16 Rev. Litig. 173

The Inevitability of the Brewpub: Legal Avenues for Expanding Distribution Capabilities

Justin M. Welch

In 1981, California legalized the production of beer and its retail sale in one location; an operation that most people know as a "brewpub." Prior to 1981, brewpubs were outlawed by statutes generally referred to as "tied-house" statutes. Over the next decade, all states legalized brewpubs in one form or another, and a billion dollar industry was born. However, each of the 50 states imposed limitations on various aspects of the brewpub's operations, such as the amount of beer that could be made, and where it could be sold. This article examines on a national scope, the history of "tied-house" legislation, state legislation legalizing brewpubs, and potential legal avenues for challenging the operational restrictions imposed by that legislation. Included as an appendix is a graph comparing the brewpub statutes of eight states.

 

   A man who doesn't care about the beer he drinks may as well not care about the bread he eats. Beer may have been man's staple diet before bread was invented, and these two staffs of life are as comparable as they are closely related. Each can offer an everyday experience or a rare pleasure.     Michael Jackson n1    I. Introduction For the better part of a century, the American beer palate has been lulled into submission by a brewing industry hell bent on producing gutless, watery concoctions identifiable as beer only by the label on the can. For the most part, American beer differs so slightly from brand to brand that label loyalty and price, as opposed to a distinctive taste, are a beer's only distinguishing characteristics. n2 American beer has for years been the butt of beer drinkers' jokes throughout the world. For example, a common European joke says, in reference to American beer, that we should "put it back in the horse." n3 However, recently the American palate, either through boredom or shame, is shifting from the Budweisers and Millers of the world to much smaller and less well known labels like Pecan Street, Sierra Nevada, Celis, and the Texas Brewing Company. This recent trend, which most industry analysts put at about twenty years old, represents a desire for more flavorful, unique beers. n4 And with store shelves stocking everything from raspberry to pepper beer, beer lovers certainly have a wide variety from which to choose. While the larger breweries still account for the majority of beer sold in the United States, this new breed of brewery captured two percent of the beer market in 1994. n5 These smaller breweries fall into one of three general categories: "microbreweries," "brewpubs," or "regional brewing companies." State statute, for the most part, creates the demarcation between the type of brewery, with the primary defining characteristic being annual barrel production limits. A microbrewery typically produces less than 15,000 barrels of beer annually, while a regional brewery brews between 15,000 and 500,000 barrels a year. n6     However, brewpubs are distinctly different from the other brewery categories in that they not only brew their product in one location, but serve it there as well. Brewpubs generally are laid out with their brewing kettles and equipment on display for their patrons. The customer has his choice of various beers, ordinarily ranging from a darker, stouter beer to a lighter brew for the less adventurous imbiber. In addition to beer, the brewpub commonly has a complete food menu. All these factors combine to produce a truly unique experience.     Although the concept of the brewpub may appear absolutely logical, much like baking bread and selling it in the bakery, brewpubs were effectively prohibited in the United States until 1983 when California became the first state to allow the vertical integration of beer production and retail distribution brewpubs. n7 Even more surprising, Texans were denied the brewpub experience until August of 1993 when Texas legislators finally capitulated to pro brewpub lobbyists and legalized brewpubs. n8     Brewpubs were prohibited by legislation of the various states generically referred to as "tied house" statutes. For public policy reasons to be explored later, these statutes prohibit common ownership of licenses in more than one of the three tiers of the alcohol industry: manufacturing, wholesale, and retail. n9 A brewpub violates tied house statutes by collapsing the manufacturing and retail tiers into one operation owned by a single entity, totally bypasssing the wholesale function.     Instead of abolishing tied house statutes, legislation legalizing brewpubs creates a narrow exception to them. Brewpub statutes allow for limited production of beer with varying and sometimes severe restrictions on where and to whom the beer can be sold. n10 Depending on the state statute, the brewpub is generally severely limited in its yearly barrel production. Owners are sometimes prevented from possessing interests in other brewpubs or other alcohol related endeavors. Some states even require a certain percentage of brewpub revenue be derived from food sales. However, the restriction that most frustrates brewpub owners is the prohibition on sales off the brewpub premises. This ban precludes sales to grocery stores, other bars, restaurants, and even to distributors.     Despite these types of restrictions, the brewpub has become a rapidly increasing force in the restaurant and entertainment industry. In 1990, less than fifty brewpubs commenced operation in the United States. n11 In 1995, 190 brewpubs opened, for a total of some 500 brewpubs nationwide with combined annual sales in excess of one billion dollars. n12 Brewpubs, traditionally operating as sole proprietorships and partnerships, have even expanded into the corporate world of public stock offerings. In 1994, Rock Bottom, Inc., a Colorado based brewpub chain, raised fifty million dollars in two stock offerings. n13 Mendocino Brewing Company of California followed suit with a 3.6 million dollar offering in 1995. n14 And finally, Portland Brewing Company of Portland, Oregon raised an estimated 1.7 million dollars as of September 1995. n15     Brewpub legalization was born from entrepreneurial inspiration and public demand for a new product. As a result, it seems inevitable that the creative and imaginative forces at work in the brewpub industry will soon test the boundaries of current brewpub legislation. The purpose of this Note is to investigate legal avenues for future challenges to brewpub legislation, and to inform the potential brewpubber of the legislative hurdles working against him.     In order to explore these avenues fully, this Note will review the background and policy considerations behind tied house legislation. It will explore the ability to appeal an alcoholic beverage commission ruling and the probability of success on appeal. It proposes a novel legal argument, based on constitutional equal protection grounds, for challenging brewpub distribution restrictions. And of course, it examines current brewpub legislation and anticipates areas of expansion where challenges to brewpub statutes will occur in the future.     The Note will use Texas legislation and caselaw as a basis for analysis. However, it will also examine the statutes and caselaw of other states to provide a basis for comparison and to give a feel for the trends and obstacles that brewpubs in the rest of the country face. This Texas emphasis is a product of two elements. First, Texas statutes and case law significantly resemble the statutes and case law of other states. Second, Texas is rapidly gaining recognition as a national leader in brewpub innovation. n16 The first brewpub in Texas was Waterloo Brewing Company, of Austin, Texas. n17 Since then, Texas has become one of the fastest growing markets in the nation. n18 In 1995, the Institute for Brewing Studies moved its National Microbrewers and Pubbrewers Conference and Trade Show from Boston, Massachusetts to Austin, Texas. n19 The move from Boston, a brewing industry cornerstone, surprised many in the industry. David Edgar, the Institute's associate director, said of the move, "The industry recognizes that Texas will play a big part in the future of craft brewing." Mr. Edgar further elaborated, "We want to go to the frontier of industry growth, and Austin appears to be the kernel of new craft brewing interest." n20    II. Texas Tied House Legislation As the primary roadblock to the establishment of brewpubs, tied house statutes prevent vertical integration under common ownership of the various tiers of the alcoholic beverage industry. Depending on the state, the statutes separate the alcohol industry into three or four tiers. For example, the Texas Alcoholic Beverage Code uses three tiers: "manufacturing," "wholesale" and "retail." n21 As will be seen in detail later, the Texas statute prohibits one entity from maintaining a common interest in a license of more than one tier of the industry. n22 Therefore, because brewpubs collapse the manufacturing and retail tiers into a single, integrated operation, brewpubs are prohibited by tied house statutes.     