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The Florida Alcohol Beverage Law: A Body of Law in Flux and Change

Administrative Law

It is common knowledge that beverage alcohol is a highly regulated commodity in the United States. The 21st Amendment of the U.S. Constitution established that the states have virtually plenary control over the intrastate sales, service, and consumption of alcohol. The federal government’s purview rests in the interstate commerce aspect of the commodity and, in particular, the importation, manufacture, and labeling of alcohol. Title 27 of the U.S. Code of Federal Regulations codifies these legal requirements in manageable form.

State control over beverage alcohol is codified in heftier texts — that is the statute books and code sections of all 50 states. Florida, where the story that follows takes place, has designated F.S. Chs. 561-569 and F.A.C.R. 61A-1 through 61A-5 as its body of alcohol beverage law. Collectively these laws and regulations are referred to as the Beverage Law.

This term of art is a living and breathing thing. Statutory interpretation and code section validity have been tested in both declaratory statements, administrative hearings, and often in the courts of the state of Florida. The litigants in these matters are easy to identify. They are those with vested interests, namely the actors that operate within the three-tier system.

The three-tier system, the bedrock principle of the Beverage Law, establishes that there must be manufacturers, distributors, and retailers of beverage alcohol and never must the three meet (with limited exceptions). These distinct and entrenched camps, guided by their own interests, often face off as adversaries in the battles and struggle to interpret the Beverage Law. Collectively, these tiers have expended significant treasure in the courtroom and on the legislative floor to ensure that they and the orthodox concept of the three-tier system will not perish from this earth. In the absence of the three-tier system, certain industry members could cease to exist.

Three Cases: Statutory Interpretation and Intervention

What follows is the story of a trio of lawsuits brought in Florida that began not in the courts but as petitions for declaratory statements tendered to the Florida Department of Business and Professional Regulation Division of Alcoholic Beverages and Tobacco (DABT) and as an administrative rule challenge in Florida’s Division of Administrative Hearings (DOAH). However, the First District Court of Appeal ultimately resolved all these matters. Two of these cases were intervened in by trade associations composed of distributors opposing a retailer. All three cases while standing for a specific proposition of law also affect future interpretations of the Beverage Law. Stated from the outset, that proposition is if an activity is not specifically and explicitly prohibited, the act complained of is likely permitted within the context of the Beverage Law.

The first two cases concerned the grant and use of an alcohol beverage storage permit known as an off-premises storage permit or OPS. An OPS allows licensed retailers of beverage alcohol to store alcohol off its licensed premises (licensed premises defined broadly as its brick-and-mortar store). An OPS can take the form of a fully operational warehouse with multi-level racks, forklifts, and warehouseman. It may also consist of a sole shipping container secured by a padlock that sits atop the tarmac of nearly vacant parking lot. The OPS, as part of the permitting process, must be inspected and approved by DABT prior to its use.

The statutory authority for the existence of the OPS can be found in F.S. §562.03. F.A.C.R. 61A-4.020 provides guidance on the approval process and related operational matters for the storage facility. A Florida vendor of alcoholic beverages is permitted to maintain an unlimited number of OPS facilities with no state-imposed fee. The rule does, however, limit where a vendor may operate an OPS: “Such permits can be obtained from the [d]ivision without fee, provided that the storage room is located in the same county as the parent place of business of the licensee….[1]

To complicate matters further, there are many types of retail alcohol beverage licenses available under the Beverage Law. Most of these licenses, referred to as “special licenses,” require that applicants meet certain criteria before they qualify as a licensee. As an example, a special food service license or SFS may be issued to food service establishments that meet certain size and occupancy requirements and that maintain food and beverage revenues with a majority of revenue coming from the sale of food and non-alcoholic beverages. Special licenses, generally, have no intrinsic value, but for many retailers of alcoholic beverage, this license type is out of reach — it does not fit within the desired business or operational model.

