Matter of Soho Alliance v New York State Liquor Auth.
Annotate this CaseDecided on November 17, 2005
Supreme Court, New York County
In the Matter of the Application of, Soho Alliance, et al, Petitioners,
against
The New York State Liquor Authority, EDWARD F. KELLY in his capacity as Chairman of the New York State Liquor Authority; LAWRENCE J. GEDDA, as a Commissioner of the New York State Liquor Authority; and JOSEPH ZARRIELLO, as a Commissioner of the New York State Liquor Authority; and GINX, Inc. d/b/a Lola, Respondents, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules.
103970/05
Marilyn Shafer, J.
Background
Pursuant to Article 78, petitioner Soho Alliance and some 22 captioned community organizations and 509 individual Soho residents (Soho Alliance) move to set aside the determination (the Determination) of respondent New York State Liquor Authority (the Authority) granting a liquor license to Respondent Ginx, Inc., d/b/a Lola (Lola), at 5-15 Watts Street in the Soho neighborhood of lower Manhattan. Soho Alliance is a community association with 1,500 members in Soho, many of whom live in over 67 residential buildings within 500 feet of 5-15 Watts Street. By application for a retail license to sell alcohol dated October 24, 2004, [*2]Lola proposed that its restaurant/lounge will feature a 22' bar and music seven days a week from 11am through 4am; Lola subsequently amended its proposed hours to terminate at 1am. An architectural diagram submitted with the application shows a bar and lounge area with 35 seats facing a wall of French doors opening onto Watts Street (Answer, Exhibit 1).
A 500-Foot Rule hearing was held on November 30, 2004 before Administrative Law Judge Ed Rodriguez (the ALJ), pursuant to Sections 64.7(f) and 64-a 7 (d) of the Alcoholic Beverage Control Law (ABCL). The ALJ heard statements from the applicant owner, her attorney, and a character reference. The owner stated that Lola will not operate as a nightclub and that her earlier restaurant/lounge at a prior Manhattan location had a history as a good neighbor. The owner also presented a petition with some 500 signatures in support of the proposed establishment. Lola's attorney confirmed that Lola will feature live music and he asserted that patrons "will not cause any additional noise." Lola's attorney also stated that traffic congestion on Watts Street, a major thoroughfare to the Holland Tunnel, would be minimal since most restaurant patrons will arrive on foot or by public transportation.
The ALJ also heard numerous statements by opponents of the application who spoke at the 500 Foot Rule hearing. These included an architect who stated that the applicant failed to obtain a required special permit from the Board of Standards and Appeals. A professional traffic analyst stated that traffic conditions would be severely worsened if Lola opened, and that parking demands will not be met. Members of Community Board No.2 stated that they unanimously opposed the application on grounds that amplified music and traffic gridlock nightly until 1 am was contrary to the public interest.
Soho Alliance states that the Determination is affected by an error of law, arbitrary and capricious, and not supported by substantial evidence. Specifically, Soho Alliance states that the community is oversaturated with 35 drinking establishments within 500 feet of the proposed premises, in violation of §64(7)(b) of the ABCL. The Authority is mandated to deny the license, argues Soho Alliance, since it failed to consult the community before the license was granted; failed to establish that the subject license is in the public interest; and failed to state clear reasons, as required by statute, why a liquor license in "an area already teeming with clubs, bars, lounges, and restaurants" would serve the public interest (Verified Petition, ¶¶ 13,16).
In its answer, the Authority states that a reasonable basis existed for approval of the liquor license, that it was within the discretion of the Authority to grant the application, and that the Determination is based upon substantial evidence. The Authority asks for dismissal of the instant petition, or in the alternative, transfer to the Appellate Division. Further, the Authority states that §121 of the ABCL bars review of the instant petition, and that Soho Alliance lacks standing to proceed.
In its answer, Lola states that a reasonable basis existed for granting the application, which was neither arbitrary and capricious, unreasonable, nor unlawful. Lola further states that the Determination is founded upon substantial evidence including a petition signed by community members in support of the license and a memorandum from Lola's attorney. Lola asks for dismissal of the instant petition, or in the alternative, transfer to the Appellate Division, and asserts that review is barred ABCL §121 and that Soho Alliance lacks standing to proceed.
