Illegality at First Sip:
Fifth Circuit Confirms That “Showcase” Supply-Retail Agreements Breaching TABC §102.16 Are Void and Unenforceable

1. Introduction

In ROKiT Drinks, L.L.C. v. Landry’s Inc. (5th Cir. Aug. 8 2025), the United States Court of Appeals for the Fifth Circuit confronted an increasingly common business model in the alcoholic-beverage industry: the brand-owner’s effort to pair high-visibility sports sponsorships with mandatory in-venue product placement. ROKiT, a beverage manufacturer and global marketer, claimed that Landry’s, a nationwide restaurant conglomerate associated with the Houston Rockets NBA franchise, breached a multi-year “Beverage Agreement” by not prominently selling (“showcasing”) ROKiT products in more than 600 restaurants.

The dispute spawned five Texas-law causes of action—breach of contract, promissory estoppel, fraud by misrepresentation, fraud by non-disclosure, and tortious interference. The district court dismissed under Fed. R. Civ. P. 12(b)(6) for failure to plead an enforceable contract. On appeal, the Fifth Circuit affirmed, but on a different ground: the alleged agreement was illegal under §102.16 of the Texas Alcoholic Beverage Code (“TABC”) and therefore void ab initio. All derivative claims necessarily failed.

2. Summary of the Judgment

• Holding: Any agreement—written or oral—between an alcoholic-beverage “manufacturer” and a “retailer” that requires or influences the retailer to purchase or sell the manufacturer’s products violates TABC §102.16(a)(1) and is void for illegality; no Texas court (or federal court applying Texas law) will enforce such a contract or any claim premised upon it.
• Disposition: Affirmance of Rule 12(b)(6) dismissal. The Fifth Circuit exercised its prerogative to affirm on any ground raised below, deeming the agreement illegal even though the district court had relied on contract-formation defects.
• Consequences: All substantive claims (contract, promissory estoppel, fraud, and tortious interference) were dismissed with prejudice.

3. Analysis

3.1 Precedents Cited and Their Influence

• American Precision Ammunition, L.L.C. v. City of Mineral Wells, 90 F.4th 820 (5th Cir. 2024) – Reiterated that a contract is void if performance would violate the law of the place where performance occurs. Provided the overarching illegality framework.
• Dickerson v. Bailey, 336 F.3d 388 (5th Cir. 2003) – Described Texas’s “three-tier” alcohol regulatory system (manufacturers → wholesalers → retailers). This structural separation underscores why direct supply agreements are presumptively unlawful.
• Cadena Commercial USA Corp. v. TABC, 518 S.W.3d 318 (Tex. 2017) – Texas Supreme Court case confirming the “strict separation” policy underlying the TABC, reinforcing the illegality finding.
• Phillips v. Phillips, 820 S.W.2d 785 (Tex. 1991) & White v. Philadelphia Indemnity Ins. Co., 490 S.W.3d 468 (Tex. 2016) – Texas authority that illegal contracts are void and unenforceable.
• Older Texas authorities (Texas & Pacific Coal Co. v. Lawson, 89 Tex. 394 (1896); Cain v. Franklin, 476 S.W.2d 952 (1972)) – Barred any action that requires proof of an illegal contract.

Although the panel cited a host of pleading-standard cases (Raj, Bass, Bell), the fulcrum was the illegality doctrine paired with TABC §102.16.

3.2 The Court’s Legal Reasoning

1. Illegality as an Affirmative Defense on the Pleadings
   • Federal courts may dismiss under Rule 12(b)(6) when an affirmative defense “appears on the face of the complaint.”
   • ROKiT’s own pleadings conceded two critical facts: (i) ROKiT is a “manufacturer,” and (ii) the agreement obligated Landry’s—a “retailer”—to “showcase,” meaning sell, ROKiT beverages at all locations.
2. Operation of TABC §102.16(a)(1)
   • The statute criminalizes any agreement that requires or influences a retailer to purchase “a certain volume or quota” of alcohol from a manufacturer.
   • The court read “showcase” as at least an “influence” to purchase; exact quantity is irrelevant because §102.16 expressly covers “more or less.”
3. Voidness and its Ripple Effect
   • Because performance of the Beverage Agreement would necessarily violate Texas law, the contract is void.
   • Under settled Texas doctrine, no derivative claim—promissory estoppel, fraud, tortious interference—can survive if it depends on an illegal agreement.
4. Choice to Affirm on Alternative Ground
   • The Fifth Circuit invoked the rule that an appellate court may affirm on any ground supported by the record and presented below (Ballew v. Continental Airlines).

3.3 Potential Impact of the Decision

• Clarification of §102.16’s Breadth: The opinion squarely holds that even “influencing” a retailer to stock a manufacturer’s products, absent a specific volume term, is enough to trigger illegality. This sweeps broadly across promotional, “pay-to-play,” or co-marketing deals between brand owners and restaurant chains.
• Pleading-Stage Weapon: Defendants in alcohol-industry litigation can now invoke §102.16 as a complete defense at the motion-to-dismiss stage, saving substantial discovery costs.
• Business-Practice Repercussions: Sports sponsorships or celebrity endorsements that bundle onsite product placement with team or venue agreements must be re-engineered to route sales through the statutory three-tier system (manufacturer → wholesaler → retailer) and never obligate the retailer.
• Cross-Tier Caution in Other Jurisdictions: While rooted in Texas law, the reasoning echoes “tied-house” prohibitions common across U.S. states, signaling judicial intolerance for modern variants of post-Prohibition evils.
• Doctrinal Reminder: The case reinforces that estoppel or tort theories cannot rescue parties from the consequences of an illegal bargain—vital guidance to litigators seeking alternate pleading paths.

4. Complex Concepts Simplified

• Three-Tier System – A regulatory structure separating (1) manufacturers/brands, (2) wholesalers/distributors, and (3) retailers (e.g., bars, restaurants). Each tier must remain financially and operationally independent.
• TABC §102.16(a)(1) – Texas provision forbidding any manufacturer from entering an agreement that obligates or persuades retailers to buy its products in specified volume or effectively at all.
• Void for Illegality – A contract that cannot be performed without violating law is treated as if it never existed; courts refuse to grant any remedy based on it.
• Rule 12(b)(6) Dismissal on Affirmative Defenses – Although defenses (like illegality) are normally raised later, dismissal is permissible if the complaint itself reveals the defense beyond dispute.
• Promissory Estoppel vs. Contract – A back-up claim used when no contract exists, requiring (i) a clear promise, (ii) foreseeable reliance, and (iii) actual, detrimental reliance. It cannot override statutory illegality.

5. Conclusion

ROKiT Drinks v. Landry’s delivers a sharp, unequivocal message: courts will not enforce—and will summarily dismiss at the pleading stage—any agreement that disturbs Texas’s statutorily mandated separation between alcohol manufacturers and retailers. By treating “showcase” obligations as per se violations of TABC §102.16, the Fifth Circuit both tightened the screws on cross-tier promotional arrangements and offered defendants a potent early-stage defense. Future contractual architects in the beverage space must meticulously route commercial benefits through lawful channels or risk seeing their deals evaporate—together with any related tort or estoppel claims—before discovery even begins. In the broader legal landscape, the decision showcases how statutory public policy can trump creative business strategies and how pleading admissions can doom a case when illegality is apparent on the face of the complaint.