Down By Law? TABC Says Valarium's Closure Not Related To Any New Changes in the Law

When the Valarium announced two weeks ago that it would be closing its doors on Nov. 24, the music community in Knoxville openly mourned. The club brought in a lot of bands that no one else tries to get, and the void will hurt both local musicians and fans.

Club owner Gary Mitchell posted a letter on the Valarium's website stating that the closure was for legal reasons. He wrote, "Due to new rule changes from the TN Alcoholic Beverage Commission concerning the minimum percentage of food an establishment must sell in relation to its gross sales, our venues will be closing. We also cannot comply with the minimum number of days they require us to be open per week."

The Knoxville News Sentinel reported that the issue was "legislation passed last May by the Tennessee General Assembly creating a new limited service license, which requires that 15 percent of the gross revenue is derived from the service of food."

But according to the Tennessee Alcoholic Beverage Commission, this isn't the case at all. TABC's attorney, Ginna Winfree, says the law changes happened in 2010—and they were actually designed to help bars get by while selling less food, not more.

Up until 2010, if you wanted to be a bar serving liquor in Tennessee, you had to also be a restaurant. At least 50 percent of your revenue had to come from food sales, and you had to be open at least five days a week.

There are innumerable exceptions to this rule—the law regulating liquor licenses is riddled with special cases for hotels, private clubs, and places like the Tennessee Theatre, which has its own special exception codified into law as a historic theater. But the majority of what are commonly thought of as bars in the state have a restaurant license. (Bars that only serve beer, and not wine or liquor, do not need an TABC license, just a permit from the beer board, and thus are governed by different laws.)

Then in 2010, the state Legislature passed a law changing these regulations. While restaurant licenses (obviously) continue to exist, the state now also offers "limited service restaurant" licenses for entities that have less than 50 percent food sales. According to Winfree, businesses with this particular license are required to have at least 15 percent food sales and be open three days a week instead of five. (This latter requirement was also changed for all restaurants.) And, Winfree says, this is the kind of license the Valarium had.

So what changed this year? According to Winfree, nothing. She says "minor language" was added to the law this past session but she could not point out anything that would fit what Mitchell had stated were his reasons for closing.

Again, the two points he lists—the minimum percentage of sales and the minimum number of days to be open—had already been in effect since 2010 and had actually become less onerous than when the club first opened in 2007.

Mitchell declined to talk to for this story, stating that his lawyer was already mad at him for sharing too much in his post on the Valarium website. Mitchell says he plans to sue, but when asked if that meant he plans to sue TABC, and for what, he wouldn't say. The only thing he would say was that the problem was "they took beer off of food sales." But according to an e-mail from Winfree, "Beer sales have never been allowed to count towards the food percentage. Food percentages are determined by comparing the gross sales of prepared foods to the gross sales of alcoholic beverages, excluding low-gravity beer."