Dept. of Alcoholic Bev. Control v. Alcoholic Bev. Control App. Bd. ( 2021 )

Filed 10/5/21; Certified for Publication 10/29/21 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
DEPARTMENT OF ALCOHOLIC
BEVERAGE CONTROL,
E075738
Petitioner,
(ABC Ct. No. AB9852)
v.
OPINION
ALCOHOLIC BEVERAGE CONTROL
APPEALS BOARD,
Respondent;
IBPOE ELKS OF THE WORLD
ARROWHEAD LODGE 896,
Real Party in Interest.
ORIGINAL PROCEEDINGS; petition for writ of review.
Xavier Becerra and Rob Bonta, Attorneys General, Chris A. Knudsen, Assistant
Attorney General, Celine M. Cooper and Alice Q. Robertson, Deputy Attorneys General
for Petitioner.
No appearance for Respondent.
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Law Offices of Lawrence R. Bynum and Lawrence Bynum for Real Party in
Interest.
The Department of Alcoholic Beverage Control (department), the petitioner in this
writ proceeding, revoked the liquor license of real party in interest IBPOE Elks of the
World Arrowhead Lodge 896 (Arrowhead Elks). The revocation was based on findings
that, among other things, Arrowhead Elks had knowingly allowed cannabis sales events
to be held on its licensed premises. Respondent Alcoholic Beverage Control Appeals
Board (the appeals board) reversed, finding a lack of substantial evidence to support the
department’s decision.
We agree with the department that there is substantial evidence in the record to
support its factual findings regarding the cannabis sales events and that, given those
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factual findings, it was statutorily required to revoke Arrowhead Elks’s license.
Accordingly, we annul the appeals board’s decision and reinstate the department’s
decision.
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I. FACTS
Arrowhead Elks was established as a nonprofit organization in 1959. There was a
period when Arrowhead Elks was affiliated with the national organization, the Improved
1
In light of this conclusion, we need not address the parties’ arguments regarding
whether Arrowhead Elks’s license was also properly revoked for the alternative reason
that the organization is no longer qualified to hold the license because of changes in its
affiliation and operation.
2
Undesignated statutory references are to the Business and Professions Code.
2
Benevolent Protective Order of Elks of the World, Inc., though that is no longer so.
Arrowhead Elks is the holder of a type 51 club license, which is a type of retail license
issued to a nonprofit club, authorizing sale of beer, wine, and liquor to club members and
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their guests for on-premises consumption only. (See §§ 23320, subd. (b)(41) [schedule
of licenses and fees], 23425 [defining “club”]; 23431 [describing privileges and
restrictions for club licenses].) The Arrowhead Elks intermittently uses its lodge in San
Bernardino for its own purposes, but also regularly rents the premises out for other
purposes.
In June 2019, the department issued an accusation seeking, as relevant here, to
revoke Arrowhead Elks’s license based on unlawful possession and sale of cannabis at
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the lodge. More specifically, the department alleged that (1) between August 15, 2018
and April 25, 2019, Arrowhead Elks had knowingly permitted the sale, or negotiations
for sale, of controlled substances or dangerous drugs at its premises in violation of
section 24200.5, subd. (a) (count 2); (2) Arrowhead Elks had knowingly permitted on its
3
The appeals board questioned whether a type 51 club license qualifies as a retail
license. It does, because it allows the holder to sell alcohol directly to the consumer,
albeit only to its members and their guests, not the general public. (See §§ 23026
[defining “‘[r]etail sale’ or ‘sale at retail’” to mean “sale by an on- or off-sale licensee for
consumption and not for resale”], 23431 [describing privileges and restrictions for club
licenses].) Arrowhead Elks has not argued otherwise in this proceeding.
4
In the nine-count accusation, counts 2 through 6 related to unlawful possession
and sale of marijuana at the lodge. Counts 8 and 9 alleged that Arrowhead Elks no longer
qualified as a bona fide club and therefore was no longer qualified to hold its license.
