STATE OF IOWA BEFORE THE DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION
IN RE:
DOCKET NO. A-2009-00034 DIA NO. 09DOCBL103
Etre, L.L.C. , d/b/a Etc. 118 S. Dubuque Street Iowa City, Iowa 52240 PROPOSED DECISION Liquor License No. LC-32070 ________________________________________________________________________ On July 28, 2009, the Iowa City City Council (local authority) voted to disapprove the renewal application filed by Etre, L.L.C. d/b/a Etc. (licensee) for Liquor License No. LC-32070 based on the rate of PAULA (Possession of Alcohol Under Legal Age) citations on the licensed premises over the previous twelve months. The licensee filed a timely appeal and was granted timely filed status, which enables it to continue selling alcoholic beverages pending administrative appeals. A consolidated hearing was held before Administrative Law Judge Margaret LaMarche on October 23, 2009 at 1:00 p.m. This case was consolidated for hearing with a similar appeal filed by Iowa City Field House Co., Inc., d/b/a The Field House, Liquor License No. LC-34755 (Docket No. A-2009-00033). Separate decisions are being issued for each licensee. The local authority was represented by Assistant City Attorney Eric Goers. Etc. was represented by attorney Steven Ballard. The Field House was represented by attorney Matthew J. Adam. The record was held open for a total of three weeks for the parties to submit simultaneous briefs and reply briefs. THE RECORD The record includes the electronic license renewal applications, Notices of Appeal and Acknowledgements; Notice of Hearing; Notice Rescheduling Administrative Hearing; testimony of the witnesses; the parties’ Briefs and Reply Briefs; Local Authority Exhibits 1 (with redactions), 2-4, 7-29 (See Exhibit List for description); Etc. Exhibits 100-102, 104, 106-107, and 109 (See Exhibit Index for description); and Field House Exhibits B (City Clerk Tally Sheet for IDs turned in
DIA No. 09DOCBL103 Page 2 by Licensee) and C (Transcript of Local Authority Special Work Session on 2/9/09). ISSUE Whether the local authority properly denied the renewal application filed by the licensee based on a finding that the licensee lacked the requisite “good moral character” to hold a liquor license because the licensee’s PAULA rate exceeded 1.0, in violation of Resolution No. 09-38, approved by the local authority on February 10, 2009? FINDINGS OF FACT 1. For a number of years, the local authority and the University of Iowa have been exploring various strategies and proposals to address and reduce both underage and over consumption of alcoholic beverages in Iowa City. The University is especially concerned about these issues because they can lead to negative legal consequences for students and can adversely affect students’ health, safety, and academic success. A number of the proposals considered and implemented by the local authority have focused on the licensed liquor establishments in Iowa City. (Testimony of Sarah Lux Hansen; Samuel Hargadine; Local Authority Exhibits 1, 14, 17-27) 2. State statutes and rules do not prohibit persons who are under 21 years of age from being present on premises that serve alcohol, although local authorities may impose such a prohibition through a local ordinance. 1 On August 1, 2003, the local authority adopted an ordinance 2 prohibiting persons under the age of 19 from being present on the premises of a licensed liquor establishment, whose primary business is the sale of alcohol, after 10:00 p.m. There was a subsequent ballot initiative in Iowa City to increase the age for entry to bars in Iowa City to 21, but the ballot initiative failed on November 6, 2007. Currently, persons age 19 and over are legally permitted to be present on the premises of licensed liquor establishments within Iowa City. However, the local authority continues to explore ways to prevent persons ages 19 and 20 from obtaining and consuming alcohol while they are present at a licensed liquor establishment. (Local Authority Exhibits 14-28) 1 2
See, generally, Iowa Code chapter 123 and 123.30(2), 185 IAC chapter 4, and 4.3. Iowa City Ordinance 4-5-8.
