BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:   April 20, 2016


                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION


                                  Adam Gray, Chair


          AB 2082  
          (Campos) - As Amended March 17, 2016


          SUBJECT:  Alcoholic beverages:  licenses: emergency orders.


          SUMMARY:  Authorizes the Director of the Alcoholic Beverage  
          Control (ABC) to temporarily suspend, limit, condition, or take  
          other action upon, any license by emergency order prior to any  
          hearing when, in the opinion of the department, the action is  
          urgent and necessary to protect against an immediate threat to  
          health or safety. The bill would, among other things related to  
          the issuance and application of an emergency order, a licensee  
          or person or entity against whom the emergency order has been  
          issued may petition for relief from the order by written  
          argument, as specified.  Specifically, this bill:



          1)  States that the Director may temporarily suspend, limit,  
          condition, or take other action upon, any license issued, as  
          specified, by emergency order prior to any hearing when, in the  
          opinion of ABC, the action is urgent and necessary to protect  
          against an immediate threat to health or safety. 


          2)  Maintains the emergency order may suspend, limit, condition,  
          or take other action in relation to the license of one or more  
          persons in an operation without affecting other individual  








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          licensees. 


          3)  Provides the emergency order shall set forth the grounds  
          upon which it is based, including a statement of facts  
          constituting the alleged emergency necessitating the action. 


          4)  States the emergency order shall be effective immediately  
          upon issuance and service upon the licensee or any agent of the  
          licensee.  ABC shall serve the licensee with the emergency  
          order, a copy of available discovery, and other relevant  
          evidence in possession of the department, including, but not  
          limited to, affidavits, declarations, and any other evidence  
          upon which the ABC relied in issuing the emergency order.  ABC  
          shall notify the licensee of the licensee's right to petition  
          for relief. 


          5)  Provides that once the emergency order has been served, a  
          licensee, person, or entity against whom the emergency order has  
          been issued may petition for relief from the order by written  
          argument. 


          6)  States if a petition for relief is filed, using a  
          preponderance of the evidence standard; the director shall  
          modify or vacate the emergency order if either: 


            (a) There is a reasonable probability that the licensee will  
          prevail in the accusation. 


            (b) The likelihood of immediate threat to the health or safety  
          in not sustaining the emergency order does not outweigh the  
          likelihood of injury to the licensee in sustaining the emergency  
            order. 









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            (d) ABC shall respond, in writing, to a petition for relief,  
          either by sustaining, modifying, or vacating the emergency  
          order, within three business days of receipt of the petition.   
          If ABC does not sustain or modify the emergency order within  
          three business days of receipt of the petition, the emergency  
          order shall be dissolved.  


            e) The emergency order shall remain effective until further  
          order of the ABC or disposition at an accusation proceeding. 


            (f) ABC shall file an accusation against the licensee with any  
          additional, available pertinent discovery that was not provided  
          to the licensee at the time the emergency order was issued  
          within five business days after the issuance of an emergency  
          order.  


            (g) The licensee or person or entity against whom the  
          emergency order has been issued and served is entitled to a  
          hearing. If a hearing is requested, it shall commence within 10  
          business  days of the received date of the Notice of Defense. 


            (h) A licensee is not precluded from proceeding directly to a  
          full evidentiary hearing on an accusation without first  
          petitioning ABC for relief. 


            (i) At the accusation hearing, the administrative law judge  
          shall issue a verbal decision that sustains or vacates the  
          emergency order.  A proposed decision by an administrative judge  
          on   the accusation shall be prepared for the director's review  
          within 10 business days after the submission of the hearing. 

          EXISTING LAW:  









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          1)  States ABC has the exclusive power, in accordance with laws  
          enacted, to license and regulate the manufacture, importation  
          and sale of alcoholic beverages in this State. It also has the  
          power for good cause to deny, suspend or revoke any specific  
          alcoholic beverage license. (Section 22 of Article XX,  
          California Constitution)  


          2)  Provides ABC is headed by a Director, whose function is to  
          supervise the manufacture, distribution and sale of alcoholic  
          beverages in such a number as to fulfill the public policy and  
          legislative purpose of the ABC Act. 


          3)  Authorizes ABC to investigate potential violations of the  
          ABC Act.  Authorizes the Director of the department to bring an  
          action to enjoin a violation or the threatened violation of the  
          act, and provides for a hearing process held on a protest,  
          accusation, or petition for a license. 


