Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—5th Cir.: Beverage distribution deal void for violating Texas alcohol code, (Aug 15, 2025)

By George Basharis, J.D.

The court found the deal’s “showcase” requirement unlawfully influenced alcohol purchases at the restaurant group’s locations.

The U.S. Court of Appeals for the Fifth Circuit has upheld the dismissal of contract, promissory estoppel, and tort claims brought by a beverage supplier against a national restaurant group, concluding that the alleged distribution agreement at the center of the dispute was illegal and unenforceable under the Texas Alcoholic Beverage Code (TABC). The panel determined that compliance with the arrangement would have required conduct prohibited by the state’s three-tier alcoholic beverage distribution system (Rokit Drinks, LLC v. Landry's Inc., No. 23-20506 (5th Cir. Aug. 8, 2025)).

Breakdown of alleged agreement. ROKiT Drinks, LLC supplies a range of products including spirits, beer, and energy drinks. Landry’s Inc., owned by Tilman Fertitta, operates over 600 restaurants nationwide and is affiliated with Fertitta Entertainment, which owns the Houston Rockets basketball franchise.

In 2018, while negotiating a sponsorship arrangement with the Rockets, the parties discussed a possible separate “Beverage Agreement” under which Landry’s would promote and sell ROKiT products in its restaurants. According to ROKiT, the agreement would “showcase” specific beverage lines, including Bogart Spirits, at Landry’s locations nationwide.

Although ROKiT entered into distribution contracts with some of Landry’s preferred distributors, no final written agreement between ROKiT and Landry’s was executed. ROKiT nonetheless alleged that emails, proposals, and related contracts collectively formed an enforceable agreement, with the distribution contracts supplying the price term. The quantity term, however, was undefined, and the agreement did not obligate Landry’s to purchase a specific amount of product.

By early 2019, ROKiT expressed dissatisfaction with sales levels, asserting that Landry’s had failed to meet expectations set during negotiations. ROKiT claimed sales reached only about $440,000 to a limited number of locations by January 2020 and alleged that in 2021 Landry’s ordered all locations to discontinue carrying ROKiT products.

District court ruling. ROKiT filed suit in May 2022 in the Southern District of Texas, alleging breach of contract, promissory estoppel, fraud by misrepresentation, fraud by non-disclosure, and tortious interference with contract. The claims centered on Landry’s alleged failure to perform under the Beverage Agreement.

The district court dismissed the complaint, finding it failed to plead necessary price and quantity terms for an enforceable contract, did not allege the existence of a signed written agreement as required by the statute of frauds, and that the tort and estoppel claims could not stand without a valid underlying agreement. While the district court acknowledged that the alleged Beverage Agreement might run afoul of the TABC, which prohibits alcoholic beverage manufacturers from entering into agreements that require or influence retailers to purchase specified volumes of alcohol, it determined that it was unnecessary to resolve that statutory question because the claims failed on other grounds.

Fifth Circuit’s analysis. On appeal, the Fifth Circuit affirmed on the alternative ground that the alleged Beverage Agreement was void under Texas law. The panel explained that illegality is an affirmative defense to a breach of contract claim and that Texas courts will not enforce an agreement requiring conduct prohibited by statute or public policy.

The court emphasized that Texas’s alcoholic beverage laws operate within a strict three-tier system separating manufacturers, wholesalers, and retailers, with only limited exceptions. Under the TABC, an alcoholic beverage manufacturer is prohibited from entering into any oral or written arrangement that either requires or influences a retailer to purchase a specific quantity of its products, regardless of whether the agreement sets an exact figure. The prohibition is designed to prevent vertical integration and undue influence over retail sales.

The panel found that ROKiT’s own pleadings described an arrangement that fell squarely within this statutory bar. The alleged requirement that Landry’s “showcase” ROKiT products was understood to mean that the products would be sold at all of Landry’s locations, an obligation that necessarily entailed purchases. Even if “showcase” were construed more narrowly to mean product placement or menu inclusion, the court determined that this still influenced purchasing decisions in violation of the TABC.

The court also rejected the argument that the lack of a definite quantity term insulated the arrangement from the statute, noting that the TABC captures agreements of any scope, including those without fixed purchase amounts. Because the arrangement could not be performed without contravening Texas law, the court concluded it was void and unenforceable, making it unnecessary to address the other grounds for dismissal.

Impact on related claims. Having determined that the Beverage Agreement was void for illegality, the Fifth Circuit held that this conclusion was equally fatal to ROKiT’s promissory estoppel and tort claims. Under longstanding Texas precedent, courts will not enforce any right that arises from or depends upon an illegal contract, regardless of how the claim is labeled. This principle prevents litigants from recharacterizing a barred contract claim as a tort or equitable theory to obtain indirectly what they cannot recover directly.

The panel observed that each of ROKiT’s remaining claims, including fraud by misrepresentation, fraud by non-disclosure, and tortious interference, was predicated on the promises or obligations set forth in the Beverage Agreement. For example, the fraud claims alleged that Landry’s made false statements about its intent to perform under the agreement, while the tortious interference claim asserted that Landry’s actions in connection with the agreement disrupted ROKiT’s relationship with a third party. Because proof of these claims would require reliance on the terms of an agreement the court deemed void, they could not proceed.

The court further explained that promissory estoppel, while sometimes available to enforce promises where formal contract elements are lacking, cannot be used to validate an arrangement prohibited by law. Likewise, fraud-by-non-disclosure was not viable because Texas law presumes that parties are aware of statutory prohibitions, and a failure to point out a legal restriction generally does not give rise to a duty to disclose.

The Case is No. 23-20506.

Judge: Per curiam.

Attorneys: Larry Klayman (Freedom Watch, Inc.) for Rokit Drinks, LLC. Michael Sammie Goldberg (Baker Botts, L.L.P.) for Landry's Inc.

Companies: Rokit Drinks, LLC; Landry's Inc.

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