Maryland liquor license

Maryland only this past year repealed provisions of law applicable in specified counties that made it a criminal offense to knowingly selling or providing an alcoholic beverage to an individual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.

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.

While it is difficult to comprehend what new liquor licensing laws could possibly be enacted in Maryland after the legislature passed the largest bill in Maryland history, only 2 years ago in 2016, some 3,180 pages long, re-codifying the alcoholic beverage laws, this is review of just that ..

At the close of the just concluded 438th session of the Maryland General Assembly on April 9, 2018, 1,269 Senate bills and 1,832 House bills were introduced of which 889 bills were enacted, including more than a few that will provide business opportunities for those engaging in the business of alcoholic beverages.

Among the significant issues involving alcoholic beverages are:

Comptroller’s Office

In Maryland, alcoholic beverages manufacturers and wholesalers are regulated by the Comptroller’s Office, while alcoholic beverages retailers are regulated by local boards of license commissioners. House Bill 1316 (Ch. 25) is largely seen as a rebuke to the Comptroller for his legislative activism on craft breweries when it establishes a Task Force to Study State Alcohol Regulation in the State. The 21-member task force, whose membership includes legislators, alcohol industry representatives, law enforcement representatives, and health care professionals, must examine whether the Comptroller’s Office is the most appropriate agency to ensure the safety and welfare of Maryland residents, or whether those tasks should be assigned to another State agency or to one created specifically to carry out those tasks.

Wineries

A Class 4 limited winery license, issued by the Comptroller, authorizes the sale and sampling of wine and pomace brandy produced by the license holder for consumption. Among other things, a license holder may distill and bottle up to 1,900 gallons of pomace brandy made from available Maryland agricultural products. House Bill 972 (passed) establishes stricter requirements for a business to obtain a Class 4 limited winery license. Specifically, the bill changes the broad requirement that a licensee use Maryland agricultural products to produce wine and pomace brandy to instead require the licensee to own or have under contract at least 20 acres of grapes or other fruit in cultivation in the State for use in the production of wine or ensure at least 51% of the ingredients used in alcoholic beverages production are grown in the State. The Secretary of Agriculture each year may grant a one-year exemption to an applicant from the 51% requirement. The bill will not apply until May 1, 2022, to any person who holds a Class 4 license on or before June 30, 2018.

Class 6 Limited Wine Wholesaler’s License

A holder of a Class 4 limited winery license whose winery produces no more than 27,500 gallons of its own wine annually may obtain a Class 6 limited wine wholesaler’s license. The Class 6 license allows the winery to sell and deliver its own wine produced at the licensed premises to a retailer or other person authorized to acquire the wine; however, a license holder may not sell the wine to another wholesaler. House Bill 896 (passed) increases the annual amount of wine that can be produced, sold, and delivered by the holder of a Class 4 limited winery license that also has a Class 6 limited wine wholesaler’s license from 27,500 gallons to 35,000 gallons. The bill also authorizes a Class 6 license holder to sell its wine to a holder of a wholesaler’s license.

Distilleries

There are two types of manufacturer’s license issued in the State that authorize the production of liquor. A Class 1 distillery license authorizes the establishment and operation of a plant for distilling brandy, rum, whiskey, alcohol, and neutral spirits at the location described in the license. Similarly, a Class 9 limited distillery license, which may be issued to a holder of certain Class B or D beer, wine, and liquor licenses, authorizes the license holder to distill, rectify, bottle, or sell up to 100,000 gallons of the same types of alcoholic beverages; however, the Class 9 license holder may sell at retail on the premises of the Class D or Class B license only 15,500 gallons of liquor each year. Senate Bill 384 (passed) increases the annual amount of liquor that may be sold at retail under a Class 9 limited distillery license to 31,000 gallons.

Manufacturer Off-site Permits

The Harford County Farm Fair is an annual event celebrating Harford County’s agricultural heritage and features rides, farm animals, and food, among other attractions. House Bill 270 (passed) allows the holder of a brewery off-site permit or a winery off-site permit to use the permit to sell and provide samples of beer or wine at this fair.

Retail Sales of Alcoholic Beverages – Licenses from Multiple Jurisdictions

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 generally limits the number of alcoholic beverages licenses that may be issued to a single license holder to one; however, there are 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. House Bill 1003 (passed) authorizes a single individual to hold multiple Class B beer, wine, and liquor licenses or equivalent licenses issued by different local licensing boards for restaurants, hotels, or motels. The number of licenses that a single individual may hold is only limited by the cap imposed by each local 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.

Continue Reading Alcoholic Beverages in the 2018 Maryland General Assembly Session

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.