ABC Law Services Virginia

For most of the history of Virginia, there were little to no laws concerning the brewing of beer, distilling of liquor or turning grapes into wine. Thomas Jefferson made wine and George Washington’s distillery on Rt. 1 in Fairfax County Virginia is still in operation!
All Alcohol Beverage and Control laws started following the end of Prohibition in 1933 with the enactment of the 21st Amendment. While Prohibition was intended to save people from the “evils” of alcohol, it really just drove the alcohol business underground, thus making criminals and bootleggers rich. Consequently, Congress left it to the states as to whether they wanted to allow alcohol. Virginia approved the sale of alcohol in December of 1933 and set up a complicated mechanism for its regulation and sale.

Basically, Virginia has a “Three Tier System.” The three tier are:
Manufacturers (breweries, distillers and wine growers)
Wholesalers
Retailers (“restaurants” for on-premise consumption of alcohol, “retailers” for purchase of off-premises consumption of beer and wine (e.g. 7-11, Safeway), and “ABC stores” for the off-premises purchase of distilled spirits).
As you can already tell, there are different rules for Distilled Spirits and for Beer and Wine. And this fact is evident in almost all aspects of the ABC laws.

For beer and wine, each tier is totally independent of the other tier. Beer and Wine manufacturers can not sell to the public, nor to retailers. Retailers must get their beer and wine from wholesalers. For example, they can not go directly to the brewery nor can they go to another retailer (e.g. a restaurant cannot go to Costco to buy beer and then sell it at their place).

The three tier system also exists with distilled spirits, except that the ABC acts as the wholesaler to restaurants and the retailer to the public. Distillers have to give their wares to the ABC, and restaurants and people have to buy their liquor from ABC stores.

Have you ever noticed in some big cities that there are bars where you can walk in and get a drink but not any food? Not in Virginia. We only have restaurants. While there are a few minor exceptions for niche businesses like Day Spas or Oyster Bars, in order to serve any alcohol, you must have a full service restaurant with a menu that includes entree’s. And in order to serve distilled spirits, there is a food to alcohol ratio requirement — 45% of the restaurants gross receipts must be from food and non-alcoholic beverages.

An ABC License can be acquired simply by logging on to the ABC website and filling out the forms. Like anything, there is no law that says you need an attorney. Many people successfully acquire a license on their own. However, if a problem arises, it may exclude you from a license. Many times these problems could have been avoided had the applicant first sought legal counsel.
The ABC license for a restaurant is most likely that restaurant’s most important profit generator. We always find it strange that a restaurant owner will pay for architects, builders, or consultants, but not a lawyer to handle their most important profit asset – their ABC license. For example, choosing the type of license is essential. Can you generate the food sales to support a mixed beverage (liquor) license, or will a beer and wine license that does not require a food to alcohol ratio work better? Where in the restaurant will the ABC allow sales? Is your menu sufficient to qualify for an ABC license? Is the business form (e.g. corporation, LLC, partnership) and the persons involved in that entity eligible for a license? The list goes on and on. If a lawyer is consulted ahead of time, these types of questions can be answered appropriately, enhancing your chances of acquiring a license.

There is no comprehensive list of the types of ABC violations. Any violation of the ABC Regulation or ABC Code can result in a violation. There are basically three major types of violations.
The first and most common class of violations involve serving underage persons. Most think that they can be protected from this just by “carding” patrons. But let’s face it, many people who work in restaurants just can’t get it right. And as a business owner, you are responsible for the actions of your staff. There is a way to protect your license ahead of time. Recent changes in the law give the ABC the ability to consider the employer’s previous steps to train his/her staff to assure no underage sales are done. In fact, the ABC agents will even help you with training.

The second classification of violations are those related to not following the intricacies of the ABC regulations. For example, here are a few of the many types of violations: A restaurant must acquire all their liquor from a Virginia ABC store. When a liquor bottle is empty, it must be destroyed. All liquor must be served by the restaurant – patrons cannot pour their own drinks. (The one exception to this is the Korean liquor Soju, which is a ceremonial drink that by tradition calls for people to pour others a drink.)

The third classification involve financial and reporting violations. There are extensive reporting requirements. Believe it or not, failure to simply file a report on time can result in complete revocation of a license. In addition to reports, there are food ratio issues. A beer and wine license only requires the restaurant to have a full service kitchen and sell a bare minimum amount of food. A liquor license (called “mixed beverage license) requires the licensee to sell a certain percentage of food (as measured by amount of sales of food verses amount of sales of liquor). Failure to meet the minimum percentage of food sales is a common violation. Recently, a number of clients have approached us with this problem brought about by the fact that they sell high end liquor. This can be best described with an example. A vodka tonic made with rail vodka at $7 and a vodka tonic made with Grey Goose for $14 have equivalent amounts of vodka. But, the Grey Goose requires twice the amount of food to be sold. So, restaurants that are selling lost of high end liquor often have more problems meeting their minimum food requirement.

