Booze News: Distilled in Room 215

A blog about the Baltimore City Liquor Board

Liquor Board Rules & Regs Steering Committee Meeting #2

Written by Kristine Dunkerton

The second meeting of the Liquor Board Rules and Regulations Advisory Committee occurred on Wednesday, August 19, 2015, from 10:00 am to 12:00 noon in the Liquor Board Conference Room at 231 E. Baltimore Street. Attorney Stanley Fine of Rosenberg, Martin, and Greenberg LLP, who often represents developers and licensees, chaired the meeting. Other committee members in attendance included:

– Minda Goldberg, Chief City Solicitor
– Abe Hurdle, Attorney (often represents licensees)
– Tom Akras, Liquor Board Deputy Executive Secretary
– Michelle Wirzberger, Midtown Community Benefits District Executive Director (Attorney formerly of Council President Jack Young’s office and of Community Law Center, represented community associations)
– Steven Johnson, Mount Vernon Belvedere Association
– Michelle Bailey-Hedgepeth, Liquor Board Executive Secretary
– Peter Kimos, Licensee
– Tom Yeager, Downtown Partnership
– Theo Harris, Greektown CDC
– Melvin Kodenski, Attorney (often represents licensees)
– John Pica, Attorney (often represents licensees)
– Richard Parker, Citizens of Pigtown President

According to the committee members listed in the Meeting Notes from August 4, 2015, the only committee member not in attendance at this August 19 meeting was Victoria Schassler, Licensee.

Others in attendance were:

– Stacia Thomas, Attorney
– Christina Schoppert Devereux, Community Law Center Volunteer Attorney (formerly represented community associations before the Liquor Board), and author of this blog post

The agenda for the meeting was to review chapter 1 of the Rules, a draft version of which had been prepared by Mr. Akras, with an attachment explaining the origin of the proposed Rules (mostly from state law or other counties’ rules). Committee members had been asked to prepare comments in advance of the meeting. The Committee had received written comments, which were distributed at the meeting, from Becky Lundberg Witt of Community Law Center, Joanne Masopust of Fell’s Point Community Organization, Melvin Kodenski, and Victor Corbin of Fells Prospect. Meeting notes from the previous meeting of August 4, 2015, were also distributed.

The draft Rules included citations to state law in some parts, and none in others. Ms. Goldberg suggested that this was confusing and citations should be removed. Mr. Hurdle commented that this could be problematic if the law changes, and asked about just citing the law. Ms. Bailey-Hedgepeth explained that the Rules are for laymen who may not have access to the Code. It was resolved that citations would be removed, and the problem of the law changing and the Rules becoming in conflict with the law is solved by Rule 1.01, which provides that the Rules are subordinate to state law.

A number of times throughout the meeting the point was made that these Rules are the liquor license guide for licensees and communities. They should therefore be accessible and cover what licensees and communities need to know about liquor licenses in Baltimore City.

The Committee reviewed sections 1.01 through 1.06 of the Rules, focusing mostly on definitions. The following is a summary of the discussion, section by section. The italicized/bolded text is the draft Rule, as it stands following discussion. Text beneath the Rule is my notes on the discussion.

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Rule 1.01 Authority
Pursuant to the authority granted by Article 2B of the Annotated Code of Maryland as amended (herein referred to as “Article 2B”), the Board of Liquor License Commissioners for Baltimore City, Maryland, hereby adopts the following Rules and Regulations to enable the Board to effectively discharge the duties imposed upon the Board by Article 2B. In any case of conflict between these Rules and Regulations, these Rules and Regulations are subordinate to Article 2B.

Mr. Pica commented that he doesn’t know what “subordinate” means and suggested that the rule be made simpler for the public. Committee members explained that the rule means that if there is a conflict between the Rules and Regulations and state law, state law will supersede the Rules and Regulations.

