Court rules in favor of alcohol company SA fighter TABC

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Friday’s court ruling could mean more than $10 million for Gabriel Investment Group Inc.

Gabriel Investment Group, or GIG, has sought a court ruling that would allow the company to sell its shares to a large public company. The TABC, which regulates the state’s liquor industry, opposed the request.

“GIG is obviously very pleased with the Supreme Court’s decision,” Russell Post, a Houston attorney representing the company, said in an email. He declined to comment further.

A TABC spokesman said he had no comment on the decision.

The state legislature in 1995 placed licensing restrictions on package stores, which sell hard liquor. As a result, public companies cannot hold or possess a license in the state. A public company is defined as any company that is listed on the stock exchange or has more than 35 owners.

Gabriel Investment Group is considered a public company because it has had more than 35 owners. The company, however, received an exemption from the public ban before it came into effect in 1995. It was only one of two companies that obtained the exemption.

GIG argues that the exemption would be transferred to any public company that purchases its shares. The TABC argued that the exemption applied only to the GIG itself.

The state high court sided with the company, saying that the shares of the two exempt companies might have been expected to change hands over the years.

The state “The Legislature has not included any limitations on the ownership of shares in exempt corporations,” the court said in its opinion.

The TABC opposed public corporations that own liquor stores, apparently fearing they would dominate the liquor trade in Texas.

“Had GIG’s unusual corporate structure relative to other licensees allowed it to grow to dominate the landscape, the legislature could have addressed concerns about exempt companies’ diffuse ownership or market dominance. The opposite appears to have happened,” the court added.

GIG, along with retailers Gabriel’s Liquor and Don’s & Ben’s Liquor, filed for Chapter 11 bankruptcy protection in 2019. The businesses had been operated by the politically connected Gabriel family for more than 70 years. Companies blamed competition from big-box liquor stores for their financial troubles.

The bankruptcy “does not demonstrate that public corporations have an inherently unfair advantage in the liquor retail business,” the Supreme Court said. “Of course, some public companies are better managed than others. Whether the law should further protect the Texas market for well-run public companies is a question for the legislature.

During the bankruptcy reorganization, GIG sued the TABC in an attempt to obtain approval from a bankruptcy judge to sell stock in the company to a non-exempt public company, such as Walmart.

In the summer of 2020, GIG, Gabriel’s Liquor and Don’s & Ben’s changed ownership as part of a reorganization plan. The bankrupt companies were consolidated into a single entity and then split into two.

Omega Capital Group, led by James Pfirrmann and Ron Heller, took over the operation of 32 local Gabriel’s and Don’s & Ben’s stores, along with associated licenses and permits. The transaction was valued between $6 million and $7 million.

GIG’s new owners—Blake-Wilder Companies of St. Petersburg, Fla., Omega, and longtime shareholders—received the assets and license for the Don’s & Ben’s store at 810 S. Gen. McMullen Drive. GIG also withheld the lawsuit against the TABC.

Bankruptcy court and federal court judges in San Antonio ruled against GIG in its lawsuit, leading the company to appeal to the 5th US Circuit Court of Appeals.

In January, the federal appeals court asked the Texas Supreme Court to take up two issues as part of the legal battle. This is a process known as certification of matters of law. “We are not the final arbiters of Texas law,” a three-judge appeals court panel said.

The Texas court was asked to answer whether a package store’s permits remain valid if the store sells some or all of its stock to a public company that does not benefit from the exemption.

The Texas court was also asked to determine whether a package store was validly accumulating additional package store permits under the Texas Alcoholic Beverage Code.

To both questions, the high court answered “yes”. Judge James D. Blacklock wrote the court’s opinion.

Presumably, the case will now return to the federal appeals court to adopt the Supreme Court’s findings.

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