## Facts

- Beer Garden, Inc. operated a New York City nightclub holding an on-premises liquor license issued by the New York State Liquor Authority (SLA).
- The SLA initiated a proceeding to cancel, revoke, or suspend the license under an SLA regulation (Rule 36.1(q)), alleging the premises became “a focal point for police attention” due to noise, disturbance, misconduct, or disorder in or near the premises.
- The SLA later initiated a separate proceeding charging Beer Garden with selling alcohol to a minor in violation of Alcoholic Beverage Control Law § 65(1), with a stated maximum penalty of a 30-day suspension.
- The SLA also issued a notice relating to license renewal that relied on the same “focal point for police attention” allegations.
- Each notice bore the stamped signature of Sharon L. Tillman, then Counsel to the SLA.
- An administrative law judge conducted hearings, sustained the charges, and referred the matters to the SLA Commissioners for final determination.
- After the hearings, Tillman became an SLA Commissioner; the Commissioners, including Tillman, adopted the findings and revoked Beer Garden’s license.
- Beer Garden sought reconsideration and requested Tillman’s recusal due to her prior role as SLA counsel in the case; she declined, and the SLA reaffirmed the revocation.
- Beer Garden brought an Article 78 proceeding; the Appellate Division granted relief based on the refusal to recuse, and the SLA appealed.

## Issues

1. Whether the SLA could revoke or discipline a license based on Rule 36.1(q)’s “focal point for police attention” standard when applied in a manner that conflicts with the Alcoholic Beverage Control Law’s statutory grounds for discipline.
2. Whether due process and New York administrative law required recusal of an SLA Commissioner who previously served as the agency’s counsel when the charges were initiated and prosecuted.

## Decision

- The Court of Appeals ruled for Beer Garden and agreed with the Appellate Division’s grant of relief.
- It held Rule 36.1(q) was invalid as applied because it conflicted with the authorizing legislation.
- It held the Commissioner who had served as SLA counsel should have recused herself from the final agency determination.
- The SLA’s revocation determination was annulled, with further proceedings required consistent with these holdings.

## Legal Principles

- An administrative agency may not apply a regulation in a manner inconsistent with, or beyond, the scope of authority granted by the governing statute.
- A regulatory standard that effectively supplies a generalized, extra-statutory basis for discipline (e.g., “focal point for police attention”) cannot be used as the operative ground for revocation when the statutory scheme requires proof of statutory violations.
- The “invalid as applied” doctrine permits a court to bar a regulation’s use in particular circumstances where its application conflicts with the statute, without necessarily striking the regulation in all contexts.
- Administrative adjudication requires an impartial decision-maker; an official who participated as agency counsel in developing or prosecuting charges may not later participate, as an adjudicator, in the final decision in the same matter.
- Participation by a non-recused decision-maker with prior prosecutorial involvement is a structural defect requiring annulment of the agency determination.

## Conclusion

The court annulled the SLA’s revocation of Beer Garden’s liquor license because the agency applied its “focal point for police attention” regulation in conflict with the Alcoholic Beverage Control Law and because a Commissioner who had previously served as SLA counsel improperly participated in the final adjudication despite a recusal request.


Beer Garden, Inc. v. N.Y. State Liquor Auth., 79 N.Y.2d 266, 590 N.E.2d 1193 (1992)