Maryland only this past year repealed provisions of law applicable in specified counties that made it a criminal offense to knowingly selling or providing an alcoholic beverage to an individual with an intellectual disability or to an individual if a family member or guardian has given written notice to the license holder that the person is of an unsound mind.

It is difficult to understand how in modern times in Allegany, Carroll, Charles, Harford, Kent, Montgomery, Queen Anne’s, and Washington counties, an alcoholic beverages license holder or an employee of a license holder may not knowingly sell or provide an alcoholic beverage to: a habitual drunkard; an individual with an intellectual disability; or an individual if a family member or guardian has given written notice to the license holder or employee of the license holder not to sell or provide an alcoholic beverage to the individual because of the individual’s physical condition, intemperate habits, or unsound mind.

Generally, “knowingly” means the knowledge a reasonable individual would have under ordinary circumstances based on the habits, appearance, or personal reputation of an individual.

A violation was a misdemeanor.

Not only was the criminalization of serving someone with a disability a violation of the American with Disabilities Act, but also a violation of the U.S. Constitution and Maryland Declaration of Rights.

Senate Bill 461 passed the Senate and House of Delegates unanimously and with the Governor’s signature the bill took effect July 1, 2018.

In the final days of 2018 the President signed into law H.R. 5317 repealing the pre-Civil War prohibition on certain alcoholic beverage manufacturing on Indian lands.

I the parlance of the early 19th century the bill repeals a prohibition on creating or continuing a distillery in Indian country for manufacturing ardent spirits, when it almost cryptically provides, “Section 2141 of the Revised Statutes (25 U.S.C. 251) is repealed.”

The now repealed 1834 law was one of the Indian Trade and Intercourse Acts enacted in the 18th and 19th centuries. The law has its origins in legislation pursued by President Thomas Jefferson in 1802 banning all alcohol in Indian country.

The purpose of the 19th century laws was to regulate non-Indian interaction with individual Indians and Indian tribes on Indian lands. While the operation of the Trade and Intercourse Acts has been repealed or superseded by subsequent laws, several of them, including the one prohibiting distilleries on Indian lands, remained in effect through 2018.

The Indian Trade and Intercourse Acts reserved to the United States the exclusive right to acquire Indian lands and to regulate and restrict trade with tribes.

The early 19th century acts were intended to implement and enforce the terms of Indian treaties against “obstreperous whites, [and] gradually came to embody the basic features of federal Indian policy” to preserve peace on the frontier, including by imposed restrictions on the sale, exchange, or barter of spirituous liquors to Indians in Indian country.

Section 21 of that Act provides that if any person sets up or continues a distillery for the manufacturing of ardent spirits in Indian country, the penalty shall be $1,000 and the superintendent of Indian affairs shall destroy and break up the distillery.

Most of the 1834 law remained in effect until 1953 when Congress passed the last of six Indian termination acts to eliminate historical discriminatory legislation against Indians in the United States. Under the 1953 law, the production and distribution of liquor is permitted in Indian country subject to the laws of the State in which such acts or transactions occur, and subject also to tribal ordinances approved by the Secretary of the Interior.

Nonetheless, because the 1834 law imposing express restrictions on distilleries in Indian country remained in effect, there was a question whether a tribe may lawfully construct and operate a distillery on its reservation even though it may be permitted to build and run a brewery or winery.

The 1834 law expressly prevents any tribe from hosting a distillery project on its lands. While the law may have advanced a valid public policy goal in the mid 19th century, or not, it is not compatible with the modern policy of promoting tribal self-determination and economic diversification on Native American lands where existing laws provide reasonable regulation of liquor transactions.

The bill was especially supported by the Confederated Tribes of the Chehalis Reservation, which plans to construct and operate a distillery and restaurant on its lands. According to the Tribe, the project, part of a larger brewery, distillery, and restaurant project, will be wholly tribally owned and operated, with net profits going to the Tribe.

Last week the Baltimore County Board of Liquor License Commissioners issued a new Class B-ECF/DS alcoholic beverage license to the University of Maryland Baltimore County.

Despite that there were already 781 alcoholic beverages licenses issued for use in Baltimore County, this license is significant.

