Existing law, the Alcoholic Beverage Control Act, which is administrated by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. The act authorizes the department to investigate potential violations of the act, authorizes the Director of the Department of Alcoholic Beverage Control to bring an action to enjoin a violation or the threatened violation of the act, and provides for a hearing process held on a protest, accusation, or petition for a license.

This bill would authorize the director, by emergency order, to temporarily suspend, limit, or condition any license that authorizes consumption of alcohol on the premises of the licensee, except as specified, prior to any hearing when, in the opinion of the department, the action is urgent and necessary to protect against an immediate threat to health or safety that is reasonably related to the operation of the licensed business. The bill would, among other things related to the issuance and application of an emergency order, authorize a licensee against whom the order has been issued to petition for relief by written argument. The bill, upon order of the department, would authorize the hearing to be conducted electronically. The bill would authorize a licensee to bring a cause of action seeking damages against a local civil authority, law enforcement, or another public official acting in his or her official capacity, if the licensee can establish that the direct evidence proffered to the department to support the existence of an immediate threat to health or safety was false and presented with malicious intent.

Existing law, the Alcoholic Beverage Control Act, which is administrated by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. The act authorizes the department to investigate potential violations of the act, authorizes the Director of the Department of Alcoholic Beverage Control to bring an action to enjoin a violation or the threatened violation of the act, and provides for a hearing process held on a protest, accusation, or petition for a license.

This bill would authorize the director director, by emergency order, to temporarily suspend, limit, condition, or take other action upon, or condition any license by emergency order prior to any hearing when, in the opinion of the department, the action is urgent and necessary to protect against an immediate threat to health or safety. safety that is reasonably related to the operation of the licensed business. The bill would, among other things related to the issuance and application of an emergency order, authorize or licensee or person or entity a licensee against whom the order has been issued to petition for relief by written argument.

Existing law, the Alcoholic Beverage Control Act, which is administrated by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. The act authorizes the department to investigate potential violations of the act, authorizes the Director of the Department of Alcoholic Beverage Control to bring an action to enjoin a violation or the threatened violation of the act, and provides for a hearing process held on a protest, accusation, or petition for a license.

This bill would authorize the department to place a license on a 6-month probationary period when that license is transferred or sold to an entity or individual and currently under review by the department or is transferred or sold to an entity or individual that has been convicted of, or been subject to disciplinary action for, a violation of the Alcoholic Beverage Control Act. The bill would provide that proceedings to revoke a license during a probationary hearing shall be expedited and authorizes the department to consult with other state agencies regarding these provisions. director to temporarily suspend, limit, condition, or take other action upon, any license by emergency order prior to any hearing when, in the opinion of the department, the action is urgent and necessary to protect against an immediate threat to health or safety. The bill would, among other things related to the issuance and application of an emergency order, authorize or licensee or person or entity against whom the order has been issued to petition for relief by written argument.

Existing law, the Alcoholic Beverage Control Act, which is administrated by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses.

This bill would state the intent of the Legislature to subsequently amend this bill to include provisions that would establishes a six-month probationary period for specified licenses issued under the Alcoholic Beverage Control Act. authorize the department to place a license on a 6-month probationary period when that license is transferred or sold to an entity or individual and currently under review by the department or is transferred or sold to an entity or individual that has been convicted of, or been subject to disciplinary action for, a violation of the Alcoholic Beverage Control Act. The bill would provide that proceedings to revoke a license during a probationary hearing shall be expedited and authorizes the department to consult with other state agencies regarding these provisions.

Existing law, the Alcoholic Beverage Control Act, which is administrated by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses.

This bill would state the intent of the Legislature to subsequently amend this bill to include provisions that would establishes a six-month probationary period for specified licenses issued under the Alcoholic Beverage Control Act.

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: 2082 Hearing Date: 6/28/2016

SUBJECT: Alcoholic beverages: licenses: emergency orders

DIGEST: This bill adds a new section of law to the Alcoholic Beverage Control (ABC) Act that grants the Director of ABC the authority, by emergency order, to temporarily suspend, limit, or condition any license that authorizes the consumption of alcohol on the premises of the licensee, except as specified, prior to any hearing when, in the opinion of the director, the action is urgent and necessary to protect against an immediate threat to health or safety that is reasonably related to the operation of the licensed business.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state and the collection of license fees or occupation taxes for this purpose.
   
2. Authorizes ABC to investigate potential violations of the ABC Act and grants the director authority to bring an action to enjoin a violation or the threatened violation of the Act, and provides for a hearing process held on a protest, accusation, or petition for a license.
   
3. Provides that the ABC may place reasonable conditions upon any licensee in certain situations, including, but not limited to, the following: (a) where grounds exist for the denial of an application for a license or where a protest against the issuance of a license has been filed; (b) where findings are made by the ABC which would justify suspension or revocation of the license, and imposition of the conditions is reasonably related to those findings; and, (c) where findings are made by the ABC that the licensee has failed to correct objectionable conditions within a reasonable period of time. Furthermore, the law provides that the ABC may suspend or revoke a license for failure to take reasonable steps to correct objectionable conditions, as described.
   
4. Authorizes ABC, in its discretion, to suspend or revoke any license to sell alcoholic beverages if it determines for good cause that the continuance of such license would be contrary to the public welfare or morals. ABC may use a range of progressive and proportional penalties, as specified.
   
5. Provides that if an accusation is filed against a licensee, the licensee is entitled to have a public hearing on the accusation to present a defense against the charges made. The hearing will be presided over by an Administrative Law Judge of the Administrative Hearing Office. At the hearing, the licensee is entitled to the issuance of subpoenas to compel the attendance of witnesses and materials and may be represented by counsel (but not at public expense), may present relevant evidence and may cross-examine all witnesses. The Administrative Law Judge makes a proposed decision, which is filed with the ABC Director. (Government Code Sections 11500 to 11528)
   
6. Generally provides that the ABC shall deny an application for a license if the issuance or transfer of the license would tend to create a law enforcement problem or add to undue concentration of licenses, unless issuing the license would serve a public convenience or necessity. The law defines "undue concentration" in terms of a specified ratio of licensed premises-to-population within a census tract or a crime reporting district in which the reported crime rate exceeds the crime rate of the entire local law enforcement jurisdiction by more than 20%.
7. Requires that notice of an application for a license be conspicuously posted on applicant premises and requires ABC to notify various local officials in the jurisdictions in which the premise is located that an application has been received. The law also sets out procedures by which public agencies or public officials may protest the issuance of a license.
8. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Authorizes the Director of ABC, by emergency order, to temporarily suspend, limit, or condition any license, as defined, prior to any hearing when, in the opinion of the director, the action is urgent and necessary to protect against an immediate threat to health or safety that is reasonably related to the operation of the licensed business.
   
2. Defines “license” to mean a license issued pursuant to this subdivision that authorizes consumption of alcohol on the premises of a licensee, excluding the licensed premises of production of a winery, brewery, or distillery.
3. Provides that if an immediate threat to health or safety is alleged, direct evidence of the threat must be presented to the director prior to the issuance of an emergency order pursuant to this section. Also, provides that the standard in any subsequent evidentiary hearing shall be whether the licensee “knew” about the threat.
   
4. Defines “direct evidence” to mean police reports, citations from the relevant local civil authority, photographs, and video footage provided by law enforcement or another public official acting in his/her official capacity.
   
5. Defines “immediate threat to health or safety” to mean the trafficking or dealing of controlled substances, prostitution, human trafficking, gambling, or violence involving great bodily injury or death that occurs on the licensee’s premises.
   
6. Provides that the emergency order must set forth the grounds upon which it is based, including a statement of facts constituting the alleged emergency necessitating the action.
   
7. Stipulates that the emergency order shall be effective immediately upon issuance and service upon the licensee or any agent of the licensee.
   