          4)  Provides that the ABC may place reasonable conditions upon  
          any licensee in certain situations, including, but not limited  
          to, the following: where grounds exist for the denial of an  
          application for a license or where a protest against the  
          issuance of a license has been filed; where findings are made by  
          the ABC which would justify suspension or revocation of the  
          license, and imposition of the conditions is reasonably related  
          to those findings; where findings are made by the ABC that the  
          licensee has failed to correct objectionable conditions within a  
          reasonable period of time.  Provides further that the ABC may  
          suspend or revoke a license for failure to take reasonable steps  
          to correct objectionable conditions, as described.  (B & P Code  
          Sections 23800, 24200, and 24200.1.) 


          5)  Authorizes ABC, in its discretion, to suspend or revoke any  








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          license to sell alcoholic beverages if it shall determine for  
          good cause that the continuance of such license would be  
          contrary to the public welfare or morals.  ABC may use a range  
          of progressive and proportional penalties. This range will  
          typically extend from Letters of Warning to Revocation.  Higher  
          or lower penalties may be recommended based on the facts of  
          individual cases where generally supported by aggravating or  
          mitigating circumstances. 


          6)  Provides if an accusation is filed against a licensee, the  
          licensee is entitled to have a public hearing on the accusation  
          to present a defense against the charges made. The hearing will  
          be presided over by an Administrative Law Judge of the  
          Administrative Hearing Office.  At the hearing, the licensee is  
          entitled to the issuance of subpoenas to compel the attendance  
          of witnesses and materials and may be represented by counsel  
          (but not at public expense), may present relevant evidence and  
          may cross-examine all witnesses.  The Administrative Law Judge  
          makes a proposed decision, which is filed with the ABC Director.  
          (Government Code Sections 11500-11528) 


          7)  Provides generally that the ABC shall deny an application  
          for a license if the issuance or transfer of the license would  
          tend to create a law enforcement problem or add to undue  
          concentration of licenses, unless issuing the license would  
          serve a public convenience or necessity.  Defines "undue  
          concentration" in terms of a specified ratio of licensed  
          premises-to-population within a census tract or a  
          crime-reporting district in which the reported crime rate  
          exceeds the crime rate of the entire local law enforcement  
          jurisdiction by more than 20%.  (Business & P Code Sections  
          23958 and 23958.4.)  


          8)  Defines an "on-sale" license as authorizing the sale of all  
          types of alcoholic beverages: namely, beer, wine and distilled  
          spirits, for consumption on the premises (such as at a  








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          restaurant or bar).  An "off-sale" license authorizes the sale  
          of all types of alcoholic beverages for consumption off the  
          premises in original, sealed containers.   


          9)  States the California Gambling Control Commission (CGCC) may  
          issue any emergency orders against an owner licensee or any  
          person involved in a transaction requiring prior approval that  
          the division deems reasonably necessary for the immediate  
          preservation of the public peace, health, safety, or general  
          welfare, as specified.

          FISCAL EFFECT:  Unknown


          COMMENTS:  



           Purpose of the bill  :  The author's office notes this bill would  
          provide the Director of ABC with the authority to suspend a  
          business' alcohol license in the case of an emergency that  
          threatens the health and safety of the public.  To do so, the  
          Director must produce an emergency order with a statement of  
          facts containing the alleged emergency, any relevant evidence  
          upon which the department relied in issuing the emergency order,  
          and a notice of the licensee's right to petition for relief.  


          The author states this bill also allows the licensee to petition  
          for relief from the order by written argument, to which the  
          department must respond within three business days with a  
          document sustaining, modifying, or vacating the emergency order.  
           If the licensee or entity against who the emergency order has  
          been issued requests a hearing, it will be granted within 10  
          business days of the received date of the Notice of Defense. 


          The author points out "in San Jose, we have seen many cases of  








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          violent crime and murder in relation to bars that double as  
          "bikini bars" or strip clubs.  The illegal operations in these  
          bars may go unpunished for weeks or even months, while the  
          police department and local ABC officials build a case against  
          them.  Even under urgent situations, like repeated violent  
          crimes happening, local officials have their hands tied and must  
          let the businesses continue operation.  Even worse, many times  
          these establishments are run by the same group of business  
          partners/family members who merely transfer the alcohol license  
          amongst each other when the business is finally shut down.  The  
          author notes that the San Jose Police Department has had success  
          in dealing with and shutting down these establishments, but  
          their authority is still lacking."  


