aluminum,

Inc., 445 U.S. 97, 110 (1980)]. A State which chooses to ban the sale

and consumption of alcohol altogether could bar its importation; and,

as our history shows, it would have to do so to make its laws effective.

States may also assume direct control of liquor distribution through

state-run outlets or funnel sales through the three-tier system. We

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have previously recognized that the three-tier system itself is “unques-

tionably legitimate.” North Dakota v. United States, 495 U.S. [423,] 432

. . . [(1990) (plurality opinion)]. See also id., at 447 (Scalia, J., concur-

ring in judgment) (“The Twenty-first Amendment . . . empowers North

Dakota to require that all liquor sold for use in the State be purchased

from a licensed in-state wholesaler”). State policies are protected under

the Twenty-first Amendment when they treat liquor produced out of

state the same as its domestic equivalent. The instant cases, in con-

trast, involve straightforward attempts to discriminate in favor of local

producers.

544 U.S. at 488–89 (last alteration in original)

TPSA interprets this dictum as essentially stripping away Commerce

Clause protections for state alcohol regulations that deal with the retailer or

wholesaler tiers rather than with the producer tier. All that the Commerce

Clause requires, TPSA says, is that a state treat liquor produced out-of-state

the same as liquor produced in-state. In support of that theory, TPSA points

to Southern Wine & Spirits of America v. Division of Alcohol & Tobacco Conrol,

731 F.3d 799 (8th Cir. 2013). That court upheld a Missouri statute imposing

residency requirements on wholesalers that was somewhat analogous to the

Texas residency requirement for retailers. Addressing the dictum in Heald,

the court reasoned that “[i]f it is beyond question that States may require

wholesalers to be ‘in-state’ without running afoul of the Commerce Clause,

then . . . States have flexibility to define the requisite degree of ‘in-state’

presence to include the in-state residence of wholesalers’ directors and officers,

and a supermajority of their shareholders.” Id. at 810.

TPSA’s interpretation of Heald is unconvincing. That Court did not pur-

port to change decisional law, and the statute at issue addressed the producer

tier of the three-tier distribution system. We thus expressly decline to follow

Southern Wine and instead adhere to the reading of Heald adopted in Wine

Country Gift Baskets.com v. Steen, 612 F.3d 809, 821 (5th Cir. 2010) (substitute

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opinion on petition for rehearing).

In Wine Country, we interpreted Heald as reaffirming the applicability

of the Commerce Clause to state alcohol regulations, but to a lesser extent

when the regulations concern the retailer or wholesaler tier as distinguished

from the producer tier, of the three-tier distribution system. Id. at 820–21. 23

State regulations of the producer tier “are protected under the Twenty-first

Amendment when they treat liquor produced out of state the same as its

domestic equivalent.” Heald, 544 U.S. at 489. But state regulations of the

retailer and wholesaler tiers are not immune from Commerce Clause scrutiny

just because they do not discriminate against out-of-state liquor.

Because of the Twenty-first Amendment, states may impose a physical-

residency requirement on retailers and wholesalers of alcoholic beverages

despite the fact that the residency requirements favor in-state over out-of-state

businesses. Wine Country, 612 F.3d at 821. The Twenty-first Amendment does

not, however, authorize states to impose a durational-residency requirement

on the owners of alcoholic beverage retailers and wholesalers. Id. (citing

Cooper, 11 F.3d at 555). Distinctions between in-state and out-of-state retail-

ers and wholesalers are permissible only if they are an inherent aspect of the

three-tier system. See id. at 818.

B. Privileges and Immunities Clause

Even if Heald and Southern Wine did represent a significant change in

decisional law for challenges to state alcohol regulations under the Commerce

Clause, TPSA’s Rule 60(b) motion should still be denied on the merits. In this

23 Cf. Heald, 544 U.S. at 472 (“Time and again this Court has held that, in all but the

narrowest circumstances, state laws violate the Commerce Clause if they mandate ‘differen-

tial treatment of in-state and out-of-state economic interests that benefits the former and

burdens the latter.” (quoting Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality of Ore., 511

U.S. 93, 99 (1994))).