Tied house statutes have historically been a central tenet of American alcohol regulation. Although the rationale behind them is usually masked by flamboyant and idealistic rhetoric, the general premise originates from a distrust of domination of the alcohol industry by a few companies. Most public policy statements in favor of tied house statutes resemble the following excerpt from Neel v. Texas Liquor Control Board: n23    We need not dwell upon the evils of the "tied house." It is obvious that one result of such control could be the creation of a monopoly for certain brands of liquors as well as dictating prices. The importance of preventing such control is reflected by a report of the United States Department of Commerce in 1941 titled State Liquor Legislation wherein on page 20 it is stated, "The liquor control legislation enacted in the several states ... has uniformly attempted to prevent a recurrence of the evils that were prevalent before prohibition when the large liquor interests controlled, through vertical and horizontal integration, the productive and distributive channels of the industry." n24 More concisely, if one entity were able to control manufacturing, as well as the retail distribution of alcohol, price and quality could be adversely affected.     The American fear of monopolization may very well derive from our British roots. The British alcohol industry is the antithesis of the American industry. To illustrate, British breweries own or lease most of the British pubs. n25 In return for lower rents, "publicans," the rough equivalent of a franchisee, carry only one brewery's beer. n26 Pubs owned outright by the brewery are managed by an employee of the brewery. n27 Furthermore, British breweries offer significant discounts on beer accompanied by offers of low interest loans to cooperative "free traders" pubs not owned by brewers.     On the contrary, all American alcoholic beverage codes strictly prohibit this practice. n28 Through these industry practices and operating structures, British brewers can dictate the price and supply of their product. n29 Thus, breweries owning a large number of pubs can effectively exclude other manufacturers, which further increases the ability to control price. n30     The British brewing industry took a giant leap toward oligopolistic industry domination in 1996 with the merger of the "Big Six" breweries into only two. n31 Allied, Bass, Courage, Scottish & Newcastle, Watney and Whitbread have merged into Scottish Courage and Bass Tetley and control a combined seventy percent of beer production and supply. n32     Whatever the impetus for enacting them, American tied house statutes have done little to curb domination of the beer industry by a few, well heeled brewing behemoths. In 1994, sales from the ten largest American breweries accounted for 97.4% of the market. n33 As an even stronger indicator of the oligopolistic nature of the American industry, the largest three of those ten breweries, Anheuser Busch, Miller, and Coors, made up 80.3% of the market: a situation very analogous to British industry domination. n34     Ironically, tied house statutes have served to protect large manufacturers from competition from smaller producers such as brewpubs. Realizing the benefit of limiting competition, large manufacturers have, to a small degree, either lobbied to preserve tied house statutes in their present form, or opposed enlarging the distribution capabilities of brewpubs under existing brewpub statutes. For example, Thomas Schlafly of the Saint Louis Brewery wanted to expand his brewpub's production past the 2,500 barrels allowed by Missouri statute. n35 While urging the Missouri legislature to raise the limit to 60,000 barrels, Schlafly met with opposition from an Anheuser Busch lobbyist who said Schlafly "was seeking to make an inordinate amount of beer." n36 Ironically, Anheuser Busch sold 88.5 million barrels of beer in 1994. n37 Schlafly and Anheuser Busch allegedly reached a compromise of 17,500 barrels. n38 However, in the final legislation, the limit was only raised to 10,000 barrels. n39 Schlafly attributes the difference to what he believes to be lobbying by Anheuser Busch after they had agreed on 17,500 barrels. n40 Although opposition to brewpubs by the large manufacturers has been limited to date, it is foreseeable that as brewpubs and microbreweries continue to capture a larger share of the market, future confrontations will become more vigorous. For example, in 1996, Anheuser Busch instituted a marketing philosophy, entitled "100 percent share of mind," that suggests to beer distributors that they exclusively carry Anheuser Busch products. n41 A local brewpub in Kansas City, the Flying Monkey, claims that its sales were temporarily suspended when its distributor cut them off in favor of the new policy. n42 Anheuser Busch claims that it did not bully distributors into complying with the company policy. n43 However, Richard Rossman, owner of Crawford Sales Company Flying Monkey's former distributor faced pressure to adopt the "100 percent share of mind" policy. n44 The amount of pressure is not hard to imagine, considering that Busch, whose products constitute forty seven percent of the market, could withhold supply due to noncompliance.     Most of the opposition to brewpubs in Texas has come from wholesalers and distributors. George Mitchell, chairman of Mitchell Energy & Development Company and an active lobbyist in the legalization of brewpubs, commented on the intensity of the opposition, saying, "The distributors really killed us. They are very powerful, and they beat your head in." n45 Distributors and wholesalers fear the idea that a manufacturer, the brewpub, will be able to bypass them and sell directly to the consumer; this would diminish the percentage cut that wholesalers exact from the retailer on resale.     The Texas Alcoholic Beverage Code makes a clear statement supporting the separation of the three tiers of the alcohol industry:    It is ... the public policy of this state and a purpose of this section to maintain and enforce the three tier system (strict separation between the manufacturing, wholesaling, and retailing levels of the industry) and thereby to prevent the creation or maintenance of a "tied house"... n46 The Code then defines "tied house" as "any overlapping ownership or other prohibited relationship between those engaged in the alcoholic beverage industry at different levels." n47     Section 102.01 of the Code serves as a catch all for any conceivable combination of interests between the different levels of the industry that could possibly create a tied house. For instance, Section 102.01(c) prohibits any person having an "interest" in a permit of one level from having an "ownership interest" in the permit of a "different level." n48 The definition of "ownership interest" is sweeping and includes ownership in the business, the corporate stock, or other "similar interest," held "directly or indirectly" in a permitee of a different level. n49 This all encompassing language requires a business acquiring a permit to closely scrutinize affiliated business interests to determine if a permit held by one affiliate could interfere with the acquisition of the permit sought. To demonstrate, in August A. Busch & Co., v. Texas Alcoholic Beverage Commission, August A. Busch & Co. was denied a distributor's license based on the fact that it was a wholly owned subsidiary of Anheuser Busch, Inc., which holds a Texas manufacturer's permit. n50     Although Section 102.01 of the Code focuses primarily on financial interests, it also concerns itself with other possible relationships. For example, Section 102.01(d) prohibits employment situations in which one person serves as the "officer, director, or employee" of permittees at different levels. n51 As a result, the possibility exists that a member of the board of directors of Brinker International Inc., the owner of restaurants such as Chili 's and Macaroni Bar & Grill, would also be prohibited from being on the board of a small brewery. n52 It is possible to conjure up even more obscure, prohibited employment relationships. However, it suffices to say that there are a myriad of reasons the Texas Alcoholic Beverage Commission could use to deny the issuance of or revoke a permit based on the permit and license holdings of an affiliated entity.     