Troubling trend: Court appeals go against liquor licensees

Just one solitary win.

Out of more than 50 appeals of liquor license renewal denials that made their way to Pennsylvania's Commonwealth Court this year, licensees came away with only one win. And if you read the case summaries, as I do, you find that this was a grudging win at that.

Focusing my practice at Scaringi Law on representing liquor-serving establishments, I keep a close eye on Commonwealth Court - and this year I've been startled by what I'm seeing.

The trend lines are clear, even if I am still attempting to determine the causes and implications of the shift: Commonwealth Court is deciding in favor of the Pennsylvania Liquor Control Board in liquor license renewal denials as never before.

Clearly, licensees facing an adverse PLCB ruling on their license renewals need a new strategy. Knowing the long odds going into a costly Commonwealth Court appeal, I certainly wouldn't want to stake my client's livelihood on the outcome.

So what are the alternatives?

Before I explore alternative strategies, let's take a quick look at the appeals route for denials of liquor license renewals.

2-year cycle decides the fate of a business

Liquor license renewals come every two years, with the PLCB's Bureau of Licensing working through its 11 licensing districts on a regular, rotating basis.

At renewal time, a licensee submits his or her renewal application and fee, then is called into account for any enforcement actions that occurred in the intervening period. Studying the "adjudicated citation history,'' the agency looks for any infraction patterns, such as repeated citations for serving minors or very intoxicated patrons. Police department complaints for nuisance bar calls and fights in parking lots also are taken into account. In the end, the licensee gets the renewal or a notice of denial, along with specific reasons for the rejection.

The latter can spur a three-pronged appeals process. First, there is an administrative hearing at which an examiner takes evidence from all sides before issuing a written recommendation to the three-member PLCB board.

If the decision holds to deny the license renewal, licensees can appeal to their county Court of Common Pleas. The final step is an appeal to Commonwealth Court.

But the appeals process is costly and a favorable result far from certain, given Commonwealth Court's recent track record.

This is where what's called a "conditional license agreement" can come into play.

The give and take of conditional license agreements

The Pennsylvania Liquor Code was amended some time ago to grant the PLCB authority to enter into conditional agreements with licensees. This is an action somewhere between denying a liquor license and renewing it without equivocation.

Under this arrangement, an establishment keeps its license and stays in business. But there can be major drawbacks to conditional license agreements.

First, once the PLCB adds conditions to a license, they remain in force unless or until the PLCB decides otherwise. Second, because the conditions are passed along when the license or establishment changes hands, they amount to a lien on the license and can deflate its value.

However, if the licensee takes proactive steps over a period of time to address the license conditions, a licensee can request that the conditions be removed. This route is particularly advantageous at the time that a license is transferred or when an establishment is sold.

I have been successful in getting conditional license agreements modified or removed when a license is transferred. But there are no guarantees.

The best route when entering into a conditional license agreement with the PLCB is to make sure that one can live with the conditions. This is where effective negotiation, clear communication and broad-based experience with the PLCB play a big role.

Living with the conditions

In proposing specific conditions, the PLCB focuses on the perceived problems at an establishment. For example, say there are fights and other problems in an establishment's parking lot. One condition could be adding lights, video monitoring or increased security.

If service to minors and visibly intoxicated patrons are the issue, perhaps the PLCB will insist that the establishment become RAMP-certified. I actually recommend to my clients that they enroll in the Bureau of Liquor Code Enforcement's Responsible Alcohol Management Program.

The five-point program trains bars and restaurants and their staffs about what to look for to avoid serving minors and intoxicated patrons. To earn the all-important certification, establishment owners must submit to a PLCB inspection, display proper PLCB signage in their establishment and meet all RAMP requirements.

A conditional license agreement also could mandate that an establishment obtain and use ID scanners, which instantly determine a patron's age and verify the authenticity of the ID when a driver's license is scanned, usually at the door.

Again, I recommend these devices to all of the licensed establishments I represent. They are a good way to prevent underage drinking and avoid enforcement actions.

But some conditional license agreements could mandate that the ID scanners be used on every patron who enters the establishment to drink, regardless of age. In my opinion, this is a recipe for annoyed customers, irate regulars and a bar or restaurant that sees its alcohol sales suffer as a result. I have witnessed this repercussion at some licensed establishments that come to me for help.

Simply put, I don't recommend agreeing to this kind of condition. And I have had success negotiating with the PLCB on the specific language of each license condition. Still, if the choice is using an ID scanner on every patron or losing one's liquor license, which would you choose?

When it comes to denials of liquor license renewals, some establishments might have little choice but to submit to the PLCB's demands for conditional license agreements. Right now, the appeals route to the PLCB-leaning Commonwealth Court is looking like a fruitless and costly uphill legal climb.

The best shot in every situation remains effective, experienced legal representation before the PLCB, including nuanced negotiation over every condition that could be added in a conditional license agreement to preserve one's license and livelihood.