8. Provides that ABC shall serve the licensee with the emergency order, a copy of available discovery, and other relevant evidence in its possession, including but not limited to, affidavits, declarations, and any other direct evidence. The ABC must also notify the licensee of his/her right to petition for relief.
   
9. Provides that once the emergency order has been served, a licensee may petition for relief from the order by written argument. If a petition for relief is filed, using a preponderance of the evidence standard, the director must modify or vacate the emergency order if either:
   
   1. The ABC has determined that the evidence is not substantial enough to prevail in a hearing or ABC has acknowledged an error on its behalf.
      
   2. The likelihood of immediate threat to the health or safety in not sustaining the emergency order does not outweigh the likelihood of injury to the licensee in sustaining the emergency order.
      
10. Requires ABC to respond, in writing, to a petition for relief within three business days. If the ABC does not sustain or modify the emergency order within three days of receipt of the petition, the order must be dissolved.
    
11. Provides that the emergency order shall remain effective until further order of the ABC or disposition at an accusation proceeding.
    
12. Provides that the licensee is entitled to a hearing and if a hearing is requested, it must commence within 10 business days, as specified. Also, permits a hearing to be conducted electronically.
    
13. Provides that nothing in this section precludes a licensee from proceeding directly to a full evidentiary hearing on an accusation without first petitioning the ABC for relief.
    
14. Authorizes a licensee to bring a cause of action seeking damages against a local civil authority, law enforcement, or another public official acting in his or her official capacity, if the licensee can establish that the direct evidence offered to ABC to support the existence of an immediate threat to health or safety was false and presented with malicious intent.
    

Background

ABC in brief. The enactment of the 21^st Amendment to the U.S. Constitution in 1933 repealed the 18th Amendment and ended the era of Prohibition. Accordingly, states were granted the authority to establish alcoholic beverage laws and administrative structures to regulate the sale and distribution of alcoholic beverages. In California, this responsibility was originally entrusted to the State Board of Equalization. In 1955, however, the State Constitution was amended to shift this responsibility to the newly established Department of Alcoholic Beverage Control (ABC).

The intent in establishing the ABC was to create a governmental organization which would ensure strict, honest, impartial, and uniform administration and enforcement of the state’s liquor laws. The ABC was vested with the exclusive authority to license and regulate the manufacture, distribution and sale of alcoholic beverages within California. The ABC has the authority to suspend, revoke or deny a license if it determines that granting or continuance of the license would be contrary to public welfare or morals. The law requires notice of violation and a hearing at which a licensee can defend itself, as well as a right to an appeal to the ABC Appeals Board, a 3-member body appointed by the Governor, subject to Senate confirmation.

ABC licensing. There are currently more than 88,000 alcoholic beverage licenses throughout the state – this includes both on-sale and off-sale establishments which sell beer and wine, and on-sale and off-sale general licensees that are authorized to sell distilled spirits, including beer and wine. The ABC is required to investigate both the applicant and the premises for which a license is applied to determine if the public would be adversely affected by the license issuance. These investigations include an evaluation of the moral character of the applicant and the suitability of the proposed premises.

The ABC must deny an application for a license if issuance would create a law enforcement problem or if issuance would result in, or add to, an undue concentration of licenses in the area where the license is desired. For liquor stores and other specified retail licenses, however, the ABC is authorized to issue a license if the respective local government determines that public convenience or necessity would be served by granting the license.

State law caps the number of new on-sale and off-sale general licenses issued by the ABC at one for every 2,500 inhabitants of the county where the establishment is located (2,000:1 for on-sale licenses). If no licenses are available from the state due to the population restrictions, those people interested in obtaining a liquor license may purchase one from an existing licensee, for “whatever price the market bears.”

State v. local control of alcohol policy. Over the years, local governments have often petitioned the Legislature (see “related legislation”) for greater authority to directly regulate establishments that sell alcohol (e.g., restricting the hours of operation of problem premises, or limiting the sale of certain products such as fortified wines or high alcohol content malt beverages). Much of this activity has been centered on local government’s use of zoning laws and conditional use permits that place operating conditions on new businesses that sell alcohol. While current law prohibits the ABC from issuing a new license in an area not locally zoned for that type of business activity, those establishments in existence prior to any local zoning action are generally “grandfathered” and therefore beyond the reach of the local government – a source of contention for local governments.

Purpose of AB 2082. According to the author’s office, large cities throughout the state (e.g., Los Angeles, San Francisco, and San Jose in particular) have witnessed an increase in illegal activity surrounding alcohol-serving establishments. The author’s office contends that illegal activities in such businesses may go unpunished for weeks or even months, while local law enforcement and ABC officials build a case against the business establishment. Even in urgent situations, such as gang related crimes or human trafficking, local authorities have their hands tied in the short-term and must let the businesses continue operation. Furthermore, these establishments may be run by the same group of business partners or family members who merely transfer the alcohol license amongst each other when authorities are finalizing the process of shutting down the business.

The author’s office states that the San Jose Police Department has had success in dealing with and shutting down these establishments, but their authority is still lacking. For example, the Chief of Police can immediately suspend an entertainment license of a business in the case of an emergency, but this practice is only applicable within the city's "entertainment zone." The Department of Consumer Affairs, the Bureau of Gambling Control, and the Department of Public Health also have the authority to pull licenses or close businesses swiftly if they are found to be engaged in illegal activities that endanger the health and safety of individuals.

The author’s office believes this bill will be a tool that can be used, with caution, when residents face dangerous circumstances because of problem businesses. The author’s office notes that this bill was crafted in close collaboration with the San Jose Police Department and other local and statewide officials. In addition, the author’s office claims that at least 10 other states have broad authority to suspend alcohol licenses in cases of emergency.

In summary, the author’s office states that this bill will provide the Director of ABC with the authority to suspend an alcohol license in the case of an emergency that threatens the health and safety of the public. To do so, the Director must produce an emergency order with a statement of facts containing the alleged emergency, any relevant evidence upon which ABC relied in issuing the emergency order, and a notice of the licensee's right to petition for relief. The author states this bill allows the licensee to petition for relief from the order by written argument.

Comments. Currently, the director of ABC has broad authority to suspend and revoke an alcoholic beverage license – such an action requires notice of violation and allows for a hearing at which a licensee can defend itself as well as a right to an appeal. This bill will allow the ABC, by emergency order, to “immediately” suspend, limit, or condition a license (wineries, breweries and distilleries are excluded) when there is sufficient evidence documenting that the licensee “knew” there was human trafficking, drug dealing, prostitution, or violence occurring in their business. Once the emergency order has been served, the licensee may petition for relief by written argument, to which ABC must respond within three business days with a document sustaining, modifying, or vacating the emergency order. If a hearing is requested by the licensee it must begin within 10 business days after ABC's receipt of the Notice of Defense.

Prior/Related Legislation

AB 2151 (Jones, 2008) among other things, would have granted ABC the authority to deny the issuance or transfer of an off-sale retail license where the department determines that the issuance or transfer of the license will contribute to conditions of blight, as provided. (Vetoed by Governor)

AB 2893 (Hancock, Chapter 253, Statutes of 2008) granted ABC the authority to impose restrictions on retail license transfers in instances where the license transferor has been cited for multiple violations of the ABC Act during his/her ownership of the license.

SB 148 (Scott, Chapter 625, Statutes of 2006) among other things, provided additional basis for the suspension or revocation of an alcoholic beverage license, when a licensee fails to take reasonable steps to correct objectionable conditions on the licensed premises or any public sidewalk abutting a licensed premise, as provided, after specified notice from the district attorney, city attorney, or a county counsel.

AB 624 (Oropeza, Chapter 931, Statutes of 2001) permitted ABC to take into account neighboring crime statistics in the area of the site of the establishment when transferring an alcohol license. Furthermore, this bill extended the time local entities have to respond to the notice of a new or transferred license and required the notification of local property owners around the site.

