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Nostima Foods, Inc. v. State Liquor Authority

71 N.Y.2d 648 Court N.Y. Decision date 1988-05-03 English

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In the Matter of Nostima Foods, Inc., Respondent, v State Liquor Authority, Appellant, et al., Respondent.
Argued March 21, 1988;
decided May 3, 1988
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POINTS OF COUNSEL
Stephen D. Kalinsky and Gloria M. Dabiri for appellant.
Imposition of a penalty of a seven-day suspension of petitioner’s liquor license and a $1,000 bond claim and an additional monetary penalty of $1,750 was a valid act by the Authority and was not in excess of the Authority’s jurisdiction. (Matter of Dumbarton Oaks Rest. & Bar v New York State Liq. Auth., 58 NY2d 89 ; Matter of Farina v State Liq. Auth., 20 NY2d 484 ; Matter of Pepper & Salt Tavern v State Liq. Auth., 99 AD2d 840 , 62 NY2d 603 .)
Monroe I. Katcher, II, for Nostima Foods, Inc., respondent.
I. The "offers in compromise” procedure pursued herein is unauthorized by statute and is at variance with and in violation of the procedure established under sections 118 and 119 of the
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Alcoholic Beverage Control Law, and the provisions of rule 2 of the Authority’s rules promulgated pursuant thereto (9 NYCRR part 54). (Matter of Hilton Hotels v Epstein, 14 AD2d 399 , 11 NY2d 978 ; Matter of Costello v New York State Liq. Auth., 17 AD2d 547 ; Matter of Sorrentino v State Liq. Auth., 10 NY2d 143 ; Matter of Gross v New York City Alcoholic Beverage Control Bd., 7 NY2d 531 ; Matter of Weekes v O’Connell, 304 NY 259 ; Matter of Kaplan v Rohan, 8 AD2d 270 .) II. The "offers in compromise” procedure is void and ineffective by reason of article IV, § 8 of the NY Constitution. (People v Cull, 10 NY2d 123 ; Matter of Bizarre, Inc. v State Liq. Auth., 29 AD2d 500 , 22 NY2d 721 ; Matter of Valdes v State Liq. Auth., 55 MisC 2d 421.) III. Apart from the invalidity of the "offers in compromise” procedure, the imposition, exaction and collection from petitioner of the sum of $2,750 as a monetary penalty or fine, was in excess of the jurisdiction of the State Liquor Authority. (Matter of Dumbarton Oaks Rest. & Bar v New York State Liq. Auth., 58 NY2d 89 .) IV. The Authority, in assessing its penalty, and directing petitioner to remove the "Joker Poker” machine from the licensed premises forthwith, acted without statutory authorization or petitioner’s consent. (Matter of Plato’s Cave Corp. v State Liq. Auth., 68 NY2d 791 ; Murray v State Liq. Auth., 133 AD2d 569 .)

OPINION OF THE COURT

In 1986, the State Liquor Authority instituted a proceeding to revoke or cancel petitioner’s restaurant liquor license, alleging that petitioner mislabeled alcoholic beverage containers in violation of Alcoholic Beverage Control Law § 106 (2) and had suffered or permitted gambling on its premises by maintaining a "Joker Poker” video game in violation of Alcoholic Beverage Control Law § 106 (6). In response, petitioner invoked the Authority’s "offer in compromise” procedure, which enables the licensee to offer to plead "no contest” in exchange for a particular penalty. Under the procedure, the offer is irrevocable and the "no contest” plea automatically becomes effective if the Authority accepts the penalty that the licensee proposed. Petitioner’s offer proposed a maximum penalty of bond forfeiture ($1,000), a seven-day license suspension on the gambling charge, and a fine of $1,750 on the mislabeling charge. The Authority accepted the proposal,

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imposed the suggested penalties and, in addition, directed petitioner to remove the "Joker Poker” machines from the premises. Petitioner thereafter commenced the present proceeding challenging the regulatory agency’s authority both to establish an "offer in compromise procedure” and to impose a fine in connection with disciplinary proceedings against a licensee.

Supreme Court annulled the Authority’s determination, directed the Authority to return, with interest, the $2,750 petitioner had paid and remanded to the agency for a hearing. Citing section 54.1 (c) (2) of the Authority’s rules (see, 9 NYCRR 54.1 [c] [2]), the court concluded that the agency’s own regulations contemplated compromises only in connection with suspension proceedings and that the Authority therefore had no power to accept an "offer in compromise” in petitioner’s case. The court also noted alternatively that the offer the Authority actually accepted exceeded the terms of section 54.1 (c) (2), which provides the licensee charged in a suspension proceeding "may request that a bond forfeiture or fine be imposed in lieu of any suspension” (emphasis supplied). The Appellate Division affirmed, relying solely on the latter ground. That court then granted the Authority permission to appeal to this court (see, CPLR 5602 [a] [2]), certifying the following question of law: "Was the order of the Supreme Court, as affirmed by this Court, properly made?”

Initially, the Authority is not limited to the compromise procedure suggested in section 54.1 (c) (2) of its rules, which pertains only to suspension proceedings. To the contrary, State Administrative Procedure Act § 301 (5), which permits disposition of any adjudicative proceeding "by stipulation, agreed settlement * * * or other informal method”, gives the Authority a broader power to enter into settlement arrangements or accept "offers in compromise” in other regulatory disputes. Further, since section 54.1 (c) (2) applies only in suspension proceedings, the range of possible compromise penalties it prescribes is not controlling here.

Nonetheless, we conclude that the Authority’s determination was properly annulled. Under the statutory scheme prescribed by the Legislature, the Authority has no power to impose fines for violations of the rules and regulations governing licensees (Matter of Dumbarton Oaks Rest. & Bar v New York State Liq. Auth., 58 NY2d 89 ). Since fines are not within the categories of permissible penalties authorized by the Legis

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lature, the Authority has no more power to include a fine as part of a compromise settlement than it does to impose a fine following a fully litigated proceeding. Nor can we agree with the Authority’s position that petitioner, having itself proposed the offer in compromise, is now estopped from challenging the Authority’s power to impose a fine. Being punitive in nature, a fine may only be authorized by the Legislature (see, Matter of Dumbarton Oaks Rest. & Bar v New York State Liq. Auth., supra, at 93). Here, the Legislature has expressly withheld from the Authority the power to assess a fine. Matter of Farina v State Liq. Auth. ( 20 NY2d 484 ) is not to the contrary; it did not involve the imposition of a criminal sanction, and is, therefore, not determinative here.

This is not to suggest that the Authority and its licensees may not use the "offer in compromise” procedure to bargain for reduced penalties in exchange for "no contest” pleas. We hold only that the bargained-for penalties must remain within the classes of sanctions, such as suspensions and bond forfeitures, that are authorized ill the statutory scheme.

Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Titone, Hancock, Jr., and Bellacosa concur in Per Curiam opinion.

Order affirmed, etc.

Cases cited

Statutes and regulations cited