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Byzantine state liquor laws keep Downtown firm busy
Sunday, March 18, 2007

Like all attorneys, Robert J. O'Hara and Mark Flaherty passed the bar. Now, they work for bars -- not to mention restaurants, steakhouses, caterers, groceries, convenience stores and anyone else who wants to sell beer and spirits to customers.

The pair are principals with Flaherty & O'Hara, a Pittsburgh law firm that deals exclusively with liquor code issues, generally representing clients trying to obtain liquor licenses, as well as licensed places that have run into trouble with the courts or the Pennsylvania Liquor Control Board.

In short, wherever booze, courts and liquor law intersect, you're likely to find Flaherty & O'Hara at the intersection, directing traffic here and in all 50 states.

The firm's work has taken on a higher profile of late because it is representing convenience store chain Sheetz and two Eastern Pennsylvania grocers, Weis Markets Inc. and Wegmans Food Market, that are seeking to break the state's seeming stranglehold on beer sales. Sheetz is battling the Commonwealth Court and the Malt Beverage Distributors Association, which is trying to prevent the chain from selling beer at its mega-store in Altoona.

Based in the Allegheny Building, Downtown, the firm last week prepared two responses that were filed in the Sheetz case -- the first batch of paperwork would allow Sheetz to intervene in the case between the LCB and the wholesalers group, and appeal the case to the Supreme Court along with the LCB. The second essentially asks Commonwealth Court to allow Sheetz to sell beer as the case continues down the appeals path.

In a 4-3 decision last month, a Commonwealth Court agreed with the trade association, saying that Sheetz didn't meet the criteria of its "eating place" dispenser license because the convenience store and deli didn't allow on-premises consumption of beer.

"We think there were errors of law in the decision," said Mr. O'Hara, who could gladly elaborate but, for the sake of brevity, leaves it at that.

Locally, Flaherty & O'Hara guide bars and restaurants big and small through the process of obtaining liquor licenses, which in Pennsylvania typically involves an appearance before borough or city council, since elected leaders must approve license transfers between municipalities. They represent such mega-chains as Red Robin, Pizza Hut, Cheesecake Factory and LongHorn Steakhouse, and independent places such as the LeMont, Monterey Bay and El Campesino, a growing, local Mexican mini-chain.

So what, exactly, inspires a group of attorneys to carve out such a peculiar niche practice? Let's just say the apple doesn't fall far from the tree.

"My dad was a liquor agent for 25 years," Mr. Flaherty explained. He went out on inspection calls with his father, and remembers the particulars of the job -- measuring the distance between a church and a bar, for instance. On other calls, "he'd set me at the pinball machine," while his dad examined the place.

Flaherty & O'Hara is the nominal successor to Litman Harris Brown and the S. David Litman firm, which had its own liquor law division. The colorful Litman family can trace its liquor-soaked roots to Prohibition-era bootlegging, then through Lenny Litman, a Pittsburgh Press nightlife columnist and Liberty Avenue club owner in the post-war years.

S. David Litman represented his brother Lenny in some liquor license transfer cases, and that -- along with a 1956 Supreme Court decision, known as the Obradovich Liquor License Case -- is the genesis of today's specialty.

When the Litman firm dissolved following the principal's death, Mr. Flaherty took the specialty with him, collecting the services of Mr. O'Hara, a Kirkpatrick & Lockhart attorney. The firm was rechristened Flaherty & O'Hara in March 2001.

His firm tends to fly beneath the media radar, Mr. O'Hara said, though it is well known in restaurant and catering circles since it is just one of a handful of firms nationally that practice exclusively in liquor law.

"We act like in-house counsel on deals that are national in scope," Mr. O'Hara said. Pizza Hut, for example, might need guidance as it tries to acquire 25 licenses at once. It hires the firm's organizational expertise and specialized software, which negotiate the labyrinth of cross-jurisdictional liquor laws.

It's a unique business model, in that Flaherty & O'Hara, a firm with six lawyers and 15 paralegals, rarely appears before judges or boards out of state. When their services are required, they handle the minutia, then farm out the court appearances to a network of attorneys across America.

The firm has represented beer distributors, though on this matter, Flaherty & O'Hara are playing thorn to the paw of the beer distributors trade group, which is making a bigger deal out of the Sheetz and Weis cases than is warranted, said Mr. O'Hara.

"Their suggestion is that this is a new thing," and that groceries selling six-packs will harm beer distributors. "The fact of the matter is, sales at grocery stores, while not common, have been going on for decades. It's just been going on in more rural areas."

The law has been constant for years -- any establishment, be it a grocery, deli, convenience store or bar, must have seating for at least 30 before it can sell beer for consumption or take-out. The reason most people aren't aware of it is because the LCB's computer system doesn't sub-categorize the "eating place" licenses by the nature of the establishment. (Brian & Cooper Food Mart, a convenience store on Pittsburgh's South Pacific Avenue, has been selling six-packs for years.)

Mr. O'Hara and Mr. Flaherty also have butted heads with state Sen. John Rafferty, R-Montgomery, on the issue of beer in supermarkets, and some others. Last year, for example, Mr. Rafferty negotiated a change in the state's liquor code. What once said that municipalities must approve liquor license transfers, from another town within a county's boundaries, unless it can be shown that an applicant "adversely affects the welfare, health, peace and morals" of a community, was changed to simply say that an elected council "may" approve an inter-municipal transfer. Or, they may not.

Mr. O'Hara was worried municipalities would begin to indiscriminately reject projects, perhaps leading to scrapped projects or an increase in the open market cost of the licenses. But that hasn't happened yet, and licenses today cost between $35,000 in a place like Allegheny County, with a greater supply, and more than $250,000 in suburban counties, with low supply.

"So far, knock on wood, we haven't had a real problem yet."

First published on March 18, 2007 at 12:00 am
Bill Toland can be reached at btoland@post-gazette.com or 1-412-263-2625.