HEADNOTE: Steven Kougl, et al. v. The Board of Liquor License Commissioners for
Baltimore City, No. 935, Sept. Term, 2015.

ADMINISTRATIVE LAW - RULES OF THE BOARD OF LIQUOR LICENSE
COMMISSIONERS - USE OF TERMS “SUFFER,” “PERMIT,” OR “ALLOW”
DOES NOT IMPOSE STRICT LIABILITY ON LICENSEES - PROOF OF
KNOWLEDGE REQUIRED

Facts: Appellant, Steven Kougl, owns Club Harem, a Baltimore tavern and adult
entertainment business, and holds a liquor license for that location issued by appellee, the
Board of Liquor License Commissioners for Baltimore City (“the Liquor Board”). The
Liquor Board charged Kougl with violating three Liquor Board Rules related to solicitation
of prostitution, indecent exposure, and violation of public morals, all occurring at Club
Harem, when an employee exposed herself to an undercover police officer and then solicited
sexual intercourse from the same officer. The Liquor Board found Kougl guilty of all three
violations and ordered that his liquor license be suspended for one month. Kougl filed for
judicial review in the Circuit Court for Baltimore City, which affirmed the decision of the
Liquor Board.

Held: Reversed and remanded.

The Liquor Board found that Kougl violated (1) Rule 4.17(a), which provides that no
licensee shall “permit or suffer any employee . . . to solicit any person for prostitution,” (2)
Rule 4.17(b), which provides that “[n]o licensee shall permit or suffer any person to appear
in any act or other performance with breasts or the lower torso uncovered,” and (3) Rule
4.18, which provides that “[n]o licensee shall commit or allow the commission on his
premises of any act which shall be . . . against the public . . . morals.” The Liquor Board
interpreted these Rules to impose a strict liability standard on licensees.

The Court of Special Appeals held that the Liquor Board erred in interpreting the words
“suffer,” “permit,” and “allow” in Rules 4.17 and 4.18 to impose a strict liability standard on
licensees, because the plain meaning of the subject terms necessarily requires that some level
of knowledge by the licensee must be established by the evidence.

The Court also held that the knowledge requirement implicit in the terms “suffer,” “permit,”
and “allow” can be satisfied by proof of either actual or constructive knowledge on the part
of the licensee. Actual knowledge is actual awareness of the prohibited activity, as well as
“deliberate ignorance” or “willful blindness.” Constructive knowledge, however, implies
knowledge where a licensee should have known of the prohibited activity if reasonable care
and diligence had been exercised. Here, there simply was no evidence of Kougl’s actual or
constructive knowledge of the violations.
              REPORTED

 IN THE COURT OF SPECIAL APPEALS

            OF MARYLAND

                 No. 935

          September Term, 2015



       STEVEN KOUGL, ET AL.

                     v.

  THE BOARD OF LIQUOR LICENSE
COMMISSIONERS FOR BALTIMORE CITY




    Woodward,
    Graeff,
    Arthur,

                  JJ.



        Opinion by Woodward, J.



    Filed: June 2, 2016
             The eagle suffers little birds to sing,
             And is not careful what they mean thereby,
             Knowing that with the shadow of his wings
             He can at pleasure stint their melody[.]

                     —Tamora, Titus Andronicus, Act 4, Scene 4 (W. Shakespeare)

       In the instant case, we are called upon to decipher the meaning of the word “suffer,”

and its analogs, “permit” and “allow.” Specifically, we must decide whether these terms,

when used in rules governing the conduct of holders of a liquor license in Baltimore City,

require proof of knowledge on the part of such licensees.

       Appellant, Steven Kougl, owns Club Harem, a Baltimore tavern and adult

entertainment business, and holds a liquor license for that location issued by appellee, the

Board of Liquor License Commissioners for Baltimore City (“the Liquor Board”). On July

2, 2014, the Liquor Board charged Kougl with violating three Liquor Board Rules related to

solicitation of prostitution, indecent exposure, and violation of public morals, all occurring

on April 25, 2013, at Club Harem, when an employee exposed herself to an undercover

police officer and then solicited sexual intercourse from the same officer. The Liquor Board

found Kougl guilty of all three violations and ordered that his liquor license be suspended

for one month. Kougl filed for judicial review in the Circuit Court for Baltimore City, which

affirmed the decision of the Liquor Board.

       On appeal to this Court, Kougl raises four questions for our review, which we have

condensed and rephrased as two questions:1


       1
           Kougl’s questions, as presented in his brief, are as follows:
                                                                                (continued...)
           1.     Did the Liquor Board make sufficient findings of fact in
                  support of the three charged violations of the Liquor Board
                  Rules?

           2.     Did the Liquor Board err in concluding that Kougl was guilty
                  of the three violations even though there was no evidence that
                  Kougl had knowledge of his employee’s behavior?

