A liquor license requires a location in a proper zoning district.

An August 22, 2017 decision by the Howard County, Maryland Board of Appeals Hearing Examiner is both a detailed exposition of a liquor store as a permitted use under the zoning regulations and a wonderful treatise on the broader topic of land use law in that suburban Maryland county.

But this decision is much larger than this Howard County case alone. Today in commercial real estate, alcoholic beverage licensed businesses are increasingly more valuable because they are largely free from the downturn that most retail is seeing as a result of the Internet and online shopping. In most places alcoholic beverages cannot be bought online and shipped. And restaurants with food costs supported by alcoholic beverages are increasing in dramatic numbers.

This Howard County appeal was about an application by the property owner Science Fiction, LLC to the Planning Board to “clarify a liquor store does not have to be contained within the full service food and grocery store to be a permitted use.”

The prior existing regulation included as a permitted use, “l. full service food and grocery stores, and related uses, of 100,000 square feet or more.” The Planning Board’s counsel repeatedly told the Board, the issue was whether a liquor store use is compatible with a grocery store. Science Fiction also asked the Hearing Examiner “to consider [the FDP amendment application] as a zoning matter, not a liquor licensing matter.”

The 39 page decision is a great read beach weekend read for zoning geeks as it reveals the history of zoning, from the first 1916 New York City ordinance to the inapplicability of Euclidean principals in the James Rouse’s planned community of Columbia within Howard County where this liquor store was proposed.

But the liquor license industrial complex will delight in the portion of the decision discounting economic competition as a valid objection,

To the extent the Planning Board considered economic competition in its November 4, 2016 denial, meaning the impact of the proposed FDP amendment on other liquor stores, the Board’s action was arbitrary and capricious. Kreatchman v. Ramsburg, et al., 224 Md. 209, 219-220, 167 A.2d 345 (1961) (holding a liquor store owner in the Normandy Heights shopping center whose sole reason for objecting to a Zoning Board action was prevention of competition from a proposed shopping center further west on US 40 was not aggrieved when “[h]is only concern is with the threat of competition from a possible package liquor store in the [other] shopping center. It is to protect himself against that possible competition that he seeks the protection of the zoning regulations.”) Appellant Exhibit 6 is a Hearing Examiner decision and order addressing the inapplicability of economic competition considerations in zoning actions.

Appropriate zoning is required for all uses, not only alcoholic beverage related uses. The application of Science Fiction was approved, adding new subsection “.m” to the § 7D Permitted Uses text criteria, in the New Town zoning district,

m. Liquor store – located on the full service food and grocery store property and partitioned from the full service food and grocery store building. The liquor store has an independent entrance for deliveries and customers. “Partitioned” means walls or other physical divisions separating the full service food and grocery store and liquor store uses.

With zoning in place, an application may now be made to the liquor board for this liquor store adjacent to a Wegmans grocery store.

We are often asked, “what do I need to know about buying a restaurant in Maryland?” While each prospective purchase is driven by the unique facts of the situation and there are no two restaurants, bars or taverns that are alike, each has as its key asset an alcoholic beverage license. This blog post is a “Top 10” list of issues to consider (.. okay 10 plus 2 extra issues):

  1. What are you buying? Is this a purchase of the stock in the business entity owned by the principals or a purchase of the assets of the business? There are justifications for each option, but on balance, an asset purchase is likely more advantageous for a buyer.
  2. Does the sale include the building where the restaurant is located or is the space leased and, if so, is that lease assignable by the seller (with or without landlord consent)? Most restaurants in Maryland are in leased spaces.
  3. Is a covenant not to compete by the seller and its principals for some number of years part of the deal?
  4. What is the agreed purchase price? How much is the deposit, the amount to be paid at closing on the transaction, is there any seller financing, and the like?
  5. How is the purchase price allocated for income tax purposes? How will transfer and recordation taxes be shared and are there other taxes due for the business and on this transaction?
  6. What representations and warranties is the seller making about the business, including about what business assets exist, the financial condition of the business, etc.? Or is this an “as is” transaction?
  7. What type of due diligence will be undertaken by the buyer, including how long a study period will be provided, before the deposit becomes nonrefundable?
  8. Among the most important issues (because of the large dollars that alcohol sales contribute to a restaurant) is the contemplated transaction contingent upon transfer of the alcoholic beverage license, including possibly allowing for the running of any appeal time.
  9. Will each party comply and cooperate with the other party to assure compliance with bulk sales laws, including notices to all creditors.
  10. What is the closing date on the contemplated transaction?
  11. Will the business will continue to be operated in the ordinary course pending closing?
  12. Is there a broker to be compensated?