DIA No. 09DOCBL103 Page 3 3. In Iowa, all applicants for liquor licenses or beer permits must satisfy a statutory “good moral character” requirement. 3 Liquor license applications are first reviewed and approved (or denied) by the local authority, and then the Iowa Alcoholic Beverages Division reviews and approves (or denies) the applications. 4 The local authority has adopted an ordinance, 5 which requires the police chief to conduct an investigation to determine if an applicant for a liquor license is of “good moral character” and to make a recommendation to the local authority whether the liquor license application should be approved or denied. (Local Authority Exhibit 15, p. 2) a. On June 27, 2006, the local authority approved Resolution 6 No. 06216, implementing a written policy for the review of initial applications and renewals of liquor licenses, beer permits, and wine permits. The policy was developed by the Chief of Police, in collaboration with the City Clerk and the City Attorney. The policy stated that the Police Chief (or his or her designee) would make an investigation to determine if the applicant is of “good moral character,” as that term is defined in State Code and the rules of the Iowa Alcoholic Beverages Division. The policy set out a nonexclusive list of factors to be considered in determining good moral character, which included but was not limited to: •
A pattern of convictions of persons within the establishment for PAULA (Possession of Alcohol Under Legal Age) and/or the local law prohibiting persons under 19 from being in licensed establishments, which suggests that the licensee or permittee does not have measures in place to adequately control access of persons under legal age to alcohol. The Police Chief or Designee shall review the establishment’s rate of PAULAs per visit. A rate of 1.5 PAULAs per visit may be grounds for disapproval of the application.
Iowa Code section 123.30(1)(a); 123.3(26)(2009). See Iowa Code section 123.32(2009). 5 Iowa City Ordinance Sec. 4-2-3(B), see Field House Brief, p. 2, ftnte. 2 , for full text. An “ordinance” is defined as a city law of a general and permanent nature. Iowa Code section 363.2(16)(2009). 6 A “resolution” or “motion” means a council statement of policy or a council order for action to be taken, but “motion” does not require a recorded vote. Iowa Code section 362.2(21)(2009). 3 4
DIA No. 09DOCBL103 Page 4 (Local Authority Exhibit 14, Attachment #5 (same as Etc. Exhibit 100), emphasis supplied) b. On February 10, 2009, the local authority adopted Resolution No. 09-38, which rescinded Resolution No. 06-216 and approved Guidelines for Police Chief’s Review of Applications for Initial and Renewal Liquor Licenses (Guidelines). The Guidelines represented a substantive revision of the local authority’s prior policy concerning its consideration of PAULAs in the evaluation of “good moral character.” The Guidelines stated, in relevant part: •
Citations issued on the premises for PAULA (Possession of Alcohol Under Legal Age) which indicate that the licensee or permittee knows that such activity is taking place on the premises and does not have measures in place to adequately control access of persons under legal age to alcohol. The Police Chief or Designee shall review the establishment’s rate of PAULAs per visit. For renewals after July 1, 2009, the Police Chief will recommend denial for any establishment with a rate of 1.00 or more PAULAs per visit assuming at least 18 visits in the 12 month renewal period. A rate of less than 1.00 may be grounds for disapproval of the application.
(Etc. Exhibit 101, emphasis supplied) Thus, the defined rate of citations requires the police chief to recommend denial of the application but the local authority retains its ultimate authority and discretion to grant or deny the application based on the individual circumstances. (Etc. Exhibit 101; Local Authority Exhibit 3) 4. The Guidelines approved by the local authority did not include a definition of the word “visit.” When discussing the proposed changes to the PAULA policy at a Special Work Session on February 9, 2009, one council member commented that it was “going to be extremely important to…to define visit as best we can, so that the industry can know what to expect…” (Field House Exhibit B, p. 27) Samuel Hargadine has been the Iowa City Police Chief for the last four years. At hearing, Chief Hargadine described his view of what constitutes a “visit” as when a police officer enters a licensed establishment for the purpose of ascertaining compliance with state or city liquor laws. In Chief Hargadine’s opinion, if an officer’s entry into a bar is for the purpose of getting a glass of
