The State Liquor Authority (“SLA”) has broad powers to conduct searches under the Alcoholic Beverage Control (“ABC”) Law. Section 18 of the ABC Law authorizes the SLA to inspect “any premises where alcoholic beverages are manufactured or sold.”  With regard to on-premises licensees, Section 106 says, “All retail licensed premises shall be subject to inspection by . . . the duly authorized representatives of the liquor authority, during the hours when the said premises are open for the transaction of business.”  Section 105(15) grants the SLA the right to inspect the licensee’s books and records. In addition, licensees have a duty to cooperate with an SLA investigation.

            Even so, people, including businesses, are protected against unreasonable governmental searches and seizures by the Fourth Amendment.  Whether the Fourth Amendment will limit the SLA’s power to inspect is fact dependent.  Still, a review of case law is helpful.

In Finn’s Liquor Shop, Inc. v State Liquor Authority, 24 NY2d 647, the Court of Appeals examined three cases involving the use of unlawfully obtained evidence against a licensee.  In one of these cases, SLA investigators entered a liquor store and with the manager’s approval conducted a search of the premises.  Without determining who owned it, an inspector ruffled through a jacket hanging in a back room and discovered evidence liquor had been sold on credit illegally.  The SLA brought charges. 

At his hearing, the principal requested all evidence resulting from the jacket search be excluded because it was illegally obtained.  The Court of Appeals concluded the jacket was not open to the public and searching it violated the Fourth Amendment rights of the principal.  The Court evoked the exclusionary rule, which requires evidence obtained in violation of the Fourth Amendment be suppressed

Another case involved a hotel liquor licensee whose phones had been illegally wiretapped by police.  The SLA relied on evidence gained from the wiretap and sought to cancel the license.  Although it knew the criminal court had ordered the evidence suppressed, the SLA insisted it could use the evidence.  The SLA argued that the purpose of the exclusionary rule is to take away the incentive to invade a person’s Fourth Amendment rights.  Because it was not associated with the agency that instituted the illegal wiretap, the SLA argued it was free to use the suppressed evidence. The Court opined, “Simply put, the evidence against this petitioner, having been obtained through the use of an ex parte eavesdropping order which was invalidated by competent judicial authority, was inadmissible for any purpose.”

            Originally, the Court suppressed all evidence taken under governmental authority in violation of the Fourth Amendment.  But “[i]n recent cases, the Court has stated that ‘the application and scope of the exclusionary rule is ascertained by balancing the foreseeable deterrent effect against the adverse impact of suppression upon the truth-finding process.”  Even so, the Court expressly reaffirmed the Finn’s cases by pointing out that the illegal searches were conducted by either agents of the SLA or agents of the police acting in concert with the SLA.  It also said that the SLA has the power to penalize and therefore its proceedings are more akin to criminal proceedings.  Boyd v. Constantine, 81 NY2d 189 (1993). These cases show that the SLA does not have absolute power to conduct warrantless searches of every inch of a licensed premise and everything in it.  But they are a reminder that licensees also have a duty to cooperate with an SLA investigation.  Care must be taken to balance the requirement to cooperate with the licensee’s constitutional right to be free from warrantless or improper searches and seizures.  With so many legal nuances and issues at stake, a licensee under investigation should consult an attorney.