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; firstname.lastname@example.org, email@example.com and firstname.lastname@example.org.
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.
By Stephen Allen Jamieson
Over the holidays we warned readers about the possible liability for being a social host that knowingly serves alcohol to underage drinkers who then hurt themselves or others as a result of their intoxication. We also warned employers of possible liability for their drunk employees who attended company parties or otherwise acted in a way that made the employer responsible for the employees’ actions which injured others. See The Holidays and Alcohol: Potential Liability for Social Hosts and Employers, Dec. 24, 2013 SSJLaw newsletter.
This time we are reporting on a case, just decided by the California Supreme Court, that further clarifies the law on liability of a server of alcohol for the actions of a drunk minor. In Ennabe v. Manosa it is alleged that a 20 year old girl threw a party at a non-occupied house owned by her parents, advertised the party to friends and others, then charged a fee to attend the party. The fee was used to offset the cost of alcohol she provided to those attending. Her parents neither lived at the unoccupied house nor did they have any knowledge of the party. It is alleged that a 19 year old boy was then served while already obviously intoxicated, and when leaving the party struck and killed another intoxicated minor who was attending the party.
The Supreme Court decision just rendered holds that if the host of the party, the 20 year old girl who threw the party in the vacant house, is found by a jury or judge to fall within the definition of someone who sold alcohol, or caused the sale of alcohol, at the party, and if the minor that was served alcohol at the party was obviously intoxicated at the time he was served, then the host can be civilly liable to the family of the deceased minor for wrongful death.
This is an extension, some might say a change, to long standing existing law shielding “social hosts” from such civil liability. The public policy behind this law has for many years generally been that injuries or death caused by intoxicated persons are the fault of the intoxicated person, and not the fault of the person who served the alcohol to the intoxicated person.
While a “social host” is generally not civilly liable for injuries sustained by someone who was served alcohol by the host, or someone injured by the person who was drinking the alcohol, there is a narrow exception allowing such liability when a minor social host throws a party, and the parents or legal guardian of that minor knew or should have known alcohol was being served to minors at the party. See Civil Code 1714(b). Because in the Ennabe case the parents are alleged to have had no knowledge their daughter was throwing such a party at the unoccupied house the Court of Appeal held that the parents were not liable under this exception as “social hosts”.
The law has, however, been unclear whether or not a person like the host of this party, charging a cover charge, was a “social host” at all. It was argued in this case that one could consider the host of the party charging the cover charge to be a seller of alcohol just like a liquor store or nightclub or bar, etc. If the host is considered a seller of alcohol, or someone who caused the sale of alcohol, then, like all ABC licensees, she can also be potentially liable if she serves an “obviously intoxicated minor” who then injures or kills someone else as a result of his intoxication.
Business & Professions Code 25602.1 provides that a person who is licensed by the State to sell alcohol, as well as one who is required to be licensed by the State because they are selling alcohol, can be civilly liable for damages if that person serves or furnishes alcohol to an obviously intoxicated minor, and then that obviously intoxicated minor injures or kills himself or someone else.
In the context of this law a “minor” is defined not as someone under the age of majority, 18 years old, but rather in this context a “minor” is anyone under the age of 21 years. In the Ennabe matter Supreme Court has decided that if the person served was a 19 year old “minor”, and if that person served was an “obviously intoxicated minor”, and the server/host was a person who sold or caused to be sold the alcohol, then that server/host may be civilly liable for damages to the family of the young man who was run over and killed by the obviously intoxicated minor. To determine these facts the Supreme Court has remanded the case back to the trial court.
This decision by the Supreme Court therefore now holds that if the factual circumstances prove that the “host” of the party at the vacant house was actually selling alcohol at the party, or causing the sale of alcohol at the party, by charging a cover charge that included alcohol, then that “host” may be civilly liable for monetary damages to the family of the deceased boy if it is also proven that the minor who was served the alcohol was “obviously intoxicated” at the time he was served.