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regard, TPSA has failed to address the district court’s holding that Texas’s

residency requirement violates the Privileges and Immunities Clause. As the

party seeking a remedy, TPSA has the burden to show that relief under

Rule 60(b)(5) is warranted. Frew v. Janek, 780 F.3d 320, 326–27 (5th Cir.

2015). To do that, TPSA must show that neither ground for the injunction—

violation of the Commerce Clause or the Privileges and Immunities Clause—

justifies prospective application of the injunction. TPSA has not done that but,

instead, has impermissibly attempted to shift the burden of proof to Fine Wine

and Southern Wine.

We REVERSE the order denying the Rule 60(b) motion for want of jur-

isdiction and RENDER an order denying it on the merits, thus avoiding the

need for remand.

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JONES, Circuit Judge, dissenting:

I respectfully dissent from the majority’s holding that TPSA has

standing to seek relief from an injunction that bound only state officials in their

enforcement of Texas law. As strangers to the original injunction, and parties

not directly affected by its continuance, I would hold that the association’s

claim lacked redressability for standing purposes. I would have dismissed this

appeal.

The panel correctly decides that TPSA had to demonstrate its Article III

standing to pursue an appeal from the district court’s judgment adhering to its

injunction against a Texas residency requirement for liquor distributors. See

Diamond v. Charles, 476 U.S. 54, 68-69, 106 S. Ct. 1697, 1706-07 (1986). Even

if TPSA could show two requirements of standing, injury and traceability, I

disagree with the majority’s conclusion that the association could show that a

favorable judgment from this court would relieve the TABC’s Commissioner

from his obligation to abide by the federal court's injunction.

The Seventh Circuit confronted a factually indistinguishable situation

involving a dispute between liquor suppliers and distributors, with the

constitutionality of a state regulation at its heart. In Kendall-Jackson Winery,

Ltd. v. Branson, 212 F.3d 995 (7th Cir. 2000), the court posited the following

“critical” question: “when a district judge enters an order creating obligations

only for Defendant A, may the court of appeals alter the judgment on appeal

by Defendant B when obligations imposed on A indirectly affect B?” Id. at 998.

The court answered, “No,” prefacing its explanation with the observation that

an affirmative answer would be “incompatible” with Diamond v. Charles. The

majority assert that the decisive issue in Diamond was merely the individual

standing of an Illinois physician who attempted to appeal an injunction against

state abortion laws despite the State’s refusal to appeal. Because the doctor

was not injured by the law, he lacked standing. I disagree with this narrow

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interpretation of Diamond; the physician’s injury was only a subsidiary point.

The Court primarily relied on the principle that “a private citizen lacks a

judicially cognizable interest in the prosecution or nonprosecution of another.”

476 U.S. at 64, 106 S. Ct. at 1704 (quoting Linda R.S. v. Richard D., 410 U.S.

614, 619, 93 S. Ct. 1146, 1149 (1973)). Characterizing the doctor’s interest as

“an effort to compel the State to enact a code in accord with [his] interests,” the

Court explained that, “the power to create and enforce a legal code, both civil

and criminal, is one of the quintessential functions of a State.” Id. at 65, 1705

(internal quotations and citations omitted). Only the State, in other words,

has standing to defend the standards embodied in that code. Id. I see no

distinction between Diamond and the position of TPSA in this case. Diamond

reifies that because only the State was bound by the Cooper injunction not to

enforce the residency requirement, and TPSA was not so bound, the outcome

of TPSA’s appeal cannot substitute for the State's failure to participate.

The Kendall-Jackson court articulated two other grounds for its

conclusion. First, the “Commission’s decision not to appeal leaves the

distributors in the position that they would have occupied had the Commission

not entered the orders in the first place.” 212 F.3d at 998. Here, by analogy,

TPSA’s members stand in no worse position now, when the TABC has failed to

appeal the district court’s Rule 60(b) order, than they occupied during the past

nearly twenty years while the injunction has lain unchallenged. The majority

does not seem to quarrel with this statement.