Rule 1.02 Organization
(a) The Board of License Commissioners (“the Board”) consists of three regular members and one alternate member, all of which are appointed by the Governor of Maryland. The appointments shall be made with the advice and consent of the Maryland State Senate if it is in session, and if the Maryland State Senate is not in session, by the Governor alone.
(b) The alternate member may serve on the Board if any regular member of the Board is absent or recused. Each appointee shall be a resident and voter of Baltimore City and be an individual of high character, integrity, and of recognized business capacity. At least one appointee shall be admitted to practice before the Court of Appeals of Maryland.
(c) The tern of a member of the Board shall be 2 years and commences on July 1 of the year of appointment.

Rule 1.03 Powers
(a) The Board may issue alcoholic beverages licenses authorized under Article 2B within the City of Baltimore.
(b) The Board may suspend, revoke a license, and/or impose a fine for any violation of Article 2B and/or these Rules and Regulations, or for any cause, which in the judgment of the Board, is necessary to promote the peace or safety of the community in which the place of business is situated. For a first offense, generally, the Board may impose of fine of not more than $500.00, unless that first offense is for selling alcoholic beverages to a person under the age of 21 years of age, in which case the Board may impose a fine of not more than $1,000. For any subsequent offense, the Board may impose a fine of not more than $3,000.

Mr. Fine, Mr. Hurdle, and Mr. Pica said they thought the term “for any cause” in the first sentence of (b) is too broad, and it is not clear what it means.

The Committee spent time discussing a sentence in the draft that allowed the Board to permit an establishment to operate during a suspension, and ultimately, at Mr. Fine’s suggestion, decided to remove the sentence and add in language from Md Code 16-101(c). Ms. Goldberg asked why the Board would suspend a license and then allow the business to stay open, echoing Ms. Witt’s written comment. Ms. Goldberg explained that the Board should not have the power to issue a suspension and then not have the suspension take effect. Mr. Johnson said that, from a community standpoint, if a suspension is given during a hearing and then immediately postponed, the Board hasn’t done anything to serve the community, and this turns into a political problem.

Mr. Hurdle told the group about a case in which a license was suspended for three months for underage drinking. He thought this was unfair, because the suspension wasn’t for “shootings or anything.” Ms. Wirzberger commented that Linden Lounge was allowed to stay open during a suspension pending a stay, and someone was shot in the head.

Ms. Bailey-Hedgepeth explained that suspensions usually take effect immediately, but in the past year the Board has postponed a suspension because of a big planned event at the establishment. This led to a discussion about the Board’s policy of staying a suspension if an appeal is filed. Mr. Akras read aloud Md Code Section 16-101(c), which provides that the Board may stay its decision in the case of an appeal. Ms. Goldberg agreed that an automatic stay is discretionary – not mandatory. Mr. Fine said that he was interested in due process concerns. Mr. Kodenski said he thinks that suspensions can result in “inordinate and unequal penalt[ies].”

Ms. Wirzberger suggested that whether the Board is allowed to postpone a suspension it grants or not, it should not be in the Definitions section of the Rules.

Mr. Pica expressed concern about events that are planned when a suspension is given, and asked if the Board will allow licensees to hold events during suspensions. Ms. Bailey-Hedgepeth said this is not allowed.

(d) The Board has full power and authority to adopt such reasonable rules and regulations as it may deem necessary to effectively discharge the duties of Article 2B.

The Committee combined drafted subsections (c) and (d) into one section, as they said almost the same thing.

(e) The Board may set reasonable conditions and/or restrictions on the granting of a new license, transfer, and/or renewal of a license when it finds it to be in the best interest of public accommodation, and for the protection of the peace and safety of the community.

Ms. Witt had submitted a comment saying this Rule was in conflict with BLLC v. Fells Point Café, which states that the Board may not impose restrictions on a license without the licensee’s consent. Ms. Goldberg had read the case and did not think it applied, because in Fells Point, the problem was that the Board tried to impose restrictions in the middle of the license period, while these Rules apply to the granting of a license. Mr. Kodenski disagreed, saying that restrictions are not allowed at any time, and cited another case, Hollywood Productions, which he said amounts to the Board not being able to grant hybrid licenses by imposing restrictions. Mr. Akras suggested adding the term “upon consent” to the Rule.

The Committee decided that Mr. Akras and Ms. Bailey-Hedgepeth would distribute the Fells Point and Hollywood Productions cases, and the Committee would discuss the issue after members had familiarized themselves with the cases, to ensure that the Rules follow the law.

