Case 1:15-cv RP Document 13 Filed 10/07/15 Page 1 of 23 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION

Transcription

1 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 1 of 23 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION DEEP ELLUM BREWING COMPANY, LLC, Plaintiff, v. Civil Action No. 1:15-cv TEXAS ALCOHOLIC BEVERAGE COMMISSION; JOSÉ CUEVAS, JR., in his official capacity as Presiding Officer of the Texas Alcoholic Beverage Commission; STEVEN M. WEINBERG, in his official capacity as Commissioner of the Texas Alcoholic Beverage Commission; and IDA CLEMENT STEEN, in her official capacity as Commissioner of the Texas Alcoholic Beverage Commission, Defendants. DEFENDANTS ANSWER TO PLAINTIFF S ORIGINAL COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF Defendants, Texas Alcoholic Beverage Commission; José Cuevas, Jr., in his official capacity as Presiding Officer of the Texas Alcoholic Beverage Commission; Steven M. Weinberg, in his official capacity as Commissioner of the Texas Alcoholic Beverage Commission; and Ida Clement Steen, in her official capacity as Commissioner of the Texas Alcoholic Beverage Commission (collectively, Defendants or TABC ), file this Answer to Plaintiff s Original Complaint for Declaratory and Injunctive Relief (the Complaint ). Pursuant to Federal Rule of Civil Procedure 8(b), Defendants deny each and every allegation contained in Plaintiff s Original Complaint except for those expressly admitted herein. The headings and numbered paragraphs below directly correlate to the sections and numbered

2 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 2 of 23 paragraphs of Plaintiff s Complaint. Those titles and headings are reproduced in this Answer for organizational purposes only, and Defendants do not admit any matter contained in them. Defendants state that no response is required to the first sentence of Plaintiff s unnumbered introductory paragraph summarizing the nature of the lawsuit. The second sentence of the unnumbered introduction contains conclusory statements and argument to which no response is required. To the extent that this sentence purports to contain any factual statements requiring a response, Defendants admit that, with certain volumetric limitations, producers holding Winery Permits or Distiller s and Rectifiers permits and retailers holding Brewpub Licenses may sell certain alcoholic beverages on their premises to one those who purchase them for off-premises consumption. Defendants also admit that those who hold a Brewer s Permit and/or a Manufacturer s License may not sell their products on their premises to one who purchases them for off-premises consumption. The third sentence of the unnumbered introduction contains conclusory statements and argument to which no response is required. To the extent that this sentence purports to contain any factual statements requiring a response, Defendants admit that, with certain volumetric limitations, producers who hold Winery Permits and Distiller s and Rectifier s Permits may sell their respective products on-premises for off-premises consumption, and that, also with volumetric limitations, retailers who hold Brewpub Licenses may sell beer or ale on their premises to one who purchases those beverages for off-premises consumption. Defendants further admit that those that hold a Brewer s Permit and/or a Manufacturer s License may not sell their products on their premises to one who purchases them for off-premises consumption. The fourth sentence of the unnumbered introduction contains conclusory statements, argument, and characterization of the effect of relevant laws, to which no response is required. To the extent that this sentence contains factual allegations requiring a response, 2

3 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 3 of 23 Defendants lack knowledge and information sufficient to form a belief about the truth of the allegations and, on that basis, deny the allegations in their entirety. The final phrase in the unnumbered paragraph is a directive that requires no response. Defendants respond to the specifically numbered allegations of the Complaint as follows: INTRODUCTION 1. Paragraph 1 contains argument and Plaintiff s characterizations of the legal effect of various provisions of the Texas Alcoholic Beverage Code ( the Code ) to which no response is required. The first sentence contains no factual allegations requiring a response, but Defendants admit that Plaintiff has correctly stated one of the protections afforded by the 14 th Amendment to the U.S. Constitution. The second sentence of Paragraph 1 contains conclusory statements and argument to which no response is required. To the extent that this sentence contains factual allegations requiring a response, Defendants first deny that the Code has created irrational and arbitrary distinctions between various types of alcoholic beverage producers and also deny that the Code s distinctions between producers of different types of alcoholic beverages harm[s] those directly involved, including Texas businesses, citizens and tourists, and ultimately the Texas economy. The third sentence of Paragraph 1 contains conclusory statements and argument to which no response is required. To the extent that this sentence contains factual allegations requiring a response, Defendants deny that the Code creates two classes of alcoholic beverage producers and two classes of beer producers: those that can sell their product on-premises to consumers for off-premises consumption and those that cannot do so. The fourth sentence of paragraph 1 contains only a conclusory statement and argument, to which no response is required. 2. Defendants admit the factual allegations in all three sentences of this paragraph. 3

