Opinion
103917/2008.
Decided June 4, 2008.
Flynn Flynn, PLLC, By: Terrence R. Flynn, Jr., Esq., NY., for the Petitioner.
Thomas J. Donahue, Esq., Counsel, State Liquor Authority, NY., for the Respondent.
In this Article 78 proceeding, petitioner seeks pursuant to CPLR 7833 (3) to annul the portion of respondent's November 19, 2007, determination which failed to grant petitioner's application to license its new roof top garden. For the reasons which follow, the petition is granted to the extent of remanding for further proceedings in accordance with this decision, order and judgment.
Petitioner operates a restaurant and bar at the premises located at 783 8th Avenue, New York, New York. It has a license issued by respondent New York State Liquor Authority to serve alcohol on the first and second floors of the establishment. It has no adverse license history. In March 2006, it filed an Alteration Application with respondent to add an enclosed third floor and a roof top garden to the licensed premises. Petitioner indicated that the roof would be used for dining and beverage service. The roof area has been approved by the New York City Department of Buildings for use as a dining area and is currently being constructed.
During the course of meetings with the Board of Commissioners of respondent Authority, in connection with petitioner's application, the neighborhood community board expressed to the Chair of the State Liquor Authority its opposition to the issuance of any permit (Ver. Ans. ¶ 15, Exh. 3 [Manhattan Comm. Bd. No. 4 letter dated Apr. 12, 2006]). Included in the materials submitted by the community board in opposition to the application, is a typed list of complaints allegedly made to the City's "311" complaint hot line from March 2005-March 2006, concerning noise or "illegal use" of the back patio and rooftop bar (Ver. Ans. Exh. 4). There were also four letters from residents and one petition signed by four other residents and two of the individual letter writers (Ver. Ans. Exh. 4). The community board also indicated that there was already an issue of noise occurring at the premises, that petitioner admitted that "several parties" had been held on the roof although it had agreed not to use the outdoor space, with the result that there were complaints of noise from surrounding residents, and that the board "regularly receive[d] noise complaints from the neighbors of [petitioner owners]' other [three] establishments." (Manhattan Comm. Bd. No. 4 letter dated Apr. 12, 2006). As part of the materials submitted by the community board was a listing of a dozen complaints it had received over the course of several years about the three other establishments owned by the owners of petitioner (Ver. Ans. Exh. 3). The topics of those complaints included noise from patrons on a third floor patio, and noise through open windows. There were two violations issued during these years, for illegal construction and improper ventilation.
While this list purports to show some of the many complaints made about the premises since it first opened, it is not an official document created by the City, and provides no evidence of how many people made calls, or the time of day and to what extent the complaints were verified by the police as being factually accurate (Ver. Ans. Exh. 4).
According to the petitioner, it agreed not to have music after 11:00 p.m. (Pet. ¶ 14). The community board subsequently modified its position to support alterations on the third floor of the premises, but remained "adamantly against licensing the unenclosed front roof top area as it would be extremely noisy and disruptive to the quality of life of those living in the surrounding area." (Ver. Ans. Exh. 5 [Manhattan Comm. Bd. No. 4 letter dated Jan. 15, 2007]).
On November 19, 2007, respondent granted, without explanation, petitioner's application only as to the addition of the enclosed third floor area (OSC, Petition Exh. A). Petitioner timely commenced the instant proceeding. It argues that the decision not to grant the portion of the application for the roof top garden was arbitrary and capricious.
It is a well-settled rule that judicial review of administrative determinations is limited to the grounds invoked by the agency ( Matter of Aronsky v Board of Educ., 75 NY2d 997). The court may not substitute its judgment for that of the agency, but shall decide if the determination can be supported on any reasonable basis ( Matter of Clancy-Cullen Storage Co. v Board of Elections of the City of New York, 98 AD2d 635, 636 [1st Dept. 1983]). An arbitrary action is without sound basis in reason and is generally taken without regard to the facts. The test of whether a decision is arbitrary or capricious is "determined largely by 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., 34 NY2d 222, 232, quoting 1 NY Jur., Admin. Law, § 184, p. 609). The scope of review does not include "any discretionary authority or interest of justice jurisdiction in reviewing the penalty imposed by the Authority" and "the sanction must be upheld unless it shocks the judicial conscience" ( Featherstone v Franco, 95 NY2d 550, 554, citing Matter of Pell, 34 NY2d at 232-234). Reviewing courts are "not empowered to substitute their own judgment or discretion for that of an administrative agency merely because they are of the opinion that a better solution could thereby be obtained." ( Peconic Bay Broadcasting Corp. v Board of App., 99 AD2d 773, 774 [2d Dept. 1984]). Once the court has found a rational basis exists for the determination, its review is ended ( Matter of Sullivan County Harness Racing Assoc., Inc. v Glasser, 30 NY2d 269, 277-278).
