SC Administrative Law Court Decisions

Marion C. Hanna (Hanna) filed an application for a retail liquor store license with the South Carolina Department of Revenue (DOR). The store is to be located at 1700-A Decker Boulevard in the Dentsville section of Columbia, South Carolina. Bob Sherr (Sherr) filed a protest seeking to prevent DOR from granting the license and became a party as an intervenor in this matter. Pursuant to S.C. Code Ann. § 61-6-185 (Supp. 2000) the filing of a protest requires a hearing with jurisdiction in the Administrative Law Judge Division (ALJD) under S.C. Code Ann. § 61-2-260 (Supp. 2000).

In this matter, not all of the requirements for obtaining a retail liquor license are disputed. Rather, the only dispute is whether a "sufficient number of licenses have already been issued in the [Dentsville] . . . community." S.C. Code Ann. § 61-6-910 (Supp. 2000).

1. Positions of Parties

Sherr argues the area is already saturated with retail liquor stores and that adding additional ones will create insurmountable financial problems tempting other retailers to violate the liquor laws in order to financially survive. Hanna asserts the area residents are not more than adequately served and thus the financial concerns are overstated. DOR did not participate at the hearing, but rather submitted its investigative file as evidence for consideration.

2. Findings of Fact

I find by a preponderance of the evidence the following facts:

Hanna seeks to operate a retail liquor store at 1700-A Decker Boulevard in the Dentsville area of Columbia, South Carolina. For purposes of this hearing, the Dentsville area consists of two zip code areas, 29206 and 29223. The area identified as 29206 has approximately 10,000 residents while 29223 has approximately 19,000 residents for a total of 29,000 in the area here under review. The retail liquor industry recommends one retail liquor store for every population of 20,000 residents.

While the resident population of the area is approximately 29,000, the immediate area of Hanna's location on Decker Boulevard is accessible to transient automobile traffic. Approximately 22,000 cars per day use Decker Boulevard as a traffic artery. However, the relatively high volume of automobile traffic has not prevented a recent economic decline in the area near the proposed location. For example, several nearby businesses have recently closed such as a Kroger, Burger King, Target, and Video Update.

The recent economic decline in the area has been mirrored in the surrounding retail liquor stores as well. For example, in the last several years two retail liquor stores have closed. In addition, a decline in earnings of several stores in the area has contributed to several retail liquor operators writing "bad checks" for purchases of liquor.

Sherr has seen a decline in the profitability of his liquor store as well. Sherr's store is on Decker Boulevard and is approximately .5 of a mile from Hanna's proposed location. Sherr's earnings have declined and are now to the point that he has annual net earnings of approximately $25,000. The decline in profitability is due in part to an increase in the number of retail liquor stores in the area. At least five liquor stores are within the immediate area that Sherr serves. Moreover, within a 3.1 mile radius of Sherr's store, one additional store has just been granted a retail liquor license, ⁽¹⁾ two additional stores (including Hanna's proposed store) are planning to open, and no fewer than eight existing retail liquor stores are already in operation. If a radius of four miles is used, the number of retail liquor stores already in operation in the area grows to ten.

Against this backdrop, Sherr argues a sufficient number of licenses have already been issued in the Dentsville community.

3. Conclusions of Law

The issue here is whether Hanna's request for a retail liquor license must be denied since a "sufficient number of licenses have already been issued in the [Dentsville]. . . community." S.C. Code Ann. § 61-6-910 (Supp. 2000). Unlike some states, South Carolina has not established a bright line test limiting the number of licenses in an area. ⁽²⁾ Rather than specifics, S.C. Code Ann. § 61-6-910 (Supp. 2000) imposes a general requirement denying a retail liquor license request when a "sufficient number of licenses" have already been issued for a community.

In applying such a general test, two determinations must be made: identifying the community involved and identifying relevant criteria to measure when a sufficient number of retail liquor licenses have been granted. Because no published appellate decisions interpret § 61-6-910, the ALJ "must decide the case on the evidence presented, its interpretation of the law, and the application of the facts pertinent thereto." Warren v. Board of Education, 41 Ohio Misc. 87, 322 N.E.2d 697 (Ohio Com.Pl. 1974) (dicta).

a. Community

In the instant case, no facts dispute the "community" involved. Here, the community under review is characterized as Dentsville, an unincorporated area of Richland County consisting of the two zip code areas of 29206 and 29223. These zip code areas consist of a population of 29,000.

b. Criteria

Though the identity of the community under review is not disputed, identifying the criteria for measuring when a sufficient number of retail licenses have been granted presents a more difficult issue. In determining the measure for "sufficiency," no single factor can be controlling since the General Assembly has not chosen a single-factor test for liquor licenses. Indeed, even in those instances where the General Assembly has provided a specific statutory listing of criteria for a liquor license, such criteria have not been considered exhaustive or even exclusive. On the contrary, even when a factor is omitted in one statute but included in another, the omitted factor can still be considered in granting or denying a license since a plain recognition exists that "there may be a number of variables inherent in any decision regarding the issuance of an alcoholic beverage license." Schudel v. South Carolina Alcoholic Beverage Control Commission, 276 S.C. 138, 276 S.E.2d 308, 310 (1981).