4 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 4 of The first sentence of paragraph 3 contains conclusory statements and argument to which no response is required. To the extent that this sentence purports to contain any factual allegations requiring a response, Defendants admit that, in specific instances, the Code permits members of one tier to engage in activities that would otherwise only be appropriate for members of a different tier. The second sentence of paragraph 3 contains conclusory statements and argument that require no response. To the extent that this sentence purports to contain any factual allegations requiring a response, Defendants admit only that the quoted statement was made by the judge who authored opinion in the case cited following the statement. The third sentence of paragraph 3 contains conclusory statements and argument that require no response. To the extent that this sentence purports to contain factual allegations requiring a response, Defendants deny that there are any past and present inequities of beer law in Texas and deny that the circumstances about which Plaintiff complains spring from an extraordinarily complex regulatory structure. Defendants admit, however, that the quoted language in sentence three appears in the publication cited immediately following this sentence. The fourth sentence of paragraph 3 contains conclusory statements and argument to which no response is required. 4. The first sentence of paragraph 4 contains conclusory statements and argument to which no response is required. To the extent that this sentence purports to contain factual allegations requiring a response, Defendants admit that: (a) members that hold Brewer s Permits are not allowed to sell the products they produce on their premises to those who wish to consume it off-premise; (b) subject to certain volumetric limits, members of the Texas producer tier who hold Winery Permits or Distiller s and Rectifier s Permits may sell the alcoholic beverages they produce to consumers for off-premises consumption; and, (c) again subject to certain volumetric limits, members of the retail tier who hold Brewpub Licenses may sell the alcoholic beverages 4

5 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 5 of 23 they produce to consumers for off-premises consumption. The second sentence of paragraph 4 contains conclusory statements and argument, to which no response is required. To the extent that this sentence purports to contain factual allegations requiring a response, Defendants deny that the Code s differentiation between producers of different types of alcoholic beverages is economic protectionism or that it is not a legitimate exercise of the state s power to protect the welfare, health, peace, temperance, or safety of its people. The third sentence of paragraph 4 contains conclusory statements and argument, to which no response is required. To the extent that the sentence purports to contain factual allegations to which a response is required, Defendants deny that the Code s distinctions between producers of different types of alcoholic beverages and holders of different types of producer permits are arbitrary, unreasonable and have no rational relationship to a legitimate government interest. The fourth sentence of paragraph 4 contains conclusory statements and argument, to which no response is required. To the extent that this sentence purports to contain factual allegations requiring a response, Defendants deny that the Code s distinctions between producers of different types of alcoholic beverages and holders of different types of producer permits violate Deep Ellum Brewing s constitutional rights to Equal Protection and Due Process. The fifth sentence of paragraph 4 contains conclusory statements and argument, to which no response is required. To the extent that this sentence purports to contain factual allegations requiring a response, Defendants deny that the Code s distinctions between producers of different types of alcoholic beverages and holders of different types of producer permits harm Texas residents and visitors not to mention the Texas economy by impeding if not totally precluding, their right to choose where they can buy certain alcoholic beverages for home or off-premises consumption. 5

6 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 6 of 23 PARTIES 5. Defendants admit the allegations in paragraph With regard to the first sentence of paragraph 6, Defendants admit that, pursuant to Section 5.01 of the Code, the Texas Alcoholic Beverage Commission is an agency of the State of Texas. With regard to the second sentence of paragraph 6, Defendants admit that the Commission is located at 5806 Mesa Drive, Austin, Texas To the extent that paragraph 6 purports to contain any other factual allegations requiring a response, Defendants lack knowledge and information sufficient to form a belief about the truth of those allegations and, on that basis, deny those allegations in their entirety. 7. Paragraph 7 contains statements characterizing the effect of applicable law to which no response is required. With respect to the first sentence of paragraph 7, Defendants admit that José Cuevas, Jr. ( Cuevas ) is the Presiding Officer of the TABC; Defendants deny, however, that he is charged with and empowered under Texas law with the day-to-day management... of the TABC and its functions. Defendants admit the allegation contained in the second sentence of paragraph 7. Defendants admit that TABC accepted service on Chairman Cuevas at its headquarters. 8. Defendants admit the allegations in the first two sentences of paragraph 8. Defendants admit that TABC accepted service on Commissioners Weinberg and Steen at its headquarters. 9. Defendants admit the allegation in paragraph 9. JURISDICTION AND VENUE 10. Paragraph 10 contains argument and Plaintiff s characterizations of law to which no response is required. To the extent that paragraph 10 purports to contain any factual allegations 6