There is no inherent right to a liquor license, and the ability to engage in the business of selling alcoholic beverages is a privilege ( Wager v New York State Liquor Auth., 4 NY2d 465). The discretion to grant the privilege rests with the New York State Liquor Authority which is empowered to determine whether public convenience and advantage will be promoted by the issuance of licenses to serve or sell alcoholic beverages (Alcoholic Beverage Control Law § 2). Among its powers is the power to issue liquor licenses and permits (Alcoholic Beverage Control Law § 17). Section 64 of the Alcoholic Beverage Control Law concerns licenses to sell liquor for consumption on the premises. As part of the license application process, subsection 6-a provides that the Authority "may consider any or all" of six enumerated subsections when determining "whether public convenience and advantage and the public interest will be promoted by the granting of licenses and permits for the sale of alcoholic beverages at a particular unlicensed location." In particular, as relevant here, the Authority may consider "[t]he existing noise level at the location and any increase in noise level that would be generated by the proposed premises," as well as "[t]he history of liquor violations and reported criminal activity at the proposed premises" and "[a]ny other factors specified by law or regulation that are relevant to determine the public convenience and advantage and public interest of the community." (Alcoholic Beverage and Control Law § 64 [6-a] [d-f]).
Petitioner contends that since respondent has given approval for the service of alcohol in the first, second, and third floors, it clearly considers petitioner to be a qualified applicant, and therefore its decision that petitioner could not properly operate the roof premises is arbitrary and capricious, devoid of logic, without basis, and unsupported by substantial evidence. It notes that the premises has no adverse history upon which the Authority bases its assumptions. It states that it is not possible to control the circumstances by which the alcohol is to be distributed to the roof area, but that the Authority arbitrarily decided that the roof area is not fit for the use of consumption of alcoholic beverages, even though the Department of Buildings has approved of the roof's use for that purpose (Pet. Memo of Law unnumbered p. 2, citing 53089 Martina Corp. v New York State Liquor Auth., 190 AD2d 849 [2d Dept.], lv denied 81 NY2d 710).
Respondent argues in opposition that under the statute, the applicant-petitioner was required to notify the local community of its application for alteration, and the community board was allowed to express an opinion which would be deemed part of the record on which the Liquor Board bases its determination (Alcoholic Beverage Control Law § 64 [2a]). Here, the October 24, 2007, report issued by the Director of Licensing to the Liquor Authority Members, described petitioner's plans for the space, and also indicated that the community board supported the licensing of the additional third floor and opposed the open air rooftop bar "based on noise and quality of life concerns for the neighborhood." (Ver. Ans. Exh. 5 [O'Brien memorandum report dated Oct.24, 2007]). The Authority Members were advised that there was nothing "adverse" about the premises' license but that they needed to consider the question of the opposition by local residents as represented by the copies of residents' letters of protest for the Members' review (Ver. Ans. Exh. 5 [O'Brien memorandum dated Oct. 1, 2007]).
Respondent argues that section 64 (6-a) of the Alcoholic Beverage Control Law requires it to consider the potential impact of a license and permit on the community in which a premises is located. It contends that the Authority has been "castigated" when it has not been careful in considering community needs, citing Soho Comm. Council v New York State Liquor Auth., 173 Misc 2d 632 (Sup.Ct., NY County 1997), where its determination to grant a license to a dance club situated within 500 feet of about 22 existing licensed premises, based on the ground that liquor licenses are in the public interest because they generate additional employment and generate tax revenues, was annulled as being arbitrary and capricious and an abuse of discretion. The Court annulled the issuance of the license because the overwhelming opposition by residents, businesses, and various public officials was evidence that the license was not in the public interest. Similarly, in Flatiron Commun. Assn. v New York State Liquor Auth. , 6 Misc 3d 267 (Sup.Ct., New York County 2004), the Court annulled a liquor license issued to an establishment opening in the vicinity of a large number of other alcohol-providing venues, where the Liquor Authority's determination was made without a finding that the license would be in the public interest, given the "overwhelming community opposition." See also, Matter of Ban the Bar Coalition v New York State Liquor Auth., 2006 NY Slip Op 51544U, 864 NYS2d 752 (Sup.Ct., New York County 2006) (granting of license to new pub as being in the public interest was vacated and remanded for further consideration, where there were 12 licensed premises within 500 feet, residents of seven apartment buildings expressed opposition as did several public officials, and 58 letters and a petition with more than 250 signatures were submitted opposing the bar).
Respondent further argues that section 64 of the Alcoholic Beverage and Control Law is to be interpreted expansively, citing the discussion in Cleveland Place Neighborhood Assn. v New York State Liquor Auth., 268 AD2d 6 (1st Dept. 2000). Cleveland Place concerned an application to transfer a license. It examined the interplay of section 64 with section 111 of the statute, the latter of which mandates that a license issued for any licensed premises is not transferable except in the discretion of the authority (Alcoholic Beverage and Control Law § 111). In that matter, a number of community members and local officials appeared at the Authority's regular monthly meeting to object to transfer of the license, and provided evidence including that there were 81 licensed premises within 500 feet of the premises, that it had been cited for a noise violation involving the air conditioning units and an ice maker, had committed several violations during the renovation of the space, was a source of "offensive late-night noise, including loud music," and that its patrons caused frequent traffic and noise problems in the street outside ( 268 AD2d at 8). There was no record of the meeting and the Authority did not state its reasons for granting the license transfer. In annulling the transfer and remanding the matter to the Liquor Authority, the Court in Cleveland Place reiterated the principle that the State Liquor Authority must decide each application on its own merits and determine whether granting the application would promote public convenience and advantage, and that even where the license transferee would conduct business in the same physical premises, "the proposed transferee's business may have a decidedly different impact on the neighborhood and may compel a different finding as to the public interest" ( 268 AD2d at 11, 13).
