On certification to the Superior Court, Appellate Division, whose opinion is reported at 398 N.J. Super. 220 (2008).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
N.J.S.A. 33:1-12.31 prohibits persons from holding a beneficial interest in more than two retail alcoholic beverage licenses in New Jersey. In this appeal, the Court determines whether the Director of the Division of Alcoholic Beverage Control exceeded his authority by applying the remedy of divestiture -- allowing sale of a retail alcoholic beverage license to an unrelated bona fide purchaser -- when enforcing compliance with N.J.S.A. 33:1-12.31.
Prior to 1998, Circus Liquors, Inc. owned two liquor licenses in Middletown Township. In December 1998, Middletown granted a liquor license to Food Circus Supermarkets of Middletown, Inc. (Food Circus). Food Circus and Circus Liquors were owned by the same group of shareholders (collectively "Circus"). Middletown routinely renewed Circus's ownership of all three licenses each year through 2004, approving applications that clearly revealed the ownership interest in all three. In June 2005, after reviewing Circus's renewal applications, Middletown discovered that it could not validly renew all three liquor licenses because of the two-license limit created by N.J.S.A. 33:1-12.31. Middletown denied renewal for one of the licenses issued to Circus Liquors because it had been inactive for over two years and would therefore require a "Special Ruling" from the Director of the Division of Alcoholic Beverage Control (Division) for its renewal.
Circus filed petitions with the Division challenging the license non-renewal and seeking a "Special Ruling" that would reactivate the license for the limited purpose of permitting Circus to transfer the license. The matters were transferred to the Office of Administrative Law. The Administrative Law Judge (ALJ) issued an initial decision granting summary decision to Middletown and dismissing Circus's petitions. In November 2006, the Director adopted the ALJ's initial decision, with modifications. The Director agreed that Circus's ownership of three licenses was inconsistent with N.J.S.A. 33:1-12.31, and that Circus Liquors did not have a valid claim of detrimental reliance because it could have no expectation of renewal of a license that would constitute a continuing violation of N.J.S.A. 33:1-12.31. At the same time, the Director allowed Circus the opportunity to divest itself of all interest in the license. The Director stayed the non-renewal until June 30, 2007, indefinitely suspended Circus's use of the license, and allowed Circus the remainder of the license term to sell its interest in the license to an unrelated bona fide third party. The Director found the stay to be appropriate and necessary "to facilitate an orderly transition" for Middletown and Circus "while still ensuring compliance" with the statute.
Middletown appealed, arguing that the stay impermissibly allowed a continuing violation of N.J.S.A. 33:1-12.31. The Appellate Division agreed and reversed the Director's decision to stay the non-renewal in order to permit Circus to divest itself of the license, finding that the Director mistakenly created a circumstance by which the license holders could continue to profit from their unlawful conduct. Circus Liquors, Inc. v. Governing Body of Middletown, 398 N.J. Super. 220 (2008).
The Supreme Court granted the petitions for certification filed by Circus Liquors, 196 N.J. 343 (2008), and the Attorney General of the State of New Jersey on behalf of the Director, 197 N.J. 15 (2008).
HELD: With the Director's express authority to revoke, or to suspend, alcoholic beverage licenses comes the implied power to control the divestiture of interest in an improperly issued license. It was not arbitrary, capricious, or unreasonable for the Director to apply the remedy of divestiture in this matter to enforce compliance with the two-license limit created by N.J.S.A. 33:1-12.31.
1. Appellate court review of an administrative agency's decision is limited in scope. Without a clear showing that it is arbitrary, capricious, or unreasonable, an agency's final quasi-judicial decision should be sustained, regardless of whether a reviewing court would have reached a different conclusion in the first instance. A court must be deferential to the agency's expertise and superior knowledge of a particular field. (pp.7-8)
2. Substantial deference is owed to the Director's actions. In enforcing the State's alcohol regulations, the Director has powers of supervision and control that set him apart from any other formal appellate tribunal. The New Jersey Alcoholic Beverage Control Act (the Act) vests the Director with extensive regulatory power over the liquor industry. A municipality has the original power to pass upon an application for a license or its transfer, but that power is broadly subject to appeal to the Director. (pp. 8-9)
3. The Court is called upon to determine the scope of the Director's authority when remedying a violation of N.J.S.A. 33:1-12.31. The Act provides for fines and explicitly authorizes the revocation or suspension of any license in response to a violation of the Act. Unmistakably, an individual in possession of more than two licenses is subject to fines and the revocation or suspension of his or her license. That said, the Act does not reveal a mandate for the immediate revocation of a license the moment that a violation of N.J.S.A. 33:1-12.31 is unearthed. Here, in choosing to effectuate the Act's two-license limit through a controlled remedy of divestiture rather than immediate revocation, the Director no doubt considered the circumstances of Middletown's multiple-year issuances of these licenses to be unusual, given that all parties to these transactions were acting openly throughout. (pp. 10-11)
4. Generally, administrative agency heads may exercise powers that are expressly granted by statute and those that are fairly implied as necessary to carry out their assigned function. The Legislature has clearly granted the Director special powers of administration and control over the entire liquor industry. The Court is convinced that the Legislature meant for the Director to have ample implied authority to deal fairly with parties when executing his extensive authority. With the Director's express authority to revoke, or to suspend, licenses comes the implied power to control the divestiture of interest in an improperly issued license, as occurred here. (pp. 11-12)
5. The Director acted within his authorized powers when he indefinitely suspended Circus's license in order to permit it to divest itself of any interest in the offending license by selling it to an unrelated bona fide third party. Well-recognized principles of deference to an agency's quasi-judicial determination, coupled with the heightened deference given to the Director in the delicate area of alcohol regulation, militate against interference with the Director's chosen remedy in this matter. The Director's determination to apply the remedy of divestiture to enforce the Act's two-license limit in this matter was not an arbitrary, capricious, or unreasonable exercise of his discretion. His chosen remedy is entitled to stand. (pp. 12-13)
The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Director of the Division ...