Cloister E., Inc. v. N.Y. State Liquor Auth.

• Decision Date: 28 September 2021
• Docket Number: 20-CV-6545 (LAK)
• Citation: 563 F.Supp.3d 90
• Parties: The CLOISTER EAST, INC., et al., Plaintiff, v. NEW YORK STATE LIQUOR AUTHORITY, et al., Defendant.
• Court: U.S. District Court — Southern District of New York

563 F.Supp.3d 90

The CLOISTER EAST, INC., et al., Plaintiff,

v.NEW YORK STATE LIQUOR AUTHORITY, et al., Defendant.

20-CV-6545 (LAK)

United States District Court, S.D. New York.

Signed September 28, 2021

Robert Garson, Kevin Kehrli, Jacob Pargament, Garson, Segal, Steinmetz, Fladgate LLP, Attorneys for Plaintiffs.

James B. Cooney, Benjamin D. Liebowitz, Matthew L. Conrad, Assistant Attorney General, Letita James, Attorney General of the State of New York, Attorneys for Defendants.

MEMORANDUM OPINION

Lewis A. Kaplan, District Judge.

Life in New York changed dramatically in March 2020 when the Governor of New York declared a state of emergency due to the COVID-19 pandemic.¹ Almost immediately, movie theaters, gyms, and other venues were directed to shut down. Restaurant and bars were permitted to serve food for off-site consumption only.²

For many months thereafter, New York struggled to stem the spread of the COVID-19 virus. From February 29 to June 1, 2020, more than 200,000 cases of COVID-19 were reported in New York City alone, resulting in more than 18,000 deaths.³ The pandemic brought unprecedented challenges also to those lucky enough to stay healthy. From February to April 2020, nearly two million New Yorkers lost their jobs.⁴ And all New Yorkers had to contend with many months of "lockdown" and the isolation and uncertainty that ensued.

As the summer approached, New Yorkers understandably were eager to return to some semblance of normal life and commerce. Nonetheless, a state of emergency remained in effect, and reopening occurred in cautious phases. To that end, the Governor issued an executive order on June 6, 2020 allowing restaurants and bars to serve food and beverages only outdoors and in compliance with guidelines promulgated by the New York Department of Health (the "DOH").⁵

This case involves one particular effort by the New York State Liquor Authority's (the "SLA") efforts to enforce those guidelines. Plaintiffs–The Cloister East, Inc., which operates a restaurant known as Cloister Café, and its owners – claim that the SLA improperly suspended their liquor license after an article published on the Gothamist.com reported that Cloister Café was hosting illegal "pandemic parties." They seek damages, declaratory and injunctive relief pursuant to 42 U.S.C. § 1983 based on alleged violation of their constitutional rights by the SLA and various of its officers and employees.

Background

I. Executive Orders and DOH Guidance

Executive Order 202.38, issued on June 6, 2020, allowed a restaurant or bar to serve patrons "on-premise only in outside space, provided such restaurant or bar is in compliance with Department of Health guidance promulgated for such activity."⁶ The applicable DOH guidance (the "DOH Guidance") defined "outdoor spaces" as "open-air space designated for the consumption of food and/or beverage," which may have a "temporary or fixed cover" if the "cover has at least two sides open for airflow."⁷ The guidelines did not set occupancy limits for outdoor spaces. However, they directed that "[t]o minimize further spread, social distancing of at least six feet must be maintained between individuals, where possible."⁸ To that end, the guidelines required that "outdoor capacity [must be] limited to the number of tables that can be safely and appropriately arranged such that each table is a minimum of six feet away from another."⁹ It mandated also that tables be limited to 10 patrons each and that "individuals seated at a table [ ] be members of the same party."¹⁰

The Governor subsequently issued Executive Order 202.43, which, in order to "prevent[ed] the unnecessary congregation of people to slow the spread of [COVID-19]," provided that restaurants and bars were required to ensure that the social distancing and face covering requirements set forth in the DOH Guidance were followed by all persons within 100 feet of the premises.¹¹ If these requirements were not adhered to, the restaurant or bar was required to cease serving alcoholic beverages.¹²

Finally, Executive Order 202.52 directed restaurants and bars to serve alcoholic beverages only if accompanied by food items.¹³ It emphasized also that while New York State had succeeded in lowering the COVID-19 infection rate through the state's careful approach to reopening, it was "incumbent" upon "business owners and local governments" to continue to "enforce public health requirements to allow [the] safe reopening to continue."¹⁴