AB 1092 (Lowenthal, Chapter 499, Statutes of 1999) authorized ABC to place reasonable restrictions upon retail licenses or any licensee in the exercise of retail privileges if ABC adopts conditions requested by a local governing body.

AB 2897 (Caldera, Chapter 630, Statutes of 1994) among other things, granted ABC the authority to deny an application for a license if issuance would tend to create a law enforcement problem, or would result in or add to an undue concentration of licenses. In addition, provided that a license may be issued if the local governing body of the area in which the applicant premises are located determines that public convenience or necessity would be served by the issuance.

AB 463 (Tucker, Chapter 627, Statutes of 1994) authorized ABC to suspend or impose new conditions on a licensee who has failed to correct "reasonable conditions" as noticed by a local official.

AB 2742 (Lee, Chapter 629, Statutes of 1994) made a series of changes relating to ABC licensing and standards, including: (a) establishing general operating standards with respect to the licensed premise of retailers of alcoholic beverages; (b) providing that the existing 30-day review process shall be extended by 20 days to give the local jurisdictions more authority and opportunity for related input; (c) requiring the ABC to notify the entity or official in writing as to why they recommend that a license be issued after a protest has been made by an entity or official, as specified; and, (d) providing additional regulation of a licensee, as specified.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

Alcohol Justice
California Alcohol Policy Alliance

California Council on Alcohol Problems
California Police Chiefs Association
Eden Youth and Family Center
FreeMUNI – San Francisco
Friday Night Live Partnership
Institute for Public Strategies
Koreatown Youth and Community Center, Los Angeles
League of California Cities
Los Angeles Drug & Alcohol Policy Alliance
Lutheran Office of Public Policy - California
Partnership for a Positive Pomona
Paso por Paso, Inc.
Pueblo y Salud, Inc.
San Rafael Alcohol & Drug Coalition
Saving Lives Drug & Alcohol Coalition
SF DogPAC
The Wall Las Memorias Project
UCEPP Social Model Recovery Systems
Youth for Justice.

OPPOSITION:

CalSmallBiz
Taxpayers for Improving Public Safety

ARGUMENTS IN SUPPORT: Proponents state that “while the Department of ABC has exclusive authority to revoke the alcohol license of problem retailers, it lacks the ability to act swiftly when alcohol-serving establishments are found to be involved in severe illegal acts. AB 2082 closes a problematic enforcement gap by allowing ABC to address problem liquor stores and bars within the timeframe expected by the neighborhoods housing these licensees.”

Proponents also note that “the state already suffers more than $38 billion dollars in alcohol-related harm and over 10,000 alcohol-related deaths annually. Proponents believe this bill will help safeguard public health and safety and reduce the number of problem alcohol retailers in California.”

ARGUMENTS IN OPPOSITION: Opponents state that this bill is “fraught with constitutional concerns and relies upon arbitrary determinations, not the least of which are an unclear standard of evidence, due process violations based upon a subjective standard of threat to health or safety, and taking punitive action against a licensee without regard to any presumption of innocence. In effect, this bill requires the accused to disprove their guilt in order to avoid punishment. The issuance of an ‘emergency action’ by the Director of ABC relies upon mere allegations (police report, citation, photos) which need not be vetted by any finding of fact or formal proceedings.”

Additionally, opponents argue that “current law already allows local authorities and law enforcement to file complaints against a licensee with the ABC which is then required to hold a hearing within 60 days if the allegations are deemed to be urgent. Perhaps instead of eliminating the due process rights of the accused, the author may consider reducing the timeframe in which a hearing must be held from 60 to 45 or 30 days.”

ASSEMBLY THIRD READING

ATR Bill Id:AB 2082

Author:(Campos)

As Amended Ver:May 23, 2016

Majority vote

SUMMARY: Provides the Director of the Alcoholic Beverage Control (ABC) may, by emergency order, temporarily suspend, limit, or condition, any license when, in the opinion of the department, the action is urgent and necessary to protect against an immediate threat to health or safety that is reasonably related to the operation of the licensed business. This bill would, among other things related to the issuance and application of an emergency order, a licensee may petition for relief from the order by written argument, as specified. Specifically, this bill:

1. States that the Director may temporarily suspend, limit, or condition any license issued, as specified, by emergency order prior to any hearing when, in the opinion of ABC, the action is urgent and necessary to protect against an immediate threat to health or safety that is reasonably related to the operation of the licensed business.
2. Provides the emergency order shall set forth the grounds upon which it is based, including a statement of facts constituting the alleged emergency necessitating the action.
3. Provides if an immediate threat to health or safety is alleged, direct evidence of the threat must be presented to the director prior to the issuance of an emergency order. The standard in any subsequent evidentiary hearing shall be whether the licensee knew, or should have known, about the threat.
4. States "direct evidence" includes, but is not limited to, police reports, citations from the relevant local civil authority, photographs, and video footage provided by law enforcement or another public official acting in his or her capacity.
5. States "immediate threat to health or safety" means the trafficking or dealing of controlled substances, prostitution, human trafficking, gambling, or violence involving great bodily injury or death occurs on or immediately adjacent to the licensee's premises.
6. States the emergency order shall be effective immediately upon issuance and service upon the licensee or any agent of the licensee. ABC shall serve the licensee with the emergency order, a copy of available discovery, and other relevant evidence in possession of the department, including, but not limited to, affidavits, declarations, and any other direct evidence upon which the ABC relied in issuing the emergency order. ABC shall notify the licensee of the licensee's right to petition for relief.
7. Provides that once the emergency order has been served, a licensee may petition for relief from the order by written argument.
8. States if a petition for relief is filed, using a preponderance of the evidence standard; the director shall modify or vacate the emergency order if either:
   1. There is a reasonable probability that the licensee will prevail in the accusation.
   2. The likelihood of immediate threat to the health or safety in not sustaining the emergency order does not outweigh the likelihood of injury to the licensee in sustaining the emergency order.
   3. ABC shall respond, in writing, to a petition for relief, by either sustaining, modifying, or vacating the emergency order, within three business days of receipt of the petition. If ABC does not sustain or modify the emergency order within three business days of receipt of the petition, the emergency order shall be dissolved.
   4. The emergency order shall remain effective until further order of the ABC or disposition at an accusation proceeding.
   5. ABC shall file an accusation against the licensee with any additional, available pertinent discovery that was not provided to the licensee at the time the emergency order was issued within five business days after the issuance of an emergency order. The emergency order shall be dissolved if ABC does not file an accusation within five business days after the issuance of the order.
   6. The licensee is entitled to a hearing. If a hearing is requested, it shall commence within 10 business days after ABC's receipt of the Notice of Defense.
   7. A licensee is not precluded from proceeding directly to a full evidentiary hearing on an accusation without first petitioning ABC for relief.
   8. At the accusation hearing, the administrative law judge (ALJ) shall issue a verbal decision that sustains or vacates the emergency order or shall issue a written order sustaining or vacating the emergency order within 24 hours of the close of the hearing. The ALJ shall submit a written proposed decision within 10 days after close of the hearing.

