Board of Liquor License Commissioners v. Hollywood Productions, Inc.

CHASANOW, Judge. The question presented in this case is whether the Board of Liquor License Commissioners for Baltimore City exceeded its authority in restricting the hours of lawful operation of a licensee’s establishment. For the reasons set forth below, we hold that this restriction was beyond the scope of its statutory authority. We also hold, as a preliminary matter, that the Board of Liquor License Commissioners has standing to appeal an adverse decision by the circuit court.

I. The appellee, Hollywood Productions, Inc. (“licensee”) operates a Class B-D-7 licensed nightclub 1 on 32nd Street in Baltimore. In the Fall of 1994, the Board of Liquor License Commissioners (“Liquor Board”) received several written complaints from area residents concerning the patrons of this establishment. The focus of the complaints was the disorderly behavior of customers exiting the club in the early Monday morning hours when the club closed. The residents reported that club patrons were disturbing the peace of the neighborhood by yelling and screaming, pounding on vehicles, honking horns, playing loud music, breaking bottles, urinating in public, parking illegally, and engaging in altercations.

On more than one occasion, it appears that police intervention was ⁵ needed to control the crowd. The parties agree, however, that none of the objectionable conduct occurred on the premises of the nightclub itself and that these disturbances were restricted to Monday mornings at approximately 2:00 a.m. In response to the initial community complaints, the Liquor Board charged the licensee with violating Rule 3.12 of the Liquor Board Rules and Regulations and held a hearing to address the matter on November 3, 1994. Rule 3.12 of the Rules and Regulations of the Board of Liquor License Commissioners for Baltimore City provides: “Licensees shall operate their establishments in such a manner as to avoid disturbing the peace, safety, health, quiet, and general welfare of the community.” Upon the conclusion of that hearing, at which representatives from the community testified, the Liquor Board directed the licensee to meet with local police and residents to ascertain measures that might alleviate the problem and to report the outcome of these meetings to the Board.

Club management complied with this directive and, subsequently, notified the Board that it had: (1) raised the minimum age for admission to 25; (2) upgraded the dress code; (3) discontinued live exotic dance performances; (4) adopted a 1:30 a.m. closing time; and (5) begun announcements encouraging peaceful and quiet egress from the club. On December 29,1994, the Liquor Board held a “compliance conference” with club management and representatives from the community to assess the progress made toward addressing the residents’ concerns. It was generally agreed that there had been some improvement. On January 16, 1995, however, the Board received word from a community association that conditions had again worsened and that, on the preceding night, there had been twelve police squad cars and two police wagons in the area, several hundred individuals milling about and disturbing the peace, and at least two arrests.

The association sent further reports of disruptive conduct to the Board on January 23, 1995, and January 30, 1995, as well as a formal request that the Board prohibit the nightclub from operating on Sunday evenings. ⁶ As a result of these communications, the Liquor Board again charged the licensee with violating Rule 3.12 and scheduled a hearing for March 9, 1995. At the conclusion of this hearing, the Board directed the licensee to close the nightclub at 11:00 p.m. on March 19 and March 26, 1995. In its subsequent written decision dated April 10, 1995, the Board stated: “The Board strongly feels that it is not in the best interest of the community to continue to permit the Sunday evening to early morning operation [of the nightclub] to remain. Ample opportunity was provided the licensee to correct the complaints to the degree that all parties could live in peace and harmony.

It is the consensus Opinion of the Board that this has not occurred and will not occur without specific guidance and direction from this Board. Therefore, effective immediately, the Board orders the licensee to close this premise on Sunday evening at 7:00 p.m. The premise may operate from 12 noon on Sundays to 7:00 p.m. Sunday evening.

At that time the premise must close and cannot re-open until Monday morning at 6:00 a.m.” (Emphasis in original). Opinion of the Board of Liquor License Commissioners for Baltimore City (April 10,1995). The licensee sought judicial review of the Board’s decision in the Circuit Court for Baltimore City. The circuit court reversed on the ground that the restriction of the nightclub’s hours of operation exceeded the scope of the Board’s statutory authority, and the Liquor Board noted an appeal of this adverse ruling to the Court of Special Appeals.

