Md. high court weighs Baltimore board’s power to suspend liquor licenses

ANNAPOLIS – Baltimore bar owners can be stripped of their liquor licenses for illicit sexual activity in their taverns regardless of whether they knew it was occurring, an attorney for the city’s liquor board said Tuesday in urging Maryland’s top court to reinstate a one-month suspension of the liquor license at Club Harem.

The board’s rules establish a “bright line” of strict liability for bar owners “in all cases, in all places” for what occurs in their establishments, Michael J. Salem told the Court of Appeals.

“We are trying to remedy a perceived evil,” added Salem, an assistant Maryland attorney general, in pressing the board’s case against Club Harem’s owner, Steven Kougl.

But Kougl’s attorney, Peter A. Prevas, said the board’s rules are not so clear regarding an owner’s liability. Under the rules, owners can be held liable – and their licenses suspended and even revoked – if they “permit or suffer” an employee soliciting anyone for prostitution or immoral purposes, Prevas told the high court.

The requirement of the owners’ permission or sufferance belies strict liability and instead demands that they knew or reasonably should have known of the illicit behavior before they can be held liable, Prevas said, noting that the board never said Kougl had any knowledge of such activity at the bar.

Several Court of Appeals judges appeared to be as divided as the attorneys.

Judge Sally D. Adkins, in apparent support for the board, said strict liability would be in keeping with the panel’s desire to prevent illicit sexual activity in bars they license because it would compel owners to pay very close attention to what their employees are doing.

But Judge Irma S. Raker said perhaps the appropriate liability standard under the board’s rules is “imputed knowledge” on the part of the owner.

Falling between strict liability and constructive knowledge, imputed knowledge would hold owners liable for what they or their bar managers knew or reasonably should have known was occurring in their establishments, said Raker, a retired jurist sitting by special assignment in place of Judge Shirley M. Watts.

Watts did not publicly disclose the reason for her recusal.

Strict liability?

Judge Joseph M. Getty wondered aloud why the board declined to use the phrase “strict liability” in a regulation it now argues holds bar owners strictly liable.

In response, Salem told Getty that “perhaps what you are suggesting is a better way to go.” The lawyer urged the judges, however, to defer to the board’s interpretation of its own regulation, adding that imposing strict liability on bar owners is a fair reading of its rules.

But Prevas disagreed, saying that when the board imposes strict liability on owners it does so more clearly. He cited the board’s prohibition on the sale of alcohol to minors, a rule which makes no reference to “permit” or “suffer.”

With regard to illicit sexual activity, however, the board’s rules impose a liability standard on bar owners short of “if it happened on your premises, you’re guilty, period,” said Prevas, of Prevas and Prevas in Baltimore.

Actual or constructive knowledge by the owner “was the balance that the liquor board was looking for” before liability could be imposed, he added.

The controversy arose April 25, 2013, when plainclothes detective Fletcher Jackson entered the club on East Baltimore Street as part of a prostitution investigation. Employee Jamaica Brickhouse allegedly asked Jackson to join her and he bought her a drink, according to court papers.

After some small talk, she allegedly exposed her breasts to Jackson, suggested a lap dance and a trip to a place where they could “do whatever.” Jackson asked how much it would cost for sex; she allegedly replied it would be $170 for the room plus a tip for services. Jackson said he would tip her $100 and she allegedly agreed.

Brickhouse was issued a criminal summons eight months later but the state declined to prosecute.

The liquor board charged Kougl with the rules violations on July 2, 2014, nearly 15 months after the incident at the club.

A few weeks later, the board voted 2-1 to suspend Kougl’s license. Kougl lost his appeal in Baltimore City Circuit Court before winning in the Court of Special Appeals.

The case is The Board of Liquor License Commissioners for Baltimore City v. Steven Kougl et al., No 43, September Term 2016.