i. Number and location of licenses in the community

A starting point for identifying appropriate criteria is the statutory scheme governing retail liquor licenses. When interpreting a statute, sections of law which are part of the same general statutory law must be construed together. State v. Alls, 330 S.C. 528, 500 S.E.2d 781 (1998). Indeed, to find the meaning of a statute, courts should be mindful not to isolate the single statute under review but rather to construe the statute with regard for the whole system of law of which the statutes form a part. South Carolina Dept. of Transp. v. Faulkenberry, 337 S.C. 140, 522 S.E.2d 822 (Ct. App. 1999). One such related statute is S.C. Code Ann. § 61-6-170.

South Carolina Code Ann. § 61-6-170 limits retail liquor licenses in a political subdivision if "the citizens who desire to purchase alcoholic liquors therein are more than adequately served because of (1) the number of existing retail stores, (2) the location of the stores within the subdivision, or (3) other reasons." Thus, the sheer number of stores and the locations of those stores are relevant factors.

ii. Economic Impact on Existing License Holders

Sherr argues that the economic impact on existing liquor stores in the area is also a valid basis upon which to determine when a sufficient number of licenses have been granted. Hanna does not significantly challenge the economic impact concept. Instead, he argues the economic concerns argued by Sherr are simply not as debilitating as Sherr suggests. Rather, Hanna suggests that customers utilizing his store will come from many places (even as far away as Irmo, South Carolina) so that his store will not draw a significant number of customers from the existing population. Thus, both Sherr and Hanna argue that the economic impact is a pertinent and perhaps even controlling consideration in this case.

Clearly, a basic consideration is whether the economic impact that granting a new license may have on existing retail stores is a meaningful factor at all. Answering this inquiry must begin from the perspective that laws regulating liquor sales stem from an "exercise of the police power of the state to do what otherwise would be unlawful to do[.]" Feldman v. South Carolina Tax Commission, 203 S.C. 49, 26 S.E.2d 22 (1943). A law grounded in police powers is a law based on what the General Assembly "judges fit for the protection and welfare of its people . . . ." Merchants' & Planters' Bank v. Brigman, 106 S.C. 362, 91 S.E. 332 (1917). Thus, the decision of how much weight to give to the economic impact on existing retail stores must be made in light of the General Assembly's intent to provide for the protection and welfare of the people. ⁽³⁾

Given such an intent, is the economic impact on existing retail stores created by granting a new retail liquor license relevant to furthering the protection and welfare of the people? The answer is yes. Certainly not all cases of negative economic impact on existing licenses in the community will warrant denial of a new license. When such an impact is alleged, however, it is necessary to examine the evidence presented on the scope and severity of the impact to adequately evaluate its effect on the public welfare.

In the instant case, the "bad check" evidence suggests that a debilitating loss of profits may contribute to violations of laws designed to protect the public welfare. See S.C. Code Ann. § 34-11-60 where drawing and uttering a fraudulent check is a crime. Indeed, other jurisdictions concerned with whether sufficient licenses have been issued have also been concerned with whether granting an additional liquor license would interject a license into an area where existing operators were in a state "of impending operation at a loss." Park Distributing Co. v. Delaware Liquor Com'n, 44 Del. 6, 54 A.2d 551(Del.Gen.Sess. 1947). In addition, other courts have found economics to be a valid licensing factor since some licensing bodies have "found from past experience that licensees who attempt to operate with inadequate resources oftentimes succumb to the temptation of committing violations of the Alcoholic Beverage Control Law." Tobkes v. O'Connell, 272 A.D. 240, 70 N.Y.S.2d 494, 496 (1st Dep't 1947). Thus, the economic impact to the existing license holders in the area is a relevant consideration for deciding whether to grant an additional liquor license.

iii. Other meaningful factors

Other factors to consider can be inferred from the use of the word "sufficient" in § 61-6-910. "Sufficient" means "enough to meet the needs of a situation." Merriam-Webster Collegiate Dictionary, www.m-w.com/cgi-bin/dictionary, June 11, 2001. Thus, consideration can be given to whether the existing retail liquor stores are adequate for the needs of the community. For example, in deciding whether the needs of a community have been met, other jurisdictions have considered "whether the clientele to be served [by the new license] is different from that served by the existing business." Pennsylvania Liquor Control Board v. Spring Gulch, Inc., 87 Pa.Cmwlth. 395, 487 A.2d 472 (1985). Thus, a relevant factor is deciding whether the new license serves a clientele different from the existing licenses.

iv. Factors Considered

In summary, determining when a sufficient number of licenses have been issued for a community can include any number of factors. However, based on the evidence presented in the instant case, the most significant factors are identifying the number of existing retail stores in the community, determining the location of the existing stores, assessing the economic impact the new license will have on existing stores, and deciding whether the clientele to be served by the new license is different from that already served by the existing license holders.