Enter the holy grail of Florida alcohol beverage licenses — the quota license. They are termed quota licenses because they are issued in a limited number, based on the population of the county where they are permitted to be used. Quota licenses are bought and sold on the open market and have significant market value that also varies by county. Values range from $75,000 to over $1 million. The quota license has few operational restrictions and can be placed at almost any type of venue, like bars, nightclubs, restaurants, or package stores, local zoning ordinances permitting. Quota licenses also come with a right not granted to special alcohol licenses. Quota holders are permitted to use this license at a catered event away from the licensee’s brick-and-mortar venue, in any county in the state. It is at the intersection of these two licenses — the OPS and the quota license with its right to cater — that our story of litigation begins.

Off-Premises Storage Permits and Home County Dispute[2]

M.B. Doral, LLC, operates Martinibar, a popular nightclub in Miami-Dade County, with its principal place of business being a brick-and-mortar nightclub. It is a vendor of alcoholic beverages and holds a quota license. It also operates a successful off-premises alcohol and food catering business, catering major events such as the Super Bowl and the Ultra Music Festival.

Martinibar relies heavily on the use of OPSs for its catering business. Even to the most casual observer, the logistics of ferrying food and beverage from the nightclub to a catered event many miles away in various parts of the state is extraordinarily cumbersome, inefficient, and costly. Often times Martinibar was forced to lease tractor-trailers loaded with alcoholic beverages to then drive hundreds of miles from Miami-Dade County to other Florida counties. Martinibar was, arguably, illegally transporting alcohol. As Rule 61A-4.020 was written, Martinibar was only permitted to maintain an OPS in Miami-Dade County where its physical location was, despite the undisputed fact under the Beverage Law, it could cater events using its quota license anywhere in the state. Martinibar turned to the administrative procedures in F.S. Ch. 120 for relief from the home-county restriction of Rule 61A-4.020.

In December 2018, Martinibar filed an administrative petition with the Division of Administrative Hearings (DOAH), challenging the validity of Rule 61A-4.020. The petition sought a determination that the rule was an invalid exercise of DABT’s authority. Relying on F.S. §120.52(8), Martinibar posited that the rule enlarges, modifies, or contravenes the specific provisions of the law as implemented; it is vague, fails to establish adequate standards for agency decisions; vests unbridled discretion in DABT; and is arbitrary, capricious, and exceeds DABT’s rulemaking authority.[3] Martinibar argued that the county limitation was not proscribed by the statute and that DABT went beyond its authority and enlarged the scope of the enabling statute by its addition of a “same county” requirement.

DABT’s defense of its expansion of the legislature’s OPS requirements was almost exclusively relying on its general rulemaking authority in F.S. §561.11, which authorizes DABT to adopt rules to implement the provisions of the Beverage Law. This broad grant, DABT’s lawyers argued, was sufficient authority for it to add a same-county requirement. The administrative law judge sided with DABT’s position as to its authority.

Martinibar appealed the DOAH decision to the First District, which concluded that the grant of general rulemaking authority that the DABT relied on was insufficient authority by itself for the OPS rule. The opinion states, “[A]t oral argument, [DABT] claimed the rule was authorized by the Beverage Law as a whole and it would have been unwieldy and confusing for [DABT] to cite all the relevant Beverage Law provisions. We reject [DABT]’s laissez-faire reliance on the Beverage Law as a whole.”[4] The court concluded by stating explicitly that the OPS statute[5] authorizes DABT to “approve an OPS permit application, but does not authorize [DABT] to make approval contingent upon county-based limitations.”[6] In interpreting this ruling, the DCA suggested a specific course of conduct by a licensee may be permitted if it is not specifically prohibited by the legislature in the Beverage Law.

Off-Premise Storage Facilities and Distributor Deliveries[7]

Martinibar was now able to obtain off-premises storage permits outside its home county under F.S. §562.03, without regard to Rule 61A-4.020. Of course, nothing is ever simple in the highly regulated world of beverage alcohol. While the challenge to Rule 61A-4.020 was winding its way through DOAH and the First District, the First District was considering another challenge — this one to DABT’s interpretation of the Beverage Law’s regulation of deliveries from distributors to retailers in the context of out-of-county catering. The problem arose when some distributors refused to deliver alcoholic beverages to the site of an event Martinibar was catering outside Miami-Dade County, claiming such deliveries were not permitted by the Beverage Law. This time Martinibar was forced to turn to administrative procedures for relief. Martinibar filed a petition for a declaratory statement from DABT declaring distributors could deliver purchased products directly to the site of a catered event, even in a county other than the county that the caterer’s quota license was issued in. Several distributor trade associations intervened in the proceeding and pushed back against Martinibar’s petition for declaratory statement. The distributors’ groups took the position that they were prohibited by law from delivering product outside the licensee’s home county or “parent place of business.”

