NY: State Liquor Laws Preempt Local Municipalities from Restricting Operating Hours
JDSupra
Written by Farrell Fritz, P.C.
June, 19, 2017
The State liquor law preempts local municipalities from restricting hours of operation for businesses selling alcoholic beverages for on-premises consumption. Accordingly, local municipalities should use caution when imposing conditions upon establishments regulated by the State Liquor Authority and would be wise to consider alternative ways to manage late hours accompanied by public imbibing.
In February 2017, the United States District Court for the Western District of New York issued a decision in Obsession Sports Bar & Grill, Inc. v. City of Rochester (“Obsession“) involving State law preemption of local laws limiting hours of operation for certain businesses such as bars and restaurants. The federal Obsession case involved section 1983s claims following successful litigation in State Court. Although the federal Obsession case addressed constitutional claims only, the decision casted stark attention upon the legal precedent set forth in the underlying State Court case wherein the Fourth Department upheld the trial court’s holding that the State’s liquor laws preempted the City of Rochester (“City“) from restricting Obsession’s hours of operation. Id.
In August 2011, Obsession obtained a liquor license from the State Liquor Authority authorizing the retail sale of alcoholic beverages for on-premises consumption of alcoholic beverages at its bar and grill. Under the State Alcoholic Beverages Control Law (“ABC Law“), as amended by Monroe County local law, persons holding liquor licenses are permitted to sell alcohol, on-premises, Monday through Saturday from 8:00 a.m. until 2:00 a.m. and Sunday from 10:00 a.m. to 2:00 a.m. In addition, these establishments may remain open an additional one-half hour to permit customers to consume their beverages, i.e. until 2:30 a.m.
Obsession’s business was located in the City’s C-1 zoning district, which permits small-scale commercial uses and restricts evening hours of operation for restaurants and bars to 11:00 p.m. Although the City partially granted Obsession’s variance by permitting the establishment to remain open until 12:00 a.m. Monday through Thursday and until 2:00 a.m. on Friday and Saturday, the City’s local laws still forced Obsession to close several hours earlier than required by the ABC Law, as well as earlier than similar businesses located in neighboring zoning districts.
In November 2012, Obsession commenced a state court Article 78 proceeding against the City alleging that the ABC Law preempted the local ordinance vis-à-vis hours of operations. The City argued that the State law did not preempt the ordinance because the ordinance did not directly address the sale or consumption of alcoholic beverages. The trial court found in favor of Obsession holding that the City’s local ordinance was an impermissible exercise of municipal zoning power and null and void in the face of the ABC Law’s conflicting and preemptive provisions. The Fourth Department unanimously affirmed and in 2014, leave to appeal to the Court of Appeals was denied.
Although Obsession may have prevailed in the State court with respect to the pre-emption question, the federal court ultimately concluded that the City did not violate Obsession’s constitutional rights because Obsession did not show that the City’s actions were arbitrary, conscience-shocking or oppressive in the constitutional sense. Despite this holding, the Court did note that the City may have been negligent. The Court opined that municipalities could and should consider alternative means to address the potential adverse effects of bars and restaurants that operate in the later evening hours. To placate opposition to development, redevelopment and applications of the like, municipalities should consider alternative regulations, including but not limited to outdoor seating restrictions, light pollution, kitchen hour limitations and parking limits.