The additions of Sections 102.02 through 102.19 indicate that the drafters of the Texas Alcoholic Beverage Code must have felt that Section 102.01 of the Code was not as all encompassing as it should be. These sections regulate or prohibit everything from how many product samples a wholesaler can provide to a retailer to whether a winery can give away free bottles of wine. n53 In an inclusive but not exhaustive list, these provisions serve to expressly prohibit specific relationships and activities that could possibly create undue influence of one level of the industry over another level. n54 As an additional reinforcement to Section 102.01, it is interesting to note that other chapters of the Code, unrelated to Chapter 102, have very detailed prohibitions embedded within the individual sections. For example, the section of the Code providing for a "package store" permit elucidates, in detail, the interests that the permit holder is not allowed to be associated with. n55 The significance of this redundancy should put the potential permittee on notice that if he feels that his situation escapes the prohibitions found in Chapter 102 of the Code, he can be assured that some other provision will enjoin his activity. In fact, the usual practice in tied house violation cases is to cite Section 102.01 as the violated section, and then to supplement it with a corresponding section detailing the specific violative relationship or action. n56     The most significant of the Chapter 102 provisions to the Texas brewpubber is Section 102.07. n57 Entitled "Prohibited Dealings with Retailer or Consumer, " this section prohibits anyone with "an interest in the business of a distiller, brewer, [or] rectifier ... [from owning or having] a direct or indirect interest in the business ... of a retailer." n58 Consequently, if Section 102.01 had not done so already, this section definitively prohibits the operation of a brewpub.    III. Tied House Legislation of Other States Although sometimes not expressly titled as such, all states have tied house provisions in one form or another. n59 All states have as their primary goal the prevention of the so called "tied house evils" by prohibiting the integration of the various tiers of the industry. n60 Variations across state statutes result mainly from differing views of the structure of the industry as well as the types of activities that are admissible among the tiers.     For example, while Texas tied house statutes prohibit common ownership between any of the three tiers, n61 Florida prohibits only ownership by a manufacturer or distributor of a retailer and does not prohibit relationships between manufacturer and distributor. n62 Florida courts affirmed this statutory interpretation in Mayhue's Super Liquor Store, Inc. v. Meiklejohn, n63 concluding that the basic purpose of the tied house provisions was to "divorce manufacturing distributing activities of the liquor business from that of retailers, in the light of years of experience in many of the evils and problems of this traffic." n64 The court explained the rationale behind the prohibition: "The size and economic resources of manufacturers distributors in contrast to that of retailers entitled the legislature ... to conclude that the real, actual independence of retailers would be jeopardized." n65 Therefore, those Florida statutes differ from the norm of strict three tier separation only slightly and have, as their goal, the prevention of a domination of the industry by large economic interests.     It is interesting to note that although Michigan has a statutorily mandated three tier system, n66 Michigan courts have found cause to refer to the industry as having four tiers. n67 Maintaining the typical three tiers, the Michigan court interjects the fourth tier of "warehouses" in between "manufacturers" and "wholesalers." n68 A strict reading of some of Michigan's tied house statutes shows the discrepancy between the statutory three tiers and the court created four tiers. These statutory provisions describe prohibited transactions between "a manufacturer, ... warehouseman, wholesaler, ... or vendor of spirits," thereby creating the illusion of four tiers. n69 The discrepancy is inconsequential, however, as far as the goal of the tied house statutes is concerned. For practical purposes, the "wholesale" function includes "warehouses."     Georgia's policy declaration toward brewpubs provides an effective summary of the general thrust of tied house legislation throughout the country. The policy incorporates a clear and definitive statement of legislative intent concerning the tied house three tier system and its relation to the legalization of brewpubs, stating:    The General Assembly reaffirms the policy of this state of strict enforcement of laws and regulations applicable to the manufacture or sale of beer, including without limitation those establishing the three tier distribution system with prohibitions against ownership and employment interests between the three tiers but creates a limited exception for the operation of "brewpubs" ... n70     Stated succinctly, the brewpub is a "limited exception" to tied house statutes and any expansion of the capacities or capabilities of the brewpub moves the state closer to the alleged evils of the tied house.    IV. Brewpubs Legalized in Texas In August 1993, Texas became the forty second state to legalize brewpubs. n71 Faced with a "sunset review" of the Texas Alcoholic Beverage Code, the Texas legislature decided to compromise with pro brewpub lobbyists and make a minor exception to the strict three tier structure required by the Texas Alcoholic Beverage Commission and its Code. n72 As the term "sunset" implies, the alternative to compromise would have been an outright attack on other pro distributor statutes. n73 In other words, legislators, with the prompting of the distributor lobby, found it much more beneficial to allow a limited intrusion into the territory of the distributor than to have that territory eliminated by a challenge to all pro distributor legislation.     Relative to the complexity of other licenses in the Alcoholic Beverage Code, the new brewpub license is fairly simplistic. A brewpub may manufacture, brew, and otherwise package "malt liquor, ale, or beer" for sale and consumption on the premises. n74 In addition to beer, the brewpub may, as most brewpubs do, sell food. n75 Like most states, Texas limits brewpubs as to the number of barrels they may produce: n76 not to exceed 5,000 annually. n77 Continually surfacing as a point of contention, the upper limit generally appears as a concession made to distributors during negotiations prior to passage of the brewpub bill. n78     In addition to the brewpub permit, the holder must have either a "wine and beer retailer's permit," a "mixed beverage permit," or a "retail dealer's on premise license." n79 All three permits allow the sale of beer, while the second allows the sale of wine, and the third allows wine and liquor sales. n80 All three have fairly nominal annual fees, n81 with the exception of the mixed beverage permit, which has an initial fee of $ 3,000 with gradually decreasing fees for each successive year and eventually fixed at a low of $ 750.00. n82 Generally, the additional permit requirements are innocuous, except for the general annoyance of having to obtain them.     