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Appeals Court Affirms ABCC License Condition as Penalty

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On April 21, 2020, the Massachusetts Appeals Court decided RK&E Corp. v. Alcoholic Beverages Control Commission. This decision provides some useful guidance to practitioners who appear before the Massachusetts Alcoholic Beverage Control Commission (ABCC) and serves as another illustration as to why the ABCC and its licensees would be well served by creating a mechanism for consent judgments.

The case involved a Revere bar that was running an illegal gambling operation. Specifically, the on-premise retailer was authorized by the local licensing commission to operate “automatic amusement devices.” As such, the bar had what appears to be five video poker machines. Although the machines were supposed to be used for entertainment purposes only, the bar paid out winnings to its patrons.

After an investigation, the ABCC charged the bar with violations of its regulations. Before its administrative hearing, a representative of the bar signed a common ABCC form stipulating to the investigative report’s facts and admitting to the violations. The ABCC ultimately suspended the bar’s license for five days, with two to serve, and ordered that the bar “not possess in or on the licensed premises any automatic amusement devices or video poker machines.” 

The bar appealed to the Superior Court, where it lost, and then appealed to the Appeals Court, which affirmed the ABCC’s penalty. Specifically, the bar argued that because the local licensing commission, and not the ABCC, permitted the use of automatic amusement devices, the ABCC could not prohibit their use.

The Appeals Court disagreed. The court held that because the ABCC had the power to totally revoke the bar’s license, it also had the power to take less severe steps, including the prohibition of these devices, even if used properly. The court relied on G.L. c. 138, § 64, in holding that it “may attach a condition to a license following suspension so long as the condition is reasonably related to preventing the unlawful practice at the licensed premises.” 

So what could the bar have done differently? First and foremost, it obviously should have followed the law and not permitted illegal gambling on its premises. Once charged by the ABCC, it should have only stipulated to the facts without conceding that its actions amounted to a violation. Although the strategy it employed is rather common before the ABCC, it deprives charged licensees the opportunity to make legal arguments on appeal and in this case it prohibited the licensee from arguing that the evidence was insufficient to support the charge. Lawson & Weitzen attorneys have successfully stipulated to facts, but not violations, when representing licensees before the ABCC. This preserves the ability to make legal defenses that are otherwise waived and maintains important appellate rights.

This case also illustrates the lack of a “plea bargaining” mechanism at the ABCC which forces all cases to hearing. Ideally, the ABCC would institute a mechanism to allow the investigators and charged licensees to reach an agreement on a proposed penalty. Other states have had success with consent decrees and stipulated violations. The criminal justice system allows plea bargains. The same should be true before the ABCC. It would promote efficiency and would incentivize charged licensees to change and improve practices instead of challenging the ABCC’s legal authority. In addition, it would prevent decisions like RK&E Corp. from creating sweeping language concerning the ABCC’s authority that will likely impact a variety of closer cases in the future.

If you are licensed by the ABCC and are looking for assistance with compliance or representation in a violation proceeding, Lawson & Weitzen’s Alcoholic Beverage Law Team is here to help. Contact us today.