For those interested in inside baseball, this is an entirely new class of license. The Class B Education Conference Facility/ Dining Service beer, wine and liquor license was created by Senate Bill 1144 in the last General Assembly session authorizing the holder to sell alcoholic beverages for on-premises consumption from multiple designated outlets on the UMBC campus. So, yes, there will only be one of these licenses and it may only be issued for use on the UMBC campus. And as noted it was issued last week and alcohol flowed this past Saturday evening at the Inaugural Celebration for County Executive Johnny Olszewski, Jr.

While the opening of the new 172,000 square foot Event Center on the UMBC campus triggered the discussions that lead to this license, across the country, alcoholic beverages have been available to basketball fans who pay for fancy suites and premium seats, including in the Retriever Room at the UMBC venue. There has been a taboo on alcohol sales to most in attendance, in deference to the many underage college students in the bog room, but that has eroded across the country. While the NCAA is increasing the frequency of athletic events where alcohol may be sold, college campuses are also more than ever renting their venues for non traditional college uses as revenue sources.

In point of fact this Maryland bill was signed into law the same day a similar bill was signed in North Carolina allowing alcohol to be served at college sporting events.

But it is the non college athletic events that will be held in the new Event Center (.. think Harlem Globetrotters) that could only take place at a venue that sells alcoholic beverages, which events are necessary to produce the revenue required to retire the bonds that funded the building.

Which makes sense to many folks. But why was General Assembly action required? Simply put, despite that the legislature passed the largest bill in Maryland history, only 2 years ago in 2016, some 3,180 pages long, re-codifying the state alcoholic beverage laws, there was no law that authorized a license at a college campus in Baltimore County.

So, we worked with UMBC and crafted legislation modeled after the license law that exists in Prince George’s County for the University of Maryland College Park.

Historically, St. John’s College in Annapolis, the third oldest college in North America, served beer as far back as 1784. So beer on college campuses in Maryland is obviously nothing new.

And the need to seek relief in the state legislature also has application in the private sector. Some years ago we worked with a restaurant owner to create the new class of Towson Small Restaurant license in the General Assembly.

The value of liquor licenses has increased dramatically across Maryland in recent years, including because of shifting market forces that have resulted in the growth in numbers of restaurants, all of which portends the importance of a liquor license to many business justifying the time, inconvenience and expense of seeking a change in state law create a new license.

The Board of Liquor License Commissioners for Baltimore County has issued new Rules and Regulations effective September 30, 2018.

Liquor board Rules are of great import and govern the issuance of an alcoholic beverage license as well as the day to day operations of a business selling alcoholic beverages. While hyper technical in nature, the Rules have the force of law and a violation of a Rule can result in civil penalties and ultimately suspension or revocation of an alcoholic beverage license.

Maryland Annotated Code, Alcoholic Beverages Article, Section 13-207 provides, the Baltimore County Board may adopt Rules to carry out the State law, including rules regarding:

  1. the presence on a licensed premises of an individual who is not a consumer; and
  2. the issuance of a license when the actual use of the license is to be deferred until the completion of construction or alterations on the premises.

There are substantially the same enabling laws across the state although local licensing boards ultimately promulgate very different Rules from county to county.

As a purely housekeeping matter, the new Baltimore County Rules and Regulations identify the current members of the Board, including longtime chairman Charles Klein, recently appointed member Susan Green and new member Audie Jones.

In a procedural clarification, the Rules now make clear that a licensee may be subject to a fine of up to “$2,000 or suspension or revocation of their license for any violation of any of these rules.”

The change that garnered the must comment at the public hearing on the Rules is Rule 1 that now provides, “a license holder or an employee of a license holder may not sell or provide alcoholic beverages to any person who exhibits signs of intoxication or impairment, ..” Some argued this was a high bar for a server. Our concern is that the new Rule is a different standard than the state law that provides, “A license holder or an employee of the license holder may not sell or provide alcoholic beverages to an individual who, at the time of the sale or delivery, is visibly under the influence of an alcoholic beverage.” Md. Ann. Code art. AB, § 6-307

Possibly, the change that will impact the largest number of licensees was from the old Rule 5.B, “It shall be unlawful for the holder of a Class “D” license to allow any minor or minors under the age of twenty-one (21) years to be on the premises after 9:00 p.m.” has been altered to 10:00 p.m., “unless accompanied by a parent or legal guardian” who is 21 years or older. That change reflects a societal change as much as anything else.