As would be expected, the brewpub statute provides for its own tied house provisions. The statute designates the brewpub as a ""retailer' for the purposes of Section 102.01 of [the] Code." n83 Then, with language almost identical to Section 102.01(c), the Code prohibits the standard array of affiliated interests with a permit holder of the manufacturing or wholesale levels of the industry. n84     One aspect of the statute which has caused significant aggravation to brewpub owners is the prohibition of the sale of beer off the premises. Simply put, the statute prohibits a brewpub from marketing its product for resale at another location. n85 This restriction effectively forecloses sales of brewpub beer by grocery and package stores, restaurants, or any other location away from the brewery. For example, George Mitchell, mentioned earlier as a pro brewpub lobbyist, had planned to turn one of his seven Galveston restaurants into a brewpub and distribute its beer to the other six. n86 The statute prevents him from doing so. Not surprisingly, the prohibition was the product of successful lobbying by wholesalers who saw the resale capability of brewpubs as an avenue to bypass their services. n87     Despite the limitations, one aspect of the statute has satisfied brewpubbers. The holder of a brewpub permit can own and operate more than one brewpub. n88 The permittee is required to obtain and pay for a permit for each location, but may open as many brewpubs as economically feasible. n89 For example, Rock Bottom Restaurants, Inc., of Boulder, Colorado, operates several brewpubs nationwide with multiple locations in Texas. n90    V. Comparison to Brewpub Statutes of Other States With the exception of Montana and Mississippi, where brewpubs are still illegal, every state has its own brewpub legislation that addresses the same issues and restrictions as the Texas legislation. n91 Because this Note anticipates areas of future challenges to brewpub statutes, it is helpful to compare less restrictive with more restrictive legislation where pro brewpub lobbying has overcome distributor lobbying.     An example of a very lax brewpub statute can be found in Colorado where brewpubs may also distribute their beer directly to retailers for resale (e.g., sale in a grocery store or other bars). n92 This is contrary to the Texas statute which, as discussed above and to the consternation of many brewpubbers, prohibits the sale of the brewery's beer off the brewpub's premises. The benefit of selling beer off the premises stems from the ability to eliminate the added costs associated with the wholesale tier of the industry.     The Colorado legislation is currently under fire from Colorado beer distributors for the same reasons discussed previously; distributors are afraid of having their proverbial rice bowls snatched out from under them. A bill introduced by the Colorado Beer Distributors Association would restrict brewpubs from distributing their own beer for resale. n93 The bill would also restrict annual production to 1,130 barrels. n94 Since most of the larger brewpubs in Colorado produce two to three times that much, it is easy to see why the proposed legislation has brewpub owners fuming. n95     The current dispute in Colorado is important for two reasons. First, it shows how profitable and desirable the ability to distribute off the premises is to a brewpub. Therefore, it is a good indicator of where brewpubs in states like Texas will try to challenge their respective legislatures next. Their ability to do so will be examined later. Second, it is an example of how intense the opposition of the distributor lobby to brewpubs can be. Due to the unrestrictive Colorado statute, brewpubs in Colorado have captured a significant niche of the beer market, and this has distributors nervous. Judy Henning, president of the Colorado Beer Distributors Association, says brewpubs in Colorado are growing to the size where they "just have to make a decision which path they want to go." n96 The "path" to which she wants brewpubs to go is back to the three tier system that preserves the distributors' position in the brewing industry. n97 As other states' craft brewing industries begin to expand, they can expect similar reactions from manufacturers and distributors.     Maine is another example of a state with liberal brewpub legislation. Brewpubs, called "small breweries" by the statute, are permitted to produce up to 50,000 barrels a year. n98 As the Appendix indicates, this level of production far exceeds the typical maximum barrel production found in most states. In addition to high barrel limits, the Maine statute allows beer sales to patrons for consumption off the premises. n99 In other words, a customer, having just tasted a freshly brewed beer, can decide to take home a six pack. If for no other reason, this provides valuable capability for increasing the bottom line through increased sales. For example, in Connecticut, where sales for off premises consumption are illegal, n100 Phil Hopkins of the Hartford Brewery has joined a movement led by Connecticut House Speaker Tom Ritter to legalize off premises consumption. n101 Hopkins explained his support for the bill as two fold: it encourages drinking at home, and it increases his sales. n102 However, the most valuable aspect of Maine's brewpub statute is the same as Colorado's: the ability to sell directly to retailers for resale to ultimate consumers. n103 This right to sell beer off the premises will repeatedly arise as a contested issue and is the central focus of a novel constitutional equal protection argument presented later in the Note.     Both Maine's and Colorado's brewpub statutes exactly resemble what most brewpubbers in other states would like to see a move toward: high annual barrel limits, the ability to sell directly to consumers for off premises consumption, and the ability to sell directly to retailers for resale. Texas exemplifies this desire for change. Currently in Texas, brewers producing under 75,000 barrels, often referred to as "microbreweries," are allowed to sell directly to retailers. n104 However, they are not permitted to sell directly to consumers on the premises. n105 A package of legislation filed in Texas in early 1995 by Rep. Glenn Maxey attempted to move Texas brewpubs and microbreweries that much closer toward their goal. n106 The legislation would have allowed brewpubs to have distribution privileges similar to those of microbreweries. n107 In turn, microbreweries would gain the right to sell directly to the consumer on the premises, much like brewpubs. n108     Despite much anticipation, the bulk of Maxey's legislation apparently did not survive the legislative process. n109 The only amendment made to the Texas brewpub statute in 1995 concerned the ability to offer beer free off the premises of the brewery. n110 As a result of the legislation, brewpubs may now dispense beer without charge, at a "tasting, competition, or review." n111     With one of the more restrictive brewpub statutes, Michigan provides an excellent comparative basis for anticipating areas of future expansion (an example of what brewpubs are trying to get away from). For example, Michigan restricts ownership or other direct or indirect interests to only one brewpub. n112 As seen previously, Texas allows for ownership of multiple brewpubs. n113 The consequences to the Michigan brewpubber of being able to open only one brewpub can cause, at the very least, frustration and, at the most, a restraint of trade. The reasoning behind the restriction originated with the historical fear of the tied house, as discussed previously. Legislators felt, no doubt with some encouragement from distributor lobbies, that multiple ownership could create entities large enough to have a monopolistic influence on the industry.     As a more peculiar restriction, Michigan requires that twenty five percent of gross sales be from "food and nonalcoholic beverages prepared for consumption on the premises." n114 In contrast, many states have no food preparation requirement and allow brewpubs to sell only alcoholic beverages. n115 The rationale behind the food requirement is to prevent casual entrants into the brewpub business, by increasing startup costs associated with food preparation. Due to the initial cost of acquiring the brewing equipment, the justification of such a fear is debatable. More than likely, the requirement is a barrier to entry promulgated by distributors to protect their distributorships from competition. Finally, Michigan has one of the lowest production limits of any state: 2,000 barrels per year. n116 This restriction is, when compared with other states' limits, obviously fertile ground for future challenge. n117    VI. Future Challenges to Brewpub Statutes Future challenges to brewpub statutes will focus on gaining capabilities in the following areas: 1) sales directly to customers on the brewpub premises for consumption off the premises ("take home" sales); 2) sales directly to retailers off the premises for resale (sales to package and grocery stores, and other bars for sale to customers); 3) removal of barriers to ownership; and 4) increases in annual barrel production limits.     