Prior to consideration by the intermediate appellate court, however, this Court issued a writ of certiorari on its own motion and ordered that the case be docketed for its consideration.

II

As á preliminary matter, we must address whether the Liquor Board has standing to appeal the adverse ruling of the ■circuit court. The licensee asserts that, pursuant to the ⁷ decision of this Court in Liquor License Board v. Leone, 249 Md. 263 , 239 A.2d 82 (1968), the Board has no right to appeal the reversal of its decision by the circuit court. In Leone , we did in fact hold that appeals by a liquor board were not permitted by law. Leone, 249 Md. at 267-69, 271 , 239 A.2d at 85-86, 87 .

Subsequent developments in both statutory and case law, however, undermine Leone’s present applicability. At the time that Leone was decided, § 175(f) of the Alcoholic Beverages Act severely limited the opportunity for appeal of circuit court rulings. The decision of a court reviewing a liquor board action was final under that provision; further appeal was permitted only to resolve inconsistencies among the circuits. See Maryland Code (1957, 1968 Repl.Vol.), Article 2B § 175(f).

In the Leone court’s view, this manifest legislative intent to limit appellate review supported a narrow interpretation of the liquor board’s particular right to appeal. See Leone, 249 Md. at 267-69 , 239 A.2d at 85-86 . The Court reasoned that if the General Assembly had envisioned appeals by the liquor board, it would have expressly conferred this right by statute. Leone, 249 Md. at 269 , 239 A.2d at 86 .

It is significant, therefore, that in 1992 the legislature amended § 175 to provide that “any party of record to an appeal of a decision of a local licensing board to the circuit court may appeal the decision of the circuit court: (i) To the Court of Special Appeals; or (ii) By certiorari, to the Court of Appeals.” Chapter 510 of the Acts of 1992 (codified as Md.Code (1957, 1996 Repl.Vol.), Art. 2B, § 16-101(f)). 2 Therefore, the current version of the statute broadly confers the right of appeal to any “party of record.” The reasoning upon which this Court partly based its decision in Leone is thus no longer viable. ⁸ Perhaps even more importantly, the common law underpinnings of Leone have evolved and are now of more limited application. In reaching its decision, the Leone court referenced the principle set forth in Board of Zoning Appeals v. McKinney, 174 Md. 551, 564 , 199 A. 540, 546 (1938), that administrative agencies exercising a quasi-judicial function may not appeal circuit court reversals of their decisions, absent specific statutory authority. It is significant that the role of the agency at issue in McKinney , the Board of Zoning Appeals, was “merely to find facts, to. apply to those facts rules of law prescribed by the Legislature, and to announce the result.” McKinney, 174 Md. at 560-61 , 199 A. at 544 . The agency was not engaged in policy making or other executive functions and served only a non-adversarial, judicial role.

Id. Judge Offut, on behalf of the Court, thus likened the agency to a justice of the peace and held that it had no right to appeal circuit court judgments. McKinney, 174 Md. at 562 , 199 A. at 545 . Although McKinney was a significant factor in Leone , we have since limited the McKinney doctrine. 3 In Consumer Protection v. Consumer Pub., 304 Md. 731, 746 , 501 A.2d 48, 56 (1985), we recognized that the functions of certain agencies are so aligned with interpreting and enforcing the State’s policies that the rationale of the McKinney doctrine simply does not apply.

