Beverage Warehouse, Inc. v. Commonwealth

• Decision Date: 16 February 2012
• Docket Number: NO. 2009-CA-002020-MR,NO. 2010-CA-001718-MR,NO. 2010-CA-001717-MR,NO. 2010-CA-001779-MR,2009-CA-002020-MR,2010-CA-001717-MR,2010-CA-001718-MR,2010-CA-001779-MR
• Parties: BEVERAGE WAREHOUSE, INC. APPELLANT v. COMMONWEALTH OF KENTUCKY, DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL; LIQUOR BARN #5, LLC; AND CITY OF ST. MATTHEWS, KENTUCKY APPELLEES LIQUOR BARN #5, LLC APPELLANT v. FLOYD MELVIN CANCELLO; CHRISTINE MCLELLEN; 116 MCARTHUR DRIVE, LLC; BEVERAGE WAREHOUSE, INC.; COMMONWEALTH OF KENTUCKY, DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL; CITY OF ST. MATTHEWS, KENTUCKY; JAMES L. KING, ST. MATTHEWS ABC ADMINISTRATOR; AND LOUISVILLE/ JEFFERSON COUNTY METRO GOVERNMENT APPELLEES COMMONWEALTH OF KENTUCKY, DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL APPELLANT v. FLOYD MELVIN CANCELLO; CHRISTINE MCLELLEN; 116 MCARTHUR DRIVE, LLC; BEVERAGE WAREHOUSE, INC.; LIQUOR BARN #5, LLC; CITY OF ST. MATTHEWS, KENTUCKY; JAMES L. KING, ST. MATTHEWS ABC ADMINISTRATOR; AND LOUISVILLE/ JEFFERSON COUNTY METRO GOVERNMENT APPELLEES FLOYD MELVIN CANCELLO; CHRISTINE MCLELLEN; 116 MCARTHUR DRIVE, LLC; AND BEVERAGE WAREHOUSE, INC. CROSS-APPELLANTS v. COMMONWEALTH OF KENTUCKY, DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL; CITY OF ST. MATTHEWS, KENTUCKY; JAMES L. KING, ST. MATTHEWS ABC ADMINISTRATOR; LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT; AND LIQUOR BARN #5, LLC CROSS-APPELLEES
• Court: Kentucky Court of Appeals

BEVERAGE WAREHOUSE, INC.APPELLANT

v.COMMONWEALTH OF KENTUCKY, DEPARTMENT OF ALCOHOLIC BEVERAGE

CONTROL; LIQUOR BARN #5, LLC; AND CITY OF ST. MATTHEWS, KENTUCKYAPPELLEES

LIQUOR BARN #5, LLCAPPELLANT

v.FLOYD MELVIN CANCELLO; CHRISTINE MCLELLEN; 116 MCARTHUR

DRIVE, LLC; BEVERAGE WAREHOUSE, INC.; COMMONWEALTH OF KENTUCKY,

DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL; CITY OF ST. MATTHEWS,

KENTUCKY; JAMES L. KING, ST. MATTHEWS ABC ADMINISTRATOR; AND LOUISVILLE/

JEFFERSON COUNTY METRO GOVERNMENTAPPELLEES

COMMONWEALTH OF KENTUCKY,

DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROLAPPELLANT

v.FLOYD MELVIN CANCELLO; CHRISTINE MCLELLEN; 116 MCARTHUR

DRIVE, LLC; BEVERAGE WAREHOUSE, INC.; LIQUOR BARN #5, LLC; CITY OF ST. MATTHEWS,

KENTUCKY; JAMES L. KING, ST. MATTHEWS ABC ADMINISTRATOR;

AND LOUISVILLE/ JEFFERSON COUNTY METRO GOVERNMENT APPELLEES

FLOYD MELVIN CANCELLO; CHRISTINE MCLELLEN; 116 MCARTHUR

DRIVE, LLC; AND BEVERAGE WAREHOUSE, INC.CROSS-APPELLANTS

v.COMMONWEALTH OF KENTUCKY, DEPARTMENT OF ALCOHOLIC

BEVERAGE CONTROL; CITY OF ST. MATTHEWS, KENTUCKY; JAMES L. KING,

ST. MATTHEWS ABC ADMINISTRATOR; LOUISVILLE/JEFFERSON COUNTY METRO

GOVERNMENT; AND LIQUOR BARN #5, LLC CROSS-APPELLEES

NO. 2009-CA-002020-MR

NO. 2010-CA-001717-MR

NO. 2010-CA-001718-MR

NO. 2010-CA-001779-MR

Commonwealth of Kentucky Court of Appeals

Dated: February 16, 2012

RENDERED: OCTOBER 28, 2011; 10:00 A.M.