Removed from Rules:
[Rule 1.04 Licenses are not Property
As per Art. 2B Sect. 10-501, licenses issued by the Board under the provisions are not property, and do not confer property rights. All licenses are subject to Article 2B, and these Rules and Regulations, and may be restricted, suspended or revoked.]

Mr. Pica and Mr. Kodenski said they think the license is a property right, but Ms. Goldberg pointed out that state law, which Mr. Akras read aloud, says it’s not. Mr. Fine asked for cases explaining the law. Ms. Goldberg said that federal courts say a liquor license is a license and not a property right, as the holder can lose it. It was agreed that this section would not be in the Rules because there was too much disagreement on it.

Rule 1.05 Legal Representation
Any party, applicant, witness, or individual who files a protest or complaint, may be represented by an attorney. Where a notice is to be given under these Rules and Regulations to or by any party, applicant, witness, or individual who files a protest or complaint, the notice shall also be given by or to the person’s attorney, so long as the attorney has entered his or her appearance in the matter to be considered by the Board.

Rule 1.06 Definitions
(a) Alcohol Awareness Program means a program that: is approved and certified by the Maryland State Comptroller; has been issued an alcohol awareness program permit by the Maryland State Comptroller; includes instruction on how alcohol affects a person’s body and behavior; provides education on the dangers of drinking and driving; defines effective methods for serving customers to minimize the chance of intoxication, includes instruction on ceasing service before customers become intoxicated; and instruction on determining if a customer is under 21 years of age.
(b) Alcoholic Beverages means a liquid, or compound, by whatever name called, that contains one-half of one percent or more of alcohol by volume, and is fit for consumption.
(c) Affidavit means an oath or affirmation sworn or made before an officer or other person authorized to administer an oath or take an affirmation that the matters and facts set forth in the paper writing to which it pertains are true to the best of the affiant’s knowledge, information and belief.

Mr. Kodenski suggested that the phrase “under penalty of perjury” be added to this subsection. The question was raised about people lying under oath during Liquor Board hearings, e.g. about how much money they’ve invested in a business. The Committee decided that this is not the appropriate place to address that concern.

(d) Attorney means any attorney at law admitted to the Bar of the Court of Appeals of Maryland.
(e) Beer means any brewed alcoholic beverage and includes beer, ale, porter and stout.

There was a concern about a new way of making beer that does not involve brewing. A more complete definition from state law (Art. 2B Sect. 1-102(a)(3)) will replace this one.

(f) Board means the Board of Liquor License Commissioners of Baltimore City.
(g) Caterer means any beer and wine or beer, wine and liquor licensee who contracts to provide food and alcoholic beverages to sponsors of public or private events held off the licensed premise.

Someone asked about a private room on premises. The last phrase, “held off the licensed premise,” might be removed.

(h) Club means an association, corporation, or other entity, organized and operated exclusively for educational, social, fraternal, patriotic, political, or athletic purposes, and not for profit. This definition does not apply to those clubs applying for a beer, wine, and liquor license under Article 2B, Section 7-101(b) and Article 2B 7-101(d).
(i) Comptroller means the Comptroller of the Treasury of the State of Maryland.
(j) Contract Purchaser means a person, corporation, or partnership that purchases the license and/or business from a licensee for the purposes of selling the license and/or business on the open market. The contract purchaser is only recognized as such once the appropriate documentation has been filed and approved the Board or its designee. At not time can the contract purchaser operate the business, but can only hold the license for the purposes of sale subject to the restrictions stipulated in Article 2B.
(k) City means the City of Baltimore, Maryland.
(l) Hotel means a premise for the accommodation of the public, equipped with not less than one hundred (100) rooms for the accommodation of the public and a dining room with facilities for preparing and serving regular meals for at least 125 persons at one seating and the capital investment in the hotel facility may not be less than $500,000.

Three sections, one defining “Identification,” one defining “Intoxicated/Inebriated,” and one defining “Keg,” were removed. The comment was noted that it might be helpful to have a definition of Intoxicated/Inebriated, since licensees are not supposed to serve people who are intoxicated or inebriated.

