Matter of Ban the Bar Coalition v New York State Liq. Auth.

[*1] Matter of Ban the Bar Coalition v New York State Liq. Auth. 2006 NY Slip Op 51544(U) Decided on August 9, 2006 Supreme Court, New York County Bransten, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 9, 2006
Supreme Court, New York County

In the Matter of the Application of Ban the Bar Coalition, DANIEL HARRIS, JEANMARIE DOLAN, MARY JANE McGONEGAL, ALICE BECK-ODETTE, VIVIAN GORDON, CARL C. GORDON, EILEEN STEN, ALICE TAHAPARY, JOSEPHINE O'LEARY, SUSAN STOWENS, DORIS H. STOWENS, GLADYS DUBOVSKY, NORMAN MILLER, PAMELA STERN, LESLIE JONES, NEAL T. JONES, WINNIE BELL, LISA COWLES, NORIKO HIGURASHI, PENNY KNAPP, FREDERICK KNAPP, VICKI A. UNGAR, MICHELLE STARR, JUDITH BINNEY, OZDINCH MUSTAFA, LILLIAN S. MARKS, INA LEE SELDEN, MERRIE S. FRANKEL, PATRICIA CHAN, CAROLE PARNES, RICHARD KAUFMAN, DOROTHY S. GYGER, TERRY L. GYGER, DR. VERA MEHTA, PERRY LANGER, LINDA COMPAGNONE, MICHAEL COMSTOCK, MICHAEL SALEM, ELAYNE ADLER, ROBERTA ADLER, CAROLYN A. ZONINO, DOROTHY A. RASA, ROBERT BRODSKY, PHYLLIS BRODSKY, MADELYN TEDESCO, VIRGINIA A. WOODS, MARY CARTER, SIDNEY S. GOLDSTEIN, SUSAN B. GOLDSTEIN, Petitioners,

against

The New York State Liquor Authority, DANIEL BOYLE, in his capacity as the Chairman of the New York State Liquor Authority; and LAWRENCE J. GEDDA, as a Commissioner of the New York State Liquor Authority; and OHMSAYIN, INC., d/b/a EMBASSY, Respondents.



104347/06

Eileen Bransten, J.

In this CPLR Article 78 proceeding, petitioners Ban the Bar Coalition, Daniel Harris ("Mr. Harris"), Jeanmarie Dolan ("Ms. Dolan"), Mary Jane McGonegal ("Ms. McGonegal"), Alice Beck-Odette, Vivian Gordon ("Ms. Gordon"), Carl C. Gordon, Eileen Sten ("Ms. Sten"), Alice Tahapary ("Ms. Tahapary"), Josephine O'Leary, Susan Stowens, Doris H. Stowens, Gladys Dubovsky, Norman Miller, Pamela Stern, Leslie Jones, Neal T. Jones, Winnie Bell, Lisa Cowles, Noriko Higurashi, Penny Knapp, Frederick Knapp, Vicki A. Ungar, Michelle Starr, Judith Binney ("Ms. Binney"), Ozdinch Mustafa, Lillian S. Marks, Ina Lee Selden, Merrie S. Frankel, Patricia Chan ("Ms. Chan"), Carole Parness, Richard Kaufman, Dorothy S. Gyger, Terry L. Gyger, Dr. Vera Mehta ("Dr. Mehta"), Perry Langer, Linda Compagnone, Michael Comstock, Michael Salem, Elayne Adler, Roberta Adler, Carolyn A. Zonino, Dorothy A. Rasa, Robert Brodsky, Phyllis Brodsky, Madelyn Tedesco ("Ms. Tedesco"), Virginia A. Woods, Mary Carter, Sidney S. Goldstein and Susan B. Goldstein, (hereinafter "Petitioners") seek an Order and Judgment setting aside the determination of respondents the New York State Liquor Authority ("the Liquor Authority"), Chairman of the New York State Liquor Authority Daniel Boyle, Commissioner of the New York State Liquor Authority Lawrence J. Gedda and Ohmsayin, Inc., d/b/a Embassy ("Embassy"). Petitioners also move for costs pursuant to CPLR 8601.

Background

Embassy is a proposed restaurant to be located at 862 Second Avenue, New York, New York. Petition ("Pet."), at ¶ 2. On December 7, 2005, the Liquor Authority the executive body created by the New York State Legislature to issue and revoke liquor licenses under the Alcoholic Beverage Control Law ("ABCL") granted Embassy a liquor license. Pet., at ¶ 39. In this CPLR Article 78 petition, Petitioners residents of the Turtle Bay Community who live within 500 feet of Embassy challenge the Liquor Authority's determination. Pet., at ¶ 1.

On October 25, 2005, Embassy applied to the Liquor Authority for an on-premises liquor consumption license. Respondents' Answer ("Answer"), Ex. 6, at 1. Because Embassy is to be located in New York City, the Liquor Authority was required to notify the local community board, Community Board Six ("the Community Board"). ABCL § 64(2-a). Upon review of the application, the Community Board noted that there were already 12 licensed premises and several residential buildings within 500 feet of Embassy. Pet., Ex. B, at 3. Based on the presence of a multitude of licensed establishments in the area, the Community Board scheduled a meeting with Embassy's owners to discuss the proposed license.

Community Board Meetings

On January 6, 2005, Embassy's owner Jonathan Hoo ("Mr. Hoo") and his attorney Michael Hartofelis appeared at a Community Board meeting to explain their proposal. Pet., Ex. C, at 3. In particular, Mr. Hoo stated that Embassy would be open from 11:00 a.m. until 4:00 in the morning, seven days a week, and would feature DJ-played music after 11:00 at [*2]night. Pet., at ¶ 18. Additionally, Mr. Hoo projected that Embassy would have several high-definition big-screen televisions, open rooftop seating, and two security persons at the entrance. Id.