A denial of a liquor license may be based on the likelihood of future violations only where there is a factual record to rationally support the conclusion ( see, Matter of Circus Disco, Ltd. v New York State Liquor Auth., 51 NY2d 24, 36). Here, respondent's attorney proffers the record and argues that there was sufficient evidence of past problems, as seen through the representations made by the community board concerning its knowledge of the operation of the premises at issue as well as the owners' other three establishments, along with the letters of protest written by nearby residents. Unlike the facts in Cleveland Place, Soho Comm. Council, or Flatiron Commun. Assn., the record here does not include evidence of overwhelming community disapproval, or of a history of wrongdoing by the premises. Notably, there is no evidence of any violations or citations for noise at the premises, nor any record of police investigation.
Petitioner asks the court to take note of an unreported decision wherein the court annulled the denial of a license for a roof-top dining area and ordered it to be granted, as the denial was arbitrary and capricious (Pet. Exh. B). In Matter of West 17 Partners, LP, et al. v New York State Liquor Auth. (Sup Ct, New York County, Aug. 4, 1994, McCooe, J., index No. 116555/94), the Liquor Authority was held to have committed errors of fact and law when it made its determination in part based on what the former licensee had allowed, and in its conclusion that outside bars and roof-top bars have been a source of violations of the Alcoholic and Beverage Control Law so that granting a license would not promote public convenience. West 17 Partners held that while the Authority can suspend a license when the noise level adversely affects residents, it is arbitrary and capricious to deny a license because of the presumption of potential noise violations, without there being supporting facts in the record, and it is improper to rely on past experiences with similar establishments to conclude that the subject establishment will violate the law. The community's opposition was not found to be a sufficient basis for denial of the license, as the West 17 Partners court noted that neither the Liquor Authority nor the police had ever cited or sanctioned the premises for a noise violation, and that the neighborhood complaints were mostly generated from one individual.
Where property interests are protected by law, decisions affecting those rights must not be based on sympathy or public opinion ( Circus Disco, at 38). Here, the license application is made by the current owners of the premises with a more than two-year neighborhood history at the premises, as well as a several year history at several other nearby establishments. The materials submitted by the community board describe noise problems and neighborhood opposition only through about April 2006, but without evidence of any citations or violations issued whatsoever. Respondent's determination granting the third floor only , made without any accompanying explanation, was made in November 2007. Although the decision of an administrative agency is entitled to deference by the courts ( see, Samiento v World Yacht Inc. , 10 NY3d 70 , 79), here the denial of the roof-top space appears to be based, at the very least, on out-of-date information and speculation. "Where the Authority's conclusions are rooted in speculative inferences, and are unsupported by the record, its determination should be annulled . . . and remitted to the respondent for further consideration" ( Matter of NY Palm Tree Inc. v New York State Liquor Auth., 2007 NY Slip Op 52376U, * 6-7, 856 NYS2d 25 [Sup. Ct., New York County 2007], citing Matter of Matty's Restaurant v New York State Liquor Auth., 21 AD2d 818 [2d Dept.], affd 15 NY2d 659, Hayes v New York State Liquor Auth., 39 AD2d 482, 484 [4th Dept. 1972]). As the record does not show that respondent's determination was based on complete and current facts, it should be remanded for further investigation. Therefore, the petition is granted to the extent that the matter is remanded to the State Liquor Authority for further proceedings consistent with the decision herein. Specifically, the State Liquor Authority should explain the basis for reaching its conclusion so that a reviewing court can determine whether such explanation is arbitrary and capricious. The court notes that it is not making a determination as to the veracity of the alleged complaints from the community, but only that the extant record is inadequate to allow a court to find that the State Liquor Authority found them credible and therefore acted reasonably in relying on them to deny the application. As it now stands, it is unclear what the basis for the denial was.
Finally, although petitioner raises the question of substantial evidence, there is no need to transfer this matter to the Appellate Division pursuant to CPLR 7804(g), because the meeting held by the Authority was not a quasi-judicial hearing and could not raise the question of substantial evidence ( see, Flatiron Commun. Assn., 6 Misc 3d at 272, citing Matter of Wal-Mart Stores v Planning Bd. of Town of N. Elba, 238 AD2d 93, 96 [3d Dept. 1998]). It is therefore
ADJUDGED and ORDERED that the petition is granted to the extent that the matter is remanded to respondent for further proceedings in accordance with this decision.
This is the decision, order and judgment of this court.