What happened at the Liquor Board on December 15, 2016.

Commissioner Moore asked for an explanation of a provision of the MOU, which says that the volume level of music will be “normal and customary” which she did not “understand it at all.” Mr. Poole responded that any music will be in the background, for atmostphere, and quiet enough for patrons to have a conversation. Moore then asked about a security plan; the applicants responded that they will have a host at the door to check IDs, and bartenders will double-check IDs before serving. Mr. Bauer, after a further question about parking from Moore, explained that the restaurant will be part of a community-wide valet parking program.

Commissioner Greenfield asked the applicants for more information about the capital investment required for a new Class B license under state law. Mr. Benkert responded that he had submitted information about $206,000 worth of investment into the building and business, which did not include an additional $200,000 for a new sprinkler system in the building. They did not have any receipts with them.

The applicants plan to employ 10-20 people and to open in March or April, depending on how quickly their sprinkler system is installed. Both applicants have recently worked at Woodberry Kitchen and were alcohol management certified there.

Fogleman explained that Stang of Siam has been in operation for six years and is a restaurant with 76 seats. He submitted an appraisal of the improvements to the business as well as a sample menu.

The restaurant applied for and received a Class B restaurant license in 2011, when the license was first transferred to Mr. Carraghan’s wife, who now lives in Thailand. The applicants are applying for a new license, after their former Class B expired in April 30, 2015. They have not invested any new money into the business since 2011; they are requesting the new license using the original 2011 investment. Mr. Fogleman said that he did not believe that anything in the statute forbade this practice.

Commissioner Greenfield inquired further about the history of the expired Class B license, saying, “I want to make sure we’re not double-counting here,” adding “I don’t want the previous license to have been obtained because of this same $200,000 investment.” Fogleman replied that the previous license was obtained with the same investment.

For the first question, the age of the capital investment, the Chairman noted in the hearing that if the investment had been made “in 1956,” it would have been a different situation. He seems to be acknowledging, then, that there is an appropriate time period within which the capital investment should have been made in order to qualify for a new license. So what is the line, then, beyond which a capital investment is too old? This determination, which seems to lie somewhere between five years and sixty years, seems like one that the agency should promulgate in its rules and regulations, for greater clarity.

On to the second question, about whether there can be multiple licenses borne out of the same capital investment. In the context of the city-wide moratorium on new licenses, the Class B restaurant license is a special case: one of the very few types of licenses that can be obtained by application to the Liquor Board instead of via transfer of an existing license. The original legislative history is difficult to access, since the statute is so old, but one could reason that the capital investment requirement exists to encourage economic development in the city by providing a large benefit – a liquor license – to restauranteurs who have updated and improved their properties. Under this presumed legislative intent and in light of the oversaturation of licenses and the moratorium on new licenses, why would the Board be allowed to create an additional license, which would normally be prohibited, without evidence of additional investment? If the license had not expired due to mismanagement but instead had been sold and transferred elsewhere, would the licensees have been entitled to apply for another Class B license in that case? Class B licenses are not the most valuable type of liquor license, but could, hypothetically, a licensee create and then sell multiple Class B licenses out of the same $200,000 capital investment? This seems like a ridiculous idea, but it’s one that would fit within the commissioners’ understanding of the statute.

The concern in situations like these, where the statute is vague, is not that the Liquor Board must come to any one “correct” answer. Ideally, though, the commissioners should have taken the time to look at the statute, read the relevant section aloud during the hearing, discuss the purpose and context of the greater Alcoholic Beverages Article and its goals, and give a full discussion and description of why they came to the decision that they made. Instead, unfortunately, the commissioners voted in favor of the application without much substantive discussion other than noting that it was a confusing situation. This leaves the door open for future confusion in future cases.

Commissioner Moore noted that there was a letter of support in the file from the Archdiocese of Maryland dated January 2016 and asked if the support was still in place. Fogleman replied that it was and that they have a good relationship with MAP.

Commissioner Greenfield asked about the alcohol management certification. Ms. Cavanaugh-Royce replied that she will be certified in alcohol management and she does have years of bartending experience, though she will not be directly serving alcohol.

Mr. Fogleman explained to the Board that “you have a corporation and a human being on the license;” given his seven year history as Chairman of the Board, it’s rather alarming to hear him describe these roles so loosely when the statute itself is clear: you don’t have just any “human being” on the license. The human being is a particular one: an officer, in the case of a corporation or club, or an authorized person in the case of a limited liability corporation. The commissioners did not seem to refer to the statute in order to clarify this point, though the Chairman expressed concern that the executive director could leave her position. Fogleman responded that there would be an application for substitution or a transfer; he even referred to the organization’s board at that point but did not cite the actual section of state law that pertains to who must apply for a liquor license held by a club.

