Mattheis Co. v. Town of Jackson

• Decision Date: 23 July 2019
• Docket Number: S-18-0268
• Citation: 444 P.3d 1268
• Parties: The MATTHEIS COMPANY, Appellant (Defendant), v. The TOWN OF JACKSON, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

444 P.3d 1268

The MATTHEIS COMPANY, Appellant (Defendant),

v.The TOWN OF JACKSON, Appellee (Plaintiff).

S-18-0268

Supreme Court of Wyoming.

July 23, 2019

Representing Appellant: Mark D. Sullivan, Mark D. Sullivan, PC, Wilson, Wyoming. Argument by Mr. Sullivan.

Representing Appellee: Audrey P. Cohen-Davis and Lea M. Colasuonno, Town of Jackson, Jackson, Wyoming. Argument by Ms. Colasuonno.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

FOX, Justice.

[¶1] The Mattheis Company (Company) operated a bar in Jackson, Wyoming. After learning that the Company had submitted a liquor license renewal application containing false information, the Town of Jackson (Town) initiated proceedings to revoke the Company’s liquor license. Following a bench trial, the district court revoked the Company’s liquor license. The Company timely appealed, and we affirm.

ISSUES

[¶2] The parties raise several issues that we rephrase and reorganize:

1. Does liquor-license revocation require a "gross violation" of Title 12, or a violation of the "intent and purpose" of Title 12?

2. Did the district court err in concluding that the Company’s submission of a false liquor license renewal application was a gross violation of Title 12?

3. Did the district court abuse its discretion in revoking the Company’s liquor license, rather than suspending it?

FACTS

[¶3] In 2007, brothers Steve and Mike Mattheis formed The Mattheis Company, purchased a liquor license, and began operating the Town Square Tavern (Tavern) in Jackson, Wyoming. The Tavern’s 10-year lease was set to expire on March 31, 2017, unless the Company provided notice of its intent to exercise its five-year right-of-renewal 120 days before that date. Between 2007 and 2016, the Company renewed its liquor license annually—nine times in total.

[¶4] The Company first became aware that its liquor license was in jeopardy when Ms. Sandy Birdyshaw, Town Clerk, informed it that its December 9, 2016 liquor license renewal application was "inaccurate." The renewal application indicated that the Company’s lease expired on March 31, 2022, referencing the lease the Town had "on file" and its five-year right-of-renewal provision. Ms. Birdyshaw called Steve Mattheis¹ and told him she could not certify the application complete because its lease expiration date did not match the March 31, 2017 expiration date contained in the Town’s "on file" lease. She requested that the Company "provide the lease renewal that went to 2022 or something that would substantiate that’s when the lease expired." In a follow-up email to Steve, she stated that "liquor renewal requires a lease be in place for the full renewal liquor year which runs to 3-31-2018."

[¶5] The record does not explain precisely what occurred between the Company and its landlord. In any event, the Company had not secured the anticipated five-year lease extension when it submitted its December 2016 application and failed to ever do so. Worried about the future of its business, the Company hired attorney Richard Mulligan to assist with the dispute.² The Company told Mr. Mulligan that it needed to have a lease through March 31, 2018, to renew its liquor license and that it was important that the Tavern remain open during Jackson’s summer "prime season," which would require having a lease until at least October 31, 2017. Mr. Mulligan and the landlord’s attorney attempted to reach an agreement over the next several weeks.

[¶6] Meanwhile, uncertain of whether the Company would secure a new lease before the license expired on March 31, 2017, Steve asked Ms. Birdyshaw what he could do to preserve it. Ms. Birdyshaw informed Steve that the Company could transfer the license to another location on a non-operational status for up to two years and transfer it back to the Tavern location when the Company secured a new lease. Steve also confirmed with the Wyoming Liquor Division (Division) that it was possible to "park" a liquor license on non-operational status for up to two years. On February 1, 2017, the Company submitted a transfer application to the Town, explaining that it was parking the license at another location on non-operational status due to a lease dispute with its landlord. The Town Council approved the transfer.