The message of this Supreme Court decision to the general public is clear: By charging for the alcohol provided at the house party, even if done indirectly thru a “cover charge” or other label, it may be that the host now ventures into the sea of liability that must be navigated by a seller of alcohol. We will, however, have to wait and see what the trial court determines these facts to be in this particular case.
Among the issues not resolved by the Supreme Court in this decision, however, are the following: Whether or not the insurance carrier providing coverage to the vacant house and or to this “host” will accept or decline coverage under these circumstances? Will the homeowners coverage or rental home coverage apply if the person who threw the party is deemed to have been running a business, selling alcohol, or otherwise falls in to some exception or exemption from coverage that may be stated in the policy? Whether or not the obviously intoxicated minor who killed the decedent could in turn sue the server/host to indemnify him from the claims of the decedent’s family against him for that alleged wrongful death? And, finally can the 20 year old “host” be criminally liable for being a “seller” of alcohol and not being licensed by the State ABC to sell? That is a misdemeanor. Can she be prosecuted? The Supreme Court explicitly refused to decide if she is required to be licensed under such circumstances.
Further decisions will further clarify this area of the law. When they happen we will update you.
Stephen Allen Jamieson is a Partner at Solomon, Saltsman & Jamieson. He can be reached at email@example.com or at 800/405-4222.
Copyright © 2014 Solomon Saltsman & Jamieson, All rights reserved. SSJLaw has written the California Licensee’s Alcohol Beverage Control Handbook, the Oregon Liquor Control Commission Handbook, and a Handbook on Alcohol Law related to Sovereign Tribal Nations. Downloadable copies are available at www.ssjlaw.com
David Schwartz, Staff Writer
San Bernardino County Sun
SAN BERNARDINO – Opponents of a liquor license for the San Manuel Indian Bingo and Casino say they will not appeal a ruling that allows the gambling hall to serve alcohol in their residential neighborhood.
The decision from the state Department of Alcoholic Beverage Control allows the casino to continue serving beer, wine and hard liquor from 6 a.m. to 2 a.m., except when two nearby schools are in session. On those days, alcohol won’t be served until 5 p.m.
While the decision could still be appealed, many opponents said they would not.
“I’ve certainly thought about it, but I don’t have the money to do it,” said Rheba Hewitt, one of the most vocal detractors.
Opponents continue to believe the state should not allow the permanent license to be transferred from the old facility to the new one.
Alcohol, they say, contributes to the number of vagrants, drunk drivers and other people engaging in illicit behavior on their streets. But their opposition during a two-day trial in June was overruled.
Although Hewitt has received a copy of the decision, she hadn’t looked at it yet. “I’m so disgusted I didn’t read it. I knew what it’d say.”
During the hearing at Highland City Hall, residents faced off with a legal team hired by the San Manuel Band of Mission Indians and a legal team and staff from the Alcoholic Beverage Control.
Residents were without a lawyer.
“We were outgunned,” said Kirk Wilson, an opponent of the license.
“I don’t have the money or the time to fight it any further. I could tell when I went down to the hearing, whatever we said didn’t have much weight compared to the high-powered attorneys and government agencies that didn’t want to step on the tribe’s sovereignty,” he said. “It’s like, why bother fighting it?”
Stephen Solomon, one of the attorneys for the tribe, said, “It was a full and fair trial. The protestant had a right to have a lawyer or not have a lawyer. The judge heard the testimony, he took briefs afterward.”
Solomon, part of a Los Angeles-based firm, said there had been little evidence presented with accusations of prostitution, drug dealing and traffic associated with alcohol served at the casino.
“The tribe stood the test of reality,” he said.
San Bernardino Councilman Neil Derry, who represents the city areas around the casino, said he would not seek the City Council’s approval to fund an appeal.
“There’s certainly not the support to appeal it on the council or from most of the elected officials,” he said.
He put the cost at $50,000 to hire an attorney.
“We could appeal it to the Supreme Court, but none of my residents have that kind of money. Half are retired,” he said.
The protestants have 40 days from Sept. 15 to appeal the decision, said John Carr, spokesman for the Department of Alcoholic Beverage Control.