In response to Embassy's proposal, 35 residents living within 500 feet of the site objected, arguing that the restaurant would present security and noise concerns. Pet., Ex. C, at 4. The Community Board then deferred consideration of the license for one month to give Embassy a chance to address residents' complaints and provide more information on the music and the rooftop area. Id.

On February 3, 2005, a second Community Board meeting was held. Pet., Ex. D, at 10. At this appearance, Mr. Hoo stated that Embassy would be "a restaurant styled after Cafeteria," and that he expected patrons to stay even after the kitchen closed. Id. Mr. Hoo also specified that the rooftop seating area would accommodate 100 people. Id. Thereafter, on February 4, 2005, 74 residents of 300 East 46th Street signed a petition opposing Embassy's liquor license application. Pet., Ex. D, at 10. Forty-six residents of 240 East 47th Street and 48 residents of 333 East 46th Street signed additional petitions opposing the application. Pet., Ex. C, at 3; Pet., Ex. D, at 12-16. Moreover, nine residents of 330 East 46th Street signed a fourth petition and the Board of Directors of Turtle Bay Towers wrote a letter opposing Embassy's liquor license application. Pet., Ex. C, at 8-9; Pet., Ex. D, at 11.

Several public figures opposed Embassy's liquor license application as well. For instance, on February 21, 2005 New York State Senator Liz Kreuger ("Senator Kreuger") wrote a letter to the Liquor Authority urging it to deny the application. Pet., Ex. D, at 1. She argued that there are several establishments within 500 feet of Embassy and that granting another license in the area would not be in the public interest. Id. The letter was also signed by Assemblymember Jonathan Bing ("Assemblymember Bing") and Councilmember Eva Moskowitz ("Councilmember Moskowitz"). Pet., Ex. D, at 2.

Based on the community's overwhelming opposition to Embassy's application, the Business and Governmental Affairs Committee of the Community Board passed a resolution recommending denial of Embassy's liquor license application. Pet., Ex. C, at 3. In particular, 10 members of the committee voted against granting the application and not a single member voted for it. Pet., Ex. C, at 3.

On February 9, 2005 at a full-board meeting, the Community Board overwhelmingly passed a resolution opposing the application; 34 board members voted against granting the liquor license and only one member voted for it. Pet., Ex. C, at 3. Despite the resolution, the Community Board continued to place Embassy's application on the agenda to give Embassy a chance to provide more information that would change the resolution. Id.

At an April 7, 2005 Community Board meeting, Mr. Hoo appeared with a new lawyer, Bruno Gioffre ("Mr. Gioffre"), and withdrew his plan to provide rooftop seating. Pet., Ex. C, at 3. Mr. Hoo also submitted a letter from Councilman Michael Russo ("Councilman Russo") of the City of Hoboken, who averred that Mr. Hoo's other establishment, Green Rock Tap and Grill, had no violations or noise complaints from the community. Answer, Ex. [*3]4, at 13. Mr. Hoo did not, however, present any new architectural or written plans as requested by the Community Board. Id. The Community Board meeting minutes state that "applicant was hostile and threatening to committee members; numerous community residents were present to oppose the reconsideration for reasons previously enumerated." Pet., Ex. C, at 3.

The parties again met at a Community Board meeting on May 5, 2005. Pet., Ex. C, at 4. At this meeting, Mr. Hoo promised to close the windows by midnight and to hold regular meetings with the Community Board during Embassy's first year of operation. Id. Mr. Hoo further explained that the restaurant would not feature live music, only DJ-played music, and that he would have no promotional parties. Id.

Nonetheless, the community members at the meeting continued to oppose Embassy's application, stressing that although they would welcome a "white tablecloth restaurant," Embassy's plans indicated that it would function as a bar. Pet., Ex. C, at 4. Specifically, the community members pointed out that, unlike an upscale restaurant, Embassy would have security people at night, remove tables after lunch to "make more room" for diners, have a DJ instead of background music, and serve only pub fare. Id.

On November 3, 2005, Mr. Hoo appeared at a fifth Community Board meeting to discuss Embassy's liquor license proposal. Pet., Ex. C, at 5. Again, he did not submit a new proposal or recommend any changes. Pet., Ex. C, at 5. Several members of the public appeared at this meeting to oppose Embassy's application, including Barry Klein ("Mr. Klein"), Chief of Staff to Assemblyman Bing. Pet., Ex. C, at 5.

Based on the community's continuing opposition to the petition, the Community Board's Chair of Business & Governmental Affairs Committee, Harry Edward Ursillo ("Mr. Ursillo"), wrote, "Community Board 6 Manhattan completely opposes this application and implores the [Liquor Authority] to err on the side of caution and deny the application to the relief of the community residents." Pet., Ex. C, at 8.

Hearing

On November 15, 2005, the Liquor Authority held a 500-foot hearing in accordance with ABCL § 64(7)(f) ("Before [the Liquor Authority] may issue any such license [within 500 feet of three or more licensed establishments], the authority shall conduct a hearing, upon notice to the applicant and the municipality or community board * * * "). Administrative Law Judge Stephen D. Kalinsky ("ALJ Kalinsky") presided and the proceedings were recorded on cassette tape and later transcribed. Pet., at ¶ 27; Pet., Ex. B, at 1.

At the hearing, two witnesses testified on behalf of Embassy.

To begin, Mr. Gioffre, Embassy's attorney, testified that Mr. Hoo had invested "a million dollars" in Embassy and that it was to be an upscale restaurant-lounge serving American-Continental cuisine. Transcript of the 500-foot Hearing ("TR"), at 9. He also said that Embassy would close at 2:00 in the morning on weekdays and at 4:00 in the morning on weekends, and that after 11:00 at night, the restaurant would feature DJ-played music. TR, [*4]at 14-15.

