Booze News: Distilled in Room 215

A blog about the Baltimore City Liquor Board

What happened at the Liquor Board on February 12, 2015.

Written by Becky Witt

11:00 a.m. cases

All cases on February 12 were heard at 11:00am.

I. Transfers and amendments:

Applicant David Hitchner
Business Name Chasers, LLC
Trading As trade name pending
Address 2501 Fleet Street
Type of License Class “BD7” Beer, Wine & Liquor License
Reason for hearing Application to transfer ownership
Hearing notes

Executive Secretary Michelle Bailey-Hedgepeth announced that the applicant and the community association had both asked to postpone the hearing in order to give both sides time to meet and negotiate. Chairman Ward agreed to the postponement.

Zoning R-8
Neighborhood Canton
Area demographics 86% White, 4% Black, 3% Asian; 5% Hispanic ethnicity; 9% households have children under age 18; median household income: $82,130
Does corp entity exist, in good standing? Yes; yes.
Location of entity’s principal office Baltimore City
Attorney for licensee N/A
# in support N/A
Attorney for community N/A
# of protestants N/A
# of inspectors/police officers N/A
Result of hearing Postponed
Vote tally None taken
Portions of state law cited in decision N/A
Other reasons given for decision N/A
Issues raised in audit present in this case or other issues observed None
Applicants James Shaffer & Albert Shaffer
Business Name Shaffer Investment Group, LLC
Trading As Argosy Café
Address 5 N. Calvert Street
Type of License Class “B” Beer, Wine & Liquor License
Reason for hearing Application for a new Class “B” BWL Under provisions of Article 2B §6-201(d)(vii), requiring $700,000 in capital investment in restaurant fixtures and facilities and a seating capacity exceeding 150 people; request for off-premises catering
Hearing notes

The Board called next a continuation of the January 22, 2015 hearing for the proposed Argosy Café. Ms. Caroline Hecker and Mr. Justin Williams represented the applicants, both present. Mr. Tom Yeager, of Downtown Partnership, was also present in support of the new license application.

Ms. Hecker went over the requirements of the new license again, which include a $700,000 capital investment, a minimum of 75 seats, and 65% annual average daily receipts from sales of food. She argued that the applicants have shown a $797,000 investment two different ways: the first way is that the value of the premises to be operated by the applicants is $377,000, calculated by the square footage that they will take up. The second way is that the applicants will pay $489,000 in rent for the property, over their 10-year lease. Hecker suggested that the Board may wish to seek the advice of the Attorney General on this issue, a suggestion that Chairman Ward immediately dismissed.

Hecker pointed out that, in most areas of the city, a restaurant may apply for a new Class B license after having invested $200,000, not including the costs of land or buildings. In the 46th legislative district, the requirements are heightened. In five smaller areas within the 46th district, the requirements are heightened even further. In all five of those small districts (within which this restaurant would fall), the statute does not specifically say that the capital investment must exclude the cost of land or buildings. Rather, the statute is silent on whether or not the investment may include real property. Hecker argued that, because the legislature did not specifically exclude land and buildings, the inference is that real property could be included in the capital investment requirement. Hecker had spoken with former state senator George Della, whom, she claimed, had agreed with her on this. Mr. Della was not present to give his own perspective, nor did he provide a letter or other document to explain his position or give any legislative history. Hecker said that the legislature knows how to exclude the costs of land or buildings when it chooses to; because they did not exclude it, those costs should be included.

The second argument that the attorney made is about when the capital investment must be complete. Hecker said that there is no provision in Article 2B that requires that the capital investment be new or be made prior to the issuing of the license. She pointed out that the applicants will be paying $4,000 in rent per month over ten years. Ward noted that the applicants are assuming that the rent will be paid over ten years, but it will be due in monthly installments.

Commissioner Moore said that Hecker’s argument that the capital investment did not have to be a new investment was illogical and against the plain meaning of the law. She also said that there is a difference between the terms cost, investment and value, which the applicants were trying to make equivalent. Moore said that the terms in the law were simple, and the Commissioners should not have to go through mental gymnastics to approve the license. Even if the Commissioners counted rental payments as part of the investment, the applicants aren’t going to spend that amount for ten years.