Commissioner Moore asked why there would be one license covering two separate hotels. Hecker responded that Mr. Chang is the 100% owner of both hotels, and there is only one restaurant, shared between the two hotels. The two towers are connected to each other as part of one building, so patrons can walk between the towers without leaving the building. Moore reiterated that she was troubled by this idea of two hotels sharing a license. Hecker pointed out that if there were two separate licenses, the alcoholic beverage service would have to be kept completely separate and not overlap, which could be troublesome for the shared meeting and event spaces.

Mr. Kodenski proffered, for his client, that the applicants already have a brewery license and are requesting a Class D license to be able to serve beer at the premises. He submitted a letter of support from the Locust Point Civic Association as well as some photos of the business.

Commissioner Moore asked about the ownership of the license, in relation to the ownership of the business. The business is owned by twenty individuals, in varying percentages. Mr. Smith responded that the only two people on the license will be himself and his uncle. The alcoholic beverages statute allows a maximum of three licensees per license, regardless of the number of owners.

Commissioner Greenfield asked who will be managing the business on a day to day basis. Mr. Smith replied that he will be managing it in the near future but may hire a manager soon.

Commissioner Greenfield noted that there was some negative history at this establishment under the previous licensees and cautioned the new owners to follow the rules and regulations of the board.

More fundamentally, does state law allow a licensee to give over management completely to non-licensees and leave the state for months at a time? BLLC Rule 3.01 holds that “[e]very licensee shall be the actual owner and operator of the business conducted on the licensed premises.”

Ms. Joyce Yun Chung testified that she agrees to the restrictions in the community association’s letter. After questioning from the Chairman, Ms. Chung said that the neighborhood is totally different from where her former restaurant, Maxie’s, which had many violations on its record, was located in Charles Village. The business will be focused on Chinese and sushi cuisine, so it will be completely different.

Commissioner Moore recalled that, during the violation hearings for Maxie’s, she heard testimony not just about underage service but an explicit attempt by Maxie’s staff to hide underage students in the bathroom when the police entered the business. She brought up efforts by Johns Hopkins University and Loyola University to request a significant suspension due to the harm done to their students. Ms. Chung testified that she does have another restaurant at the Horseshoe Casino, but she said that no one can get into the casino if they are under 21. Moore reiterated that it wasn’t just isolated underage drinking violations but that there was a culture of underage drinking at her former establishment, with a huge negative impact on the community.

Commissioner Greenfield asked Mr. Sapperstein about his role in the business. Sapperstein responded that he works for the landlord of the development. He is on-site all the time and stops by frequently to see what is going on at the establishment. Within the same shopping center, there are other liquor licensed establishments that have no issues with underage drinking or any other violations.

“Ms. Becky Witt, of Community Law Center (and Booze News writer), had submitted written comments ahead of the meeting, expressing concern over the delineation between substitution of licensees and transfers of licensees in Rules 2.04 and 2.05. The draft rules state that if there is a 50% or more transfer of ownership of a corporation, the licensees must file a transfer of ownership application. If there is less than a 50% transfer of ownership of a corporation, the licensees do not have to file a transfer application and can substitute the old owners for new owners at renewal. Under the rules, there would be no notice to the community that the licensees had changed and no opportunity for public comment or protest. There would also be no significant investigation into the substituted licensees’ character or fitness besides the standard background check.

In response to this concern, Mr. Thomas Akras stated that the Board has interpreted “ownership” in the statute to mean “50%+ ownership,” because a majority ownership gives a person “dominion and control.” If a minority ownership changes hands, the licensees don’t have to go through the normal transfer process, because the “dominion and control” of the corporation has not changed. There is no 50% threshold in Article 2B, and no other county in Maryland makes this distinction. In fact, there are no other counties in Maryland that have a corporate officer “substitution” process in their rules and regulations. When this point was raised, Mr. Fine, Mr. Akras and Ms. Michelle Bailey-Hedgepeth, Executive Secretary of the agency, all stated that it would be administratively difficult for the agency to schedule even expedited transfer hearings for all transfers of ownership. No committee members found this lack of notice to the community about licensee changes to be problematic, so the drafted rule remained as it was.”

Commissioner Moore asked about parking issues; Kodenski replied that there’s never been an issue with parking before.

Commissioner Greenfield asked whether the transferee will be moving to Baltimore. Mr. Gebre replied that he will be moving from Arlington to Baltimore in the next 2-3 months. Greenfield did note the history of violations under the current owner and expressed hope that they would not see the new applicant back for a violation again.

