The latest episode of the AZ Big Podcast with Michael & Amy has officially dropped. Episode 39’s guest is Jake Curtis, shareholder of Burch & Cracchiolo, who talks all things liquor licensing, and tricky compliance issues that businesses face.
LISTEN TO THE PODCAST: https://open.spotify.com/episode/02BEOo41xDv0rXtPEviUAE?si=GsTMRf-VTv66wp9GVq8azQ
Listen to more of the AZ Big Podcast here.
Podcast Transcript:
Michael Gossie
Welcome to the AZ Big Podcast sponsored by Burch and Cracchiolo. I'm Michael Gossie, editor-in-chief of AZ Big Media, and I'm joined by my co-host, our publisher Amy Lindsey. Today, we're very excited to have in the studio, Jake Curtis, shareholder at Burch and Cracchiolo. Jake, thanks for being here.
Jake Curtis
My pleasure. Thanks for having me.
Amy Lindsey
Thanks for joining us. So, Jake, let's start off: tell us a little bit about your legal practice.
Jake Curtis
My legal practice has been pretty extensive over the years. I started off doing zoning and civil litigation, mostly – so business disputes and some personal injury. And then about five years ago, I teamed up with our former shareholder, Claire Abel. She was kind of my mentor. She had a long liquor license practice and she was winding down her practice and she wanted someone to take it over and so, she kind of mentored me. She was a really amazing lawyer. She'd been a female lawyer in Arizona since the 70s, which there weren't too many.
Michael Gossie
No, she was amazing.
Jake Curtis
Yeah, you had to be pretty awesome and so, she introduced me to everybody and kind of showed me the ropes and so, liquor licensing is a good practice area, you know, lots of people need it.
You really help your clients in a way that you don't in litigation. Litigation is a lot of fighting. It can be expensive, and so the liquor license practice is mostly helping people get their liquor licenses if they have compliance issues with the Department of Liquor, I help them work through those. And so, it's really been fun. It's been building people's businesses kind of, you know, they have a dream to start a restaurant and I'm one of the people that helps them do it. So, it's been pretty rewarding.
Amy Lindsey
Arizona is definitely growing with restaurants. Keeping you very busy I'm sure.
Jake Curtis
It's definitely growing.
Michael Gossie
So, you went from zoning to liquor licensing. So, what attracted you to liquor licensing? What kind of led you down that path?
Jake Curtis
Yeah, really it was less confrontational, so a little bit less stress. It was a more consistent practice and like I said, it was really more about helping people build their businesses. Not so contentious and so that kind of was a lifestyle thing.
Amy Lindsey
OK, so I was doing a little research, getting ready for today's podcast and I learned something kind of interesting. It's illegal to give away free drinks in Arizona?
Jake Curtis
It is illegal to give away free drinks. Yeah.
Amy Lindsey
So, how do bars and restaurants get around that?
Jake Curtis
Well, you can kind of.
Michael Gossie
Or, don't they?
Amy Lindsey
I was gonna say, can I ask this question on air?
Jake Curtis
Maybe they get away with it. They're not supposed to, but you can do things like 2 for one specials. You can give coupons, but you just can't make anything contingent upon drinking or getting a free drink in Arizona and so, you can imagine that that's a Department of Liquor safety issue. They don't want, you know, drinking contests and people getting free drinks. So yeah.
Amy Lindsey
OK, so what happens if a bar is out of compliance?
Jake Curtis
Well, if the Department of Liquor finds out about it and that can be through a complaint from somebody. They'll come and investigate and if they find out that it's a violation of the Arizona laws, then they'll issue a notice of violation. And then you go through a process a lot of times it's a …ends in a consent decree or a fine. They… the Department of Liquor is not looking to put people out of business for the most part unless it's egregious. And, so things like that that are just minor noncompliance, they want people to be educated, so they'll usually have the staff take classes to make sure that their processes are in place so that they don't violate it again. And there's typically maybe a fine. Or, they might be on probation for a little while until they come into compliance.
Amy Lindsey
OK.
Michael Gossie
So, say I'm a person that wants to start a business or a restaurant that serves alcohol. How do you get started? What's the process?