There was then some confusion about the exact space where the restaurant will be located within the large building. Commissioner Moore doubted the restaurant’s ability to fit in 75 seats in the space she was imagining. Chairman Ward asked Chief Inspector Shelton Jones to go out and visit the space, to report back to the Board on how big it is and whether 75 seats will fit.

Ms. Hecker concluded by arguing that the Board should interpret the law in such a way that it produces the most “beneficial results.” She said that the legislative intent of the statute was to “ensure legitimate restaurants,” which these applicants plan to create. There is no community opposition on the record, and Mr. Tom Yeager was present in support of the project. Hecker suggested that the Board hold the matter sub curia until they have had the chance to read her memorandum on the issue, which she had submitted the afternoon before the hearing.

Zoning B-4-2
Neighborhood Downtown
Area demographics 39% White, 37% Black, 16% Asian, 3% 2 or more races; 5% Hispanic ethnicity; 9% of households have children under age 18; Median Household Income: $38,146; 18% households live below poverty line
Does corp entity exist, in good standing? Yes; yes.
Location of entity’s principal office Flagstaff, AZ
Attorney for licensee Ms. Caroline Hecker, Mr. Justin Williams, of Rosenberg Martin Greenberg LLP
# in support 3
Attorney for community None
# of protestants 0
# of inspectors/police officers 0
Result of hearing Held sub curia, which means that the Board will consider the attorney’s oral and written argument and will wait for Mr. Jones’ inspection of the premises before making a decision
Vote tally None taken
Portions of state law cited in decision None
Other reasons given for decision Because the Commissioners had not had the time to read Ms. Hecker’s memorandum, and because they had further questions about the size and location of the restaurant space, they agreed to hold their decision. The case was not rescheduled for a new hearing.
Issues raised in audit present in this case or other issues observed

It is true that the term “capital investment” is not well-defined, both in general throughout Article 2B and specifically in the section that the applicant is citing to apply for a new Class B restaurant license. When a statute is unclear or could be interpreted in more than one way, an agency may interpret that statute in any reasonable manner that is consistent with the statute as a whole, and a court will give deference to an agency’s interpretation. However, an agency cannot interpret a statute in an inconsistent way – applying it in one way in one case and in another way in another case.

Here, the Board has consistently told applicants that they must have invested the full amount required by statute before they receive their new Class B restaurant license, whether that required amount is $200,000, $500,000, or, as here, $700,000. The Board cannot legally refrain from applying this rule in this case and then go back to applying it to future licensees. The Board could announce a change in their interpretation and apply the law differently going forward, but the Board must not be “arbitrary and capricious” in its interpretation and application of the law.

It makes sense to require that the applicant actually have spent the capital investment money before receiving their license, though technically the applicants’ attorney is correct that the statute does not explicitly require it. Over sixty percent of restaurants close or change ownership within the first three years of operation. If that happens in this case, and the Board has allowed the applicants’ rent to be considered their investment, they will have only spent $144,000 by the time they close their restaurant, which will not bring their total investment above $700,000, as required by the statute.

It also makes sense to require the money spent to be “new money” expended for the benefit of the business requesting the new license. The Board acquiesced on this at the Atwater’s hearing (over Commissioner Moore’s dissent) but has otherwise required it. Otherwise, it is difficult to draw the line of which investment should be counted in the total.

In Ms. Hecker’s final argument, that the Board should interpret the statute to ensure “beneficial” results, there was no discussion or explanation of any of the terms used. It was unclear what it means to be a “legitimate restaurant” and what would differentiate it from an illegitimate restaurant, or whether the attorney’s understanding of “beneficial” results meant anything different from the results desired by her client.

