Tuesday, November 18th, 2014

Liquor License: A Right or a Privilege?

WISAM 1, Inc. v. Ill. Liquor Control Comm’n, 2014 IL 116173 (2014)

In this recent case, the Illinois Supreme Court affirmed the Appellate Court’s ruling that the decision of the deputy local liquor control commissioner of the City of Peoria (Local Commissioner) to revoke a liquor license did not violate due process rights.

A liquor store held a valid liquor license issued by the City of Peoria (the City). One of the store’s managers was found guilty on five counts of violating or conspiring to violate the Money Laundering Control Act of 1986.

Subsequently, the City charged a violation of section 3-28 of the Peoria Municipal Code (the Code) prohibiting any liquor licensee or its agent or employee from engaging in any activity or conduct in or about the licensed premises that is prohibited by federal law.

After a hearing, the Local Commissioner revoked the liquor store’s license. The liquor store raised three issues before the Illinois Supreme Court: (1) the Local Commissioner denied it due process; (2) the Local Commissioner’s findings were not supported by substantial evidence; and (3) the Local Commissioner’s decision to revoke its license was not supported by the record.

In support of the liquor store’s argument the Supreme Court stated that, “although a liquor license is generally regarded as a privilege, and not a property right under the Liquor Control Act, once issued, it becomes a property right in a functional sense for due process purposes because it is only revocable for cause.”

Yet, the Court held that a liquor license may be revoked where the licensee has violated any valid local ordinance as long as the violation is fairly related to liquor control, and it rejected the liquor store’s argument that the Local Commissioner denied it due process by not allowing it to relitigate the manger’s criminal conviction.

Additionally, the Court agreed with the liquor store that the manager’s conviction alone does not satisfy the necessary elements to support its liability for a violation of section 3-28 of the Code. Section 3-28 requires that the City prove (1) an agency relationship; (2) that the agent committed a violation of federal law; and (3) that the conduct occurred in or about the licensed premises. See Peoria Municipal Code § 3-28 (adopted Apr. 20, 1993). However, prior to any finding on its liability, the liquor store had already stipulated to the agency relationship, as it stipulated that the manager was convicted of the federal offenses as charged in the indictment, and it stipulated that the offenses for which the manager was convicted all related to the financial and business operations of the liquor store. Because of these stipulations, the Court held that the City had met the requirements of Section 3-28.

Lastly, the Court agreed with the liquor store that the City improperly sought to admit the entire transcript of proceedings from the federal trial, because it did not identify the purpose for which it sought to use the testimony, but it declined to decide whether the testimony was inadmissible hearsay because it found that there was sufficient evidence to support the administrative ruling.

Bottom Line: There are two main takeaways from the decision. First, once a liquor license is issued, it becomes a property right for due process purposes and becomes only revocable for cause. Keep in mind that this “property right” may be revocable for violation of any local ordinance. Secondly, be careful what your attorneys stipulate to, as the store’s stipulation may have changed the outcome of the case.


Jonathan M. Feinstein

Author: Jonathan M. Feinstein