TITLE 16.ECONOMIC REGULATION

Part 3. TEXAS ALCOHOLIC BEVERAGE COMMISSION

Subchapter C. RECORDS AND REPORTS BY LICENSEES AND PERMITTEES

The Texas Alcoholic Beverage Commission adopts a new subsection (g) to §41.52 with changes to the text as published in the January 31, 2003, issue of the Texas Register (28 TexReg 817). The change to the rule as adopted as compared to the rule as originally published is the addition of the final sentence to the rule requiring private club operators to obtain written consent from club members or prospective members when accessing the electronically readable information on their driver's licenses.

Like all alcoholic beverage providers, private club permittees violate the law if they furnish alcoholic beverages to minors. Also, private clubs are authorized to serve alcoholic beverages to members and their guests, but violate the law if they sell an alcoholic beverage to anyone. Because a significant number of private clubs are in dry areas where the citizens have not voted to authorize the sale of alcoholic beverages, sales by private clubs are often a matter of constitutional significance under Article XVI §20 of the Texas Constitution.

In light of this significance the state takes great interest in, and closely regulates, matters related to a club's membership. For example, clubs must insure that a certain number of their members reside in the county in which the club is located, or in adjacent counties. Alcoholic Beverage Code §32.03(e). Following this interest, the commission requires clubs to keep and maintain accurate and careful membership records reflecting, among other things, the "full name [and the] current complete address of each member." 16 TAC §41.52(c)(1)(D). Further, as a condition of the commission's required approval for maintaining membership records through a machine system, clubs are required monthly to produce a complete membership list. Of course, if the records maintained by a club are inaccurate, the club is subject to administrative sanctions. 16 TAC §41.52(f)(2).

In sum, both the state and private club permittees have a significant interest in insuring that club operators have current and accurate information relating to a member or prospective member's age, identity and address. A primary means of obtaining this information is through reference to identity cards and driver's licenses issued by the Texas Department of Public Safety. Further, a primary means of verifying the accuracy of information so obtained is by accessing, or scanning, the data electronically encoded on the magnetic strip of licenses and identity cards.

It was to allow such scanning by alcoholic beverage permittees that §109.61 of the Alcoholic Beverage Code was adopted, authorizing scanning "for the purpose of complying with this code or a rule of the commission, including for the purpose of preventing the person from committing an offense under [the] code." Accordingly, this rule is adopted to authorize private club permittees to scan the electronically encoded information on driver's licenses and identity cards for the purpose of verifying the accuracy of information they are required by §41.52 to collect and maintain.

Despite the importance of this activity, the commission recognizes that accessing the personal data contained on licenses and identity cards implicates individual privacy interests. Accordingly, the commission resolved to require private club permittees to obtain written consent from consumers to access license and identity card information, and to maintain records of that consent so the commission could insure compliance with that requirement. Through this mechanism, consumers could decide, through individual consent, whether to authorize access to their personal data.

Although no groups or associations commented on this rule, approximately 140 private club permittees commented in favor of the rule. The permittees were in favor of the rule because it allows them to collect and verify necessary information with efficiency to themselves and convenience to members and prospective members.

Two commenters were opposed to the rule, at least in part, because in their view the rule would allow private club permittees to violate the provisions of the federal Driver's Privacy Protection Act (DPPA). 18 U.S.C. §2721 et seq. The commission disagreed with this view.

The DPPA regulates the publication and use of information appearing on licenses and identity cards by the Texas Department of Public Safety and private parties who have purchased the database of license and identity card information from the DPS. 18 U.S.C. §2721(a). It does not regulate the exchange of such information between license or card holders and other persons who have not purchased the DPS database. Attorney General Opinions JC-0423 (2001), p. 4; JC-0499 (2002), p. 7. O'Brien v. Quad Six Inc. 219 F. Supp. 933 (N.D. Ill., 2002).

In some circumstances private clubs may compare license and card information they have scanned with the DPS database through association with a purchaser of that database. Such comparison is acceptable under the DPPA if any of a number of exceptions apply. 18 U.S.C. §2721(b).

The commission concluded that, by taking all reasonable steps to insure the accuracy of their membership records and the age of their patrons, private club permittees are acting on behalf of this agency in carrying out its functions of assuring that alcoholic beverages are not provided to minors or sold by clubs to non-members. This is an acceptable use of license and card information under 18 U.S.C. §2721(b)(1).

Further, by scanning licenses and cards and comparing the scanned data with the DPS database, private club permittees are acting to verify the information obtained and, if incorrect, to obtain the correct data so as to prevent fraud arising from the use of false or inaccurate licenses and cards. This is an acceptable use of license and card information under 18 U.S.C. §2721(b)(3).

Finally, information from the DPS database may lawfully be disclosed for use "by any requestor if the requestor demonstrates that it has obtained the written consent of the individual to whom the information pertains." 18 U.S.C. §2721(b)(13). By complying with the last sentence of the rule adopted here, private club permittees place their actions within this exception.

This rule is adopted under the authority of §5.31 of the Alcoholic Beverage Code, which provides the commission with the authority to prescribe and publish rules necessary to carry out the provisions of the code.

Cross Reference: Alcoholic Beverage Code §32.03 and §109.61 are affected by this rule.

§41.52.Private Clubs--In General.