       For reasons set forth herein, we answer both questions in the affirmative, and thus

reverse the judgment of the circuit court and remand the case to that court for entry of a

judgment reversing the decision of the Liquor Board.

                                     BACKGROUND

       On April 25, 2013, Detective Fletcher Jackson, a Baltimore City police officer

assigned to the Special Enforcement Section, entered Club Harem in plain clothes to conduct

a prostitution investigation. Jamaica Brickhouse, a woman who worked at Club Harem,

approached Det. Jackson at the bar and asked if she could join him. Det. Jackson said “sure,”

and bought Brickhouse a drink. After some initial conversation, Brickhouse exposed her



       1
       (...continued)
            1.    Did the Liquor Board make sufficient findings of fact and
                  conclusions of law to allow for meaningful judicial review?

           2.     Did the Liquor Board err in finding the licensee guilty of
                  violating Liquor Board Rule 4.17(a)?

           3.     Did the Liquor Board err in finding the licensee guilty of
                  violating Liquor Board Rule 4.17(b)?

           4.     Did the Liquor Board err in finding the licensee guilty of
                  violating Liquor Board Rule 4.18?

                                             2
breasts to Det. Jackson. Brickhouse invited Det. Jackson to touch her breasts, which he did.

Brickhouse then suggested a lap dance or a trip to “the VIP,” where they could “do whatever

up there.” Det. Jackson asked how much it would cost him to have sex with Brickhouse;

Brickhouse replied that it would cost $170 “for the room,” plus a tip for her services. Det.

Jackson said that he could tip $100, and Brickhouse agreed. Brickhouse returned to the stage

to perform, and Det. Jackson notified other officers. Brickhouse, however, was not issued

a criminal summons until December 10, 2013, almost eight months later.2

       Fifteen months after the incident, on July 2, 2014, the Liquor Board charged Kougl

with violating three Liquor Board Rules related to solicitation of prostitution in violation of

Rule 4.17(a), indecent exposure in violation of Rule 4.17(b), and violation of public morals

in violation of Rule 4.18. On July 17, 2014, the Liquor Board held a hearing on the charges

against Kougl. Det. Jackson was the only witness for the prosecution; Kougl testified in his

own defense. The Liquor Board voted 2-1 that Kougl was guilty of the three violations3 and

suspended his liquor license for one month.

       On July 18, 2014, Kougl filed a Petition for Judicial Review in the circuit court. On

March 2, 2015, Kougl filed his Memorandum, in which he argued that (1) the Liquor Board’s

decision was not based on substantial evidence, because “[t]here [wa]s nothing in [Det.


       2
           These charges were nolle prossed by the State on January 6, 2014.
       3
        As set forth infra, the dissenting Commissioner found that the evidence did not
support the charges, because “there was a lapse of eight months. And I think that is
extraordinary. It is unusual and it is not acceptable practice.”

                                              3
Jackson’s] testimony to indicate that the [l]icensee knew, allowed or permitted this type of

activity, which is needed to sustain the violations”; (2) its decision was unreasonable and

arbitrary, because the Chairman of the Liquor Board stated that a licensee “would be

responsible for actions of an employee” regardless of “whether the [l]icensee knew or did not

know or allowed or did not allow or permitted or did not permit” the prohibited activity; and

(3) the Liquor Board failed to make specific findings of fact and conclusions of law as

required. On April 15, 2015, the Liquor Board filed its Response to Kougl’s Memorandum,

in which it contended that (1) its decision was based on substantial evidence; (2) its decision

was reasonable; and (3) the Liquor Board made sufficient findings of fact and conclusions

of law.

       On May 22, 2015, the circuit court held oral argument and issued an oral ruling

affirming the decision of the Liquor Board. On May 28, 2015, the court entered its order

affirming the Liquor Board’s decision. On June 22, 2015, Kougl filed a timely notice of

appeal.

                                STANDARD OF REVIEW

       Maryland law provides by statute that the action of a local liquor board is presumed

to be proper and places the burden of proof upon the licensee to show that the decision

complained of was arbitrary, fraudulent, unsupported by substantial evidence, illegal, or

against the public interest. Md. Code (1957, 2011 Repl. Vol), Art. 2B, § 16-101(e)(1)(i).

This Court has explained appellate review of a Liquor Board’s decision as follows:


                                              4
                  While the last sentence of § 16-101(e)(1)(i) expressly permits
           the trial court, under certain circumstances, to hear additional
           evidence, the court may hear such evidence only to ascertain the
           veracity of findings of fact and conclusions of law reached by the
           Board. As the section does not authorize appeals de novo, the trial
           court may not hear additional evidence on matters not addressed by
           the Board. This Court has consistently explained that judicial
           review of a decision by the Board is similar to review of decisions
           by most other administrative agencies. It is a cardinal rule of
           administrative appeals that a reviewing court . . . shall apply the
           substantial evidence test to final decisions of an administrative
           agency such as the Board, but it must not itself make independent
           findings of fact or substitute its judgment for that of the agency.

