Liquor License FAQs Regarding Illegal Activity on New Jersey Premises

FREQUENTLY ASKED QUESTIONS

An NJ retail establishment such as, for example, a tavern or restaurant, is required to follow the applicable requirements of the Alcoholic Beverage Control Act and its corresponding regulations. Thus, the licensee’s obligation is not only to obtain a liquor license, but also to maintain it in full force and effect.

In that regard, one of the more notable examples of the ways a liquor license can be suspended is the failure to prevent illegal activity from occurring on premises. The following are FAQs relating to that issue.

FAQ # 1 – Is it a defense that the illegal activity on a premises at which alcohol is sold occurred outside the view and/or participation of the licensee?

Generally, it is not. The New Jersey Supreme Court has held that “[t]he fact that the licensee did not participate in the violation or that his agent, servant or employee acted contrary to instructions given to him by the licensee or that the violation did not occur in the licensee’s presence shall constitute no defense to the charges preferred in such disciplinary proceedings.” Division of Alcohol Beverage Control v. Maynards, Inc. 192 NJ 158, 177 (2007)

FAQ # 2 – What is the standard for liability against a licensee for illegal activity that occurs at premises in which alcohol is being served pursuant to a license issued pursuant to the NJ Alcoholic Beverage Control Act?

The determination of whether the licensee will be found at fault in this context is governed by the legal principle of “strict liability.” That means there will be the potential for liability against the licensee without the requirement of demonstrating that they were at fault.

In other words, there is something so inherently dangerous about serving alcohol to people who are also engaged in illegal drug transactions that the very fact it is being done is enough to engender liability; how and why it is being done is not generally relevant (at least as to whether the allegations state a cause of action).

As the Supreme Court of New Jersey has stated “[i]n the context of the pervasive regulation of the liquor industry, it has been consistently held that liquor licensees are strictly liable for illicit drug transactions within the licensed premises, whether committed by the licensees themselves, their employees or by others.” Id. at 178.

FAQ # 3 – Are there any mitigating factors that the licensee is entitled to raise that may lessen the potential penalties for violating the Alcoholic Beverage Control Act and corresponding regulations in regard to illegal drug activity occurring on premises?

New Jersey courts have consistently held that, even though there is strict liability for the sale of drugs and drug paraphernalia at a licensed premises in which alcohol is served, there are also mitigating factors that can reduce the severity of the damages or penalties.

Two examples of such mitigating factors are whether the respondent has engaged in sufficiently robust efforts to prevent the illegal activity, notwithstanding the fact that the activity did continue on premises. Another is that the illegal activity was aberrational and not repetitive within a sufficiently long period of time that the licensee was selling alcohol on premises.

FAQ # 4 –What is the standard by which the director of the Division of Alcoholic Beverage Control will review the findings and imposition of penalties by the Division’s Administrative Law Judge?

When an administrative complaint is filed commencing an action against a licensee under the Alcoholic Beverage Control Act the latter will be afforded all the standard means of quasi-due process of the administrative law system, such as the right to present defenses in pleadings, limited discovery and motion practice and consideration of the findings of the administrative law judge by the director of the Division of Alcoholic Beverage Control.

After the administrative law judge makes their determination, the matter may be reviewed by the director. The director is at liberty to reject or accept the administrative law judge’s findings. Notably, once the administrative remedies are pursued to conclusion, the matter can be appealed to the Appellate Division of the Superior Court of New Jersey pursuant to R. 2:2-3(a)(2). Ultimately, an application for certification can even be made the Supreme Court of New Jersey, though it is within that court’s discretion whether to accept the matter on its docket.

Liquor License Legal Matters in New Jersey

The Nissenbaum Law Group welcomes inquiries from businesses and people in the business community with legal matters that relate to either litigation regarding—or the application for or sale of—liquor licenses. Review our Franchise Law legal services and contact us today.