It is important to note that the ALJ is a fact-finder. The ALJ, as the finder of fact, must decide the case based on the evidence presented in the hearing and may not conduct its own independent investigation of the facts. E.g., People v. Hobley, 182 Ill.2d 404, 696 N.E.2d 313 (1998); see also Coleman v. C.I.R., T.C. Memo. 1963-19, 1963 WL 410 (Tax Ct. Jan 24, 1963) ("[W]hile we may sympathize with the petitioner we must decide the case on the evidence presented, which is wholly inadequate to support petitioner's claim here.").

Here, the evidence shows that the area already has a significant number of existing retail liquor stores. Within a 3.1 mile radius of Sherr's store, one additional store has just been granted a retail liquor license, two additional stores (including Hanna's proposed store) are planning to open, and no fewer than eight existing retail liquor stores are already in operation. If a radius of four miles is used, the number of retail liquor stores already in operation in the area grows to ten. Such a large number is a factor weighing against granting an additional license.

Another factor weighing against granting Hanna's license is the location of his proposed store. The immediate area consists of two zip code areas (29206 and 29223) with a combined population of 29,000 residents. Under the facts of this case, no refutation was made against the evidence that the retail liquor industry recommends one retail liquor store for every population of 20,000 residents. Sherr (who is in the same immediate area that Hanna seeks to serve) operates his store in the same immediate service area for at least five other licensed liquor stores. Thus, at least when measured by the uncontradicted standard used by the retail liquor industry, a resident population of 29,000 is already more than adequately served and weighs against granting an additional retail liquor license.

In addition, I do not find that the highway traffic on Decker Boulevard provides a meaningful basis for a "population increase." Hanna's supposition is that high traffic volume on Decker Boulevard will equate to increased sales.

No persuasive evidence demonstrates that "drive-by" traffic will result in sales of liquor. Indeed, given the existing liquor stores on Decker Boulevard (Hanna's being only .5 mile from Sherr's) no basis exists to believe that traffic will stop at Hanna's location when existing stores already serve the "drive-by" traffic. Further, while approximately 22,000 cars per day use Decker Boulevard, such a volume of automobile traffic has not prevented an overall decline in other business in the immediate area. For example, several nearby businesses (Kroger, Burger King, Target, and Video Update) have recently closed. Thus, under the facts of this case, traffic flow alone is not enough to conclude the base population should be increased in an effort to justify another retail liquor store.

In addition, the economic impact on existing stores is of such a degree that a detriment to the public welfare is presented. Again, the object of the law is not to protect profits of existing license holders. Rather, the object is to avoid additional licenses in an area that is approaching loss consequences since, if granted, existing license holders would face a temptation to violate the law. Already, in the instant case, existing stores have encountered declining sales to the extent that temptations to present "bad checks" have been yielded to by at least two license holders in the area. Further, Sherr, an existing and experienced license holder, has witnessed steady and consistent declining sales approaching loss proportions as additional licenses have entered the area. Such a circumstance negatively impacts the public welfare and does not weigh in favor of granting an additional license.

Finally, a relevant factor is whether the clientele to be served by the new license is different from that already being served by the existing license holders. Here, for all practical purposes, the clientele Hanna seeks to serve is identical to that being served by the other liquor stores in the area. No evidence in this case differentiates Hanna's service or products from that of any other liquor store in the area. Therefore, such a factor weighs against granting an additional license.

c. Conclusion

While many factors may be considered, the most significant factors for the instant case are identifying the number of existing retail stores in the community, determining the location of the existing stores, assessing the economic impact the new license will have on existing stores, and deciding whether the clientele to be served by the new license is different from that already served by the existing license holders. The evidence presented in this case indicates that as a whole, all of these factors weigh against granting Hanna's current application.

The South Carolina Department of Revenue is directed to deny Marion C. Hanna's application for a retail liquor license for a store to be located at 1700-A Decker Boulevard in the Dentsville section of Columbia, South Carolina.

AND IT IS SO ORDERED

______________________

RAY N. STEVENS

Administrative Law Judge

Dated: June 14, 2001

Columbia, South Carolina

1. Stevenson v. DOR and Sherr, 01-ALJ-17-0109-CC, May 29, 2001

2. Other states' statutes have very specific criteria for limiting the number of licenses in an area. See, e.g., Mass. Statutes 138 § 17 (Westlaw 2001 Electronic Pocket Part Update) (statute sets the number of licenses for an area based upon the population of the area); Penn Statutes 47 P.S. § 4-404 (Westlaw, Current through End of the 2000 Regular Session) (new license must not be within two hundred feet of any other licensed premises).

3. Other jurisdictions have reached the same conclusion. See, e.g., Halbert v. Nebraska Liquor Control Commission, 206 Neb. 687, 294 N.W.2d 864 (1980) ("In the first place, the type of competition with which the Commission is to be concerned must, in some manner, affect the general public. As we noted in Allen v. Nebraska Liquor Control Commission, 179 Neb. 767, 140 N.W.2d 413 (1966), the purpose of limiting the number of licenses in a certain community must be related in some manner with furthering the interest of law and order and the well-being of the general public.").