Baltimore County Liquor Board

As grocery stores and restaurants deliver exponentially larger quantities of food, beer, wine and spirits sales by delivery are only a step behind.

You cannot wait to deliver by autonomous vehicle or even drone. The market shift is happening now.

This is much more than only the impact that Amazon is already having on retail. Food delivery, in particular, is projected to grow by the double digits, at 12% per year, for each of the next five years. While grocery stores see some sales cannibalization, such has not been the case for restaurants, where more than 25% of consumers spend more on off-premises orders. But that many delivery sales do not include beverages, alcohol or otherwise, (.. despite that beverages provide high margins) presents a huge opportunity for increased sales.

And in Maryland that fast growing market for beer, wine and spirits delivery will, by law, be filled by existing alcoholic beverage license holders (i.e., Amazon Prime is not delivering beer in Maryland).

And this is not Homer’s dangerously wine-dark sea. Responding to that demand and after a change in state law, Alcoholic Beverages Article, § 3-506 et seq, that expressly provides for delivery, nearly every Board of Alcoholic Beverage Commissioners in Maryland now has a procedure to approve deliveries in their respective county. As a threshold matter, of course deliveries of beer, wine and spirits may only be made by a licensee in the county where they are licensed. This limiting factor is a huge boon to existing package good operations.

The rules vary from county to county. In Baltimore City, a licensee desiring to deliver alcoholic beverages must complete the Baltimore City Delivery Registration Application Form and receive a letter of authorization from the Board before deliveries may be made.

The City rule does not require a public hearing on the delivery request. But as a limiting factor, mimicking the 2015 state law “each delivery person shall be an employee of the licensee,” which arguably precludes the use of third party delivery companies? The rule also tracks the state enabling law expressly authorizing “delivery service upon request by customers through any mode of electronic contact (e.g. smartphone application, or internet on-line purchase, etc.).” Each delivery requires, “the signature of the intended recipient who is at least 21 years old, ..”

Baltimore County is currently proposing revisions to its rules, and its rules have historically been more limiting than other jurisdictions. A request for a letter of authorization to deliver requires that the licensees appear before the Board and demonstrate at a public hearing how staff will be trained to comply with the rule. The County requires an Alcoholic Beverage Delivery Form be completed for every delivery and maintained for a period of time (although that period of time is one of the rule changes pending).

In Howard County, similarly, licensees must appear before the Alcoholic Beverage Hearing Board for their letter of authorization from the Board to make deliveries. Delivery must be “made from the licensed premises by the retail license holder or an employee of the retail license holder” (.. again, parroting the state law). A delivery log must be kept that documents all retail deliveries in a manner similar to keg registration requirements.

Again, the rules vary between local jurisdictions in Maryland, but in each instance a licensee must obtain liquor board authorization in advance of making deliveries.

Local boards are also handling ordering through a third party differently. Despite the apparent limitation in state law, among the fastest growing businesses in this sector are those accepting orders by phone app and delivery by ..?

We first posted Delivery will Change the Alcoholic Beverage Industry in 2018 and we will follow up with more and additional posts on the all but explosive business opportunities of delivery.

It was recently widely reported that online alcohol delivery sales grew over 32% last year, increasing at an average rate of just about 3% month over month. None of those deliveries were by robot; not yet .. But, if you are not delivering alcohol to your customer, your competitor will.

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.

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.

One of the most common questions asked by callers to the local liquor boards is whether a liquor license is available for a particular location? The answer varies depending upon the local jurisdiction governing alcoholic beverage licenses.

But Baltimore County is typical of many locales. The maximum number of alcoholic beverage licenses in each of the 15 Election Districts within Baltimore County is limited to one On Sale License for each 2,500 of population of each Election District and one Off Sale License for each 4,000 of population of each Election District.

Population reports are updated annually by the County Department of Planning. The County’s population is growing, so many years there are new licenses available on a first come basis in some but not all Election Districts.

No license is transferable from the Election District in which it was originally located.

Of course you can purchase a license from an existing license owner within the Election District and the price of licenses varies greatly. In fact most licenses are purchased from a third party, some in prime Election Districts for hundreds of thousands of dollars.

