Following relaxed policy regulations during the COVID era, the Department has published a proposed rule change to codify Title 4, Rule 70 which will allow licensed premises to serve and allow consumption of alcoholic beverages in permanent non-contiguous areas separate from the main or primary by public area of the licensed premises. There are restrictions and requirements that licensees should be acquainted with if alcohol service is intended or is ongoing in these non-contiguous areas. Proposed Rule 70 is set out in full herein. There will be a public hearing before the Department on November 1, 2022.
The fee waivers became available in February 2021 when Governor Gavin Newsom signed a package of immediate actions that provided relief to individuals, families and businesses suffering the most significant economic hardship from the COVID-19 Recession
With the legalization of commercial recreational use of cannabis products commencing in 2018, along with licensed manufacture and sale, several questions have arisen about what activities are permissible on or in premises licensed by the Department of Alcoholic Beverage Control (“ABC”) to manufacture or sell alcoholic beverages.
“The new portal offers an easier and more efficient way for licensees to renew their licenses by paying annual fees online,” said ABC Director Eric Hirata. “The online system is part of ABC’s overall plan to modernize and provide faster service through the use of technology.”
“The California ABC just made attending and completing LEAD training for Off-sale premises (RBS training is required for On-sale premises) easier.
They have established it Online.
See the press release just received, and click on the hyperlink that takes you to the page that sets out the 10 modules, and provides a Certificate, as well as the other information and guides”.
In the world of American alcohol and beverage regulation, as of the spring of 2020, Carrie Bonnington had seen it all. The Sacramento-based partner at…
The Department has continued to carefully consider the public health, safety, and welfare in determining if any Regulatory Relief provisions should be extended.
California is close to passing a new state law that will shake up the time-table for serving and drinking alcohol at restaurants, bars, hotels and nightclubs. It will establish, if passed by the State Assembly and signed by the governor, a pilot program allowing Los Angeles, and six other cities, to serve into the predawn light by extending “Last Call For Alcohol” from 2 am to 4 am. If it works in the pilot seven cities it could be extended state-wide. If it works in California, other states may follow. Read more
By: Ralph Barat Saltsman * Stephen Warren Solomon * Stephen Allen Jamieson
Did you hear the one about the convenience store owner who attempts to hold up the competing convenience store across the street? Ok. So there really wasn’t a robbery, but…this store owner really did try to hold up the city and state application process so that a competing store would never open its doors across from his business. This hold up man came armed with public forums and some serious misinterpretations of state law. He failed at each step along the way, and the saga ended in two published companion opinions by the Court of Appeal.
In these landmark opinions, the Court of Appeal delved into the byzantine Alcoholic Beverage Control application process and the obscure complex role played by municipalities in that process. In these cases the Court determined the collaborative effort between state and municipal governments properly resulted in issuance of a license for sale of alcoholic beverages. The discretion which must be exercised by these governmental entities was analyzed by the Court which held that both city and state properly engaged and completed their respective statutory obligations in concert one with the other.
Relevant to these cases, by statute, the Alcoholic Beverage Control cannot issue a license to an applicant in an “over-concentrated area,” that is, in a census tract where the number of licenses meets or exceeds the number of licenses allowed. There are exceptions. As set by statutory formula, certain Alcoholic Beverage Control license applications cannot be issued absent a finding of Public Necessity or Convenience. This finding is required for an application in over-concentrated areas or where the site is in an area designated as “high crime” also by statutory definition and law enforcement statistics.
For certain licenses, such as restaurants and hotels, the finding of Public Convenience or Necessity may be made directly by the Department of Alcoholic Beverage Control. For other licenses, such as liquor stores, markets and convenience stores, such finding may be made by the local governing body where the premises are sited. In this way, county governments and municipal governments exercise discretion to make a finding of Public Convenience or Necessity or choose to make a finding that Public Convenience or Necessity will not be served by issuance of such licenses.
Business and Professions Code § 25958.4 (1995) created this threshold process for municipalities and county governments, but the underlying investigation of determining whether the license should issue remains exclusively with the ABC.