Solomon, Saltsman & Jamieson are attorneys practicing in the areas of ABC law, ABC Appeals Board cases, and all related Land Use Matters such as City and County Conditional Use Permits, Variances, Police and Fire permits, Entertainment law, and Gambling Law; as well as Business and Personal Injury litigation. Solomon, Saltsman & Jamieson can be reached at 800 405 4222.”
In a sweeping opinion in cases brought by Ralph B. Saltsman and Stephen Warren Solomon of Solomon Saltsman & Jamieson, the California Supreme Court unanimously struck down the practice of attorneys in administrative agency hearings submitting ex parte communications to decision-makers within their agency. The Supreme Court held such communication violated specific prohibitions stated in the Administrative Procedure Act, the statutory manifestation of Due Process of Law.
The Court’s ruling vindicated the rights of all ABC licensees in California and will change how all administrative agencies in California do business, and not just the ABC. There will no longer be secret communications from agency attorney to departmental decision-maker in any adversarial hearing. While the decision was issued in cases prosecuted by the Department of Alcoholic Beverage Control, the decision will impact governmental agencies across the state, including other state agencies as well as municipal and county governments.
The Court followed Saltsman’s argument before the court and held: “[A] prosecutor cannot communicate off the record with the agency decision maker or the decision maker’s advisors about the substance of the case. But the one contact that is forbidden is the one contact that occurred here.”
In the cases before the Court, Administrative Law Judges after hearing in written proposed decisions, dismissed disciplinary proceedings brought against ABC licensees. Those proposed decisions were rejected, and the Department imposed suspensions nevertheless. In each instance written ex parte documents were submitted following the hearing by the prosecutor to the Department’s Chief Counsel who acted as decision-maker. The lawfim argued and the Court determined that this and any secret communication from prosecutor to decision-maker was unlawful and unconstitutional.
To review the decision go to:
Court of Appeals holds that Rule 141 requires dismissal by the ABC in all decoy cases prosecuted without the required face-to-face identification.
Stephen Warren Solomon and Ralph Barat Saltsman succeeded in persuading the Court of Appeal to construe Rule 141 to be applied precisely as it is written in Acapulco Restaurant, Inc, v. ABC Appeals board. The court found that in all police decoy cases, Rule 141 requires that the decoy subject to a face-to-face identification. Without such identification, the ABC has no choice but to dismiss the accusation. The ABC previously refused to dismiss such cases.
Solomon, Saltsman & Jamieson has won an extraordinary number of police decoy cases on this basis alone since this ruling.
Solomon Saltsman & Jamieson are attorneys practicing in the areas of ABC law, ABC Appeals Board cases, and all related Land Use Matters such as City and County Conditional Land Use Permits, Variances, Police and Fire Permits, Entertainment Law, Gaming Law, as well as Personal Injury litigation. Solomon Saltsman & Jamieson can be contacted at 800-405-4222.
By Ralph Saltsman – June 19 2013
Beware of Conditions on your License.
Under the ABC Act, the Department can refuse to issue or transfer a license unless conditions are “agreed” to by an applicant. This is true for an application on a new license, a person to person transfer of an existing license, even certain corporate share transfers.
Local law enforcement agencies are invited to lodge requests for conditions to be imposed in a transfer. The Department may also require conditions as a result of a disciplinary process.
Conditions may allow the Department frightening power over a license augmenting very limited power provided by statute. For example, the Department may require a licensee’s sales of alcohol to not exceed the sales of food on a quarterly basis. There is no statute or rule that grants the ABC that extent of supervision over any licensed premises. Certainly service of food and maintenance of kitchen facilities are mandated by law in restaurants with ABC licenses, but there is no legal requirement for licensed premises to meet an arbitrary sales comparative between food and alcohol. An otherwise law-abiding licensee could lose a license for violating this or some other condition.