                   Judicial review of administrative action differs from appellate
           review of a trial court judgment. In the latter context the appellate
           court will search the record for evidence to support the judgment and
           will sustain the judgment for a reason plainly appearing on the record
           whether or not the reason was expressly relied upon by the trial court.
           However, in judicial review of agency action the court may not uphold
           the agency order unless it is sustainable on the agency’s findings and
           for the reason stated by the agency.

Blackburn v. Bd. of Liquor License Comm’rs for Balt. City, 130 Md. App. 614, 623-24

(2000) (emphasis added) (citations and internal quotation marks omitted).

       “Of course, the reviewing court may substitute its judgment for that of the [Liquor]

Board on questions of law.” Id. at 624. In deciding whether to substitute its judgment on a

question of law, a court should accord a degree of deference to the position of the

administrative agency. Md. Aviation Admin. v. Noland, 386 Md. 556, 572 (2005). “Thus,

an administrative agency’s interpretation and application of the statute which the agency

administers should ordinarily be given considerable weight by reviewing courts.” Id. “An

agency conclusion will not be upheld upon review, however, if based upon an error of law.”

                                             5
Hoyle v. Bd. of Liquor License Comm’rs for Balt. City, 115 Md. App. 124, 129 (1997).

                                       DISCUSSION

                                               I.

                                 Sufficient Findings of Fact

        “There is no express requirement that the Board set forth specific findings of fact and

conclusions of law. In order for any meaningful review to be conducted, however, the Board

must do so, at least informally.” Blackburn, 130 Md. App. at 624 (citation omitted).

        Kougl argues that the Liquor Board did not make sufficient findings of fact to allow

for meaningful judicial review. Specifically, Kougl contends that the Liquor Board’s

decision consists of the following two statements, neither of which contain any findings of

fact:

            All right. The verdict is responsible for all three charges. The police
            department is not on trial here. Mr. Kougl is. And bar owners or
            licensees are responsible for the conduct of their employees, as I have
            said before, in all cases, in all bars, in the city of Baltimore.

                                             ***

            All right, my finding is responsible to all three charges and close him
            for one month, effective immediately.

According to Kougl, the above statements were insufficient to support a legal conclusion that

Kougl violated the Rules at issue.

        The Liquor Board responds that there is no requirement that it set forth specific

findings of fact so long as its informal findings are sufficient to allow for “meaningful


                                               6
appellate review.” Furthermore, the Liquor Board argues that it made informal findings of

fact that were “sufficient for this Court to determine whether substantial evidence supports

the Board’s conclusion that Kougl violated the three Liquor Board Rules as charged.” We

agree with the Liquor Board and shall explain.

       As previously indicated, Kougl, as the licensee, was charged with violating Rules

4.17(a), 4.17(b), and 4.18. Rule 4.17 provides:

           Sexual Practices and Obscenity
           (a)   No licensee shall permit or suffer his premises to be used for
                 the purpose of any sexual activity, nor shall any licensee
                 permit or suffer any employee, patron or frequenter to
                 solicit any person for prostitution or other immoral
                 purposes.

           (b)    No licensee shall permit or suffer any person to appear in
                  any act or other performance with breasts or the lower
                  torso uncovered; nor shall any licensee knowingly permit or
                  suffer his premises to be used for the conduct, exhibition or
                  performance of an obscene act or other performance.

(Emphasis added).

       Rule 4.18 provides:

           Illegal Conduct
           No licensee shall commit or allow the commission on his premises of
           any act which shall be contrary to any federal, state or local statute,
           law or ordinance or against the public peace, safety, health, welfare,
           quiet or morals.[4]

       4
       The Alcoholic Beverages Rules and Regulations for the Board of Liquor License
Commissioners for Baltimore City were updated in 2015 and effective as of January 1, 2016.
The new rules that correspond to old rules 4.17 and 4.18 are:

                                                                               (continued...)

                                             7
       At the conclusion of the hearing on the charges

against Kougl, the following occurred:

           CHAIRMAN WARD:                          All right. The verdict is
                                                   responsible for all three
                                                   charges. The police department
                                                   is not on trial here. Mr. Kougl is.
                                                   And bar owners or licensees are
                                                   responsible for the conduct of
                                                   their employees, as I have said


       4
        (...continued)
             Rule 4.15—Sexual Practices and Obscenity

           (a)     A licensee may not permit the licensed premises to be used for
                   any sexual activity. A licensee, any employee, patron or
                   frequenter may not solicit any person for prostitution or other
                   immoral purposes.