II. Hardship Extensions:

Applicant Thomas Mathison
Business Name Ott Corporation
Trading As Quest
Address 3607 Fleet Street
Type of License Class “BD7” Beer, Wine & Liquor License
Reason for hearing Request for a hardship extension under the provisions of Article 2B Section 10-504(d)
Hearing notes

Mr. Mathison was present, unrepresented. Mr. Stephan Fogleman, former Chairman of the Board of Liquor License Commissioners was also present at the hearing, on behalf of a potential future buyer of the license. Fogleman told the Commissioners that the license’s decades of operation ceased on August 31, 2014, which was Labor Day weekend. The building where the license was located has been demolished, and the owner of the property is building luxury townhouses in the building’s place.

Commissioner Moore asked about the nature of the undue hardship (as required by Article 2B section 10-504, the Board must make a determination that the licensee has suffered an undue hardship before they may grant an extension.) Mr. Fogleman responded that Mr. Mathison’s landlord ended the lease and razed the building, through no fault of Mr. Mathison’s.

To be sure of the timeline, Commissioner Moore went through it again: the license ceased use on August 31, 2014. The licensee submitted a request for an extension of the license due to undue hardship on January 30, 2015, within the statutory period, and is asking for an additional 180 days from the end of the first 180-day period.

Zoning B-2-2
Neighborhood Brewers Hill
Area demographics 66% White, 9% Black, 3% Asian; 20% Hispanic ethnicity; 17% households have children under age 18; median household income: $60,484; 15% households live below the poverty line
Does corp entity exist, in good standing? Yes; yes.
Location of entity’s principal office Baltimore, MD
Attorney for licensee None
# in support 2
Attorney for community None
# of protestants 0
# of inspectors/police officers 0
Result of hearing Approved
Vote tally Unanimous
Portions of state law cited in decision None
Other reasons given for decision None
Issues raised in audit present in this case or other issues observed

In the past, the Board has never really inquired into the nature of the “undue hardship” which has befallen the licensee. Commissioner Moore has, lately, been asking about the hardship that the licensee claims; this is important, because Article 2B requires the Board to first make a determination that “an undue hardship currently exists causing the closing or cessation of business operations” before granting a 180-day extension of time to reopen or transfer the license. The Board has almost never done this in the past.

III. Violations:

Licensee Kyu Chan Kim
Business Name New Q’s Liquors and Tavern, Inc.
Trading As Q’s Liquors & Tavern
Address 2521 E. Monument Street
Type of License Class “BD7” Beer, Wine & Liquor License
Reason for hearing

Violation of Rule 4.01(a): Minors – December 17, 2014 – At approximately 9:45pm the Baltimore Police Department conducted an underage alcohol investigation at “New Q’s Liquors and Tavern” located at 2521 East Monument in Baltimore City, Maryland. Police Cadet Jones, who was under the age of 21, entered the establishment and purchased a 375 ml “Peach Amsterdam Vodka” from the bartender/store clerk using a $20 bill that was marked by police and received change from the bartender. The cadet then communicated with police who responded to the scene. The police entered the establishment and notified the bartender/store clerk that an alcoholic beverage had just been sold to a minor and it would be reported to the BLLC. The police then recovered the marked currency and returned both the alcoholic beverage to the bartender and the change that was provided to the cadet by the establishment.

Hearing notes

Mr. Stephan Fogleman, former Chairman of the Baltimore City Liquor Board, represented the widow of the licensee and representative of his estate. Also present on behalf of the licensee were his brother and Councilman Branch.

Baltimore City Police Detective LC Greenhill testified to the facts from his report. Cadet Ken Jones, 19 years old, who made the purchase, also testified about the facts charged against the licensee.

Mr. Fogleman called the licensee’s brother to testify that the licensee died on October 3, 2014. Fogleman provided a copy of the death certificate to the commissioners. According to Kif Kim, the licensee’s brother, a Mr. Cho Wong was the clerk who sold the vodka to the cadet. It was Mr. Wong’s second day on the job, and he was fired immediately.