In Nebraska, even though fifty percent of a brewpub's annual production can be sold on the premises for off premises consumption, n118 the brewpub cannot sell directly to a retailer for resale. n119 This same prohibition can be found in several states, including Texas. n120 Distributors and wholesalers who do not want to see sales lost to brewpubs selling directly to the retailer support such a restriction. n121 Mac Hull of the Gottberg Brewpub in Columbus, Nebraska, planned to open a brewpub in late 1995 producing 5,000 barrels annually, nearly five times the normal Nebraska brewpub output. n122 The high output is in anticipation of legislation allowing the sale of beer off the premises directly to retailers for resale. n123 However, as of the date of this Note, such legislation has yet to be passed. n124     Ben Edwards, owner of the Traffic Jam & Snug in Detroit, expressed similar frustration with Michigan's laws which also prevent sale for resale off premises. n125 Edwards blamed the slow growth of the brewpub industry in Michigan on "flawed" legislation that favors distributors and wholesalers: "Everything must be consumed on the premises [the distributors and wholesalers] did away with any possibility that they could lose any sales ...." n126     George Mitchell has also encountered problems with the prohibition against selling beer off the premises. n127 In anticipation of brewpub legalization, Mitchell planned to convert one of the seven restaurants he owns in Galveston, Texas into a brewpub and distribute its beer to the other six. n128 However, sale of the brewpub's product off the premises of the actual brewery is prohibited by the Texas brewpub statute. n129     Ownership restrictions can be classified either as 1) restrictions on the number of brewpubs that can be owned by a single person or entity; or as 2) restrictions on the interests a brewpub owner may have in other alcohol related establishments. The first type of restriction limits the interest that one brewpub can have in another brewpub. For example, Michigan's statute limits brewpub ownership to an interest in only one brewpub. n130 The second type of ownership restriction limits the interest that a brewpub can have in another tier of the industry and is usually a product of a state's existing tied house statutes. For instance, Allan Dray, owner of Texas Brewing Co. of Dallas, is prohibited from owning a brewpub. n131 This is because Texas Brewing Co. is a "microbrewery," n132 which Texas law considers to be a "manufacturer," n133 while a brewpub is desig nated as a "retailer." n134 Dray anticipated opening brewpubs throughout Texas. n135     Barrel restrictions are primarily a function of the ability of the brewpub to sell beer for consumption off the brewpub premises. A brewpub that can only sell on the premises generally does not have the demand to exceed barrel limitations; accordingly, the limit is not an issue. However, barrel limitations become critical when a brewpub is permitted either to sell its beer for resale off the premises or to sell it on the premises for off premises consumption. This relation becomes evident when comparing the states with high barrel limits to states with low limits. For example, California n136 and Illinois n137 both have unlimited annual production and both allow for resale off the premises as well as for sale on the premises for off premises consumption. n138 On the other hand, a state like Texas has a low annual barrel limit n139 and does not permit sale for resale n140 or sale on the premises for off premises consumption. n141 Therefore, it is reasonable to expect that a challenge to annual barrel restrictions will not occur without a concurrent or prior challenge to the brewpub's distribution capabilities.    VII. Challenging a Ruling of the Texas Alcoholic Beverage Commission Through Appeal This section examines both the appealability and the likely success of appeals of adverse decisions by the Texas Alcoholic Beverage Commission. A successful appeal against the Commission would significantly affect the current state of affairs by establishing a favorable precedent for expansion of brewpub operations. For example, if the courts found the statute prohibiting brewpubs from selling directly to retailers unconstitutional, the decision would effectively free brewpubs from the limitation. However intriguing this type of litigation might appear to the stymied brewpubber, it is only fair to warn the reader that the prognosis for a successful appeal is grim. As an administrative agency, the Commission has a stranglehold on the appeals process, effectively prohibiting a balanced approach to making a decision and substituting in its place the Commission's judgment as a rarely questioned and all empowering voice of authority. In fact, some might find that this Note is more successful at convincing the reader to hire a good lobbyist than at providing viable legal arguments for overturning legislation.    A. Organization and Powers of the Commission Texas law gives the Alcoholic Beverage Commission "all powers incidental, necessary, or convenient" to enforce the provisions of the Alcoholic Beverage Code. n142 The Commission is further empowered to "inspect, supervise, and regulate every phase of ... manufacturing, importing, exporting, transporting, storing, selling, ... and distributing alcoholic beverages ...." n143 Finally, the statutes give the Commission the power to establish rules "necessary" to carry out the provisions of the Code. n144     The Alcoholic Beverage Commission, originally named the Texas Liquor Control Board, changed its official name in 1970. n145 Three members appointed by the governor comprise the Commission. n146 These commissioners are imbued with the broad powers discussed above as well as those specifically named in other sections of the Code. n147     The power most relevant to the brewpubber is the Commission's ability to "grant, refuse, suspend, or cancel" the licenses and permits provided for in the Code. n148 This broad power allows the Commission great leverage in enforcing its will upon the alcohol industry. For example, in a Texas Attorney General opinion, the Commission was found to have erred when it permanently denied renewal of a license because of a single, minor offense by a permit holder. n149 However, the same opinion found that the Commission was entitled to deny reissuance of the license for twelve months. n150 In most cases, this type of temporary denial has the same effect as permanent denial, due to the fact that a licensee usually cannot sustain a twelve month cessation of business. For example, in Texas Liquor Control Board v. Falstaff Distributing Co., n151 Falstaff was cited for various violations of the Alcoholic Beverage Code, and the Commission suspended its distributor's license for forty five days. n152 At the suspension hearing, Falstaff plead as a defense that suspension of its license for any substantial period of time would result in revocation of the contract with the manufacturer for distribution of Falstaff beer; therefore, suspension of the license would be tantamount to cancellation. n153 The court disagreed and upheld the Commission's suspension. n154     Decisions like Falstaff allow the Commission to suspend a license, producing the same effect as a cancellation without the difficulty of obtaining the cancellation. As a result, permit and license holders adhere to a strict and narrow interpretation of Commission rules in order to prevent even the slightest hint of impropriety that could lead to suspension proceedings.     In addition to the regulation of permits, the Commission is given the right to investigate violations of the Code. n155 In the event that it finds a violation, the Commission has as many as six assistant attorneys general at its disposal to assist in the prosecution of violators. n156 The consequences of a violation are found scattered throughout the Code, but usually result in suspension or cancellation of the permittee's license or permit. n157    B. The Right to Appeal An appeal of an order by the Commission "refusing, canceling, or suspending a permit or license" may be filed with the district court of the county in which the applicant or permittee resides. n158 With its usual redundancy, the Code grants this right of appeal multiple times throughout the Code by reference to the same section (for later reference, this Code section is 11.67). n159 It should be noted that earlier cases generally held that the right of appeal did not exist in certain circumstances. n160 This was due to the fact that several sections of the original Alcoholic Beverage Code prohibited appeal. n161 However, these sections were repealed in 1977 due to conflicts with the Administrative Procedure and Texas Register Act [hereinafter APTRA], n162 which granted the right to appeal once a person "exhausted all administrative remedies available within the agency." n163     It should be noted that repeal of the Alcoholic Beverage Code sections which prevented appeal coincided with the enactment of APTRA. The timing may have led some to believe that APTRA itself provided a right of appeal from an administrative ruling. However, several cases since the 1977 repeal have refuted this argument, holding that the intent of the APA legislation was to provide a right of appeal only when appeal is provided for by the respective statutes of the administrative agency. n164 Therefore, it necessarily follows that where the Alcoholic Beverage Code does not specifically grant the right of appeal, that right does not exist. As a result, the redundant references granting the right of appeal in the Alcoholic Beverage Code may be necessary to preserve that right.    