In this CPLR article 78 proceeding (transferred to this Court by order of Supreme Court, New York County [Sheila Abdus-Salaam, J.], entered on or about May 8, 2008), petitioner challenges the determination of respondent New York State Liquor Authority, dated March 20, 2008, which, upon a finding that petitioner violated State Liquor Authority Rules 54.2 (9 NYCRR 48.2) and 54.3 (9 NYCRR 48.3), revoked petitioner's on-premises liquor license.
The opinion of the court was delivered by: Catterson, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Peter Tom, J.P., David B. Saxe, James M. Catterson, Karla Moskowitz & Leland G. DeGrasse, JJ.
The principal issue presented on this appeal is whether there is substantial evidence to support the finding that the petitioner permitted overcrowding on the premises in violation of State Liquor Authority Rules 54.2 (9 NYCRR) § 48.2 (hereinafter referred to as "Rule 48.2") (failure to exercise adequate supervision over the conduct of the licensed establishment), and Rule 54.3(9 NYCRR) § 48.3 (failure to conform with all occupancy level regulations) (hereinafter referred to as "Rule 48.3"). Furthermore, this appeal necessarily brings up for review the issue of whether the respondent, the New York State Liquor Authority (hereinafter referred to as the "SLA"), exceeded its authority in promulgating rules in excess of the power delegated to it by explicit state law.
We find that testimony that patrons were standing "shoulder to shoulder," the only evidence proffered by the SLA that the premises were overcrowded, is insufficient to support the findings that the petitioner violated Rule 48.2 and Rule 48.3. Furthermore, we find that the SLA exceeded its authority in determining that the petitioner was guilty of violating the occupancy law where the underlying charges were dismissed in Criminal Court. Moreover, we find that Rules 48.2 and 48.3 are ultra vires as applied here because the enforcement of the rules is contrary to the legislative requirements contained in their statutory predicate (Alcoholic Beverage Control Law § 106) (hereinafter referred to as the "ABC Law").
On January 13, 2007, as a result of a joint task force investigation of various premises in downtown Manhattan, several New York City police officers and SLA investigators descended on the petitioner's premises, a large restaurant/bar located in the area commonly known as Alphabet City*fn1. Five charges were brought against the petitioner by the SLA: (1) Allowing the premises to become disorderly in violation of section 106(6) of the ABC Law; (2) Failure to exercise adequate supervision over the premises on January 13, 2007 in violation of Rule 48.2; (3) Failure to comply with occupancy level regulations on January 13, 2007 in violation of Rule 48.3 and SLA Rule 36.1(f) (9 NYCRR) § 53.1(f) (hereinafter referred to as "Rule 53.1(f)"); (4) Failure to conform with governmental regulations regarding employment of security guards on January 13, 2007 also in violation of Rules 48.3 and 53.1(f); (5) Failure to conform with building codes and/or other regulations on January 13, 2007 in violation of Rules 48.3 and 53(1)(f). According to the SLA, all 5 charges were cause for revocation, cancellation or suspension of the petitioner's liquor license in accordance with Rule 53.1(f).
On October 30, 2007, a hearing was held before an Administrative Law Judge. At the hearing, a senior SLA investigator testified that on January 13, 2007, he went to the petitioner's premises as part of a joint inspection with the New York City Police Department. The investigator stated that he entered through the cellar entrance with two other investigators and observed people standing "pretty much shoulder to shoulder." He further testified that he pushed his way through the crowd and walked up to the first floor with the two other investigators. At that point, he met several other investigators and police officers who had entered the restaurant on that level. The group exited through a service corridor because it was too crowded on the first floor to "plow [their] way to the back in the front."
While the SLA investigator was outside, he observed a police lieutenant talking with the owner of the petitioner, who had produced the certificate of occupancy for the premises allowing for 61 people in the cellar and 135 on the first floor. The investigator stated that he heard the lieutenant tell the owner that the premises were overcrowded and instructed him to get the place under legal capacity. The investigator testified that he observed what he estimated to be between 75 and 100 people in the cellar. He could not say how many people were on the first floor of the premises. On cross-examination, the investigator conceded that he did not use a counting device to determine the number of people at the premises nor did he conduct any headcount while inside the premises. He also conceded that it was not unlawful for people to be standing "shoulder to shoulder."
The SLA introduced into evidence its investigator's report, which noted, inter alia, that the petitioner was issued a summons for overcrowding (New York City Administrative Code § 15-227(a)) and for hiring an unlicensed security guard (see General Business Law § 89-g(1)(a)). The security guard was also issued a summons for not being able to produce a New York Department of State registration card upon request. General Business Law § 89-f(6).
The owner testified without contradiction that the summonses issued that night were later dismissed and that he fully cooperated with the police in getting the place under legal capacity. The owner also testified that there was no overcrowding and that one of his employees had a counter showing that the premises were within the legal limits. He stated that after the police told him to reduce the number of people inside the premises he complied immediately.
Following the hearing, the Administrative Law Judge dismissed the charges that the petitioner failed to conform with governmental regulations regarding employment of security guards. She also found that there was "no evidence" that the licensee "suffer[ed] or permit[ed]" the premises to become disorderly in violation of section 106(6) of the ABC Law. However, the ALJ determined that the licensee failed to exercise adequate supervision over the premises in violation of Rule 48.2 and failed to comply with occupancy levels in violation of Rule 48.3. She stated that it was "clear from the substantial evidence presented that the premises were in fact overcrowded [...] and that the premises were allowed to become disorderly." The ALJ dismissed the charge that the petitioner failed to "conform with all building codes, and/or fire, health, safety and governmental regulations" because it was duplicative of the charge that the petitioner failed to "conform with all applicable building codes and/or fire regulations regarding occupancy level[s]."
On March 20, 2008, the SLA sustained the findings of the ALJ and, referencing the petitioner's extensive adverse history, cancelled its on-premises liquor license.*fn2
The petitioner then commenced this article 78 proceeding against the SLA alleging that the cancellation of its liquor license was arbitrary, capricious, contrary to law and an abuse of discretion. In addition to arguing that the determination was not supported by substantial evidence and that the penalty was excessive, the petitioner contends that the promulgation of Rules 48.2 and 48.3 is ultra vires and has no basis in the ABC Law. Specifically, the petitioner contends that both rules fail to meet the legislative requirements contained in their statutory predicate, ABC Law § 106(6).
As a threshold matter, we perceive it to be an inherent contradiction to dismiss a charge that a licensee has "suffer[ed] or permitt[ed]" the premises to become "disorderly" in violation of section 106(6) of the ABC Law while at the same time find substantial evidence that the premises was "in fact overcrowded [...] and allowed to become disorderly" under a SLA Rule. Even if we were to accept, as the SLA urges, that overcrowding constitutes disorderly conduct per se, we disagree that there was sufficient evidence that there was overcrowding in the ...