          The author believes this bill will be a tool that can be used,  
          with caution, when residents face dangerous circumstances  
          because of problem businesses.  The bill was drafted in close  
          collaboration with local and statewide ABC officials, as well as  
          San Jose Police Department officials.  Currently, the San Jose  
          Chief of Police can immediately suspend an entertainment license  
          of a business in the case of an emergency, but this practice is  
          only applicable within the city's "entertainment zone." Law  
          enforcement and ABC have their hands tied when the same  
          emergency situations happen anywhere outside that zone.  This  
          bill also takes into consideration the current abilities of the  
          Department of Consumer Affairs, the Department of Public Health  
          and the Bureau of Gambling Control (see #9 in Existing Law) as  
          examples of how to craft the ability to suspend licenses in  
          cases of emergencies, while ensuring that licensees have  
          necessary protections and the right to due process. 


          Background:


           State v. Local Control of Alcohol Policy  :  Much to local  
          government's frustration, both the state Constitution and the  
          ABC Act generally prohibit local governments from regulating the  








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          sale of alcoholic beverages within their jurisdictions.   
          Exacerbating this sentiment is the perception that ABC is  
          under-funded and understaffed with less than 200 enforcement  
          agents available to police the almost 70,000 retail licenses in  
          the state.  Further compounding this situation is the inability  
          of ABC to receive any funding increases.  The ABC is a special  
          fund department that receives funding from fees imposed upon  
          alcoholic beverage licensees. 


          Over the years, local governments have often petitioned the  
          Legislature for greater authority to directly regulate  
          establishments that sell alcohol (e.g., restricting the hours of  
          operation of problem premises, or limiting the sale of certain  
          products such as fortified wines or high alcohol content malt  
          beverages).  Much of this activity has been centered on local  
          government's use of zoning laws and conditional use permits that  
          place operating conditions on new businesses that sell alcohol.  
          While current law prohibits the ABC from issuing a new license  
          in an area not locally zoned for that type of business activity,  
          those establishments in existence prior to any local zoning  
          action are "grandfathered" and therefore beyond the reach of the  
          local government - a source of contention for local governments.  



          Historically, the alcohol industry and retailers have opposed  
          ceding to local government any measure of the state's exclusive  
          authority to regulate alcohol.  The industry has advocated that  
          matters relating to the regulation of alcohol should be  
          determined at the state level, as opposed to an assortment of  
          local regulations, which may vary from local jurisdiction to  
          local jurisdiction.  


           Disorderly house law  :  A disorderly house is a licensed premises  
          that disturbs the neighborhood or is maintained for purposes  
          that are injurious to the public morals, health, convenience or  
          safety.  For example, a licensed outlet that (a) disturbs the  








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          neighborhood with noise, loud music, loitering, littering,  
          vandalism, urination or defecation by patrons, graffiti, etc.;  
          or (b) has many crimes ongoing inside, such as drunks, fights,  
          assaults, prostitution, narcotics, etc. The licensed premise  
          includes the parking lot.  Any licensee, or employee of any  
          licensee, who keeps or permits such a disorderly house is guilty  
          of a misdemeanor, and the license is subject to disciplinary  
          action. (B & P Sections 25601 and 24200) 


           Penalty for selling an alcoholic beverage to a minor or  
          permitting a minor to consume an alcoholic beverage in an  
          on-sale premises :  The law requires the suspension of a license  
          for a second or subsequent violation within a 36-month period.   
          The law also authorizes the revocation of a license for a third  
          violation within a 36-month period.  ABC may revoke a license  
          prior to a third violation when the circumstances warrant it. (B  
          & P Section 25658.1)  


          In support  :  Writing in support, Alcohol Justice (formerly Marin  
          Institute) states, "The state already suffers more than $38  
          billion dollars in alcohol-related harm and over 10,000  
          alcohol-related deaths annually.  This bill will help safeguard  
          public health and safety and reduce the number of problem  
          alcohol retailers in California.  Existing law provides ABC with  
          exclusive authority to revoke the license of problem retailers,  
          such as those that make underage sales, disturb the neighbors,  
          or engage in other illegal behavior.  This fact coupled with the  
          lack of resources devoted to ABC enforcement often allows  
          problem retailers to continue operation long after the community  
          raises concerns.  As a result, it is that much more important  
          that when a license is revoked that ABC ensures problems do not  
          continue at the location when a new license is issued."  