1. Application Process for a Permit or License. The process of applying for a permit or license to deal in alcoholic beverages varies depending on the type of license or permit applied for. However, an application for a license to "manufacture, distribute, or sell beer" (emphasis added) is governed by one set of provisions, which will be the focus of this section since the manufacture and sale of beer is the primary concern of this Note. n165     The Code establishes a two step process in applying for a license. First, the applicant files the necessary application with the county judge of the county in which he plans to operate. n166 The judge then determines whether any grounds exist for denial of the permit; if not, he enters an order approving the license. n167 Because brewpubs are designated as "retailers" for Code purposes, the sections providing mandatory and discretionary grounds for denial of licenses to retailers are of particular interest. n168 Among other things, the county judge must deny a license if "the place or manner in which the applicant for a retail dealer's license ... conducts his business warrants a refusal of a license based on the general welfare, health, peace, morals, safety, and sense of decency of the people." n169 This type of language gives the judge tremendous leeway in denying a license, and, as will be discussed later, the judge only needs cursory evidence to support the denial. n170     The review by the county judge is described in the case law as being administrative in character and is not governed by the balanced approach of a judicial proceeding. n171 This is due to the fact that the license is seen as a "mere privilege." n172 The significance of the designation relates to constitutional issues of whether the administrative powers of the Commission invade property rights or mere privileges. As an invasion of a privilege, Commission action against a licensee is granted much more leeway. n173 As a result, the applicant is not entitled to argue the validity of his application as in a trial or judicial hearing, but rather can be denied the license based on the judge's finding of any of the grounds provided in the Code. n174     The second step of the application process occurs after the county judge enters an order approving the application. n175 This order is submitted to the Commission for issuance of the final license. n176 However, the Commission may deny the license based on the same factors the county judge would apply. n177     The Code grants the applicant the right to appeal a license denial at either stage of the process, whether it be the ruling by the county judge or the Commissioner. n178 The right of appeal is found by reference to Section 11.67, and it is this section that governs the procedural aspects of the appeal. n179 The intricacies of the appeal process will be discussed after the following discussion of cancellation or suspension of a license by the Commission.    2. Cancellation or Suspension of a License. The Commission expressly grants itself the right to revoke or suspend a license if it finds that the holder has violated any provision of the Code. n180 Again, this right is premised on the theory that the permit or license is a privilege and not a property right. n181     The Code provides for a hearing to determine if there are adequate grounds for cancellation or suspension. n182 The hearing is mandatory if called by the Commission, mayor, chief of police, county judge, sheriff, or county attorney of the city or county in which the licensed premises are located. n183 At the hearing, the licensee has the opportunity to show cause as to why his license should not be canceled or suspended. n184     As with permit and license denials, the Code sets out grounds for suspension and cancellation of licenses and permits. n185 For example, the holder of a retail dealer's license may have his license suspended or canceled for any of at least thirty violations. n186 The list of offenses ranges from the all encompassing to the minutely specific and includes conditions which disrupt the "general welfare, health, peace, morals, safety, and sense of decency of the people" as well as a failure to provide running water on the premises. n187 Of more interest to the brewpub owner who is trying to expand operations is the fact that any violation of the Code can cause cancellation, including excessive yearly barrel production or sale directly to a retailer for resale. n188     Whether an aggrieved party has been refused a license or has had a license canceled or suspended, the right of appeal is the same. As mentioned previously, all provisions granting the right of appeal refer to Section 11.67 of the Code, which outlines the procedure of the appeal. n189 Appeals are taken to the district court and are subject to the "rules applicable to ordinary civil suits" with certain exceptions. n190 For instance, neither party is entitled to a jury. n191 However, the most significant aspect of the Section 11.67 appeal is the requirement that the reviewing court apply the substantial evidence rule when reviewing the case.    C. Appeal and the Substantial Evidence Rule When reviewing a decision of the Texas Alcoholic Beverage Commission, courts are required by the Code to apply the substantial evidence rule as the standard of review. n192 The substantial evidence rule, regardless of how one chooses to define it, creates an almost impregnable, protective barrier to a decision of the Commission. Consequently, reversals of Commission or county judge rulings are rare. n193     In determining whether substantial evidence supports the Commission's decision, the rule requires the reviewing court to uphold the decision if it finds that there is sufficient evidence "such that reasonable minds could have reached the conclusion that the agency must have reached in order to justify its action ...." n194 The trick comes in defining the quantity and quality of evidence that constitutes sufficient evidence. Quantity is usually described as more than a "mere scintilla" but less than a preponderance of the evidence. n195 Therefore, the evidence may preponderate against the Commission and yet still amount to substantial evidence and avoid reversal. n196 In a factual sufficiency examination of a normal civil court appellate review, by contrast, this low level of evidence would require the case to be reversed and remanded due to factual insufficiency.     