Jake Curtis
Yeah, first, you decide what kind of license you need and so there's various… there's probably 20 or more different types of licenses, depending on what you're doing, so if you're… the most common is a restaurant license, so a restaurant that's a license you don't have to buy – that's it's not a quota license or there's not a limited supply of them. Any restaurant can apply for and get a liquor license. So, you apply with the Arizona Department of Liquor and then whatever municipality you're in, it goes through that municipality.
So, if you're like in the city of Scottsdale, then the city of Scottsdale, the application gets forwarded to them. You file a separate application with Scottsdale. It ultimately goes to a public hearing, so it gets noticed. The City Council will ultimately sign off on it so neighbors get notified. Anybody in the area who might have a problem with it can come to the City Council and chime in.
Then the City Council does whatever it does. It can either protest or not protest the license. If it doesn't protest the license, it goes back to the Department of Liquor, and then it's basically an administrative process where they approve it to make sure that it's an appropriate location. They look to see if the owners of the licensee are qualified, so if they do extensive background checks on everybody who owns more than 10% of the business, they look for felonies or if they have significant liquor violations in their past, they might get rejected for that reason. for some reason Department of Liquor has a problem with the license, then they can protest it and then it goes to the liquor board, which is a group of five people that's appointed by the governor, and you get a public hearing and you can go and make your case to the liquor board and they'll either yay or nay you. And if you don't like the outcome of that, you can actually end up if you really want to fight about it, you can go to the Superior Court.
Amy Lindsey
Oh wow. So, it sounds like a very lengthy process. I mean, what kind of lead time would It take for a restaurant?
Jake Curtis
These days, I'd say I'd tell people to give about six months, so there's actually a statutory requirement they complete the liquor license process. I think it's 150 days.
Amy Lindsey
Oh, wow. OK.
Jake Curtis
But they've had some staffing problems down there lately and things were taking a little longer than normal, but it's a pretty efficient process. And but I'd say give six months and you need some prep to get your application together. So, there's some time there to figure out what you're gonna do.
Michael Gossie
What are some of the reasons that somebody might not get a liquor license?
Jake Curtis
It's primarily the, so it's the qualifications of the individuals who are controlling the company and so if they have like major felonies in their background, something like that or if they have a history of having licenses and not being in compliance, they looked at that and then the other, the other thing they look at look at the qualifications of the individuals, but they look at the location and so they'll look and see if there are a lot of liquor licenses in that area.
I was using the example of restaurants, so restaurants they don't really. They kind of want every restaurant can almost get a liquor license, but if it's something like a bar or a liquor store. They'll look to the area to see if there's a lot of liquor licenses in the area. They'll see if there's crime issues in the area or other problems that might be exacerbated by a liquor license and so, they'll they can they look at location and qualifications are the two criteria for getting a liquor license.
Amy Lindsey
Oh, so location can have a big bearing on it as well.
Jake Curtis
It can.
Michael Gossie
So, what are some of the big compliance issues? So, once you have a liquor license, what are some of the big compliance issues that restaurants and bars run into?
Jake Curtis
Really, the big ones that the Department of Liquor focuses on is underage service that's really frowned upon, so if you get caught doing that, that's a serious problem. And they do. They have undercover program. It's called Cubs. I can’t remember what it stands for? They they have a state program where they'll send in people underage to try to drink and try to catch you doing that.
Michael Gossie
Is that is that a bigger problem in Arizona because of all our universities and… and younger population?
Jake Curtis
I mean, I so, apparently, and I've only learned this recently, that the ability to get a fake ID is somewhat easy through the internet and so it's become a little bit of a problem.
So yeah, places like down on Mill and things like that. So, they that's just something they really focus on, they're trying to avoid that but I don't know if it's worse here than anyplace else. But a couple of the other things I look for: The state law prevents them from serving someone who's obviously intoxicated, so if you're really drunk and that's like you manifest drunkenness like you slur your speech or you can't walk, you're not allowed to serve that person any more alcohol, you have to cut them off and so that's another thing that they're they focus on too, is if they're in there and they see you over serving.