DIA No. 09DOCBL103 Page 5 water, using the bathroom, or even to respond to a reported fight, then that entry should not be counted as a “visit” to the bar for purposes of calculating the PAULA citation rate. Chief Hargadine has delegated responsibility for maintaining PAULA records and calculating PAULA rates to Sergeant Troy Kelsay, who is a supervisor in the records department. The police chief did not provide Sgt. Kelsay with a definition of the word “visit” for the purposes of the Guidelines. Sgt. Kelsay has been keeping PAULA records in a generally consistent manner since 2002. In calculating the PAULA rate, Sgt. Kelsay divides the number of PAULA citations by the number of police visits to the licensed premises over the previous 12 months, so long as there have been at least 18 “visits.” The frequency and number of visits to each bar in Iowa City varies. Chief Hargadine has commented that “we go fishing where the fish are.” (Local Authority Exhibits 713; Testimony of Troy Kelsay; Sam Hargadine) Sgt. Kelsay has always had a very clear idea of what he meant by “visit,” but concedes that his view may be different from Chief Hargadine’s interpretation and that someone else may not be able to determine what constitutes a “visit” by examining the Guidelines. In calculating the PAULA rate, Sgt. Kelsay only includes visits to the premises for which the police dispatcher has assigned an activity code of “bar check.” A “bar check” is typically initiated by the officer(s) to check for violations. The officer radios in to police dispatch to report that he or she is checking a particular bar, and the dispatcher would code the call as a “bar check.” In calculating the PAULA rate, Sgt. Kelsay does not consider police visits to an establishment for other reasons, such as police responses to specific complaints such as fights or organized compliance checks using cooperating underage persons. His rationale for excluding these visits to the licensed premises is that the officers would not be looking for PAULA violations or issuing PAULA citations when they are going to the licensed premises for a limited purpose. Sgt. Kelsay posts the PAULA statistics on-line, including the number of bar checks at each establishment. He is willing to review the classification of a particular visit and change it to a bar check if a licensee can show that it was miscoded by the officer or dispatch. Officers have different approaches when conducting a bar check for underage violations. Some officers will use a “shotgun” approach and request identification from every patron. Others, like Sgt. Kelsay, will focus on those patrons who act suspiciously by going into a restroom or handing their beverage
DIA No. 09DOCBL103 Page 6 to another patron when they see an officer. If Sgt. Kelsay issues a PAULA citation to an underage patron who has been marked as over-21 at the door, he immediately suspects that the person displayed false identification to a door person. He will pressure the patron to provide any false identification in their possession by pointing out that he could take them to the police station rather than cite and release them on the PAULA violation. In Sgt. Kelsay’s experience, most patrons will then turn over their false identification or consent to a search of their wallet or purse. Even if a patron is not observed in physical possession of an alcoholic beverage at the establishment, PAULA citations may be issued based solely on a positive preliminary breath test (PBT). In addition, PAULA citations may also be issued for constructive possession of alcohol, such as when four patrons are found sitting at a table with a pitcher and four glasses. Sgt. Kelsay believed that most officers would require more than an alcoholic beverage within arm’s reach of the patron before issuing a PAULA citation. (Testimony of Troy Kelsay) 5. Etre, L.L.C., d/b/a Etc. (“Etc.”) has held Class C Liquor License No. LC32070 for the premises at 118 S. Dubuque Street in Iowa City, Iowa since July 19, 2002. Etre, L.L.C. is owned by George Etre and his mother, Lois Etre. Last year they also bought and opened a restaurant, Takanami. The local authority approved the liquor license renewal applications for Etc. in 2003, 2004, 2005, 2006, 2007, and 2008. On or about July 16, 2009, Etc. filed a renewal application for Liquor License No. LC-32070. (Electronic Renewal Application; Testimony of George Etre) 6. Chief Hargadine reviewed Etc.’s most recent renewal application using the Guidelines approved by the local authority on February 10, 2009. In the 12month period from July 17, 2008 to July 16, 2009, 69 PAULA citations had been issued to patrons on the premises of Etc. during 50 “bar checks.” This gave Etc. a PAULA citation rate of 1.38. Chief Hargadine prepared a written memorandum recommending denial of Etc.’s renewal application based on its PAULA citation rate. In his memorandum, Chief Hargadine also noted that during the previous 12 months George Etre had been charged with violating Iowa City ordinance 4-5-7 (unlimited servings for a fixed price) but the charge was later dismissed. Chief Hargadine also noted that there had been 128 arrests/charges associated with the Etc. location, 118 S. Dubuque Street, as follows:
DIA No. 09DOCBL103 Page 7 o o o o o o o o o o
PAULA: 69 Public Intoxication: 18 Assault or Disorderly Conduct (fighting): 2 DL/ID offenses: 16 Under 19 In Bar After 10pm: 14 Obstruction &/or Interference: 3 Theft: 2 Alcohol Sales violations: 1 PCS: 1 Public Urination: 1
Chief Hargadine also noted 78 calls-for-service associated establishment, including the following 18 nuisance calls: o o o o o
with
the
Out with subject: 8 Fight in progress: 6 Assault: 2 Suspicious activity/person: 1 Welfare check: 1
Both the arrests and calls for services included incidents occurring outside of Etc. that were “associated” with Etc. by the original complainant. The calls for service are not considered “bar checks” and were not counted when calculating the licensee’s PAULA citation rate. Sgt. Kelsay acknowledged that the Driver’s License/ID citations were likely given to patrons who also received PAULA citations. “Out with subject” indicates that the officer called dispatch to report he or she will be out in front of Etc. with a subject, presumably to discuss some negative behavior such as a fight or an open container. At hearing, Chief Hargadine and Sgt. Kelsay both testified that if it were not for the PAULA rate over 1.0, they would have recommended approval of Etc. renewal application. Etc.’s PAULA citation rate decreased after the local authority adopted its new Guidelines on February 10, 2009. Etc.’s PAULA citation rate from July 2008 to February 10, 2009 was 1.60, but the citation rate from February 11, 2009 to July 15, 2009 improved to 1.05. One city council member voted to approve the renewal application based on this improvement. (Local Authority Exhibits 3, 4; Etc. Exhibit 109; Testimony of Samuel Hargadine; Troy Kelsay)
DIA No. 09DOCBL103 Page 8 7. PAULA citations are only issued to bar patrons and are not issued to the bar’s owners or employees, unless they happen to be underage and in possession of alcohol. Citations are only allegations and do not establish or prove guilt. Chief Hargadine had no data to show whether the 69 PAULA citations that were issued to patrons of Etc. in the 12 months preceding the renewal application resulted in convictions. (Testimony of Samuel Hargadine; Troy Kelsay) 8. Etc. is a small bar with an occupancy of 178 persons. It is open Thursday, Friday and Saturday during the school year and is occasionally open on Tuesday and Wednesday. George Etre is on the premises most of the time that the bar is open. It is closed in the summer and winter when students are not on campus. On a busy night, it may have 6 bartenders, 6 waitresses, 2 bar backs, 4 door persons, and 1 monitor checking for underage persons with alcohol. Employees are not promoted to the position of bartender until they have worked at Etc. at least one year. After the local authority adopted its new PAULA guidelines in February 2009, Etc. made some changes in its operations. A new lighting system was installed. Previously only persons over the legal age were given a wrist band and 19 and 20 year olds were given a mark on their hand. After the new guidelines, 19 and 20 year olds were given both a mark on their hand and a bright wrist band. The majority of Etc.’s employees have had TIPS (Training for Intervention Procedures) training from the Iowa City Police Department and have received additional training in identifying false identification. (Testimony of George Etre) CONCLUSIONS OF LAW I.
Summary of Arguments
The local authority relies on its Resolution No. 09-38, which was approved on February 10, 2009 and which sets out factors for the police chief to consider in evaluating the “good moral character” of applicants for liquor licenses, to support its denial of this liquor license renewal application. Specifically, the local authority relies on the part of the resolution that requires the police chief to recommend denial if the applicant has a PAULA citation rate over 1.0 in the 12 months preceding the application. In summary, the local authority contends that its adoption and implementation of Resolution 09-38 is a valid exercise of its home rule authority, is not inconsistent with state law, and provides a valid and
DIA No. 09DOCBL103 Page 9 fair measure of “good moral character.” The licensee, on the other hand, contends that the resolution is not consistent with state law, is not authorized by Home Rule, is void for vagueness, is arbitrary and an abuse of discretion, and that even if valid, that the numbers used by the local authority to calculate the PAULA rate were inaccurate and meaningless. II.