Mr. Gioffre acknowledged the presence of more than 12 licensed premises within 500 feet of Embassy's doors. TR, at 7. He admitted, moreover, that residents of several apartment buildings opposed the granting of a liquor license to Embassy, but he erroneously stated that residents of only three buildings challenged the application, when, in actuality, residents of seven buildings expressed opposition. Petitioners' Memorandum of Law on Reply ("Reply"), at 8.

Mr. Hoo also testified on Embassy's behalf. In particular, Mr. Hoo stated that he had met with an acoustical consultant and would do everything possible to limit noise, including installation of triple-pane windows. Pet., Ex. B, at 2. Mr. Hoo further averred that his other location in New Jersey had no adverse history. Id.

No community members testified on behalf of Embassy. Pet., at ¶ 27. Instead, Embassy provided the letter of resident Timothy Sikes ("Mr. Sikes"), who pledged his support of Embassy's liquor license application. Pet., Ex. A, at 7.

By contrast, seven witnesses testified in opposition to Embassy's liquor license application.[FN1] Pet., at ¶ 44.

First, Mr. Harris a resident of 300 East 46th Street testified, among other things, that Embassy will be problematic to the community because its patrons will smoke and make noise that will disturb residents' sleep. Pet., Ex. B, at 1-2. Mr. Harris further stated that, in addition to the 12 licensed premises within 500 feet of Embassy, 15 more licensed establishments are located within a five-minute walk of Embassy. Pet., Ex. B, at 1.

Second, Ms. Dolan a resident of 300 East 46th Street, which is directly across from the proposed restaurant testified in opposition to the application. Pet., Ex. B, at 2. Ms. Dolan cited security concerns and complained that the restaurant would be noisy and disturbing to the neighborhood. Id. She also objected to Mr. Hoo's proposal to keep the restaurant open until 4:00 a.m. on weekends. Id. Ms. Dolan submitted a letter on behalf of herself and 57 other residents opposing Embassy's application for a liquor license. Id.

Third, Ms. Gordon of 300 East 46th Street testified that there are already several other American-fare restaurants in the area and that Embassy would attract noisy patrons who would disturb residents. Pet., Ex. B, at 2.

The fourth witness in opposition to Embassy's application, Ms. Sten, whose building is only 60 feet from Embassy, averred that patrons of area bars are noisy, and urinate as well as vomit in the bushes. Pet., Ex. B, at 2.

Ms. Chan, a fifth witness in opposition to Embassy's application, testified that she opposed the application because Embassy's patrons would be noisy. Pet., Ex. B, at 2. Ms. [*5]Chan further pointed out that there are many children in the area. Id.

Sixth, Patrick McCandless ("Mr. McCandless") appeared on behalf of Senator Kreuger and submitted a written statement by the senator in opposition to Embassy's application. Pet., Ex. B, at 2; Pet., Ex. E, at 1-2.

The last opponent, witness Dr. Mehta, testified that the proposed premises would threaten security, attract an undesirable element, and bring noise and pollution to the area. Pet., Ex. B, at 2.

The Turtle Bay Association submitted a letter by facsimile setting forth its opposition to the application. Pet., Ex. B, at 2; TR, at 24.

ALJ Kalinsky noted that he received communications from the Community Board, including a letter and statement in opposition as well. TR, at 24. Indeed, in the seven-page letter, the Community Board stressed that it met with Mr. Hoo on five occasions, including at three meetings after its passage of a resolution against the application, and that Mr. Hoo never presented an acceptable proposal. Pet., Ex. C, at 2. In the letter, the Community Board also urged the Liquor Authority to deny the application, arguing that it gave Mr. Hoo many chances to reach a compromise with the community, but that he never did so. Id.

Post-hearing Submissions

During the post-hearing submission period, residents and community members submitted 58 individual letters and a petition with more than 250 signatures opposing the license. Pet., at ¶ 45. In particular, residents alleged that there were already plenty of bars in the area and that Embassy would have a negative impact on quality of life because it would function as a nightclub, not a restaurant. Pet., Ex. D, at 23-24, 29. They argued, moreover, that patrons would vomit and urinate in bushes of Dag Hammarskj"ld Park and that Embassy's liquor license was "not in the public interest." Pet., Ex. D, at 17-21, 26.

Public officials wrote letters in opposition as well.

Assemblymember Bing urged the Liquor Authority to deny Embassy's application, arguing that, "It is incumbent upon the applicant to show that the granting of the license would be in public interest. Clearly, from the widespread community opposition * * * it is impossible to find that the granting of this license would be in the public interest." Pet., Ex. C, at 3.

Additionally, New York City Councilmember-elect Daniel R. Garodnick ("Councilmember Garodnick") wrote a letter encouraging the Liquor Authority to deny the application, stating that Embassy "presented no case for the establishment serving the public interest, nor did [Mr. Hoo], in my opinion, credibly dispute the community's concern that this was to be operated as a bar/nightclub rather than a restaurant." Pet., Ex. C, at 5-6.

ALJ Kalinsky closed the record on November 24, 2005. Answer, Ex. 1, at 11. Notably, none of the post-hearing submissions were mentioned in ALJ Kalinsky's report. Pet., at ¶ 46.

[*6]Authority's Determination

On November 30, 2005, Liquor Authority Deputy Commissioner Fred J. Gioffre ("Commr. Gioffre") wrote a memorandum to the Liquor Authority outlining Embassy's liquor license application and the results of the 500-foot hearing. Answer, Ex. 6. In the memorandum, Commr. Gioffre noted that the Community Board, Senator Kreuger, Assemblymember Bing and Councilmember Moskowitz strongly opposed approval of the license based on the presence of several other licensed establishments in the area. Answer, Ex. 6, at 1. He also wrote, however, that the Community Board made no appearance at the 500-foot hearing. Answer, Ex. 6, at 2.