[¶7] Eventually, the Company and its landlord reached an agreement. On March 3, 2017, the parties executed a lease with a term from April 1, 2017, to March 31, 2018. The same day, the parties executed a "Modification of Lease Term" that reduced the term to a seven-month period ending on October 31, 2017. Three days later, Steve and Mike executed an application to transfer the liquor license back to the Tavern location. The Company stated that the Tavern lease expired on March 31, 2018, directly above the application provision: "NOTE: Please submit a copy of the lease with the application. W.S. 12-4-103(a)(iii) requires the lease be valid THROUGH the TERM OF THE LICENSE ...." (Emphasis in original.) Steve and Mike signed, and Mr. Mulligan notarized, the application directly beneath its "Oath or Verification" section, which stated: "Under penalty of perjury, and the possible revocation or cancellation of the license, I swear the above stated facts, are true and accurate ." (Emphasis in original.)³ Steve and Mike each signed affidavits authorizing the Town to conduct investigations into the truth of the information in the application, both of which stated: "The applicant hereby agrees to comply fully with the rules and regulations of the Town of Jackson governing the license/permit requested." Mr. Mulligan also notarized these documents. The same day, the Company submitted the application to the Town, attaching the one-year lease and the affidavits, among other required documents. It did not submit the modification that shortened the lease term to October 31, 2017.

[¶8] The Town Council approved the transfer application, and the Tavern conducted business throughout the summer of 2017. During that period, the Tavern’s landlord entered into a new lease agreement with a local restaurateur, set to begin after the Tavern’s modified lease expired on October 31, 2017. In August 2017, the future tenant applied to the Town for a liquor license. Ms. Birdyshaw noticed that the application cited the Tavern address as its place of business and became "concerned that there might be a lease issue" because she "thought there was a one year lease in place with The Mattheis Company." She emailed Steve, saying that the application "kind of took us [ ] by surprise," and requested that he share any plans the Company had for its liquor license. She reminded him that the Company must have a written lease for the duration of the liquor-license period and asked him to confirm the Company’s last occupancy date.

[¶9] In the meantime, the future tenant’s attorney gave Ms. Birdyshaw a copy of the "Modification of Lease Term" that changed the term expiration to October 31, 2017. The Town sent the Company a letter notifying it that, unless the Company provided evidence disproving the inconsistency between its March 2017 application and the lease modification, it would initiate revocation proceedings. The Company admitted the inconsistency, but asked the Town Council for leniency, asserting they "had no idea that we were signing something that would jeopardize our business or our liquor license. We wouldn’t knowingly sign documents with false information, nor would our attorney allow us to do so (and he in fact notarized all documents)."

[¶10] The Town filed an action to revoke the Company’s liquor license,⁴ arguing that its omission of the lease modification from its March 2017 application amounted to a "gross violation" of Title 12 and that it violated the "intent and purpose" of Title 12. See Wyo. Stat. Ann. §§ 12-1-101 to 12-10-102 (LexisNexis 2017). The Company admitted that its March 2017 application contained false information but argued that it had neither committed a "gross violation" of Title 12 nor violated the Title’s "intent and purpose" because its mistake was not purposeful or flagrant and because it had acted under the advice of counsel. It also requested that the district court suspend the license in lieu of revoking it, in part because other businesses that had committed liquor-license violations had not had their licenses revoked.

[¶11] The district court held that the "Company’s conduct amount[ed] to a gross violation, which violated the intent and purpose of the liquor licensing statute[s]," finding:

Mattheis Company had applied for the renewed annual license every year for almost a decade. It was not a novice or newcomer to the process. The renewal license application is a form provided by the Wyoming Liquor Division. ... Each includes an express provision that reads as follows: "NOTE: Please submit a copy of the lease with the application. W.S. 12-4-103(a)(iii) requires the lease to be valid THROUGH the TERM OF THE LICENSE and MUST contain a provision for the SALE OF ALCOHOLIC BEVERAGES." (emphasis in original). Mattheis Company provided testimony that Steve Mattheis was aware of the one-year lease requirement. He discussed that requirement with the Town of Jackson when it had the lease dispute with its landlord. According to his testimony, that one-year lease requirement was of paramount concern from mid-December 2016 to the time the license was renewed in March 2017.

The court found the submission of the application representing that the Company had a one-year lease "was a flagrant violation of the Wyoming liquor licensing statutes" and "not a careless act or a negligent oversight." It also found the violation "contrary to the purpose and intent of the licensing statutes."

[¶12] Turning to the Company’s advice-of-counsel defense, the district court noted that this Court has never considered whether the defense is available in a liquor-license revocation proceeding. It concluded that even if the defense applied, it would fail in these circumstances. The...