However, where cities and counties have authority to make findings on Public Convenience or Necessity, such findings must state the affirmative or the ABC will not issue the applied-for license. In cases where a finding of Public Convenience or Necessity is vested in the local governing body there must be a collaborative process between the Department of Alcoholic Beverage Control and the city or county in reviewing applications for sale of alcohol.
Crucial to the two recent Court of Appeals decisions, Business and Professions Code § 25958.4 was amended in 1996 to provide, in relevant part:
“(b)(2) With respect to any other license, if the local government body of the area in which the applicant premises are located, or its designated subordinate officer or body, determines within 90 days of notification of a completed application that Public Convenience or Necessity would be served by the issuance. The 90-day period shall commence upon receipt by the local governing body of (A) notification by the department of an application for licensure, or (B) a completed application according to local requirements, if any, whichever is later.” (Emphasis added)
The Court of Appeal in Nick v. Lake Forest, 232 Cal.App.4th 871 (Dec. 2014) upheld a finding of Public Convenience or Necessity made by the City Council for Lake Forest for a 7-Eleven to be located within that municipality. In a companion case, Nick v. Department of Alcoholic Beverage Control, 233 Cal.App.4th 194 (Dec. 2014) (Modified Jan. 15, 2015), the Court upheld the Alcoholic Beverage Control decision to issue a license for sale of alcoholic beverages to that 7-Eleven.
The facts underlying both decisions show that on June 29, 2010 the Department of Alcoholic Beverage Control informed the City of Lake Forest that 7-Eleven would be filing a request for a municipal determination that Public Convenience or Necessity would be served by issuance of this license. 7-Eleven lodged its request with the City Development Director on July 6, 2010. The City found that 7-Eleven’s request constituted the “completed application” under city requirements. Lake Forest determined Public Convenience or Necessity on October 4, 2010, that is, within 90 days after 7-Eleven’s completed application. Appeals were brought by Nick, a nearby competitor, through the city appellate process which concluded before the City Council. After a public hearing, the Council affirmed the earlier finding of Public Convenience or Necessity and made its own extensive factual findings as to how Public Convenience or Necessity would be served by issuance of this license.
Nick challenged this City Council decision in the Superior Court under Code of Civil Procedure § 1094.5. Nick argued that the language of the Lake Forest ordinance did not reflect the statute’s mandate. The Superior Court upheld the City Council decision noting any phraseology distinction between ordinance and statute was insignificant. At the Court of Appeal, Nick argued that the City did not act timely. Ultimately, in its opinion, the Court of Appeal recognized the clear language of 25658.4(b)(2) which provides that the 90-day count begins with notification that an application is made or when the city receives a completed application “whichever is later.” (emphasis by the Court) The City’s finding was upheld as timely.
The Court in Nick v. Lake Forest also examined the city’s findings and found those findings to be a sound exercise of discretion conferred on the city by 25658.4. The Court also acknowledged prior Court of Appeal opinions (such as Sepatis v. Alcoholic Beverage Control Appeals Board, 110 Cal.App.3d 93 (1980)) which reviewed Public Convenience or Necessity determinations made by the Alcoholic Beverage Control based on the ABC rule which preceded Business and Professions Code § 23958.4. The Court in Nick noted there is no definition of what constitutes Public Convenience or Necessity but that the term vests broad discretion so long as the decision maker does not act arbitrarily or on factors nor supported by substantial evidence. The Court opined that the findings made by the city were reasonable and supported by substantial evidence.
In the companion case, Nick v. Department of Alcoholic Beverage Control, the Court examined the Alcoholic Beverage Control application process and the statutory system that anticipated a collaborative effort between state and city where, when required by statute and statistics, the city is to determine whether Public Convenience or Necessity is served, and the ABC must conduct its “thorough” investigation into the underlying question of whether public welfare and morals would be jeopardized by its issuance of the ABC license.