Commissioner Greenfield noted, in closing, that the corporate entity is not in good standing with the state. Hurdle replied, “not to give too much away,” but they are working with SDAT to get back in good standing. It will be resolved before the license can be picked up.

This particular factual situation is complex and requires some careful thought and explanation from the commissioners about the timeline, why the license is or is not still in good standing, and whether the licensee should be allowed to reopen after – perhaps – almost two years of closure. The situation involves the interrelation between several different sections of state law, including the section on what happens when a licensee passes away. None of that required careful legal explanation occurred during this hearing.

Mr. Kodenski then moved to dismiss the charges, since Mr. Jones testified that it was a minor incident that was cleared up quickly with the help of the police. In response, the Chairman asked his fellow commissioners whether they had a copy of Rule 3.12 in front of them. Neither of them had the Rules and Regulations of the Liquor Board handy, so the Chairman asked Mr. Akras to find and read Rule 3.12 out loud.

In the meantime, Commissioner Moore noted that the board members’ summary stated that Mr. Jones had told the licensees that there were not enough security guards on duty at the time of the incident. Mr. Jones explained that there should be one security guard for each exit of the building. There were four entrances and exits. Jones added that four would have been his minimum and he would have suggested a couple more security personnel to supervise the whole area, so, ideally, 4-6. There were also a lot of people to supervise within the space: 150-200 on that particular night.

The licensees were present but did not testify on their own behalf. Kodenski proffered that the incident only took a few minutes and there were no arrests. Since the incident, the licensees have increased their security to four people or more.

Kodenski then argued that, since the fight took place entirely inside the establishment, there was no disturbance to the health and safety of “the community.” Commissioner Greenfield responded that Mr. Kodenski often argues that fights that take place outside of the establishment are not the licensee’s responsibility, so “you can’t have it both ways.” Mr. Kodenski argued that there is no record of community disturbance in this case. Chairman Matricciani asked whether the licensees have a responsibility to their own patrons to ensure their security, and Mr. Kodenski responded that they do.

During the punishment phase of the hearing, the Chairman noted that they had received a letter from the Baltimore Highlands community association, containing complaints about the operation of the establishment. The Chairman noted that there are no violations on the record. Kodenski complained that the community association had not contacted the licensee directly.

Also, why are the commissioners having to hunt to find one copy of the Rules and Regulations during a hearing? Should they not each have their own copy in front of them, as well as a copy of the Alcoholic Beverages Article of the Maryland Code, since they are interpreting and applying that law with each and every hearing? This goes back to the problem of showing one’s work mentioned in more than one case above. Perhaps the commissioners could work from the old law school framework: (1) spotting a legal issue, (2) stating the relevant rule from state law, (3) analyzing the factual situation in light of the rule, and (4) coming to a conclusion. In the vast majority of hearings, the board jumps straight to its conclusions without clearly laying out the entire decision in a logical and complete way.

Violation of Rule 3.02: Cooperation – August 19, 2016 – At approximately 2:20 PM Inspector Andy Perez of the BLLC conducted a routine inspection of the establishment. At that time, the bartender/manager of the establishment could not produce a valid trader’s license. Inspector Perez told the bartender/manager that the establishment would have 10-15 days to obtain a valid 2016 Trader’s License. On October 6, 2016, Inspector Perez returned to determine if the establishment had come into compliance. Perez was presented with a document which purported to be a “2016 Trader’s License.” However, due to the coloring and numbering of the license Inspector Perez had doubts as to the authenticity of the document. At that time, Perez instructed the manager to post the purported Trader’s License in a conspicuous location as per the BLLC Rules and Regulations. On October 28, 2016 Perez was able to verify through a review of on-line records and an in-person conversation with staff of the Clerk of the Court that the corporation associated with this establishment had not been issued a valid trader’s license in either 2015 or 2016. On November 4, 2016, Inspector Perez returned to the establishment and spoke to the bartender/manager to inquire as to where he had obtained the “2016 Trader’s License.” Perez was informed that it was provided to the bartender/manager by the owner. It was at this time that Perez violated the establishment for not having a valid trader’s license and non-cooperation with the BLLC as the establishment had attempted to pass off a false document to the BLLC during an inspection.

Inspector Andy Perez read the facts from his report into the record. The licensees have all of their required permits and licenses, currently.

The licensee testified that, not only did the manager not renew the license that he was supposed to renew, he created a fake updated version of the license for the file.

After questioning by Commissioner Moore, the licensee testified that he is the sole licensee and does not live in Baltimore City. The Rippels both stated that they will be more on top of their business and its requirements in the future.