Court rules in favor of S.A. liquor business fighting TABC

Friday’s court ruling could mean in excess of $10 million for Gabriel Investment Group Inc.

Gabriel Investment Group, or GIG, sought a court ruling that would allow the company to sell its stock to a major public corporation. 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 who represents the company, said in an email. He declined further comment.

A TABC spokesman said it had no comment on the ruling.

The state Legislature in 1995 imposed restrictions on permits for package stores, which sell hard liquor. As a result, public corporations may not hold or own a permit in the state. A public corporation is defined as any company that trades on a public stock exchange or has more than 35 owners.

Gabriel Investment Group is considered a public corporation because it has had more than 35 owners. The company received an exemption to the public ban before it took effect in 1995, however. It’s only one of two corporations granted the exemption.

GIG argues the exemption would transfer to any public corporation that buys its shares. The TABC has argued the exemption only attaches to GIG itself.

The state’s high court sided with the corporation, saying it would have been expected the shares of the two exempt companies would change hands over the years.

The state “Legislature did not include any limitation on ownership of shares in exempt corporations,” the court said in its opinion.

TABC has opposed public corporations owing liquor stores, apparently concerned they could dominate the booze business in Texas.

“If GIG’s unusual corporate structure relative to other permit holders had enabled it to grow to dominate the landscape, the Legislature could have responded to address concerns about the exempt corporations’ diffuse ownership or their market dominance. The opposite seems to have happened,” the court added.

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

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

While in bankruptcy reorganization, GIG sued the TABC in an effort to get a bankruptcy judge’s approval to sell company shares to a non-exempt public company, such as Walmart.

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

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

GIG’s new owners — Blake-Wilder Companies of St. Petersburg, Fla., Omega, and longtime shareholders — received the assets and permit of the Don’s & Ben’s store at 810 S. Gen. McMullen Drive. GIG also retained 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 U.S. Circuit Court of Appeals.

In January,the federal appeals court asked the Supreme Court of Texas to take up two questions in the legal battle. It’s a process known as certification of questions of law. “We are not the final arbiters of Texas law,” a panel of three appeals court judges said.

The Texas court was asked to answer whether a package store’s permits remain valid if the store sells any or all of its shares to a public corporation that does not qualify under the exemption.

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

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

Presumably, the case will now go back to the federal appeals court for it to adopt the Supreme Court’s findings.

[email protected]