Second, because “Illinois does not recognize any private right of action to

contest such an enforcement decision by the Commission, it would not be sound

to allow the distributors to challenge that decision indirectly.” Id. In the

absence of this specific private right against the agency, Kendall-Jackson

denied the distributors’ claim effectively to step into the shoes of the regulatory

agency. Reinforcing that the court would have afforded standing only if Illinois

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law afforded them a claim against the Commission, the court later observes

that the distributors could have gone into state court seeking an order

requiring the Commission to appeal the federal court injunction. If the

distributors won, then “all issues will be presented for resolution on the

merits.” Id. at 1000. If, however, the distributors were “unable to persuade a

state court to direct [the Commission] to appeal, that will demonstrate how

similar this situation is to Diamond.” Id.

The majority here cling to the court’s dictum acknowledging that in

certain cases, third parties may challenge regulations enforced by public

agencies. As Kendall-Jackson opines, “federal regulations may be enforced by

private parties . . . by suits against private parties . . . to the extent a statute

or regulation creates a private right of action.” 1 Id. at 998. The majority

believe this exception to Kendall-Jackson's principal holding applies to TPSA

because a statutory provision allows “[a]ny package store permittee” to sue for

injury by “another package store permittee” for enforcement of code

requirements. TEX. ALCO. BEV. CODE ANN. § 109.53. Allowing suits between

competitors, however, is far different from waiving the State’s sovereign

immunity to allow a permittee to sue the Commission for affirmative

enforcement of state law (or to appeal the continuation of the instant

injunction). Texas requires a clear legislative statement to effectuate a waiver

of state sovereign immunity; this provision does not fill the bill. See TEX.

GOV’T. CODE ANN. § 311.034 (“[A] statute shall not be construed as a waiver of

sovereign immunity unless the waiver is effected by clear and unambiguous

language.”) Put otherwise, the majority’s attempt to fit Texas law within the

1 This dictum was distinguished by a recent 7th Circuit panel. Cabral v. City of

Evansville, 759 F.3d 639, 644 (7th Cir. 2014) (“West Side argues this dictum [quoted above]

provides it with standing. But a key element of that speculation is that the private party

could bring a suit against the agency or governmental actor . . . .”).

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narrow ambit of Kendall-Jackson's exception fails because a suit to enforce the

code’s provisions against another private party is wholly different from a suit

seeking Rule 60(b) relief from a federal court injunction that binds only the

Commission. Because TPSA isn’t bound by the injunction, it might even sue

Fine Wine and Southern Wine under § 109.53 for “violating” the same local

residency provision that was enjoined here! A state court might then have to

decide whether to defy the federal court’s ruling. This hypothetical proves the

point that TPSA’s indirect injury from the injunction is not redressable by this

court because any judgment in TPSA’s favor cannot remove the injunction

against the Commissioner. 2

TPSA’s effort on appeal is nothing less than to substitute itself, although

not bound by the Cooper injunction, for the state authorities who, for whatever

reason, did not appeal the continuation of the injunction. This is an end-run

around the State’s sovereign prerogative to “create and enforce a legal code.”

Diamond, 476 U.S. at 65, 106 S. Ct. at 1705. Texas law does not authorize

individuals to enforce the Alcoholic Beverage Code, in essence, against the

State. A judgment by this court favoring TPSA neither relieves TPSA of any

burden nor effectuates relief against the Commissioner. We lack jurisdiction

to adjudicate this appeal.

2 TPSA concedes that the injunction prevents the state Attorney General from

performing his nondiscretionary duty to enforce the code when a party like TPSA brings a

violation to his attention, TEX. ALCO. BEV. CODE ANN. § 109.53, but an injunction against the

enforcement authority simply does not run against TPSA.

22