(a) Scope. This section does not apply to temporary members or to hotel patrons, as described in the Alcoholic Beverage Code, §§32.09, 32.10, and 32.11. In addition, subsection (c)(1)(G) and (H) and subsection (e) of this section do not apply to fraternal organizations or to veterans' organizations.

(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise:

(1) Club--A private club.

(2) Member and membership--A member of and membership in a private club.

(1) No private club shall be qualified to hold a private club registration permit unless it shall:

(A) have 50 or more members at all times;

(B) have a membership committee composed of three or more members of the club and vested with authority by charter, by-law or regulation to approve or reject membership applications and terminate existing memberships. The governing body of a club, if qualified under this provision, may be the membership committee, and when functioning as such shall be subject to and governed by all provisions herein relating to the membership committee. When considering a membership application or termination of membership, the membership committee shall keep written minutes showing the meeting date, the names of all committee members present, the name of any person admitted to membership, and the name of any person whose membership was terminated. No minutes shall be required of any discussion or action regarding a membership application which is denied;

(C) have, other than charter members, no members except those approved by at least three members of the membership committee at a meeting of such a committee;

(D) keep a well bound book in which is shown the following about each member: The full name of the member, his initial membership number which shall be issued in sequence, the current complete address of such member, the date such member was admitted to membership, and the date such member was removed from membership. Provided that when a member has been removed from membership, his membership number may be reassigned to another member. Provided further that additional well bound books may be used if necessary to record the information required by this paragraph, but all such books shall be kept permanently by the club. Provided further that a club using a business machine to maintain its membership records shall not be required to keep a well bound book if such machine provides such information as shall be required by the administrator, and is approved in writing by the administrator;

(E) keep all books, records and minutes required herein on the premises of such club, and make them available to any representative of the commission upon reasonable notice;

(F) maintain in force a bond executed by: the corporation, as principal, if an incorporated club; or, an officer of the club, as principal, if an unincorporated club. Such bond shall be executed by a surety company duly authorized and qualified to do business in this state, as surety, in an amount required by rule of the commission payable to the State of Texas conditioned that all fees and taxes owned by such club to the State of Texas shall be paid. Such bond shall be in a form approved by the administrator and the attorney general of Texas;

(G) if operating under the locker system, at all times keep all liquor owned by each member under the locker system in a locker located on the premises and rented only to such member, except when the member, one of his family or his guest is present on the premises and using such liquor; and

(H) if operating under the pool system, keep a well bound book in which is recorded the following about each member of the pool: His name and membership number, the date and amount of each liquor pool assessment, and the date of payment of the assessment. The information required to be kept in a book by this paragraph may be kept in the book required in subparagraph (D) of this paragraph. Provided that a club using a business machine to bill each member of its liquor pool shall not be required to have such well bound book if such machine provides such information as shall be required by the administrator and is approved by the administrator.

(2) No membership shall be terminated except by action of the membership committee or by written resignation of the member. Resignation of any member shall be recorded immediately in the minute book of the membership committee and in the records required by paragraph (1)(D) of this subsection.

(3) The administrator may, after notice and hearing, refuse to issue a private club registration permit if he finds that the applicant has failed to comply with any requirement set forth in this subsection.

(4) After notice and hearing the administrator may suspend for a period not exceeding 60 days, or cancel, a private club registration permit if he finds that the holder of the permit, its governing body, or any of its committees, officers, directors, members, agents, servants, or employees has failed to comply with any requirement set forth in this section.

(d) Who may consume. As provided in the Alcoholic Beverage Code, §32.01, alcoholic beverages owned by members of a private club may be served only to and consumed only by a member, a member's family, or their guests.

(1) The word "member" shall mean a person who has been admitted to membership as provided in subsection (c) of this section.

(2) The term "member's family" shall mean the spouse, parents, and adult children of the member.

(3) The word "guest" shall mean an individual who is personally known by the member or one of the member's family and who is admitted to the club premises by personal introduction of, or in the physical company of, the member or one of the member's family.

(e) Food service. A private club shall provide regular food service adequate for its members and their guests. The term "food service adequate for its members and their guests" shall mean that complete meals shall be available on the club premises for service to members, their families, and guests.

(f) Suspension and cancellation. After notice and hearing the administrator may suspend for a period not exceeding 60 days, or cancel, a private club registration permit if he finds that the club or any of its members, agents, servants, or employees has:

(1) served, consumed or permitted another person to consume an alcoholic beverage on the premises of the club at any time when the private club registration permit of such club is suspended by an order of the administrator; and

(2) made a false statement or a misrepresentation in any book, record, minutes or report, or other written matter required to be kept or reported by this section or by any provision of the Alcoholic Beverage Code.

(g) Permittees may access electronically readable information on a driver's license, commercial driver's license or identification certificate for the purpose of verifying the accuracy of the records required by this rule. Information so accessed may not be retained longer than is reasonably necessary to insure verification. The information may not be marketed in any manner. Written consent must be obtained from the club member or prospective member when accessing electronically readable license information and proof of such consent must be maintained with the permittee's membership records.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on May 2, 2003.

TRD-200302754

Jeannene Fox

Assistant Administrator

Texas Alcoholic Beverage Commission

Effective date: May 22, 2003

Proposal publication date: January 31, 2003

For further information, please call: (512) 206-3204