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Department of Alcoholic Beverage Control Default Set Aside

Our office often handles cases involving charges of furnishing alcohol to a minor, i.e., by an adult friend to a juvenile friend at a bar or outdoor music festival, and selling alcohol to a minor, often at a liquor store or 7-11, wherein an obvious fake ID is presented.  

The cases are often part of a sting operation by the Department of Alcoholic Beverage Control and can have significant criminal penalties.

When the Department of Alcoholic Beverage Control accuses a nightclub of violating alcohol statutes and regulations, the livelihood of the nightclub owner and employees are jeopardized.  In other words, it is not just an individual facing a conviction – it can be dozens of people.

In September 2019, undercover Department of Alcoholic Beverage Control (ABC) personnel discovered several illicit activities taking place at The Palms, a well-known, popular nightclub in Signal Hill, in Los Angeles County.  The undercover ABC officers claimed that The Palms exceeded its alcoholic license privileges by knowingly permitting the illegal sale, possession and consumption of alcohol and controlled substances at its premises and permitting several of its employees to violate the Health & Safety Code, the Business and Professions Code and the California Code of Regulations by consuming alcohol in unlicensed areas, exposing their genitalia and performing simulated sex acts, furnishing cocaine and drug paraphernalia to club patrons and smoking and ingesting cannabis on the premises.

On January 30, 2020, the Department of Alcoholic Beverage Control issued a misdemeanor citation to George Cataloiu, the Palms president, demanding that he appear in court on June 15, 2020.

On September 11, 2020, the Department issued a 40-count accusation against GC Brothers Entertainment LLC dba The Palms, alleging it exceeded its license privileges as described by the undercover officers.  On this day, the Department served the accusation on GC Brothers by certified mail to the Palms in Signal Hill.

GC Brothers did not respond and, on November 23, 2020, the Department entered a default and revoked the nightclub’s liquor license.  As the reader may know, under California Government Code § 11520, the Department may act based on its own evidence if the respondent either fails to file a notice of defense to an accusation or fails to appear at the hearing.

The Board served its decision on GC Brothers by certified mail to the Palms in Signal Hill.  This time, GC Brothers responded by filing a motion to vacate the decision following default, arguing it did not receive notice since the Palms was closed due to COVID-19.  

The Department denied the motion to vacate and GC Brother appealed to the Alcoholic Beverage Control Appeals Board, which affirmed the denial.

GC Brothers then sought a writ of mandate from the Second Appellate District directing the Appeals Board and Department to reverse their decision.

The Second Appellate District granted the writ and the case was remanded for a showing of good cause for relief from default.  It explained under Government Code § 11520(c), that after the Department issues a decision, the Appeals Board is authorized to grant the licensee relief from default for the sole reason that the licensee failed to receive notice of the accusation based on a showing of good cause.  

Here, the appeals court found the Appeals Board improperly found that no good cause had been established to set aside the decision because the Palms offered to show it failed to receive notice of the accusations.  The Appeals Board insistence that this showing must be made in the motion to vacate was unreasonable because the motion must be made within seven days of service of a decision.

Thus, the Second Appellate District found it was fairer to treat a motion for relief from default like an initial notice of defense as a general denial to be supported by evidence later.  Accordingly, the writ of mandate to reverse their decisions was granted and the case was remanded for a showing of cause for relief from default.

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