Presently, the ABC is on a condition binge imposing conditions on licenses in order to grant the ABC authority over licensees not contemplated by the legislature. Conditions can gut a successful business or deprive an applicant a reasonable opportunity to succeed. “No Happy Hour” or “close at 11:00 PM” or “no alcohol on the patio” could guarantee failure. The nightmare illustrations are without limit.
In an application process, the applicant can always say “no” to a condition. The Department then has the option of denying the transfer setting up a trial on the application before an administrative law judge.
One final note, once a condition is on the license, it’s misery to try and get it removed. It’s possible, and an administrative process is available where the Department refuses to modify or delete conditions. The process is slow and the outcome never assured. By law, in order to remove a condition, the licensee has the burden of demonstrating the reason for imposition of the condition no longer exists.
So…the lesson to be learned is: avoid conditions where possible. In the alternative, pursue removal of conditions before there’s a violation charged by the ABC.
By Ralph B. Saltsman with Stephen Warren Solomon and Stephen A. Jamieson
Applying for a new or original ABC license is so daunting that many legitimate, potentially successful businesses don’t even try. Why bother? Some cities’ zoning regulations and processes are so tough that a year or two can be taken just wrangling through the city system. And then there’s the Public Convenience or Necessity requirement. That’s the legislature’s gift to municipalities that grants virtual veto power to cities in many ABC applications. And we haven’t even reached the ABC application stage.
Picture this: one of the nation’s finest chefs wants to come to the California food scene. He and his corporate financial partners are excited at the prospect of establishing a fine dining experience in the heart of Southern California’s movie industry backyard. Or perhaps the Northern California bay area holy ground of wine and food. After obtaining the backing of city government and civic leaders, the restaurateur still must go through the city process for a year or so.
The process through the municipal zoning system can be even more difficult for the convenience store, supermarket, or grocery, large or small. But in this scenario, the restaurateur is spending money at a frightening clip. Assistant chefs are hired as is a management staff, and a wait crew. Promotions, menus, equipment, furnishings and the long term lease are draining resources. When does this place open? Wait. Who applied for an ABC license? How long does it take? Is it as simple as, say, getting a license to sell alcohol in a restaurant in Louisiana? Let’s hope the ABC application was filed contemporaneously with the city zoning applications. But that’s not our scenario. In our example, the application was filed a month ago. The 30 day posting is just coming down. Now, either there are protests or there aren’t. If there are not protests filed, the ABC can conclude the investigator’s report required by Business and Professions Code Section 23958 and issue the license. If there are protests….
Once a protest is filed, the Department is presently required to conduct a hearing before the license can be issued pursuant to section 24015. Even if the Department truly wants to issue the license, there must be a Hearing on Protest concluded first. After the hearing, the Administrative Law Judge issues a Proposed Decision, and the Department will certify the decision if it is acceptable to the Department. That certification usually follows around 60 days after the hearing is concluded. What if the protestant loses? Can that protestant appeal the decision under Business and Professions Code Section 23081? Of course. The appeal typically takes another eight to twelve months or even longer. In the meantime, no license? Yes and no.
In 1994 (effective January 1, 1995) the legislature created the Interim Retail Permit in Section 24044.5. The IRP is issued by the Department in 120 day periods within the Department’s discretion if an application is protested and if the Department determines through its investigation that the license should be issued. That IRP can be the difference between success and failure since it allows the applicant an opportunity to open. There has been a hitch, perhaps until early this year. The Department has taken the position that in order to determine if there really are protests in order to make an applicant eligible for the IRP, the protests had to be verified. That process is in itself lengthy and time consuming.
If there are protests received by the Department, the ABC ships the protests up to Hearing and Legal up in Sacramento where an overworked clerical desk sends notices to those protestants requesting verifications to those protests. The verification is a statement that the allegations made in the protest are true or are true based on information and belief. It doesn’t matter if the allegations really are true; the protest still has to be verified. The protestant is given 10 days to respond by signing and returning the verification. Waiting to see if protest verifications will be returned can be and has been a significant log jam. However, an innovative applicant working with the innovative folks at the LA/Metro District Office in Southern California with permission from Southern Division Headquarters early this year asked the question: Why wait for the verifications? The IRP statute doesn’t say “Verified Protest;” it says “…has been protested….”
