BILL ANALYSIS AB 1798 Page 1 Date of Hearing: April 21, 2010 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Joe Coto, Chair AB 1798 (Evans) - As Amended: April 5, 2010 SUBJECT : Alcoholic beverages: Alcoholic Beverage Control Appeals Board: tied-house restrictions. SUMMARY : Makes a minor clarifying change, as well as code maintenance changes, to existing provisions of the Alcoholic Beverage Control Act (Act) in order to reduce paperwork requirements of the Department of Alcoholic Beverage Control (ABC). In addition, increases from 60 to 75 days the period upon which the Appeals Board must enter its order after the filing of an appeal. Specifically, this bill : 1)Retains the requirement that the winegrower, or the officer, director, or agent of the winegrower meet the specified conditions regarding the sale or furnishing of wine under the circumstances described above, but would eliminate the requirement that statements describing these conditions be made pursuant to an undertaking approved by the department. 2)Requires the Alcoholic Beverage Control Appeals Board (Appeals Board) to enter its order within 75 days after the filing of an appeal. EXISTING LAW : 1)Existing provisions of the Act, known as "tied-house" restrictions, generally prohibit a winegrower from having an ownership interest in an on-sale alcoholic beverage license, with limited exceptions. Among other exemptions, existing law exempts from the tied-house restrictions any licensed winegrower who meets specified conditions, including that the winegrower, or his or her officer, director, or agent, enters into an undertaking, approved by the Department of Alcoholic Beverage Control, that makes specified statements regarding the sale or furnishing of wine by the winegrower, or any officer, director, or agent of the winegrower. 2)Establishes in state government an Appeals Board, of which the members are appointed and serve as provided in the Constitution, and receive an annual salary. AB 1798 Page 2 3)Provides that an appeal must be filed at the Appeals Board office within 40 days from the date of the ABC decision. However, if ABC's decision states it is to be "effective immediately," an appeal must be filed within 10 days after the date of ABC's decision. Documents not filed within the time limits are untimely and cannot be accepted by the Appeals Board. 4)Specifies that no decision of the ABC shall become effective during the period in which an appeal may be filed and the filing of an appeal shall stay the effect of the decision until such time as a final order is made by the Appeals Board. 5)Provides that the review by the Appeals Board of a decision by ABC shall be limited to specified questions. 6)Provides that the Appeals Board is required to enter its order within 60 days after the filing of an appeal. FISCAL EFFECT : Unknown. COMMENTS : Purpose of this bill: According to the author, this bill attempts to address a growing concern by the alcohol industry, law enforcement, and citizens of California relating to the time frame upon which an appeal is rendered by the Appeals Board. The Appeals Board has been faced with a substantial increase in caseload, which has resulted in a backlog of appeals. ABC's enforcement activities have increased in response to legislative mandates to curtail underage drinking, which has lead to more rulings and, in turn, the number of appeals to the Appeals Board has increased. The author is concerned with the length of time it is taking to process the appeals. In many cases, it has been reported that it is taking up to 12 to 18 months before the Appeals Board renders a final order. The author is concerned with the current appeals time frame because while the case is being reviewed the "bad apples" continue to operate which troubles law enforcement and residents within the community. The author believes that it is essential that the Appeals Board be held to better accountability relating to meeting specific timelines specified in current law. The author further adds that with the increase in industry AB 1798 Page 3 license fees (Wesson and Oropeza, Chapter 488, Statues of 2001) there should be sufficient funds within the Appeals Board budget to maintain the staffing levels necessary to expedite appeals in a more diligent manner. This measure is necessary to ensure that the principles of the appeals process within the ABC Act are preserved and upheld as they relate to a licensee's right of due process. The bill also makes a change to current law by retaining the requirement that the winegrower meet specified conditions regarding the sale or furnishing of wine under the circumstances as described but would eliminate the requirement that statements describing these conditions be made pursuant to an "undertaking approved by ABC." Additionally, this measure makes other minor technical changes to this section of law. In summary, these changes are intended to streamline, simplify and provide for a more conforming tied-house exception without materially impacting its effect. Background : The Appeals Board provides quasi-judicial administrative review of decisions of the ABC. The questions that may be considered by the Appeals Board are limited by the California Constitution and by statute. The Appeals Board is made up of three members appointed by the Governor. Funding for the Appeals Board comes entirely from a surcharge on all ABC license renewals. All Appeals Board activities, staff functions, and budget expenditures are directed toward the review and finalization of appeals. The Appeals Board conducts 10 hearings throughout the year in both Northern and Southern California. The Appeals Board determines appeals solely on the record of ABC and any briefs filed by the parties. No additional evidence may be received by the Appeals Board. However, the parties to appeals may present oral argument during the Appeals Board's monthly hearings. The Appeals Board issues written decisions with orders affirming, reversing, and/or remanding ABC decisions. Judicial review of the Board's order may be obtained by filing a petition for writ of review with the California Supreme Court or the Court of Appeal. The timely issuance of orders by the Appeals Board is a critical part of the state's regulation of the alcoholic beverage AB 1798 Page 4 industry and enforcement of the ABC Act. When an appeal is filed, any action by the ABC on its decision is stayed until the appeal is concluded by a final order of the Appeals Board. During the appeal period, a license that is subject to the appeal may not be suspended or revoked; in the case of an application for a license, the ABC may not issue or transfer the license while the process is in effect. The number of new appeals filed with the Appeals Board on average is around 200 cases per year. A majority of the cases reviewed by the Appeals Board relate to alcohol sales to minors. According to the Appeals Board, approximately 3 % of the sales to minor cases or approximately 17% of the overall cases are reversed or partially reversed. Prior legislation : AB 1245 (Torrico) of 2007-2008 Regular Session. Would have required the Alcoholic Beverage Control Appeals Board to enter its order within 75 days after the filing of an appeal. (Passed off the Assembly floor 75-0 but was a gut and amend in the Senate) SB 359 (Rainey) Chapter 529, Statutes of 1997. Modified an existing tied-house exception that permits a licensed winegrower to hold an ownership interest in an on-sale license, if certain conditions are met, to include a winegrower who has a wholesale license to sell wine only. SB 1376 (Thompson) Chapter 318, Statutes of 1994. Among other things, created a tied-house exception applicable to winegrowers owning restaurants or bed and breakfast inns, provided certain conditions are met. REGISTERED SUPPORT / OPPOSITION : Support None on file Opposition None on file Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531