7 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 7 of 23 requiring a response, Defendants admit that, as a general matter, 28 U.S.C grants this Court jurisdiction to hear federal questions. Defendants further admit that 42 U.S.C provides as follows: Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State... subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law.... Defendants further admit that, as a general matter, 28 U.S.C. 1343(a)(3) grants this Court original jurisdiction to hear a civil action arising under 42 U.S.C Otherwise, Defendants deny that any violation of law has occurred or that Plaintiff has demonstrated subject matter jurisdiction in any other respect. 11. Paragraph 11 contains argument and Plaintiff s characterization of relevant law, to which no response is required. Defendants admit that TABC is an agency of the State of Texas and that its headquarters are located within the Western District of Texas. To the extent that paragraph 11 purports to contain any factual allegations requiring a response, Defendants admit, as a general matter, that 28 U.S.C. 1391(b) addresses the appropriate venue for cases over which this Court may have jurisdiction. Otherwise, Defendants deny that any violation of law has occurred or that Plaintiff has demonstrated that venue is proper in this Court in any other respect. FACTS 12. Defendants admit that, in general, the beer industry in the United States has changed in recent years; Defendants lack knowledge and information sufficient to form a belief about the truth of the statement, in the first sentence of paragraph 12, that the changes have been dramatic and, on that basis denies that allegation. Defendants lack knowledge and information sufficient to form a belief about the truth of the allegations in the second and third sentences of paragraph 12 7

8 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 8 of 23 and, on that basis, deny those allegations in their entirety. In particular, neither the Code nor TABC s rules contain a definition of the term craft beer. 13. Defendants lack knowledge and information sufficient to form a belief about the truth of that portion of the first sentence of paragraph 13 alleging that craft beer has gained tremendous market share in other states and, on that basis, deny the allegation in its entirety. Defendants do admit that the number of those holding Manufacturer s Licenses and/or Brewer s Permits and that produce limited quantities of beer and ale is increasing. The second sentence of paragraph 13 contains conclusory statements and argument, to which no response is required. To the extent that this sentence purports to contain factual allegations requiring a response, Defendants deny that the Code s differentiation between producers of different alcoholic beverages and holders of different types of producer permits is improper or illogical. Defendants lack knowledge and information sufficient to for a belief about the truth of the factual allegations in the third sentence of paragraph 13 and, on that basis, deny them in their entirety. 14. Defendants lack knowledge and information sufficient to form a belief about the truth of the factual allegations in paragraph 14 and, on that basis, deny them in their entirety. 15. Defendants admit that Plaintiff Deep Ellum Brewing Company, LLC holds a brewer s permit and that it has its sole place of business in Dallas, Texas. To the extent that paragraph 15 purports to contain any additional factual allegations requiring a response, Defendants lack knowledge and information sufficient to form a belief about the truth of those allegations and, on that basis, deny them in their entirety. Texas Law s Differential Treatment of Craft Beer Brewers 16. Paragraph 16 contains argument and conclusory statements, to which no response is required. Defendants admit that Code section 1.04(15) defines beer as a malt beverage 8

9 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 9 of 23 containing one-half of one percent or more of alcohol by volume and not more than four percent of alcohol by weight, and section 1.04(12) defines ale or malt liquor as a malt beverage containing more than four percent of alcohol by weight. To the extent that the first sentence of paragraph 16 purports to contain factual allegations requiring a response, Defendants lack knowledge and information sufficient to form a belief about their truth and, on that basis, deny those allegations in their entirety. 17. The first sentence of paragraph 17 (up to the colon) contains conclusory statements and argument, to which no response is required. 1 To the extent that this sentence purports to contain factual allegations requiring a response, Defendants deny that the Code divides malt beverage producers into two categories; the Code actually creates Manufacturer s Licenses and Brewer s Permits, which may be held by members of the producer tier, and Brewpub Licenses, which can only be held by members of the retail tier. As to the second sentence in paragraph 17, Defendants admit that Code section allows holders of Manufacturer s Licenses to manufacture or brew beer and distribute and sell it in this state to the holders of general, local, and branch distributor s licenses and to qualified persons outside the state. Defendants further admit that Code section would not allow a manufacturer to conduct these activities without first acquiring a valid Manufacturer s License. As to the third sentence of paragraph 17, Defendants admit that Code section 62.01(a)(2) permits holders of Manufacturer s Licenses to dispense beer for consumption on the premises, and that Code section (b) limits the aggregate volume of that beer (and ale produced on the same premises by the holder of a Brewer s Permit) to 5,000 barrels annually. Defendants further admit that Plaintiff correctly cites to corresponding language 1 Because of the structure of paragraphs 17, 21, and 34, Defendants will treat each indented block of material marked with a leader dot as a separate sentence. 9

