Did the California Alcoholic Beverage Control Cede its Authority?

By Brian Russell

Nick v. Department of Alcoholic Beverage Control (2014) 233 Cal.App.4th 194.

This is a case of one convenience store owner attempting to prevent another convenience store, 7-Eleven, from selling beer and wine by using the powers of the Department of Alcoholic Beverage Control (ABC). The petitioners, Adam and Sherry Nick (Nick) claimed in its complaint that under the Alcoholic Beverage Control Act (Bus. and Prof Code, Section 23000 et seq. or the “Act”) it prohibits the ABC from issuing a license that would result in or add to an undue concentration of licenses unless the local governing body of the area where the applicant’s premises is located determines that issuing the license would serve a “public convenience or necessity.”

7-Eleven operates a convenience store in the City of Lake Forest (City) which is located south of Irvine in Orange County, California, and applied to the ABC for an “off sale” beer and wine license. An off-sale beer and wine license allows a licensee to sell beer and wine for consumption off the premises. The ABC determined that the request would result in an undue concentration in licenses because there are three other stores in the same census tract which already held an off‑sale beer and licenses, including the convenience store Nick owned which is located across the street from the 7-Eleven.

ABC, therefore, required 7-Eleven to obtain a determination from the City of Lake Forest that stated that issuing the ABC license would serve a public convenience or necessity. The city’s director of development services concluded that issuing the license would serve public convenience or necessity. Nick appealed the decision to the Planning Commission and then to the City Council. The City of Lake Forest City Council agreed that issuing the license to 7‑Eleven would serve a public convenience or necessity. Nick sought to overturn the city’s decision by seeking a writ of administrative mandamus, but the superior court denied Nick’s writ petition and the Appeals court affirmed that decision in Nick v. City of Lake Forest (2014) 232 Cal.App.4th 871.

Nick also filed a protest with the ABC, raising several reasons why it should deny 7-Eleven’s application, including claims that issuing the license would result in an undue concentration of off-sale licenses in the area and 7-Eleven offered nothing unique in the sale of alcoholic beverages that is not already available in the community.

After receiving the city’s public convenience or necessity determination, the ABC’s investigator completed her own investigation regarding 7-Eleven, its application, the surrounding community, and Nick’s protest. The investigator prepared a report analyzing Nick’s protest and recommending the ABC deny the protest and grant 7-Eleven’s application.

In November 2012, the ABC conducted an evidentiary hearing on Nick’s protest at which the ABC, 7-Eleven, and Nick each called witnesses and presented evidence. The administrative law judge issued aproposed decision denying Nick’s protest and granting 7-Eleven’s application. The proposed decision explained issuing the license to 7-Eleven would raise the total of off-sale liquor licenses to four, but this would result in a minimal degree of overconcentration because the statutory formula establishing the threshold for undue concentration authorized three licenses for the census tract. The proposed decision also noted, after considering a wide variety of factors and making numerous findings, the city determined issuing the license would serve the public convenience or necessity despite an overconcentration of licenses in the area.

Nick appealed the decision to the Appeals Board. The Appeals Board affirmed the ABC’s decision to deny Nick’s protest and grant 7-Eleven’s application.

Nick timely filed a petition for a writ of review challenging the ABC’s and Appeals Board’s decisions.

The California Constitution grants the ABC “exclusive power” to license the sale of alcoholic beverages “in accordance with the laws enacted by the Legislature.” (Cal. Const., art. XX, § 22.) The ABC may, “in its discretion, … deny, suspend or revoke any specific alcoholic beverage license if it shall determine for good cause that the granting or continuance of such license would be contrary to public welfare or morals, or that a person seeking or holding a license has violated any law prohibiting conduct involving moral turpitude.” (Ibid.; see Rondon v. Alcoholic Beverage Control Appeals Bd. (2007) 151 Cal.App.4th 1274, 1281 [60 Cal.Rptr.3d 295].)

Nick contends the ABC improperly “ceded” its authority to the city by treating the city’s public convenience or necessity determination as “conclusive and binding.” According to Nick, the city’s determination was merely advisory and the ABC was required to independently investigate 7-Eleven’s application to make its own public convenience or necessity determination. Nick, however, misconstrues the governing statutes and mischaracterizes the ABC’s investigation and determination.

By relying on a local governing body’s public convenience or necessity determination, the ABC does not divest itself of its constitutional authority, but rather follows the statutory instructions on how to exercise that authority.

After receiving the city’s public convenience or necessity determination, the ABC reviewed the factors the city considered in reaching its determination, and the specific findings the city made to support it. Based on its own investigation, the ABC concluded the city’s determination was reasonable and that issuing the license would benefit the neighborhood by providing a convenient location to purchase convenience items, including 7-Eleven’s exclusive brand, while also purchasing alcoholic beverages. The ABC’s investigator also noted that issuing the license would result in only a minimal degree of overconcentration because it would be the fourth off-sale license in a census tract that allows three off-sale licenses without a public convenience or necessity determination. The ABC therefore did not cede any of its authority to license the sale of alcoholic beverages to the city.

Brian Russell is an attorney at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.

 

Trackbacks (0) Links to blogs that reference this article Trackback URL
Comments (0) Read through and enter the discussion with the form at the end