In holding that the Consumer Protection Division may seek appellate review of an adverse circuit court ruling, Judge Eldridge, writing for the Court, observed: “The Consumer Protection Division exercises a broad range of functions including rule making, investigating and prosecuting alleged violators of the statute, and holding cease and desist order hearings. * * * With its many different functions, its mandate to protect consumers and its role as a ⁹ representative of the interests of the State, the Division is not the type of agency to which the rationale of McKinney applies.” Id. Therefore, we consider characteristics such as the authority to adopt rules, investigate complaints, prosecute violators, and issue orders in furtherance of the public interest in determining whether the McKinney limitation on the right to appeal is applicable to an agency. Since adopting these criteria, we have found the McKinney doctrine inapplicable to such agencies as the Maryland Racing Commission, see Maryland Racing Com’n v. Castrenze, 335 Md. 284, 295 , 643 A.2d 412, 417 (1994); the Real Estate Commission, see Maryland Real Estate Comm’n v. Johnson, 320 Md. 91, 97 , 576 A.2d 760, 763 (1990); and the Department of Human Resources, see Maryland Department of Human Resources v. Bo Peep Day Nursery, 317 Md. 573, 585-86 , 565 A.2d 1015, 1020-21 (1989), cert. denied, Cassilly v. Maryland Dep’t of Human Resources, 494 U.S. 1067 , 110 S.Ct. 1784 , 108 L.Ed.2d 786 (1990). In each case, we were satisfied that the agency possessed characteristics sufficiently similar to those referenced in Consumer Protection that McKinney did not apply. 4 We now reach the same conclusion here with regard to the Liquor Board.

Like the Consumer Protection Division, the Liquor Board has rule making, investigatory, and prosecutorial authority. See §§ 16-301(a)(conferring power to adopt rules and regulations) and 10-403(a)(providing authority to revoke or suspend licenses after notice and hearing). Furthermore, the Maryland legislature has declared: “(a) Regulation necessary.—(1) It is the policy of the State of Maryland that it is necessary to regulate and control ... ¹⁰ alcoholic beverages ... to obtain respect and obedience to law and to foster and promote temperance. (2) It is the legislative intent that that policy will be carried out in the best public interest by empowering the Comptroller of the Treasury, the various local boards of license commissioners and liquor control boards, all enforcement officers and the judges of the various courts of this State •with sufficient authority to administer and enforce the provisions of this article.

(3) The restrictions, regulations, provisions and penalties contained in this article are for the protection, health, welfare and safety of people of this State.” § 1-101. This statute reflects a legislative intent that the various liquor boards represent the interests of the public and the State in carrying out their duties. In this respect as well, the Liquor Board resembles the Consumer Protection Division. These similarities, coupled with the statutory changes providing for an expanded right of appeal, lead us to the conclusion that the Liquor Board has standing to appeal an adverse decision by the circuit court.

Since Leone is inconsistent with this conclusion, it is overruled.

III

The second issue is whether the Liquor Board exceeded its authority in restricting the hours of lawful operation of the licensee’s nightclub. Although this sanction is not expressly authorized by statute, the Liquor Board contends that it falls within the scope of the Board’s general regulatory authority. Specifically, the Liquor Board argues that its broad rule making authority justifies its restricting the hours of operation by a licensee. Because the restriction purportedly promotes the welfare and safety of the community, the Liquor Board asserts that it furthers the stated policy goals of Article 2B.

This position ignores the fact, however, that regardless of any rule making authority that the Liquor Board might enjoy, it may not impose a sanction that exceeds the confines of its expressly or impliedly delegated powers. Even in cases where we have recognized broad delegations of au ¹¹ thority, we have emphasized that agency rules and regulations must conform to the language and spirit of the statute under which the agency acts. See, e.g., Fogle v. H & G Restaurant, 337 Md. 441, 453 , 654 A.2d 449, 455 (1995). As we observed in Sullivan v. Bd. of License Comm’rs, 293 Md. 113, 124 , 442 A.2d 558, 564 (1982), “the power ... to make rules is not the power to make laws.” “[I]n determining whether a[n] ... administrative agency is authorized to act in a particular manner, the statutes, legislative background and policies pertinent to that agency are controlling.” Lussier v. Md. Racing Comm’n, 343 Md. 681, 686 , 684 A.2d 804, 806 (1996).

Where the legislature has properly and broadly delegated regulatory authority to an agency, we have quite liberally construed the scope of the agency’s implied powers to act in that area. See, e.g., Christ v. Maryland Department of Natural Resources, 335 Md. 427, 440 ,