Misurelli v. City of Racine

• Decision Date: 02 August 1972
• Docket Number: Civ. A. No. 71-C-316,71-C-317,71-C-335.
• Citation: 346 F. Supp. 43
• Parties: Richard A. MISURELLI and Terrance McCue, Plaintiffs, v. CITY OF RACINE, a Wisconsin Municipal Corporation, Defendant. GO-GO OF RACINE, INC., a Wisconsin Corporation, et al., Plaintiffs, v. CITY OF RACINE, a Wisconsin Municipal Corporation, et al., Defendants. David H. ROBERS, Plaintiff, v. CITY OF RACINE, a Wisconsin Municipal Corporation, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

346 F. Supp. 43

Richard A. MISURELLI and Terrance McCue, Plaintiffs, v. CITY OF RACINE, a Wisconsin Municipal Corporation, Defendant.

GO-GO OF RACINE, INC., a Wisconsin Corporation, et al., Plaintiffs, v. CITY OF RACINE, a Wisconsin Municipal Corporation, et al., Defendants.

David H. ROBERS, Plaintiff, v. CITY OF RACINE, a Wisconsin Municipal Corporation, Defendant.

Civ. A. Nos. 71-C-316, 71-C-317, 71-C-335.

United States District Court, E. D. Wisconsin.

August 2, 1972.

COPYRIGHT MATERIAL OMITTED

Jay Schwartz and Victor C. Cairo, Racine, Wis., for plaintiffs Richard A. Misurelli and David H. Robers, et al.

No appearance for plaintiffs Go-Go of Racine, Inc.

Jack Harvey, City Atty., and Edward A. Krenzke, Deputy City Atty., Racine, Wis., for defendant City of Racine, and others.

Before FAIRCHILD, Circuit Judge, and REYNOLDS and GORDON, District Judges.

DECISION AND ORDER

REYNOLDS, District Judge.

In these § 1983 actions, the plaintiff tavern owners challenge the defendant City of Racine's denial of their applications for renewal of their Class "B" Fermented Malt Beverage and Intoxicating Liquor Licenses on the ground that they were not given a fair hearing. More specifically, they allege that the City of Racine ("Racine"), acting in accordance with state law, has violated their civil rights, both in the manner of and the basis for the denial of a renewal license in that the licenses were (1) denied without an adversary-type hearing, and (2) denied because of the nude dancing entertainment provided in the taverns. The complaint challenges Wis.Stats. §§ 176.05(1) and (8) as unconstitutional, and injunctive relief is requested. This court has jurisdiction pursuant to Title 28 U.S.C. § 1343.¹

In accordance with Title 28 U.S.C. § 2281,² a three-judge court has been convened. The governor and attorney general of Wisconsin were notified of the pendency of these actions, and the attorney general intervened as a defendant. The parties have stipulated to the facts and each has moved for summary judgment. We find for the plaintiffs.

Sections 176.05(1)³ and 176.05(8)⁴ of the Wisconsin Statutes, as construed by the Wisconsin Supreme Court,⁵ enable Wisconsin municipalities to deny liquor license applications after providing the applicant with only a legislative-type hearing "wherein one is given notice of the hearing and a fair opportunity to state his position * * *."⁶ Specifically, this hearing need not necessarily include "the right to cross examine or require testimony to be given under oath."⁷

Racine, acting upon the plaintiffs' applications for renewal⁸ of their liquor licenses, held a public hearing before the city council licensing committee, in which all citizens were allowed to make statements. Citizens expressing their views were neither put under oath nor subject to cross-examination by the license applicants. A verbatim transcript of the hearing was not made. The plaintiffs appeared at the hearing and made statements.

Subsequent to these hearings, the license committee met and voted to recommend denial of plaintiffs' renewal license applications because of both the nude dancing entertainment provided by the applicants in their taverns and because of the negative effects this form of entertainment allegedly had on the community. The city council, upon receipt of their license committee's recommendations and the reasons for those recommendations, voted to deny plaintiffs' applications for renewal of their Class "B" Fermented Malt Beverage and Intoxicating Liquor Licenses.

It is agreed that Racine's renewal licensing procedure is in accordance with Wis.Stats. §§ 176.05(1) and (8), and that unless plaintiffs possess the liquor license denied them, they will be unable to continue operation of their taverns, taverns in which they each have a substantial investment.

