In its written denial dated December 28, 2009, the SLA denied Rose’s removal application because there were five liquor stores within 2.2 miles of the mall.  One of the stores was just .25 miles from the mall.  According to the SLA, the stores were already competing for business and it would be poor judgment to dilute that market further by issuing an additional liquor store license at the proposed location.  The SLA continued by noting that that with so many stores in such close proximity, there was a substantial likelihood of an increase in ABC Law violations, intoxicated people and the purchase of inventory from unauthorized sources.  Moreover, three neighboring liquor store owners opposed the application citing the economic downturn and voiced concerns that the new store would impact their sales.  The only support for the application came from Rose herself.

As the court explained, part of the application process requires that Rose provide her personal financial records,  but the five other stores were also instructed by the SLA to provide the figures of their gross sales for the past four years.

Rose’s proposed store, “Vita’s Grapes of Italy, was envisioned as an upscale wine shop with most (80%) of its inventory being wine, not hard liquor, and that none of the other stores in that area cater to this under-served niche market.  Rose stated that she spent $18,000 on preparing the new space and incurred other expenses which should have also been taken into consideration  by the SLA if it was considering the economic impact of Rose’s application.

As the court explained, a licensee seeking the transfer or “removal” of its liquor license to a different location, etc. must file an application with the SLA for permission to remove the license.  The decision to grant or deny the removal application must be made in accordance with public convenience and advantage.

At one time, liquor licenses were routinely denied in situations where there were clusters of retail stores to prevent the concentration of stores.  This resulted in legally protected monopolies.  However, changes in the law repealed and dispensed with that formulaic approach, embracing more of a free market approach for the sale of liquor to the consumer.  Therefore, each application must be decided on its own merits, and considered based on its promotion of “public convenience and advantage,” rather than the robotic application of distance requirements.

So what exactly is meant by serving public convenience and advantage? The court has broadly defined public convenience to refer to the accessibility of stores and involves considerations of distance and the overcrowding of present facilities. Public advantage has also been defined broadly and encompasses social and similar problems, and involves the state’s general policy as to the sale of alcholic beverages for off-premises consumption.

Rose had a tough burden to meet from the get go.  She had to demonstrate that the SLA acted arbitrarily and capriciously and abused its discretion by denying its removal application because there were five pre-existing liquor stores in the immediate area where it sought to open its new liquor store.  A removal license application is subject to the same scrutiny as a new license, so the SLA had great discretion in deciding whether to grant the license.

By statute, the holder of a liquor store license must provide the SLA with access to its financial records, including information about its gross sales.  In this case, the SLA considered he gross sales of all the stores in the immediate area and found that the gross sales of the existing stores declined by almost a 50% drop from 2008.

Although the SLA, can not blindly apply distance restrictions to protect existing liquor stores because they serve no other purpose than to maintain local monopolies, the SLA can consider evidence that liquor sales in the immediately surrounding area are unlikely to sustain an additional store and that the existing liquor stores are adequately serving the public’s needs, convenience, and advantage.

The court found that the SLA had sufficient reason to deny Rose’s removal application.  The SLA did not deny the application because the store would unfairly compete with existing stores in the area, but rather, the SLA determined that the public’s convenience and advantage was being more than adequately served, if not over served, by the five existing liquor stores in that area, each of which reported a steep 50% decline in gross sales.  The SLA also cited Rose’s reason for seeking a removal to a new location – a hope that the new location would be more profitable.  Finally, the court noted that three liquor stores opposed her application voicing concerns about the impact the new store would have on their sales.

The denial was upheld by the court and Rose lost her entire $18,000 investment in renovations and over a year’s worth of lease payments.

Citation: Rose Ancona, Inc. v. New York State Liquor Authority, 2010 NY Slip Op 31024, April 22, 2010.