Kougl v. Board of Liquor License Commissioners
2016 Md. App. LEXIS 64, 228 Md. App. 314, 137 A.3d 1062 (2016)
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Rule of Law:
Liquor Board rules prohibiting a licensee from 'suffering,' 'permitting,' or 'allowing' certain conduct require proof that the licensee had actual or constructive knowledge of the prohibited activity; these terms do not impose strict liability.
Facts:
- Steven Kougl owned Club Harem, a tavern and adult entertainment business in Baltimore, and held a liquor license for the establishment.
- On April 25, 2013, an undercover police officer, Detective Fletcher Jackson, entered Club Harem to conduct a prostitution investigation.
- An employee, Jamaica Brickhouse, approached Detective Jackson at the bar.
- Brickhouse exposed her breasts to Detective Jackson and invited him to touch them, which he did.
- Brickhouse then solicited Detective Jackson for sexual intercourse in exchange for $170 for a room plus a tip, to which he agreed.
- There was no evidence presented that Kougl was aware of this interaction between Brickhouse and Detective Jackson.
Procedural Posture:
- The Board of Liquor License Commissioners for Baltimore City charged Steven Kougl with three rule violations based on his employee's conduct.
- Following a hearing, the Liquor Board found Kougl guilty of all three violations and suspended his liquor license for one month.
- Kougl filed a Petition for Judicial Review in the Circuit Court for Baltimore City.
- The circuit court (a trial court) held a hearing and issued an order affirming the decision of the Liquor Board.
- Kougl, as appellant, filed a timely notice of appeal from the circuit court's judgment to this court (an intermediate appellate court), with the Liquor Board as appellee.
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Issue:
Does a liquor licensee violate Liquor Board Rules that prohibit a licensee from 'suffering,' 'permitting,' or 'allowing' certain conduct when there is no evidence that the licensee had actual or constructive knowledge of an employee's prohibited actions?
Opinions:
Majority - Woodward, J.
No, a licensee does not violate these rules without knowledge of the employee's conduct. The plain meaning of the words 'suffer,' 'permit,' and 'allow' used in Liquor Board Rules 4.17 and 4.18 necessarily implies that a licensee must have knowledge of the prohibited activity to be held responsible. The court rejected the Liquor Board's argument that these rules create strict liability, where the licensee would be responsible regardless of knowledge. Instead, the court reasoned that the dictionary definitions of these terms and persuasive authority from other states indicate that they require an element of awareness. The Board must establish that the licensee had either actual knowledge (including 'willful blindness') or constructive knowledge, meaning knowledge that could have been obtained through reasonable care and diligence.
Analysis:
This decision significantly clarifies the standard of liability for liquor licensees in Baltimore City under rules using terms like 'permit' or 'suffer.' It rejects a strict liability standard, placing a higher burden on the Liquor Board to prove that a licensee had at least constructive knowledge of an employee's illegal acts. This precedent protects licensees from being held automatically responsible for isolated, clandestine misconduct by their employees, requiring the Board to show some level of fault or negligence on the part of the licensee. Future enforcement actions will now require evidence demonstrating that an owner knew or should have known about the prohibited conduct.
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