Counts 1 and 7 sought only temporary suspension of the license, not revocation, and the
department’s petition did not challenge the appeals board’s order regarding those counts.
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premises the possession of a controlled substance (cannabis) on two specific dates,
August 15, 2018 and April 25, 2019 (counts 3 and 5), in violation of Health and Safety
Code section 11357; and (3) on the same two dates, Arrowhead Elks had knowingly
permitted on its premises possession of a controlled substance (cannabis) for purposes of
sale (counts 4 and 6), in violation of Health and Safety Code section 11359.
After a contested hearing, an administrative law judge (ALJ) recommended that all
counts of the accusation be sustained and that Arrowhead Elks’ license be revoked. The
ALJ found, as relevant here, that Arrowhead Elks “was fully aware that it was renting out
the Licensed Premises to promotors and vendors for cannabis sales events.” This
conclusion was based on, among other things: (1) the testimony to that effect of two
officers of the Arrowhead Elks, its “house chairman” and its “exalted ruler and
president”; (2) the circumstance that on two occasions, August 15, 2018 and April 25,
2019, police had served search warrants on the premises and impounded substantial
amounts of cannabis products, as well as other evidence indicating that cannabis was
being sold on the premises; (3) evidence that another officer of the Arrowhead Elks, its
“leading knight and vice president,” had hired a security guard for the events and hired
another person to put up and take down tables for vendors to use; (4) evidence that
Arrowhead Elks had charged cannabis vendors $150 for vending space, plus $100 for
“permit purposes” (even though no permits were obtained); and (5) evidence that a
particular cannabis event promotor who goes by the name “Lyfe” or “McLyfe” attended a
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membership meeting of the Arrowhead Elks in August 2017, at which an upcoming
“Lyfeevent in January, 2018” was discussed.
The department adopted the ALJ’s proposed decision in full. The appeals board,
however, reversed the department’s decision (except with respect to one of the counts not
at issue here). As relevant here, the appeals board found that the decision as to the
cannabis related counts was not supported by substantial evidence.
II. DISCUSSION
The department contends that its decision to revoke Arrowhead Elks’s license was
supported by substantial evidence, so the appeals board’s finding to the contrary should
be annulled. We agree.
Both the department and the board are “constitutional agencies upon which limited
judicial powers have been conferred.” (Walker v. Munro (1960) 178 Cal.App.2d 67, 73;
see Cal. Const., art. XX, § 22 [describing department’s authority].) “‘The administration
of the Alcoholic Beverage Control Act . . . is initially vested in the department. Its
decisions, however, are subject to administrative review by the board and a final order of
the board is, in turn, subject to judicial review.’” (Caressa Camille, Inc. v. Alcoholic
Beverage Control Appeals Bd. (2002) 99 Cal.App.4th 1094, 1099.) The scope of the
review of the department’s decisions is the same in the appeals board and this court.
(Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd.
(Deleuze) (2002) 100 Cal.App.4th 1066, 1071.) By statute, the review “shall not extend
further than to determine, based on the whole record of the department as certified by the
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board, whether: [¶] (a) The department has proceeded without or in excess of its
jurisdiction. [¶] (b) The department has proceeded in the manner required by law. [¶] (c)
The decision of the department is supported by the findings. [¶] (d) The findings in the
department’s decision are supported by substantial evidence in the light of the whole
record. [¶] (e) There is relevant evidence which, in the exercise of reasonable diligence,
could not have been produced or which was improperly excluded at the hearing before
the department.” (§ 23090.2; see also ibid. [“Nothing in this article shall permit the court
to hold a trial de novo, to take evidence, or to exercise its independent judgment on the
evidence”].)
Arrowhead Elks has not argued that the evidence was insufficient to support the
ALJ’s finding that cannabis sales events were held at Arrowhead Elks’s premises on
August 15, 2018 and April 25, 2019. To the contrary, it has affirmatively conceded in
briefing that its “agents allowed the promotors to use the licensed premises and those
individuals used it to engage in unlawful activity.” Among other things, on the dates
above, police executed search warrants at the property, impounding substantial amounts
of cannabis, as well as gathering other evidence that left no doubt about the nature of the
events.