Although establishing a range of what qualifies as sufficient is an elusive task, one aspect of the rule is well established in the case law: the reviewing court may not substitute its judgment for that of the Commission. On appeal, the Commission's findings are presumed to be supported by substantial evidence, and the burden of proving otherwise is on the complaining party. n197 Therefore, the true test is not whether the Commission reached the correct conclusion or the conclusion the reviewing court would have reached, but whether there exists in the record some reasonable basis substantial evidence for the action taken by the Commission. n198     What makes a Commission ruling so difficult to reverse on appeal and what distinguishes a substantial evidence review from a factual sufficiency review is the reviewing court's inability to reevaluate the Commission's findings of fact. The Commission is the primary factfinding body; therefore, the only question to be resolved by the reviewing court is whether the Commission's ruling was correct as a matter of law. n199 Since the resolution of factual conflicts is the province of the Commission, the reviewing court may not substitute its judgment. n200 Protecting the Commission's role in this regard is the primary goal of the substantial evidence rule. n201     Although the reviewing court may not second guess the decision of the Commission as to conflicting evidence, it does have the duty to pass on the credibility of witnesses used in establishing evidence on which the Commission relied. n202 Therefore, if evidence relied on by the Commission is found to lack credibility it is removed from the Commission's pool of substantial evidence supporting its decision. It follows that if the complaining party can discredit enough of the Commission's evidence as well as produce substantial evidence supporting its contrary position (i.e., evidence constituting more than a scintilla and less than a preponderance), then the reviewing court is required to reverse the Commission's ruling. n203     Although appeals from a Commission ruling are rarely fruitful, there are a few success stories. In Toot'n Totum Food Stores, Inc. v. Williams, n204 the appeals court, on appeal from a denial of an off premises wine permit and beer license, found that the district court simply failed to include in the record any evidence supporting the Commission's denial. As a result, the denied applicant only had to introduce more than a scintilla of evidence constituting substantial evidence in support of its position. The court found that some evidence did exist in favor of the applicant; therefore, the applicant had fulfilled its burden of showing that the Commission's decision was not based on substantial evidence. n205     However, without these types of blatant court errors, reversals of the county judge or Commission rulings are few and far between. This results from judicial deference to the Commission, encouraged by the substantial evidence rule and its lopsided treatment of an appellant. In addition to an unlevel legal playing field, the enterprising brewpubber who challenges the Alcoholic Beverage Code can anticipate the deleterious economic effects of either delays in receiving a license, lengthy closures, or both. In brief, change in the Texas brewpub statutes via the judicial process should be pursued only by the truly tenacious and economically well heeled.    VIII. Beverage Commissions and Appealability of Rulings in Other States For all intents and purposes, the alcohol regulating agencies of other states vary little from the Texas Alcoholic Beverage Commission. The main differences arise in the basic procedural mechanisms such as licensing, the appeals process, permit fees, and the personnel makeup of the respective agency. However, as a common element, the various state agencies generally have broad regulatory powers over licensing, transportation, sale, manufacture, and taxing of alcoholic beverages.     However, of primary importance to this Note is the similarity in review that a case receives on appeal from an adverse agency ruling. Not surprisingly, most other states mandate the substantial evidence standard of review.     California has dubbed its regulatory agency the Department of Alcoholic Beverage Control. n206 The Department, like the Texas Commission, is given the power to "deny or revoke any ... license" based on the stereotypical list of offenses such as bad moral character, threat to public welfare or morals, or just a plain violation of the Beverage Code. n207 Upon denial, suspension, or revocation, the aggrieved party may appeal to the Alcoholic Beverage Control Appeals Board which consists of three members. n208 This board provides an added level of appeal before judicial review is available, a deviation from the Texas format which allows judicial review directly from a Commission decision. n209 After the Appeals Board review, a party in California may then proceed to judicial review in the Superior and Appeals Courts. n210     The function of the Appeals Board and Superior and Appeals Court review is to determine if substantial evidence supports the Department's ruling. n211 Like Texas courts, California courts refuse to substitute their judgment for that of the Department's as to the weight and credibility of the evidence and are limited to determining whether the quantity of evidence qualifies as substantial evidence. n212 One interesting aspect in the California substantial evidence review that is absent in Texas is the notion that the review is conducted "in light of the whole record." n213 This would be favorable to an appellant in that it would allow the reviewing body to look at evidence favorable to the appellant and determine whether that evidence constitutes substantial evidence outweighing the evidence relied on by the Department. In practice, however, courts have interpreted "in light of the whole record" as a review of only that evidence favoring the prevailing party's case, the prevailing party generally being the Department. n214 This corresponds with the substantial evidence review of Texas as well as that of most of the other states. n215     Colorado vests regulatory authority in the Colorado Department of Revenue and grants it the standard licensing and license suspension and revocation powers. n216 In addition to state control, Colorado allows local control of licensing by a "local licensing authority." n217 Due to the fact that the local decision may involve a large number of factually intensive variables, n218 it is not surprising that most of the license dispute cases arise from the rulings of the local authority. n219 This practice of local approval is similar to the Texas practice of requiring license approval by a local county judge. n220     In the event of an adverse ruling at either the state or local level, the applicant may appeal for judicial review. n221 Deviating from the norm, Colorado courts tend to grant less leeway to their regulating agencies. n222 This rare grant of judicial discretion in review of administrative decisions appears to originate from a state statute which says that the court must determine if the action of the licensing authority was "arbitrary and without good cause." n223 When reviewing a case, Colorado courts espouse the usual catch phrases, demanding deference toward the decision of the regulatory agency. For example, "the licensing authorities are vested with a very wide discretion." n224 and    we are concerned only with the question of whether the decision of the licensing authority was supported by [substantial] evidence ... and not whether the trial court or we would have arrived at a different conclusion ... All reasonable doubts as to the correctness of the Board's rulings are to be resolved in favor of the Board. n225 However, claiming that the local authority acted without "good cause," courts frequently overturn decisions because they would have arrived at a different conclusion.     For example, in Southland Corp. v. City of Westminster City Council, n226 the court reversed a beer license denial, finding that the applicant's evidence in favor of issuance outweighed the city council's evidence in favor of license denial. n227 The facts of this case illustrate the extent of the court's leniency and lack of deference to the agency. n228 For instance, the council's evidence included the fact that there were five other beer outlets in the same neighborhood one within the same block. Furthermore, the court discounted the testimony of a director of a nearby vocational school, finding that it was too speculative to support denying the license. n229     Under a typical substantial evidence review in states such as Texas, this level of evidence would appear to overwhelmingly support the council's decision. n230 Moreover, as seen previously, the reviewing court would not have evaluated the evidence opposing the city council; the court would have considered only the evidence favoring its decision. n231 In effect, Colorado courts have adopted the substantial evidence review that evaluates the record as a whole even though not required by statute. This is in ironic contrast to California substantial evidence review, where review of the record as a whole is mandated by statute but not observed by the courts. n232 The consequences are seen in situations analogous to Southland Corp., where courts consider the evidence for both parties and determine if one side outweighs the other. n233    IX. Challenging Brewpub Restrictions on Constitutional Grounds The 1982 case of August A. Busch & Co. v. Texas Alcoholic Beverage Commission n234 laid the foundation for what may be a viable legal avenue for giving brewpubs the right to sell beer for resale off the premises. The brewpub's case would be a constitutional challenge centered around an equal protection argument. A constitutional challenge avoids the difficulties involved with a substantial evidence review by accepting the facts as found by the regulating agency and claiming that the particular law is unconstitutional.     