EXISTING LAW:

1. States ABC has the exclusive power, in accordance with laws enacted, to license and regulate the manufacture, importation and sale of alcoholic beverages in this State. It also has the power for good cause to deny, suspend or revoke any specific alcoholic beverage license. (California Constitution Article XX, Section 22)
2. Provides ABC is headed by a Director, whose function is to supervise the manufacture, distribution and sale of alcoholic beverages in such a number as to fulfill the public policy and legislative purpose of the ABC Act.
3. Authorizes ABC to investigate potential violations of the ABC Act. Authorizes the Director of the department to bring an action to enjoin a violation or the threatened violation of the act, and provides for a hearing process held on a protest, accusation, or petition for a license.
4. Provides that the ABC may place reasonable conditions upon any licensee in certain situations, including, but not limited to, the following: where grounds exist for the denial of an application for a license or where a protest against the issuance of a license has been filed; where findings are made by the ABC which would justify suspension or revocation of the license, and imposition of the conditions is reasonably related to those findings; where findings are made by the ABC that the licensee has failed to correct objectionable conditions within a reasonable period of time. Provides further that the ABC may suspend or revoke a license for failure to take reasonable steps to correct objectionable conditions, as described. (Business and Professions (B&P) Code Sections 23800, 24200, and 24200.1.)
5. Authorizes ABC, in its discretion, to suspend or revoke any license to sell alcoholic beverages if it shall determine for good cause that the continuance of such license would be contrary to the public welfare or morals. ABC may use a range of progressive and proportional penalties. This range will typically extend from Letters of Warning to Revocation. Higher or lower penalties may be recommended based on the facts of individual cases where generally supported by aggravating or mitigating circumstances.
6. Provides if an accusation is filed against a licensee, the licensee is entitled to have a public hearing on the accusation to present a defense against the charges made. The hearing will be presided over by an Administrative Law Judge of the Administrative Hearing Office. At the hearing, the licensee is entitled to the issuance of subpoenas to compel the attendance of witnesses and materials and may be represented by counsel (but not at public expense), may present relevant evidence and may cross-examine all witnesses. The Administrative Law Judge makes a proposed decision, which is filed with the ABC Director. (Government Code Sections 11500 to 11528)
7. Provides generally that the ABC shall deny an application for a license if the issuance or transfer of the license would tend to create a law enforcement problem or add to undue concentration of licenses, unless issuing the license would serve a public convenience or necessity. Defines "undue concentration" in terms of a specified ratio of licensed premises-to-population within a census tract or a crime-reporting district in which the reported crime rate exceeds the crime rate of the entire local law enforcement jurisdiction by more than 20%. (B&P Code Sections 23958 and 23958.4.)
8. Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.
9. States the California Gambling Control Commission may issue any emergency orders against an owner licensee or any person involved in a transaction requiring prior approval that the division deems reasonably necessary for the immediate preservation of the public peace, health, safety, or general welfare, as specified.

FISCAL EFFECT: According to the Assembly Appropriations Committee, minor and absorbable costs to ABC. The new authority granted to ABC would be used in extreme cases and would conform to ABC's existing operations.

COMMENTS:

Purpose of the bill: The author's office notes this bill would provide the Director of ABC with the authority to suspend a business' alcohol license in the case of an emergency that threatens the health and safety of the public. To do so, the Director must produce an emergency order with a statement of facts containing the alleged emergency, any relevant evidence upon which ABC relied in issuing the emergency order, and a notice of the licensee's right to petition for relief.

The author states this bill also allows the licensee to petition for relief from the order by written argument, to which ABC must respond within three business days with a document sustaining, modifying, or vacating the emergency order. If the licensee or entity against who the emergency order has been issued requests a hearing, it will be granted within 10 business days after ABC's receipt of the Notice of Defense.

The author points out "In San Jose, we have seen many cases of violent crime and murder in relation to bars that double as 'bikini bars' or strip clubs. The illegal operations in these bars may go unpunished for weeks or even months, while the police department and local ABC officials build a case against them. Even under urgent situations, like repeated violent crimes happening, local officials have their hands tied and must let the businesses continue operation. Even worse, many times these establishments are run by the same group of business partners/family members who merely transfer the alcohol license amongst each other when the business is finally shut down. The author notes that the San Jose Police Department has had success in dealing with and shutting down these establishments, but their authority is still lacking."

The author believes this bill will be a tool that can be used, with caution, when residents face dangerous circumstances because of problem businesses. This bill was drafted in close collaboration with local and statewide ABC officials, as well as San Jose Police Department officials. Currently, the San Jose Chief of Police can immediately suspend an entertainment license of a business in the case of an emergency, but this practice is only applicable within the city's "entertainment zone." Law enforcement and ABC have their hands tied when the same emergencies happen anywhere outside that zone. This bill also takes into consideration the current abilities of the Department of Consumer Affairs, the Department of Public Health and the Bureau of Gambling Control (see 9) in Existing Law) as examples of how to craft the ability to suspend licenses in cases of emergencies, while ensuring that licensees have necessary protections and the right to due process.

Background:

State v. Local Control of Alcohol Policy: Much to local government's frustration, both the state Constitution and the ABC Act generally prohibit local governments from regulating the sale of alcoholic beverages within their jurisdictions. Exacerbating this sentiment is the perception that ABC is under-funded and understaffed with less than 200 enforcement agents available to police the almost 70,000 retail licenses in the state. Further compounding this situation is the inability of ABC to receive any funding increases. The ABC is a special fund department that receives funding from fees imposed upon alcoholic beverage licensees.

Over the years, local governments have often petitioned the Legislature for greater authority to directly regulate establishments that sell alcohol (e.g., restricting the hours of operation of problem premises, or limiting the sale of certain products such as fortified wines or high alcohol content malt beverages). Much of this activity has been centered on local government's use of zoning laws and conditional use permits that place operating conditions on new businesses that sell alcohol. While current law prohibits the ABC from issuing a new license in an area not locally zoned for that type of business activity, those establishments in existence prior to any local zoning action are "grandfathered" and therefore beyond the reach of the local government – a source of contention for local governments.

Historically, the alcohol industry and retailers have opposed ceding to local government any measure of the state's exclusive authority to regulate alcohol. The industry has advocated that matters relating to the regulation of alcohol should be determined at the state level, as opposed to an assortment of local regulations, which may vary from local jurisdiction to local jurisdiction.

Disorderly house law: A disorderly house is a licensed premises that disturbs the neighborhood or is maintained for purposes that are injurious to the public morals, health, convenience or safety. For example, a licensed outlet that 1) disturbs the neighborhood with noise, loud music, loitering, littering, vandalism, urination or defecation by patrons, graffiti, etc.; or 2) has many crimes ongoing inside, such as drunks, fights, assaults, prostitution, narcotics, etc. The licensed premise includes the parking lot. Any licensee, or employee of any licensee, who keeps or permits such a disorderly house is guilty of a misdemeanor, and the license is subject to disciplinary action. (B&P Code Sections 25601 and 24200)

Penalty for selling an alcoholic beverage to a minor or permitting a minor to consume an alcoholic beverage in an on-sale premises: The law requires the suspension of a license for a second or subsequent violation within a 36-month period. The law also authorizes the revocation of a license for a third violation within a 36-month period. ABC may revoke a license prior to a third violation when the circumstances warrant it. (B&P Code Section 25658.1)

In support: Writing in support, Alcohol Justice (formerly Marin Institute) states, "The state already suffers more than $38 billion dollars in alcohol-related harm and over 10,000 alcohol-related deaths annually. This bill will help safeguard public health and safety and reduce the number of problem alcohol retailers in California."

Also writing in support, The California Council on Alcohol Problems states, "quite frankly, we were a little shocked to learn that the ABC Director currently lacks the authority to do what this reasonable bill authorizes, which is to be able to suspend the alcohol license of a business if the department deems that there is an urgent or immediate threat to the health and safety of the public. The bill assures due process rights to the licensee."

In opposition: There is no opposition on file.

Prior legislation: AB 2151 (Jones) of 2008, was vetoed by the Governor. AB 2151 added provisions to the ABC Act for the purpose of assisting local governments in their effort to control the issuance and transfer of liquor licenses.

AB 2893 (Hancock), Chapter 253, Statutes of 2008. Grants ABC the authority to impose restrictions on retail license transfers in instances where the license transferor has been cited for multiple violations of the ABC Act during his/her ownership of the license.