10 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 10 of 23 in the TABC Guide for Manufacturers, Wholesalers, Distributors & Retailers of Alcoholic Beverages in Texas, September 2013 (TABC Guide). Defendants admit the allegation in the third sentence of paragraph 17. As to the fourth sentence in paragraph 17, Defendants admit that Code section (a) and (b) allow holders of Brewer s Permits to dispense ale for responsible consumption on the premises and limits the aggregate volume of that ale (and beer produced on the same premises by the holder of a Manufacturer s License) to 5,000 barrels annually. Defendants further admit that Plaintiff correctly cites to corresponding language in the TABC Guide. As to the fifth sentence of paragraph 17, Defendants admit that Code section 12.01(4) allows the holder of a Brewer s Permit to dispense ale and malt liquor for consumption on the premises. Defendants admit the factual allegation in the sixth sentence of paragraph 17. As to the seventh sentence of paragraph 17, Defendants admit that Code section 74.01(a) allows a retailer who holds a Brewpub License located in a wet area to sell or offer without charge, on the premises of the brewpub, to ultimate consumers for consumption on or off those premises, malt liquor, ale, or beer produced by the holder... to the extent the sales or offers are allowed under the holder s other permits or licenses. As to the eighth sentence of paragraph 17, Defendants admit that holders of Brewpub Licenses may sell alcoholic beverages that they are otherwise licensed to sell and that are produced on the premises to ultimate consumers for off-premises consumption so long as those sales, coupled with the sales for on-premises consumption do not exceed the production limit in Code section (10,000 barrels for each licensed brewpub). Defendants further admit that holders of Manufacturer s Licenses and/or Brewer s Permits may not sell alcoholic beverages on their premises for off-premises consumption. 18. As to the first sentence of paragraph 18, Defendants admit that the combined effect of Code sections 1.04(12) and is to require members of the producing tier that produce ale 10

11 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 11 of 23 and malt liquor to have a Brewer s Permit and that the combined effect of Code sections 1.04(15) and is to require a member of the producing tier that produces beer to have a Manufacturer s License. Defendants cannot admit the first sentence of paragraph 18, however, because Code section 74.01(a) permits a member of the retail tier who holds a Brewpub License to manufacture, brew, bottle, can, package and label malt liquor, ale, and beer. Defendants admit the factual allegation in the second sentence of paragraph 18, and further admit that the referenced Guide and website descriptions so state. Defendants deny the factual allegations in the third sentence of paragraph 18. As of October 2, 2015, there were 97 active Brewer s Permits and 42 active Manufacturer s Licenses in the state. 19. As to the first sentence of paragraph 19, Defendants deny that the holder of a Brewer s Permit may also obtain a Brewpub License. Defendants admit that Code section 74.01(c) allows a member of the retail tier who holds a wine and beer retailer s permit, a mixed beverage permit, or a retail dealer s on-premise license to obtain a Brewpub License. Defendants further admit that Code section limits the total annual production of malt liquor, ale and beer by a holder of a brewpub license [to] 10,000 barrels for each licensed brewpub. Finally, as to the first sentence of paragraph 19, Defendants admit that the TABC Guide and its website descriptions accurately reflect the Content of these Code provisions. As to the second sentence, Defendants admit that holders of Brewpub Licenses are members of the retail tier and must hold one of the permits or license specified in Code section 74.01(c). Defendants further admit that members of the producer tier may not hold any of the permits specified in Code section 74.01(c) and that the TABC Guide correctly states that the holder of a Brewpub License must hold one of the permits identified in Code section 74.01(c). Defendants admit that Code section 74.01(d) prevents holders of a Brewpub License from holding or having any interest either directly or 11