Mr. Fogleman then asked the Board to dismiss the charge, because the licensee had died before the violation occurred, and, according to Fogleman, a person can’t be held responsible for anything that happens after his death. Fogleman said, “I don’t want to be ‘that guy'” but it is an absolute impossibility that the licensee sold or furnished alcohol to the cadet two months after his death.

Chairman Ward denied Fogleman’s request, saying that a person who succeeds to the operation of a business absorbs all legal responsibilities. The law and the facts in this case were clear, and Ward said that the estate is fully responsible for the violation.

In mitigation, Mr. Fogleman told the Board that Mr. Kim was a very good neighbor to his community. He used to donate turkeys to those in need. There are prior violations on his record for selling to underage cadets, but in 2013, he did not sell to a cadet and received a commendation from the Liquor Board. Councilman Branch agreed that Mr. Kim was a good neighbor, was good to the community and generous with his neighbors. Branch said that he can count on one hand the number of businesses that give back to the community in his district, and Mr. Kim was one of them.

Councilman Branch went on to say that M & M’s is an example of a business that has been problematic. The Board gave the licensees there a three month suspension, but the Circuit Court granted the licensees an emergency stay, so they are back open. Branch said that he visited the establishment recently, and they’re still not letting people in the tavern portion of the store. Chairman Ward called up Chief Inspector Shelton Jones and told him to do something about M & M.

Zoning B-2-2
Neighborhood McElderry Park
Area demographics 3% White, 90% Black, 1% Asian. 4% Hispanic ethnicity. 51% households have children under age 18. Median household income: $33,352.
Does corp entity exist, in good standing? Yes; yes.
Location of entity’s principal office Baltimore, MD
Attorney for licensee Mr. Stephan Fogleman
# in support 3
Attorney for community None
# of protestants 0
# of inspectors/police officers 2
Result of hearing Responsible for violation. 2 day suspension, $500 fine.
Vote tally Unanimous on responsibility; 2-1 on penalty (Ward would have imposed a one-week suspension and $2,000 fine)
Portions of state law cited in decision None
Other reasons given for decision

Noting that the licensee has violated the law by selling to undercover cadets more than once in his past, Ward suggested a one-week suspension and $2,000 fine. Moore disagreed. She said that she felt sympathy for the licensee’s widow and brother, and she pointed out that the licensee passed the underage cadet test in 2013. She said that she does not see councilmembers on the licensee’s side very often. Jones agreed with Moore, but he said that he would have gotten rid of the suspension altogether, since the licensee had a perfect record after 2010.

Issues raised in audit present in this case or other issues observed

Article 2B section 10-506 governs the process that must take place when a licensee dies; like other sections of the Code, unfortunately, it is rather confusing. The section says that, “[u]pon the death of the holder of any license … the license shall expire.” However, the executor or administrator of a licensee’s estate may apply for a certificate of permission to continue the business for 18 months after the licensee’s death. There is no deadline after a licensee’s death by which the executor or administrator must apply for this certificate. In between the licensee’s death and the application for the certificate, must the business be closed, since the license expires with the licensee? In any case, when the executor does apply for that certificate, he or she is “subject to all the provisions” of Article 2B, which also includes all of the Rules and Regulations promulgated by the Board under the authority of Article 2B.

Comments are closed.

Disclaimer: While the author makes every effort to provide the most accurate and up-to-date information on this blog, the accuracy of some information is subject to change and cannot be guaranteed. Neither the author nor the publisher is responsible for any errors or omissions. All information in this blog is provided “as-is,” with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information, and without warranty of any kind, express or implied. This blog is not intended to do harm to, defame, libel, or malign any religious or ethnic group, club, organization, company, individual, or government entity. In no event will the author, her employer, or the publisher be liable to you or anyone else for any action taken in reliance on the information in this blog or for any consequential, special or similar damages incurred, even if advised of the possibility of such damages.

The materials contained on this website have been prepared by Community Law Center, Inc. for informational purposes only and are not intended to be legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.

Copyright: Text, photos and other materials found on this website are the property of CLC, except where otherwise noted. Such materials may not be reproduced without CLC’s written prior consent.