Kepa, Inc. v. Va. Dep't of Health

Decision Date17 December 2013
Docket NumberRecord No. 1164–12–3.
Citation751 S.E.2d 671,62 Va.App. 614
PartiesKEPA, INC., d/b/a She–Sha Café and Hookah Lounge v. VIRGINIA DEPARTMENT OF HEALTH.
CourtVirginia Court of Appeals

OPINION TEXT STARTS HERE

Andrew P. Connors (James R. Creekmore, Daleville; Keith Finch, Blacksburg; The Creekmore Law Firm PC, on briefs), for appellant.

Paul Kugelman, Jr., Assistant Attorney General (Kenneth T. Cuccinelli, II, Attorney General, on brief), for appellee.

Present: Chief Judge FELTON, Judges FRANK, HUMPHREYS, KELSEY, PETTY, ALSTON, McCULLOUGH, HUFF and CHAFIN.

UPON A REHEARING EN BANC.

PETTY, Judge.

Kepa, Inc., doing business as She–Sha Café and Hookah Lounge (She–Sha”), appeals from an order of the trial court upholding the decision of the Virginia Department of Health (“Department”) that She–Sha is not exempt from the regulations 1 of the Virginia Indoor Clean Air Act (“VICAA”). A divided panel of this Court held that She–Sha was not exempt from the regulations of the VICAA and accordingly affirmed the trial court's decision. Kepa, Inc. v. Va. Dep't of Health, 61 Va.App. 696, 740 S.E.2d 26 (2013). We subsequently granted She–Sha's petition for rehearing en banc and stayed the panel decision.2 On rehearing en banc, we hold that She–Sha is exempt from the regulations of the VICAA because it is a retail tobacco store.

I. Background

On appeal, we view the evidence in the light most favorable to the Department of Health, the party prevailing below. See Hilliards v. Jackson, 28 Va.App. 475, 479, 506 S.E.2d 547, 549 (1998).

She–Sha is a retail tobacco store and restaurant located in Blacksburg, Virginia. The business model for She–Sha involves charging patrons for a flavored, wet tobacco which is heated by a burning coal and then smoked through a water-filled pipe known as a hookah.3

She–Sha does not allow its customers to consume any outside tobacco on its premises. Instead, customers pay a fee to rent a hookah filled with hookah tobacco. She–Sha also sells packaged tobacco for customer use off-premises. To go along with hookah and tobacco sales, She–Sha offers customers a menu of food and beverage items.

She–Sha has been in business since 2003, and has nearly half a million dollars in annual revenue. Tobacco and tobacco-related sales, e.g., hookah rentals, accounted for sixty-six percent to sixty-seven percent of She–Sha's revenue in the three months preceding the citations from the Department—December 2009 to February 2010. These sales figures have been consistent since September 2008. 4

She–Sha is licensed by the Department of Taxation as an “Other Tobacco Product Retailer.” As of February 2010, She–Sha had paid a total of $7,208.72 in other tobacco products taxes to the Commonwealth. She–Sha has a “Restaurant and Retail Tobacco Store” business license that was issued by the Town of Blacksburg. She–Sha is also “a place where food is served,” defined in Code § 15.2–2820 as a “restaurant.” Accordingly, She–Sha has a permit/license from the Department to operate as a restaurant.

On January 27, 2010, the Department investigated a complaint that She–Sha was allowing customers to smoke in its place of business. In a Food Establishment Evaluation Report, the Department cited She–Sha for two non-critical violations of the VICAA: (1) failure to post no-smoking signs as required by Code § 15.2–2825(D), and (2) failure to prohibit smoking in non-smoking areas as required by Code § 15.2–2825(F).

She–Sha requested an informal fact-finding hearing to dispute the citations. On March 22, 2010, Dr. J. Henry Hershey, the Director of the New River Health District for the Montgomery County Health Department, conducted the informal fact-finding hearing. On July 8, 2010, Dr. Hershey issued a letter opining that the citations were proper.

She–Sha then requested a formal adjudicatory hearing. She–Sha also renewed its request for a summary case by the Department pursuant to Code § 2.2–4020.1.5 In its request, She–Sha stipulated that it was a restaurant as defined in the VICAA. By letter dated October 12, 2010, the State Health Commissioner informed She–Sha that a summary case decision was inappropriate at that time, but the Department would consolidate the summary case decision proceeding with the formal hearing She–Sha had requested.

The formal adjudicatory hearing was conducted on March 15, 2011. On May 19, 2011, the hearing officer recommended nine findings of fact and conclusions of law. On June 17, 2011, the Health Commissioner issued a case decision agreeing with and adopting the hearing officer's recommendations. The case decision upheld the violations noted in the report and stated that She–Sha is a restaurant subject to the regulations of the VICAA.

She–Sha appealed the Department's decision to the Circuit Court for Montgomery County on August 12, 2011. The circuit court issued a letter opinion, and subsequent final order, holding that She–Sha is not exempt from the VICAA; therefore, it dismissed the appeal with prejudice. She–Sha then appealed to this Court.

II. Analysis

The question presented to us in this appeal is whether a retail tobacco store 6 that is also a restaurant is exempt from the provisions of the VICAA. We hold that it is.