Thus, on December 7, 2005 the Liquor Authority approved Embassy's application for a liquor license. Pet., at ¶ 3. The determination reads, "According to the Administrative Law Judge who presided at the 500-Foot-Rule Hearing on November 15, 2005, there was no appearance by Manhattan Community Board No. 6." Pet., Ex. A, at 5. The determination goes on to provide that, "The Authority has considered this application in light of all the pertinent facts and circumstances; and the Authority, in the exercise of its considered discretion, determines that * * * public convenience and advantage would be satisfied by approval of this application." Pet., Ex. A, at 9-10.

Petition

Petitioners now move for an order annulling the Liquor Authority's determination to grant Embassy an on-premises liquor license, arguing that the determination was affected by error of law and was arbitrary and capricious. Pet., at 2.

In particular, Petitioners argue that the Liquor Authority violated ABCL § 64(7)(f) by failing to consult with the local community board before granting the license. Pet., at ¶ 14. They explain that by stating that the Community Board made no appearance at the hearing and ignoring the Board's resolution opposing Embassy's application, the Liquor Authority failed to confer with the community board as required by the statute. Pet., at ¶ 27.

Petitioners further allege that the Liquor Authority violated ABCL § 64(7)(f) by failing to make findings of public interest in accordance with the criteria set forth in § 64(6-a) and by failing "to explain in its determination how the opening of this establishment in an area already oversaturated with clubs, bars, lounges and restaurants would serve the public interest." Pet., at ¶ 14(iii).

Petitioners also assert that the granting of a liquor license to Embassy is not in the public interest because Embassy is a nightclub masquerading as a high-end restaurant and the neighborhood already has a legitimate white tablecloth restaurant across the street, Don Veitita. Pet., at ¶ 18, 31. To support this claim, they point out that Mr. Hoo intends to remove tables after serving lunch to "make room" to serve dinner and that he plans to feature DJ-played music. Pet., at ¶ 31. Petitioners argue, moreover, that Embassy must be a bar, not a restaurant, because it will be open until 4:00 in the morning, serve extremely lite fare and employ bouncers. Pet., at ¶ 31.

[*7]They urge that the Authority has not sufficiently explained how its determination is in the public interest because it did not state what facts and circumstances it relied on in reaching its determination. Pet., at ¶ 15. They aver that, in violation of precedent, the Authority's "Statement of Public Interest" is merely a quoted statement lifted verbatim from Embassy's submission. Pet., at ¶ 16. Petitioners also allege that the Statement of Public Interest is deficient because the Authority failed to consider that there are already 12 licensed establishments within 500 feet of Embassy and the ABCL provides for only three licensed establishments per 500 feet. Pet., at ¶ 7.

Petitioners further allege that the determination should be annulled because Commr. Gioffre, who was responsible for reviewing Embassy's liquor license application, is related to Embassy's attorney, Mr. Gioffre.[FN2] Amended Pet., at ¶ 35.

The Liquor Authority opposes the petition without citing a single case in support of its position.

The Authority first argues that the determination presents a question of substantial evidence and should be transferred to the Appellate Division. Answer, at ¶ 22. Next, it contends that Petitioners do not have standing to bring this CPLR Article 78 petition. Answer, at ¶ 22. Additionally, the Authority asserts that Commr. Gioffre did not vote on Embassy's application, and therefore, there is no conflict of interest. Answer, at ¶ 19. Finally, the Authority alleges that the petition should be denied because its determination was not arbitrary or capricious.

On reply, Petitioners argue that the petition is properly before Supreme Court because it does not raise a question of substantial evidence. Reply, at 18.

Analysis

Standing

Respondents claim that Petitioners have no standing to bring this proceeding challenging its determination to issue Embassy a liquor license. They are incorrect.

To establish standing, plaintiffs must first demonstrate that they have suffered "injury in fact." New York State Assn. of Nurse Anesthetists v. Novello, 2 NY3d 207, 211 (2004). To do so, they must show that they will be actually harmed by the administrative determination. Id. Additionally, plaintiffs must show that their injuries fall within the "zone of interests" sought to be promoted or protected by the statute. New York State Assn. of Nurse Anesthetists v. Novello, 2 NY3d, at 211; Matter of Dairylea Coop., Inc. v. Walkley, 38 NY2d 6, 9 (1975). "Only when there is a clear legislative intent negating review will standing be denied." Matter of Dairylea Coop., Inc. v. Walkley, 38 NY2d, at 11.

Moreover, an organizational plaintiff may sue on behalf of its members if it can show that: at least of one of its members will suffer an injury in fact and is in the zone of interests; the organization represents that member's interests; and, the litigation does not require participation of [*8]the individual members. New York State Assn. of Nurse Anesthetists v. Novello, 2 NY3d, at 211.

New York courts have repeatedly held that residents and employers living or operating in the vicinity of a proposed licensed alcoholic beverage establishment have standing to challenge the Liquor Authority's determination to grant or deny an alcohol-consumption license because they may be adversely affected by the over-saturation of licensed liquor establishments and the ABCL was enacted to prevent exactly such harm. See, e.g., Flatiron Comm. Assn. v. New York State Liquor Auth., 6 Misc 3d 267, 274 (Sup. Ct., New York County, 2004); Matter of Soho Alliance v. New York State Liquor Auth., 10 Misc 3d 1078(A), at 4 (Sup. Ct., New York County, 2005); The Bowery Room Corp. v. New York State Liquor Auth., 2000 WL 433558, at 5 (Sup. Ct., New York County, 2000) (allowing residents of building in vicinity of establishment to intervene).