12 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 12 of 23 indirectly, or through a subsidiary, affiliate, agent, employee, officer, director, or other person, in a manufacturer s or distributor s license or permit in the manufacturing or wholesaling levels of the alcoholic beverage industry regardless of the specific names given to permits or licenses in Title 3 of this code. Defendants deny the factual allegation in the fourth sentence of paragraph 19; as of October 2, 2015, there were 114 active Brewpub Licenses in the state. 20. Paragraph 20 contains conclusory statements, arguments and characterizations of existing law, to which no response is required. However, to the extent that the paragraph purports to contain factual allegations requiring a response, Defendants admit that the Code requires certain things of and imposes limits on the production of malt beverages by holders of Manufacturers, Brewers and Brewpubs. Defendants deny that Plaintiff is not challenging Texas three-tier system by its lawsuit. Two Types of Alcohol Beverage Producers 21. Defendants deny that the Code aligns producers of malt beverages in a category opposed to producers of wine and distilled spirits; the Code differentiates between producers of each type of alcoholic beverage. As to the factual allegations in the second sentence of paragraph 21, Defendants admit that the Code does not authorize the holder of a Manufacturer s License or a Brewer s Permit to sell alcoholic beverages on their premises to ultimate consumers for offpremises consumption. As to the factual allegations in the third sentence of paragraph 21, Defendants admit that Code section 16.01(a)(5) permits the holder of a Winery Permit to sell wine to ultimate consumers: (A) for consumption on the winery premises; or (B) in unbroken packages for off-premises consumption in an amount not to exceed 35,000 gallons annually. As to the factual allegations in the third sentence of paragraph 21, Defendants admit that Code sections 14.01(8) and permit the holder of a Distiller s and Rectifier s Permit in a wet area to sell 12

13 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 13 of 23 distilled spirits manufactured or rectified by the permit holder to ultimate consumers for consumption (a) on the permitted premises... in an amount not to exceed 3,000 gallons annually and (b) in unbroken packages containing not more than 750 milliliters of distilled spirits for offpremises consumption in an amount not to exceed 3,500 gallons annually, and with the further restriction that no more than two 750 milliliter bottles (or an equivalent volume) may be sold to the same consumer within 30 days. 22. Paragraph 22 contains conclusory statements and argument, to which no response is required. To the extent that paragraph 22 purports to contain factual allegations requiring a response, Defendants admit that Plaintiff has correctly quoted from an unsigned, unattributed document on the identified website, but deny the truth of the statements contained in the document. 23. Paragraph 23 contains conclusory statements and argument, to which no response is required. To the extent that paragraph 23 purports to contain factual allegations requiring a response, Defendants admit Deep Ellum Brewing, as the holder of a Brewer s Permit, may not sell the malt beverages it produces on its premises for off-premises consumption. Defendants further admit that the Code permits holders of Winery Permits and Distiller s and Rectifier s Permits to sell limited quantities of the alcoholic beverages they produce (or rectify) to ultimate consumers in unbroken packages for off-premises consumption. Defendants further admit that the Code authorizes holders of Brewpub Licenses, who are members of the retail tier, to sell limited quantities of the alcoholic beverages that they produce on their premises to ultimate consumers for off-premises consumption. Deep Ellum Brewing 24. Defendants admit that Deep Ellum Brewing is currently engaged in the business of brewing and selling ale and malt liquor. As to the second sentence of paragraph 24, Defendants 13

14 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 14 of 23 lack knowledge and information sufficient to form a belief about the truth of the factual allegations it contains and, on that basis, deny them in their entirety. Defendants admit that Plaintiff has sold at least 30 different kinds of ales and malt liquors since Defendants admit the factual allegation in the fourth sentence of paragraph Defendants admit the factual allegation in the first sentence of paragraph 25. Defendants lack knowledge and information sufficient to allow them to form a belief about the truth of the fact allegations in the second sentence of paragraph 25 and, on that basis, deny them in their entirety. As to the factual allegations in the third sentence of paragraph 25, Defendants admit that Plaintiff produced more than 11,000 barrels of beer in calendar year Defendants also admit that, for fiscal year 2014, only ten producers produced more ale than Plaintiff. 26. Defendants admit the factual allegation in the first sentence of paragraph 26. As to the factual allegations in the second sentence of paragraph 26, Defendants lack knowledge and information sufficient to form a belief about the truth of the allegation that Deep Ellum IPA and Dallas Blonde are two of Plaintiff s most popular brands and, on that basis, deny this allegation in its entirety. Defendants admit that, as the holder of a Brewer s Permit, Deep Ellum may not sell its products to consumers on its premises for off-premises consumption. As to the factual allegations in the third sentence of paragraph 26, Defendants lack knowledge and information sufficient to allow them to form a belief as to the truth of the hypothetical statement because the sentence contains no information about the volume of pre-existing sales of the hypothetical winery, distiller or brewpub. 27. Defendants lack knowledge and information sufficient to form a belief about the truth of the factual allegations in the first sentence of paragraph 27 and, on that basis, deny them in their entirety. The second sentence of paragraph 27 contains argument, to which no response is 14