SB 148 (Scott), Chapter 625, Statutes of 2006. Among other things, provided additional bases for the suspension or revocation of an alcoholic beverage license, when a licensee fails to take reasonable steps to correct objectionable conditions on the licensed premises or any public sidewalk abutting a licensed premise, as provided, after specified notice from the district attorney, city attorney, or a county counsel.

AB 624 (Oropeza), Chapter 931, Statutes of 2001. Permitted ABC to take into account neighboring crime statistics in the area of the site of the establishment when transferring an alcohol license. Furthermore, extended the time local entities have to respond to the notice of a new or transferred license and require the notification of local property owners around the site.

AB 1092 (Lowenthal), Chapter 499, Statutes of 1999. Authorized ABC to place reasonable restrictions upon retail licenses or any licensee in the exercise of retail privileges if ABC adopts conditions required by a local governing body.

AB 2897 (Caldera), Chapter 630, Statutes of 1994. Among other things, granted ABC the authority to deny an application for a license if issuance would tend to create a law enforcement problem, or would result in or add to an undue concentration of licenses. In addition, provided that a license may be issued if the local governing body of the area in which the applicant premises are located determines that public convenience or necessity would be served by the issuance.

AB 463 (Tucker), Chapter 627, Statutes of 1994. Authorized ABC to suspend or impose new conditions on a licensee who has failed to correct "reasonable conditions" as noticed by a local official.

AB 2742 (Lee), Chapter 629, Statutes of 1994. Made a series of changes relating to ABC licensing and standards, including 1) establishing general operating standards with respect to the licensed premise of retailers of alcoholic beverages, 2) providing that the current 30-day review process shall be extended by 20 days to give the local jurisdictions more authority and opportunity for related input, 3) requiring ABC to notify the entity or official in writing as to why they recommend that a license be issued after a protest has been made by an entity or official, as specified, and 4) providing additional regulation of a licensee, as specified.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0003041

ASSEMBLY THIRD READING

ATR Bill Id:

Author:(Campos)

As Amended Ver:April 13, 2016

Majority vote

SUMMARY: Authorizes the Director of the Alcoholic Beverage Control (ABC) to temporarily suspend, limit, condition, or take other action upon, any license by emergency order prior to any hearing when, in the opinion of the department, the action is urgent and necessary to protect against an immediate threat to health or safety. This bill would, among other things related to the issuance and application of an emergency order, a licensee or person or entity against whom the emergency order has been issued may petition for relief from the order by written argument, as specified. Specifically, this bill:

1. States that the Director may temporarily suspend, limit, condition, or take other action upon, any license issued, as specified, by emergency order prior to any hearing when, in the opinion of ABC, the action is urgent and necessary to protect against an immediate threat to health or safety.
2. Maintains the emergency order may suspend, limit, condition, or take other action in relation to the license of one or more persons in an operation without affecting other individual licensees.
3. Provides the emergency order shall set forth the grounds upon which it is based, including a statement of facts constituting the alleged emergency necessitating the action.
4. States the emergency order shall be effective immediately upon issuance and service upon the licensee or any agent of the licensee. ABC shall serve the licensee with the emergency order, a copy of available discovery, and other relevant evidence in possession of the department, including, but not limited to, affidavits, declarations, and any other evidence upon which the ABC relied in issuing the emergency order. ABC shall notify the licensee of the licensee’s right to petition for relief.
5. Provides that once the emergency order has been served, a licensee, person, or entity against whom the emergency order has been issued may petition for relief from the order by written argument.
6. States if a petition for relief is filed, using a preponderance of the evidence standard; the director shall modify or vacate the emergency order if either:
   1. There is a reasonable probability that the licensee will prevail in the accusation.
   2. The likelihood of immediate threat to the health or safety in not sustaining the emergency order does not outweigh the likelihood of injury to the licensee in sustaining the emergency order.
   3. ABC shall respond, in writing, to a petition for relief, by either sustaining, modifying, or vacating the emergency order, within three business days of receipt of the petition. If ABC does not sustain or modify the emergency order within three business days of receipt of the petition, the emergency order shall be dissolved.
   4. The emergency order shall remain effective until further order of the ABC or disposition at an accusation proceeding.
   5. ABC shall file an accusation against the licensee with any additional, available pertinent discovery that was not provided to the licensee at the time the emergency order was issued within five business days after the issuance of an emergency order.
   6. The licensee or person or entity against whom the emergency order has been issued and served is entitled to a hearing. If a hearing is requested, it shall commence within 10 business days of the received date of the Notice of Defense.
   7. A licensee is not precluded from proceeding directly to a full evidentiary hearing on an accusation without first petitioning ABC for relief.
   8. At the accusation hearing, the administrative law judge shall issue a verbal decision that sustains or vacates the emergency order. A proposed decision by an administrative judge on the accusation shall be prepared for the director's review within 10 business days after the submission of the hearing.

EXISTING LAW:

1. States ABC has the exclusive power, in accordance with laws enacted, to license and regulate the manufacture, importation and sale of alcoholic beverages in this State. It also has the power for good cause to deny, suspend or revoke any specific alcoholic beverage license. (California Constitution Article XX, Section 22)
2. Provides ABC is headed by a Director, whose function is to supervise the manufacture, distribution and sale of alcoholic beverages in such a number as to fulfill the public policy and legislative purpose of the ABC Act.
3. Authorizes ABC to investigate potential violations of the ABC Act. Authorizes the Director of the department to bring an action to enjoin a violation or the threatened violation of the act, and provides for a hearing process held on a protest, accusation, or petition for a license.
4. Provides that the ABC may place reasonable conditions upon any licensee in certain situations, including, but not limited to, the following: where grounds exist for the denial of an application for a license or where a protest against the issuance of a license has been filed; where findings are made by the ABC which would justify suspension or revocation of the license, and imposition of the conditions is reasonably related to those findings; where findings are made by the ABC that the licensee has failed to correct objectionable conditions within a reasonable period of time. Provides further that the ABC may suspend or revoke a license for failure to take reasonable steps to correct objectionable conditions, as described. (Business and Professions (B&P) Code Sections 23800, 24200, and 24200.1.)
5. Authorizes ABC, in its discretion, to suspend or revoke any license to sell alcoholic beverages if it shall determine for good cause that the continuance of such license would be contrary to the public welfare or morals. ABC may use a range of progressive and proportional penalties. This range will typically extend from Letters of Warning to Revocation. Higher or lower penalties may be recommended based on the facts of individual cases where generally supported by aggravating or mitigating circumstances.
6. Provides if an accusation is filed against a licensee, the licensee is entitled to have a public hearing on the accusation to present a defense against the charges made. The hearing will be presided over by an Administrative Law Judge of the Administrative Hearing Office. At the hearing, the licensee is entitled to the issuance of subpoenas to compel the attendance of witnesses and materials and may be represented by counsel (but not at public expense), may present relevant evidence and may cross-examine all witnesses. The Administrative Law Judge makes a proposed decision, which is filed with the ABC Director. (Government Code Sections 11500-11528)
7. Provides generally that the ABC shall deny an application for a license if the issuance or transfer of the license would tend to create a law enforcement problem or add to undue concentration of licenses, unless issuing the license would serve a public convenience or necessity. Defines "undue concentration" in terms of a specified ratio of licensed premises-to-population within a census tract or a crime-reporting district in which the reported crime rate exceeds the crime rate of the entire local law enforcement jurisdiction by more than 20%. (B&P Code Sections 23958 and 23958.4.)
8. Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.
9. States the California Gambling Control Commission may issue any emergency orders against an owner licensee or any person involved in a transaction requiring prior approval that the division deems reasonably necessary for the immediate preservation of the public peace, health, safety, or general welfare, as specified.