Rule 6 that limits gifts from wholesalers to licensees has been completely rewritten and now expressly allows advertising support with a value of not more than $150. Of all the changes this one may be problematic to enforce and not only have real First Amendment challenges, but also problems in enforcing in the social media age?

There was a nod to modernity in the modest revision to Rule 9 that allow delivery of alcoholic beverages where the Rule had provided only for orders placed by mail or telephone and now orders may also be placed by “email, fax, text or via an app”.

And another minor, but possibly salacious edit to the Rules in this modern era was a change to the Rule 2 prohibited practices that had in the past only prohibited female nudity and now requires that ”the male or female pubic region, anus, cleft of the buttocks, or genitals” must be clothed and not exposed to public view.

There are a dozen or so other mostly modest changes that may impact individual licensees. The new Rules are a very good cleanup of the last version. All licensees should read the new Rules.

Talbot County, on the eastern shore of Maryland, is one of only a handful of places in America that prohibits the selling or providing of alcoholic beverages on an election day during the hours when the polls are open.

The picturesque waterfront county is named for Lady Grace Talbot, the sister of Lord Baltimore and wife of Sir Robert Taylor, whose family was an owner of Sean’s in Athlone, the oldest pub in Ireland (that was purchased by Boy George in 1987). And while the founding date of Talbot County is lost to history, it existed before February 12, 1661, when then is record that a writ was issued to its sheriff.

The rural jurisdiction does not appear to have any history of election day carousing or the like.

But since the repeal of prohibition, an alcoholic beverages licensee may not sell or provide any alcoholic beverages on an election day during the hours when the polls are open in any election district or precinct where an election is being held.

A person who violates the provision is subject to a fine of between $50 and $100 for each offense. However, on the day of an election, a restaurant that holds an alcoholic beverages license may provide alcoholic beverages for consumption only on the licensed premises.

This vestige of 19th century corrupt political bosses trading votes for free booze, which seems strikingly unsuitable post Citizens United, was also the law in the City of Annapolis until the Maryland legislature repealed it for that city in 2015, after it was noticed that the statewide repeal of many years before had failed to include that capitol city.

Of note, in Allegany County, Maryland a licensee may not sell or provide any alcoholic beverages on the day of any election during the hours the polls are open if the licensed premises is used as a polling place. But that appears to be a modern compromise to allow rural polling places in retail establishments.

The economic impact, if any, of this law is not clear, but Talbot County residents do consume more than their share of alcoholic beverages. In fact, the 37,512 County residents consumed 5.89 gallons of wine each, the highest per capita consumption of any Maryland county. Residents could buy their wine before the polls open or drive to Queen Anne’s County to the north?

Apparently none of the County’s 137 liquor licenses sought to have the prohibition added to the 2015 repeal for the City of Annapolis.

 

But with election day 2018 approaching, there has been discussion led by a group of liquor licensees in Easton, the cosmopolitan County seat, about repealing the antiquated election day booze ban in the legislature next year.

Given that a liquor license is “the” key asset in a business selling alcoholic beverages, be it a restaurant or package goods store, violations of laws associated with those licenses are of great import.

The twenty three counties in Maryland, Baltimore City, and the City of Annapolis each issue retail alcoholic beverages licenses and local boards of liquor license commissioners police activities under those licenses.

This blog post is a review of retail liquor license violations across Maryland during 2017, the most recent period for which data is available.

Local licensing boards regulate the types of licenses issued, scope and restrictions of licenses, including hours of sale, and much more. Those boards enforce the more than 3,100 page state law, county and city laws, and the boards’ own rules and regulations. Enforcement varies from locale to locale and is often fact specific, but penalties can range from civil enforcement dollar penalties for a first offense or other fines to suspension of a license for a period of time often after a repeated violation, ultimately to revocation of a license. Anecdotally, we know a business with a first violation is more likely to have another violation within 12 months.

Significantly, an adjudication of guilt on a liquor license violation often has ramifications beyond the liquor board proceeding. The violation is often a breach of the lease for the licensed premises and likely to be a material breach of loan documents and terms of business financing.

