43 N.Y.2d 721 (1977)

A licensee can be held responsible for violations of the Alcoholic Beverages Control Law committed by an employee if that employee exercises managerial authority, even without an official title, when the licensee is not present.

Summary

David Falso, a restaurant owner, appealed a decision by the State Liquor Authority (SLA) finding him responsible for a gambling violation committed by his brother, who was left in charge of the premises for several hours daily. The SLA argued that Falso’s brother exercised managerial authority during Falso’s absence, making Falso liable for his actions. The Court of Appeals affirmed the Appellate Division’s decision, holding that a licensee can be penalized for the actions of an employee who exercises managerial authority, even in the absence of a formal title or comprehensive management responsibilities. The dissent argued that there was no explicit finding that the brother had unequivocal supervisory responsibility.

Facts

David Falso owned the Palm Gardens Restaurant. Falso regularly left his brother in charge of the licensed premises for one hour in the morning and four hours in the afternoon. During one of these periods, Falso’s brother tolerated gambling on the premises. The State Liquor Authority sought to penalize Falso for this violation, arguing that his brother acted in a managerial capacity during those times.

Procedural History

The State Liquor Authority imposed a penalty on Falso. The Appellate Division confirmed the Authority’s determination. Falso appealed to the Court of Appeals.

Issue(s)

Whether a licensee can be held responsible for a violation of the Alcoholic Beverages Control Law committed by an employee who exercises managerial authority, even if that employee does not have a formal managerial title or comprehensive management responsibilities.

Holding

Yes, because a licensee is chargeable with the conduct of an employee who has been given managerial responsibility, even if that responsibility is limited to the operation of the premises and the conduct of the licensed activity thereon on other than a casual or temporary basis.

Court’s Reasoning

The Court of Appeals distinguished this case from Matter of Martin v. State Liq. Auth., where the penalty was based on the licensee’s alleged failure to discover a barmaid’s gambling activities. Here, the penalty was imposed because Falso’s brother, who was left in charge, exercised managerial authority. The court emphasized that it is not necessary for the employee’s management responsibility to extend to all aspects of the business. It suffices if the employee is responsible for the operation of the premises and the conduct of the licensed activity when the licensee is absent. The court stated, “It is not necessary that the management responsibility delegated to the employee be that for the conduct of the entire enterprise, e.g., including purchase and sale of supplies, physical maintenance of the premises; it suffices if the employee is given responsibility for the operation of the premises and the conduct of the licensed activity thereon on other than a casual or temporary basis.”

The court found that there was substantial evidence to support the Appellate Division’s conclusion that Falso’s brother exercised managerial authority. The failure to confer a managerial title was not determinative. As a proposition of law, the court held that a licensee is normally chargeable with the conduct of an employee who has been given managerial responsibility for the purposes of the Alcoholic Beverages Control Law. The dissent argued that neither the hearing officer nor the SLA made an explicit finding that the brother was a manager or that Falso gave his brother unequivocal supervisory responsibility and that there was no direct evidence that the employee had managerial duties.