She–Sha concedes that it is a restaurant; however, it asserts that it is also a retail tobacco store. In her final agency case decision, the Health Commissioner did not make an explicit finding regarding She–Sha's claim that it is a retail tobacco store. However, both the Virginia Department of Taxation and the Town of Blacksburg recognize that She–Sha is engaged in the retail sale of tobacco. Furthermore, on brief, and during oral argument before this Court, the Department conceded that She–Sha is both a restaurant and a retail tobacco store.7 While we are not bound to accept concessions of law,

[a]n entirely different paradigm, however, applies to questions of fact unique to the litigants and specific to the circumstances of each particular case.... On purely factual questions, therefore, we can and do rely on the adversarial process to sort out the contested and the uncontested aspects of the case before we begin our responsibility of applying de novo the correct legal principles.

Logan v. Commonwealth, 47 Va.App. 168, 172, 622 S.E.2d 771, 773 (2005).

Thus, based on the evidence before us and the Department's concessions, there can be no dispute that She–Sha is engaged in the retail sale of tobacco and that it is, at minimum, both a retail tobacco store and a restaurant.8 The dispute arises as to whether She–Sha is exempt from regulation as a restaurant under the VICAA because of its concurrent operation as a retail tobacco store. This presents us with a question of statutory construction.

The Virginia Administrative Process Act (“VAPA”) authorizes judicial review of agency decisions. SeeCode § 2.2–4027. Under well-settled principles, the burden is upon the party appealing such a decision to demonstrate error. Avante at Roanoke v. Finnerty, 56 Va.App. 190, 197, 692 S.E.2d 277, 280 (2010); Carter v. Gordon, 28 Va.App. 133, 141, 502 S.E.2d 697, 700–01 (1998). “Our review is limited to determining (1) [w]hether the agency acted in accordance with law;’ (2) [w]hether the agency made a procedural error which was not harmless error;’ and (3) [w]hether the agency had sufficient evidential support for its findings of fact.’ Avante at Roanoke, 56 Va.App. at 197, 692 S.E.2d at 280 (quoting Johnston–Willis, Ltd. v. Kenley, 6 Va.App. 231, 242, 369 S.E.2d 1, 7 (1988)).

On appeal from an agency's determination of law,

“where the question involves an interpretation which is within the specialized competence of the agency and the agency has been entrusted with wide discretion by the General Assembly, the agency's decision is entitled to special weight in the courts[, and] ... ‘judicial interference is permissible only for relief against arbitrary or capricious action that constitutes a clear abuse of delegated discretion.’

Evelyn v. Commonwealth, 46 Va.App. 618, 624, 621 S.E.2d 130, 133 (2005) (alteration in original) (quoting Johnston–Willis, 6 Va.App. at 244, 369 S.E.2d at 8). Generally, however, [a]n agency's ‘legal interpretations of statutes' is accorded no deference because [w]e have long held that pure statutory interpretation is the prerogative of the judiciary, and thus, Virginia courts do not delegate that task to executive agencies.’ Commonwealth ex rel. Va. State Water Control Bd. v. Blue Ridge Envtl. Def. League, Inc., 56 Va.App. 469, 481, 694 S.E.2d 290, 296 (2010) (quoting The Mattaponi Indian Tribe v. Commonwealth Dep't of Envtl. Quality, 43 Va.App. 690, 707, 601 S.E.2d 667, 676 (2004)); see also Va. Dep't of Health v. NRV Real Estate, LLC, 278 Va. 181, 185, 677 S.E.2d 276, 278 (2009) (“Although decisions by administrative agencies are given deference when they fall within an area of the agency's specialized competence, issues of statutory interpretation fall outside those areas and are not entitled to deference on judicial review.”). Accordingly, we conduct a de novo review of the agency's interpretation of the statutes in dispute. Id.

“Statutory interpretation is a question of law which we review de novo, and we determine the legislative intent from the words used in the statute, applying the plain meaning of the words unless they are ambiguous or would lead to an absurd result.” Wright v. Commonwealth, 278 Va. 754, 759, 685 S.E.2d 655, 657 (2009). The Virginia Supreme Court has long held that “when analyzing a statute, we must assume that ‘the legislature chose, with care, the words it used ... and we are bound by those words as we interpret the statute.’ City of Virginia Beach v. ESG Enters., 243 Va. 149, 153, 413 S.E.2d 642, 644 (1992) (quoting Barr v. Town & Country Properties, 240 Va. 292, 295, 396 S.E.2d 672, 674 (1990)). ‘Where the legislature has used words of a plain and definite import the courts cannot put upon them a construction which amounts to holding the...

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1 cases
  • Va. Dep't of Health v. Kepa, Inc.
    • United States
    • Virginia Supreme Court
    • 8 Enero 2015
    ...that She–Sha, as a restaurant, was exempt from VICAA because it is also a retail tobacco store. Kepa, Inc. v. Virginia Dept. of Health, 62 Va.App. 614, 617, 751 S.E.2d 671, 672 (2013) (Kepa II ).Again, the majority found that Code §§ 15.2–2821 and –2825 were “inconsistent or ambiguous when ......

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