HDV Cleveland, LLC v. Ohio Liquor Control Comm'n

• Decision Date: 14 December 2017
• Docket Number: No. 17AP–362,17AP–362
• Citation: 2017 Ohio 9032,101 N.E.3d 1025
• Parties: HDV CLEVELAND, LLC, d.b.a. Larry Flynt's Hustler Club, Appellant–Appellant, v. OHIO LIQUOR CONTROL COMMISSION, Appellee–Appellee.
• Court: Ohio Court of Appeals

101 N.E.3d 1025

2017 Ohio 9032

HDV CLEVELAND, LLC, d.b.a. Larry Flynt's Hustler Club, Appellant–Appellant,

v.OHIO LIQUOR CONTROL COMMISSION, Appellee–Appellee.

No. 17AP–362

Court of Appeals of Ohio, Tenth District, Franklin County.

Rendered on December 14, 2017

On brief: Berkman, Gordon, Murray & DeVan, Cleveland, J. Michael Murray, and Steven D. Shafron, appellant. Argued: J. Michael Murray.

On brief: Michael DeWine, Attorney General, and Charles E. Febus, Columbus, for appellee. Argued: Charles E. Febus.

DECISION

SADLER, J.

{¶ 1} Appellant-appellant, HDV Cleveland, LLC, d.b.a. Larry Flynt's Hustler Club, appeals from a judgment of the Franklin County Court of Common Pleas affirming orders of appellee-appellee, Ohio State Liquor Control Commission ("commission"), issued on September 9 and October 19, 2016 and April 25, 2017. For the reasons that follow, we affirm.

I. FACTS AND PROCEDURAL HISTORY

{¶ 2} Appellant operates an adult night club in Cleveland, Ohio. At all relevant times, appellant held a valid D–5 and D–6 liquor permit issued by the Ohio division of Liquor Control ("division"). According to appellant, the club operates a bar on the premises where patrons can sit and purchase alcoholic beverages. In addition to the bar area, the club contains a stage featuring female entertainers performing choreographed erotic dance. The club also contains a VIP area where entertainers can perform personal one-on-one dances for patrons who pay a fee.

{¶ 3} On August 29, 2015, liquor control agent Kevin J. Cesaratto entered the club posing as a patron, and he paid the required fee for a personal one-on-one dance in the VIP area. According to Cesaratto's September 3, 2015 investigation report, during the private dance, the female entertainer "expos[ed] her naked breasts, * * * rubbed her bare nipple over [his] lips * * * and pulled away the clothing exposing her vagina [and] exposing her anus." Liquor control agents subsequently cited appellant for two violations of Ohio Adm.Code 4301:1–1–52, otherwise known as "Rule 52." Agents cited appellant for prohibited conduct in knowingly or willfully allowing dancers to "[a]ppear in a state of nudity," in violation of Ohio Adm.Code 4301:1–1–52(B)(2), and to "[e]ngage in sexual activity," in violation of Ohio Adm.Code 4301:1–1–52(B)(3).

{¶ 4} The commission held a hearing on August 11, 2016 regarding the two charges stemming from the August 29, 2015 investigation, as well as two other charges arising out of a similar investigation on February 7, 2015. As a result of the hearing, appellant denied the August 29, 2015 charge alleging nudity but stipulated to the facts contained in agent Ceseratto's report. The commission dismissed the second charge of "sexual activity" arising from the August 29, 2015 investigation. The commission also dismissed the two charges arising out of the February 7, 2015 investigation.

{¶ 5} On August 25, 2016, the commission issued an order finding that appellant committed one violation of Rule 52 and imposing the following penalty:

It is the order of this Commission that the Permit Holder has the option to either pay a forfeiture in the amount of $100,000.00, or the permit will be REVOKED if the Permit Holder shall elect to pay the forfeiture, the Permit Holder has twenty-one (21) days after the date on which this order is sent to pay the full amount of the forfeiture.

(Order at 1.)

{¶ 6} The commission subsequently denied appellant's motion for reconsideration on October 19, 2016. On November 1, 2016, appellant filed a notice of appeal to the common pleas court pursuant to R.C. 119.12. The notice of appeal alleges the following errors by the commission:

The grounds for the appeal are that the decisions below are not supported by reliable, substantial and probative evidence; that the decisions below are contrary to law; that Regulation 4301:1–1–52 is unconstitutional on its face and as applied under Art. I, § 11 of the Ohio Constitution ; that the forfeiture imposed is excessive and far greater than forfeitures imposed on permit holders that are similarly situated or whose violations were more egregious and denies HDV equal protection of the laws, as well as procedural and substantive due process under the Fourteenth Amendment to the United States Constitution, and Art. I, §§ 1, 2 and 16 of the Ohio Constitution.

(Notice of Appeal at 1–2.)

{¶ 7} On November 4, 2016, the trial court stayed the commission's order pending appeal. On December 19, 2016, appellant moved the trial court to supplement the administrative record with evidence in support of its contention that Rule 52 is unconstitutional. On April 25, 2017, the trial court issued a decision and entry affirming the commission's order and denying appellant's motion to supplement the administrative record.

{¶ 8} Appellant timely appealed to this court from the trial court judgment.

