The Latest on the ABC Emergency Rules – Now to Include “Emergency” License Suspension if the order is made by a Minor Decoy and a Delivery Driver Drops off Alcohol at the Door without checking the ID of the Recipient.
By John Hinman, Hinman & Carmichael LLP
The ABC “Emergency Rules” – Second Round Comments to Office of Administrative Law Due by Tuesday May 25, 2020
We lost Round One - The ABC Ignored the Comments Submitted
This is the second blog dealing with the ABC’s new proposed rules changing the process for administrative hearings to adjudicate violations of the ABC Act. We (and many others) submitted comments to the ABC by the Monday May 18th ABC comment deadline.
However, the ABC ignored the many comments directed to them and instead sent the proposed rules to the Office of Administrative Law (OAL) for adoption on Monday May 18th.
No changes in the proposed new rules were made by the ABC.
Round Two – Comments to the OAL
There is one more five-day opportunity to comment, this time to the OAL, which has the authority to approve the new rules, or reject them. This time the comment period is extended until Tuesday May 25, 2020 because of the Memorial Day holiday. There will be no public hearing and no debate permitted. If the new rules are adopted by the OAL they will be in place for 180 days and you can expect every ABC enforcement case to be deemed an “emergency.” After 180 days the rules can be extended for another 180 days and after that, if the ABC desires, made permanent.
We had hoped that the ABC would agree there is no “necessity” for the proposed rules and that overwhelming opposition from the entire licensed alcoholic beverage industry (which they have received) would convince the ABC to withdraw the draconian rule-making proposal.
We were wrong.
The Effect of the New “Rules”
The new “rules” do away with most due process protections for licensees including discovery of relevant evidence, responsive pleadings, time to prepare for hearing and mandatory live administrative hearings before license suspension or revocation being imposed. The new proposed rules also do away with the statutory right to appeal to the ABC Appeals Board and instead create a new process of appeal to the Superior Court of the county in the which the licensee is located.
Hearings for all violations subject to “emergency orders” would occur only if the ABC agrees to hold a hearing, the licensee could appear “if practicable” and discipline (license suspensions and revocations) would be imposed immediately. The new rules do not go away if the COVID 19 “emergency” goes away. From now on an “emergency” is anything the ABC says is an “emergency.”
The nine categories of violations affected by the emergency rule making include common violations of the ABC Act related to alleged improper conduct on licensed premises or related to activities of licensees away from licensed premises. All were initially reviewed in our May 17th blog post (here), and none involve actual emergencies.
The Hinman & Carmichael LLP Comments to OAL Opposing the Emergency Rule Making
Our firm filed a comment letter with the ABC, and we are now submitting an updated version of that letter to the OAL. Our updated letter is attached here. We urge all licensees and interested parties who agree with our comments to send a letter or an email to the OAL adopting the comments (or the parts agreed with) as their own.
Here are the addresses and email for the comments:
OAL Reference Attorney and Department of Alcoholic Beverage Control
300 Capitol Mall, Suite 250 3927 Lennane Drive, Suite 100
Sacramento, CA 95814 Sacramento, CA 95834
E-mail: staff@oal.ca.gov E-mail: RPU@abc.ca.gov
ABC Disciplinary Actions are Serious Matters; and so is the Potential for Regulatory Corruption
ABC disciplinary actions have serious financial impacts on licensees and their employees; penalties can include fines, license suspensions, license revocations and criminal liability. The right of a licensed winery, brewery, distillery, restaurant, hotel, entertainment venue, sports stadium or other licensed business to survive is at stake If their basic right to sell alcoholic beverages is subject to being revoked at the whim of an angry neighbor, overzealous local police department or competitor filing a false or misleading claim on any of the unlimited grounds listed in the proposed emergency regulations.
Assessing penalties without due process and the right to appeal to the ABC Appeals Board leads to inconsistent treatment of licensees, favoritism, and the potential for corruption. Article 20, Section 22 of the California Constitution was passed in 1954 to address the corruption that existed on the part of many of the California liquor regulators in the period from the end of Prohibition up to that time.
That Amendment to the California Constitution created the ABC Appeals Board to oversee the affairs of the ABC. The scandals at the time that led to the adoption of the due process procedures found in the ABC Act today were notorious and are explained in the official records of the State Board of Equalization here.
Preventing corruption in the ranks of the lower level officials charged with ABC enforcement is as much a priority today as it was in 1954. In 2018 an ex-ABC Investigator and a District Administrator were indicted in Los Angeles for bribery and fraud resulting from a long running scheme (started in 2013) to shakedown ABC licensed establishments to enrich themselves by abusing their position as ABC officials. A copy of the Grand Jury indictment can be found here and attached to our letter to the OAL.
We are not accusing any current ABC official of corruption but if due process is sacrificed for expediency the ability for abuse of the system is amplified. That concern was front and center when the current system was created in 1954, was highlighted by the 2018 Grand Jury indictments, and it is no less important today.
Now the ABC wants to Include the Use of Minor Police Employed Decoys as “Emergencies” justifying the suspension of due process protections.
On May 20, 2020 the ABC upped the ante on the new emergency regulations by including a new category of offense in the emergency rules – sale to a minor employed by the police as a decoy to accept alcoholic beverages from a delivery driver acting as the “agent” of the selling licensee.
The proposal and the actual text of the regulations permitting the police use of decoys to sting licensees through delivery drivers can be found here and here.
These proposed regulations have not gone to the OAL but the ABC is (as required by the statute) giving five days notice of its intent to transmit these rules to the OAL for adoption as “emergency rules.” Once the rules are transmitted to the OAL, public comments can be made to the OAL but there will be no hearing and the emergency rules may be effective immediately thereafter as the current emergency rules are to be effective.
Minor decoy penalties are draconian. The first violation is a 15-day license suspension, the second in a 36-month period is a mandatory 25-day license suspension and the third in a 36 -month period is license revocation.
Given these violations are also criminal violations for the delivery person (which could be any of the delivery services, including Federal Express and UPS) this may bring the current work around of delivering alcohol to a screeching halt. I cannot imagine the major delivery services agreeing to carry alcohol when doing so exposes them and their drivers to criminal liability for not carding someone wearing a mask because of Covid 19 concerns and requiring the driver to leave the package on the front porch.
CONCLUSION – 'Emergencies' have always been the pretext on which the safeguards of individual liberty have been eroded. Friedrich Hayek
The ABC is using the COVID 19 crisis as an excuse to implement a system of permanent “emergency” orders that would abrogate licensee rights to defend themselves and their licenses in administrative proceedings.
We urge the industry to comment not only to the OAL now but to their legislative representatives about the entire ABC abuse of the “emergency” rule-making power. These efforts at “emergency rulemaking” are unnecessary, unjustified, improper and will result in an alcohol regulatory system rife with abuse.
This blog is dedicated to occasional (and hopefully interesting) reports of state and national alcoholic beverage regulatory developments that we encounter in our practice. Booze Rules (and any comments below) are intended for informational use only and are not to be construed as legal advice. If you need legal advice please consult with your counsel.