Reaching the merits of this controversy,⁹ we find that when Racine failed to provide plaintiffs with (1) notice of the charges upon which denial of their liquor licenses was urged, (2) an opportunity to respond to those charges, (3) an opportunity to present witnesses under oath, (4) an opportunity to confront and cross-examine opposing witnesses under oath, and (5) the opportunity to have a verbatim transcript made at their own initiative and expense, it failed to provide plaintiffs with a hearing commensurate with Fourteenth Amendment due process. We further find that §§ 176.05(1) and (8) of the Wisconsin Statutes, as construed by the Wisconsin Supreme Court, are unconstitutional insofar as they expressly authorize a hearing not meeting minimal due process demands.¹⁰

The due process clause of the Fourteenth Amendment is one of subtle shading, embodying differing rules of fair play for differing types of proceedings.¹¹ In any given case the answer to whether the constitution requires a hearing or a specific type of hearing depends not upon what labels might be attached to the matter in dispute¹² but rather depends upon a balancing of the citizen's stake in the matter vis-a-vis the Government's need for abbreviated decision making.¹³ In the case at hand such a balancing, even when divorced from analogous precedent, leaves room for but one conclusion.

The stake of the plaintiffs is both their occupations and their investments for denial of the renewal of a liquor license bars them not only from selling liquor but substantially impairs the value of their taverns. They seek a hearing in which they are provided with a meaningful opportunity to disprove damaging charges and demonstrate that they are deserving of being licensed to continue in their chosen businesses.

There is no dispute that Racine's (and Wisconsin's) interest in being able to deny liquor licenses in general is substantial. However, its interest in being able to deny the renewal of licenses with no other safeguard than a legislative hearing is at best minimal. While defendants have chosen to remain largely silent on this issue, we can surmise but two arguable factors suggesting the foregoing of an adversary-type hearing —cost and inconvenience.¹⁴ Both, however, are of questionable application. There would seem little reason, for instance, why increased expenses inherent in a more formal type hearing might not at least be partially recouped by taxing "costs" to the losing party, as is the practice in litigation before a court.¹⁵ If a legislative hearing may be more convenient, certainly the adversary hearing of the type we hold as required today better serves the state and city's interest in ascertaining the truth. None of the rights set forth in our opinion today preclude the gathering of information; rather the rights set forth act to better insure that Racine will have the entire picture before it when it acts.¹⁶

The Supreme Court has on several occasions held that a hearing in keeping with due process is required when the state denies an occupational license.¹⁷ The fact that the cases before the Supreme Court might have touched areas of special local concern has not deterred this constitutional mandate.¹⁸ We find two cases in particular, one affirmed and the other cited with approval by the Supreme Court, to be most compelling. In Constantineau v. Grager, 302 F.Supp. 861, 865 (E.D.Wis.1969), this court held that before an individual might be denied the right to purchase liquor he was entitled "to an opportunity to confront the person claiming that his conduct warrants his being `posted' and to present his side of the story before he is in fact `posted.'" This holding was affirmed by the Supreme Court. Wisconsin v. Constantineau, 400 U.S. 433, 91 S.Ct. 507, 27 L.Ed.2d 515 (1971).

In Hornsby v. Allen, 326 F.2d 605, 608 (5th Cir. 1964), the Fifth Circuit held that before a city may deny a license to sell liquor "the parties must generally be allowed an opportunity to know the claims of the opposing party, citations omitted, to present evidence to support their contentions, citations omitted, and to cross-examine witnesses for the other side, citation omitted." The Supreme Court cited Hornsby, specifically noting that it dealt with liquor licensing, in support of its holding that due process requires a hearing in public assistance cases. Goldberg v. Kelly, 397 U.S. 254, 262 n. 9, 90 S.Ct. 1011, 25 L. Ed.2d 287 (1969).

We find in balancing the interests involved in the cases before us that the due process clause of the Fourteenth Amendment requires in the instant setting a hearing "granted at a meaningful time and in a meaningful manner."¹⁹ We further find that the legislative hearing permitted by state statute and granted by Racine fails to qualify as "meaningful" within the context of the cases before us.

First: When the reasons for the denial of a renewal of a license are based upon the testimony or reports of individuals,²⁰ the applicant must be given an opportunity²¹ to present witnesses and confront and cross-examine his accusers. "Anonymous informations" are as repugnant to Americans today as they were to Roman emperors²² and frontier lawmen.²³ The Supreme Court has increasingly "emphasized in recent years that procedural due process often requires confrontation and cross-examination of those whose word deprives a person of his livelihood."²⁴

Second: Prior to a renewal license hearing, the applicant must be given timely notice of the reasons urged for denial. Given the wide ranging reasons that may constitute an adequate basis for denial of the renewal of a liquor license in Wisconsin as well as the fact that even if denial might be legally justified the licensing authority usually has the discretion to grant it if circumstances warrant such action, an applicant can present a meaningful defense only if he knows the basis upon which denial is urged. This notice must be timed so as to allow the applicant an adequate opportunity to investigate the charges, gather witnesses, and otherwise prepare a defense. Mere notice of a hearing date or notice of charges only an...