This Top 10 plus 2 list of issues to be considered is really just the starting point. Some are easily dealt with between the parties and others, like the transfer of the alcoholic beverage license, which is key in the value of the business, require an application, public hearing and approval by a board of liquor license commissioners.

And not just because you are reading a blog written by attorneys, but given that large dollar amounts involved, the complexity of the transaction and potential liabilities involved, the purchaser of a restaurant or other alcoholic beverage business in Maryland should be represented by legal counsel. We do that work and would be pleased to speak with you.

This blog post is a review of retail liquor license violations across Maryland during 2016.

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

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 or fines to suspension of a license for a period of time, ultimately to revocation of a license.

Local licensing boards across the state reported a total of 859 retail license violations during 2016.

Overwhelmingly, the largest category of those violations, 321, that is over 37% 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.

In a statistical anomaly the only other violation that reports in triple digits is sale of alcohol without an license, however, 101 of the 103 reported violations are in Prince George’s County such that this is a locale specific issue not necessarily of gravis concern to most licensees.

The next largest categories of violations are ministerial in nature. 63 licenses paid penalties for late renewal filings and 49 paid penalties for not being able to produce and alcohol awareness certificate.

35 alcoholic beverage businesses had penalties assessed for being a public nuisance. 22 of those were in Baltimore City and most were part of the larger effort to reduce the number of package goods stores.

33 were penalized for illegal conduct on the licensed premises, ranging from solicitation of sex acts to sale of drugs; and, another 15 allowed prohibited practices in the premises the largest number of which involved partially clothed dancers.

29 establishments were cited for unauthorized entertainment.

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

16 were penalized for sales to intoxicated persons.

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

12 were serving during prohibited hours.

11 purchased alcoholic beverages from other than a wholesaler.

There were also license violations for: an intoxicated server; gambling on the premises; open container; minors conducting the sale; 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.

Curiously, there were no reports in 2016 of violations for: serving outdoors without permission; refilling bottles; failure to register a keg; underage employees; and, noise disturbing the neighborhood, despite violations for each during 2015.

Statistically, with 139 each Montgomery and Prince George’s reporting the largest number of those violations. The only other jurisdictions in triple digits was Baltimore City with 122 violations. Baltimore County reported 54 violations. Frederick County had 42 and Allegheny had 41 respectively. Carroll County reported 39 violations. Howard County had 35 violations and other locales had fewer. No jurisdiction reported no violations.

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


It is not surprising that in Maryland the determination as to whether the liquor license is owned by the individual applicants, or by a corporation that operates the business, depends on the circumstances of the particular case.

That said, Maryland law has been and continues to be that liquor licenses issued to individuals for the use of a corporation, which is the most common situation, are owned by the corporation.

The Baltimore County alcoholic beverage license that was the subject of the court challenge in 2001, in the widely discussed case of Rosedale Plaza Limited Partnership v. Lefta, Inc., et al., over who owned the license read, in pertinent part:

THIS IS TO CERTIFY, that Andreas Pitsos, Maria Papadimitriou, Irene A. Pitsos, Lefta, Inc., t/a Hillbrook Station Raw Bar & Grill/Chesaco Liquors, 1703–09–11 Chesaco Avenue, Baltimore, MD 21237 is licensed by the State of Maryland to keep for sale, and to sell all alcoholic beverages at retail at the place herein described, for consumption on the premises or elsewhere.

In that case and despite a statute (.. that no longer exists), then Article 2B Section 9-101(a), which provided in pertinent part:

License issued to individuals; application for partnership.—A license may not be issued to a partnership, to a corporation, or to a limited liability company, but only to individuals authorized to act for a partnership, corporation, or limited liability company who shall assume all responsibilities as individuals, and be subject to all of the penalties, conditions and restrictions imposed upon licensees ..

The appellate court found that liquor license was owned by the corporation. And that has been Maryland law.

Note, Maryland is a minority jurisdiction in this regard and most other states hold to the contrary. But at least 38 states have a Dram Shop Act (but not Maryland) which raises the stakes on who is strictly liable to anyone injured by a drunken patron.

Consistent with the decision is Lefta, in another instance, the Court of Appeals held that a state tax lien of a corporation could be enforced by a writ of execution upon a liquor license issued for the benefit of that corporation. Similarly, in another case, the Court of Appeals accepted that a writ of execution that had been entered against the liquor license to satisfy a personal debt of the licensee arising from his divorce would be improper if the license was owned by a corporation.