           (b)     A licensee may not permit a person to appear in an act or other
                   performance with breasts or the lower torso uncovered. A
                   licensee may not knowingly permit the licensed premises to be
                   used for the conduct, exhibition, or any unlawful performance.

           (c)     Section (b) of this rule does not apply to licensees that have a
                   valid adult entertainment license issued by this Board.

           Rule 4.16—Illegal Conduct

           A licensee may not commit or allow the commission on the licensed
           premises of an act that is contrary to any federal, State or local statute,
           law or ordinance or that is against the public peace, safety, health,
           welfare, quiet, or morals.

        The prior version of Rule 4.17 did not contain a subsection (c) exempting the
application of the Rule to licensees with a valid adult entertainment license. There is nothing
in the record, nor do the parties contend, that Kougl held a valid adult entertainment license
for Club Harem at the time of the violations.

                                               8
                                     before, in all cases, in all bars,
                                     in the city of Baltimore.

                                     The only question now is
                                     punishment. . . .

                                ***

                                     All right, my finding is
                                     responsible to all three charges
                                     and close him for one month,
                                     effective immediately. And I’d be
                                     glad to hear from the other
                                     commissioners.

          COMMISSIONER JONES:        I agree. I agree that there’s a
                                     guilty for all charges. It’s clear
                                     to me that this thing took place.
                                     I have confidence in the police
                                     department. If I didn’t, the
                                     system would have a great defect
                                     in it, so I agree to the one month
                                     close order.

          CHAIRMAN WARD:             Commissioner?

          COMMISSIONER MOORE:        I disagree. I don’t think that the
                                     evidence substantiates the
                                     charges. And I’m concerned that
                                     there was a lapse of eight months.
                                     And I think that is extraordinary.
                                     It is unusual and it is not
                                     acceptable practice. And I think
                                     that that argues against a finding
                                     of guilt. So I say no.

          CHAIRMAN WARD:             Two to one. You heard the thing,
                                     you heard the penalty, sir. Good
                                     luck to you.
(Emphasis added).

                                 9
       The excerpt above makes clear that Commissioner Jones expressly relied on Det.

Jackson’s testimony, and Chairman Ward implicitly relied on such testimony. Moreover,

Kougl, in his testimony, did not dispute any of the evidence presented in Det. Jackson’s

testimony, so a finding of guilty necessarily meant that Chairman Ward and Commissioner

Jones credited Det. Jackson’s testimony as true.5

       Furthermore, a “Board Summary” was issued after the hearing, which set forth the

factual basis for each violation:

                   Violation of Rule 4.17(a) “No licensee shall permit or suffer
           his premises to be used for the purpose of any sexual activity, nor
           shall any licensee permit or suffer any employee, patron or frequenter
           to solicit any person for prostitution or other immoral purposes. (Re:
           April 25, 2013, dancer solicited undercover police officer for sexual
           intercourse) GUILTY 2-1

                  Violation of Rule 4.17(b) “No licensee shall permit or suffer
           any person to appear in any act or other performance with breasts or
           the lower torso uncovered; no[r] shall any licensee knowingly permit
           or suffer his premises to be used for the conduct, exhibition or
           performance of an obscene act or other performance” (Re: April 25,
           2013, dancer exposed herself to undercover police officer) GUILTY
           2-1

                  Violation of Rule 4.18 “No licensee shall commit or allow the
           commission on his premises of any act which shall be contrary to any
           federal, state or local statue [sic], law or ordinance or against the
           public peace, safety, health, welfare, quiet or morals.” (Re: April 25,


       5
        The existence of “the VIP” appears to be the only contested factual finding. In his
testimony, Kougl denied that a “VIP room” existed at Club Harem. According to Det.
Jackson, however, Brickhouse never referred to a room, but rather stated that she and Det.
Jackson could “go up to the VIP.” Brickhouse could have been referring to the employees’
dressing room or Kougl’s offices, both of which are located “upstairs” at Club Harem.

                                             10
            2013, dancer solicited undercover police officer for sexual
            intercourse; dancer exposed herself to undercover police officer)
            GUILTY 2-1

(Italics added) (bold in original). The facts supporting each violation, as emphasized in

italics above, tracks Det. Jackson’s testimony, and provides a sufficient factual basis to allow

for meaningful judicial review.

                                               II.

                                        Strict Liability

       Kougl argues that Rules 4.17 and 4.18 require some evidence or inference therefrom

that Kougl suffered, permitted, or allowed solicitation and nudity to occur, and there was no

evidence to support such a finding. According to Kougl, there was insufficient evidence for

the Liquor Board to infer that Kougl permitted such conduct to occur “merely by reason that

the dancer solicited the detective.”