15 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 15 of 23 required. To the extent that the second sentence of paragraph 27 purports to contain factual allegations requiring a response, Defendants admit that the Code does not authorize Plaintiff to sell its product to consumers on its premises for off-premises consumption; Defendants deny that this is impermissible differential treatment of Deep Ellum Brewing. As to the factual allegations in the third sentence of paragraph 27, Defendants lack knowledge and information sufficient to form a belief as to the truth of the allegations because the sentence provides no information about the volume of the pre-existing sales of the hypothetical brewpubs, wineries, and distilleries of their products for off-premises consumption. 28. Defendants lack knowledge and information sufficient to form a belief as to the truth of the factual allegations in the first sentence of paragraph 28 and, on that basis, deny them in their entirety. Defendants lack knowledge and information sufficient to form a belief as to the truth of the factual allegations in the second sentence of paragraph 28 and, on that basis deny them in their entirety. Defendants deny that Deep Ellum loses any sales because of the Code s provisions preventing it from selling its products on-premises for off-premises consumption because nothing prevents it from telling customers where they may purchase its products for offpremises consumption. 29. Paragraph 29 contains argument, conclusory statements and conjecture, to which no response is required. To the extent that paragraph 29 purports to contain factual allegations requiring a response, Defendants lack knowledge and information sufficient to form a belief about the truth of the allegations and, on that basis, deny them in their entirety. Defendants deny, however, that the Code s restrictions on holders of Brewer s Permits create an economic hardship to Deep Ellum Brewing. 15

16 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 16 of Paragraph 30 contains conclusory statements and argument, to which no response is required. To the extent that the first sentence of paragraph 30 purports to contain factual allegations requiring a response, Defendants admit that Code section 74.01(d) prohibits Plaintiff from acquiring a Brewpub License. Defendants also admit that Code section limits the holders of Brewpub Licenses (which are only issued to members of the retail tier) to manufacturing no more than 10,000 barrels annually for each licensed brewpub, and that the cited pages of the TABC Guide and TABC s website correctly reflect that limitation. To the extent that the second sentence of paragraph 30 purports to contain factual allegations requiring a response, Defendants admit that Plaintiff manufactured more than 10,000 barrels of its products in calendar year To the extent that the third sentence of paragraph 30 purports to contain factual allegations requiring a response, Defendants admit that the Code prevents Plaintiff from having a Brewer s Permit and a Brewpub License at the same time, and that the Code limits the holder of a Brewpub License to producing 10,000 barrels of its product annually for each licensed brewpub. Defendants lack knowledge and information sufficient to form a belief about the truth of the contentions that Plaintiff s production will be 12,500 barrels in calendar year 2015 or that Plaintiff s production is going to grow beyond that figure. To the extent that the fourth sentence of paragraph 30 purports to contain factual allegations requiring a response, Defendants deny: (a) that Defendants are trying to force Deep Ellum to severely curtail the amount of beer it sells and its profits ; (b) that Deep Ellum could acquire a Brewpub License by cutting back its sales; and (c) that a producer could avoid the current ban on on-site sales for off-premises consumption by seeking to acquire a Brewpub License. 31. Paragraph 31 contains conclusory statements and argument, to which no response is required. To the extent that the first sentence of paragraph 31 purports to contain factual 16