State Has Broad Authority To Regulate Liquor and Liquor Licenses
Iowa Code section 123.1 sets forth the public policy underlying the Iowa Alcoholic Beverages Control Act and states that the Act: …shall be deemed an exercise of the police power of the state, for the protection of the welfare, health, peace, morals, and safety of the people of the state, and all its provisions shall be liberally construed for the accomplishment of that purpose. It is declared to be public policy that the traffic in alcoholic liquors is so affected with a public interest that it should be regulated to the extent of prohibiting all traffic in them, except as provided in this chapter. Iowa Code chapter 123 establishes the Alcoholic Beverages Division within the Department of Commerce to administer and enforce the laws of this state concerning beer, wine, and alcoholic liquor 7 and also provides for the governor to appoint a division administrator and members of the Alcoholic Beverages Commission. 8 The administrator, with the approval of the commission and subject to chapter 17A, may adopt rules as necessary to carry out Iowa Code chapter 123, including rules prescribing the conditions and qualifications necessary for the obtaining of licenses and permits. 9 Liquor license applications (and renewal applications) are initially filed with the appropriate local authority. 10 The local authority shall either approve or Iowa Code section 123.4(2009). Iowa Code sections 123.5, 123.10(2009) 9 Iowa Code section 123.21(11)(2009) 10 Iowa Code section 123.32(1)(2009). “Local authority” means the city council of any incorporated city in the state of Iowa or the county board of supervisors of any county, which is empowered by Iowa Code chapter 123 to approve or deny applications for beer or wine permits or liquor control licenses; empowered to recommend that such permits or licenses be granted and issued by the division; and empowered to take actions reserved to them by Iowa Code chapter 123. Iowa Code section 123.2(21)(2009). 7 8
DIA No. 09DOCBL103 Page 10 disapprove the issuance of a liquor control license, shall endorse its approval or disapproval on the application and shall forward the application with the necessary fee and bond, if required, to the division. 11 An applicant for a liquor control license, wine permit, or beer permit may appeal from the local authority's disapproval of an application for a license or permit to the administrator of the Alcoholic Beverages Division (division). In the appeal, the applicant shall be allowed the opportunity to demonstrate in an evidentiary hearing conducted pursuant to chapter 17A that the applicant complies with all of the requirements for holding the license or permit. If the administrator determines that the applicant complies with all of the requirements for holding a license or permit, the administrator shall order the issuance of the license or Therefore, in this proceeding the licensee has the burden of permit. 12 establishing that it complies with the requirements for holding a liquor license in the state of Iowa. A.
Statutory Good Moral Character Requirement
The legislature has determined that a liquor control license may only be issued to a person who is of “good moral character” as defined by Iowa Code chapter 123. 13 Iowa Code section 123.3(26) provides the following relevant definition for “good moral character”: 26. "Person of good moral character" means any person who meets all of the following requirements: a. The person has such financial standing and good reputation as will satisfy the administrator that the person will comply with this chapter and all laws, ordinances, and regulations applicable to the person's operations under this chapter... This provision establishes a relatively broad and subjective standard for good moral character.14 However, 185 IAC 4.2(4)”b” provides further guidance for
Iowa Code section 123.32(2)(2009). Iowa Code section 123.32(6)(2009). 13 Iowa Code section 123.30(1)(a)(2009) 14 Other provisions of the definition are more objective, e.g. a person must be a U.S. citizen and citizen of Iowa or registered to do business in the state, must not have been convicted of a felony 11 12
DIA No. 09DOCBL103 Page 11 determining good moral character and also provides a role for the local authority in making this determination: 4.2(4) Financial standing and reputation. A local authority or the administrator may consider an applicant's financial standing and good reputation in addition to the other requirements and conditions for obtaining a liquor control license...and local authority or the administrator shall disapprove or deny an application for a liquor control license,... if the applicant fails to demonstrate that the applicant complies with the lawful requirements and conditions for holding the license... b. In evaluating an applicant's "good reputation," the local authority or the administrator may consider such factors as, but not limited to, the following: pattern or practice of sales of alcoholic beverages to 19- and 20-year-old persons for which the licensee or permittee, or the licensee’s or permittee’s agents or employees, have pled or have been found guilty, 15 pattern and practice by the licensee or permittee or the licensee's or permittee's agents or employees, of violating alcoholic beverages laws and regulations for which corrective action has been taken since the previous license or permit was issued, sales to intoxicated persons, licensee or permittee convictions for violation of laws relating to operating a motor vehicle while under the influence of drugs or alcohol, the recency of convictions under laws relating to operating a motor vehicle while under the influence of drugs or alcohol, licensee or permittee misdemeanor convictions, the recency of the misdemeanor convictions. (emphasis supplied). The list of factors is non-exclusive but notably all of the listed factors relate to conduct and behavior of the license applicant or the applicant’s employees. Licenses can be denied for failure to satisfy the good moral character in the past 5 years, and must not have had another liquor license revoked. See Iowa Code section 123.3(26)(b)-(d). 15 This provision relates back to a time when the licensee sanctions for alcohol sales to 19 and 20 years olds were limited to a $50 fine. That statutory provision has been repealed and this portion of the rules is no longer of any practical effect. See 97 Acts, ch 126, §54.