Local licensing boards across the state reported a total of 852 retail license violations during 2017, only slightly less than the 859 violations in 2016 (certainly not a statistically significant difference).

Of note, the per capita consumption of alcoholic beverages, based upon deliveries to retailers, dipped ever so slightly from 19.921 gallons in 2016 to 19.684 gallons in 2017, but that modest decrease almost certainly does not impact the number of violations.

Overwhelmingly, the largest category of those violations, 450, that is significantly more than 50% of all violations, are for sale of an alcoholic beverage to a minor. Sales to a minor represent the largest number of violations not only statewide but also in nearly all counties; and generally result in larger dollar fines than other violations. Interestingly in 2016, violations for sales to minors were only 37% of violations.

101 of those 450 reported violations were in Prince George’s County, the only locale in triple digits.

The next largest categories of violations were sales conducted by a minor and interestingly 53 of those 59 reported violations were in Allegheny County.

Next in terms of violations were 53 violations for failure to produce alcohol awareness certificates.

32 alcoholic beverage businesses had penalties assessed for being a public nuisance.

25 were penalized for sales after prohibited hours.

And 25 were also penalized for sales to intoxicated persons.

23 establishments were cited for unauthorized entertainment.

22 businesses paid penalties for failure to maintain records, reports of purchases, and invoices.

21 were fined or had licenses suspended for failure to cooperate with police.

16 purchased alcoholic beverages from other than a wholesaler.

There were also license violations for: an intoxicated server; gambling on the premises; open container; failure to display a license; inappropriate relationship with a wholesaler; tampering with contents of nonalcoholic beverages on the premises; business being operated by other than the owner; operating under a trade name not approved, etc.

Statistically, with 168 violations Montgomery reporting the largest number of those violations followed closely by Prince George’s County with 164. The only other jurisdiction in triple digits was Allegheny County with 135 violations. Baltimore City reported 91 violations. Baltimore County reported 67 violations. Only Queen Anne’s County reported no violations.

With a liquor license being the key asset in an alcoholic beverage business, a licensee should consider the value of that license when cited for a violation and is likely best served to be represented by legal counsel at a license board proceeding.

A liquor license holder in Maryland may now be issued more than one restaurant liquor license.

Effective July 1, 2018, House Bill 2018-1003, now Chapter Laws 225, authorizes a single individual to hold multiple Class B, beer, wine, and liquor licenses or equivalent licenses issued by different local liquor licensing boards for restaurants, hotels, or motels.

Nancy Hudes has focused experience advising chain restaurants and other with multiple restaurant locations about alcoholic beverage licensing matters.

The number of licenses that a single individual may hold is only limited by the cap imposed by each local liquor licensing board on the licenses that the board issues. The licenses may be issued for use by the license holder, a partnership, a corporation, an unincorporated association, or a limited liability company.

In Maryland, a Class B beer, wine, and liquor license allows a restaurant, hotel, or motel to sell alcoholic beverages for consumption on and/or off premises, depending on the license.

State law had before the bill generally limited the number of alcoholic beverages licenses that may be issued to a single license holder to one.

However, there were express exceptions in some jurisdictions. For example, with certain specified requirements, Montgomery County authorizes a single license holder to obtain up to 10 Class B beer, wine, and liquor licenses. Other jurisdictions issue other classifications of licenses that authorize alcoholic beverages to be sold in a restaurant, hotel, or motel. For example, Anne Arundel County issues a Class BLX license that may be used to sell beer, wine, and liquor in a luxury-type restaurant in the 27th legislative district of the county, and Montgomery County issues a Class BD-BWL license that authorizes the sale of beer and wine for on- and off-premises consumption and authorizes the sale of liquor for on-premises consumption. Those local provisions, although found in State law arguably contradicted the general State law as recodified by the legislature two years ago.

And then last year, the Maryland Attorney General’s office gave advice that a license holder that has a Class B license in one jurisdiction cannot have another Class B license in another jurisdiction. With that advice a prospective restaurant owner on Pratt Street in Baltimore was told by the local liquor licensing board that it would not approve a license for that location when the licensee already had a license at a restaurant in Annapolis.

House Bill 1003 was enacted to clarify and correct the apparent inconsistencies.

