Supreme Judicial Court hears dispute over "negative pledge" clause in longtime restaurant lease

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…