In re 47 Ave. B. East Inc. v. New York State Liquor AuthorityIn re 47 Ave. B. East Inc. v. New York State Liquor Authority
Mehler & Buscemi, New York City (Martin P. Mehler of counsel), for petitioner.
Thomas J. Donohue, New York City (Scott A. Weiner of counsel), for respondent.
OPINION OF THE COURT
CATTERSON, J.
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 Rules of
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 rules 48.2 and 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 (
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.1 Five charges were brought against the petitioner by the SLA: (1) Allowing the premises to become disorderly in violation of
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 (
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
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.2
The petitioner then commenced this
As a threshold matter, we perceive it to be an inherent contradiction to dismiss a charge that a licensee has “suffer[ed] or permit[ted]” the premises to become “disorderly” in violation of
“Judicial review of the determination made by an administrative agency . . . is limited to a consideration of whether that resolution was supported by substantial evidence upon the whole record.” (See 300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176, 181 [1978].) Substantial evidence “is less than a preponderance of the evidence” and requires only that there be enough “relevant proof as a reasonable mind may accept as adequate to support a conclusion or ultimate fact.” (300 Gramatan Ave. Assoc., 45 NY2d at 180.) The test “relates to whether a particular action should have been taken or is justified . . . and whether the administrative action is without foundation in fact.” (Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222, 231 [1974] [internal quotation marks and citation omitted].)
It is beyond dispute that the credibility determinations of the Administrative Law Judge are entitled to great weight. (See Matter of Albany Manor Inc. v New York State Liq. Auth., 57 AD3d 142, 144 [1st Dept 2008].) Indeed, for purposes of this appeal we accept as true all of SLA’s allegations concerning the investigator’s observations of conditions on the premises on the night of January 13, 2007. It is uncontroverted, however, that the investigator did not perform a headcount in the basement and merely observed that the patrons were standing “shoulder to shoulder.” Nor did the investigator conduct a headcount on the main floor where he only spent a brief time observing the scene.
As for the SLA investigator’s testimony that there were between 75 and 100 persons in the basement, we reject that as a “guesstimate” that cannot constitute substantial evidence. No matter how much lower the standard, substantial evidence of a violation of occupancy limits cannot be based on testimony that cavalierly assesses groups of people on a “give or take” of 25 persons, which is a 33.3% margin of error. Indeed, were we to apply the 33.3% margin of error to the guess of 75 persons, it is doubtful how anyone could ascribe overcrowding to a premises with a legal maximum occupancy of 61 persons.
We disagree with the dissent’s finding of substantial evidence of overcrowding in the summons that stated there were “approximately 300 patrons.” It is beyond dispute that an unsigned, unverified and unsworn statement scribbled on a summons that
Accordingly, because there is inadequate evidence that the petitioner permitted the premises to become overcrowded, the underlying basis for both violations, we conclude that neither charge can be sustained.
Furthermore, we find that the SLA exceeded its authority in determining that the petitioner violated the occupancy law. The SLA based its cancellation of the petitioner’s license on rule 53.1 (f), which states: “Any license or permit issued pursuant to the
The SLA argues that the petitioner violated rules 48.2 and 48.3 and thus, cancellation is permissible pursuant to rule 53.1 (f). Rule 48.3 states that “[t]he [SLA] expects all on-premises licensees, regardless of type of premises, to conform with all applicable building codes, fire, health, safety and governmental regulations.” Pointing to the summons issued on January 13, 2007 for an alleged violation of
We note that Matter of Cris Place, Inc. v New York State Liq. Auth. (56 AD3d 339 [1st Dept 2008]), Matter of Dawkins v New York State Liq. Auth. (47 AD3d 440 [1st Dept 2008]) and Matter of Moonwalkers Rest. Corp. v New York State Liq. Auth. (250 AD2d 428 [1st Dept 1998]) are inapplicable to the instant case. In each of the memorandum decisions, we declared that there was substantial evidence to support the SLA’s findings that the licensees had violated some other governmental agency’s regulations.
