Laube

In these consolidated cases, petitioners are liquor licensees who suffered suspension or revocation of their liquor licenses because they allegedly “permitted” drug sales in their establishments. Neither licensee knew or had reason to know of the drug trafficking. In each case the Department of Alcoholic Beverage Control (Department) took action against petitioners’ licenses on the basis of its interpretation of McFaddin San Diego 1130, Inc. v. Stroh (1989) 208 Cal.App.3d 1384 [ 257 Cal.Rptr. 8 ]. McFaddin held that a liquor licensee “permits” drug activity when he or she fails to take reasonable steps to prevent it, even when the licensee has no reason to believe such activity is occurring, and regardless of the nature of the establishment or its clientele. The Alcoholic Beverage Control Appeals Board (Board) agreed with the Department’s application of McFaddin to petitioners and affirmed the Department’s decision. We issued a writ of review and heard oral argument. We annul the decisions of the Department and the Board.

Procedural Background

The Department initiated disciplinary action against petitioners on the ground that petitioners “permitted” drug transactions…