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Myles Development Co., LLC v. Pennsylvania Liquor Control Board

Commonwealth Court of Pennsylvania

January 16, 2020

Myles Development Company, LLC
Pennsylvania Liquor Control Board, Appellant

          Argued: November 12, 2019




         The Pennsylvania Liquor Control Board (PLCB or Board) appeals an order of the Court of Common Pleas of Chester County (trial court) that reversed the PLCB's decision to deny the application of Myles Development Company, LLC (Applicant) for an Economic Development Restaurant Liquor License (EDR License). The PLCB argues that the trial court erred in holding that Applicant satisfied the requirements for an EDR License in the Liquor Code[1] and the PLCB's regulations. We affirm.


         On December 30, 2016, Applicant filed an application for an EDR License for a six-story building located at 2 West Market Street in the Borough of West Chester, also known as the Farmers & Mechanics Trust Company Building or the F&M Building. A. Thomas Myles, IV, is the sole member of Applicant and the sole member of Myles Land & Improvement Company, LLC, which owns the property. Applicant intends to open a fine dining restaurant in the basement and first and second floors of the building. The remaining floors will be leased for offices.

         By letter dated June 21, 2017, the PLCB's Bureau of Licensing (Bureau) notified Applicant that a hearing would be held on July 6, 2017, on the following objections to the application:

1. The proposed licensed premises will be located within 200 feet of another establishment licensed by this Board.
2. The Board shall take evidence to determine whether the [A]pplicant exhausted reasonable means in an effort to find a suitable license within the current county quota scheme, [2] in accordance with Section 3.105 of the Board's Regulations.
3. The Board shall take evidence to determine that the approval of this application will not adversely affect the health, welfare, peace and morals of the neighborhood within a radius of 500 feet of the proposed licensed premises.

         Reproduced Record at 94a (R.R.__).

         At the hearing, the PLCB's licensing analyst testified that Barnaby's West Chester, Inc. (Barnaby's), a bar and restaurant, is located across the street and approximately 60 feet away from the F&M Building. It is the only establishment with a liquor license that is within 200 feet of Applicant's property. Myles discussed his planned restaurant and his unsuccessful efforts to purchase a retail restaurant liquor license by sending letters of inquiry to the holders of 142 active licenses and 15 licenses in safekeeping.[3] Myles also testified that the West Chester Borough Council had approved the EDR License, subject to several conditions.[4]

         After the hearing, the hearing examiner issued an opinion recommending that the PLCB deny Applicant's application on the basis that it had not exhausted reasonable means of procuring a license within the county quota system. The hearing examiner noted the presence of another licensed establishment, Barnaby's, within 200 feet of the property, but determined this was not a basis for denying the application because "[t]here was no evidence presented that this would create any problems for the neighborhood[.]" R.R. 390a.[5]

         By order dated August 23, 2017, the PLCB denied Applicant's application for an EDR License. On September 1, 2017, Applicant appealed the PLCB's order to the trial court. On November 2, 2017, the PLCB filed an opinion in support of its order stating, inter alia, that it had denied the application based on Applicant's failure to exhaust reasonable means to find a license within the county quota system. Additionally, and contrary to the recommendation of the hearing examiner, the PLCB stated that it had, in its discretion, denied Applicant's application based on the proximity of Barnaby's to the proposed licensed premises.

         On October 3, 2018, the trial court held a de novo hearing at which Patrick Stapleton, Esquire, a former member and chair of the PLCB, testified on behalf of Applicant. While on the PLCB, Stapleton reviewed and voted on "no less than a couple hundred" applications for EDR Licenses. Notes of Testimony, 10/3/2018, at 28 (N.T.__); R.R. 429a. Stapleton focuses more than half of his practice on liquor and beverage law, and he has represented applicants for EDR Licenses in the Borough and elsewhere in Chester County.