Citing these three cases, the dissent concludes that “[t]his Court has upheld the [SLA’s] independent determination of regulatory violations on numerous occasions.” We have not. There is no indication in these decisions as to what exactly we found constituted the substantial evidence. Certainly, there is no suggestion that we permitted a finding of a violation based on the SLA’s independent determination rather than on a valid summons issued by the underlying regulatory agency.
In any event, we find that rules 48.2 and 48.3 are ultra vires as applied because the SLA failed to adhere to the legislative requirements contained in the statutory predicate. It is a fundamental principle of administrative law that an administrative agency has no authority to create rules and regulations without a statutory predicate. (Rotunno v City of Rochester, 120 AD2d 160, 163 [4th Dept 1986], affd 71 NY2d 995 [1988].)
It is undisputed that the statutory predicate to rules 48.2 and 48.3 is
The Court of Appeals has held “that conduct is not suffered or permitted unless the licensee or his manager knew or should have known of the asserted disorderly condition on the premises and tolerated its existence.” (Matter of Playboy Club of N.Y. v State Liq. Auth. of State of N.Y., 23 NY2d 544, 550 [1969] [internal quotation marks and citation omitted].) In determining whether petitioner “suffer[ed] or permit[ted]” its premises to become disorderly in violation of
In Matter of Beer Garden, the Court of Appeals applied
In Jay-Jay Cabaret, this Court, following Matter of Beer Garden, held that rule 53.1 (s) was invalid, because it imposed a “‘no-fault’ proximity rule requiring no element of ‘disorder’ to establish a violation” (215 AD2d at 173).6 We determined that the SLA had no authority to promulgate rule 53.1 (s) because it was, in effect, a categorical, no-fault blanket proximity prohibition banning topless dancing within six feet of patrons regardless of how orderly the licensed premises may otherwise have been. In other words, we determined that a regulation promulgated pursuant to
Here, just as in Matter of Beer Garden, we find that rule 48.2 was promulgated as a “no-fault” rule without the requisite element of awareness. Rule 48.2 states that “[i]t shall be the obligation of each [licensee] to insure that a high degree of supervision is exercised over the conduct of the licensed establishment at all times in order to safeguard against abuses of the license privilege.” It continues by stating that each licensee “will be held strictly accountable for all violations that occur in the licensed premises and are committed by or suffered and permitted by any manager, agent or employee or such licensee” (emphasis added).
A plain reading of rule 48.2 makes patent that the petitioner can be held “strictly accountable” for failing to maintain “a high degree of supervision” even though there was no finding of anyone in a managerial position being aware of any occurrence of disorder on the premises. In other words, the rule improperly imputes an employee’s knowledge of improper activity to the
Furthermore, we find that rule 48.3 is also ultra vires as applied. Rule 48.3 requires licensees “to conform with all applicable building codes, fire, health, safety and governmental regulations.” A plain reading of the rule makes clear that there is no requirement the licensee “suffer or permit” a violation of a governmental regulation. (Matter of Beer Garden, 79 NY2d at 276-277.) In other words, a licensee can be found to be in violation of rule 48.3 without any evidence that the licensee was aware that he lacked conformance with any one of a multitude of applicable governmental regulations. Moreover, simply because a licensee may not be in conformance with “all applicable . . . governmental regulations” does not require the conclusion that he or she has permitted “disorderly” conduct to occur on the premises. (Jay-Jay Cabaret, 215 AD2d at 172-173.)
We reject the dissent’s contention that this case does not fall within the ambit of Matter of Beer Garden. The dissent would allow an inference of “culpable mental state” by positing that the petitioner’s owner was on the premises, observed the condition of overcrowding and did nothing to alleviate it. However, this view presumes the validity of the ad hoc and unsubstantiated determination of overcrowding made by an SLA investigator and the anonymous statement scribbled on a dismissed summons, while dismissing that what the petitioner’s owner observed was, in fact, not overcrowding. In other words, the dissent imputes, to the licensee’s detriment, not facts but base assumptions proffered by the SLA without any evidence that the assumptions on overcrowding were correct.