Subsequent to all of that and if it were not already clear how Maryland courts will addresses this issue, there are now new sections Maryland Alcoholic Beverages Article of the Annotated Code (the recodified Article 2B), specifically entitled,

Section 4-103 Application on Behalf of Partnership

Section 4-104 Application on Behalf of Corporation or Club

Section 4-105 Application on Behalf of Limited Liability Company

While the current codes expressly provides, “[T]his section is new language derived without substantive change from the second sentence of former Art. 2B, § 9-101(a)(1) and the second sentence of (b)(2), as it related to partnerships,“ .. it is a substantive change in the statute to be consistent with the accepted interpretation.

None of this precludes an individual from doing business in his own name, as a sole proprietorship, and having the liquor license is his name.

There is now no question in Maryland liquor licenses issued to individuals for the use of a partnership, a corporation or an LLC, are owned by the that legal entity and, absent some express agreement to the contrary, the persons named on the liquor license as a licensees have no individual ownership interest in the liquor license.

The Board of Liquor License Commissioners for Baltimore County has issued new Rules and Regulations.

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, Board 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 and those code sections require public notice and a public hearing before adoption the Rules.

In March of this year, our blog post Baltimore County to Adopt New Liquor Licensee Rules described the drafting and public hearing for the now final Rules. There are significant changes from the earlier draft. Deleted from the final Rules is the proposal that licensed premises have a video camera system.

Added to that draft is the now new Rule 39 implementing the new State law that authorizes the sale of draft beer in non-refillable growlers. This is a significant new opportunity for licensees, and it particular restaurants that otherwise do not have an ability to sell beer (.. including taking advantage of the growth in craft beers) for off premises consumption.

The new Rules are a great clean up of the last version promulgated in 2014, including ‘keeping pace with the times’ by expressly authorizing notice of certain hearings to be posted on the Board’s website. But there are still vestiges of the past in this new document, including a fun regulation that a “licensee may not use or permit to be used or dispensed on the licensed premises any violent emetics or purgatives” (.. you will have to Google that).

And there are a host of substantive changes that create more and additional economic opportunity arising from the sale of alcoholic beverages in the County. There are changes to Rule 19, including the all important “exception licenses” (i.e., exceptions to the limitations on the number of licenses by population with an election district). For example, the new provisions requires,

Office buildings having a minimum of sixty thousand (60,000) square feet of leased commercial office space provided that each such building shall be limited to one (1) Class B (On Sale) beer, wine and liquor license.

.. a more generous provision than the prior Rule that required a 75,000 square feet office building. And there are other similar more economic opportunity friendly changes like reducing the minimum size of a shopping center from 500,000 square feet to 400,000 square feet for an exception Class A off premises sales license.

The new Rules will advance the alcoholic beverage industrial complex in Baltimore County. All licensees should read the June 2017 Rules.

Enacted unanimously by the Maryland Senate and House of Delegates and approved by the Governor, a new state law establishes a nonrefillable container permit for draft beer that will create a new revenue stream for restaurants, bars and others across Maryland.

The permit authorizes the sale of draft beer for off-premises consumption by packaging the beer in a nonrefillable container that meets specific standards. The permit may be issued by a local board of license commissioners in 19 counties, Baltimore City, and the City of Annapolis; these are the same jurisdictions that may currently authorize the sale of draft beer in larger refillable containers.

The new law takes effect July 1, 2017.

The law will have a meaningful positive impact for a small business that will realize increased sales through this new category. For example restaurants that have an alcoholic beverage license authorizing on premises sales only will now, after obtaining the permit authorized by the law, be able to sell draft beer for off premises consumption. This will especially be an advantage for the exploding craft beer industry.

There is a great deal of excitement for this “Growlette” or smaller nonrefillable version than the existing authorized refillable Growler.

House Bill 292, cross filed with Senate Bill 491, establishes specific requirements for the nonrefillable container permit for draft beer. The term and hours of sale for a nonrefillable container permit are the same as those of the underlying license. An applicant who holds an underlying license without an off-sale privilege must meet the same advertising, posting of notice, and public hearing requirements as those for the underlying license.

To be used as a nonrefillable container for draft beer, a container must:

be made out of aluminum;

be sealable;

have a capacity of 32 ounces;

be branded with the identifying marks of the seller of the container; and

bear the federal health warning statement required for refillable containers.

Positively, applicants in specified jurisdictions may not be charged a fee for the nonrefillable container permit if they already have a refillable container permit.