FISCAL EFFECT: According to the Assembly Appropriations Committee, minor and absorbable costs to ABC. The new authority granted to ABC would be used in extreme cases and would conform to ABC's existing operations.

COMMENTS:

Purpose of the bill: The author's office notes this bill would provide the Director of ABC with the authority to suspend a business' alcohol license in the case of an emergency that threatens the health and safety of the public. To do so, the Director must produce an emergency order with a statement of facts containing the alleged emergency, any relevant evidence upon which the department relied in issuing the emergency order, and a notice of the licensee's right to petition for relief.

The author states this bill also allows the licensee to petition for relief from the order by written argument, to which the department must respond within three business days with a document sustaining, modifying, or vacating the emergency order. If the licensee or entity against who the emergency order has been issued requests a hearing, it will be granted within 10 business days of the received date of the Notice of Defense.

The author points out "In San Jose, we have seen many cases of violent crime and murder in relation to bars that double as 'bikini bars' or strip clubs. The illegal operations in these bars may go unpunished for weeks or even months, while the police department and local ABC officials build a case against them. Even under urgent situations, like repeated violent crimes happening, local officials have their hands tied and must let the businesses continue operation. Even worse, many times these establishments are run by the same group of business partners/family members who merely transfer the alcohol license amongst each other when the business is finally shut down. The author notes that the San Jose Police Department has had success in dealing with and shutting down these establishments, but their authority is still lacking."

The author believes this bill will be a tool that can be used, with caution, when residents face dangerous circumstances because of problem businesses. This bill was drafted in close collaboration with local and statewide ABC officials, as well as San Jose Police Department officials. Currently, the San Jose Chief of Police can immediately suspend an entertainment license of a business in the case of an emergency, but this practice is only applicable within the city's "entertainment zone." Law enforcement and ABC have their hands tied when the same emergency situations happen anywhere outside that zone. This bill also takes into consideration the current abilities of the Department of Consumer Affairs, the Department of Public Health and the Bureau of Gambling Control (see 9) in Existing Law) as examples of how to craft the ability to suspend licenses in cases of emergencies, while ensuring that licensees have necessary protections and the right to due process.

Background:

State v. Local Control of Alcohol Policy: Much to local government's frustration, both the state Constitution and the ABC Act generally prohibit local governments from regulating the sale of alcoholic beverages within their jurisdictions. Exacerbating this sentiment is the perception that ABC is under-funded and understaffed with less than 200 enforcement agents available to police the almost 70,000 retail licenses in the state. Further compounding this situation is the inability of ABC to receive any funding increases. The ABC is a special fund department that receives funding from fees imposed upon alcoholic beverage licensees.

Over the years, local governments have often petitioned the Legislature for greater authority to directly regulate establishments that sell alcohol (e.g., restricting the hours of operation of problem premises, or limiting the sale of certain products such as fortified wines or high alcohol content malt beverages). Much of this activity has been centered on local government's use of zoning laws and conditional use permits that place operating conditions on new businesses that sell alcohol. While current law prohibits the ABC from issuing a new license in an area not locally zoned for that type of business activity, those establishments in existence prior to any local zoning action are "grandfathered" and therefore beyond the reach of the local government – a source of contention for local governments.

Historically, the alcohol industry and retailers have opposed ceding to local government any measure of the state's exclusive authority to regulate alcohol. The industry has advocated that matters relating to the regulation of alcohol should be determined at the state level, as opposed to an assortment of local regulations, which may vary from local jurisdiction to local jurisdiction.

Disorderly house law: A disorderly house is a licensed premises that disturbs the neighborhood or is maintained for purposes that are injurious to the public morals, health, convenience or safety. For example, a licensed outlet that 1) disturbs the neighborhood with noise, loud music, loitering, littering, vandalism, urination or defecation by patrons, graffiti, etc.; or 2) has many crimes ongoing inside, such as drunks, fights, assaults, prostitution, narcotics, etc. The licensed premise includes the parking lot. Any licensee, or employee of any licensee, who keeps or permits such a disorderly house is guilty of a misdemeanor, and the license is subject to disciplinary action. (B&P Code Sections 25601 and 24200)

Penalty for selling an alcoholic beverage to a minor or permitting a minor to consume an alcoholic beverage in an on-sale premises: The law requires the suspension of a license for a second or subsequent violation within a 36-month period. The law also authorizes the revocation of a license for a third violation within a 36-month period. ABC may revoke a license prior to a third violation when the circumstances warrant it. (B&P Code Section 25658.1)

In support: Writing in support, Alcohol Justice (formerly Marin Institute) states, "The state already suffers more than $38 billion dollars in alcohol-related harm and over 10,000 alcohol-related deaths annually. This bill will help safeguard public health and safety and reduce the number of problem alcohol retailers in California."

Also writing in support, The California Council on Alcohol Problems states, "quite frankly, we were a little shocked to learn that the ABC Director currently lacks the authority to do what this reasonable bill authorizes, which is to be able to suspend the alcohol license of a business if the department deems that there is an urgent or immediate threat to the health and safety of the public. The bill assures due process rights to the licensee."

There is no opposition on file.

Prior legislation: AB 2151 (Jones) of 2008, was vetoed by the Governor. AB 2151 added provisions to the ABC Act for the purpose of assisting local governments in their effort to control the issuance and transfer of liquor licenses.

AB 2893 (Hancock), Chapter 253, Statutes of 2008. Grants ABC the authority to impose restrictions on retail license transfers in instances where the license transferor has been cited for multiple violations of the ABC Act during his/her ownership of the license.

SB 148 (Scott), Chapter 625, Statutes of 2006. Among other things, provided additional bases for the suspension or revocation of an alcoholic beverage license, when a licensee fails to take reasonable steps to correct objectionable conditions on the licensed premises or any public sidewalk abutting a licensed premise, as provided, after specified notice from the district attorney, city attorney, or a county counsel.

AB 624 (Oropeza), Chapter 931, Statutes of 2001. Permitted ABC to take into account neighboring crime statistics in the area of the site of the establishment when transferring an alcohol license. Furthermore, extended the time local entities have to respond to the notice of a new or transferred license and require the notification of local property owners around the site.

AB 1092 (Lowenthal), Chapter 499, Statutes of 1999. Authorized ABC to place reasonable restrictions upon retail licenses or any licensee in the exercise of retail privileges if ABC adopts conditions required by a local governing body.

AB 2897 (Caldera), Chapter 630, Statutes of 1994. Among other things, granted ABC the authority to deny an application for a license if issuance would tend to create a law enforcement problem, or would result in or add to an undue concentration of licenses. In addition, provided that a license may be issued if the local governing body of the area in which the applicant premises are located determines that public convenience or necessity would be served by the issuance.

AB 463 (Tucker), Chapter 627, Statutes of 1994. Authorized ABC to suspend or impose new conditions on a licensee who has failed to correct "reasonable conditions" as noticed by a local official.

AB 2742 (Lee), Chapter 629, Statutes of 1994. Made a series of changes relating to ABC licensing and standards, including 1) establishing general operating standards with respect to the licensed premise of retailers of alcoholic beverages, 2) providing that the current 30-day review process shall be extended by 20 days to give the local jurisdictions more authority and opportunity for related input, 3) requiring ABC to notify the entity or official in writing as to why they recommend that a license be issued after a protest has been made by an entity or official, as specified, and 4) providing additional regulation of a licensee, as specified.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0002892

Date of Hearing: May 4, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2082

Author:(Campos) – As Amended Ver:April 13, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes the Director of the Alcoholic Beverage Control (ABC) to temporarily suspend, limit, condition, or take other action upon, any license by emergency order when the action is urgent and necessary to protect against an immediate threat to health or safety. In summary, this bill:

1. Allows the Director to temporarily suspend, limit, condition, or take other action upon, any license issued, as specified, by emergency order prior to any hearing when, in the opinion of ABC, the action is urgent and necessary to protect against an immediate threat to health or safety.
2. Defines the scope of the emergency order, the process for issuing it, and the information it must include, including a statement of facts.
3. Allows licensees to file a petition for relief from the emergency order and defines how ABC must respond to that petition.
4. Requires ABC to file an accusation against the licensee with any additional relevant discovery that was not part of the emergency order within five business days of the issuance of the emergency order.
5. Allows a licensee to proceed to a full evidentiary hearing without petitioning for relief.