17 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 17 of 23 allegations requiring a response, Defendants admit that, if Deep Ellum were to obtain a Manufacturer s license, the Code would still not permit it to sell its products on-site for offpremises consumption. To the extent that the second sentence of paragraph 31 purports to contain factual allegations requiring a response, Defendants admit that the Code does not permit the holder of a Manufacturer s License to sell its products on-site for off-premises consumption. To the extent that the third sentence of paragraph 31 purports to contain factual allegations requiring a response, Defendants admit that the Code permits the holder of a Manufacturer s License to, among other things, manufacture or brew and sell beer and that the Code permits the holder of a Brewer s Permit to, among other things manufacture and sell ale and malt liquor. CAUSES OF ACTION Count I Equal Protection Violations 32. Defendants repeat and reaffirm their answers to each and every allegation contained in the paragraphs above and incorporate the same herein as if fully set forth. 33. Defendants admit that, in the first sentence of paragraph 33, Plaintiff has correctly stated the protection afforded by the Equal Protection Clause of the U.S. Constitution. The remaining sentences of paragraph 33 contain assertions of law and Plaintiff s characterizations of case law, to which no response is required. To the extent that Paragraph 33 purports to contain any factual allegations requiring a response, Defendants deny those allegations in their entirety. 34. The first sentence of paragraph 34 contains assertions of law, conclusory statements and argument, to which no response is required. To the extent that this sentence purports to contain factual allegations requiring a response, Defendants deny them in their entirety. To the extent that the second sentence of paragraph 34 purports to contain factual allegations requiring a response, Defendants admit that Code section 74.01(a)(2) permits the holder of a Brewpub License to sell 17

18 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 18 of 23 or offer without charge, on the premises of the brewpub, to ultimate consumers for consumption on or off the premises, malt liquor, ale, or beer produced by the holder, in or from a lawful container, to the extent the sales or offers are allowed under the holder s other permits or licenses. Defendants further admit, with respect to this sentence, that Code sections 12.01(4) and (a) do not permit the holder of a Brewer s Permit to sell the holder s products on the premises for offpremises consumption. To the extent that the third sentence of paragraph 34 purports to contain factual allegations requiring a response, Defendants admit that Code section 16.01(a)(5) permits the holder of Winery Permit in a wet area to sell wine to ultimate consumers: (A) for consumption on the winery premises; or (B) in unbroken packages for off-premises consumption in an amount not to exceed 35,000 gallons annually. Defendants further admit, with respect to this sentence, that Code sections 12.01(4) and (a) do not permit the holder of a Brewer s Permit to sell the holder s products on the premises for off-premises consumption. To the extent that the fourth sentence of paragraph 34 purports to contain factual allegations requiring a response, Defendants admit that Code sections 14.01(a)(8) and permit the holder of a Distiller s and Rectifier s Permit in a wet area to sell distilled (or rectified) spirits to ultimate consumers on its premises for consumption on the premises and may sell such spirits, in unbroken packages containing not more than 750 milliliters, for off-premises consumption in an amount not to exceed 3,500 gallons annually, and with the further restriction that no more than two 750 milliliter bottles (or an equivalent volume) may be sold to the same consumer within 30 days. Defendants further admit, with respect to this sentence, that Code sections 12.01(4) and (a) do not permit the holder of a Brewer s Permit to sell the holder s products on the premises for off-premises consumption. 18

19 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 19 of Paragraph 35 contains conclusory statements and argument, to which no response is required. To the extent that Paragraph 35 purports to contain factual statements requiring a response, Defendants deny those allegations in their entirety. 36. Paragraph 36 contains assertions of law, conclusory statements, and argument, to which no response is required. To the extent that paragraph 36 purports to contain factual statements requiring any additional response, Defendants deny those allegations in their entirety. 37. Paragraph 37 contains assertions of law, conclusory statements, and argument, to which no response is required. To the extent that paragraph 37 purports to contain factual statements requiring any additional response, Defendants deny those allegations in their entirety. 38. Paragraph 38 contains assertions of law, conclusory statements, and argument, to which no response is required. To the extent that paragraph 38 purports to contain factual statements requiring any additional response, Defendants deny those allegations in their entirety. 39. Paragraph 39 contains assertions of law, conclusory statements, and argument, to which no response is required. To the extent that paragraph 39 purports to contain factual statements requiring any additional response, Defendants deny those allegations in their entirety. 40. Defendants admit that Plaintiff requests all costs and reasonable attorneys fees in this lawsuit, but Defendants deny that Plaintiffs are entitled to any such costs or fees from this Court. Count II Substantive Due Process Violations 41. Defendants repeat and reaffirm their answers to each and every allegation contained in the paragraphs above and incorporate the same herein as if fully set forth. 42. Paragraph 42 contains assertions of law and Plaintiff s characterizations of the relevant case law, conclusory statements, and argument, to which no response is required. To the 19