DIA No. 09DOCBL103 Page 12 requirement if there has been a pattern and practice of violations of alcoholic beverage laws and regulations by the licensee (or by the licensee’s employees or agents) for which “corrective action” has been taken since the previous license was issued. 16 Violations do not have to be proven through criminal convictions. 17 Violations can be established in an administrative hearing held before the local authority or the division. 18 PAULA citations are issued to patrons and are not issued to the licensee or to the licensee’s employees. Nevertheless, a large number of PAULA citations issued to patrons inside the licensed establishment in the year prior to renewal may constitute a pattern and practice of violations that will reflect poorly on the licensee’s good moral character, so long as the local authority goes forward with evidence to show the culpability of the licensee or the licensee’s employees with respect to the citations. In terms of establishing a pattern and practice of violations under subrule 4.2(4)(b), the following provisions of Iowa Code section 123.49(2) are potentially implicated by PAULA citations: 2. A person or club holding a liquor control license or retail wine or beer permit under this chapter, and the person’s or club’s agents or employees, shall not do any of the following: … h. Sell, give, or otherwise supply any alcoholic beverage, wine, or beer to any person, knowing or failing to exercise reasonable care to ascertain whether the person is under legal age, or permit any person, knowing or failing to exercise reasonable care to ascertain whether the person is under legal age, to consume any alcoholic beverage, wine or beer. … j. Knowingly permit or engage in any criminal activity on the premises covered by the license or permit. Thus, if the patron issued a PAULA citation was sold or served an alcoholic beverage by the licensee (or an employee of the licensee) or if the licensee (or the 185 IAC 4.2(4)”b.” Iowa Code section 123.39(1)(c)(2009)(“A criminal conviction is not a prerequisite to suspension, revocation, or the imposition of a civil penalty pursuant to this section.”) 18 Iowa Code section 123.39(1)(2009). 16 17
DIA No. 09DOCBL103 Page 13 licensee’s employee) “permitted” the underage person to consume an alcoholic beverage, while either knowing the person was underage or by failing to exercise reasonable care to ascertain that the person was underage, then the licensee is liable for committing a violation of Iowa Code section 123.49(2)(h) 19 and/or 123.49(2)(j). It is important to remember, however, that if underage persons misrepresent their age (for example by showing false identification), and the licensee establishes that reasonable inquiry was made to determine whether the prospective purchaser was over legal age, then the licensee is not guilty of selling alcoholic liquor, wine, or beer to a person under the legal age. 20 B.
Home Rule and Local Authority Power to Adopt Ordinances or Regulations Governing Liquor Licenses.
Under Article III, Section 38A of the Iowa Constitution, municipalities in Iowa have home rule authority to determine their local affairs and government, but only to the extent those determinations are not inconsistent with the laws of the General Assembly. 21 This provision of the Iowa Constitution, known as the “Home Rule Amendment,” grants municipal corporations broad authority to regulate matters of local concern. 22 However, this authority is limited by the fact that a city’s exercise of power must not “be inconsistent with the laws of the general assembly.” 23 The determination of whether a particular local action is inconsistent with the laws of the general assembly requires a preemption analysis. 24 Preemption may be express or implied. Express preemption occurs when the general assembly has specifically prohibited local action in an area. 25 The Iowa Supreme Court has recognized that while the general assembly reserved to itself the general authority to regulate the alcoholic beverage industry in Iowa, it also gave limited regulatory powers to local authorities. 26 For example:
Iowa Code section 123.50(3) mandates progressive penalties for violations of Iowa Code section 123.49(2)(h), ranging from a $500 fine for a first violation to revocation for a fourth violation in a period of three years. 20 Iowa Code section 123.49(3)(2009). 21 Goodell v. Humboldt County, 575 N.W.2d 486,500(Iowa 1998). 22 City of Des Moines v. Gruen, 457 N.W.2d 340, 341 (Iowa 1990). 23 Iowa Const. art.III, §38A. 24 Iowa Const., art. III, §39A, see Home Rule in Iowa, 22 Drake L.Rev. at 305. 25 Goodell, 575 N.W. 2d at 492. 26 Iowa Grocery Industry Association v. City of Des Moines, 712 N.W.2d 675, 679(Iowa 2006). 19
DIA No. 09DOCBL103 Page 14 •
•
• •
No liquor control license shall be issued for premises which do not conform to all applicable laws, ordinances, resolutions, and health and fire regulations. 27 Local authorities may adopt ordinances or regulations for the location of the premises of retail wine or beer and liquor control licensed establishments, and local authorities may adopt ordinances, not in conflict with Iowa Code chapter 123, that do not diminish the hours during which beer, wine or alcoholic beverages may be sold. 28 Local authorities may also require an applicant’s security personnel to be trained and certified in security methods. 29 Following written notice and opportunity for hearing, local authorities may suspend a license or permit for a period not to exceed one year or impose a civil penalty not to exceed one thousand dollars per violation. 30
Because there is no express preemption, the question turns to implied preemption. Implied preemption occurs when the ordinance prohibits an act Implied permitted by statute, or permits an act prohibited by a statute. 31 preemption may also occur when the legislature has “covered” a subject by statutes in such a manner as to demonstrate a legislative intention that the field is preempted by state law. 32 In determining what the legislature has permitted or prohibited [for purposes of implied preemption], the [court] looks to the legislative intent, and requires that any local ordinance remain faithful to the legislative intent, as well as the legislative scheme established in the relevant state statutes. 33 III.