FISCAL EFFECT:

Minor and absorbable costs to ABC. The new authority granted to ABC would be used in extreme cases and would conform to ABC’s existing operations.

COMMENTS:

1. Purpose and background. According to the author, this bill will provide ABC with the authority to suspend a business’ alcohol license in the case of an emergency that threatens the health and safety of the public, such as an alcohol-serving establishment that is found to be involved in human trafficking. The author contends that this bill will be a tool that can be used, with caution, when residents face dangerous circumstances because of problem businesses. While ABC currently has the authority to revoke the alcohol license of problem retailers, it lacks the ability to act swiftly in more urgent emergencies.
2. Parallel gambling provisions. The author notes that the Department of Consumer Affairs, the Bureau of Gambling Control, and the Department of Public Health, as well as local law enforcement in specified areas of a city, all have the authority to pull licenses or close down businesses swiftly if they are found to be engaged in illegal activities that endanger the health and safety of individuals.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 2082 (

Author:Campos) – As Amended Ver:March 17, 2016

SUBJECT: Alcoholic beverages: licenses: emergency orders.

SUMMARY: Authorizes the Director of the Alcoholic Beverage Control (ABC) to temporarily suspend, limit, condition, or take other action upon, any license by emergency order prior to any hearing when, in the opinion of the department, the action is urgent and necessary to protect against an immediate threat to health or safety. The bill would, among other things related to the issuance and application of an emergency order, a licensee or person or entity against whom the emergency order has been issued may petition for relief from the order by written argument, as specified. Specifically, this bill:

1)  States that the Director may temporarily suspend, limit, condition, or take other action upon, any license issued, as specified, by emergency order prior to any hearing when, in the opinion of ABC, the action is urgent and necessary to protect against an immediate threat to health or safety.

2)  Maintains the emergency order may suspend, limit, condition, or take other action in relation to the license of one or more persons in an operation without affecting other individual licensees.

3)  Provides the emergency order shall set forth the grounds upon which it is based, including a statement of facts constituting the alleged emergency necessitating the action.

4)  States the emergency order shall be effective immediately upon issuance and service upon the licensee or any agent of the licensee. ABC shall serve the licensee with the emergency order, a copy of available discovery, and other relevant evidence in possession of the department, including, but not limited to, affidavits, declarations, and any other evidence upon which the ABC relied in issuing the emergency order. ABC shall notify the licensee of the licensee’s right to petition for relief.

5)  Provides that once the emergency order has been served, a licensee, person, or entity against whom the emergency order has been issued may petition for relief from the order by written argument.

6)  States if a petition for relief is filed, using a preponderance of the evidence standard; the director shall modify or vacate the emergency order if either:

(a) There is a reasonable probability that the licensee will prevail in the accusation.

(b) The likelihood of immediate threat to the health or safety in not sustaining the emergency order does not outweigh the likelihood of injury to the licensee in sustaining the emergency order.

(d) ABC shall respond, in writing, to a petition for relief, either by sustaining, modifying, or vacating the emergency order, within three business days of receipt of the petition.  If ABC does not sustain or modify the emergency order within three business days of receipt of the petition, the emergency order shall be dissolved. 

e) The emergency order shall remain effective until further order of the ABC or disposition at an accusation proceeding.

(f) ABC shall file an accusation against the licensee with any additional, available pertinent discovery that was not provided to the licensee at the time the emergency order was issued within five business days after the issuance of an emergency order. 

(g) The licensee or person or entity against whom the emergency order has been issued and served is entitled to a hearing. If a hearing is requested, it shall commence within 10 business days of the received date of the Notice of Defense.

(h) A licensee is not precluded from proceeding directly to a full evidentiary hearing on an accusation without first petitioning ABC for relief.

(i) At the accusation hearing, the administrative law judge shall issue a verbal decision that sustains or vacates the emergency order.  A proposed decision by an administrative judge on the accusation shall be prepared for the director’s review within 10 business days after the submission of the hearing.

EXISTING LAW:

1) States ABC has the exclusive power, in accordance with laws enacted, to license and regulate the manufacture, importation and sale of alcoholic beverages in this State. It also has the power for good cause to deny, suspend or revoke any specific alcoholic beverage license. (Section 22 of Article XX, California Constitution) 

2) Provides ABC is headed by a Director, whose function is to supervise the manufacture, distribution and sale of alcoholic beverages in such a number as to fulfill the public policy and legislative purpose of the ABC Act.

3) Authorizes ABC to investigate potential violations of the ABC Act. Authorizes the Director of the department to bring an action to enjoin a violation or the threatened violation of the act, and provides for a hearing process held on a protest, accusation, or petition for a license.

4) Provides that the ABC may place reasonable conditions upon any licensee in certain situations, including, but not limited to, the following: where grounds exist for the denial of an application for a license or where a protest against the issuance of a license has been filed; where findings are made by the ABC which would justify suspension or revocation of the license, and imposition of the conditions is reasonably related to those findings; where findings are made by the ABC that the licensee has failed to correct objectionable conditions within a reasonable period of time.  Provides further that the ABC may suspend or revoke a license for failure to take reasonable steps to correct objectionable conditions, as described.  (B & P Code Sections 23800, 24200, and 24200.1.)

5) Authorizes ABC, in its discretion, to suspend or revoke any license to sell alcoholic beverages if it shall determine for good cause that the continuance of such license would be contrary to the public welfare or morals.  ABC may use a range of progressive and proportional penalties. This range will typically extend from Letters of Warning to Revocation.  Higher or lower penalties may be recommended based on the facts of individual cases where generally supported by aggravating or mitigating circumstances.

6) Provides if an accusation is filed against a licensee, the licensee is entitled to have a public hearing on the accusation to present a defense against the charges made. The hearing will be presided over by an Administrative Law Judge of the Administrative Hearing Office.  At the hearing, the licensee is entitled to the issuance of subpoenas to compel the attendance of witnesses and materials and may be represented by counsel (but not at public expense), may present relevant evidence and may cross-examine all witnesses.  The Administrative Law Judge makes a proposed decision, which is filed with the ABC Director. (Government Code Sections 11500-11528)

7) Provides generally that the ABC shall deny an application for a license if the issuance or transfer of the license would tend to create a law enforcement problem or add to undue concentration of licenses, unless issuing the license would serve a public convenience or necessity.  Defines "undue concentration" in terms of a specified ratio of licensed premises-to-population within a census tract or a crime-reporting district in which the reported crime rate exceeds the crime rate of the entire local law enforcement jurisdiction by more than 20%.  (Business & P Code Sections 23958 and 23958.4.) 

8) Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar).  An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.  

9) States the California Gambling Control Commission (CGCC) may issue any emergency orders against an owner licensee or any person involved in a transaction requiring prior approval that the division deems reasonably necessary for the immediate preservation of the public peace, health, safety, or general welfare, as specified.

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill:  The author’s office notes this bill would provide the Director of ABC with the authority to suspend a business’ alcohol license in the case of an emergency that threatens the health and safety of the public. To do so, the Director must produce an emergency order with a statement of facts containing the alleged emergency, any relevant evidence upon which the department relied in issuing the emergency order, and a notice of the licensee’s right to petition for relief. 

The author states this bill also allows the licensee to petition for relief from the order by written argument, to which the department must respond within three business days with a document sustaining, modifying, or vacating the emergency order.  If the licensee or entity against who the emergency order has been issued requests a hearing, it will be granted within 10 business days of the received date of the Notice of Defense.

