Massachusetts SJC Upholds Lottery Commission’s Denial of License Based on Deficient Moral Character

The Massachusetts Supreme Judicial Court’s decision in MD Zafar v. State Lottery Commission, SJC-13864, addresses an important question in administrative licensing law: may a state agency deny a business license based on conduct it finds proven by a preponderance of the evidence, even where the applicant was acquitted of related criminal charges?

The SJC answered yes. The Court held that the State Lottery Commission acted within its statutory and regulatory authority when it denied MD Zafar’s applications for lottery sales agent licenses based on a finding of deficient moral character. The Commission’s finding rested on criminal trial transcripts from a case in which Zafar had been acquitted. The SJC concluded that the acquittal did not prevent the Commission from making its own administrative finding under a lower burden of proof.

Background of the Case

MD Zafar owned convenience stores and had previously held licenses allowing him to sell Massachusetts lottery tickets. During a license renewal process, the State Lottery Commission learned that Zafar had been charged with serious offenses involving his then-wife, referred to by the Court under the pseudonym “Esha.” The charges included rape and other alleged domestic-violence-related offenses.

In 2017, after a jury trial, Zafar was acquitted of all criminal charges.

Several years later, Zafar applied for lottery licenses for two stores. The Commission denied the applications. Zafar requested administrative review, and the matter proceeded through Commission-level proceedings.

At the administrative hearing, the evidence included the transcripts and Superior Court file from Zafar’s criminal case, along with live testimony from Zafar and from the Commission’s director of compliance and security. The hearing officer credited the trial testimony of Esha and found, by a preponderance of the evidence, that Zafar had raped her. The hearing officer concluded that rape demonstrates deficient moral character and recommended denial of the license applications.

The Commission adopted that recommendation.

Zafar then sought judicial review in Superior Court. A Superior Court judge reversed the Commission’s decision, concluding that the Commission could not deny a license based on deficient moral character alone unless the applicant had also been convicted of a felony. The judge also concluded that the Commission’s finding was not supported by substantial evidence because it relied on criminal trial transcripts rather than live testimony from Esha and other witnesses.

The SJC transferred the case on its own initiative and reversed the Superior Court.

The Licensing Statute and the Commission’s Authority

The case centered on the interpretation of G. L. c. 10, §§ 26 and 27, which govern lottery sales agent licenses.

Section 26 gives the director of the State Lottery Commission broad authority to license “such persons as in his opinion will best serve the public convenience.” Section 27 provides that before issuing a license, the director shall consider several factors, including the applicant’s financial responsibility, business activity, location, existing license coverage, and expected sales. It also states that the director may refuse to issue a license to a person who has been convicted of a felony and who, in the director’s opinion, is not of good moral character.

The regulation at issue, 961 Code Mass. Regs. § 2.13(7), allows the Commission to deny, suspend, or revoke a license if the applicant’s moral character is found to be deficient. The regulation also provides that a felony conviction creates a presumption of deficient moral character.

Zafar argued that the statute required both a felony conviction and a finding of deficient moral character before the Commission could deny a license. Because he had been acquitted, he argued, the Commission exceeded its authority.

The SJC disagreed.

The Court emphasized the broad discretionary language in the lottery statute. The director is not required to license every applicant who avoids disqualifying criminal convictions. Instead, the director has authority to decide which applicants will best serve the public convenience. In that broader statutory context, the Court concluded that the Commission reasonably interpreted the statute to permit denial based on deficient moral character alone.

The SJC held that a felony conviction is not an absolute prerequisite to denial. Rather, under the Commission’s regulation, a felony conviction creates a presumption of deficient moral character. But the absence of a felony conviction does not prevent the Commission from finding deficient moral character based on other evidence.

Why the Acquittal Did Not Control the Licensing Decision

One of the most important aspects of the decision is the Court’s treatment of the prior acquittal.

In the criminal case, the Commonwealth had to prove guilt beyond a reasonable doubt. That is the highest burden in the law. The jury’s acquittal meant that the Commonwealth did not prove the criminal charges beyond a reasonable doubt.

But the administrative licensing proceeding involved a different question and a different burden. The Commission did not have to prove criminal guilt beyond a reasonable doubt. It had to decide whether, by a preponderance of the evidence, Zafar’s conduct demonstrated deficient moral character for purposes of holding a lottery sales agent license.

The SJC held that the acquittal did not bar the Commission from considering the underlying conduct. The Court relied on the difference between criminal punishment and administrative licensing. An acquittal does not necessarily mean the alleged conduct did not occur. It means the criminal burden of proof was not met.

That distinction was decisive. The Commission could review the trial record, make its own credibility and factual determinations under the administrative standard, and decide whether the applicant should be licensed.

Substantial Evidence and Use of Trial Transcripts

Zafar also argued that the Commission’s decision was not supported by substantial evidence because the hearing officer relied heavily on criminal trial transcripts rather than live testimony from Esha.

The SJC rejected that argument.