       The Liquor Board responds that the three violations “are, as a matter of law, strict

liability offenses,” none of which require “a licensee’s knowledge of the impermissible

conduct.” The Liquor Board analogizes Rules 4.17(a) and (b) to Rule 4.01(a), which

prohibits sales of alcohol to minors, to argue that both Rules “contain[] both a strict liability

prohibition and a second provision with a knowledge requirement.” As for Rule 4.18, the

Liquor Board argues that it “contains no knowledge or mens rea language. Therefore, it

describes a strict liability offense.” According to the Liquor Board, Kougl was found guilty

of violating the strict liability portion of the Rules.


                                               11
       By virtue of its argument that the charged violations are strict liability offenses, the

Liquor Board concedes that the evidence adduced at the hearing was insufficient to find that

Kougl had actual or constructive knowledge of the violations. Upon review of the record,

we agree that there was simply no evidence of Kougl’s actual or constructive knowledge of

the violations.

       Whether Rules 4.17 and 4.18 impose a strict liability standard on a licensee depends

on the meaning of the words “suffer,” “permit,” and “allow” as used in the Rules. In

determining the meaning of such words, “we apply well-settled rules of statutory

construction, the cardinal rule of [which] is to ascertain and effectuate the intent of the

Legislature.” Assateague Coastkeeper v. Md. Dep’t. of Env’t, 200 Md. App. 665, 708-09

(2011) (citations and internal quotation marks omitted).

           In so doing, we look first to the normal, plain meaning of the language
           of the statute, read as a whole so that no word, clause, sentence or
           phrase is rendered surplusage, superfluous, meaningless or nugatory.
           If the language of a statute is clear and unambiguous, we need not
           look beyond the statute’s provisions and our analysis ends. Where the
           language of the statute is ambiguous and may be subject to more than
           one interpretation, however, we look to the statute’s legislative
           history, case law, purpose, structure, and overarching statutory scheme
           in aid of searching for the intention of the Legislature.

Whitley v. Md. State Bd. of Elections, 429 Md. 132, 149 (2012) (citations and internal

quotation marks omitted).

       In accord with the above standard, we turn to the plain meaning of the subject terms

in the Rules. Black’s Law Dictionary defines “suffer” as:


                                              12
            To allow, to admit, or to permit. It includes knowledge of what is
            to be done under sufferance. To suffer an act to be done or a
            condition to exist is to permit or consent to it; to approve of it, and not
            to hinder it. It implies knowledge, a willingness of the mind and
            responsible control or ability to prevent.

Black’s Law Dictionary 1432 (6th ed. 1990) (emphasis added) (citations omitted). “Permit”

is defined as: “To suffer, allow, consent, let; to give leave or license; to acquiesce, by failure

to prevent, or to expressly assent or agree to the doing of an act.” Id. at 1140. Finally,

Black’s Law Dictionary defines “allow” as:

            The word has no rigid or precise meaning, its import varying
            according to circumstances or context in connection with which it is
            used. It may mean to bestow or assign to any one as his right or due.
            To approve of, accept as true, admit, concede, adopt, or fix. To grant
            something as a deduction or an addition; to abate or deduct; as, to
            allow a sum for leakage. To sanction, either directly or indirectly,
            as opposed to merely suffering a thing to be done; to acquiesce in;
            to suffer; to tolerate.

Id. at 76 (emphasis added) (citations omitted).

       No Maryland appellate opinion exists regarding the meaning of these words in the

context of the Liquor Board Rules. Other jurisdictions that use “suffer,” “permit,” or

“allow,” in their liquor board rules are divided on whether such terms impose a strict liability

standard, or whether knowledge on the part of the licensee must be proven.

       Wisconsin, Oregon, and New Jersey courts have held that their states’ liquor board

rules, all of which use the words “suffer,” “permit,” or “allow,” impose strict liability on the

part of the licensee. In City of West Allis v. Megna, the Supreme Court of Wisconsin held

that an ordinance that stated that no licensee shall “either directly or indirectly suffer or

                                                13
permit any person of either sex under the age of 21 years . . . to enter or be on such licensed

premises for any purpose,” imposed a strict liability standard. 133 N.W. 2d 252, 253 (Wis.

1965). The Court determined that “[p]roof of knowledge on the part of the tavern keeper that

the patron is actually under age is not required by the statute in order to obtain a conviction,”

and that such standard “is a price that the operator pays for the privilege of becoming

licensed.” Id. at 254.