20 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 20 of 23 extent that paragraph 42 purports to contain factual statements requiring any additional response, Defendants deny those allegations in their entirety. 43. Paragraph 43 contains assertions of law, conclusory statements, and argument, to which no response is required. To the extent that paragraph 43 purports to contain factual statements requiring any additional response, Defendants deny those allegations in their entirety. 44. Paragraph 44 contains assertions of law, conclusory statements, and argument, to which no response is required. To the extent that paragraph 44 purports to contain factual statements requiring any additional response, Defendants deny those allegations in their entirety. 45. Paragraph 45 contains assertions of law, conclusory statements, and argument, to which no response is required. To the extent that paragraph 45 purports to contain factual statements requiring any additional response, Defendants deny those allegations in their entirety. 46. Defendants admit that Plaintiff requests all costs and reasonable attorneys fees in this lawsuit, but Defendants deny that Plaintiffs are entitled to any such costs or fees from this Court. Count III Declaratory Judgment 47. Defendants repeat and reaffirm their answers to each and every allegation contained in the paragraphs above and incorporate the same herein as if fully set forth. 48. Paragraph 48 contains Plaintiff s recitation of the declaratory relief sought under the Declaratory Judgment Act and 42 U.S.C. 1983, to which no response is required. To the extent that paragraph 48 purports to contain any factual allegation requiring a response, Defendants deny those allegations in their entirety. 20

21 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 21 of Paragraph 49 contains Plaintiff s recitation of the injunctive relief it seeks, to which no response is required. To the extent that paragraph 49 purports to contain any factual allegation requiring a response, Defendants deny those allegations in their entirety. 50. Defendants admit that Plaintiff requests all costs and reasonable attorneys fees in this lawsuit, but Defendants deny that Plaintiffs are entitled to any such costs or fees from this Court. PRAYER FOR RELIEF Defendants admit that Plaintiff seeks the relief stated in Paragraphs A through F of the section entitled Prayer for Relief, but Defendants deny that Plaintiff is entitled to any relief from this Court. DEFENSES TO PLAINTIFF S ORIGINAL COMPLAINT 1. Defendants assert the defense of Eleventh Amendment immunity to all claims to which that defense applies. 2. Defendants assert the right to amend these affirmative defenses to assert additional affirmative defenses as they may become known to Defendants. PRAYER For the foregoing reasons, Defendants ask the Court to enter judgment that Plaintiff take nothing, dismiss Plaintiff s suit with prejudice, assess costs against Plaintiff, and award Defendants all other relief that the Court deems appropriate. Respectfully submitted, KEN PAXTON Attorney General of Texas CHARLES E. ROY First Assistant Attorney General 21

22 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 22 of 23 JAMES E. DAVIS Deputy Attorney General for Civil Litigation DAVID A. TALBOT, JR. Chief, Administrative Law Division /s/ Karen L. Watkins KAREN L. WATKINS Attorney-in-Charge State Bar No Telephone: (512) KIMBERLY FUCHS Assistant Attorney General Telephone: (512) OFFICE OF THE ATTORNEY GENERAL OF TEXAS Administrative Law Division P. O. Box Austin, Texas Facsimile: (512) COUNSEL FOR DEFENDANTS 22

23 Case 1:15-cv RP Document 13 Filed 10/07/15 Page 23 of 23 CERTIFICATE OF SERVICE I hereby certify that on this 7 th day of October, 2015, a true and complete copy of the foregoing Defendants Answer to Plaintiff s Original Complaint for Declaratory and Injunctive Relief has been served on the following via the Court s CM/ECF system, and/or by electronic mail: Kelly Stewart K. STEWART LAW, P.C. 100 Highland Park Village, Suite 200 Dallas, Texas Telephone: (972) kelly@kstewartlaw.com Jeffrey S. Levinger LEVINGER, PC 1445 Ross Avenue, Suite 2500 Dallas, Texas Telephone: (214) Facsimile: (214) jlevinger@levingerpc.com Christopher M. McNeill BLOCK & GARDEN, LLP 5949 Sherry Lane, Suite 900 Dallas, Texas Telephone: (214) Facsimile: (214) mcneill@bgvllp.com Counsel for Plaintiff Deep Ellum Brewing Company, LLC /s/ Karen L. Watkins KAREN L. WATKINS 23