In its petition, Martinibar asked whether a licensee had the ability to receive the delivery of alcoholic beverages away from its licensed premises at the location of a catered event. The intervening distributor trade associations argued that F.S. §561.57, which focuses on deliveries by distributors and vendors, does not explicitly permit Florida distributors to deliver to catered events. DABT, agreeing with the distributor’s position, concluded that Martinibar could not receive deliveries of alcohol at the site of catered events, even though they could lawfully sell the alcohol if they could get it there.

Martinibar appealed this decision to the First District taking the position that DABT erred in ruling that an event location catered by Martinibar does not constitute a licensed premises even though it is a permitted point of retail sales. Further, Martinibar argued that while nothing in the Beverage Law specifically permits Florida distributors to deliver alcoholic beverages to a catered event, DABT’s declaratory statement was erroneous as no statute, administrative rule, or case prohibits distributors from making such deliveries.

As noted earlier, all tiers have a deeply vested interest in maintaining the three-tier system. In their brief, the intervenors argued that the bedrock principle of the three-tier system, tied house evil statutes, would be violated if they were to deliver beverage alcohol away from the vendors’ licensed place of business. Tied house evil makes it unlawful for a distributor to provide a thing of value (except those permitted by exception) to vendors. The distributors’ associations argued that the delivery services contemplated in this case were in fact a thing of value and in violation of tied house evil embodied in F.S. §561.42.

In the declaratory statement, the agency’s position was summed up by stating that the Beverage Law is silent on the issue of distributor deliveries off the licensee’s licensed premises and therefore such deliveries are not permitted. The court, however, viewed this silence in the exact opposite manner. The court posited, once again, absent a statutory provision explicitly prohibiting these types of deliveries, they in fact are not unlawful. Again, the proposition being that if the Beverage Law does not explicitly state a prohibition, then the activity is permitted. Accordingly, the First District reversed the declaratory statement in favor of Martinibar.

The Beverage Law and Technology[8]

The last matter of our trio of cases concerns the encroachment of technology on the Beverage Law. To say that there is a tense abutment of the modern world with certain aspects of alcohol beverage regulation and business practices is an understatement. Here, once again, distributor trade associations intervened to defend what they perceived as an encroachment on their territorial rights.

This particular case concerns a retail license other than Martinibar. La Galere Market is the operator of mini-markets in residential buildings throughout Florida and has spent many years and much money on creating a secure automated alcohol dispensing machine (ADM) for use in unmanned markets. La Galere understood preventing sales of alcohol to underage users of these ADMs was paramount. The mini-market devised a three-step process for the purchase of alcohol from its machine. First, the buyer must be a resident of the building where the machine is located. Next, the resident can only enter the mini market using a pre-issued key fob. Lastly, in order to access the ADM, a set of complex biometric markers, pre-collected from the user confirming age and identity are automatically verified. Only then can the alcohol be dispensed.

La Galere sought a declaratory statement from DABT asking it, among other things, to determine whether such machines are permitted under the Beverage Law, prior to installing the ADMs. After the submission of its petition, the various industry distributor trade associations once again intervened. In its declaratory statement, DABT concluded that nothing in the Beverage Law permits ADMs and determined that La Galere was precluded from implementing its business plan.

La Galere appealed to the DCA. DABT argued that there were multiple provisions of the Beverage Law that could be violated if ADMs were permitted. The crux of their argument was that the Beverage Law was a regulatory framework designed to prevent the sale of alcoholic beverages to underage persons and noted that the legislature had not authorized the sale of alcohol through automated machines. The distributor intervenors strongly favored DABT’s position.

