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Circus Liquors, Inc. v. Governing Body of Middletown Township

199 N.J. 1, 970 A.2d 347 (2009)

LIQUOR LICENSES — The express authority to revoke or suspend liquor licenses granted to the Director of the Division of Alcoholic Beverage Control comes with the implied power to control the divestiture of an interest in an improperly issued license.

A company owned two liquor licenses. A related company, owned by the same group of shareholders, applied for and received a third liquor license from the same municipality. Several years later, after reviewing the renewal applications for the licenses, the municipality refused to renew all three licenses because the applicable statute prohibits persons from holding simultaneous beneficial interest in more than two alcohol beverage licenses. It renewed two of the licenses and passed a resolution denying renewal of the third license. It had been inactive for over two years. The company filed petitions with the New Jersey Division of Alcoholic Beverage Control: (a) challenging the non-renewal of the license; and (b) seeking a “special ruling” that would reactivate the license for the purpose of permitting it to transfer the license so that the “two-license” limitation would become moot. The matters were consolidated and transferred to an Administrative Law Judge (ALJ). The ALJ issued an initial decision dismissing the petition, finding that the petitioner’s ownership of the three licenses clearly violated the statute. The Director of the Division of Alcoholic Beverage Control adopted the ALJ’s initial decision, but modified the remedy by issuing a stay on the non-renewal, allowing the petitioner’s to divest itself of all interest in the license to an unrelated, bona fide third party. The municipality appealed the Director’s remedy alleging that the stay of the non-renewal perpetuated a continued violation of the statute.

The Appellate Division agreed with the municipality and reversed the Director’s decision. While noting that it need not decide whether the Director, under certain circumstances, could authorize a brief period of technical non-compliance with the two-license limitation, the appellate court refused to invoke such authority in petitioner’s favor because of the license-holder’s “stark and lengthy” violation of the statute, i.e. the licensee owned the third license in violation of statute for seven years. It found that the Director mistakenly created a circumstance where the licensee could continue to profit from its unlawful conduct. The licensee and the Director both appealed the decision.

The Supreme Court reversed and remanded the matter to the Director. It held this appeal was about the role of appellate courts when reviewing an administrative agency’s decision. It ruled that absent a “clear showing” that it is arbitrary, capricious or unreasonable, or that an administrative decision lacks fair support in the record, an administrative agency’s final quasi-judicial decision should be sustained. This would be true, it found, even if the reviewing court would have reached a different conclusion in the first instance. It also found that the applicable statute vests the Director with extensive authority and investigative power over the liquor industry. It noted that when the two-license limitation was enacted, the Legislature did not specify the precise means by which a violation of the provision must be remedied. The Legislature then amended the statute to provide for fines and authorized the director to revoke or suspend licenses if the act was violated. The Court believed that the Legislature meant for the Director to have ample implied authority to deal fairly with parties. Thus, it found that the Director’s express authority to revoke or to suspend licenses came with the implied power to control the divestiture of interest in an improperly issued license. It then concluded that the Director’s remedy was not inconsistent with the act and his decision to apply the remedy of divestiture was not an arbitrary, capricious or unreasonable exercise of that discretion.

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