There are things like limitations on the amount of liquor that you can serve somebody you can't serve, like more than 50 ounces of beer at one time. So if they give somebody like 6 beers in one sitting or a cocktail, that's I think it's more than 20 ounces of liquor. That's a violation. That's to prevent over-service. So, there are some things like that there. There's some prohibitions on drinking games, things like that. So it's mostly what they're looking for is safety issues. So, you know, if there's violence at the bar, usually the police will notify the Department of Liquor that they're required to report acts of violence, and so then they'll scrutinize their security. Even if things happen in the parking lot, that's the responsibility of the licensee. They can be in trouble for that.
Amy Lindsey
OK.
Jake Curtis
So if there's Like a violent crime or any violence at the licensee's establishment, the Department of Liquor, if they are notified of it, will come in and scrutinize that and make sure that they're acting in accordance with the law and not over serving people and maintaining appropriate security, things like that.
Michael Gossie
OK, Jake, we have a million questions for you. But before we get to them, I have to say the attorneys at Burch & Cracchiolo have been proving for more than 50 years that a successful business or legal case of any kind starts when you hire the right lawyer. Let them prove it to you. Learn more at bcattorneys.com, that's bcattorneys.com.
So, Jake, during the pandemic, Arizona passed a law that you can get liquor to go. So, that law is still in place. So. what kind of issues has that raised?
Jake Curtis
So, interesting enough, that was not a law that was passed by the state of Arizona.
Michael Gossie
Oh, it wasn't?
Jake Curtis
Well, the governor just decided to do it because he thought it was a good idea and so it was clearly not compliant with Arizona law, which did not allow restaurants to have to-go alcohol, that was reserved to bars and liquor stores but it was in place for a while and before the litigation worked its way through to prevent it. Then the legislature last summer then did pass a law to allow restaurants to allow to-go mixed-cocktails and also to -go packaged liquor, so unopened liquor and that went into place in the last six months or so.
Amy Lindsey
It is a law, so that's not going anywhere?
Jake Curtis
You can do it, yeah. They did it right. They went through the legislature and the governor approved it.
Amy Lindsey
Good to know now.
Michael Gossie
But are there any kind of liability issues? Because now you can't govern how much somebody's drinking, but you did sell them?
Jake Curtis
It's true. So, they… so it's almost impossible as you can imagine to protect people when they're off your site, so the statute does provide they cannot serve people who are overly intoxicated. That's still the law of the land but as a practical matter, there's not much way to pass that.
So, Arizona has what's called DRAM shop liability. So, some states you… a purveyor of alcohol is not liable for injuries that a drunk person causes that drink at their establishment. But, Arizona does have tort liability for that. That has not winded its way through the courts yet. I haven't seen any case where someone like delivered a mixed cocktail with somebody and then they got into a car accident, hurt somebody and that third party can then bring a claim against the licensee. So, there are definitely issues with that. And then the way that the state law works is to essentially protect the quota licensees. So the bars and the liquor licenses because that was there, they had a monopoly on to-go liquor before that.
So, they weren't too happy. So, they… were at the legislature lobby, so you have to enter into a lease with a bar or a liquor store or a beer and wine bar if you're a restaurant. Pay them some money every year to acquire their what they call off-sale privileges, their ability to sell liquor to go and so you have to find somebody to do that and pay them some money. Well, for mixed cocktails, it's a process you just apply, and you basically can get it.
Michael Gossie
Are there different liquor licenses based on like if you just want to serve beer and wine or if you want to serve [a] complete complement of…
Jake Curtis
There is. So, there's a series 6 as a bar license, and that's full service. You can sell everything and then you can also get a less expensive liquor license of Series 7, which is just to sell beer and wine. Series 9 is a liquor store. Like I said, there's like 23 series, so there's like special provisions for local wineries. You've probably seen a lot of the like brew pubs around where they brew on site and then you buy it there.
The way the law works is you can't manufacture and retail liquor, they divide manufacturing and wholesaler, and a retailer all have to be separate under separate ownership. So, there's some exceptions for like small.
Michael Gossie
Is that right?
