The ORR Recommendations – (Finally) Bringing Michigan Liquor Law into the 21st Century
If you have not seen the ORR Recommendations yet, they are available here.
Our General Impression:
On the whole, we are pleased with the recommendations made by the ORR. We were particularly pleased to note that several of the changes are those that Jim Stariha has advocated in favor of over the past forty-six years.
If these changes are adopted piece-meal, the change may be negligible. On the other hand, if a majority of the changes are adopted, we expect that working with MLCC will become a more streamlined and uniform process, benefitting all involved. Perhaps the most effective change, one which was added by the ORR and not the Advisory Rules Committee, would be a comprehensive revision of the Liquor Control Code. At the moment, the Code is best described as patchwork of legislative amendments and compromises pieced together over the past 80 years – the result is occasionally contradictory and often lacking in clarity or common sense. A complete revision of the Liquor Control Code could create a modern and uniform system of liquor control in our state. It is worth noting that while we strongly advocate for such an approach, we do not believe any comprehensive changes are on the immediate horizon.
A Few of the Many Recommendations (with our opinions and explanations, where relevant):
- Allow license applicants to submit the same Brewer’s Notice and supporting documents required by the federal Alcohol and Tobacco Tax to the Commission concurrent with their submission to TTB. — We approve. This increases parity between the state and federal government – the result is increased efficiency and a decreased burden upon applicants. The booming “beer trade,” in Michigan promises positive economic effects for the state, and should be embraced.
- Issuance of a temporary license — Our (approving) opinion on this recommendation can be seen here.
- Eliminate the Fingerprinting requirement and run LEIN, NCIC or ICHAT checks on applicants if complete arrest and conviction information is deemed necessary. — We tentatively approve. While we believe that a criminal history should never be a bar to licensure, we also believe that the Commission should be fully aware of the criminal history of all applicants (and members/stockholders). If basic criminal background checks (e.g. ICHAT) were still run on all applicants, we believe the dual goals of safety and efficiency would be satisfied.
- Allow for immediate issuance of any permit that requires neither local government or local law enforcement approval. — We believe this is a common sense approach and approve wholeheartedly.
- Eliminate investigation of individuals already licensed with the Commission. — Again, this is common sense.
- Eliminate pre-licensing verification of finances by the Commission. — We approve. This process is time consuming, burdensome, and frankly, ineffective. While our firm refuses to work with any individuals intent on defrauding the Commission, there are several ways in which the current process of “verifying the finances” could easily be achieved with “dirty money.”
- Eliminate the word “verifiable” from R 436.1105 and 436.1121 (dealing with “verifiable finances”). Use affidavits attesting to the source and legitimacy of funds used. — We disagree that it is necessary to amend either the Code or the Rules in order to use affidavits in this situation. Both the Code and the Rules refer to “verifiable” finances; significantly, the word is not “verified.” Because the finances only need to be “verifiable,” we believe that the use of affidavits (and potential follow-up investigations where necessary) satisfy the law and applicable rule. With that in mind, we believe that this approach will assist in expediting the licensure process and reduce the strain on MLCC’s Enforcement Division.
- Authorize “incomplete” applications for investigation. This was the practice of the Commission until recently. We certainly preferred the prior method (fee collection at final license issuance).
- Escrowed on-premises licenses should be transferable between adjacent counties subject to a five-year limitation on subsequent inter-county transfers. A fee of $10,000 should be assessed for this type of transfer. — Our broker friends have already voiced displeasure with this recommendation. As they argue, this change – if implemented – could greatly reduce the value of existing licenses. With that in mind, we believe the overall effect will be positive, increasing license availability and decreasing the number of licenses that languish in escrow with no benefit to anyone.
- Replace the current microbrewer and brewpub licenses with a single small brewer’s license, which combines the rights of the two current licenses. — Again, this change positively seeks to streamline licensure. By combining microbrewers and brewpubs into a single license, the effect is to give smaller brewers the best of all worlds. As noted above, we believe that Michigan’s beer industry plays an increasingly significant role in the state economy, and we welcome any move to promote that industry.
- Permit up to 40 non-transferable on-premises licenses where the licensee has invested at least $500,000. The licensee fee should be set at $25,000. — This change, if implemented, is intended to benefit chain restaurants in particular. We believe that a side-effect of this proposed change – decreased competition for other licenses – could positively assist smaller restaurants and bars that seek licensure.
- Require a higher standard of proof (knowledge) for many violations – except those involving minors. — We agree with this proposal wholeheartedly. While the protection of minors warrants a higher standard of proof, a lower standard makes more sense in many other situations. For example, if a small bag of marijuana was found (hidden) in a licensee’s restroom, the licensee could be found to have committed a violation even if the licensee took steps to prevent the presence of drugs on the premises and had no knowledge that drugs were on the premises. Licensees must remain vigilant; however, they should not be held liable for the unknown and unpreventable acts of third-parties.
- Increase the amount of liquor that on-premise licensees may buy from off-premise licensees. — For some of our smaller clients, the benefits of this recommendation could be immense. Liquor sales can be difficult to predict, especially for on-premise licensees in “resort” areas. Raising this bar would increase the flexibility that smaller locations have, permitting them to purchase products “on demand,” albeit at a higher cost.
- Reduce the fuel pump inventory threshold to $50,000. — We believe that the current law is arbitrary and, frankly, absurd. While we feel that the $50,000 is still an arbitrarily high number, it is sufficiently low to eliminate the bar that currently prohibits many gas station owners from obtaining licensure. Our only concern is what to do with all of the postage stamps?
- Increase license fees. — This may not be a popular idea with our clients; however, it is worth noting that the retail license fee in 1915 was $500. When inflation is taken into account, that would amount to over $10,000 today.
These are the recommendations that we found worth taking note of; for a full list of recommendations, we suggest you take a few moments to peruse the report.
Also worth noting — not all of the recommendations that we expected/hoped for, including elimination of the “1/2 mile rule” (Rule 436.1133) and elimination of the Church Rule (436.1503) made it into the final draft of the report.
*This information and thoughts herein are provided by the Liquor Lawyers at Stariha & Brower, PLC. As always, we remind readers that the materials on this site are provided purely for informational purposes and are not legal advice. These materials are intended, but not promised or guaranteed, to be correct, complete, and current. This blog is not intended to be a source of legal advice. Therefore, the reader should not consider this information an invitation for an attorney-client relationship. Readers should always seek the advice of competent counsel.