Local Authority’s Adoption and Application of Resolution No. 09-38
The local authority has adopted Ordinance 4-5-8, which requires the police chief to conduct an investigation to determine if a liquor license applicant is of “good moral character” and to make a recommendation to the local authority whether to approve or deny the application. This ordinance only establishes a local
Iowa Code section 123.30(2)(2009). Iowa Code section 123.39(2)(2009); 185 IAC 4.3. 29 Iowa Code section 123.32(4)(2009). 30 Iowa Code section 123.39(1)(2009). 31 Gruen, 457 N.W.2d at 342. 32 Goodell, 575 N.W.2d at 493. 33 Id. at 500. 27 28
DIA No. 09DOCBL103 Page 15 procedure for the review of applications and does not conflict with any provision of Iowa Code section 123. On February 10, 2009, the local authority adopted Resolution 09-38, which required the police chief to review an applicant’s PAULA citation rate and to recommend denial if the rate over the past 12 months exceeded 1.0. Chief Hargadine and Sgt. Kelsay conceded that the only reason for the police department’s recommendation to deny Etc.’s renewal application was its PAULA citation rate. If it were not for the PAULA rate and Resolution No. 09-38, the police department would have recommended renewal of the license. Moreover, the hearing before the local authority focused almost exclusively on the PAULA rate as the reason for the denial. (Local Authority Exhibit 3). For this reason, this proposed decision focuses on the portion of Resolution No. 09-38 that pertains to PAULA citations. Resolution No. 09-38 provides, in part, that the factors to be considered by the police chief in determining good moral character include: Citations issued on the premises for PAULA (Possession of Alcohol Under Legal Age) which indicate that the licensee or permittee knows that such activity is taking place on the premises and does not have measures in place to adequately control access of persons under legal age to alcohol. Read in isolation, the foregoing section of Resolution No. 09-38 does not appear to be necessarily inconsistent with state statutes and rules that focus on the conduct of the licensee or the licensee’s employees in determining good moral character. However, the local authority has implemented and applied the Resolution to the licensee without providing evidence to show that the licensee or the licensee’s employees knew that the prohibited activity (underage possession and consumption of alcohol) was taking place on the premises, which would be required to find a violation of Iowa Code section 123.49(2)(j). Nor did the local authority provide evidence to show that the licensee failed to exercise reasonable care to ascertain that a person consuming alcoholic beverages was of legal age, as minimally required to show a violation of Iowa Code section 123.49(2)(h). Rather, the local authority relies on raw statistics of PAULA citations and on the implication that based solely on the number of citations per “bar check”, the licensee or the licensee’s employees must have known or permitted the violations to occur.
