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.

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.