Lead Opinion
This appeal from the revocation of a restaurant liquor license presents a question never before addressed by this Court: the extent to which a licensee may be liable for illicit drug transactions by an employee. We hold that a strict liability standard is inappropriate and that at least some degree of scienter is required. When violations of the Liquor Code and its attendant laws and regulations are not the conduct under review, a licensee is liable only if he knew or should have known of the illegal activity and if he fails to prove substantial affirmative measures taken to eliminate a known pattern of illegal activity.
The facts of the case are as follows. In January, 1984, Ron Jacobs was employed as a doorman at Peter P’s, the licensed premises. On January 25, inside the restaurant, an informant and an undercover agent arranged to purchase heroin from Jacobs for $30. Jacobs refused to deliver the heroin in the restaurant, so the parties left and the exchange was made off the premises.
Following a hearing, the Pennsylvania Liquor Control Board (PLCB) revoked Peter P’s liquor license due to the sale of heroin by Jacobs. The PLCB found: “The licensee, by its servants, agents or employes permitted the use of its licensed premises in the furtherance of the traffic in or use of a controlled substance, on January 25, 1984____” On appeal, a de novo hearing was held, and the court of common pleas sustained the license revocation. The Commonwealth Court, in an unreported opinion, affirmed the order of the common pleas court, reasoning that the violation occurred on the licensed premises. The court relied on its decision in Bates v. Commonwealth,
A violation of the Liquor Code or its attendant laws and regulations places a liquor license in jeopardy on a basis of strict liability — that is, a license may be suspended or revoked for such a violation regardless of whether the licensee knew or should have known of the misconduct. This is due to the legislative mandate in the Liquor Code:
§ 4-471. Revocation and suspension of licenses; fines
Upon learning of any violation of this act or any laws of this Commonwealth relating to liquor, alcohol or malt or brewed beverages, or of any regulations of the board adopted pursuant to such laws, of any violation of any laws of this Commonwealth or of the United States of America relating to the tax-payment of liquor or malt or brewed beverages by any licensee within the scope of this article, his officers, servants, agents or employes, or upon any other sufficient cause shown, the board may, within one year from the date of such violation or cause appearing, cite such licensee ... to show cause why such license should not be suspended or revoked or a fine imposed____
47 P.S. § 4-471 (emphasis added). This statute has been interpreted as authorizing license suspension or revocation regardless of a licensee’s ignorance of his employee’s misconduct. See, e.g., Commonwealth v. Koczwara,
“There is perhaps no other area of permissible state action within which the exercise of the police power of a state is more plenary in the regulation and control of the use and sale of alcoholic beverages.” ... Individuals who embark on such an enterprise do so with knowledge*504 of considerable peril, since their actions are rigidly circumscribed by the Liquor Code.
Koczwara,
In addition to strict liability for adherence to the liquor laws and regulations, section 4-471 permits revocation or suspension of a liquor license “upon other sufficient cause shown.” It is well established that violations of criminal laws other than the Liquor Code may constitute sufficient cause for revocation or suspension of a liquor license. See, e.g., I.B.P.O.E. Liquor License Case,
As to what quantum of guilty knowledge or intent will justify proceedings against a liquor license, the caselaw developed by the Commonwealth Court provides some guidance. Two principles in particular are expressly approved. The first is that if a licensee knew or should have known of illegal activities by an employee or patron, the licensee is liable. The second principle is that a licensee may defend his license by demonstrating that he took substantial affirmative steps to guard against a known pattern of illegal
Both principles are exemplified in the case of Bates v. Commonwealth, supra. Bates’s liquor license was revoked because he “permitted” unlawful traffic of drugs on his premises; it was undisputed that drug sales occurred on the premises, albeit by patrons rather than employees, that numerous controlled substances were discovered during police raids, and that drug-related arrests were made on the premises. Defining “permitted” as “acquiesced by failing to prevent,” the court held that Bates had permitted the drug trafficking, due to the obvious nature of the activity and due to his failure to prove he took “substantial affirmative measures ... to eliminate a known pattern of use of and traffic in controlled substances on his premises____” Id.,
We think the foregoing analysis in Bates is sound, though it relied in part on Sobel Liquor License Case, supra, and Dubin Liquor License Case,
Applying the foregoing standard to this case requires us to affirm the order of the Commonwealth Court. Assuming, as he testified, that the licensee did not know of Jacobs’s activity, the record nonetheless establishes the existence of a pattern of drug trafficking at the establishment. A six-month investigation of Peter P’s had been conducted by Donald Way, an undercover narcotics agent. Agent Way testified that he was able to purchase drugs from a patron of the establishment, and that he observed drug sales between patrons, sales of stolen goods, the use of drugs in the bathroom, and a drug sale take place in the presence of the bartender. Due to the pervasive nature of this illicit activity, it may be said that the licensee should have known of the misconduct of his employee. That being the case, he is deemed to have permitted or acquiesced in the misconduct unless he proved that he took substantial affirmative measures to prevent it.
Although the licensee argues that he attempted to prevent drug trafficking at Peter P’s, the record indicates the limited extent of his effort. He testified that he posted signs warning against drug use and instructed his employees that they should keep their eyes open for drugs and should bar any drug user from entering the establishment. Even this evidence was contradicted by the testimony of agent Way, who denied seeing any signs prohibiting drug sales or use at any time during his six-month investigation. The licensee himself provided further evidence that his remedial measures were insubstantial; he testified that although he hired Jacobs as doorman to stem the obvious drug trafficking, he had no personal knowledge of Jacobs’s character nor did he ask for character references. The record manifestly fails to prove that the licensee took the substantial affirmative steps necessary to avoid license revocation in the face of an obvious pattern of misconduct under the drug laws.
Order affirmed.
Concurrence Opinion
concurring.
I cannot accept the majority’s dichotomous analysis of section 471 of the Liquor Code.
Notes
. Act of April 12, P.L. 90, art. IV § 471, as amended 47 P.S. § 4-471.