Now Maryland law authorizes a single individual to hold multiple Class B alcoholic beverage licenses issued by different local liquor licensing boards for restaurants, hotels, or motels.

You may not yet know that you need an expert witness? But, in a public hearing before a Board of Liquor License Commissioners, expert witness testimony often is admitted when the Board determines that the testimony will assist it, as the trier of fact, to understand the evidence or to determine a fact in issue.

Thomas Jefferson may be the earliest known expert witness in an American court when in 1771 in Hite v. Fairfax, the future President offered his knowledge and experience on behalf of Lord Fairfax, a proprietary land owner, in a complicated chancery suit. Dr. Henry Chang-Yu Lee may be the best known modern expert witness for his forensic science analysis and testimony challenging the police collection of blood evidence that was instrumental in O.J. Simpson being found not guilty of murder. And Michael Egen is a counterfeit wine expert consulting and testifying about wine authenticity, including for the FBI.

Our attorney, Stuart Kaplow, has testified as the expert witness on alcoholic beverage matters and could be your expert.

We can provide a written report and expert testimony before a local liquor licensing board as is considers “.. the public need and desire for the license.” Maryland the law provides the “local licensing board shall deny a license application .. if the local licensing board determines that .. the granting of the license is not necessary to accommodate the public.” And the testimony of an expert is the way to address that legal test.

In making a determination to accept expert testimony on that and other matters, the local liquor licensing board will determine whether the witness is qualified as an expert by knowledge, skill, experience, training, or education; the appropriateness of the expert testimony on the particular subject; and, whether a sufficient factual basis exists to support the expert testimony. We are qualified and have the experience to satisfy those requirements.

We may need your assistance to form the basis of our expert opinions. The facts or data in a particular case upon which an expert bases an opinion are those perceived by or made known to the expert at or before the hearing. Ideally, we develop and can offer testimony of alternative and redundant theories, at times based upon facts independently developed or based on third party purchased market data, to advance each case.

All of this noted, none of this limits the right of an opposing party to cross examine an expert witness or to test the basis of the expert’s opinion or inference.

Interestingly, testimony in the form of an opinion or inference otherwise admissible is not objectionable merely because it embraces an ultimate issue to be decided by the local liquor licensing board. There is much courtroom debate over experts in litigation, from medical malpractice cases to lead paint cases, but much of that debate does not extend to the administrative proceedings that are alcoholic beverage licensing matters. There are formal rules of evidence that govern expert testimony in federal and state courts, but liquor licensing boards use ‘relaxed’ less formal rules, common in administrative proceedings, allowing wider and more expansive use of experts in liquor licensing hearings.

When you think you may need an expert, we would be pleased to work with you and your attorney to provide analysis and expert witness testimony for your liquor licensing board hearing, and more.

I have just returned from a month of mountain climbing in Pakistan where alcoholic beverages are banned.

Pakistan has the world’s greatest concentration of high peaks and glaciers, with more than 160 summits of over 6,000 meters and a beauty, isolation and sheer immensity like nothing else on the planet. It was this wilderness of ice and rock that Eric Shipton called “the epitome of mountain grandeur” that drew me to the confluence of the Himalaya, Karakoram and Hindu Kush ranges and the big mountains Broad Peak and K2.

Over the course of history, the Indo-Aryans, Persians, Greeks, Scythians, Huns, Tibetans, Chinese, Mongols, Russians, and Britons, all climbed these mountains before me, and little has changed on the harsh, immense and unforgiving Baltoro Glacier of crag, cornices, and crevaces since Alexander the Great stood on that glacier in 333 BC.

At the time of its independence in 1947, Pakistani law was fairly liberal regarding liquor laws.

It is suggested that when the sale of alcoholic beverages was prohibited in April, 1977, such was more of a political convulsion than a religious tension. Under pressure from an alliance of various right wing political parties, then Prime Minister Zulfikar Ali Bhutto began to pragmatically address some of the demands made by the right including religious leaders.

Today, alcoholic beverages are legally banned in Pakistan for Muslims only (more than 97% of the population), but the penalty of 80 lashes for drinking was repealed in 2009.