II. ASSIGNMENTS OF ERROR

{¶ 9} Appellant sets forth the following three assignments of error:

1. Rule 52 is unconstitutional on its face and as applied under Art. I, § 11 of the Ohio Constitution, and the court below erred in concluding otherwise.

2. The court erred in sustaining the penalty imposed by the Commission that HDV pay $100,000 or have its license revoked because the penalty violated HDV's right to due process and equal protection under the United States and Ohio Constitutions and because it was not supported by substantial, reliable and probative evidence.

3. The Court erred in denying HDV the opportunity to supplement the administrative record at an evidentiary hearing on the issue of the unconstitutionality of Rule 52 on its face under Art. I, § 11 of the Ohio Constitution, and of the unconstitutionality of the penalty that it imposed.

III. STANDARD OF REVIEW

{¶ 10} "Under R.C. 119.12, a common pleas court, in reviewing an order of an administrative agency, must consider the entire record to determine whether reliable, probative, and substantial evidence supports the agency's order and the order is in accordance with law." Yohannes Parkwood, Inc. v. Liquor Control Comm. , 2014-Ohio-2736, 15 N.E.3d 363, ¶ 9, citing Univ. of Cincinnati v. Conrad , 63 Ohio St.2d 108, 110–11, 407 N.E.2d 1265 (1980). "When a court of common pleas reviews an administrative determination such as that of the commission, its review is ‘neither a trial de novo nor an appeal on questions of law only, but a hybrid review in which the court "must appraise all the evidence as to the credibility of the witnesses, the probative character of the evidence, and the weight thereof." ’ " (Emphasis sic.) Gemini, Inc. v. Liquor Control Comm. , 10th Dist. No. 07AP-112, 2007-Ohio-4518, 2007 WL 2473471, ¶ 6, quoting Big Bob's, Inc. v. Liquor Control Comm. , 151 Ohio App.3d 498, 2003-Ohio-418, 784 N.E.2d 753, ¶ 14 (10th Dist.), quoting Lies v. Veterinary Med. Bd. , 2 Ohio App.3d 204, 207, 441 N.E.2d 584 (1st Dist.1981). "[T]he common pleas court must give due deference to the administrative agency's resolution of evidentiary conflicts, but the findings of the agency are not conclusive." Gemini at ¶ 6, citing Conrad at 111, 407 N.E.2d 1265. The common pleas court conducts a de novo review of questions of law, exercising its independent judgment in determining whether the administrative order is "in accordance with law." Yohannes at ¶ 9, quoting Ohio Historical Soc. v. State Emp. Relations Bd. , 66 Ohio St.3d 466, 471, 613 N.E.2d 591 (1993).

{¶ 11} An appellate court's review of an administrative decision is more limited than that of a common pleas court. Pons v. State Med. Bd. , 66 Ohio St.3d 619, 621, 614 N.E.2d 748 (1993). "The appellate court reviews factual issues to determine whether the court of common pleas abused its discretion in determining that the administrative action either was or was not supported by reliable, probative and substantial evidence." Yohannes at ¶ 10, citing Alternative Residences, Two, Inc. v. Ohio Dept. of Job & Family Servs. , 10th Dist. No. 04AP-306, 2004-Ohio-6444, 2004 WL 2757848, ¶ 17. " ‘[A]buse of discretion’ connotes more than an error of law or judgment; it implies that the court's attitude is unreasonable, arbitrary or unconscionable." Yohannes at ¶ 10, quoting Blakemore v. Blakemore , 5 Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983). "Absent an abuse of discretion, a court of appeals may not substitute its judgment for that of an administrative agency or the common pleas court." Yohannes at ¶ 10, citing Pons at 621, 614 N.E.2d 748. "An appellate court, however, has plenary review of purely legal questions." Yohannes at ¶ 10, citing Big Bob's at ¶ 15.

IV. LEGAL ANALYSIS

A. First Assignment of Error

{¶ 12} In appellant's first assignment of error, appellant contends the trial court erred when it concluded that Rule 52 does not violate Article I, Section 11 of the Ohio Constitution either on its face or as applied to appellant. We disagree.

{¶ 13} Rule 52 contains the following prohibition against improper conduct by permit holders:

(B) Prohibited activities; no permit holder, his agent, or employee shall knowingly or willfully allow in and upon his licensed permit premises any persons to:

* * *

(2) Appear in a state of nudity.

{¶ 14} Ohio Adm. Code 4301:1–1–52(A)(2) defines nudity as "the showing of the human male or female genital, pubic area or buttocks with less than a fully opaque covering; the showing of the female breast with less than a fully opaque covering of any part of the nipple and/or areola."

{¶ 15} As noted above, appellant stipulated to the investigator's report, which sets forth sufficient facts to support the commission's finding that appellant committed a violation of Ohio Adm.Code 4301:1–1–52(B)(2). Appellant does not deny that conduct amounting to a violation of Rule 52 occurred. Rather, appellant challenges the constitutionality of Rule 52 on grounds that the rule violates appellant's right to freedom of expression guaranteed by Article I, Section 11 of the Ohio Constitution. According to appellant, Rule 52 is an...