(p) Licensed Premises means those premises that are specifically identified in the license issued by the Board, and may also include an approved outdoor café area, and/or a parking area in which patrons from the licensed premises are allowed to park their vehicles.

Ms. Wirzberger noted that it is important to make clear that licensees are responsible for cleaning up their entire premises. Mr. Pica said this isn’t fair if the licensee doesn’t use the parking area. Ms. Wirzberger explained that the licensee must explain the areas his/her patrons are using. Mr. Akras noted that the word “may” in the subsection gives the Board discretion about what to include in the premises.

Someone asked if it should be explained somewhere that outdoor service must end at a certain time. Mr. Hurdle said that this would go under a license restriction. There was then discussion about whether Memorandum of Understanding – the signed document commonly used as a binding agreement between licensees and community associations – should be defined in the Rules. It was decided that “Memorandum of Understanding” need not be defined.

(q) License Holder or Licensee means the holder of any license or permit issued under the provisions of Article 2B or any other law of the State of Maryland.

Following Ms. Witt’s written comment that license holder and corporate entity should be distinguished, and Ms. Devereux’s oral comment on the same, the following section was removed: “The license holder may be either the entity on behalf of whom the license has been issued an/or the individuals whose names appear on the license.”

(r) Live Entertainment is defined by Section 1-153.2 of the Baltimore City Zoning Code.
(s) Mixed Drink means a drink that includes as an ingredient one or more alcoholic beverages combined together or with non-alcoholic beverages and/or food stuffs.
(t) Non-Profit Organization …

This subsection will be worded to reflect that a non-profit organization is an entity certified as a non-profit by the IRS or the state.

(u) Pecuniary Interest means a legal or equitable interest in the licensed business entitling the owner thereof to receive a percentage of the profits derived from the sale of alcoholic beverages of the business. It does not include payments made to any employee, manager, mortgagor, landlord, creditor, or other individual who does not otherwise own an interest in the licensed business. The ownership of stock in a publicly or privately traded corporation is not considered a pecuniary interest for the purpose of these Rules and Regulations provided that the owner of such stock does not have any substantial degree of control or management of the corporation.

This subsection will be redrafted. The definition of “Pecuniary interest” is important because state law (Md Code Art. 2B Sect. 10-103(4)) provides that at least one person on a liquor license must be a Baltimore City resident for at least two years preceding application. Sometimes, the Baltimore City resident listed on a license does not have any pecuniary interest in that license. This raises the question of whether the Baltimore City resident is at all involved in the establishment, or if he/she just appears at the hearing to help the establishment owner acquire a license. Ms. Wirzberger explained that this provision exists to ensure that licensees have a connection to Baltimore City, and a stake in the community in which their establishment operates. Mr. Fine explained that it is hard for national companies to have a Baltimore City resident with a pecuniary interest in the license, but he said that this is a problem with the state law. Ms. Wirzberger responded that the target of the law is small liquor stores, and the law ensures that they are somehow connected to the community. Mr. Fine pointed out that a licensee could own property in Baltimore City and live somewhere else, and still be in compliance with the law.

Ms. Thomas suggested that this Rule follow the example of medical marijuana dispensary regulations, which set a threshold for ownership.

“[O]r privately” was added to the last sentence to appease the concern of Mr. Hurdle that having only publicly traded corporations not be considered to have a pecuniary interest in a license discriminated against smaller, privately traded corporations and allowed shenanigans for bigger companies.

Someone asked what “legal or equitable” means in this context.

(v) Person means a natural person, an association, a partnership, a corporation, a limited liability company, or any other legal entity.
(w) Renewal means the reissuance of an existing license for the same premise, licensee(s), and type of license.
(x) Restaurant means, generally, an establishment that accommodates the public, and is equipped with a dining room with facilities for preparing and serving regular meals. The daily receipts from the sale of food must be and average of at least 40% annually of the total daily receipts of the establishment.