Accordingly, in this proceeding, brought pursuant to
Tom, J.P. (dissenting). Substantial evidence supports respondent’s determination that the licensed establishment was permitted to become overcrowded in violation of Rules of the State Liquor Authority rules 54.2 (
Testimony was received from a senior investigator for respondent that he observed approximately 75 to 100 people in the cellar of the premises, with patrons “standing shoulder to shoulder” throughout the establishment. A summons was issued to petitioner for an “overcrowded bar” based on a police officer’s observation of “approximately 300 patrons inside [the licensed establishment]” (see Matter of 7th Ave. & Grove St. Corp. v New York State Liq. Auth., 215 AD2d 107, 108 [1995]). The certificate of occupancy, produced by petitioner’s owner at the direction of police, permits a maximum occupancy of only 61 people in the cellar and 135 on the first floor. Furthermore, petitioner’s owner testified that the establishment’s security guard tracked the number of admitted patrons by use of a counting device and that the police alleviated the overcrowding by directing the guard to deny entry to additional persons while inducing patrons to leave the premises by virtue of the obvious police presence.
As this Court has recently noted, review of an administrative determination is governed by the rather low threshold of substantial evidence, which is less than even a preponderance of the evidence, and may be predicated on both hearsay and
The testimony of respondent’s investigator that people in the licensed establishment were “standing shoulder to shoulder” and the summons issued by a police officer stating that there were approximately 300 people on the premises constitute substantial evidence of overcrowding. Contrary to the majority’s intimation, petitioner’s owner, Sameh Jakob, never testified that the count maintained by the club’s doorman showed that the premises were within occupancy limits. Jakob’s bald denial of overcrowding merely raised a question of fact for resolution by the ALJ, whose determination is supported by the record of the proceedings (see Matter of Menick v Bruckman, 279 NY 795 [1939], revg 255 App Div 810 [1938]; cf. Matter of Culture Club of NYC v New York State Liq. Auth., 294 AD2d 204 [2002]).
Although the summons for overcrowding was ultimately dismissed for failure to prosecute, this disposition has no preclusive effect.* As respondent’s counsel explained, “the police officers never showed up to court,” and the dismissal was not on the merits.
The majority’s hypothesis that the ALJ lacked authority to determine that the premises were overcrowded is not supported by case law. While respondent may rely on violations issued by another agency to support a finding that its own regulations have been violated (see e.g. Matter of Jericho Pub v New York State Liq. Auth., 4 AD3d 228 [2004] [signage]), there is no requirement that it do so. This Court has upheld the Liquor Authority’s independent determination of regulatory violations on numerous occasions (see e.g. Matter of Cris Place, Inc., 56 AD3d at 339 [inter alia, overcrowding]; Matter of Dawkins v New York State Liq. Auth., 47 AD3d 440 [2008] [signage]; Matter of Moonwalkers Rest. Corp. v New York State Liq. Auth., 250 AD2d 428 [1998] [overcrowding]; cf. Matter of Culture Club of NYC, 294 AD2d at 204 [insufficient evidence of excessive noise to sustain violation of
Petitioner has tried very hard to bring this matter within the ambit of Matter of Beer Garden v New York State Liq. Auth. (79 NY2d 266, 275 [1992]), in which the Court of Appeals held that a rule making any disorder on or about the licensed premises a basis for adverse action exceeds the prohibition of
The present matter is clearly distinguishable. First, as discussed, the regulation violated is not one issued by respondent. Second, the record contains substantial evidence that petitioner’s owner, Sameh Jakob, was on the premises at the time of the overcrowding, had observed the condition and did nothing to alleviate it until instructed by police to restrict entry by patrons. Furthermore, Jakob failed to supervise the club’s doorman, who concededly kept a count of the number of persons admitted, so as to avoid exceeding the rated capacity of the premises, as provided in the certificate of occupancy. Thus, to the extent that Matter of Beer Garden is applicable, the evidence demonstrates the requisite culpable mental state on behalf of petitioner’s principal.
In view of petitioner’s extensive prior history of sustained violations, including two for overcrowding and three for
Accordingly, the determination should be confirmed.
Saxe and DeGrasse, JJ., concur with Catterson, J.: Tom, J.P., and Moskowitz, J., dissent in a separate opinion by Tom, J.P.
In this proceeding, brought pursuant to