       Similarly, the Court of Appeals of Oregon held in DK Entertainment, LLC v. Oregon

Liquor Control Commission that, when interpreting an ordinance stating that “‘[n]o licensee

or permittee will permit any unlawful activity on the licensed premises or in areas the

licensee controls that are adjacent to or outside the premises,’” the Oregon Liquor Control

Commission “may impute to the licensee the knowledge of the licensees employees.” 278

P.3d 112, 113 n.2, 114 (Or. App. 2012). Finally, in Division of Alcoholic Beverage Control

v. Maynards Inc., the Supreme Court of New Jersey held an ordinance providing that “[n]o

licensee shall allow, permit or suffer in or upon the licensed premises any unlawful

possession of or any unlawful activity pertaining to” narcotics and other controlled dangerous

substances imposed a strict liability standard. 927 A.2d 525, 536 (N.J. 2007). The Court

noted that “[i]t has long been the law in New Jersey that, in the context of the regulation of

alcoholic beverages, ‘the word suffer . . . imposes responsibility on a licensee, regardless of

knowledge, where there is a failure to prevent the prohibited conduct by those occupying the

premises with his authority.’” Id. at 538 (ellipses and italics in original).


                                               14
       Conversely, other courts, such as those in Colorado, California, New York, and

Washington, have held that the terms “suffer,” “permit,” or “allow” require actual or

constructive knowledge. In Full Moon Saloon, Inc. v. City of Loveland, the Colorado Court

of Appeals held that a statute making it unlawful to, among other things, “permit the sale,

serving, giving, or procuring of any alcohol beverage to or for a person under the age of

twenty-one years” required that “some level of knowledge by the licensee must be

established by the evidence.” 111 P.3d 568, 569-70 (Colo. App. 2005). The Court

explained:

             The word “permit” connotes affirmative or knowing conduct.
             Thus, licensees and their employees and agents “permit” such
             conduct if they have actual knowledge of the violation or have
             constructive knowledge that it is occurring.

                                               ***

                     Our conclusion that constructive knowledge of liquor code
             violations is sufficient to hold a licensee responsible for permitting the
             violation is consistent with cases from other jurisdictions. See Spitz
             v. Mun. Court, 127 Ariz. 405, 621 P.2d 911 (1980) (licensee is
             deemed to have constructive knowledge of the age of underage buyer
             if licensee provides alcohol to the minor and fails to follow certain
             procedures); Laube v. Stroh, 2 Cal. App. 4th 364, 3 Cal. Rptr. 2d 779
             (1992) (to suspend liquor license, evidence must be presented that
             licensee had either actual or constructive knowledge of activity);
             Pinacoteca Corp. v. Dep’t of Bus. Regulation, 580 So.2d 881 (Fla.
             Dist. Ct. App. 1991) (where activity is persistent and recurring,
             licensee’s knowledge of the activity may be inferred); State v.
             Engberg, 109 Idaho 530, 708 P.2d 935 (Ct. App. 1985) (violation may
             be found if licensee had constructive knowledge of the prohibited
             activity); Town & Country Lanes, Inc. v. Liquor Control Comm’n, 179
             Mich. App. 649, 446 N.W.2d 335 (1989) (licensee violated liquor
             license rule by failing to exercise reasonable diligence to ascertain the

                                                15
           age of underage customer); Leake v. Sarafan, 35 N.Y.2d 83, 358
           N.Y.S.2d 749, 315 N.E.2d 796 (1974) (to sustain a violation, licensee
           must have knowledge of the activity or the opportunity through
           reasonable diligence to acquire knowledge of the alleged acts); Smith
           v. Bd. of Liquor Control, 96 Ohio App. 396, 121 N.E.2d 920 (1954)
           (licensee must have actual or constructive knowledge of prohibited
           activity) Tex. Alcoholic Beverage Comm’n v. Sanchez, 96 S.W.3d 483
           (Tex. App. 2002) (to suspend liquor license, evidence must be
           presented that licensee had either actual or constructive knowledge of
           activity); Reeb, Inc. v. Wash. State Liquor Control Bd., 24 Wash. App.
           349, 600 P.2d 578 (1979) (to “permit” a violation, licensee must have
           actual or constructive knowledge of the activity).

Id. at 570-71 (emphasis added).

       Similarly, in Laube v. Stroh, the Court of Appeal of California “h[e]ld that a licensee

must have knowledge, either actual or constructive, before he or she can be found to have

‘permitted’ unacceptable conduct on a licensed premises.” 3 Cal. Rptr. 2d 779, 788 (Cal.

App. 1992). The Court continued: “It defies logic to charge someone with permitting

conduct of which they are not aware.” Id. Finally, the Court noted that “[f]ailure to prevent

the problem from recurring, once the licensee knows of it, is to ‘permit’ by a failure to take

preventive action.” Id. at 789.

       Likewise, in Leake, the Court of Appeals of New York noted the following regarding

the statutory words “suffer” or “permit”:

                   There is no particular mystery or magic in the language of the
           statute. This court in Matter of Migliaccio v. O’Connell defined the
           intent of the statute when it stated that in considering what is
           implied by the phrase suffer or permit as employed in the statute
           quoted above, we are guided by what was written for this court
           (per Cardozo, J.) in People ex rel. Price v. Sheffield Farms:
           Sufferance as here prohibited implies knowledge or the

                                             16
           opportunity through reasonable diligence to acquire knowledge.
           This presupposes in most cases a fair measure at least of continuity
           and permanence.