This list is not meant to be a full list of all the violations. Rather, it is just an illustration of a few types of violations to give you an idea of what traps are out there for restaurant owners.

We assume that most readers of this site and the blog already have ABC retail licenses. Consequently, you already know how the ABC works (or for those who are frustrated with the system, how it does not work). So, why not represent yourself in an ABC Hearing?

You would expect our answer to be, “You should never represent yourself.” After all, as lawyers, we don’t get paid by people who don’t use our services. But to be honest, there is no law or regulation that says you have to have a lawyer in an ABC hearing. For that matter, there is no law that says you have to have a lawyer in any hearing in a court of law. Even people charged with the death penalty can waive a lawyer. So if you think you are competent and know the law and the rules of evidence, you could save some money and do it yourself.

But let me tell you what we just witnessed while sitting in a recent ABC hearing. While we were in the hearing room, a series of six violations for a restaurant were being heard. The subject of the violations, the owner, chose to represent himself. He was an intelligent man. And we are sure he knows a lot more about running a restaurant that we do. But we know a lot more about the rules of evidence and trying a case than he does. Because he was not trained in the rules of evidence, he failed to object to testimony. Consequently, all of this objectionable testimony is now part of the record. And since that record is permanent, if he wants to appeal the ruling, the ABC Board will be able to read it all.

Let us give you just a few examples.

1.Distilled Spirits Regulation Violation: Failure to Obliterate the Stamp and Destroy the Bottle. When the ABC Agent described how she found numerous empty bottles of Tequila behind the bar, she said that there were no stamps them. There is nothing wrong with that statement. However, she went on to say, “When we see no stamps, we assume the licensee illegally went to DC or Maryland and purchased the liquor.” The owner said nothing! Any lawyer would object on numerous grounds, such as, (1) “Objection, speculation.” (2) “Objection, the Agent is testifying to facts and can not make conclusions of law.” (3) “Objection, Irrelevant. The Licensee is not charged with this offense.” Either of these would have made this statement by the ABC agent inadmissible. Now, on the record of the owner’s case, is a statement that the ABC agent assumed he bought the liquor out of state.

2.Distilled Spirits Regulation Violation: Failure to Provide Required Security Per Local Government Special Use Permit / Zoning Requirements. The allegation was that the licensee did not have the required number of security guards on premises. The ABC agent stated, “When I arrived, the Licensee did not have the 6 required security guards.” There is no problem with that statement. But she went on to say, “What brought it to my attention was that there were teenagers outside drinking alcohol and the police had to be called.” The owner did not object. Any decent lawyer would object on grounds such as, (1) “Irrelevant. All that is at issue is the number of security guards, which the Licensee had on premises. Underage drinking outside is irrelevant to this issue.” (2) “Answer goes beyond the scope of the question asked (or in the case of a hearing where the ABC officer testifies without questions) goes beyond the scope of the charges at issue.” Since the owner failed to object, now on the permanent record of his case is a reference to underage drinking that most likely has absolutely nothing to do with his restaurant, and was probably just two teenagers who happened to pick a parking lot in a strip mall to drink.

3.Beer Wine and Distilled Spirits License: Failure to Have an ABC Manager on Duty Who Can Read and Speak English. The ABC agent testified that the ABC Manager did not speak English. There is nothing objectionable in this statement. But then the ABC Agents said, “I find it interesting that the Licensee did not have his manager here today to show us she can speak English. I’ll tell you why, because she can not speak English and he does not want you to know it.” Here are just a few of the objections a lawyer would make, (1) “Objection, speculation. Calls for conjecture of what is in the Licensee’s mind.” (2) “Objection, Argumentative. The Agent is here to testify about facts. Inferences derived from those facts are for the Hearing Officer to decide.”

We could go on and on, but we think you get the point.

Put it this way. No good restaurant owner would let us take over the business for a weekend. It would be out of business in a short time because we do not know how to order the right amount of food or alcohol, don’t know the proper staffing levels to provide good service without overspending on labor costs, don’t now about health code requirements, nor do we know how to cook if the cook does not make it into work. Likewise, no good lawyer would let a restaurant owner try his case.

Let’s face it. The stakes are high. How much money does a restaurant lose if it’s license is suspended for a day, a week or a month? The loss in revenue and damage to the restaurant’s reputation makes the expense on a lawyer very small.