Superior Court Holds DBR Lacks Authority To Authorize Sale Of Distilled Liquor By The Bottle

| Nov 21, 2013 | Firm News

The Superior Court has held that the Rhode Island Department of Business Regulation (“DBR”) lacked the authority to authorize a nightclub (the “Club”) to sell distilled liquor by the bottle to its patrons in the “VIP” section. In a challenge brought by the Providence Board of Licenses, the Court said the General Assembly had not delegated this authority to DBR.

In Title III of the General Laws, the General Assembly has passed legislation that authorizes DBR to regulate the sale by its licensees of bottles of wine and aquardiente. R.I.G.L. §§ 3-7-26, 3-8-14. Otherwise, licenses issued by DBR “shall in no case authorize the sale for consumption on the premises where sold of distilled liquors…unless those sales are authorized by this title.” R.I.G.L. §3-5-13. The General Assembly has said “This title shall be construed liberally in aid of its declared purpose….the promotion of temperance and for the reasonable control of the traffic in alcoholic beverages.” R.I.G.L. §3-1-2.

In 2008, DBR issued a “notice” to the holders of all liquor licenses in the State that a licensee may not sell alcoholic beverages by the bottle, except wine and aquardiente, but must serve and dispense the alcoholic beverage by an employee or the owner. Since then, DBR has consistently taken the position that holders of Class B liquor licenses by not sell distilled liquor by the bottle.

In 2013, the municipal licensing board fined the Club for various violations, including selling distilled liquor by the bottle. The Club appealed the fine to DBR. The Club requested an advisory opinion to clarify the Notice. The request was one page long and did not include any specific facts or a specific request for what relief the club was seeking. DBR issued a “Ruling” stating that “the sale of a multiple serving bottle of distilled liquor to a VIP patron…table is permitted.” The licensing board appealed to the Superior Court.

The Superior Court first discussed the standard of review. Issues of law are reviewed de novo. An agency’s interpretation of the statutes applicable to it is entitled to deference “unless clearly erroneous or unauthorized.”

Next, the Court considered whether DBR’s publication of the “Ruling” was proper. The Club requested an “advisory opinion,” which the Administration Procedures Act authorizes. R.I.G.L. §42-35-8. There is no statutory authority for a “Ruling.” Moreover, DBR’s procedure for advisory opinions requires that the request for the advisory opinion set forth the pertinent facts in a manner similar to a complaint in a civil action. The Supreme Court has held that the statutory section authorizing advisory opinions is “an administrative counterpart of the Declaratory Judgments Act.” There must be an actual “judiciable controversy” for the agency to resolve. Here, the Club’s request did not set forth any specific facts or specify what relief the club sought other than a “clarification” of the 2008 Notice. Accordingly, the request for the advisory opinion was not in a proper format. In addition, there is no authority for DBR to issue a “Ruling.”

The Court next assumed the request for the advisory opinion was procedurally correct and considered whether DBR had the authority to grant the relief it did. The Court said administrative agencies possess only the authority to promulgate regulations that the General Assembly delegates to them. In this case, that authority depends on the powers delegated in Title III of the General Laws.

The Court rejected DBR’s argument that it had the authority to issue its Ruling because nothing in Title III prohibited it from doing so. The Court said the express grant of authority to permit the sale of wine and aquardiente by the bottle indicates an intent to exclude the authority to permit the sale of other kinds of liquor. Moreover, the General Assembly said Title III should be interpreted to promote “temperance” which Black’s Law Dictionary defines as “restrained or moderate indulgence” or “abstinence.” The Court said DBR’s ruling did not promote temperance; it did exactly the opposite.

The Superior Court held DBR did not have the authority to permit the Club to sell distilled liquor by the bottle. It vacated the Ruling and remanded the matter to DBR for further proceedings consistent with its decision.

The City of Providence Board of Licenses v. The Department of Business Regulation, P.C. 2013-2429, slip opinion (R.I. Super. Nov. 18, 2013)

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