TO BE PUBLISHED

APPEAL FROM FRANKLIN CIRCUIT COURT

HONORABLE THOMAS D. WINGATE, JUDGE

ACTIONNO. 09-CI-01395

APPEAL FROM FRANKLIN CIRCUIT COURT

HONORABLE THOMAS D. WINGATE, JUDGE

ACTIONNOS. 09-CI-01897 AND10-CI-00149

APPEAL FROM FRANKLIN CIRCUIT COURT

HONORABLE THOMAS D. WINGATE, JUDGE

ACTIONNOS. 09-CI-01897 AND10-CI-00149

CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT

HONORABLE THOMAS D. WINGATE, JUDGE

ACTIONNO. 09-CI-01897

OPINION

AFFIRMING

BEFORE: KELLER AND THOMPSON, JUDGES; SHAKE,¹ SENIOR JUDGE.THOMPSON, JUDGE: We are asked to consider three orders of the Franklin Circuit Court addressing a third party's right to a hearing before and after the issuance of a liquor license. We refer to the cases which have been consolidated for appeal as Beverage Warehouse I, Beverage Warehouse II and Beverage Warehouse III.

BACKGROUND

Beverage Warehouse, Inc. operates a licensed retail liquor store at 4323 Shelbyville Road in St. Matthews, a fourth-class city located in Jefferson County, Kentucky.Liquor Barn is a limited liability company organized under Kentucky law that applied for and received a Department of Alcoholic Beverage Control(ABC) license to operate a retail liquor store directly across the street from that operated by Beverage Warehouse.

In February 2009, Liquor Barn filed a notice in the Louisville Courier-Journal stating its intent to apply for a liquor license for premises located at 4301 Shelbyville Road in St. Matthews.Pursuant to KRS 243.360, Beverage Warehouse filed a protest with the ABC on the basis that the proposed Liquor Barn license was in violation of St. Matthews Ordinance Section 111.15(E), prohibiting the issuance of a liquor license within 700 feet of another licensed premises.Beverage Warehouse pointed out that the ordinance requires that the distance be measured "along the right-of-way of existing public vehicular roadways from a point on any right-of-way line nearest the entrance of any existing premises licensed for these sales to a point on any right-of-way line nearest the entrance of the proposed licensed premises."The ordinance further defines "public vehicular roadways" as "any road open to general public travel and actually and substantially used for automotive travel."Beverage Warehouse protested that, using the method described in the ordinance, the distance between its premises and the proposed Liquor Barn location was less than 361 feet.

Initially, the St. Matthews City Administrator, Jim King, measured the distance between the two premises and determined that the proposed Liquor Barn license violated the "700 foot rule."Specifically, in a letter to Liquor Barn, he stated: "The measurement was taken by wheel and determined that 4301 Shelbyville Road was too close to Beverage Warehouse to have a package liquor store at that location."He also informed an ABC assistant director and the zoning department that the license would not be approved.

Liquor Barn pursued the matter and inquired as to how Administrator King measured the distance.In a March 11, 2009, letter, it suggested that Administrator King re-measure the distance using an alternative method and informed him that an engineer had measured the distance between the two premises and determined it to be no less than 830 feet.Contrary to his initial determination, Administrator King approved the application.Liquor Barn then obtained a letter of intent to issue the requisite state licenses pending final inspection from Distilled Spirits Administrator Daniel Reed and, on that same date, the application was filed in Frankfort.

Before the liquor license was issued, construction began at the proposed Liquor Barn premises, prompting Beverage Warehouse to file a supplement to its protest alleging that the issuance of a license would be unlawful and that it had not received notice that the license had been approved.Subsequently, Liquor Barn's counsel notified Beverage Warehouse that Administrator King had issued an "approval" for Liquor Barn's license.On May 28, 2009, Beverage Warehousefiled a letter with the ABC outlining the facts and giving notice of its intent to pursue legal remedies if the license was issued.The letter was also sent to Liquor Barn, Administrator King, and St. Matthews' counsel.

