Without Government Regulation, Who Would Hassle Liquor Retailers?

I grew up watching Perry Mason. Almost invariably, the person on the stand, with under five minutes to go in the show, was the one who was guilty and, again, almost invariably confessed while on the stand. It didn't take more than an 11-year old's brain to surmise that that's not how the vast majority of real-world courtroom dramas unfold.

When I was involved in a legal case as an expert once, one of the lawyers and I exchanged our stories about the closest thing we had ever seen to a Perry Mason moment in a real trial. I told her mine, which I had seen in the Bush v. Gore trial under Florida judge Sanders Sauls. (Except for bathroom breaks, I watched the thing from start to finish.) She told me hers, which occurred when she was a young assisting lawyer in a civil case. Her boss, who couldn't legally mention that the guy suing them had a prison record, figured out a way of getting the jurors to understand that the guy had, indeed, been in prison.

But neither of those cases comes close to this one (although mine comes closer than hers.) It was a case involving the Texas Alcohol Beverage Commission going after a large liquor retailer named Spec's.

Here's the setting, as told by Jay Root in "Texas liquor agency rebuked after investigation of Spec's," The Texas Tribune, June 30, 2017:

Leaders at the Texas Capitol love to bash what they call out-of-control bureaucrats at city halls and in Washington, D.C., but a recent case pitting the Texas Alcoholic Beverage Commission against Spec's Wines, Spirits & Finer Foods looks like state regulatory overreach on steroids.

After an investigation of the state's largest liquor retailer, the TABC sought to yank permits for all 164 of the company's stores – which would effectively shut it down – or hit Spec's with fines of up to $713 million, according to court documents filed last week. The agency also put the company's expansion plans on ice by freezing Spec's new permit applications during the three-year probe, records show.

The whole thing, which Root tells very well, is worth reading. Here's the close-to-Perry-Mason moment:

"She [Houston-based auditor Kathy Anderson] agreed that there was no evidence Spec's accepted the terms," the judges noted in tossing the allegation. "She also admitted that there was no documentary evidence that Spec's actually purchased any of the products."

Even more damaging to TABC was Anderson's claim that one of Spec's wholesalers, United Wine & Spirits, had "admitted" to violations that implicated Spec's in a scheme to skirt liquor laws designed to keep alcohol manufacturers, wholesalers and retailers all in separate lanes. The supposed proof: an agreed-to "waiver order" – basically an acceptance of punishment – that United Wine & Spirits signed. That order was cited like a King's X over and over in TABC's case against Spec's.

A long string of allegations relying on that document collapsed when [Spec's attorney] Van Huff asked Anderson if she had read the settlement agreement attached to the waiver order – which stated that United agreed to pay a fine to "resolve the contested allegations" but did not admit guilt. She said she was not aware of that stipulation.

This was the gotcha moment of the trial.

Van Huff asked Anderson: We now see that the TABC agreed ... that this wouldn't be construed as an admission by United, correct?

Anderson: Correct.

Van Huff: So each and every time you refer to the waiver order and say it was United Wines & Spirits' admission of wrongdoing that reflects poorly on Spec's, that was all incorrect, wasn't it?

Anderson: It appears so.

Van Huff: Thank you. We'll take that as a yes, right?

Anderson: Yes.

Reprinted from EconLog.