         Stapleton testified that the Borough has agreed to allow EDR Licenses "over the past number of years." N.T. 28; R.R. 429a. Stapleton testified, based on his experience, that the Borough in practice "refuse[s] to accept licenses - regular R, restaurant licenses from other municipalities in Chester County." N.T. 28; R.R. 429a. After briefly explaining recent legislative changes to intermunicipal transfers of liquor licenses, Stapleton attempted to testify that the Borough has "taken the position" not to allow intermunicipal transfers. N.T. 29; R.R. 430a. The PLCB objected to this statement as hearsay, and the trial court sustained the objection.

         Stapleton testified that a recent amendment to the Liquor Code allows the PLCB to auction off expired liquor licenses. He explained that this has changed the EDR License application process. In practice, an applicant must show that it attempted to participate in an auction in order to establish that it exhausted reasonable means to obtain an existing license. Stapleton further testified that, during the relevant timeframe for Applicant's application, only seven licenses were available at auction in Chester County, and none were in the Borough of West Chester. Because the Borough will not allow intermunicipal transfers of liquor licenses, the availability of these licenses for auction did not matter.

         A. Thomas Myles testified about his efforts to obtain a license through the county quota system before applying for an EDR License. Myles and his attorney personally spoke with restaurant licensees and individuals with knowledge of restaurant licenses for sale within the Borough. None of these discussions bore fruit. Myles never made an offer to purchase a license because there were none available within the Borough. Because of the Borough's practice of refusing intermunicipal transfers of licenses, Myles concluded there was no point in seeking a license outside the Borough. After his initial efforts to purchase a restaurant liquor license within the Borough were unsuccessful, Myles sought and received approval from the Borough Council to pursue an EDR License.

         After gaining approval from the Borough Council, counsel for Applicant sent a letter to every restaurant liquor licensee in Chester County, including all licensees whose licenses were in safekeeping. The letter stated:

Dear Licensee:
Please be advised that a client of mine is interested in purchasing your R-Liquor License. Kindly contact this office at your earliest convenience if you are interested in discussing the sale of the above-referenced Liquor License.
Thank you for your time and consideration. I look forward to hearing from you.

R.R. 150a (emphasis in original).

         Applicant received responses from 11 licensees, none of which had licenses in the Borough. Nevertheless, Applicant followed up with all of them. Myles testified that each licensee that responded was willing to sell their license only as part of a sale of their entire business, which included the real estate in some cases. None of the licensees were willing to sell the restaurant liquor license alone. Myles testified that Applicant could not afford to purchase both a liquor license and an entire business, and he offered supporting financial evidence.

         Myles testified that he reviewed the PLCB's listings of liquor licenses that were available for purchase at auction. None of the listings included a restaurant liquor license within the Borough. Myles did not bid on any restaurant liquor licenses located outside the Borough because of the Borough's practice of refusing intermunicipal transfers of liquor licenses.

         On December 14, 2018, the trial court reversed the PLCB's denial of Applicant's application and ordered the PLCB to issue the EDR License.

         The trial court held that Applicant had exhausted all reasonable means to find a license within the existing county quota system. The trial court observed that Applicant had contacted every licensee in Chester County to inquire about the availability of its license for purchase, which is all the PLCB regulation requires. All of the licensees responding to Applicant required the purchase of the business associated with the liquor license. Applicant was not in a financial position to consummate such a transaction, and it was not required under the regulation. The trial court noted that Applicant considered purchasing a license at auction, but there were no auctions of licenses within the Borough. Although there were licenses available for auction in Chester County, the trial court found they were not actually available to Applicant given Stapleton's testimony that the Borough will not approve the transfer of a license from another municipality. The trial court noted that the PLCB presented no evidence to refute Stapleton's testimony. The trial court rejected the PLCB's argument that Applicant had recourse through an appeal of the Borough's denial of a transfer, holding that purchasing a license that is likely not to be accepted by the municipality cannot be considered a "reasonable means" of finding a suitable license. Trial Court Opinion at 10 (quoting 40 Pa. Code §3.105(e)).

         The trial court also decided that the proximity of the proposed licensed premises to Barnaby's was not a basis for denying Applicant's application because there was no evidence that issuing an EDR License to Applicant would be harmful to the community. The trial court cited the PLCB's finding that there was no evidence there would be any problems for the neighborhood and that the Borough ...

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