The current law although little used, dating to 2014, already standardized the requirements for alcoholic beverage refillable containers used in the sale of draft beer or wine for off premises consumption. The holder of a refillable container permit may sell, fill, or refill any container that meets certain standards.

The 2014 law already authorizes a refillable container that: for beer, have a capacity of not less than 32 ounces and not more than 128 ounces; for wine, have a capacity of not less than 17 ounces and not more than 34 ounces; be sealable; be branded with an identifying mark of the seller of the container; bear the federal health warning statement; display instructions for cleaning the container; and bear a label stating that cleaning the container is the responsibility of the consumer, and that the contents of the container are perishable and should be refrigerated immediately and consumed within 48 hours after purchase

Many businesses have advised that there is great interest in nonrefillable containers for draft beer, especially in the expanding craft beer industry.

There will be costs of the supplies, storage needs, and possible recycling issues involved with nonrefillable containers, but because the establishments already sell draft beer, this is a win win.

We assist the alcoholic beverage industry in positively leveraging constraints and finding advantages in matters involving the sale of licensed beverages, often including new approaches and possibilities in this emergent area. If we can assist you with sound business advice and legal counsel in matters of the sale if draft beer or otherwise in the broader licensed beverage industry do not hesitate to give Nancy Hudes or Stuart Kaplow a call.

It is difficult to comprehend what new liquor licensing laws could possibly be required in Maryland in 2017 after the legislature passed the largest bill in Maryland history last year, some 3,180 pages long, codifying alcoholic beverage laws.

But as the just concluded 437th session of the Maryland General Assembly, began in the City of Annapolis on the eleventh day of January 2017, and ending on the tenth day of April 2017, more than 2,881 bills were introduced of which more than 361 bills were enacted, including more than a few that will provide business opportunities for those engaging in the sale of alcoholic beverages. This post is a compilation of those bills.

For the past several years, craft brewers in the State have backed legislation to increase the amount of beer they may sell for on-premises consumption in their taprooms. They have been opposed by beer wholesalers and retailers, who have feared that their businesses would suffer as a result. Of the several bills on these issues, the sides reached agreement on House Bill 1283 (passed) that applies to all Class 5 breweries, which include both small craft breweries and a large Guinness brewery scheduled to open in Baltimore County. Note, the bill does not apply to pub-breweries, micro-breweries, or farm breweries.

The bill increases, from 500 barrels to 2,000 barrels, the amount of beer a Class 5 brewery may sell for on-premises consumption each year. The brewer may apply for permission to sell an additional 1,000 barrels per year, provided any beer sold in excess of the 2,000 barrels is first purchased by the brewer from a licensed wholesaler. The bill also authorizes a Class 5 brewery to contract to brew and bottle beer with and on behalf of another Class 5 brewery or holder of a Class 2 rectifying license, Class 7 micro-brewery license, Class 8 farm brewery license, or nonresident dealer’s permit. Contract beer that is sold for on-premises consumption at a Class 5 brewery may not exceed the greater of 25% of the total number of barrels of beer sold annually for on-premises consumption or 1.2% of total finished production under the Class 5 brewery license. Also, the bill alters the hours during which the sales and serving privileges of an on-site consumption permit may be exercised for specified Class 5 breweries. For license holders who obtain an on-site consumption permit after April 1, 2017, the hours of sale for on-site consumption extend from 10 a.m. until 10 p.m., Monday through Sunday. Class 5 breweries, who obtained licenses before April 1, 2017, are exempt from the bill’s stated hours of sale and will continue to operate under the longer hours established in each local jurisdiction. Continue Reading New Alcoholic Beverage Laws from the 2017 Session of the Maryland Legislature

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

A recent decision by the Maryland Court of Special Appeals is instructive as to when a liquor license is really dead.

The 25 page decision is not for the faint of heart but is important for anyone acquiring a liquor license.

The Maryland appellate court explains at the beginning of the 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.

Notwithstanding the extensive procedural history of this case, the dispositive facts were not in dispute. Turner’s, an establishment in Federal Hill, closed for business on July 11, 2009. The first application to the Baltimore City Liquor Board to transfer the liquor license was filed on June 19, 2009. That application was approved by the Board on July 23, 2009. There was little is any activity for a period of time. On February 25, 2013, a second application for transfer and expansion was filed. The original intent was to transfer the license to 1100-06 South Charles Street. Later, it was planned to expand and utilize the license at the original East Cross Street premises.

The appellate court read the state law that applies to Baltimore City, Article 2B Section 10-504(d)(2)(i) providing that an alcoholic beverage license shall expire 180 days after the holder’s business has closed or ceased alcohol sales, unless: “An application for approval of a transfer to another location or an application for assignment to another person pursuant to § 10-503(d) of this subtitle has been approved or is then pending.”

