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Liquor Licensee's Good-Faith Effort Prevents Automatic Revocation

liquor drinksBen Seal, The Legal Intelligencer

A liquor license held in safekeeping for more than the allotted three years should not be revoked if its owner makes a good-faith effort to reinstate the license but fails, the Commonwealth Court has ruled.

In a unanimous March 29 memorandum opinion in Club 530 v. Pennsylvania Liquor Control Board, the court found that Club 530 Inc. was not at fault for the circumstances that prevented it from reinstating its liquor license within three years and the license should not have been automatically revoked. Because the club lacks a valid health license, however, the decision nonetheless vacated a portion of the trial court's ruling that reinstated the club's license, giving the club 60 days to demonstrate compliance with the Liquor Code in order to reissue the license.

Club 530 acquired a liquor license for a location in Scranton in 2007 and requested that it be placed in safekeeping for a period that was set to expire in November 2010, Senior Judge Dan Pellegrini wrote for the court. After the club timely requested a return of the license from safekeeping, the Pennsylvania Liquor Control Board's Bureau of Licensing informed it in December 2010 that it could not approve the move because a valid health license was not posted on the premises.

The bureau also said the license would be revoked within 20 days unless it received an application to extend the safekeeping period, but Club 530 took no action, "purportedly because licensee did not receive" the letter, Pellegrini said. The bureau then revoked the license and Club 530 appealed.

A hearing examiner recommended the license not be revoked because the lack of a health permit "'was not the fault of the licensee'" and was instead due to miscommunications Club 530 could not have controlled, Pellegrini said. The PLCB nonetheless issued an order revoking the license, and testimony at the trial court from a Scranton official indicated a conflicting appointment prevented the official from performing a timely health inspection. The official testified that the premises previously held a health license and he was not aware of anything that would have affected the issuance of a new one.

The trial court reversed the PLCB's order because Club 530 made a good-faith effort to successfully reinstate the license. The court also refused to impose the $5,000 annual safekeeping fees for the years following Club 530's appeal.

"What was before the trial court was not whether there was an automatic revocation but whether the license should be revoked because licensee did not successfully complete all the requirements to have the license reissued," Pellegrini said. "Because the trial court determined that licensee made every good-faith effort to successfully reinstate its license but failed to do so for reasons beyond its control, the trial court acted within its discretion not to revoke the license."
The PLCB said the trial court still erred when it reinstated the license rather than returning it to safekeeping and requiring the $35,000 in fees it would have collected in safekeeping since 2010. The Commonwealth Court agreed on reinstatement, but not on the fees.

"The trial court was bound by the PLCB's regulation prohibiting the reissuance of a restaurant liquor license given that the premises still, to this day, fail to meet all sanitary requirements for a public eating place in the municipality—i.e., a valid health license," Pellegrini said. "Until that occurs, the license cannot be taken out of safekeeping and the trial court cannot reinstate the license. That does not mean, however, that the appropriate remedy is to place the license back into safekeeping and to impose annual safekeeping fees for each year the license has been revoked."

Scott Cooper of Schmidt Kramer, who represented Club 530, said the decision "prevented a really unreasonable result from happening to bar owners," who could be charged $5,000 for each year an appeal took to complete. "It sets a standard that once they revoke it, it's not in safekeeping," Cooper said.
Jessica Lathrop of the PLCB did not return a call for comment.

(Copies of the 15-page opinion in Club 530 v. Pennsylvania Liquor Control Board, PICS No. 17-0510, are 
available at https://www.law.com/thelegalintelligencer/almID/1202752745342/?slreturn=20170310145734/.)