In this case in the administrative hearing before the ABC, Nick argued the ABC, in its investigation and hearing process, ceded its authority to conduct its investigation to the City of Lake Forest when the Department relied on and incorporated the city’s findings of Public Convenience or Necessity into the ABC’s decision to issue the applied-for license. This administrative hearing, held in November 2012, allowed Nick the opportunity to cross-examine 7-Eleven’s and the Department’s witnesses and to present his own witnesses. The Department’s decision to issue the license acknowledges the City’s extensive and comprehensive finding of Public Convenience or Necessity. Nick argued that it is the ABC’s exclusive authority and obligation to investigate an application including findings of Public Convenience or Necessity.
The ABC decision was appealed to the ABC Appeals Board, the administrative appellate body which affirmed the Department’s issuance of the license. In an original proceeding before the Court of Appeal (see Business and Professions Code § 23090), Nick argued that the Department did not engage in its statutory mandate to “make a thorough investigation” into the application (see 23958) but unlawfully relied on the City’s Public Convenience or Necessity finding.
The Court of Appeal upheld the Department’s decision and the Appeals Board’s affirming opinion that the ABC properly reviewed the city’s finding of Public Convenience or Necessity and also conducted its statutory mandated investigation and properly concluded, based on the evidence, that the license should issue. The Court concluded:
“The Department therefore did not cede any of its authority to license the sale of alcoholic beverages to the City.”
In the Court’s two companion decisions, taken together, the ABC application process and the statutory interplay between state and municipality are explored and explained by the Court.
The moral is: if you’re going to attempt to hold up the application for your competition across the street, come armed with accurate statutory interpretations.
Post script – The administrative hearings before the city and the ABC, as well as the cases before the Court of Appeal were litigated by Solomon Saltsman & Jamieson. Nick filed Petitions for Review before the California Supreme Court which were summarily denied on March 11, 2015 and April 15, 2015, respectively. The ABC license was issued May 27, 2015, nearly five (5) years after application. By permit 7-Eleven was open and operating beginning April 2011.
Ralph B. Saltsman, Stephen Warren Solomon and Stephen Allen Jamieson are partners in the Law Firm of Solomon, Saltsman & Jamieson in Los Angeles. The authors practice in the areas of Land Use; Indian Gaming; Internet Gaming; Gaming; Zoning; Administrative; Personal Injury; and Constitutional Law. Saltsman, Solomon and Jamieson can be reached at (310) 822-9848; [email protected], [email protected] and [email protected].
By Daniel P. Smith
BYOB creates an array of unique considerations
When Joe Burke Jr. opened TreVi Pizza three years ago in Glenside, Pennsylvania, he was excited by liquor sales’ robust profit margins and the food-and-beverage pairings he could promote with a curated selection of wine, cocktails and beer.
Unfortunately, Burke could not digest the expense of a $200,000-plus liquor license for his 90-seat, startup operation and embraced BYOB (bring your own bottle/booze/beer). Capitalizing on Pennsylvania’s forgiving BYOB laws, Burke has since created a marketplace niche for TreVi, one of the few establishments in its suburban Philadelphia community permitting BYOB.
“The wine flows freely here at TreVi and customers enjoy not having to pay four to five times markup on a bottle. It’s actually become a selling point for us,” Burke says.
BYOB, however, can be a tricky play for pizzerias given a dizzying array of regulations, liabilities and pinched profitability.
BYOB regulations vary from state to state and even municipality to municipality, a reality inspired by the federal government’s hands-off alcohol policy following the end of Prohibition in 1933.
Some states allow BYOB in restaurants already holding a liquor license; other states leave discretion to municipalities or even individual restaurants; still others explicitly prohibit BYOB.
In the State of New York, for instance, it is a criminal misdemeanor to permit BYOB in any commercial establishment without the appropriate licensing. In neighboring New Jersey, meanwhile, where a number of dry towns prohibit restaurants from holding liquor licenses, guests can bring in their own bottle and the restaurant can charge a corkage fee.