And even with the recent election of former cricketer Iman Kahn’s PTI party, while I was in the country, there will be no immediate softening of religious influence.

Non-Muslims can consume alcoholic beverages after getting license from government, the only place in the world I know of where you need a license to drink. And non-Muslims foreigners are also allowed to order alcohol is some hotels. The sole authorized bar in the country is at the Pearl Continental in Peshwar. And curiously the Murree brewery exists as the nation’s only legal distillery; with a cult like following in the U.S. after Scout Willis was caught underage with a can of Murree beer in New York City.

Of course there are places in the U.S. where you cannot purchase alcoholic beverages. Ten states allow dry counties. Some states allowed counties and cities to ban alcoholic beverage sales following the repeal of Prohibition in 1933, while in others, like Alaska and Mississippi, municipalities didn’t start going dry until the 1960s and 1980s, respectively. But these dry areas are going wet. In Maryland, for example, the last dry town, Damascus, became wet in 2012.

The people of Pakistan are warm and friendly and the mountains are the most spectacular on Earth, but it is very good to be back in Maryland where I can order a cold beer.

 

The transfer of a liquor license often involves issues of life and death, and in some instances, zombies and phantoms.

A decision last year by the Maryland Court of Special Appeals in Liquor License Commissioners for Baltimore City v. Austin was instructive as to when a liquor license is really dead. The court explains at the beginning of the 25 page opinion,

.. a zombie is defined as the supernatural power according to voodoo belief may enter into and reanimate a dead body.

And the opinion goes on to make the distinction that a phantom is defined as “something (as a specter) apparent to sense but with no substantial existence.” Both are used as slang terms to refer to a liquor license that has been permitted by a local liquor board to survive, for transfer purposes, beyond the statutory expiration period.

But then, .. the Maryland legislature enacted HB 1410 that changes the law of zombie liquor licenses in Baltimore County, only, effective July 1, 2018.

Under the current law a liquor license expires 180 days after the licensee has closed the business or stopped active alcoholic beverages business operations unless an application for transfer to another location or another person has been approved or is pending; an application for a certificate of permission or a renewal license for continuation of business has been approved or is pending before the Baltimore County Liquor Board; or a written request for a hardship extension is filed within the 180-day period.

Generally, the licensee or another appropriate party may make a written request to the Board to extend the life of the license due to hardship. The Board may grant the extension if the Board finds after a hearing that existing hardship caused the closing or stopping of business operations. An extension may not prolong the life of the license beyond 360 days after the date of closing or stopping of business operations.

Today if a licensed premises is forced to close because of a casualty loss, the Board may extend the license for not more than two years after the closing.

Effective July 1, 2018, as a result of HB 1410, the request for a hardship extension in Baltimore County (but not the rest of the state) automatically extends the life of the liquor license, such that the bill actually repeals the authority of the Baltimore County Board to grant a hardship extension (because it will be automatic).

The bill clarifies that the expiration period resumes on the last to occur of: final action of the Board denying an application for transfer or a request for a certificate of permission or a renewal license for continuation of business; final judgment of the reviewing court if judicial review of the Board’s action on an application or request has affirmed the Board’s action; or the dismissal of a petition for judicial review of the Board’s action.

If a licensed premises is forced to close because of a casualty loss, the Board may extend the license for not more than three years, rather than previous two years, after the closing.

This is a significant change in the life of a zombie liquor license in Baltimore County. Generally, a hardship extension may not prolong the life of an inactive license beyond the total of two years after the date of closing or stopping of alcoholic beverages business operations and any time period during which the license is suspended under an application for approval of a transfer to another location or another person, or an application for a certificate of permission or a renewal license for continuation of business has been approved or is pending.

With 781 alcoholic beverages licensees issued for use in Baltimore County the economic impact of this change in the law should not be underestimated.

And while the licenses beverage industry supported this bill, cosponsored by the entire Baltimore County delegation, its negative impact on the alienability of licenses in a highly regulated industry make the enactment of questionable positive impact on small businesses in the Baltimore County. The bill’s provisions allow a small business licensee to retain a license for a longer period of time after closing or stopping of alcoholic beverages business operations and while this may result in a licensee being able to reopen a business, it does make licenses more difficult to acquire when it slows down efforts to sell the license before the license expires.