Paek v. Prince George's County Board of License Commissioners

CATHELL, J. This case concerns the March 14, 2002 decision by the Prince George’s County Board of License Commissioners (the “Board”), respondent, to sanction Myoung Paek, petitioner, who trades as the “Lanham Inn” on Lanham-Severn Road in the Lanham section of Prince George’s County, for his actions in offering adult entertainment in the form of topless dancing at the Lanham Inn without first obtaining Board approval. Petitioner, on April 2, 2002, filed an action for judicial review of the Board’s decision in the Circuit Court for Prince George’s County. On October 30, 2002, the Circuit Court issued a memorandum opinion and order reversing the Board’s decision. The Circuit Court found that the Board exceeded its statutory authority “to authorize or deny live entertainment” because it was “discriminat[ing] between types of live entertainment without clear, ascertainable standards ....,” and further stated that, “the Board, for no apparent reason other than its distaste for the type of entertainment being offered, banned topless dancing.” As to the present case, 1 the Circuit Court appears to have misunderstood the status of the administrative proceedings.

As far as this record reflects, the Board still has not banned topless dancing at the Lanham Inn. This misperception was later discussed by the Court of Special Appeals in its unreported opinion. As indicated, the Board then filed a timely appeal to the Court of Special Appeals and, on September 26, 2003, in an unreported opinion, the intermediate appellate court reversed the judgment of the Circuit Court. Petitioner filed a Petition for a Writ of Certiorari to this Court and, on December 18, ⁵⁸⁷ 2003, we granted the petition.

Paek v. License Commissioners, 378 Md. 617, 837 A.2d 928 (2003). Petitioner presents two issues for our review: “I. Whether the Court of Special Appeals erred as a matter of law and fact when it determined that the Board of License Commissioners’ general and broad standards for regulating various types of entertainment were not applied in an arbitrary and capricious manner, thus violating applicable due process requirements.” “II. Whether the Court of Special Appeals erred as a matter of law and fact when it determined that the Prince George’s County Board of License Commissioners did not exceed the powers delegated to it by Article 2B when it placed a restriction on [petitioner’s] alcohol beverage license prohibiting adult entertainment at his business establishment.” [Alteration added.] We shall hold that the Board’s action requiring petitioner to appear before the Board, for it to decide whether he could offer adult entertainment at his licensed establishment, was not an arbitrary and capricious action violating due process requirements. The Board justifiably considered petitioner’s decision to offer adult entertainment at the Lanham Inn to be a significant change in the use of the premises and such a change was required to first be approved by the Board.

The fine given to petitioner as a result of his continued offering of adult entertainment without first obtaining Board approval was a lawful action under both Article 2B of the Maryland Code and the relevant local Board rules and regulations. I. Facts Petitioner is the owner and proprietor of a restaurant known as the Lanham Inn, which is located in Lanham, Maryland. He has operated this business for approximately seventeen years and is the principal licensee of a Class B +, Beer, Wine and Liquor License granted by the Board, a license that authorizes the keeping and sale of alcoholic bever ⁵⁸⁸ ages at the Lanham Inn premises for both on and off-premises consumption. In May 2001, petitioner asked the Board’s permission to make renovations to the Lanham Inn premises in an attempt to modernize his business.

These renovations included the addition of a stage area for the purposes of offering “live” entertainment to the patrons of the Lanham Inn. This request was approved by the Board without a hearing in a letter dated December 14, 2001. Prior to the Board’s approval of the stage area, petitioner had also asked the Board for approval to create, by partition, an additional room on the premises. Before considering this alteration, however, the Board requested that petitioner attend a hearing on January 2, 2002 to discuss the proposed new room.

At this hearing, Board members inquired about the type of entertainment that petitioner was intending to offer at the Lanham Inn. Petitioner responded that he intended to offer all forms of legal entertainment, including, but not limited to, karaoke, a disc jockey and live bands. When questioned by the Board about any intentions he may have had to offer forms of adult entertainment, i.e., topless dancing or “go-go girls,’* petitioner stated that he had not made a final decision with regard to offering that form of entertainment. Board members then stated that no such adult entertainment would be permitted at the Lanham Inn without first being approved by the Board.

On January 9, 2002, only a week removed from the Board hearing, petitioner began offering adult entertainment, in the form of topless dancing, at the Lanham Inn. Before this date, Board inspectors had been alerted of the planned adult entertainment after viewing advertising fliers promoting “topless dancing” at the Lanham Inn. On January 9th, the inspectors went to the premises and witnessed topless dancing taking place. 2 At that time, the inspectors served petitioner with a ⁵⁸⁹ notice charging him with, inter alia, significantly changing the mode of operation of the premises without Board approval. Subsequently, an inspector delivered a cease and desist order requiring that petitioner cease from offering all forms of adult entertainment on the premises without first obtaining permission from the Board to allow such mode of operation on the premises.