The case involved the denial of a Texas distributor's license to August A. Busch & Co., based on the fact that it was a wholly owned subsidiary of Anheuser Busch, Inc., holder of a Texas manufacturer's license. n235 As seen previously, Texas tied house statutes prohibit commonly owned entities from holding licenses in more than one tier of the industry. n236 Granting the distributor's license would create common ownership of licenses at both the manufacturing and wholesale levels. August A. Busch & Co. claimed, among other things, that it was denied equal protection by provisions of the Alcoholic Beverage Code which allow smaller manufacturers to distribute their own beer while requiring larger ones, like Anheuser Busch, to distribute through a wholesaler. n237 The offending provisions allow a manufacturer whose annual production does not exceed 75,000 barrels to distribute its own beer directly to retailers. n238 Anheuser Busch's production exceeds this amount, and therefore, it must distribute through a wholesaler. n239     The court responded that a rational basis existed for distinguishing large and small manufacturers; therefore, it was not a violation of the constitutional right to equal protection. n240 The court reasoned that small manufacturers would not significantly affect the three tiered division of the industry envisioned by state tied house statutes. n241 Large manufacturers, on the other hand, could have significant influence over retailers if allowed to distribute to them directly, a situation that tied house statutes were designed to prevent. n242     A brewpub could successfully challenge the prohibition on selling its beer directly to retailers based on this line of reasoning. The court noted that a reasonable basis for discriminating against large manufacturers in favor of smaller ones exists based on the amount of influence each will exercise on retailers. Extending this argument, the brewpub might argue that no reasonable basis exists for also discriminating against an even less influential manufacturer, the brewpub. This is due to the fact that the brewpub produces even less beer than the small manufacturer. n243 In other words, if a small manufacturer is considered to have no significant influence over a retailer when producing 75,000 barrels, the brewpub must have even less influence when producing only 5,000 barrels. Therefore, there is no rational basis for prohibiting distribution by a brewpub, and it is a violation of equal protection to do so.     However, August A. Busch & Co. reemphasized one tenet of state liquor law which may defeat a constitutional challenge even in light of the naked logic of this argument. In further support of its denial of Busch's permit, the court stated that "states have wide latitude in regulating economic aspects of the alcoholic beverage industry without violation of the equal protection clause." n244 Thus, the court appears willing to give deference to regulators in cases where the court itself might have found an equal protection violation.    X. Conclusion To the author's knowledge, there are no cases of record challenging the brewpub statutes of any state. In fact, the only case that has dealt with the concept of the brewpub is Traffic Jam & Snug, Inc. v. Liquor Control Commission, n245 a Michigan case. At the time the case was decided, Michigan had not legalized brewpubs. n246 Traffic Jam & Snug was an attack on the state's tied house statutes in an effort to legalize brewpubs. n247 The Traffic Jam & Snug restaurant, which held a retail beer and liquor license, was a corporation solely owned by Ben Edwards. Edwards planned to create a wholly owned subsidiary of Traffic Jam & Snug, Inc. and to license it as a brewer that would sell its product to the parent restaurant. The ownership by the restaurant of the brewery was a clever attempt to bypass a Michigan tied house statute that prohibited a manufacturing license holder from having an interest in a retailer license holder. Edwards structured his parent subsidiary arrangement in the reverse. Since the retailer owned the manufacturer, instead of the other way around as expressly prohibited by statute, Edwards argued that his setup was legal. The court, however, did not feel bound by Edwards's strict reading of the statute and decided that allowing the arrangement would violate the legislative intent of the provision, which envisioned separation of the different levels of the industry. n248     Although a courageous effort on Edwards's part, the case is of little value to those looking for legal avenues for challenging brewpub statutes. This is a result of two factors: First, the case is moot due to Michigan's subsequent legalization of brewpubs; second, Edwards's argument is based on a syntactical loophole not present in most brewpub or tied house statutes.     Due to the lack of litigation involving brewpub statutes, this Note has had to speculate about the likelihood of a successful challenge to brewpub statutes based on litigation involving other provisions of the various state alcoholic beverage codes. Extrapolating the likelihood of success was based not on the particular facts of each case, but on the procedures and legal concepts that the court applied in reviewing the case on appeal. The result of this analysis provides a discouraging forecast for the viability of a brewpub's challenge to an adverse agency ruling.     This grim conclusion results primarily from the substantial evidence review that courts use when reviewing the decision of an agency. Courts are not allowed to substitute their judgment for that of the agency, but must only evaluate whether there exists the most scant of evidence upon which the agency could have based its decision. Moreover, in most states, the weight of the evidence in favor of the appealing party is not to be considered regardless of whether it outweighs the agency's evidence.     There is, however, a glimmer of hope in a challenge based on constitutional equal protection grounds. The Texas case of August A. Busch & Co. provides a tantalizing avenue for challenging state provisions that prohibit the sale of a brewpub's beer off the premises one of the more coveted rights for a brewpub to have. However, the equal protection argument outlined in this Note would be an extension of the arguments presented in August A. Busch & Co., and the probability of success is far from guaranteed. Moreover, any challenge, constitutional or otherwise, of state alcohol legislation, must overcome the courts' deference to the constitutional grant of wide latitude to the states in regulating the alcohol industry. However, it is my sincere hope that new challenges to the brewpub tied house statutes utilize the equal protection argument, or at the very least, include it as an alternative to any other arguments presented to the court.     Litigation, as with any field of the law, has significant and debilitating effects on the parties involved. Unfortunately, the only party enduring the deleterious economic consequences of litigation against an alcoholic beverage agency is the brewpubber. It does not cost the agency anything to deny a license and to withstand the ensuing litigation. It is the brewpub owner attempting to expand distribution capabilities who faces lost profits and idle capital with little hope of success against an agency that has the rules on its side.     However, for those of you who do not want to sacrifice your finances on the altar of good beer, you may find better odds with a lobbyist than with a lawyer. But beware of the wholesaler and the manufacturer, for they protect their turf tenaciously. More importantly, they can afford to expend a far greater amount of money on lobbying efforts than the brewpubs can. Make no mistake about it the age of the brewpub is here. In what can aptly be described as a labor of love, numerous people have expended great amounts of time and energy lobbying to take brewpubs where they are today. It is only a matter of time until that driving force is channeled into expanding the brewpub's capabilities into other more creative and traditional methods of distribution.    [SEE APPENDIX IN ORIGINAL]
           
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