The Cloister East, Inc. v. New York State Liquor Authority

Background

The Cloister East, Inc. and/or one or more of its owners operated The Cloister Café in Manhattan and held a New York State liquor license. The restaurant had indoor and outdoor space and claimed that it served patrons only outdoors in compliance with COVID-19 regulations.

On August 7, 2020, the New York State Liquor Authority (SLA) held an online meeting after receiving online and other reports of activities at the restaurant that allegedly violated pandemic regulations. The licensee said it was not notified of the meeting and had no opportunity to be heard. After the meeting, the SLA issued an order summarily suspending the liquor license. The suspension effectively forced the restaurant to close and caused it to lay off approximately 40 employees.

The SLA stated that it acted under Section 401(3) of the New York Administrative Procedure Act. That provision permits an emergency suspension when an agency finds that public health, safety, or welfare requires immediate action, while requiring prompt proceedings for revocation or other action. On August 10, 2020, the SLA began a license-revocation proceeding against Jaroslaw Drobenko, whom it identified as the holder of the license. The opinion also noted differences between the findings made at the August 7 meeting and the charges in the later notice.

Claims and requested relief

The Cloister East filed the action under 42 U.S.C. § 1983, a federal statute allowing claims for violations of constitutional rights by persons acting under state authority. Its principal claim was that the summary suspension violated procedural due process—the right to notice and a meaningful opportunity to respond before the government takes certain adverse action.

The restaurant sought a temporary restraining order (TRO) that would restore the liquor license until the court considered its motion for a preliminary injunction. It asserted that another closure would destroy the business and create severe financial strain. The SLA relied on the emergency public-health rationale for the suspension and pointed to possible review through a proceeding in New York state court.

Court’s analysis

The court identified two central questions for the TRO application: whether the restaurant faced immediate and irreparable injury before the preliminary-injunction motion could be decided, and how likely the restaurant was to succeed on its procedural-due-process claim.

The court found that the restaurant’s evidence of immediate and irreparable injury was limited. Its owners submitted a statement that the business would not survive another closure and that the financial strain might be insurmountable. The court said the owners apparently owned the building where the restaurant operated and might therefore be better able to withstand the closure than other restaurant owners. It left open whether the restaurant would later provide substantial evidence, including concrete facts and financial figures, supporting its claim of immediate and irreparable injury.

The court also said the procedural-due-process issue required more briefing and deliberate consideration. It noted that the constitutionality of an ex parte emergency suspension—one issued without advance notice to the affected party—might depend on whether New York provided a prompt and effective remedy after the suspension. The SLA argued that judicial review was promptly available through a New York Article 78 proceeding, but the opinion noted that the SLA had also argued in some state courts that review of a summary suspension was unavailable because the suspension was not a final judgment. The court said this raised a serious question about whether an effective state-court remedy existed.

The court expressly concluded that it did not need to decide those difficult due-process and state-remedy questions to resolve the TRO request. The expedited schedule allowed the parties to submit all papers on the preliminary-injunction motion by August 26, with argument possibly later that week.

Disposition

Judge Lewis A. Kaplan denied the application insofar as The Cloister East sought a temporary restraining order. The opinion did not decide the restaurant’s underlying procedural-due-process claim, whether the SLA’s suspension was constitutional, or whether state-court review was available.