315 N.E.2d at 797 (emphasis added) (citations and internal quotation marks omitted).

       Finally, in Reeb, the Court of Appeals of Washington held:

           The word “permit” as used in the regulation does not imply that the
           licensee must have permanently sanctioned the prohibited act; it
           refers to the licensee’s actual or constructive knowledge of the
           circumstances which would foreseeably lead to the prohibited
           activity. Reeb was aware of the propensity of its dancers to engage
           in questionable conduct and chose nevertheless to maintain topless
           dancing on its licensed premises. Under these circumstances, the
           Board could find that Reeb permitted the conduct in violation of [the
           Liquor Board Rules]. This violation is sufficient to support the 7-day
           license suspension imposed by the Board.

600 P.2d at 581 (citation omitted).

       Considering the plain meaning of the words “suffer,” “permit,” and “allow,” we

conclude that the use of those words in Rules 4.17 and 4.18 necessarily require that “some

level of knowledge by the licensee must be established by the evidence.” Full Moon Saloon,

111 P.3d at 569. As indicated above, the definition of “suffer” expressly states that “[i]t

includes knowledge of what is to be done under sufferance.” Black’s Law Dictionary at

1432. The terms “permit” and “allow” also imply knowledge of what is to be permitted or

allowed. See First Nat’l Bank & Trust Co. of Port Chester v. New York Title Ins. Co., 12

N.Y.S.2d 703, 709 (1939) (“It has been said that every definition of ‘suffer’ and ‘permit’

includes knowledge of what is to be done under the sufferance and permission, and intention

that what is done is to be done.”).

                                            17
       We are fully cognizant of the strong public policy considerations behind requiring a

strict liability standard in the Liquor Board Rules. Unlawful or immoral activities may be

associated with places where alcoholic beverages are sold. However, one of the primary

purposes of the Liquor Board Rules is to clearly inform licensees of their responsibilities

regarding prohibited activities so that they can conform their conduct and the conduct of their

businesses to be in compliance with the Rules. Interpreting the words used in the Liquor

Board Rules at variance with their plain meaning does not advance the public purpose of

achieving compliance with the Rules. Although we are obligated to give deference to the

Liquor Board’s interpretation of its Rules, see Noland, 386 Md. at 572, “[a]n agency

conclusion will not be upheld upon review, however, if based upon an error of law,” Hoyle,

115 Md. App. at 129. Accordingly, we hold that the Liquor Board erred in interpreting the

words “suffer,” “permit,” and “allow” in Rules 4.17 and 4.18 to impose a strict liability

standard on licensees.6

       We also hold that the knowledge requirement implicit in the terms “suffer,” “permit,”

and “allow” can be satisfied by proof of either actual or constructive knowledge on the part

of the licensee. See Full Moon Saloon, 111 P.3d at 570. Actual knowledge is, of course,

actual awareness of the prohibited activity. Actual knowledge also includes the concept of

“deliberate ignorance” or “willful blindness.” See Rice v. State, 136 Md. App. 593, 604


       6
        Nothing in this opinion should be interpreted as precluding the Liquor Board from
imposing a strict liability standard on licensees, so long as the language of the Liquor Board
Rules explicitly provides for such standard.

                                              18
(2001). In State v. McCallum, Judge Chasanow explained the meaning of this form of

knowledge in a concurring opinion:

                 There is more than one mental state that may constitute
          “knowledge.” The first and highest form of “knowledge” is actual
          knowledge, that is, an actual awareness or an actual belief that a
          fact exists. A second form of “knowledge” is what has often been
          called “deliberate ignorance” or “willful blindness.” R. Perkins,
          Criminal Law, Ch. 7, § 4 at 687 (1957). The latter form of
          “knowledge” exists where a person believes that it is probable
          that something is a fact, but deliberately shuts his or her eyes or
          avoids making reasonable inquiry with a conscious purpose to
          avoid learning the truth. See 1 W. LaFave & A. Scott, Substantive
          Criminal Law, § 3.5 at 307 (1986), and authorities cited therein. In
          United States v. Jewell, 532 F.2d 697 (9th Cir.), cert. denied, 426 U.S.
          951, 96 S.Ct. 3173, 49 L.Ed.2d 1188 (1976), the 9th Circuit Court of
          Appeals noted that the deliberate ignorance or willful blindness form
          of knowledge has been accepted by leading commentators in the
          United States and in England. The opinion quoted from Professor
          Glanville Williams’ Criminal Law: The General Part, § 57 at 157, 159
          (2d ed. 1961), as follows:

                 “To the requirement of actual knowledge there is one
                 strictly limited exception. . . . [T]he rule is that if a
                 party has his suspicion aroused but then deliberately
                 omits to make further enquiries, because he wishes
                 to remain in ignorance, he is deemed to have
                 knowledge. . . . The rule that wilful blindness is
                 equivalent to knowledge is essential, and is found
                 throughout the criminal law.”