The author points out “in San Jose, we have seen many cases of violent crime and murder in relation to bars that double as “bikini bars” or strip clubs.  The illegal operations in these bars may go unpunished for weeks or even months, while the police department and local ABC officials build a case against them. Even under urgent situations, like repeated violent crimes happening, local officials have their hands tied and must let the businesses continue operation.  Even worse, many times these establishments are run by the same group of business partners/family members who merely transfer the alcohol license amongst each other when the business is finally shut down.  The author notes that the San Jose Police Department has had success in dealing with and shutting down these establishments, but their authority is still lacking.” 

The author believes this bill will be a tool that can be used, with caution, when residents face dangerous circumstances because of problem businesses.  The bill was drafted in close collaboration with local and statewide ABC officials, as well as San Jose Police Department officials.  Currently, the San Jose Chief of Police can immediately suspend an entertainment license of a business in the case of an emergency, but this practice is only applicable within the city’s “entertainment zone.” Law enforcement and ABC have their hands tied when the same emergency situations happen anywhere outside that zone.  This bill also takes into consideration the current abilities of the Department of Consumer Affairs, the Department of Public Health and the Bureau of Gambling Control (see #9 in Existing Law) as examples of how to craft the ability to suspend licenses in cases of emergencies, while ensuring that licensees have necessary protections and the right to due process.

Background:

State v. Local Control of Alcohol Policy:  Much to local government's frustration, both the state Constitution and the ABC Act generally prohibit local governments from regulating the sale of alcoholic beverages within their jurisdictions.  Exacerbating this sentiment is the perception that ABC is under-funded and understaffed with less than 200 enforcement agents available to police the almost 70,000 retail licenses in the state.  Further compounding this situation is the inability of ABC to receive any funding increases.  The ABC is a special fund department that receives funding from fees imposed upon alcoholic beverage licensees.

Over the years, local governments have often petitioned the Legislature for greater authority to directly regulate establishments that sell alcohol (e.g., restricting the hours of operation of problem premises, or limiting the sale of certain products such as fortified wines or high alcohol content malt beverages).  Much of this activity has been centered on local government's use of zoning laws and conditional use permits that place operating conditions on new businesses that sell alcohol. While current law prohibits the ABC from issuing a new license in an area not locally zoned for that type of business activity, those establishments in existence prior to any local zoning action are "grandfathered" and therefore beyond the reach of the local government – a source of contention for local governments.

Historically, the alcohol industry and retailers have opposed ceding to local government any measure of the state's exclusive authority to regulate alcohol.  The industry has advocated that matters relating to the regulation of alcohol should be determined at the state level, as opposed to an assortment of local regulations, which may vary from local jurisdiction to local jurisdiction. 

Disorderly house law:  A disorderly house is a licensed premises that disturbs the neighborhood or is maintained for purposes that are injurious to the public morals, health, convenience or safety. For example, a licensed outlet that (a) disturbs the neighborhood with noise, loud music, loitering, littering, vandalism, urination or defecation by patrons, graffiti, etc.; or (b) has many crimes ongoing inside, such as drunks, fights, assaults, prostitution, narcotics, etc. The licensed premise includes the parking lot.  Any licensee, or employee of any licensee, who keeps or permits such a disorderly house is guilty of a misdemeanor, and the license is subject to disciplinary action. (B & P Sections 25601 and 24200)

Penalty for selling an alcoholic beverage to a minor or permitting a minor to consume an alcoholic beverage in an on-sale premises:  The law requires the suspension of a license for a second or subsequent violation within a 36-month period. The law also authorizes the revocation of a license for a third violation within a 36-month period.  ABC may revoke a license prior to a third violation when the circumstances warrant it. (B & P Section 25658.1) 

In support:  Writing in support, Alcohol Justice (formerly Marin Institute) states, “The state already suffers more than $38 billion dollars in alcohol-related harm and over 10,000 alcohol-related deaths annually. This bill will help safeguard public health and safety and reduce the number of problem alcohol retailers in California. Existing law provides ABC with exclusive authority to revoke the license of problem retailers, such as those that make underage sales, disturb the neighbors, or engage in other illegal behavior. This fact coupled with the lack of resources devoted to ABC enforcement often allows problem retailers to continue operation long after the community raises concerns.  As a result, it is that much more important that when a license is revoked that ABC ensures problems do not continue at the location when a new license is issued.” 

Also writing in support, The California Council on Alcohol Problems states, “quite frankly, we were a little shocked to learn that the ABC Director currently lacks the authority to do what this reasonable bill authorizes, which is to be able to suspend the alcohol license of a business if the department deems that there is an urgent or immediate threat to the health and safety of the public. The bill assures due process rights to the licensee.  We are aware of many unfortunate examples of ABC licenses being given to businesses that claim to be eating places or bars, but morph -- often in the late evening hours into commercial enterprises that mix alcohol (including after-hour drinking) with prohibited business activities.  AB 2082 would give ABC a tool to assist local law enforcement in their efforts to protect the citizens of the communities negatively impacted by these "morphing' business ventures.”

Prior legislation: AB 2151 (D. Jones), 2007-2008 Session, Vetoed by Governor. The bill added provisions to the ABC Act for the purpose of assisting local governments in their effort to control the issuance and transfer of liquor licenses.

AB 2893 (Hancock), Chapter 253, Statutes of 2008.  Grants ABC the authority to impose restrictions on retail license transfers in instances where the license transferor has been cited for multiple violations of the ABC Act during his/her ownership of the license.  

AB 960 (Hancock), 2007-08 Session.  Provides local governments more control over the issuance of liquor licenses through the use of zoning and amortization.  (Died in Assembly Governmental Organization Committee)

SB 148 (Scott), Chapter 625, Statutes of 2006.  Among other things, provided additional bases for the suspension or revocation of an alcoholic beverage license, when a licensee fails to take reasonable steps to correct objectionable conditions on the licensed premises or any public sidewalk abutting a licensed premise, as provided, after specified notice from the district attorney, city attorney, or a county counsel.

AB 624 (Oropeza), Chapter 931, Statutes of 2001.  Permitted ABC to take into account neighboring crime statistics in the area of the site of the establishment when transferring an alcohol license.  Furthermore, extended the time local entities have to respond to the notice of a new or transferred license and require the notification of local property owners around the site.

AB 1092 (Lowenthal), Chapter 499, Statutes of 1999  Authorized ABC to place reasonable restrictions upon retail licenses or any licensee in the exercise of retail privileges if ABC adopts conditions required by a local governing body.

AB 2897 (Caldera), Chapter 630, Statutes of 1994.  Among other things, granted ABC the authority to deny an application for a license if issuance would tend to create a law enforcement problem, or would result in or add to an undue concentration of licenses.  In addition, provided that a license may be issued if the local governing body of the area in which the applicant premises are located determines that public convenience or necessity would be served by the issuance.

AB 463 (Tucker), Chapter 627, Statutes of 1994.  Authorized ABC to suspend or impose new conditions on a licensee who has failed to correct "reasonable conditions" as noticed by a local official.

AB 2742 (Lee), Chapter 629, Statutes of 1994.  Made a series of changes relating to ABC licensing and standards, including (1) establishing general operating standards with respect to the licensed premise of retailers of alcoholic beverages, (2) providing that the current 30-day review process shall be extended by 20 days to give the local jurisdictions more authority and opportunity for related input, (3) requiring ABC to notify the entity or official in writing as to why they recommend that a license be issued after a protest has been made by an entity or official, as specified, and (4) providing additional regulation of a licensee, as specified.

REGISTERED SUPPORT / OPPOSITION:

Support

Alcohol Justice

California Council on Alcohol Problems

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531