Under the Massachusetts Administrative Procedure Act, courts reviewing agency decisions ask whether the decision is supported by substantial evidence. Substantial evidence means evidence that a reasonable mind might accept as adequate to support a conclusion. Courts do not reweigh the evidence or substitute their view of the facts if the agency’s finding has adequate support in the record.

The SJC held that trial transcripts can satisfy the substantial evidence test when they have indicia of reliability. Esha’s criminal trial testimony was given under oath, was based on firsthand knowledge, was subject to cross-examination, and was largely consistent with other evidence. The hearing officer also considered Zafar’s denial, his alibi evidence, inconsistencies in Esha’s testimony, and the possibility of a motive to fabricate. The fact that the hearing officer ultimately credited Esha’s testimony did not mean he ignored contrary evidence.

The Court also rejected the argument that credibility disputes can only be resolved through live testimony. The hearing officer heard Zafar’s live testimony and discredited it. As to Esha, the hearing officer relied on her sworn, cross-examined trial testimony. The SJC concluded that this was permissible in an administrative proceeding.

This portion of the decision is significant because it confirms that agencies may rely on prior sworn testimony, including testimony from a criminal case, even where that testimony did not produce a conviction.

The Vagueness Challenge

Zafar also argued that the regulation allowing denial based on “deficient moral character” was unconstitutionally vague.

The SJC rejected that claim as applied to this case.

The Court explained that a less demanding vagueness standard applies in business licensing contexts than in criminal cases or cases involving First Amendment rights. A licensing regulation does not need to define every possible form of disqualifying conduct with precision. The question is whether the agency exercised its discretion fairly and not arbitrarily.

The SJC held that, as applied here, the regulation was not vague. A person of common intelligence would understand that committing rape could support a finding of deficient moral character and could lead to denial of a license to sell lottery tickets.

The Court therefore concluded that the Commission’s regulation was not unconstitutional as applied to Zafar’s case.

The Superior Court’s Error

The Superior Court had ruled for Zafar on two grounds. First, it held that the lottery statute required both a felony conviction and a finding of deficient moral character. Second, it held that the Commission’s finding lacked substantial evidence because the hearing officer relied on transcripts instead of live testimony.

The SJC rejected both conclusions.

The Court held that the Commission’s interpretation of its statutory authority was reasonable and entitled to deference. It also held that the trial transcripts, together with the administrative record, provided substantial evidence supporting the Commission’s decision.

As a result, the SJC reversed the Superior Court and ordered judgment to enter for the State Lottery Commission.

Why This Case Matters

MD Zafar v. State Lottery Commission is an important administrative law decision because it confirms the broad discretion Massachusetts licensing agencies may have when deciding whether an applicant is suitable for a government-issued business license.

The decision also underscores the limited effect of a criminal acquittal in later civil or administrative proceedings. An acquittal protects a person from criminal conviction and punishment. But it does not necessarily prevent an agency from considering the same underlying conduct under a lower evidentiary standard.

For businesses and license holders, the case is a reminder that licensing decisions can involve character, suitability, and public-interest determinations that go beyond formal criminal convictions. For lawyers, it is a useful decision on agency deference, substantial evidence, administrative use of hearsay, and the difference between criminal and civil burdens of proof.

Defense and Licensing Takeaways

The decision carries several practical lessons.

First, applicants for regulated licenses should understand that an acquittal may not end the matter. If a licensing agency has independent authority to assess character or suitability, it may still consider the underlying allegations.

Second, administrative hearings require a different defense strategy than criminal trials. The agency may rely on evidence that would be treated differently in court, including hearsay with sufficient reliability. Counsel must therefore be prepared to challenge the reliability, completeness, and weight of the administrative record.

Third, when an agency relies on old criminal allegations, the applicant should develop a full administrative record. That may include live testimony, documentary evidence, rehabilitation evidence, business history, compliance history, community support, and evidence addressing the agency’s public-interest concerns.

Fourth, statutory and regulatory language matters. The SJC gave significant weight to the Commission’s broad authority to decide who will best serve the public convenience. Where a statute gives an agency broad discretion, courts may defer to the agency’s reasonable interpretation.

Finally, vagueness challenges to business licensing standards face an uphill battle, especially where the conduct at issue is plainly serious. A phrase like “deficient moral character” may be difficult to apply at the margins, but the Court had little difficulty concluding that it was clear enough as applied to the conduct found by the Commission.

Conclusion

The SJC’s decision in MD Zafar v. State Lottery Commission affirms the power of Massachusetts licensing agencies to make independent suitability determinations, even after a criminal acquittal. The Court held that the State Lottery Commission could deny a lottery sales license based on deficient moral character alone, that sworn criminal trial transcripts could provide substantial evidence in an administrative proceeding, and that the regulation was not unconstitutionally vague as applied.

The decision is a reminder that criminal acquittal and administrative licensing are governed by different standards. A person may avoid criminal conviction because the Commonwealth failed to prove guilt beyond a reasonable doubt, yet still face licensing consequences if an agency finds misconduct more likely than not.

For anyone facing a Massachusetts licensing dispute tied to criminal allegations, the key is to treat the administrative case as its own proceeding, with its own burden of proof, rules of evidence, and strategic demands.