          Also writing in support, The California Council on Alcohol  
          Problems states, "quite frankly, we were a little shocked to  
          learn that the ABC Director currently lacks the authority to do  








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          what this reasonable bill authorizes, which is to be able to  
          suspend the alcohol license of a business if the department  
          deems that there is an urgent or immediate threat to the health  
          and safety of the public. The bill assures due process rights to  
          the licensee.  We are aware of many unfortunate examples of ABC  
          licenses being given to businesses that claim to be eating  
          places or bars, but morph -- often in the late evening hours  
          into commercial enterprises that mix alcohol (including  
          after-hour drinking) with prohibited business activities.  AB  
          2082 would give ABC a tool to assist local law enforcement in  
          their efforts to protect the citizens of the communities  
          negatively impacted by these "morphing' business ventures." 


           Prior legislation  : AB 2151 (D. Jones), 2007-2008 Session, Vetoed  
          by Governor.  The bill added provisions to the ABC Act for the  
          purpose of assisting local governments in their effort to  
          control the issuance and transfer of liquor licenses. 


          AB 2893 (Hancock), Chapter 253, Statutes of 2008.  Grants ABC  
          the authority to impose restrictions on retail license transfers  
          in instances where the license transferor has been cited for  
          multiple violations of the ABC Act during his/her ownership of  
          the license.   


          AB 960 (Hancock), 2007-08 Session.  Provides local governments  
          more control over the issuance of liquor licenses through the  
          use of zoning and amortization.  (Died in Assembly Governmental  
          Organization Committee) 


          SB 148 (Scott), Chapter 625, Statutes of 2006.  Among other  
          things, provided additional bases for the suspension or  
          revocation of an alcoholic beverage license, when a licensee  
          fails to take reasonable steps to correct objectionable  
          conditions on the licensed premises or any public sidewalk  
          abutting a licensed premise, as provided, after specified notice  








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          from the district attorney, city attorney, or a county counsel. 


          AB 624 (Oropeza), Chapter 931, Statutes of 2001.  Permitted ABC  
          to take into account neighboring crime statistics in the area of  
          the site of the establishment when transferring an alcohol  
          license.  Furthermore, extended the time local entities have to  
          respond to the notice of a new or transferred license and  
          require the notification of local property owners around the  
          site. 


          AB 1092 (Lowenthal), Chapter 499, Statutes of 1999  Authorized  
          ABC to place reasonable restrictions upon retail licenses or any  
          licensee in the exercise of retail privileges if ABC adopts  
          conditions required by a local governing body. 


          AB 2897 (Caldera), Chapter 630, Statutes of 1994.  Among other  
          things, granted ABC the authority to deny an application for a  
          license if issuance would tend to create a law enforcement  
          problem, or would result in or add to an undue concentration of  
          licenses.  In addition, provided that a license may be issued if  
          the local governing body of the area in which the applicant  
          premises are located determines that public convenience or  
          necessity would be served by the issuance. 


          AB 463 (Tucker), Chapter 627, Statutes of 1994.  Authorized ABC  
          to suspend or impose new conditions on a licensee who has failed  
          to correct "reasonable conditions" as noticed by a local  
          official. 


          AB 2742 (Lee), Chapter 629, Statutes of 1994.  Made a series of  
          changes relating to ABC licensing and standards, including (1)  
          establishing general operating standards with respect to the  
          licensed premise of retailers of alcoholic beverages, (2)  
          providing that the current 30-day review process shall be  








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          extended by 20 days to give the local jurisdictions more  
          authority and opportunity for related input, (3) requiring ABC  
          to notify the entity or official in writing as to why they  
          recommend that a license be issued after a protest has been made  
          by an entity or official, as specified, and (4) providing  
          additional regulation of a licensee, as specified. 

          REGISTERED SUPPORT / OPPOSITION:




          Support


          Alcohol Justice


          California Council on Alcohol Problems




          Opposition


          None on file




          Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531















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