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Who May Obtain a Liquor License: Statutory Disqualifications

When a new liquor licensing client comes into our office for their initial consultation, the first issue we are required to discuss and explore is whether the client is disqualified from holding a liquor license by New York’s Alcoholic Beverage Control Law. There are essentially six categories which by law prohibit an applicant from obtaining a liquor license and are grounds for immediate denial:

1) The applicant cannot be a minor under the age of 21;
2) The applicant must be either a U.S. citizen or be admitted to the U.S. for permanent lawful residence;
3) The applicant cannot have been convicted of any felony, promoting or permitting prostitution, or selling liquor without an alcoholic beverage license;
4) The applicant cannot be a police officer or police official;
5) The applicant must never have had a liquor license revoked; and
6) The applicant cannot have a wholesale liquor license.
With that said, we now turn to the details on each of the six statutory disqualifications for obtaining a liquor license in New York.

Statutory Disqualification 1: Over the Age of 21

The first statutory disqualification, that the applicant cannot be a minor under the age of 21 is self-explanatory given that the legal age to consume alcohol in New York is 21.

Statutory Disqualification 2: U.S. Citizen or Permanent Resident

The second statutory disqualification, that the applicant must be a U.S. citizen or a lawful permanent resident, is provided for in ABCL § 126(3). If the applicant is a corporation, this requirement is satisfied by each of its principals and more than one-half of its directors being citizens or lawful permanent residents. Nationals of countries having reciprocal trade treaties with the United States, may not, however, be prohibited from trading in alcoholic beverages.

Statutory Disqualification 3: No Criminal Convictions for Felonies, Prostitution, or Selling Alcohol Without a License

The third statutory disqualification requires that the applicant cannot have been convicted of a felony, promoting or permitting prostitution, or selling liquor without an alcoholic beverage license, unless the person has obtained an executive pardon, certificate of good character from the board of parole, or a certificate of relief from disabilities.

If an applicant was convicted of a felony outside of New York, the SLA may request the board of parole to investigate and review the facts and circumstances concerning the conviction, and if requested, may submit its findings to the SLA as to whether the corporation has conducted itself in a manner that would be consistent with the public interest.

Where the applicant is a corporation and one of its principals is convicted of a felony or any of the misdemeanors or offenses described above, the corporation will not be automatically forbidden to sell alcoholic beverages, however the application for a license by the corporation will be subject to denial and the license of the corporation will be subject to revocation or suspension.

For any conviction within New York, the SLA may request that the corporation seek a certificate of relief from disabilities, assuming it is eligible, as part of the SLA’s discretionary review process.

Case Study:

In one case, Southland Corp., the parent company of 7-Eleven at the time, the chain of convenience stores, pled guilty to two antitrust violations alleging that it had conspired to rig the bidding of supplying milk to school districts in Florida and agreed to pay the United States $4 million in penalties to settle the counts. The company disclosed these criminal proceedings to the SLA as required, including its guilty pleas. In the normal course of business, 7-Eleven had applied for three beer/wine products licenses. The SLA proceeded to deny each of these applications as a result of these convictions, which created a mandatory bar to the issuance of such licenses under ABCL § 126(1). 7-Eleven disputed the SLA’s determination in Article 78 proceeding to dispute a governmental agency’s decision – and lost.

Citation: Southland Corp. v. New York State Liq. Auth., 181 A.D.2d 19 (1st Dep’t 1992).

Statutory Disqualification 4: Applicant Cannot Be a Police Officer or Police Official

Police officers and police officials, are not permitted to hold a license to manufacture or sell alcoholic beverages (ABCL § 128), or hold an interest in such a business. The spouse of a police officer or official, however, is not barred from holding a license.

Case Study:

In one case, an owner and operator of a bar in the Village of Sackets Harbor was elected mayor of the Village. Three months later the SLA charged him with violating ABCL § 128, which prohibits police officials from holding a liquor license. The SLA argued that the licensees’ duties as Village Mayor included the operation and management of the police department. After several rounds of appeals, the court ruled in favor of the bar owner and mayor because he was not a police officer or police official.

Citation: In the Matter of Comedy Playhouse LLC v. New York State Liq. Auth., 2011 NY Slip Op 02556 (4th Dep’t April 1, 2011).

Statutory Disqualification 5: Cannot Have Had Liquor License Revoked

A person who has had any liquor license revoked for cause cannot hold a license for two years after such revocation (ABCL § 126(5)(a).

Statutory Disqualification 6: Applicant Cannot Have a Wholesale License

Under the so-called “Tied House” Rule, a manufacturer or wholesaler cannot have an ownership interest, directly or indirectly, in any premises where alcoholic beverages are sold at retail, or loan any money to any person engaged in the manufacture or sale of alcohol at wholesale or retail [ABCL §101(1) (a)]. Nor can a manufacturer or wholesaler make any “gift” or render any service of any kind whatsoever to any licensed person which in the SLA’s judgment “may tend to influence such licensee to purchase the products of such manufacturer or wholesaler.” The “tied house” rule is an absolute prohibition and the SLA does not have discretion in the matter.

Case Study:

In one case, Rihga Royal Hotel, a Japanese luxury hotel, applied for an on-premise liquor license and was denied pursuant to ABLC § 101(1)(a). It turned out that three unrelated manufacturers of alcoholic products held small ownership interests in the hotel, amounting to less than 10%. The hotel commenced an Article 78 proceeding to challenge the SLA determination on the grounds that the alcohol manufacturers held a de minimis interest in the hotel and ABCL § 101(1)(a) dated back to the Prohibition Era, was designed to prevent monopolies in alcohol sales, and was obsolete. The court credited these arguments as logical and reasonable, but upheld the denial because the statute does not provide the SLA with any discretion on the matter. The application must be summarily denied. Disagreements with the statute should be taken up with the legislature.
Citation: Matter of Rihga Int’l. USA, Inc. v. New York State Liq. Auth., 84 N.Y.2d 876 (1994).

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