Martini v. Oregon Liquor Control Com'n

• Decision Date: 08 January 1992
• Docket Number: L-004
• Citation: 823 P.2d 1015,110 Or.App. 508
• Parties: Elidio MARTINI, dba Pink Pearl East, Petitioner, v. OREGON LIQUOR CONTROL COMMISSION, Respondent. 89-; CA A63926.
• Court: Oregon Court of Appeals

Page 1015

823 P.2d 1015

110 Or.App. 508

Elidio MARTINI, dba Pink Pearl East, Petitioner, v. OREGON LIQUOR CONTROL COMMISSION, Respondent.

89-L-004; CA A63926.

Court of Appeals of Oregon.

Argued and Submitted April 1, 1991.

Decided Jan. 8, 1992.

Craig B. Cordon, Portland, argued the cause and filed the brief, for petitioner.

Douglas F. Zier, Asst. Atty. Gen., Salem, argued the cause, for respondent. With him on the brief were Dave Frohnmayer, Atty. Gen., and Virginia L. Linder, Sol. Gen., Salem.

Before RICHARDSON, P.J., JOSEPH, C.J., ^* and DEITS, J.

DEITS, Judge.

Petitioner seeks review of an order of the Oregon Liquor Control Commission (OLCC) denying his application to renew the liquor license for his business, "Pink Pearl East," in Portland. OLCC concluded that the application should be denied under OAR 845-05-025(10), which provides, in part:

"The following criteria will be given sufficient consideration so that a license will not be issued unless good cause which outweighs the criteria involved is shown by the applicant:

" * * * * *

"(10) The licensing of the premises would not be in the best interests of the community because of illegal activities or a recent history of altercations, noisy conduct or other disturbances in or around the premises under the applicant's or other's ownership or control." (Emphasis supplied.) ¹

In May, 1988, before opening Pink Pearl East, petitioner met with OLCC personnel and representatives of the neighborhood where the business is located. In November, 1988, they agreed on a compliance plan to accommodate community concerns. It is undisputed that petitioner has made good faith efforts to abide by the plan and to prevent disturbances associated with his business. However, those efforts have not been entirely successful.

On April 10, 1989, the Regulatory Process Division of OLCC notified petitioner that it intended to recommend the denial of his renewal application, based on OAR 845-05-025(10) and ORS 471.295. ² On June 21, 1989, a hearings officer held a contested case hearing and found that petitioner had fulfilled the requirements of the compliance plan, that there was no indication of significant drug activities, prostitution or other violent activities in the vicinity and that petitioner had fully cooperated with OLCC and the public in attempting to control disturbing activities of his patrons on the premises. However, there was also evidence that patrons disturbed neighborhood residents while going to and from the establishment, with incidents occurring as often as two or three times a week.

At the hearing, a representative of the Regulatory Process Division recommended new interpretations of what is in the "best interests of the community" and for determining whether there is "good cause which outweighs" a basis for denial of an application under OAR 845-05-025(10). The division urged that the rule should be interpreted and applied

"so that the persistent, disturbing noisy conduct of patrons away from the licensed premises would not only be considered serious but would also constitute such a serious threat to the community that persistent, disturbing, noisy conduct alone would constitute a denial basis under OAR 845-05-025(10)."

Those recommendations differed from OLCC's existing interpretation of the rule, under which an applicant could show good cause by demonstrating substantial efforts to control the licensed premises and patrons' activities in the area. ³ The division proposed that OLCC no longer take into account good faith efforts by the licensee and that it should

"do away with the reasonable efforts emphasis in the current standard, so that [OLCC] would not renew a license if problems associated with the licensed premises were serious, numerous and persistent, even if the licensee showed no failings."

The hearings officer adhered to OLCC's existing standards for applying the best interests of the community and good cause provisions of OAR 845-05-025(10). She issued a proposed order, recommending renewal of petitioner's license.

On review of the proposed order, OLCC accepted the division's recommended changes in its interpretation of the rule and denied the license. It explained

"that persistent, disturbing, noisy conduct of patrons in the immediate vicinity of the licensed premises may be sufficiently serious to warrant license refusal under OAR 845-05-025(10). In order to overcome serious and persistent noise problems, the applicant must demonstrate not only the willingness, but also the ability to adequately control patrons' behavior in the immediate vicinity of the premises.

"In this case, [OLCC] concludes that there is inadequate control when neighbors from six households are awakened or disturbed as often as two or three times per week by the noisy conduct of the Pink Pearl patrons.

" * * * * *

"[OLCC] does not require that licensees eliminate all problems which patrons cause outside the premises. Licensees who make serious, reasonable, and consistent efforts to eliminate problems should not lose their license[s] if the remaining problems are not serious and persistent. We will look at the number of neighbors affected, the frequency of the disturbances, and the extent to which the neighbors are disturbed. Although [OLCC] declines to adopt a quantifiable standard at this time, [it] concludes that there is inadequate control when neighbors from six households are awakened or disturbed as often as two or three times per week by the noisy conduct of Pink Pearl patrons."

In his first assignment of error, petitioner contends that "OLCC changed its interpretation of OAR 845-05-025(10) during the course of the hearing, [and] petitioner did not have appropriate notice of the change in agency standards." The primary focus of petitioner's argument is that agencies must apply standards consistently and give parties fair notice of what the standards are and an opportunity to present their cases under the standards that are applied. OLCC does not share that focus in its argument to us, but concentrates instead on its authority to make and revise policy. It relies, inter alia, on Trebesch v. Employment Division, 300 Or. 264, 710 P.2d 136 (1985), and Sun Veneer v. Employment Div., 105 Or.App. 198, 804 P.2d 1174 (1991), for the proposition that agencies may define and apply delegative statutory or regulatory terms in the context of deciding contested cases. It follows, in OLCC's view, that an agency may change existing policy in that context and that that is precisely what it did here.

Petitioner relies on McCann v. OLCC, 27 Or.App. 487, 492, 556 P.2d 973 (1976), rev. den. 277 Or. 99 (1977), where we said:

"We have held that the Administrative Procedures Act, ORS ch 183, requires that administrative agencies operating under broad grants of power establish standards for official action for the purpose, among others, of consistency of application. One reason for that requirement, we observed in Sun Ray Dairy v. OLCC, 16 Or.App. 63, 71, 517 P.2d 289 (1973) (Sun Ray I ), is that an applicant is 'entitled to even treatment by rule of law and reasonable confidence that he has received such treatment.' See also Graham v. OLCC, 25 Or.App. 759, 763, 551 P.2d 112, rev. den. (1976) (Graham II ) (dissent of Thornton, J.).

"Absolute consistency cannot be expected of an agency with as broad a delegation and complex a task as the OLCC, but procedures should work toward that end. Thus we recognized in Sun Ray Drive-In Dairy v. OLCC, 20 Or.App. 91, 95, 530 P.2d 887 (1975) (Sun Ray II ), that where standards cannot by their nature be...