The Department convened a meeting in Sacramento early April to discuss the application nightmare. Senior ABC management was present, including newly appointed Director Jerry Jolly as were a number of industry leaders and consultants. This group discussed the concept of taking LA/Metro’s innovative approach to IRP issuance, that is, not waiting for verifications to be returned before issuing an IPR. We concluded that this system should be employed statewide. There’s more.
Ann Hall, Government Affairs, 7-11, is leading a legislative effort to further assist applicants. AB 2296, (Leno and Aghazarian) if passed during this legislative session, will allow the Department greater leeway in dismissing protests. Part of this proposed legislation may require that in order for a protest to go to hearing, the protestant must submit a written request. New Section 24015 would now read, in relevant part:
(b) Any person who has filed a timely verified protest that has been accepted pursuant to this article may request that the department conduct a hearing on the issue or issues raised in the protest. The request shall be in writing and shall be filed with the department within 15 calendar days of the date the department notifies the protesting party of its determination as required under subdivision (a).
The proposed legislation also provides:
(d) If a request for a hearing is filed with the department pursuant to subdivision (b), the department shall schedule a hearing on the protest. The issues to be determined at the hearing shall be limited to those issues raised in the protest or protests of the person or persons requesting the hearing.
(e) Notwithstanding that a hearing is held pursuant to subdivision (d), the protest or protests of any person or persons who did not request a hearing as authorized in this section shall be deemed withdrawn.
(f) If no request for a hearing is filed with the department pursuant to this section, any protest or protests shall be deemed withdrawn and the department may issue the license without any further proceeding.
One hopes that both the legislature and the Department would expend best efforts to assist beleaguered applicants. The process should not be so time consuming and so unwieldy that it discourages hopeful businesspersons who desire to license premises to the benefit of the community. Certainly, some licenses just shouldn’t be issued. The Department is required to conduct an investigation and exercise its discretion to issue or not issue. There is a hearing process wherein an Administrative Law Judge hears evidence in support of and against licensure and then issues a proposed decision discussing all salient information and recommending issuance or denial. However, for the process to be fair, it cannot be so brutal as to discourage potential businesses from even beginning the application process.
Obviously there are safeguards for the legitimate protestant. For example, Rule 61.4 requires the Department to deny an application for premises within 100 feet of a residence unless the applicant can affirmatively establish that the operation of the business would not interfere with the quiet enjoyment of the property by the residents. Section 23958.4 requires a determination of public convenience or necessity by either the city (or county) or the ABC depending upon the type of license in question if there is an undue concentration of licenses in the census tract or if the proposed license is sited in a high crime reporting district.
There will always be friction between business and residence. There should be a legal forum for those conflicts to be aired. Today there are several opportunities for the issues to be discussed. Zoning regulations of municipalities and counties provide such a forum. The ABC Act provides for such a forum. Creating a repetition well known by the industry. An applicant usually gets to meet his or her or its protestants at several levels. But fair is fair. There must be a better balance between the legitimate interests of business and residential community. A protestant should be not be empowered to hold our world renowned chef hostage as he attempts to bring that fine dining experience to California. The same holds true for the company that wants to open that supermarket really needed by the community; or the husband and wife who want to bring their small grocery to a neighborhood that so wants that corner building occupied by exactly that type of “mom and pop” enterprise; or the family whose life is dedicated to their cafe serving ethnic foods from their tradition and history. Legal assistance is nearly always needed, but let’s hope the Department’s new direction can give them a fighting chance to succeed.
Solomon, Saltsman & Jamieson are attorneys practicing in the areas of ABC law, ABC Appeals Board cases, and all related Land Use Matters such as City and County Conditional Use Permits, Variances, Police and Fire permits, Entertainment law, and Gambling Law; as well as Business and Personal Injury litigation. Solomon, Saltsman & Jamieson can be reached at 800 405 4222.”