DABT cited various statutes to support its position, including F.S. §561.02, which authorizes DABT to “supervise the conduct, management, and operation of the manufacturing, packing, distribution, and sale within the state of all alcoholic beverages.”[9] DABT provided a very broad argument of its grant of authority to disapprove of the use of ADMs and cited other statutes, with the stated goal of preventing underage consumption, but none of them specifically prohibited the use of ADMs. Consistent with the court’s rulings in the Martinibar cases, the First District reversed the DABT’s declaratory statement concluding that nothing in the plain language of the statutes cited prohibits the sale of alcoholic beverages through ADMs. Once again, the court confirmed the maxim that an agency cannot prohibit conduct unless it is explicitly prohibited in the Beverage Law.

The favorable trio of opinions were all issued by the court within four months of each other. One of the cases even resulting in the award of attorneys’ fees to Martinibar. It is of interest to note that counsel for the appellants in this trio of cases could find no instance of an adverse ruling regarding a motion to intervene or an instance where the DABT rejected the position of the Beer Industry of Florida, the Florida Beer Wholesalers Association, or the Independent Spirits Association.

The structure of the alcohol beverage business and the regulatory paradigm it operates within has changed very little in nearly 100 years. State legislators lobbied by vested interests have diligently worked to keep a restrictive, but highly profitable, system in place. Sometimes, lawsuits, like the ones above, make their way into the federal court system and even to the docket of the U.S. Supreme Court. The parties in those cases are not dissimilar to the cases highlighted in this article. In the past, absent a violation of the first amendment (speech) or the dormant commerce clause, state governments were able to cloak themselves in the protection of §2 of the 21st Amendment and usually prevail. The impact of this on the consumer is multi-fold but consumer choice and product competitive pricing are core concerns. In a world in which cannabis is increasingly becoming legal across the country, one must ask the question whether certain alcohol beverage laws, the foundations of which are based on old views of the common good and moral imperatives of the 1930s, are applicable in the modern world. Perhaps the sacrosanct three-tier system is a relic of the past. It is likely that changing technologies will lead to more administrative challenges to the Beverage Law. What remains to be seen is whether the legislature and DABT will comport its rules to new market trends or will it be left to the courts to decide the future of Florida Beverage Law as it abuts a modernizing marketplace.

[1] F.A.C.R. 61A-4.020(1) (emphasis added).

[2] MB Doral, LLC v. Dep’t of Bus. & Prof’l Regulation, Div. of Alcoholic Beverages & Tobacco, 295 So. 3d 850 (Fla. 1st DCA 2020). Louis J. Terminello, chair of Greenspoon Marder’s Hospitality, Alcohol & Leisure Industry Group and this article’s author, is one of three partners holding a 50% ownership interest in the appellant MB Doral, LLC, d/b/a Martinibar, and served as counsel of record in the lower tribunals and both appeals involving MB Doral, LLC, d/b/a Martinibar, discussed hereunder.

[3] MB Doral, LLC v. Dep’t of Bus. & Pro. Regul., Div. of Alcoholic Beverages & Tobacco, 295 So. 3d 850, 853 (Fla. 1st DCA 2020).

[4] Id. at 854.

[5] Fla. Stat. §562.03.

[6] MB Doral, LLC, 295 So. 3d at 855.

[7] MB Doral, LLC v. Florida Dep’t of Bus. & Prof’l Regulation, 298 So. 3d 132 (Fla. 1st DCA 2020).

[8] La Galere Markets v. Florida Dep’t of Bus. & Prof’l Regulation, 289 So. 3d 553 (Fla. 1st DCA 2020).

[9] Id. at 557.

Louis J. TerminelloLouis J. Terminello is a partner, chair of the Hospitality, Alcohol and Leisure Industry Group, and member of the Firm Management Committee at Greenspoon Marder LLP. He concentrates his practice on administrative law and providing legal services to all tiers of the alcohol beverage industry, including retailers, suppliers and wholesalers. He handles a wide array of transactional, civil, criminal, and administrative matters for hotels, restaurants, bars, nightclubs, and package stores throughout Florida.

This column is submitted on behalf of the Administrative Law Section, Stephen C. Emmanuel, chair, and Lyyli Van Whittle, editor.

Administrative Law