In reply to the Authority's Answer, Soho Alliance states that the legislative intent of the statute, as amended in 1993, imposes an affirmative obligation on the Authority to show that the public interest of the community will be served by approval of the license pursuant to ABCL [*3]§64(6-a)(f), which it has failed to do. Soho Alliance further states that neither the Determination nor the Authority's Answer addresses the oversaturation of drinking establishments in an area currently suffering from over 11 times the number of establishments permitted by statute pursuant to the 500-foot rule. Moreover, Soho Alliance argues that the Authority failed to satisfy the requirement of ABCL §64(7)(f) by failing to consult with the local community board, failing to determine how the granting of a license would be in the public interest, and failing to state and file in its office the reasons for its determination.
Additionally, Soho Alliance states that the Authority failed to show that it considered the expert testimony and exhibits in opposition to Lola's application; applied factual conclusions to the statute and case law; and failed to show how it had applied the law to the facts. On the 500-foot rule, Soho Alliance cites four cases overturning the Agency's determination granting liquor licenses when the applicant did not show that granting a license would serve the public interest. Standing of community petitioners pursuant to ABCL §121 is a "non-issue," according to Soho Alliance, since a sufficient number of persons with a genuine interest in the proceeding have established an injury in fact. Transfer of this matter to the Appellate Division is similarly without merit, according to Soho Alliance, since the substantial evidence test does not apply.
In reply to Lola's Answer, Soho Alliance states that Lola has done no more than reiterate the Authority's Answer. Soho Alliance argues that neither the Authority nor Lola show evidence or reasons to support the Determination that the public interest would be served by a "license to a 36th establishment within 500 feet." Soho Alliance also notes that Lola's assurances that its premises would be well run are insufficient, since it cannot control the behavior of late-night liquor patrons once they have left the establishment. Lastly, Soho Alliance notes that neither Lola nor the Authority has submitted memoranda to refute the case and statutory authority cited by Soho Alliance.
Discussion
"It is well settled that judicial review in an Article 78 proceeding is limited to a determination of whether the administrative action complained of is arbitrary and capricious, or lacks a rational basis" (In re Application of Chelrae Estates, Inc. v State Division of Housing and Community Renewal, Office of Rent Administration, 225 AD2d 387, 389 [1st Dept. 1996]). Considering the evidence and arguments raised before the agency when the administrative determination was rendered, "[t]he function of the court . . . is to determine . . . whether the determination had a rational basis in the record" (In re Application of HLV Associates v Aponte, 223 AD2d 362, 363 [1st Dept. 1996] citing Matter of Fanelli v New York City Conciliation & Appeals Bd., 90 AD2d 756, 757 [1st Dept. 1982]). In Pell v Board of Education of Union Free School District, the Court of Appeals defined arbitrary and capricious action as "action without sound basis in reason and generally taken without regard to the facts" (Pell v Board of Education of Union Free School District, 34 NY2d 222, 231 [1974]). A determination is "arbitrary and capricious" if the administrative action taken based on such determination is untenable as a matter of law (Siegel, New York Practice, §561 at 927 [3d ed]).
As a threshold matter, contrary to the Authority's argument, this proceeding is properly before this Court. The mandated 500-Foot Rule hearing held by the Authority was not "an adversarial, quasi-judicial hearing to which the substantial evidence test applies" (Matter of Capizzi v New York State Division of Alcoholic Beverage Control, 231 Ad2d 881, 881-882 [4th Dept 1996]). While the hearing was required by statute, "it did not involve the receipt of sworn [*4]testimony or taking of evidence within the meaning of CPLR§7803(4)" (Matter of Wal-Mart Stores, Inc. v Planning Board of the Town of N. Elba, 238 AD2d 93, 96 [3d Dept 1998]).
The Authority's argument that petitioners' lack standing and that the Determination is unreviewable is equally without merit. In order to establish standing, petitioners must meet the criteria under the "zone of interest" test (Matter of Dairylea Coop v Walkley, 38 NY2d 6, 9 [1975]). Where, as here, the administrative action will in fact have a harmful effect on the petitioners and the interest asserted is arguably within the zone of interest to be protected by the statute, the petitioners clearly have standing to bring this proceeding. There is no doubt the Determination will have an adverse effect on petitioners, who live and/or work in this community. Accordingly, petitioners have demonstrated that they have standing to bring this proceeding.
