Posted by: Patricia Salkin | September 30, 2013

DC Appeals Court Upholds Denial of Liquor License Despite Zoning That Would Have Permitted Use

Panutat, LLC applied for an alcoholic beverage license for the operation of a basement nightclub (“Sanctuary”) in the District of Columbia. The Alcoholic Beverage Control Board (“Board”) initially approved the license for Sanctuary, and Intervenors, Chris Labas et al., petitioned to have the approval reviewed. The District of Columbia Court of Appeals remanded the matter for the Board to reconsider evidence in light of another nightclub (“Shadow Room”) at the same location that already held a liquor license. After the remand hearing, the Board decided to reverse the granting of the Sanctuary application. The Board noted that since Shadow Room already existed at the same location, an increase in the number of patrons by approving Sanctuary’s license would “adversely impact peace, order, and quiet and vehicular and pedestrian safety in the neighborhood.” Panutat appealed the Board’s decision to the District of Columbia Court of Appeals.

Panutat first argued that the Board had no authority to reverse an already-decided issue. The court rejected this argument, finding that Intervenors were entitled to appeal the Board’s initial decision in which it refused to hear evidence about Shadow Room. The court cited to case law which established that the Board “has the power to reconsider any decision it makes, unless there is some statute or regulation that affirmatively forbids such action.” Here, since there was no specific law that restricted the Board’s power to reconsider, the Board had sufficient authority to reconsider the application pursuant to Intervenors’ request.

Panutat additionally asserted that the Board’s denial was incorrectly premised on Shadow Room’s alleged violations, absent evidence that Sanctuary would exacerbate the existing noise conditions. Panutat also challenged the Board’s decision as speculative regarding the future impact of “peace, order, and quiet of the area.” The court explained that the relevant statute provides that in reviewing a liquor license application, the Board must consider how the establishment would impact the location’s peace, order, noise, and littering, and “the residential parking needs and vehicular and pedestrian safety.”

Here, although Shadow Room and Sanctuary were different corporations, they shared both ownership and management and were located at the same address. The court agreed with the Board’s reasoning that this information was relevant to whether they would be operated similarly and whether the new establishment would worsen the existing issues. With respect to Panutat’s argument that there was no evidence of Sanctuary’s negative impact on the noise conditions, the court noted that it was appropriate for the Board to have considered the noise conditions caused by the nearby licensees in the area. The court agreed with the Board’s interpretation that the Board was required to consider the ways in which Shadow Room’s impacts on the area’s peace and quiet may be aggravated by Sanctuary’s possession of a liquor license. Finally, the Board’s determination that Sanctuary’s possession of a liquor license would in fact worsen Shadow Room’s impacts on the area was, according to the court, “hardly speculative.” Rather, the Board reviewed specific evidence and testimony of ways in which the granting of a liquor license to Sanctuary would likely create more problems. The Board calculated that Shadow Room’s present capacity of 250 people was already creating disturbances in the neighborhood. There had also been multiple assaults and incidences of littering and defecation. The addition of another nightclub with a liquor license would likely increase this number. The court was satisfied with the Board’s review of the foregoing evidence in opposition to Sanctuary’s liquor license.

Panutat further argued that since the neighborhood near Sanctuary and Shadow Room was zoned for “heavy commercial use,” the Board had interfered with the generally high density nature of the location in an “effort to inflict a purely ‘residential character.’” The court rejected this argument, explaining that while the nightclubs were indeed located in a commercial district, the Board was still required to consider the effects of the business on residential parking, vehicular and pedestrian safety, and peace, order and quiet. Likewise, the governing statute requires an inquiry into a nightclub’s adverse impacts on any nearby area’s residents. Since Sanctuary’s zone was directly adjacent to a residential district, the court found it appropriate for the Board to have considered the potential impact on these residents.

Next, Panutat argued that the Board’s decision constituted a “de facto moratorium on the issuance of new liquor licenses.” The court first noted that there is a statute that specifically allows the Board to deny the application on the basis that the neighborhood was at its maximum capacity for nightclub patrons. Second, the court explained that Sanctuary’s application denial did not prohibit the issuance of additional licenses in the neighborhood and thus did not amount to a moratorium. Future applicants could provide arguments that the neighborhood has changed in ways that would allow an additional nightclub. They may also offer ways to mitigate the negative effects of an additional nightclub. The court in turn found that the Board’s decision did not create a moratorium on future license applicants.

Panutat’s final argument was that if the Board approved Shadow Room’s application, Sanctuary’s application for a license at the same location with “nearly identical operation” should have also been approved. As a preliminary point, the court noted that while Shadow Room had been seeking a license renewal, Sanctuary had been seeking a new license altogether. The two different types of applications thus called for different standards of review and justified the Board’s approval of one over the other. With regard to Shadow Room’s license renewal, the Board noted that although Shadow Room had a negative impact on the neighborhood, revocation of the license was not warranted since the nightclub was located in a commercial district and was entitled to a high density of patrons. Nevertheless, the Board found that an additional nightclub with additional patron capacity would likely exacerbate these issues to the point that approval would no longer be warranted. In support of this finding, the Board heard evidence regarding double parked cars and increased night traffic, which could in turn delay emergency vehicles and create dangerous situations. Although Shadow Room provided evidence that it would be mitigating these negative effects on traffic, the Board felt it appropriate to not allow Sanctuary to create further traffic problems. As a result, the court here affirmed the Board’s application denial in this respect as well.

Panutat, LLC v. D.C. Alcoholic Beverage Control Board, 2013 WL 5271321 (DC App 9/19/2013).

The opinion can be accessed at: http://www.dccourts.gov/internet/documents/12-AA-532.pdf


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