Ms. Goldberg suggested that “as certified by a certified CPA” be added at the end of this sentence. Mr. Fine thought that adding such a phrase would be expanding the law, but Ms. Goldberg explained that this would just be the Board’s way of verifying that licensees are following the law (which requires a certain percentage of sales to be for food, depending on the establishment’s location). Mr. Fine explained that licensees report their sales breakdowns each year at renewal time, and someone pointed out that inspectors are supposed to verify these numbers. Mr. Kimos pointed out that licensees often do not report factual breakdowns of their receipts, and nothing is verified. Mr. Fine said that it is too much to ask licensees to hire CPAs, and he asked if Mr. Kimos, a licensee, has a CPA. Mr. Kimos responded that he does.

A restaurant shall be equipped with a public dining room with sufficient tables, chairs, cutlery and glassware to serve meals prepared therein. It shall be equipped with a kitchen having complete facilities and utensils for preparing and serving hot and/or cold meals to the public. There shall be employed a sufficient number of cooks [“and wait staff” was removed] to serve the number of patrons provided for in the dining room. It shall maintain a menu advertising the serving of meals. There shall be on the premises at all times sufficient food to fill orders from the menu.

Mr. Hurdle objected to the requirement that restaurants have “sufficient food to fill orders from the menu.” A number of committee members explained that establishments sometimes apply for a restaurant license to have more permissive hours, but operate as bars, and when a patron tries to order something – anything – from the menu, the establishment does not have it. Mr. Hurdle said it should be OK for an establishment to run out of something on the menu. Ms. Wirzberger said it is OK to run out of one or two things on the menu, but not to run out of everything on the menu every day.

For the purposes of totaling daily receipts, the term “food” may not include any ingredient or garnish used with or mixed with an alcoholic beverage that is prepared and served for consumption on the licensed premises. There are more specific requirements for restaurants depending upon their location in each respective legislative alcoholic beverages district. The Board will defer to Article 2B’s requirements for food to alcohol sales receipts, capital investment minimums, and seating capacity in those specific application for licensure.

Ms. Goldberg suggested that the requirements for different districts in the City (referred to in state law as “alcoholic beverages districts”) be delineated in the Rules. Mr. Akras explained that inserting such delineations would make the Rules too long and cumbersome. It was decided that this subsection will be redrafted and use some of the exact language from state law.

Mr. Hurdle suggested that the Rules should include a definition of “Patron,” and was enlisted to draft the definition.

(y) Retail Dealer means a person who deals in or sells any alcoholic beverage to any person other than a license holder.
(z) Secured Party means:
(A) A person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;
(B) A person that holds an agriculture lien;
(C) A consignor;
(D) A person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold;
(E) A trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agriculture lien is created or provided for; or
(F) A person that holds a security interest arising under Sect. 2-401, Sect. 2-505, Sect. 2-711(3), Sect. 2A-508(5), § 4-210, or § 5-118 of Md. Commercial Law Code Ann.
(G) Of note, a Secured Party’s interests are subject to any and all restrictions as outlined in Article 2B.

Mr. Kodenski commented that he thinks this subsection supports his contention that a liquor license is property.

(aa) State means the State of Maryland.
(bb) Total Daily Receipts includes sales of food and beverages and does not include sales of novelty items, income from vending machines, or other receipts not resulting from the sale of food or beverages.
(cc) Wine means any fermented beverage, including light wines, and wines with the alcoholic content of which has been fortified by the addition of alcohol, spirits, or other ingredients.

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At the end of the meeting Mr. Fine remarked that the Committee needs to move more quickly to complete review of the entire rules by October, since the Committee was scheduled to complete review of chapter 1 at this meeting and only completed half of chapter 1. Mr. Harris suggested adding more meetings, and Mr. Fine suggested that the next meeting be scheduled for longer than an hour and a half.

The next meeting will be from 10:30 AM to 1:00 pm. The Committee will finish reviewing chapter 1, and review chapter 2 through section 2.04. It will vote on chapter 1.

Mr. Fine emphasized that Committee members should do their homework, and come prepared to the next meeting with comments. He then emphasized that the Committee wanted to make time for public comment at the end of meetings, and asked if there were any public comments. There were none, and the meeting was adjourned.

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