Jake Curtis
Yeah, that's like just a leftover from prohibition. When they liquor became legal, they want to divide everybody up and prevent these monopolies that actually had to do with all these giant breweries that we're kind of manipulating the vote they would give people free drinks to vote the right way and so there's some political issues.
Michael Gossie
Oh my gosh.
Jake Curtis
So, they fill the three-tier system, so there's manufacturers, distributors and retailers all are separate. And so there's some limited exceptions for small wineries. If you're a small batch distiller or you brew your own beer you can manufacture the beer and sell it on site in a limited way.
Michael Gossie
Are there a lot of those kind of idiosyncratic or archaic laws that you have to deal with in your practice?
Jake Curtis
Uh, yeah. There are. It really took a number of years to kind of figure out all the little nuances of liquor law. There's a lot of kind of technicalities and strange laws that people don't know about and you get yourself in trouble if you don't follow.
Amy Lindsey
So, what's the best advice you can give someone who wants to launch into a business to serve alcohol?
Jake Curtis
I would say first of all, scrutinize who your partners are. If you know that you have some criminal problems in your background or liquor licensing problem, that's probably the number one thing that prevents people from getting liquor license, but then also identify your local – where you're going to be. Identify your area and I'd say, and I'd tell people to reach out to their neighbors before they.
Apply and fill them out to see if they're gonna have any problem with liquor, or see if it's an area that has a problem with violence or overly intoxicated people wandering around that the neighbors might not like, because those are the people who might come out to a public hearing and protest. Raise those issues so I tell people. Reach out to your neighbors. And while your liquor licensee, you continue to interface with their neighbors and let them contact you. If they see problems and address those problems as quickly as you can.
Amy Lindsey
So, when would be the best time for them to obtain some type of legal advice in this?
Jake Curtis
Well, as a lawyer, I would say the earlier the better. You know I can usually walk you through and identify issues for you and before we like to know before you file the application whether there's going to be problems.
Amy Lindsey
That makes sense.
Michael Gossie
OK, Jake, we're almost out of time, but I can't let you leave. I have to ask you the question. So, you live in Arcadia, is that right?
Jake Curtis
Yeah. Yep.
Michael Gossie
But you have chickens?
Jake Curtis
I have chickens.
Michael Gossie
And you're known as something of an urban farmer.
Jake Curtis
I am, I mean I grew up in Iowa, so my grandfather had a huge garden.
Amy Lindsey
OK, you do know our audience just is trying to figure out where this pivoted to.
Jake Curtis
I know that that's one of my people talk about my chickens. You know, it's a popular thing now. There's a lot of people that there's like a chicken coop walk, you can go all around and see different chicken coops.
Amy Lindsey
Who knew it was going to be that popular?
Jake Curtis
They're like an awesome urban pet. They really, they're happy to be in a coop and then I get all these eggs and then they provide fertilizer for my garden and they eat a lot of bugs. I mean, they're kind of when they're kind of just fun to let them wander around the yard for right now.
Amy Lindsey
So, how many do you have?
Jake Curtis
Four right now.
Amy Lindsey
Right now? Now that implies you're looking for more, OK.
Jake Curtis
Well, they come and go. They don't survive too long. You can't get too attached to them.
Michael Gossie
So, how many eggs do you get out of four chickens?
Jake Curtis
When they're kind of laying, like right now they chicken will lay almost an egg a day.
Michael Gossie
Oh my gosh.
Jake Curtis
Like it's a little miracle. You go out there and see this beautiful egg and they do so I'm getting like more than 20 a week with my 4 like way more than we can eat and give a lot away. I have happy friends and neighbors, yeah.
Michael Gossie
That's great, and then what kind of things do you grow in your garden? Do you have a citrus grove also?
Jake Curtis
I have citrus and I have stone fruit, 2 apricots and plums and peaches and pomegranates and a lot of citrus. I have a flood irrigated lot, so I get the good water. That's kind of the key for the trees is I get a good deep water, I get one this afternoon so.
Michael Gossie
That's awesome. That’s awesome. Jake Curtis, thank you so much for being here and thank you for listening to the AZ Big Podcast with Michael and Amy and once again, thank you to our sponsors, Burch and Cracchiolo. Visit them at bcattorneys.com. Thank you.