In Burke’s Pennsylvania, there is nothing in the state’s Liquor Control Board code that “prohibits an individual from bringing his or her own alcohol into any establishment, whether or not the establishment possesses a license issued by the Board.” Subsequently, each establishment is free to allow or disallow patrons from brining their own alcohol into the eatery, though municipalities retain the right to enact their own BYOB ordinances.
The regulatory patchwork can be confusing, particularly for concepts opening units in multiple jurisdictions.
Beyond the regulatory environment, BYOB brings a number of diverse challenges and liabilities.
Though Burke has established TreVi as his neighborhood’s premier BYOB destination, he nevertheless acknowledges that his customer counts drop after 10 p.m. on the weekends and during marquee sporting events.
“I don’t even bother opening for the Super Bowl,” he says. “Because I’m BYOB, there’s just a thinner window of time to make money.”
In addition to lost revenue, BYOB-permitting operators also face administrative, civil and even criminal concerns.
According to New York-based attorney Donald Bernstein, the most common mistake many operators make is simply allowing BYOB into their establishment when it is prohibited in their jurisdiction. “This is a black-and-white issue: it’s either permitted or it’s not,” he says.
Thereafter, issues abound regarding the BYOB operation’s inability to control the consumption of alcohol, over-serving, open-container laws and dram-shop acts.
In California, for example, sellers and servers of alcohol are generally not responsible in a civil suit to persons they have served, the primary exception being if they served an obviously intoxicated minor (under age 21). In other states, however, restaurant owners can be held responsible –– in a civil or even criminal case –– for over-serving patrons or allowing minors to consume alcohol on their premises.
Particularly with minors, restaurants must be vigilant and exercise the same precautions in a BYOB establishment that they would if they held a liquor license.
“You cannot just give glasses to anyone sitting at the table without ensuring everyone is of legal age,” Bernstein says.
Operators must also be mindful of the local open-container law. In New York, for instance, the law allows restaurant patrons to leave with an unfinished bottle provided the restaurant packages it in a specific way.
“Many operators don’t realize all the particulars and don’t make sure they have the necessary insurance for civil liability for service of alcohol or allowing BYOB, as there are often exclusions for alcohol-related instances,” says Stephen Jamieson, a Los Angeles-based attorney who practices hospitality-related law.
Legal experts Jamieson and Bernstein both urge BYOB operators to discover the regulatory specifics in their jurisdiction. If liquor laws are handled locally, city hall or the county seat will host the rules. If liquor regulations are addressed by the state, then the state’s department of alcohol beverage control defines policy.
“Don’t assume you know what the law is,” Jamieson says.
Jamieson counts the National Association of Licensing and Compliance Professionals as a particularly helpful resource for operators and suggests operators consult a lawyer or licensing professional familiar with their jurisdiction to gain a comprehensive understanding of their responsibilities.
Ultimately with BYOB, Jamieson urges operators to follow the sage wisdom of Benjamin Franklin: an ounce of prevention is worth a pound of cure.
“It’s smart to understand everything you need ahead of time before you to get into a deeper investment and potential trouble,” Jamieson says.
The Corkage Conundrum
In BYOB restaurants, operators often install corkage fees to cover their overhead or lost profit. According to national beverage consultant Joseph DeLuca, corkage fees typically range from $5 to $25.
After initially opposing a corkage fee at TreVi, owner Joe Burke Jr. noted mounting overhead from accommodating guests’ BYOB ways, such as purchasing wine glasses, using his ice to chill white wine and staff clean up. Burke began researching local and national corkage fees and, in mid-2012, launched a modest $3 fee at his Pennsylvania eatery.
Guests were not happy.
Though Burke offered free corkage nights and a frequent corkage card, some customers called him greedy and others ceased visiting. After six months, Burke tabled the fee amid falling sales.
Beyond potential customer backlash, corkage fees also complicate employee compensation. As corkage fees typically go to the house, staff might not get tipped for their efforts in opening, pouring and cleaning a BYOB table.
“Corkage fees are a delicate balance,” DeLuca says. “Operators need to make sure their servers are not being disenfranchised and that the fee is one guests will tolerate.”
Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.