In the instant matter, this Court finds that the Authority's Determination is arbitrary and capricious. Pursuant to §64(7) (b) of the ABCL, no license shall be granted for any premises within five hundred feet of three or more existing licensed premises. Section 64 of the ABCL further provides a discretionary exception to this rule providing that the Authority may issue such liquor license for a premise within 500 feet of three or more existing licensed establishments after consultation with the municipality or community board, if it determines that granting such license would be in the public interest (ABCL §64[7][f]). Since the intent of the ABCL is to prevent local communities from becoming oversaturated with licensed liquor establishments, pursuant to ABCL §64(7)(f), the Authority is required to "conduct a hearing, upon notice to the applicant and the municipality or community board, and shall state and file in its office its reasons therefor." It is undisputed that there exist at least 35 other licensed establishments within 500 feet of the proposed premises. Thus, the Authority was mandated to consult with Community Board #2. Further, it is undisputed that Community Board #2 unanimously voted against the issuance of the liquor license. However, not only did the Authority fail to acknowledge that Community Board #2 unanimously voted against the granting of the liquor license, it did not state its reasons for granting said license.
While the Determination states that the Authority "finds that it would serve public convenience and advantage and it would be in the public interest to grant this application for an on-premises license due to the aforementioned facts and circumstances," nowhere in the Determination does it provide those "facts and circumstances." The Determination merely provides a laundry list of the reasons given by each respective party in support and in opposition of the liquor license. In stating the reasons for the granting of the application, the Determination does nothing more than reiterate, almost verbatim, the memorandum submitted by Lola's attorney. There is no analysis of how issuing an on-premise liquor license to Lola is ultimately in the public interest. In rendering its Determination, the Authority states in conclusory language that "it would be in the public interest to grant this application." Without more, a "perfunctory recitation fails to comply with the requirement that the Authority state its reasons for concluding that it would be in the public interest" (Matter of Waldman v New York State Liquor Authority, 281 AD2d 286 [1st Dept 2001]).
Moreover, the Authority does little to address the petitioners' concerns regarding traffic congestion, noise pollution, or the other related "costs" to the residents in a community already oversaturated with licensed liquor establishments. While Lola claims that most of its patrons will arrive on foot or by public transportation, there is no way for Lola to control the method by [*5]which their patrons will arrive. Nor is there any way for Lola to control or enforce the behavior of its patrons when they leave the bar, thus leaving open the very issues that are at the heart of "the public interest of the community." Section 64(6a) of the ABCL provides in relevant part:
whether public convenience and advantage and the public
interest will be promoted by the granting of licenses and
permits for the sale of alcoholic beverages at a particular
location, may consider a number of factors, including the
effect of the grant of the license on vehicular traffic and
parking in proximity to the location, the existing noise
level at the location and any increase in noise level that
would be generated by the proposed premises, and any
other factors specified by law or regulation that are relevant
to determine the public convenience and advantage and public
interest of the community.
There is no doubt that there already exists an oversaturation of licensed liquor establishments within this neighborhood, however, there is also no doubt that more noise, traffic, or any of the other factors will have a negative impact on its residents and businesses. Further, there is no discussion within the Determination as to why the Authority accepted, wholesale, all of Lola's assertions with regard to the club's potential impact on the traffic flow, parking needs, noise levels and other community concerns. Notwithstanding unanimous opposition by Community Board #2; testimony from a traffic expert and an architectural and zoning expert; letters from a state senator, assemblyperson, and councilmember; a restaurant review describing the noise at the applicant's prior restaurant/lounge as deafening; petitions and letters from Soho residents; and photos of traffic jams along Watts Street, the granting of an on-premise liquor license to Lola is an act not sounding in reason and taken without regard to the facts. The fact that the Determination lacks any discussion as to how it reconciled the conflicting facts and evidence presented at the 500-Foot Rule Hearing leads this Court to find that the Authority acted in an arbitrary and capricious manner and that the Determination was not rationally based.
With regard to the requests for dismissal by both the Authority and Lola, those requests are denied as they were improperly raised without a Notice of Cross-Motion. However, even assuming the relief was properly sought, the respondents' requests would, nevertheless, be denied.
Conclusion
Upon a careful review of the record, this Court cannot conclude anything other than that the Authority acted in an arbitrary and capricious manner when it granted an on-premises liquor license to Lola without detailing its reasons why and how it would be in the public interest to do so.
Accordingly, it is
ORDERED that the petition is granted, and it is further
ORDERED that the Authority's determination, dated March 2, 2005 is hereby annulled and vacated; it is further
ORDERED that the Authority is directed to cancel said license forthwith; and it is further [*6]
ORDERED that the Authority and Lola's request for dismissal is denied;
This reflects the decision and order of this Court.
Dated:
J.S.C.
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