(2) 180 days after the holder of any license issued under the provisions of this article has closed the business or ceased active alcoholic beverages business operation of the business for which the license is held, the license shall expire unless:

(i) An application for approval of a transfer to another location or an application for assignment to another person pursuant to § 10-503(d)[13] of this subtitle has been approved or is then pending;

(ii) An application pursuant to § 10–506[14] of this subtitle has been approved or is then pending; or

(iii) A written request for a hardship extension, as provided in this subsection, is filed within the 180–day period.

(3) The licensee or other appropriate interested parties may make a written request to the Board for an extension of the life of the license due to undue hardship, for a time period of no more than a cumulative period of 360 days after the date of closing or cessation of alcoholic beverages business operations of the business for which the license is held.

In its April 26, 2017 opinion, the appellate court held, the plain language of the statute supports the Liquor Board’s conclusion that the license had “expired.” The closing of Turner’s in July of 2009 triggered the 180 day rule (“180 days after the holder of any license . . . has closed the business or ceased active alcoholic beverages business operations . . . the license shall expire[.]” Article 2B, §10-504(d)(2)).

The protestants in the proceedings below called as a witness former Senator George Della, who had sponsored the 2000 legislation creating Article 2B § 10-504(d), which is commonly referred to as the “180 day rule.” According to Senator Della:

It basically says [a] license can remain dormant for 180 days. And then if there’s a hardship, then that licensee can come back to the [B]oard and make their case, if they’re in a hardship situation. And then the Board could then grant them another extension of 180 days. ..

Beyond that, if they don’t activate that license, that license is dead. That’s what the legislative intent is behind the 180 day rule. And the Board knew it.

Curiously, and despite that the license would have been considered dormant as of October 17, 2011, possibly in a last grasp for life, it appears that the contract purchasers filed their first and only request for a hardship extension in a letter dated August 13, 2014?

In sum, the Board correctly determined that the license had expired. And, neither the approved but uncompleted transfer nor the Board’s subsequent renewals of the license could imbue it with new life.

You can read the entire decision in Board of Liquor License Commissioners for Baltimore City v. Austin here.

There are no doubt many zombie liquor licenses in Baltimore City and throughout the State. If we can assist you with the due diligence to verify that a license is alive or otherwise in dealing in matters of alcoholic beverage law, do not hesitate to give us a call.

As of the writing of this blog post, House Bill 292 has passed the House and the cross filed bill SB 491 has passed the Senate, so it appears that the soon to be completed 2017 session of the Maryland General Assembly will establish a 32 ounce nonrefillable container permit in the State. The permit authorizes the sale of draft beer for off-premises consumption by packaging the beer in a nonrefillable container that meets specified standards.

Many suggest that there is little interest in nonrefillable containers for draft beer (.. why not simply buy a container already filled?).

But, there has been a very real push for this “Growlette” or smaller version than the existing authorized Growler.

Since authorized by the legislature in 2014, Maryland has permitted alcoholic beverages refillable containers to be used in the sale of draft beer or wine for off-premises consumption. The holder of a refillable container permit may sell, fill, or refill any container that meets the specific standards set out in the state law, including that are fillable container must:

For beer, have a capacity of not less than 32 ounces and not more than 128 ounces; and for wine, have a capacity of not less than 17 ounces and not more than 34 ounces.

But that was too large for may beer drinkers.

So, HB 292, enacted with companion bill, SB 491, amends the state law, so “to be used as a nonrefillable container” for draft beer, a container must: be made out of aluminum; be sealable; and have a capacity of 32 ounces;

The new permit may be issued by a local board of license commissioners in 19 counties, Baltimore City, and the City of Annapolis; these are the same jurisdictions that today authorize the sale of draft beer in larger refillable containers.

This does not affect the few locals that authorize the sale of refillable wine. And its impact on refillable beer is not clear.

In amendments to both the House and Senate bills, the annual permit fees were capped at $50 for an applicant whose existing license has an off-sale privilege and $500 for those who do not currently have an off-sale privilege. An applicant with a refillable permit will not be charged an additional fee.

But the bill is a winner for the alcoholic beverage industry in Maryland which now has another good option to satisfy customers, including possibly significantly those who do not currently have an off-sale privilege and will now be able to sell a nonrefillable container of draft beer.

The new law, if signed by the Governor will go into effect July 1, 2017 and as soon thereafter as local boards enact the local permits.

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.