The Supreme Judicial Court heard oral argument over whether a 1986 restaurant lease provision that prevents a tenant from pledging a liquor license is enforceable or void as against public policy.

Appellant counsel Kevin Considine told the court the lease’s Article 11.24 made the tenant a sublicensee, provided for automatic reversion of the liquor license at lease termination and included “a prohibition against pledging the license.” He argued the Alcoholic Beverages Control Commission did not, and does not, approve negative-pledge agreements: “What I’m saying is the ABCC didn’t approve the negative pledge agreement. The ABCC does not approve negative pledge agreements,” Considine said during argument.

The argument centered on whether those private contract terms conflict with chapter 138 of the General Laws, particularly the last paragraph of section 23, which Considine contended delegates to the ABCC exclusive authority to approve pledges of licenses and reflects a legislative public-policy choice. Considine pointed the court to Beacon Hill Civic Association v. Toscano as precedent holding that private contracts that bar participation in the licensing process can be unenforceable as against public policy.

Counsel for the appellees, David Kelson, described the lease and related documents as negotiated between sophisticated parties and said the tenant (Byrne, Inc., later Byrne LLC) supplied the lease and supporting materials to the licensing authorities in 1996 when it became the licensed operator: “The tenant, Byrne, Inc. took care of this transaction,” Kelson said. He argued the record shows the negative-pledge language was disclosed to the regulators and that the tenant had an obligation under the lease to obtain regulatory approvals.

Justices pressed both sides on the limits of the statute and on how Toscano applies. Justice Gazziano asked why a statutory provision authorizing ABCC-approved pledges for loans should render private agreements not to pledge void; Justice Kafka and Justice Kafker questioned whether the statutory approval process for pledges governs private contractual arrangements between landlords and tenants. Justice Willa Hodge also queried how the reversion of the license at lease end would interact with the ABCC’s authority when the landlord sought to resume use of the license.

Kelson also defended a related conversion claim, arguing that the license has a dual character—both regulatory and property aspects—and that a tenant’s alienation of rights contrary to the lease could support conversion: “Conversion means, as I understand it, your honor, exercising control over,” Kelson said, adding that the lease gave the landlord a reversionary interest that the tenant was obliged to protect.

Both sides acknowledged factual points in the record: the original lease dates to 1986; Saint Cloud Corporation was the licensee before 1996; the corporate-to-corporate transfer to Byrne occurred in 1996; and the parties submitted multiple documents to the ABCC in connection with that transfer. Counsel disagreed about whether the ABCC’s 1996 approval of the corporate transfer amounted to approval (or notice) of the negative-pledge provisions and whether later ABCC actions (including a 2019 pledge approval referenced in argument) affect the analysis.

No decision was announced at argument; the court’s questions focused on statutory interpretation of chapter 138, the scope of ABCC authority under section 23, the reach of prior precedent such as Beacon Hill Civic Association v. Toscano, and the interplay between private-contract rights and public regulatory controls.

The case record as discussed at argument contains the lease with the challenged provisions, materials submitted to the ABCC in 1996, and subsequent filings raising claims including conversion and a Chapter 93A contention described in counsel’s briefs. The court session included extended questioning by several justices and argument from both sides but produced no immediate ruling.