          Id. at 700.

321 Md. 451, 458-59 (1991) (Chasanow, J., concurring) (emphasis added).

      Constructive knowledge, however, implies knowledge where a licensee should have

known of the prohibited activity if reasonable care and diligence had been exercised. See


                                            19
Leake, 315 N.E.2d at 797 (stating that “it must be demonstrated that the licensee had

knowledge or the opportunity through reasonable diligence to acquire knowledge of the

alleged acts”); Morgan v. Bd. of Water Works of Pueblo, 837 P.2d 300, 303 (Colo. App.

1992) (stating that, if in the exercise of ordinary diligence a party should have known a fact,

it will be deemed to have knowledge).

       The Colorado Court of Appeals explained constructive knowledge as follows:

                  Constructive knowledge may be inferred if the conduct occurs
           openly, such that a reasonable person would observe it. If knowledge
           of the prohibited conduct could have been obtained through the
           exercise of reasonable care and diligence, constructive knowledge
           may be inferred.

                   Applying a constructive knowledge standard does not place an
           undue burden on the licensee because constructive knowledge
           requires only reasonable care and diligence and does not require
           extraordinary vigilance. Constructive knowledge means knowledge
           that one using reasonable care or diligence should have, and therefore
           that is attributed by law to a given person.

Full Moon Saloon, 111 P.3d at 570 (citations and internal quotation marks omitted).

       Nevertheless, the Liquor Board argues that Rule 4.17 is similar to Rule 4.01(a), which

we held in Hoyle to impose strict liability. We disagree.

       Rule 4.01(a) provides: “No licensee shall sell or furnish alcoholic beverages to any

person under twenty-one (21) years of age or to any person with the knowledge that such

person is purchasing or acquiring such beverages for consumption by any person under

twenty-one (21) years of age.” Hoyle, 115 Md. App. at 130. In Hoyle, the Liquor Board

ruled that Martini’s Bar had violated Rule 4.01(a) when one of its employees served alcohol

                                              20
to a minor. Id. at 128. Martini’s Bar appealed, arguing that this Court “should read a ‘due

caution’ provision into the [R]ule.” Id. at 131. We declined to do so, and instead held that

the Rule “imposes strict liability for the sale on the licensees.” Id. at 133.

       Our holding in Hoyle is clearly distinguishable from our holding in the case sub

judice. Rule 4.01(a), unlike Rule 4.17, does not use the words “suffer,” “permit,” or “allow,”

which, as explained above, necessarily include an element of knowledge. Instead, Rule

4.01(a) sets forth a simple directive—“No licensee shall sell or furnish . . . .”, which carries

no implication of knowledge.

       Finally, because the word “knowingly” appears in the second independent clause

(“second clause”), and not in the first independent clause (“first clause”), of Rule 4.17(b),

the Liquor Board claims that such sentence construction necessarily implies a strict liability

standard in the first clause. Again, we disagree.

       To reiterate, Rule 4.17(b) states:

           No licensee shall permit or suffer any person to appear in any act or
           other performance with breasts or the lower torso uncovered; nor shall
           any licensee knowingly permit or suffer his premises to be used for
           the conduct, exhibition or performance of an obscene act or other
           performance.

The first clause clearly identifies the prohibited act—any person “appear[ing] . . . with

breasts or the lower torso uncovered.” On the other hand, the second clause prohibits the

performance of an “obscene act or other performance.” In our view, the word “knowingly”

appears in the second clause because an element of knowledge is required to constitutionally


                                              21
regulate obscenity, a class of unprotected speech that is not clearly defined in First

Amendment jurisprudence. See generally Miller v. California, 413 U.S. 15, 20 (1973)

(summarizing “the somewhat tortured history of the Court’s obscenity decisions”).

      Accordingly, we hold that the Liquor Board erred in finding that Kougl was guilty of

violating Rules 4.17(a), 4.17(b), and 4.18, because there was no evidence that Kougl had

actual or constructive knowledge of his employee’s prohibited activity.

                                        JUDGMENT OF THE CIRCUIT COURT
                                        FOR BALTIMORE CITY REVERSED. CASE
                                        REMANDED TO THAT COURT WITH
                                        INSTRUCTIONS TO ENTER A JUDGMENT
                                        REVERSING THE DECISION OF THE
                                        LIQUOR BOARD RENDERED ON JULY 17,
                                        2014. COSTS TO BE PAID BY APPELLEE.




                                           22