Here, the individual petitioners each live within 500 feet of Embassy's proposed site. Furthermore, the organizational petitioner, Ban the Bar Coalition, is an entity made up of community residents and was created to represent their interests in this litigation. New York State Assn. of Nurse Anesthetists v. Novello, 2 NY3d, at 211. Thus, Petitioners have standing to challenge the Liquor Authority's determination.



Substantial Evidence

Respondents also argue that the petition must be transferred to the Appellate Division for determination of whether there is substantial evidence to support the Liquor Authority's decision. Again, respondents are mistaken.

A challenge by neighborhood residents to the Liquor Authority's determination to grant or deny a liquor license does not raise a substantial evidence question, but rather, requires judicial analysis of whether the authority acted arbitrarily and capriciously. Matter of Rumors Disco, Inc. v. New York State Liquor Auth., 232 AD2d 421 (2d Dept. 1996); Graca v. State Liquor Auth., 32 AD2d 879, 880 (4th Dept. 1969); Flatiron Comm. Assn. v. New York State Liquor Auth., 6 Misc 3d 267, 272 (Sup. Ct., New York County, 2004); Matter of Soho Alliance v. Kelly, 10 Misc 3d 1078(A), at 4 (Sup. Ct., New York County, 2005).

Indeed, courts have concluded that transfer to the Appellate Division under such circumstances is inappropriate because although a 500-foot hearing is required by statute, the hearing is "informational in nature and does not involve receipt of sworn testimony or taking of evidence' within the meaning of CPLR 7803(4)." Matter of Wal-Mart Stores, Inc. v. Planning Bd. of Town of North Elba, 238 AD2d 93, 96 (3d Dept. 1998) (standard of review is arbitrary and capricious); see also, Flatiron Comm. Assn. v. New York State Liquor Auth., 6 Misc 3d, at 272. Other courts have determined that the 500-foot hearing is not a quasi-judicial, adversarial hearing because it "merely affords the applicant an opportunity to submit evidence that it wishes the [Liquor Authority] to consider." Capizzi v. New York State Div. of Alcohol Bev. Control, 231 AD2d 881, 881-82 (4th Dept. 1996) (standard of review is arbitrary and capricious).

Because the 500-foot hearing conducted was not quasi-judicial and adversarial, the correct standard of review is assessment of whether the determination was arbitrary and capricious and the petition will not be transferred to the Appellate Division for substantial evidence analysis.

Merits of Petition

[*9]Judicial reversal of an administrative order pursuant to CPLR Article 78 is limited to instances in which the agency acted arbitrarily or capriciously. Fiore v. O'Connell, 297 NY 260 (1948) (reviewing determination of Liquor Authority). A determination is "arbitrary and capricious" if it is untenable as a matter of law. Siegel, New York Practice, § 561, at 967 (4th ed. 2005). If there is a rational basis supporting an administrative order, judicial review is narrowly circumscribed and the agency's decision must be upheld. See, Matter of Pell v. Bd. of Educ., 34 NY2d 222, 231 (1974).

Normally, an agency's reasonable interpretation of statutes and regulations that it administers is entitled to substantial deference. Matter of Cortland Nursing Care Ctr. v. Whalen, 46 NY2d 979, 980 (1979). "That discretion, however, cannot be invoked outside the law." Barry v. O'Connell, 303 NY 46, 52 (1951). Moreover, "an agency may not, under the guise of administering the statute, ascribe a different or unreasonable meaning to its terms." Matter of Soho Community Council v. New York State Liquor Auth., 173 Misc 2d 632, 640 (Sup. Ct., New York County, 1997). As such, an agency's interpretation will be accorded little weight when the intent of the statute it administers is clearly discernable. Servomation Corp. v. State Tax Commn., 51 NY2d 608, 613 (1980).

The Statute

ABCL § 64 generally provides that the Authority shall not grant a "retail license for on-premises consumption [of alcohol] * * * for any premises * * * within five hundred feet of three or more existing premises licensed [to sell alcohol]." ABCL § 64(7)(b). Nonetheless, the Authority has discretion to grant a liquor license to an establishment that is within 500 feet of three or more existing licensed premises "if, after consultation with the municipality or community board, it determines that granting such license would be in the public interest." ABCL § 64(7)(f) (emphasis added). To do so, however, the Authority must "conduct a hearing, upon notice to the applicant and the municipality or community board," and then state and file in its office its reasons for concluding that granting another license would be "in the public interest." ABCL § 64(7)(f).

Indeed, the Appellate Division, First Department, has explained that if a proposed establishment is within 500 feet of three other licensed premises, ABCL §64(7)(f) mandates the Liquor Authority to deny the application unless it finds that granting license would be "in the public interest." Matter of Waldman v. New York State Liquor Auth., 281 AD2d 286 (1st Dept. 2001). In determining what is "in the public interest," the Authority is to consider, among other things, "the number, classes and character of the licenses in proximity to the location;" the effect that granting the license would have on vehicular traffic and parking close to the location; "the existing noise level at the location and any increase in noise level that would be generated by the proposed premises;" as well as, "any other factors." ABCL § 64(6-a)(a), (c), (d), (f).

Legislative Intent

In amending ABCL § 64 in 1993, the legislature definitively delineated the purpose of section (6-a), which sets forth the factors that the Liquor Authority must consider.

In particular, the bill's sponsors wrote, "This bill would require the State Liquor Authority * * * to consider community impacts when evaluating a proposed license for on-premises liquor consumption." Governor's Bill Jacket, L. 1993, ch. 670, at 5 (New York State Assembly, Memorandum in Support of Legislation). They explain that "many * * * factors are specifically within the purview and expertise of an area's community leaders, businesses and residents." Id. [*10]They assert, therefore, that ABCL § 64(6-a) is "necessary to assure that quality of life impacts are fully incorporated into the responsible state decision-making apparatus." Id., at 6.