Petitioner did not abide by that order, and instead continued to provide adult entertainment without seeking approval from the Board. Petitioner was thereafter summoned to appear at a hearing before the Board on March 6, 2002, to show cause as to why he should not be found to be in violation of certain Board rules and the cease and desist order. At the hearing on March 6,2002, the Board heard testimony from petitioner and two employees of the Lanham Inn, as well as from three Board inspectors who had witnessed the topless dancing. On March 14, 2002, the Board issued a written decision finding that petitioner significantly altered his mode of operation without permission and that he ignored a valid cease and desist order from the Board.

The Board, in light of these findings, fined petitioner $5,000 and directed that he cease offering adult entertainment at the Lanham Inn without first obtaining Board approval to do so. On April 2, 2002, petitioner filed a petition for judicial review in the Circuit Court for Prince George’s County. The real issue before the Circuit Court, therefore, was not whether the Board had arbitrarily disapproved topless dancing but whether its approval was necessary in the first instance. The trial court incorrectly adopted the position that the Board had arbitrarily rejected topless dancing at the Lanham Inn, when in fact, the Board’s action had been limited to insisting that petitioner seek the Board’s approval.

II

Standard of Review Upon judicial review of the decisions of alcoholic beverage licensing boards, our scope of review is determined by ⁵⁹⁰ McLCode (1957, 2001 Repl.Vol.), Art. 2B § 16-101(e)(1)(i) 3 : “Upon the hearing of such appeal [Judicial review], the action of the local licensing board shall be presumed by the court to be proper and to best serve the public interest. The burden of proof shall be upon the petitioner to show that the decision complained of was against the public interest and that the local licensing board’s discretion in rendering its decision was not honestly and fairly exercised, or that such decision was arbitrary, or procured by fraud, or unsupported by any substantial evidence, or was unreasonable, or that such decision was beyond the powers of the local licensing board, and was illegal.” [Alteration added.] See Board of License Commissioners for Charles County v. Toye, 354 Md. 116, 121 , 729 A.2d 407, 409 (1999); Baltimore County Licensed Beverage Association, Inc. v. Kwon, 135 Md.App. 178, 185-86 , 761 A.2d 1027, 1031 (2000). Our review of the Board’s decision is the same as that of the intermediate appellate court and the circuit court. Therefore, if the Board’s decision was supported by substantial evidence, and if it committed no error of law, we must reverse the circuit court and affirm the Board’s decision.

If the Board’s decision was not supported by substantial evidence, or if it did commit an error of law, we must affirm the circuit court. In addition, we can remand the proceedings to the Board if necessary. See § 16-101(e)(4)(ii).

III

Discussion Article 2B of the Maryland Code (“Article 2B”) comprehensively regulates the manufacture, sale, distribution, transportation and storage of alcoholic beverages in this State. See Dundalk Liquor Co. v. Tawes, 201 Md. 58, 65 , 92 A.2d 560, 563 (1952) (stating that “ ‘In the field of regulatory law, more attention has perhaps been given by legislatures to the control and management of the liquor business than of any other traffic....’”) (quoting Miller v. State, 174 Md. 362, 371 , 198 ⁵⁹¹ A. 710, 715 (1938)). The stated purpose of Article 2B is “to obtain respect and obedience to law and to foster and promote temperance.” Art. 2B, § 1 — 101(a)(1). It is further stated that: “[i]t is the legislative intent that the policy will be carried out in the best public interest by empowering ... the various local boards of license commissioners and liquor control boards ... with sufficient authority to administer and enforce the provisions of this article____The restrictions, regulations, provisions and penalties contained in this article are for the protection, health, welfare and safety of the people of this State.” Art. 2B, § 1-101(a)(2)-(3).

Section 16-301 (a) of Article 2B vests “full power and authority [in local boards of license commissioners] to adopt such reasonable rules and regulations as they may deem necessary to enable them effectively to discharge the duties imposed.... ” Art. 2B, § 16-301 (a) (alteration added). As this Court has stated, however, “rules and regulations adopted by an administrative agency must be reasonable and consistent with the letter and spirit of the statute under which the agency acts.” Sullivan v. Board of License Commissioners for Prince George’s County, 293 Md. 113, 121 , 442 A.2d 558, 563 (1982); see also Mayor and City Council of Baltimore v. William E. Koons, Inc., 270 Md. 231 , 310 A.2d 813 (1973); Comptroller of Treasury v. M.E. Rockhill, Inc., 205 Md. 226 , 107 A.2d 93 (1954). Of particular relevance to the case now before this Court is the language found in § 8-217(a)(4) of Article 2B 4 , which states, in pertinent part: “In Prince George’s County, in addition to the other powers and duties conferred upon them, the Board of License Commissioners ... may prescribe rules and regulations concerning alterations and additions to any licensed premises and the use thereof....” ⁵⁹² Acting in accordance with § 8-217(a)(4), the Board has adopted local rules and regulations in order to administer and enforce Article 2B. Board Rule 37, entitled “Alterations and Additions,” states, in pertinent part: “A. No license holder shall make any alteration or addition on a licensed premise or change the manner in which alcoholic beverages are dispensed without first obtaining permission from the Board.” ... “D. In the event a licensee decides to significantly alter the mode of operation and the format of presentation of alcoholic beverages to the public from that contained in the original application approved by the Board at the time of issuance of the license, such change must first be presented to the Board for approval.