There is also no reasonable dispute that Arrowhead Elks knew that the cannabis
sales events were being held at its premises. In testimony at the hearing before the ALJ,
Arrowhead Elks’s “house chairman” testified that he, under the “guidance” of the
organization’s “exalted ruler,” was responsible for leasing out the organization’s
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premises for various events, including cannabis events organized by promotors. The
“exalted ruler” also conceded that he knew “cannabis events” were being held at
Arrowhead Elks’ lodge. He also testified that he personally ensured that during cannabis
events, including on August 15, 2018 and April 25, 2019, all alcohol was removed from
the lodge’s bar and put into a locked “alcohol closet,” to which he had the only key.
There was evidence that another Arrowhead Elks officer, its “leading knight,” hired a
security guard for the cannabis events and hired another person to put up and take down
tables for vendors. There was also evidence that Arrowhead Elks collected money
directly from cannabis vendors, both for space to sell their wares on the premises and for
“permit purposes.” The several officers’ knowledge of the events taking place on
Arrowhead Elks’ premises is imputed to the organization. (Yu v. Alcoholic Beverage
Control Appeals Bd. (1992) 3 Cal.App.4th 286, 295.)
Additionally, there is no question that the cannabis sales events that took place at
Arrowhead Elks’s premises were unlawful. Cannabis remains a controlled substance
under California law, despite the passage of Proposition 64, which legalized its
recreational use. (Health & Saf. Code, §§ 11007, 11054, subd. (d)(13).) The commercial
sale of cannabis is regulated under the Medicinal and Adult-Use Cannabis Regulation and
Safety Act (MAUCRSA) (§ 26000 et seq.). It is not possible to be licensed to sell
cannabis at a premises also licensed for the sale of alcohol. (Cal. Code Regs., tit. 16,
§ 5601, subd. (g) [“a temporary cannabis event license shall not be issued for a premises
that is licensed for the sale of alcohol or tobacco”]; see also id. § 5026, subds. (c)
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[premises licensed under MAUCRSA “shall not be in a location that requires persons to
pass through a business that sells alcohol . . . to access the licensed premises”] & (d)
[premises licensed under MAUCRSA “shall not be in a location that requires persons to
pass through the licensed premises to access a business that sells alcohol...]; Bus. & Prof.
Code, § 25621.5 [“A licensee [under the Alcoholic Beverage Control Act] shall not, at its
licensed premises, sell, offer, or provide cannabis or cannabis products”].) Although
Arrowhead Elks’s house chairman testified that the promoters showed him and the
leading knight their “license” for the events, he was either mistaken about the scope of
the permissions the promoters had obtained, or he was not telling the truth.
Relying on Laube v. Stroh (1992) 2 Cal.App.4th 364 (Laube), Arrowhead Elks
argues that the evidence is nevertheless insufficient to sustain the department’s ruling
because there is no evidence that Arrowhead Elks “kn[ew] that the licensed premises
were to be used in an unlawful manner.” It notes that there was no finding that its
members or corporate officers were present for the cannabis events. It also emphasizes
the house chairman’s testimony that “a license was presented” to him, and asserts that
whether commercial cannabis sales are unlawful “becomes complicated” in light of
MAUCRSA.
Arrowhead Elks’s arguments based on Laube fail for at least three reasons. First,
as discussed above, there is nothing complicated about whether temporary cannabis sales
events such as those at issue here could be licensed to take place at a location that is
already licensed to sell alcohol. The Alcoholic Beverage Control Act (§ 23000 et seq.),
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under which Arrowhead Elks’s liquor license was issued, states plainly that “[a] licensee
shall not, at its licensed premises, sell, offer, or provide cannabis or cannabis products.”