But the real action in Baltimore County and many other locales are in the Exception Licenses that are generally available from the government without cost. There is an exception from the population requirements for an office building having at least 60,000 square feet of leased commercial office space (down from 75,000 square feet last year) allowing one Class B (On Sale) beer, wine and liquor license.

Hotel and motels having a minimum of 100 rental units are entitled to one On Sale beer, wine and liquor license.

Shopping Centers having a minimum of 200,000 square feet of leased store space (down from 250,000 square feet last year), a minimum of 10 tenants having existing leases for remaining terms of not less than one year each and parking facilities to accommodate a minimum of 400 automobiles are entitled to one Class A (Off Sale) beer, wine and liquor license and one On Sale beer, wine and liquor license.

One additional Off Sale beer, wine and liquor license and one additional On Sale beer, wine and liquor license are available in any shopping center having a minimum of 400,000 square feet of leased store space (down from 500,000 square feet last year) and at least 20 tenants having existing leases for terms of not less than one year each and contiguous off street parking facilities to accommodate a minimum of 800 automobiles.

One additional Off Sale beer, wine and liquor license and one additional On Sale beer, wine and liquor license are available in a shopping center for each additional 200,000 square feet of leased store space (down from 250,000 square feet last year).

Mixed use development licenses may be obtained in addition to other licenses available and the square footage used in calculating mixed use development Exception Licenses shall not also be considered for purposes of determining other Exception Licenses. No more than 5 On Sale Exception Licenses of any type may be issued for use at any location or mixed use development.

And there are also Club licenses that are excluded from the population and numerical requirements.

Again, a major advantage of obtaining a new license from the government, be it by population or an exception beyond its actual availability, is that it can be had at no cost, that is, beyond an application fee it does not have to be purchased.

As one might imagine, the availability of liquor licenses is actually quite elastic and not just in Baltimore County. If you have questions about the availability of an alcoholic beverage license or if we can otherwise assist you in obtaining a license so not hesitate to give us a call.

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.

 

The Baltimore County Board of Liquor License Commissioners is in the process of adopting new Rules and Regulations.

All liquor licensees are required to comply with not only the provisions of the Annotated Code of Maryland, the Baltimore County Code, but also the Rules and Regulations of the Board of Liquor License Commissioners for Baltimore County.

The current Rules and Regulations were last revised in 2014.

A version of those Rules and Regulations redlined to reflect the proposed changes is available here.

The Board of Liquor License Commissioners held a public hearing on February 27, and we both offered written comment and testified at the hearing.

Among the proposed changes, there is a new proposal for cameras to be installed in non public areas of licensed premises. We noted at the hearing that there will be a significant dollar expense of complying with this new mandate for cameras, and we noted that the proposed text is not precise in terms of which areas must have cameras (e.g., is it intended that there will be cameras in restrooms, in storage rooms, in walk in refrigerators, closets? We recommended that this new requirement be delayed until some date in the future, including greater specificity if a camera requirement is going to be implemented.

We also recommended clarification and standardization in the term “licensed premises,” in lieu of the several other ways that the licensed premises are described, including “premises covered by the license” and licensee’s “establishment.” This can be of importance where the Board of Liquor License Commissioners is faced with matters occurring ‘in a parking lot’ or ‘upstairs’ that may be outside of the licensed premises and beyond the control of the licensee. And what is and what can be included within the licensed premises may be a matter of inquiry as the Board approves new licenses.

We also recommended removing from the Rules and Regulations the required specific number of parking spaces from the Exception Licenses. That is, the Exception License that requires square footage of retail and office space is sufficient, especially in a day and age when land use regulations (including that there are LEED green building credits for reduced parking spaces) encourage less off street parking spaces not only in mixed use projects and in transit oriented development, but in all commercial uses. And all parking demand is being reduced by the use of Uber, Zip Car and the like. So, requiring more off street parking spaces seems counter to good environmental stewardship and has little, if anything, to do with liquor licenses.

While it might seem trivial to some, in the interest of staying current with modern trends and regulations, we recommended that the mandate in the Rules and Regulations for flush toilets be removed. That is, in the interest of potable water use reductions, waterless urinals are (not only permitted by the County plumbing code) but are becoming popular (again, they can contribute to LEED green building credits) in our County and waterless urinals should not be prohibited in licensed premises.

The effective date for the new Rules and Regulations is not yet known, but all licensees are well served by reviewing the redlined draft available from the link above.