DIA No. 09DOCBL103 Page 16 While it is true that the licensee has the burden to establish good moral character, the local authority is still expected to bring forward sufficient evidence to show culpability of the licensee or the licensee’s employees with respect to the underage possession charges. The local authority must present more than raw numbers of PAULA citations. The local authority’s case reveals nothing about the circumstances surrounding the issuance of any of the 69 PAULA citations. The officers who issued the citations did not testify. There were no police or incident reports with respect to any of the citations. We do not know if the individuals cited were holding or drinking an alcoholic beverage or if they possessed or consumed alcohol in the presence of an employee. The local authority’s witnesses conceded that PAULA citations could be issued to patrons with a positive PBT, even if there is no evidence that they consumed the alcohol on the licensed premises. PAULA citations can also be issued for constructive possession, such as when there are four glasses on a table and officers observe four patrons sitting at the table. In addition, if persons who were issued PAULA citations presented reasonably credible false IDs (and possession of false identification is widely recognized as a large problem in Iowa City) then these citations should not be counted as evidence of the licensee’s lack of “good moral character.” Sixteen patrons were given citations for false IDs and presumably also received 16 of the PAULA citations. It is unclear if additional citations were issued to patrons with over-21 wrist bands and who presented false IDs at the door, but who were not asked if they had a false ID or did not voluntarily produce the false ID for police officers. There is no evidence concerning the types of IDs that were presented or how credible or convincing they may have been for the person who presented them. The probative value of the PAULA statistics is further diminished because Resolution 09-38 fails to define what constitutes a “visit.” Even if Sgt. Kelsay’s interpretation of “visit” is accepted as fair and reasonable, the legitimacy of his numbers depends entirely upon individual officers to properly and fully report their activities with respect to each establishment and on the dispatcher to provide the appropriate activity code. At least one such coding error was identified at hearing with respect to The Field House. Based on this record, it must be concluded that Etre, L.L.C., d/b/a Etc. does have the required “good moral character” to continue to hold a liquor license in the state of Iowa. The local authority’s reliance on Resolution No. 09-38 to deny the renewal application based solely on the PAULA citation statistics presented at
DIA No. 09DOCBL103 Page 17 hearing was inconsistent with state law and regulations defining “good moral character” and should be reversed.
DECISION AND ORDER It is therefore ORDERED that the local authority’s decision to deny the renewal application for Liquor License No. LC-33070, filed by Etre, L.L.C., Inc. d/b/a Etc. based solely on its PAULA citation rate is hereby REVERSED. 185 IAC 10.27(1) and (2) provide that any adversely affected party may appeal a proposed decision to the Administrator of the Alcoholic Beverages Division within thirty (30) days after issuance of the proposed decision. In addition, the Administrator may initiate review of a proposed decision on the Administrator's own motion at any time within thirty (30) days following the issuance of a proposed decision. Requests for review shall be sent to the Administrator of the Alcoholic Beverages Division, 1918 S.E. Hulsizer, Ankeny, IA 50021. Unless otherwise ordered, each appealing party may file exceptions and briefs within thirty (30) days of the notice of appeal or order for review. Within thirty (30) days thereafter, any party may file a responsive brief. The Administrator may shorten or extend the briefing period as appropriate. The Administrator may resolve the appeal on the briefs or provide an opportunity for oral argument. 185 IAC 10.27(6). The administrator may affirm, reverse or modify the proposed decision. A party who is adversely affected by the proposed decision shall not be deemed to have exhausted administrative remedies unless the adversely affected party files a request for review of the proposed decision within the time provided and the Administrator has reviewed the proposed decision and has affirmed, reversed, or modified the proposed decision.
DIA No. 09DOCBL103 Page 18
Dated this 15th day of December, 2009.
Margaret LaMarche Administrative Law Judge Department of Inspections and Appeals Division of Administrative Hearings Wallace State Office Building-Third Floor Des Moines, Iowa 50319
Copies to: Margaret LaMarche Administrative Law Judge Department of Inspections & Appeals Lucas State Office Building Des Moines, Iowa 50319 John Lundquist Assistant Attorney General Department of Justice Hoover State Office Building Des Moines, Iowa 50319 Lt. David Eick ISP, District #10 15239 35th Street Oelwein, Iowa 50662-9446 Chief Sam Hargadine Iowa City Police Department 410 E. Washington Street Iowa City, Iowa 52240 Marion Karr City Clerk - City Hall 410 E. Washington Street Iowa City, Iowa 52240 John Henry Ellison Chief Investigator 2323 Grand Avenue Des Moines, Iowa 50312
Beverly Zylstra Social Gaming Unit Lucas State Office Bldg. Des Moines, Iowa 50319 Gayle Collins Commissioner Iowa Alcoholic Beverages Division 1918 SE Hulsizer Ankeny, Iowa 50021 Karen Freund Iowa Alcoholic Beverages Division 1918 SE Hulsizer Ankeny, Iowa 50021 Eric R. Goers Assistant City Attorney 410 East Washington Street Iowa City, Iowa 52240 Steven E. Ballard Attorney at Law PO Box 2447 222 South Linn Street Iowa City, Iowa 52244-2447