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Fayette Fair Trade, Inc. v. Governing Body of the City of Perth Amboy

August 8, 2007


On appeal from the State of New Jersey Department of Law and Public Safety, Division of Alcoholic Beverage Control, OAL Docket No. ABC360-05.

The opinion of the court was delivered by: Axelrad, J.T.C. (temporarily assigned).



Argued: May 1, 2007

Before Judges Coburn, Axelrad and Gilroy.

Petitioner Fayette Fair Trade, Inc. appeals from a final determination of the Director of the Division of Alcoholic Beverage Control (ABC) suspending its license based on a finding of an undisclosed business interest in the license, and the licensee's failing to disclose that interest in the application, or providing false, misleading or inaccurate information about it. At issue in this appeal is whether a licensee's employee who runs the day-to-day operations of the licensed premises with little or no oversight from the owner of the corporation licensee and who shares in the licensee's profits, but is not a shareholder, holds an impermissible undisclosed beneficial interest in the liquor license in violation of N.J.S.A. 33:1-25. The ABC Director found unlawful conduct, and we affirm.


Appellant, the holder of a plenary retail consumption license issued by Perth Amboy, operates a bar at 329 Fayette Street. This matter arose from the decision of Perth Amboy, which, by resolution dated December 9, 2004, suspended appellant's plenary retail consumption license for 136 days, having adjudicated the licensee guilty of the following charges:

(1) Failure to maintain true books of account or failure to produce true books of account within seven business days of demand, in violation of N.J.A.C. 13:2-23.32 - 60-day suspension (Second Violation);

(2) Undisclosed person not otherwise disqualified with a beneficial interest in a liquor license or licensed business, in violation of N.J.S.A. 33:1-25 - 30-day suspension;

(3) Failure to display Fetal Alcohol Syndrome warning poster, in violation of N.J.S.A. 33:1-12a - 1-day suspension; and

(4) Failure to disclose, or false, misleading or inaccurate answer to a question of material fact on application, in violation of N.J.S.A. 33:1-25 - 45-day suspension.

Fayette appealed Perth Amboy's decision to the ABC and requested a stay of the 136-day suspension. On December 13, 2004, the Director issued an order staying the suspension pending appeal. The matter was transmitted to the Office of Administrative Law as a contested case. The investigating detective; Ybelises Jerez, the club's manager; Mario Rosario, the licensee's sole shareholder; and the licensee's accountant testified at the plenary hearing before the Administrative Law Judge (ALJ).

The following testimony was elicited. Rosario owns 100% of the shares of stock of the licensee corporation, as reflected on the long-form liquor license application submitted for the 2000-2001 license term. Rosario answered in the negative in response to Question 9.3 on the license application:

Has the applicant agreed to permit anyone not having an ownership interest in the license to receive or agreed to pay anyone (by way of rent, salary, or otherwise) all or any percentage of the gross receipts or net profit or income derived from the business to be conducted under the license applied for?

Appellant filed short-form renewal applications for the 2001-2002, 2002-2003, 2003-2004, 2004-2005 and 2005-2006 license terms. On July 1, 2002, Rosario entered into a written agreement with Jerez to pay her an undesignated share of the licensee's profits as her only compensation for operating and managing appellant's business. For the 2002-2003, 2003-2004 and 2004-2005 licensed terms, appellant indicated that Jerez ran the day-to-day operations at the licensed premises. Appellant, however, did not amend the negative answer to Question 9.3.

In a recorded statement to the investigating officer, Jerez described Rosario as her "partner" and disclosed her compensation arrangement. Jerez further stated she made all of the purchases for the bar and general operating decisions. She claimed the bar would not operate if she were not there because of Rosario's unavailability due to other business commitments.*fn2

Jerez testified that she opened and closed the club during general business hours. She purchased beer, liquor and other supplies for the business, explaining that sometimes she used her own money or credit to make the purchases and would then be reimbursed by the ...

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