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OLCC Case Profile: The OLCC Canceled the Liquor License of Liquid Club & Lounge in Bend, Oregon for License Restriction Violations

The OLCC canceled the liquor license of the Liquid Club & Lounge located in Bend, Oregon in later October. The basis for cancelling the liquor license was that the licensee violated a number of license restrictions imposed on the license when it was issued. It serves as a good case study about the risks of having a liquor license with restrictions. Here, the OLCC imposed restrictions on the liquor license because the previous licensee had its license cancelled for a history of serious and persistent problems.

The OLCC can impose restrictions on a liquor license when there is a basis for denying an applicant’s application. The denial basis may be related to characteristics or the compliance history of the applicant, or it may be related to recent compliance problems at the location to be licensed. Applicants should carefully consider whether to accept a license with restrictions. Depending on the situation, it may make sense to appeal the restrictions or simply walk away from the business opportunity. If an applicant decides to accept license restrictions, they need to take great care to ensure total compliance with the restrictions going forward.

The reason that license restrictions are so serious is that the standard penalty for a first license restriction violation is license cancellation. The license restrictions at issue here were as follows:

• Licensee shall limit each person to possessing no more than one container of alcohol at one time and limit the amount of alcohol in a container to no more than 16 ounces of malt beverage, 6 ounces of wine, or 1.5 ounces of distilled spirits.
• Licensee shall ensure that the parking lot area under the licensee’s control and the outside area adjacent to the premises are patrolled on Friday and Saturday at lease every five minutes starting at 10:00 pm and continuing until 30 minutes after the close of business to discourage loitering and illegal activity.

The OLCC showed that the licensee violated the license restrictions on five separate occasions. In order to cancel the license, the OLCC must show that restriction violations are substantial enough to warrant cancellation. The Commission considers four factors in determining whether a restriction violation is substantial enough to warrant the presumed penalty of cancellation.

• Timing—with breaches soon after the license issues considered to be more serious. Here, the violations occurred almost immediately.
• Willful—restriction violations that are committed willfully by the licensee are considered to be more serious. Here, the licensee was found to be aware of the restrictions and voluntarily allowed them to be violated.
• Number of violations—five separate violations are considered to be more serious than an isolated incident.
• Hardship—breaches that strike at the heart of the restriction are considered to be more serious than more peripheral violations.

In this case, the OLCC found that all four of these factors weighed against the licensee and that license cancellation was thus warranted.

Licensees that currently have license restrictions should consider requesting their removal as soon as is practical, but should take care that they have a plan for ensuring 100% compliance while the OLCC is considering the request. The OLCC will typically not seriously consider requests to remove restrictions if the restrictions have been in place for less than one year. The burden is on the licensee to show that the original basis for imposing the restrictions no longer exists and explaining how they will ensure compliance going forward. Applicants that are facing a decision about whether to accept a license with license restrictions should also think carefully about the practical realities of operating with license restrictions and what other business opportunities are available.