(§ 25621.5.) The MAUCRSA implementing regulations state equally plainly: “A
temporary cannabis event license shall not be issued for a premises that is licensed for the
sale of alcohol or tobacco.” (Cal. Code Regs., tit. 16, §§ 5601, subd. (g); see also id.,
§ 5026, subds. (c) & (d).) Arrowhead Elks, as the holder of a liquor license, is
responsible for familiarizing itself with the law relating to use of its licensed premises
and operating those premises in accordance with the law. (See, e.g., Givens v. Dept. of
Alcoholic Bev. Control (1959) 176 Cal.App.2d 529, 534 [“[A]n on-sale licensee has an
affirmative duty to maintain properly operated premises”]; see also 5501 Hollywood, Inc.
v. Department of Alcoholic Beverage Control (1957) 155 Cal.App.2d 748, 753
[“Although the licensee is not required to act at his peril, he must exercise the caution
which would be shown by a reasonable and prudent man in the same circumstances”].) A
reasonably prudent holder of a liquor license would either know, or would take the
trouble to learn, that under current law there is no such thing as a license that would
permit the temporary cannabis events, just as the licensee would know there is no such
thing as an identification card that would allow a minor to be served alcohol.
Second, Laube does not support Arrowhead Elks’s claim that it permits a licensee
to escape liability because it did not know an activity it allowed to take place on its
premises was unlawful. Laube is about ignorance of the facts, not of the law. In Laube,
discipline was imposed on licensees who did not know, and at least arguably had no
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reason to know, that several transactions for the sale of small amounts of illegal drugs
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had taken place on their premises. (Laube, supra, 2 Cal.App.4th at pp. 367-370.) The
Court of Appeal found it “defie[d] logic to charge someone with permitting conduct of
which they are not aware.” (Id. at p. 377.) Thus, it held as follows: “a licensee must
have knowledge, either actual or constructive, before he or she can be found to have
‘permitted’ unacceptable conduct on a licensed premises.” (Ibid.) The straightforward
interpretation of this holding, given the facts before the Laube court, is that a licensee
must have knowledge, either actual or constructive, of the unacceptable conduct.
Arguably, Laube has no application to a circumstance like that of the present case, where
there is no question that the licensee knew about the conduct at issue, and there is only a
dispute about whether the licensee knew the conduct was unlawful. Or, to put this
perspective in Laube’s terms, given that Arrowhead Elks had actual knowledge of the
conduct occurring on its premises, it also had at least constructive knowledge of the
unlawfulness of that conduct, and thus the unlawfulness of its own decision to permit
such conduct. (See People v. Noori (2006) 136 Cal.App.4th 964, 978, quoting Barlow v.
United States (1833) 32 U.S. 404, 411 [it is “‘a common maxim, familiar to all minds,
that ignorance of the law will not excuse any person, either civilly or criminally]”.)
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Laube involved two consolidated cases. (Laube, supra, 2 Cal.App.4th at p.
366.) In one, the transactions were for sale of small amounts of cocaine between a patron
and an undercover investigator; in the other, the transactions involved an off duty
employee of the licensee, who sold small amounts of methamphetamine and cocaine to
an undercover investigator. (Id. at pp. 368-370.)
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Third, even if we were to assume that Laube applies here, the case in fact supports
the department’s decision to revoke Arrowhead Elks’s license. The holding of Laube
works to the benefit of a licensee that had no reason to know (either actually or
constructively) about illegal conduct on its premises. But the case also reaffirms the
principles that (1) the licensee’s “general, affirmative duty to maintain a lawful
establishment” includes “the obligation to be diligent in anticipation of reasonably
possible unlawful activity,” and (2) that “[o]nce a licensee knows of a particular violation
of the law, that duty becomes specific and focuses on the elimination of the violation.”
