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Local Government Authority to Regulate Liquor Licenses

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Lisa J. Hamameh
Foster Swift Municipal Law News
November 27, 2013

You may have heard that the Michigan Liquor Control Commission (“MLCC”) changed the rules regarding local government’s authority to regulate liquor licenses. Now that the dust has settled, what do those changes really mean?

Changes in Approval Process

Prior to July 1, 2012, local government approval was required before the MLCC would issue a new liquor license (a license which has not been previously issued by the MLCC), or approve a transfer of an existing liquor license (transfer of ownership, transfer of interest, or transfer of location). However, effective July 1, 2012, the MLCC changed that procedure by requiring local government approval only for a new on-premises liquor license. An on-premises liquor license allows for the sale of beer, wine, and spirits for consumption on the licensed premises. Therefore, local government approval is no longer required to transfer an existing on-premises liquor license, to issue a new off-premises liquor license, or to transfer an existing off-premises liquor license. An off-premises liquor license allows for the sale of beer, wine and spirits for consumption off the licensed premises. The MLCC has created a helpful chart summarizing the required approvals for every on-premises and off-premises liquor license and permit. The chart, which was last updated on Dec. 21, 2012, can be found here.

The MLCC will continue to consider the opinions of local residents, the local legislative body, and the local law enforcement agency in accordance with the Michigan Administrative Code, AC,

R 436.1105(2), which sets forth factors the MLCC shall consider in determining whether to approve an application for a liquor license or permit.

Entertainment Permits

Prior to Dec. 4, 2012 the MLCC required local government approval for all applications for dance permits, entertainment permits, topless activity permits and extended-hours permits, in addition to MLCC approval. MCL 436.1916(10).

However, on that date, a Michigan federal court struck down part of that law in a case entitled S.A Restaurants, Inc. v. Deloney, 909 F Supp 2d 881 (ED Mich 2012). That case held unconstitutional and unenforceable the law requiring local government and MLCC approval for various permits, including dance, entertainment, topless activity and extended-hours permits as a prior restraint on expressive activity.

Since that decision, the MLCC no longer requires local government approval for dance, entertainment, topless activity or extended hours permits.

Ordinances

The Michigan Administrative Code, AC, R 436.1003, requires a licensee to comply with all state and local building, plumbing, zoning, sanitation and health laws, rules, and ordinances as determined by the state and local law enforcement officials who have jurisdiction over the licensee.

Recently, the Michigan Court of Appeals in Maple BPA, Inc. v. Charter Township of Bloomfield affirmed the local government’s authority to enforce local regulations. This case involved Maple BPA’s request for a liquor license at its convenience store and gas station in Bloomfield Township. The request met all of the MLCC requirements and would have been approved. However, the request did not meet all of the requirements of the Bloomfield Township Zoning Ordinance, which had regulations that differed from the regulations of the MLCC. After Bloomfield Township objected to the issuance of the liquor license, the MLCC denied the application because it did not comply with the Bloomfield Township Zoning Ordinance. Maple BPA appealed the MLCC’s decision, and the Court of Appeals upheld the Ordinance and the decision of the MLCC.

This decision confirms local government’s ability to regulate liquor licenses through properly drafted zoning ordinances.

Conclusion

Despite the scuttlebutt, the MLCC has not completely stripped local government of its authority to regulate liquor licenses. The MLCC still requires local government approval prior to issuing new on-premises liquor licenses.It continues to consider the opinions of the local residents, the local legislative body, and the local law enforcement agency in its decision-making process. Further, upon approval of a liquor license, it includes the following language in its Order:

Under Administrative Rule 436.1003, the licensee shall comply with all state and local building, plumbing, zoning, sanitation and health laws, rules and ordinances as determined by the state and local law enforcement officials who have jurisdiction over the licensee. Approval of this license by the Michigan Liquor Control Commission does not waive any of these requirements. The licensee must obtain other required state and local licenses, permits, and approvals before opening the business for operation. The licensee’s failure to comply with all laws and rules may result in the revocation of the approval contained in this order.

Now what?

The MLCC and the courts have confirmed local government’s ability to adopt and enforce ordinances that regulate liquor licenses, if those ordinances are properly drafted and not preempted by state or federal law.

To restore its ability to properly regulate liquor licenses, local governments, with the assistance of legal counsel, should review and update their liquor licensing ordinances to ensure they are properly drafted, in compliance with all relevant laws, and require approval of all new and transferred licenses and permits. With the assistance of legal counsel, local governments should also review and update their zoning ordinances to ensure the desired regulations are current and enforceable.

Do you have any questions regarding liquor licenses? Contact Lisa Hamameh at lhamameh@fosterswift.com or 248.539.9906.