In a recent case, Maryland’s highest court held that liquor board rules and regulations may impose strict liability on liquor licensees for prohibited conduct that occurs on their premises whether the licensee is aware of the conduct or not.

In the instance before the court, the Board of Liquor License Commissioners for Baltimore City had charged Steven Kougl and his company, Kougl, Inc., with violating provisions of the Board’s Rules and Regulations that regulate sexual conduct and prohibit illegal activity on a licensee’s premises. The Liquor Board found that Kougl violated: Rule 4.17(a), which prohibits the solicitation of prostitution on a licensee’s premises; Rule 4.17(b), which prohibits indecent exposure on a licensee’s premises; and Rule 4.18, which prohibits the violation of federal, state, and local laws on a licensee’s premises, and ordered a 30 day suspension of the liquor license.

Kougl argued that because he had no knowledge that the employee had solicited prostitution and exposed her breasts, he had not violated Rules. He argued that the Rules require actual or constructive knowledge on the part of the licensee, and, therefore, he did not violate them, including that he was not even on the property at the time.

By way of background, Maryland’s intermediate appellate court, the Court of Special Appeals, found because there was no evidence of Kougl’s actual or constructive knowledge of the employee’s conduct that the Liquor Board erred in finding him guilty of violating the Rules at issue.

However, in a February 17, 2017 decision, in The Board of Liquor License Commissioners for Baltimore City v. Steven Kougl, et al., the Maryland Court of Appeals, Maryland’s highest court overturned the lower court decision and held that the Liquor Board Rules at issue impose strict liability on licensees for prohibited conduct that occurs on their premises. You can watch the argument before the high court here.

Strict liability is generally defined as “the imposition of liability on a party without a finding of fault.” So, Steven Kougl did not need to be at fault to have liability. The licensee had absolute legal responsibility without having knowledge. The Liquor Board need only prove that the prohibited activity occurred on the licensed premises.

While this case arose in Baltimore City under their Board’s Rules and Regulations, that have since been amended, this is an important case that changes Maryland law and has statewide implications.

All liquor licensees in Maryland should be aware that the standard for violation of Liquor Board rules may be strict liability. While the precise language of the local rules and regulations will control, be aware that The Liquor Board need only prove that a prohibited activity occurred on the licensed premises to find a violation.