(Laube, supra, 2 Cal.App.4th at p. 379.) “Failure to prevent the problem from recurring,
once the licensee knows of it, is to ‘permit’ by a failure to take preventive action.” (Ibid.;
see also § 24200.5, subd. (a) [“Successive sales, or negotiations for sales, over any
continuous period of time shall be deemed evidence of permission”].) Here, under any
view of the facts, Arrowhead Elks received notice of the illegality of the cannabis events
held on its property no later than when police executed a search warrant on August 15,
2018. Thus, at the very least as to the charges relating to the events of April 25, 2019,
when a second search warrant was executed, the evidence supports the conclusion that
Arrowhead Elks knew (either actually or constructively) not only of the cannabis sales
event, but its unlawful nature. Under Laube, Arrowhead Elks at a minimum permitted
the second event by failing to prevent it once it learned of the unlawfulness of the earlier
one.
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Arrowhead Elks further argues that the evidence is insufficient to sustain the
department’s decision because there was no evidence that “illegal drug sales or
possession occurred while [it] was operating its club license, or when its members or
corporate officers were present.” It points out that, as a “social club,” it “operates on a
temporary or intermittent basis and only when its members are present.” The idea here
is, essentially, since the alcohol was locked away and no club members were present
during the cannabis sales events, Arrowhead Elks was not using its license at the time, so
it should not be subject to discipline based on the activities of the nonmember promoters,
vendors, and customers. Both the department and the appeals board rejected this line of
argument, as do we. The prohibitions at issue are not triggered by whether the premises
were open for the sale of alcohol at the time, but by whether the premises are licensed for
the sale of alcohol, and whether Arrowhead Elks allowed those premises to be used in an
unlawful manner. (See Cal. Code Regs., tit. 16, §§ 5601, subd. (g), 5026, subds. (c) &
(d); § 25621.5; see also 55 Ops.Cal.Atty.Gen. 342 (1972) [“A licensed establishment . . .
does not lose its character as ‘public premises’” during hours when alcoholic beverages
are not allowed to be sold or consumed].) Arrowhead Elks cites no authority in support
of its view that the prohibitions are inoperative when alcohol is not actually for sale, as
there is no such authority.
We conclude that there was substantial evidence in support of the department’s
decision. At a minimum, even under the reading of Laube most favorable to Arrowhead
Elks, there is substantial evidence to find it permitted the cannabis sales event on April
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25, 2019, even though it knew (either actually or constructively) that the event was
unlawful. That is enough to justify the department’s decision to sustain the accusation at
least as to counts 2, 5 and 6, any one of which would support the revocation of
Arrowhead Elks’s liquor license. Indeed, revocation is mandatory where a retail licensee
“has knowingly permitted the illegal sale, or negotiations for the sales, of controlled
substances . . . upon his or her licensed premises.” (§ 24200.5, subd. (a).)
III. DISPOSITION
The decision of the Appeals Board is annulled, and the decision of the Department
to revoke Arrowhead Elks’s license is reinstated. The parties shall bear their own costs
of this writ proceeding.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
RAPHAEL
J.
We concur:
CODRINGTON
Acting P. J.
SLOUGH
J.
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Filed 10/29/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
DEPARTMENT OF ALCOHOLIC
BEVERAGE CONTROL,
Petitioner, E075738
v.
ALCOHOLIC BEVERAGE CONTROL (ABC Ct. No. AB9852)
APPEALS BOARD,
Respondent; ORDER CERTIFYING OPINION
FOR PUBLICATION
IBPOE ELKS OF THE WORLD
ARROWHEAD LODGE 896,
Real Party in Interest.
A request was made to this court pursuant to California Rules of Court, rule
8.1120(a) for publication of a nonpublished opinion heretofore filed in the above-entitled
matter on October 5, 2021, and it appearing that the opinion meets the standard for
publication as specified in California Rules of Court, rule 8.1105(c).
IT IS ORDERED that said opinion be certified for publication pursuant to
California Rules of Court, rule 8.1105(b). The opinion filed in this matter on
October 5, 2021, is certified for publication.
CERTIFIED FOR PUBLICATION
RAPHAEL
J.
We concur:
CODRINGTON
Acting P. J.
SLOUGH
J.
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