The legislature's intent in amending the statute is absolutely clear. Thus, the Liquor Authority's determination will only be upheld if it conforms to the statute's unambiguous purpose. Servomation Corp. v. State Tax Commn., 51 NY2d, at 613 ("when the question is one of pure statutory reading and analysis depending only on accurate apprehension of legislative intent, there is little basis to rely on any special competence or expertise of the administrative agency and its interpretive regulations are therefore to be accorded much less weight").

Public Interest

To comply with the statute, the Liquor Authority must first demonstrate that the granting of a liquor license within close proximity to at least three other licensed establishments is "in the public interest." Matter of Waldman v. New York State Liquor Auth., 281 AD2d 286 (1st Dept. 2001). A mere recitation of the applicant's statement of public interest is insufficient to demonstrate compliance with the ABCL. Flatiron Community Assn. v. New York State Liquor Auth., 6 Misc 3d 267 (Sup. Ct., New York County, 2004); Matter of Soho Alliance v. New York State Liquor Auth., 10 Misc 3d 1078(A) (Sup. Ct., New York County, 2005).

Here, the Liquor Authority's Statement of Public Interest, which is wholly conclusory and deficient, does not sufficiently support its determination as a matter of law.

To begin, the Authority merely copied Embassy's statement of public interest verbatim and conveniently inserted it between recitation of the ABCL's standards and a standard it created on its own. Answer, Ex. 1, at 9.

Interestingly, the Liquor Authority's "Statement of Public Interest" begins, "Granting an On Premises Liquor License to the applicant would be in the public convenience and advantage for the following reasons." Pet., Ex. A, at 9.

Next, it quotes directly from Embassy's application, which reads, " These premises have been continuously licensed since prior to November 1, 1993. However, the last licensee DAR FU REST. went out of business last year. They did not renew their license No. 1028461. Unfortunately, the premises remained abandoned until Jonathan Hoo, the Sole Shareholder of OHMSAYIN, Inc [Embassy] convinced the landlord to lease him the premises. He spent considerable monies removing the spoiled food left behind and considerably more money hiring an architect to renovate the premises into a high-end restaurant. An on-premises liquor license is simply a necessary requirement to any successful restaurant. Without it, the business would surely fail and the place would be abandoned once again.'"

Pet., Ex. A, at 9-10.

Finally, the statement concludes, "The Authority has considered this application in light of all the pertinent facts and circumstances; and the Authority, in the exercise of its considered discretion, [*11]determines that the approval of this application would not create a high degree of risk in the administration and enforcement of the Alcoholic Beverage Control Law. Such approval would be conducive to proper regulation and control; and the Authority finds that public convenience and advantage would be satisfied by approval of this application."

Pet, Ex. A, at 10.

Significantly, the Liquor Authority's word for word adoption of Embassy's Public Interest Statement without any independent analysis or reason for fully accepting all of Embassy's allegations is a basis, by itself, for annulling the determination. See, Flatiron Community Assn. v. New York State Liquor Auth., 6 Misc 3d, at 267 (annulling Liquor Authority determination because Authority merely copied the applicant's statement of public interest).

The Liquor Authority's Statement of Public Interest is further unacceptable because it creates a new additional standard for license approval that has no authority and is in direct contradiction to the statute. See, Matter of Soho Community Council v. New York State Liquor Auth., 173 Misc 2d 632, 640 (Sup. Ct., New York County, 1997) ("An agency may not, under the guise of administering the statute, ascribe a different or unreasonable meaning to its terms"). In its attempt to justify granting Embassy a license, the Authority states that, "approval of this application would not create a high degree of risk in the administration and enforcement of the Alcoholic Beverage Control Law." Pet, Ex. A, at 10. This, however, is not a consideration set forth in ABCL § 64. Indeed, the legislature did not even include the Authority's ability to enforce its regulations as one of the factors to be considered.

Community Opposition

The determination must also be vacated because it violates the clear language of ABCL § 64(6-a), which requires consideration of community opposition in determining whether a license is "in the public interest." Failure to give heed to community opposition has repeatedly been the basis for judicial annulment of Liquor Authority determinations. See, e.g., Flatiron Community Assn. v. New York State Liquor Auth., 6 Misc 3d 267 (Sup. Ct., New York County, 2004); Matter of Soho Community Council v. New York State Liquor Auth., 173 Misc 2d 632, 636 (Sup. Ct., New York County, 1997) (vacating determination for failure to give heed to overwhelming community opposition); Matter of Soho Alliance v. New York State Liquor Auth., 10 Misc 3d 1078(A).

In this case, the Liquor Authority completely ignored: (1) petitions submitted February 4, 2005 containing the signatures of 177 residents opposing the license; (2) the opposition of several public officials including Senator Kreuger, Assemblymember Bing, Councilmember Moskowitz and Councilmember Garodnick; (3) the 34-1 resolution of the Community Board opposing the license; (4) the testimony of seven witnesses who opposed Embassy's application at the 500-foot hearing; (5) 58 letters in opposition to the application from various residents; and, (6) a petition in opposition submitted after the hearing containing more than 250 signatures. Pet., at ¶ 44-45; Pet., Ex. C, at 3, 5-6, 8-9; Pet., Ex. D, at 1-2, 10-16.

Although the Liquor Authority's determination contains a recitation of the residents' concerns, it fails to provide any explanation whatsoever as to why those concerns were not given any credence. Thus, the determination must be annulled as capricious.

[*12]Finding of Facts

Finally, the determination must be vacated based on the glaring deficiencies in the Liquor Authority's findings of fact, which are based on suspect assertions and, at times, are erroneous.