II. The SLA's Authority and Procedures

The SLA is an agency of the State of New York that is responsible for administering the New York State Alcohol Beverage Control Law. The SLA may suspend, cancel, or revoke a liquor license "for cause."¹⁵ "Cause" includes "the existence of a sustained and continuing pattern of noise, disturbance, misconduct, or disorder on or about the licensed premises, related to the operation of the premises or the conduct of its patrons, which adversely affects the health, welfare or safety of the inhabitants of the area in which such licensed premises are located."¹⁶

Generally, it may suspend, cancel, or revoke a license only "after a hearing at which the licensee shall be given an opportunity to be heard."¹⁷ However, Section 401, subd. 3, of the New York State Administrative Procedure Act ("SAPA") allows state agencies – including the SLA – to order the summary suspension of a license if it "finds that public health, safety, or welfare imperatively requires emergency action."¹⁸ In such cases, the SLA is not required by statute to provide notice or an opportunity to be heard before ordering a summary suspension. Instead, a summary suspension order takes effect "pending proceedings for revocation or other action," which "shall be promptly instituted and determined."¹⁹

III. The Events of August 2020

On August 4, 2020, the Gothamist.com , an online outlet, published an article that claimed that Cloister Café was hosting "illegal, illicit pandemic parties."²⁰ Allegedly prompted by that article, Officer Charles R. Stravalle – an investigator for the SLA – visited the restaurant at around midnight on August 7, 2020.²¹ According to the amended complaint, Stravalle inspected the operation and spoke with Cloister Café’s owner "on several topics, none relating to COVID-19 enforcement."²² The amended complaint does not describe Stravalle's investigation in detail aside from alleging that he mistook a canvas covering above a patio area as a ceiling and "failed to notice" that there were only two walls enclosing that space.²³ Plaintiffs assert that Stravalle failed to conduct a proper investigation and caused an erroneous report to be submitted to the board of the SLA (the "SLA Board").²⁴

Later on that same night, the SLA Board met by video-conference to vote on whether to suspended Cloister Cafe's liquor license.²⁵ Plaintiffs were not notified of this meeting and accordingly were not provided an opportunity to be heard.²⁶

At that meeting, Margarita Marsico – associate counsel for the SLA – allegedly presented incorrect and misleading information to the SLA Board. According to the amended complaint, Marsico described Cloister Café’s outdoor area as a "secret backyard," despite the fact that Cloister Café had been "legally permitted" to serve food in that area for many years.²⁷ In particular, plaintiffs allege that Marsico told the SLA Board that there was "an illegal structure that was really three walls of neighboring buildings with a ceiling on top."²⁸ They allege that this statement was misleading because Marsico failed to explain that the ceiling was actually a "cloth awning," that there were "only two walls of neighboring buildings," and that the "temporary enclosure [had been] approved by the Department of Buildings and that the space is deemed to be an outdoor space."²⁹

Plaintiffs allege also that Marsico incorrectly informed the SLA Board that the maximum capacity at Cloister Café was "half of seventy-four" and that it was "way over occupancy."³⁰ They allege that Marsico "failed to inform the Board that the amount of people present in the Cloister Café was within the parameters of permitted occupancy."³¹ Likewise, they allege that Gary Meyerhoff, the SLA's general counsel, "made incorrect assertions of fact and law to the Board that there were seventy (70) people ‘inside’ and the presence of patrons at Cloister Café was illegal."³² Plaintiffs allege also that Marsico told the SLA Board that there was a live DJ on the premises and that the receipts for food items appeared suspicious, suggesting that Cloister Café had been serving alcohol without any food, contrary to Executive Order 202, 52.³³

Finally, plaintiffs allege that Marsico improperly relied on the Gothamist.com article and provided it to the SLA Board.³⁴ They further contend that the SLA Board improperly relied on the Gothamist.com article despite being "well aware" that the article was more prejudicial than it was probative.³⁵

Based on the information provided by Marsico and Meyerhoff, the SLA Board voted to issue an emergency order suspending Cloister Cafe's liquor license pursuant to Section 401(3) of the SAPA (the "Suspension Order").³⁶ In the Suspension Order, the SLA Board explained that it had been provided with evidence that patrons were observed inside Cloister Café and in a backyard area within an enclosure made of three walls and a fabric roof.³⁷ It stated also that evidence had been presented that patrons were observed drinking alcohol and "mingling amongst each other."³⁸ Based on those reports, it stated that the SLA Board had concluded that plaintiffs were violating one or more executive orders, which "creates a serious and continuing risk to the health, safety and welfare of the public."³⁹ It therefore concluded that it was "imperative that emergency action be taken against the immediate and continuing danger" resulting from plaintiffs’ conduct.⁴⁰ According to the Suspension Order, that decision was voted on by the chairman of the...