Baltimore County liquor license

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.

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.

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.

 

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.

Maryland law provides, “before deciding whether to approve an application and issue a [liquor] license, a local licensing board shall consider .. the public need and desire for the license,” among other factors.

And the laws goes on to further provide 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,” among other grounds.

But what does that nebulous legal test mean? Among the most frequent question we are asked is, “how do I prove that a liquor license is necessary at a location?”

The answer is different depending upon the location. The structure of Maryland’s liquor board system is local, independent boards, mitigating against any consistency of interpretation. Such is intentional. There is reason to conclude from the elaborate statutory scheme regulating the liquor boards that the legislature well understood that there was a substantial likelihood of differing interpretations of the term “necessary” by different local liquor boards.

In Baltimore County, the local liquor board Rule 19 furnishes a population based formula for determining the maximum number of licenses that may be issued for each election district, and that rule does not mention the term “necessary.” In determining the legal meaning and effect of Rule 19, the population based nature of Rule 19, that one off-sale liquor license is appropriate for every 2,500 people, suggests that this is the number of licenses that is most appropriate for the population. Is it possible that this number is “necessary for the accommodation of the public?”

No, because the final paragraph of Rule 19 states that the rule is in addition to those State law factors and that the Rule is not sufficient, alone, to meet the requirements for new licenses.

If Rule 19 does not control the standard for necessity, then how is that standard to be given meaning? The Maryland Court of Appeals defined the term “need” in the context of zoning law involving a challenge to the location of a doctor’s office in a residential area. The relevant law stated that a doctor’s office was a permissible use in a residential area if, inter alia, there was a “need” for such services in the area. The Court held that, in this context, “need” meant that which was “expedient, reasonably convenient and useful to the public.”

That zoning case is analogous to liquor licensing matters. State law allows for the transfer of a liquor license if, among other things, “need” is shown. The statute itself indicates that “need” should be considered in light of what is “necessary for the accommodation of the public.” When accommodation is the ultimate goal, it is reasonable that absolute physical necessity is not required. This is especially true when, as here, the accommodation at issue involves the location of a liquor store.

Black’s Law Dictionary states that the meaning of “necessary” varies with the context in which it is used:

[The word] may import absolute physical necessity or inevitability, or it may import that which is only convenient, useful, appropriate, suitable, proper, or conducive to the end sought. It is an adjective expressing degrees, and may express mere convenience or that which is indispensable or an absolute physical necessity.

The Baltimore County licensing board determined, here, a definition of need that focuses on convenience is, given the context, most appropriate.

The Maryland Court of Special Appeals, in 2000, concluded that “necessary,” in this instance, means that the transfer of the liquor license to the transfer site will be “convenient, useful, appropriate, suitable, proper, or conducive” to the public in that area. And this is proven at a liquor board hearing with both expert and lay witness testimony.

We can provide you with expert witness testimony for your liquor board hearing to prove that a liquor license is necessary at a location.

 

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.