The Liquor Authority must set forth the facts and conclusions on which it relied in reaching its determination. Barry v. O'Connell, 303 NY 46, 51 (1951) (Liquor Authority's failure to make findings of fact goes to irrationality of its decision); Forman v. New York State Liquor Auth., 17 NY2d 224, 229 (1966) (annulling Liquor Authority's determination because Authority failed to set forth why new license promoted public convenience and advantage). "If the administrative action is to be tested by the basis upon which it purports to rest, that basis must be set forth with such clarity as to be understandable. It will not do for a court to be compelled to guess at the theory underlying the agency's action * * *." Barry v. O'Connell, 303 NY, at 52. If the agency's findings are not supported by the record, moreover, the determination will be annulled as arbitrary and capricious. Matter of Greenlawn CVS, Inc. v. Planning Bd. of the Town of Huntington, 280 AD2d 601, 602 (2d Dept. 2001), lv. denied 96 NY2d 716 (2001).

Several facts in the record belie the reasonableness of the Liquor Authority's conclusion.

First, and most egregiously, the Authority's findings set forth that there "was no appearance by the Community Board." Pet., Ex. A, at 6. In fact, ALJ Kalinsky noted on the record that he received the Community Board's resolution, which strongly opposed Embassy's license application. TR, at 24. True, Chair of the Community Board's Business & Governmental Affairs Committee, Mr. Ursillo, did not personally appear at the 500-foot hearing, but he had previously sent the clear board resolution by facsimile so that it could be considered by ALJ Kalinsky at the hearing. Pet., Ex. C, at 8. Thus, there is absolutely no support for the Authority's statement that the Community Board had no presence at the hearing. In fact, the community was very vocal in its opposition.

Additionally, the Authority and ALJ Kalinsky arbitrarily and capriciously chose to ignore statutorily permitted post-hearing submissions and did not even mention the 250-signature petition and 58 letters in opposition that they received between November 15, 2005 and November 24, 2005. Pet., at ¶ 45.

Third, the transcript that respondents submitted in opposition to the petition is incomplete and conveniently contains only the testimony of one witness who opposed the license even though ALJ Kalinsky's report makes clear that, in fact, seven witness testified against Embassy at the 500-foot hearing. Pet., at ¶ 44; Reply, at 2.

Furthermore, in its findings of fact, the Authority failed to discuss that there are 12 other licensed premises within 500 feet of Embassy. Pet., Ex. B, at 3. It provides no explanation as to why public convenience would be served by having a 13th licensed establishment in the area. Instead, the Authority summarily recites that it "has considered all of the foregoing facts and circumstances of this application." Pet., Ex. A, at 9.

The fifth reason the findings of fact are insufficient to sustain the determination is because they are based on suspect assertions. In particular, the Authority's acceptance of Mr. Hoo's claim that Embassy will be an "upscale restaurant" not a bar, as Petitioners assert is specious and contrary to the facts in the record.

For example, Mr. Hoo avers that Embassy will be open until 4:00 in the morning and that the kitchen will close in the late evening. Pet., at ¶ 18. He also states that he intends to employ [*13]bouncers and feature DJ-played music after 11:00 at night. Pet., at ¶ 18. From approximately 11:00 p.m. until 4:00 a.m., therefore, Embassy will play music and serve no food. Hence, it will not operate as a restaurant during those periods.

Other facts asserted by Mr. Hoo suggest that Embassy will not function as a restaurant in the early evening hours either. In particular, Mr. Hoo stated that he will remove tables after lunch to "make more room" to serve dinner. Pet., Ex. C, at 4. It is entirely a mystery how Mr. Hoo plans to serve more patrons an "upscale" dinner if he is removing tables. Indeed, is seems more likely, as Petitioners suggest, that Mr. Hoo plans to run Embassy as a bar and that he plans to remove tables so that he can make more room for standing patrons to drink alcohol at the bar.

These multiple and material deficiencies in the Authority's findings of fact undermine compliance with ABCL § 64 and case law and they do not sustain the challenged determination.

Conclusion

Based on the Liquor Authority's overwhelming failure to comply with ABCL § 64, its determination to grant Embassy a liquor license is annulled as arbitrary and capricious.

This result is consistent with the determinations of several courts. See, e.g., Matter of Waldman v. New York State Liquor Auth., 281 AD2d 286 (1st Dept. 2001); Cleveland Place Neighborhood Assn. v. New York State Liquor Auth., 268 AD2d 6,12 (1st Dept. 2000); Matter of Armando's Restaurant, Inc. v. New York State Liquor Auth., 249 AD2d 301, 302 (2d Dept. 1998); Flatiron Community Assn. v. New York State Liquor Auth., 6 Misc 3d 267 (Sup. Ct., New York County, 2004); Matter of Soho Community Council v. New York State Liquor Auth., 173 Misc 2d 632 (Sup. Ct., New York County, 1997); Matter of Soho Alliance v. New York State Liquor Auth., 10 Misc 3d 1078(A) (Sup. Ct., New York County, 2005).

Indeed, when faced with strikingly similar facts, courts have repeatedly annulled the Liquor Authority's determination to grant an on-premises liquor consumption license.

For instance, in Flatiron Community Assn. v. New York State Liquor Auth., 6 Misc 3d 267, respondents applied for a liquor license for their premises, which was within 500 feet of 21 other licensed establishments. Id., at 270. Because the club's owners intended to feature both live and recorded music, employ heavy security, and stay open until 3:30 in the morning, local residents, a New York State Senator and a New York City Councilmember opposed the club's application. Id., at 269-71. In particular, opponents argued that the area was already oversaturated with bars and nightclubs. Id., at 269.