On June 25, 2009, Beverage Warehouse sent a second letter to the ABC requesting a due process hearing prior to the issuance of a license to Liquor Barn.The ABC sent a letter to Beverage Warehouse denying its request.

BEVERAGE WAREHOUSE I

After it became apparent that the licensing process would proceed despite its protests, Beverage Warehouse petitioned the Franklin Circuit Court requesting an order directing the ABC Board to provide a due process hearing prior to issuing the license to Liquor Barn and an injunction prohibiting the ABC from granting Liquor Barn a license before a due process hearing was held.

Because the Fourteenth Amendment to the United States and Section 2 of the Kentucky Constitution afford due process prior to an administrative action only if there is a deprivation of protected property or liberty interests, the circuit court first addressed whether Beverage Warehouse had a protected property or liberty interest that would entitle it to a due process hearing before the ABC Board.

Relying on Applicants for Retail Package Liquor Licenses in Floyd County v. Gulley, 674 S.W.2d 22, 26(Ky. App.1984), the circuit court began with the legal proposition that a liquor license is a privilege and not a property right.It found further guidance in Lexington Retail Beverage Dealers Ass'n v. Department of Alcoholic Beverage Control Bd., 303 S.W.2d 268, 269-270(Ky.1957), wherethe Court rejected the claim that a competitive position which may be adversely affected by the issuance of a liquor license by the ABC Board is sufficient to confer due process rights upon the competitor.In summation of the issue, the circuit court recited the rule that, absent allegations of fraud, bad faith, or collusion, a competitor has no standing to challenge the granting of a license or permit to another competitor by an administrative agency.SeePIE Mut. Ins. Co. v. Kentucky Medical Ins. Co., 782 S.W.2d 51, 54(Ky.1990).Finding that no such allegations were made by Beverage Warehouse and finding no statutory authority for Beverage Warehouse's claim for a due process hearing before the ABC Board prior to the issuance of a license, the Franklin Circuit Court dismissed the petition.

Beverage Warehouse filed a motion to alter, amend or vacate the opinion and order.Before the motion was heard, Beverage Warehouse appeared before the St. Matthews City Council and outlined its objections to the license.It then notified the circuit court that the St. Matthews City Council had set the matter for a hearing on October 27, 2009, and requested that the court order the ABC to withhold issuing a liquor license to Liquor Barn until after the city council hearing.However, before the city council hearing, licenses were issued to Liquor Barn.

After the circuit court denied Beverage Warehouse's motion to alter, vacate or amend the order dismissing the petition, Beverage Warehouse appealed.While the appeal was pending, litigation continued in the Franklin Circuit Court resulting in Beverage Warehouse II and III.

BEVERAGE WAREHOUSE II and III

After the City of St. Matthews, Louisville/Jefferson County Metro Government, and the Commonwealth issued ABC licenses to Liquor Barn, Beverage Warehouse, St. Matthews residents Floyd Cancello and Christine McLellan, and 116 McArthur Drive, LLC(collectively Beverage Warehouse) appealed directly to the Franklin Circuit Court pursuant to KRS 243.560.We refer to that appeal as Beverage Warehouse II.

Simultaneously, Beverage Warehouse appealed to the ABC pursuant to KRS 241.200 requesting an evidentiary hearing on the issuance of the licenses by St. Matthews and Louisville Metro.After the ABC Board denied jurisdiction, Beverage Warehouse appealed to the Franklin Circuit Court, resulting in Beverage Warehouse III.Beverage Warehouse II and III were consolidated.²

The ABC, St. Matthews, King, Louisville Metro and Liquor Barn filed a joint motion to dismiss Beverage Warehouse II and Beverage Warehouse III.The circuit court concluded that because no final order had been entered by the ABC in issuing the licenses, Beverage Warehouse II was prematurely filed and was dismissed.As the circuit court pointed out in Beverage Warehouse II, KRS 13B.010(2) defines an administrative hearing as "any type of formal adjudicatory proceeding conducted by an agency as required or permitted by statute or...