Changes in the mode of operation would include entertainment, alteration of physical premises, presentation of food, alcoholic beverages, seats, physical environment both inside and outside of the licensed premises. The intent of this section is that when a licensee significantly deviates from the original application, as issued, the changes in the mode of operation must be reviewed so consideration can be given to the testimony presented on the original application by the parties of record so as to have assurances that the best interest of the public is accommodated and the operation of the business to be conducted under the license does not adversely impact or unduly disturb the community and further that it is harmonious to the peace, health, welfare, and safety of the residents of Prince George’s County.” A. Propriety of Board Rule 37(D) Petitioner contends that Board Rule 37(D), while it “arguably may be a constitutionally acceptable standard for determining a licensee’s allowable form of entertainment ... remains a broad standard which the Board has applied in an ⁵⁹³ arbitrary manner in the instant case.” To support his argument, petitioner points to the Board’s decision, without a hearing, 5 to allow an alteration at the Lanham Inn so as to provide a stage for live entertainment generally. He argues that, in light of this approval, the Board acted arbitrarily in ruling that a hearing would be required before a decision would be made as to whether the licensed premises could be used for adult entertainment. Petitioner posits that “[t]he only logical explanation for such an inconsistent application of Board Rule 37(D), is that the Board has a preconceived notion that adult entertainment is detrimental to the health[,] safety and welfare of the residents of Prince George’s County while karaoke, live bands and disc jockeys are not,” and that such inconsistent application of Board rules “violates the principle of due process,” which prevents the Board from “reaching consistent and fair decisions.” As noted, supra, both Article 2B, particularly § 8-217(a)(4), and Board Rule 37(D) authorize the Board to decide whether it is in the public interest for a liquor license to remain in force for a licensed premises where there has been an alteration in the mode of operation of the premises, including a significant change in how the premises are being used.

As stated in Board Rule 37(D), the intent of having such a review hearing is to assure that “the best interest of the public is accommodated and the operation of the business to be conducted under the license does not adversely impact or unduly disturb the community and further that it is harmonious to the peace, health, welfare, and safety of the residents of Prince George’s County.” Such review is clearly acceptable in a constitutional sense, and we so held in the case of Sullivan v. Board of License Commissioners, 293 Md. 113 , 442 A.2d 558 (1982). In that case, the holder of a license to sell alcoholic beverages sought judicial review of a decision of the Board of License Commissioners for Prince George’s County denying an application to construct and operate a drive-in window for ⁵⁹⁴ the sale of packaged alcoholic beverages on the licensed premises. The question then before this Court was whether the Board employed constitutionally acceptable definite standards in situations involving applications to change the nature of the operation of a licensed premises. 6 In holding that the standards were acceptable, we stated: “It is implicit in the rule ... that in passing upon the merits of a Rule 46 [7] application, the standard governing the Board’s determination is whether the proposed change to the licensed premises is in the interest of public accommodation and is consistent with the need to protect the peace, safety and welfare of the community. As broad as this standard may be, we think it comports with due process requirements even though not accompanied by a specific delineation of the elements and factors required to be weighed and considered by the Board in passing upon the application. ” Sullivan, 293 Md. at 123-24 , 442 A.2d at 564 (emphasis added) (footnote added).

Like former Board Rule 46, which was at issue in Sullivan , a determination under Board Rule 37(D) is made subsequent to a finding that takes into account public accommodation and “the peace, health, welfare, and safety of the residents of Prince George’s County.” Therefore, the constitutionally acceptable standard once found by this Court to be “implicit” in former Board Rule 46 (now Board Rule 37(A)) has been made explicit in the language of Board Rule 37(D). We continue to agree with the conclusion reached by this Court in Sullivan, i.e., that the Board’s discretion in regulating the use of a ⁵⁹⁵ licensed premises under the standards such as those found in Board Rule 37(D), or a rule substantially similar to it, is both constitutionally permissible and consistent with the statutory framework of Article 2B. Petitioner attempted to circumvent Board Rule 37(D) by