Despite strong community opposition and the testimony of several witnesses in opposition to the application at the 500-foot hearing, the Liquor Authority granted the club a liquor license, stating that it was "in the public interest." Flatiron Community Assn. v. New York State Liquor Auth., 6 Misc 3d, at 267. Community members sought CPLR Article 78 relief.

Justice Payne of Supreme Court, New York County annulled the Liquor Authority's determination, stating that it was "arbitrary and capricious in that the Authority failed to follow its statutory mandate to make a determination that the granting of a license in this situation, where many licensed establishments fall within 500 feet of the premises, would be in the public interest * * *." Flatiron Community Assn. v. New York State Liquor Auth., 6 Misc 3d, at 273. Justice Payne explained that the Liquor Authority merely parroted the club's statement of public interest and "failed to indicate why it chose to accept, without reservation, all of the assertions made by respondents." [*14]Id., at 272. Finally, he pointed out that the Liquor Authority's determination was "perfunctory" and "contained no discussion at all as to the discrepancies between the parties' evidence." Id.

Likewise, in Matter of Soho Community Council v. New York State Liquor Auth., 173 Misc 2d 632, the proposed site of respondents' bar was within 500 feet of 22 other licensed establishments. Id., at 633. An overwhelming number of residents and public officials opposed the application and testified against respondents at the 500-foot hearing. Id. Nonetheless, the Liquor Authority granted the license stating that it was "in the public interest" because the bar would generate jobs and tax revenue. Id., at 634.

In annulling the Liquor Authority's determination, Justice Abdus-Salaam, also of Supreme Court, New York County, held that the Authority acted arbitrarily and capriciously and "in violation of the letter and spirit of [ABCL § 64]." Matter of Soho Community Council v. New York State Liquor Auth., 173 Misc 2d, at 635. She wrote, "There is absolutely no evidence on the record to support this conclusion, which apparently is based on a philosophical predisposition to grant such applications and then discipline the licensed premises * * *." Id., at 634. Further, she pointed out that the Liquor Authority failed to give any heed to the grounds raised by the community in opposing the application and ignored all the affidavits submitted in opposition. Id., at 635-36. Justice Abdus-Salaam concluded, "By adopting this interpretation of the [ABCL], the Authority has by administrative fiat written out vital sections of the [ABCL,] the intent of which was to prevent local communities from becoming oversaturated with licensed liquor establishments." Id., at 639.

Finally, in Matter of Soho Alliance v. New York State Liquor Auth., 10 Misc 3d 1078(A), respondents applied for a liquor license even though there were already 35 licensed establishments and 67 residential buildings within 500 feet of the proposed site. Id., at 1. Residents and the local community board opposed the application, pointing out that the bar planned to operate from 11:00 in the morning until 4:00 in the morning and arguing that the establishment would cause traffic congestion and noise pollution. Id., at 2.

After holding a 500-foot hearing, the Liquor Authority granted the bar's liquor license application. Matter of Soho Alliance v. New York State Liquor Auth., 10 Misc 3d 1078(A). Thus, residents of the area and members of the community board brought a CPLR Article 78 petition challenging the Liquor Authority's determination. Id.

After careful review of the parties' arguments, Justice Shafer of Supreme Court, New York County granted the petition and annulled the Liquor Authority's determination as arbitrary and capricious. Matter of Soho Alliance v. New York State Liquor Auth., 10 Misc 3d 1078(A), at 4. Specifically, Justice Shafer explained that the Liquor Authority failed to acknowledge that the community board unanimously voted against the granting of the liquor license and that it "did not state its reasons for granting said license." Id. Justice Shafer further pointed out that the Liquor Authority failed to even address petitioners' concerns regarding traffic congestion and noise pollution in an area already oversaturated with establishments and that it erroneously accepted all of applicant's claims without evaluation. Id., at 4-5.

In granting CPLR Article 78 relief, Justice Shafer emphasized, "the Determination does nothing more than reiterate, almost verbatim, the memorandum submitted by [applicant's] attorney. There is no analysis of how issuing an on-premises liquor license to [applicant] is ultimately in the public interest." Id., at 4.

New York precedent thus makes clear that the Authority's determination is arbitrary and [*15]capricious and must be annulled. Respondents have presented no case law to controvert this conclusion.

Costs

CPLR Article 86 authorizes a court to award costs and attorneys' fees to a petitioner who prevails in a case against the State, unless the court finds that the State's position was "substantially justified." CPLR 8601(a). A "prevailing party" under CPLR 8601(a) is a party who "succeeded in large or substantial part by identifying the original goals of the litigation and by demonstrating the comparative substantiality of the relief actually obtained." New York State Clinical Lab. Assn., Inc. v. Kaladjian, 85 NY2d 346, 355 (1995).

Based on this successful challenge to the administrative determination, Petitioners have prevailed and are obtaining the relief that they seek: granting of the petition and vacatur of the Liquor Authority's decision. Thus, costs are also granted. Accordingly, it is

ORDERED AND ADJUDGED that the petition is granted and the Liquor Authority's determination is annulled and vacated. The proceeding is remanded to the Liquor Authority to make a new determination not inconsistent with this Decision and Judgment; and it is further

ORDERED that Petitioners' request for costs is granted.

This constitutes the Decision and Judgment of the Court.

Dated: New York, New York

August , 2006

E N T E R

Hon. Eileen Bransten Footnotes

Footnote 1: Peculiarly, the transcript of the hearing submitted by the Liquor Authority contains the testimony of only one witness in opposition to the license even though it is clear from ALJ Kalinsky's report that seven people testified in opposition to Embassy's liquor license application at the hearing. Reply, at 2.

Footnote 2: Petitioners submit no proof that Mr. Gioffre and Commn. Gioffre are related, and therefore, the Court will not consider this argument.