N GROUP LLC v. HAWAI'I COUNTY LIQUOR COM'N

Decision Date03 March 2009
Docket NumberCiv. No. 08-00516 ACK-KSC.
PartiesN GROUP LLC dba The Nichols Public House, Plaintiff, v. HAWAI'I COUNTY LIQUOR COMMISSION, County of Hawai'i; Janice Pakele; John Does 1-10; Jane Does 1-10; Doe Partnerships 1-10; Doe Corporations 1-10; Doe Governmental Units 1-10; and Does Entities 1-10, Defendants.
CourtU.S. District Court — District of Hawaii

Damir A. Kouliev, Law Offices of Steven D. Strauss, Steven D. Strauss, Christopher P. Schlueter, Hilo, HI, for Plaintiff.

Brandon A.K. Gonzalez, Brooks L. Bancroft, Katherine A. Garson, Office of the Corporation Counsel, Hilo, HI, for Defendants.

ORDER: (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS THE COMPLAINT; (2) GRANTING PLAINTIFF TWENTY DAYS' LEAVE TO AMEND THE COMPLAINT TO FORMALLY NAME THE COUNTY OF HAWAI'I AND DIRECTING PLAINTIFF TO DO SO; (3) GRANTING PLAINTIFF LEAVE TO AMEND THE COMPLAINT TO ALLEGE STATE LAW CLAIMS ONCE IT HAS EXHAUSTED ITS ADMINISTRATIVE REMEDIES UNDER HAWAI'I REVISED STATUTES CHAPTERS 281 AND 91; (4) GRANTING DEFENDANTS' MOTION TO STAY THESE PROCEEDINGS PENDING THE RESOLUTION OF PLAINTIFF'S APPEALS IN STATE COURT; AND (5) GRANTING PLAINTIFF TWENTY DAYS' LEAVE TO AMEND THE COMPLAINT TO ALLEGE BAD FAITH WITH SPECIFICITY

ALAN C. KAY, Senior District Judge.

PROCEDURAL HISTORY

On May 5, 2008, Plaintiff, N Group LLC dba The Nichols Public House, filed a complaint ("Complaint") against Defendants, the Liquor Commission of the County of Hawai'i ("Liquor Commission") and Janice Pakele, in her official capacity as the Director of the Department of Liquor Control of the County of Hawai'i, in the Circuit Court of the Third Circuit of the State of Hawai'i ("Hawai'i Third Circuit Court") in N Group LLC v. Hawaii County Liquor Commission, Civ. No. 08-1-0126 (Hawai'i 3d Cir. Ct.). Plaintiff alleges due process and equal protection claims under the United States and Hawai'i Constitutions. (Defs.' Notice of Removal, Ex. 1 ("Compl.") ?? 21-28.) It also avers an "abuse of discretion" claim and claims for violations of Hawai'i Revised Statutes ("HRS") Chapter 281 and the Rules and Regulations of the Liquor Commission ("Liquor Commission Rules"). (Id. ?? 29-36.) Based on these alleged violations, Plaintiff requests monetary relief. (Id. at 9.) On November 17, 2008, Defendants, the County of Hawai'i and Pakele, filed a notice of removal in this Court. The County of Hawai'i explained that it had been mistakenly identified as the Liquor Commission of the County of Hawai'i in the Complaint. (Defs.' Notice of Removal 3.) It therefore designated itself as a Defendant in the notice. (Id. at 1.)

On November 24, 2008, Defendants filed a motion to dismiss the Complaint ("Mot. to Dismiss"). On January 23, 2009, Plaintiff filed a memorandum in opposition to the motion ("Mem. in Opp'n"), and, on January 30, 2009, Defendants filed a reply to Plaintiffs memorandum in opposition ("Reply"). On February 10, 2009, this Court held a hearing on the motion.

FACTUAL BACKGROUND

The facts in this order are recited only for the purpose of deciding Defendants' motion to dismiss and are not intended to be findings of fact upon which the parties may rely in future proceedings.

In 2005, Plaintiff applied for a liquor license with the Liquor Commission, and, at the hearing on the application, certain neighborhood persons and entities protested against granting the license. (Compl. ? 10; Mot. to Dismiss, Ex. 1-1 at 4.) The opposition centered largely on parking and disturbance concerns. (Compl. ? 10.) On December 5, 2005, the Liquor Commission nevertheless granted the license. (Id.; Mot. to Dismiss, Ex. 1-6 at 3.)

On April 26, 2006, Pakele sent Plaintiff a notice of hearing requiring Plaintiff to respond to a noise complaint. (Compl. ? 11.) The hearing was set for May 4, 2006. (Id.) At the hearing, Plaintiff represented itself through its member-manager, Rhonda Nichols, and presented limited evidence. (Id. ? 13.) The Liquor Commission permitted testimony from complaining neighbors concerning noise, parking, traffic violations, disorderly conduct, and criminal activity not within Plaintiff's premises. (Id.) On its own motion, the commission voted against renewing Plaintiff's liquor license based on the evidence presented. (Id. ? 14.)1

On May 15, 2006, Plaintiff filed a petition for rehearing pursuant to Liquor Commission Rule 1.9, alleging that the Liquor Commission had violated its rights to due process. (Id. ? 15.) At a regularly scheduled hearing on June 1, 2006, the Liquor Commission adopted findings of fact, conclusions of law, and a decision and order denying renewal of Plaintiff's liquor license. (Id. ? 16.) The commission found good cause to deny renewal of the license in light of the numerous incidents of noise from Plaintiffs premises or from its patrons as they departed. (Id.; Mot. to Dismiss, Ex. 1-1 at 1.) The Liquor Commission also denied Plaintiff's petition for rehearing. (Compl. ? 16.) On June 15, 2006, Plaintiff filed a notice of appeal of the Liquor Commission's decision not to renew the liquor license in the Hawai'i Third Circuit Court in N Group LLC v. Hawai'i County Liquor Commission, Civ. No. 06-1-0189 (Hawai'i 3d Cir. Ct.). (Mot. to Dismiss, Ex. 1 at 1.) It requested that the circuit court reverse and vacate the commission's decision not to renew Plaintiffs liquor license because, in making that decision, the commission offended Plaintiffs due process and equal protection rights. (Id. at 1, 6-12.)

The Liquor Commission scheduled another hearing for June 30, 2006. (Compl. ? 17.) At the hearing, Plaintiff agreed under "duress" to the imposition of certain conditions on its liquor license. (Id.) The Liquor Commission vacated its prior decision and order for nonrenewal of the license and issued a renewed license with conditions. (Id.) Plaintiffs agreement to the conditions was premised at least in part upon the Liquor Commission's representation that it would review the conditions imposed at a meeting scheduled for September 7, 2006. (Id.) At the meeting, the Liquor Commission did not fully and fairly review the conditions. (Id. ? 18.)

On December 20, 2006, Plaintiff filed an application to amend the conditions placed on its liquor license. (Id. ? 19.) A hearing on the application was originally set for March 1, 2007, but it was postponed until April 18, 2007. (Id.) At the hearing, the Liquor Commission considered Plaintiffs application and denied Plaintiffs request for relief. (Id. ? 20.) On May 17, 2007, Plaintiff filed a notice of appeal of the Liquor Commission's decision not to amend the conditions placed on the liquor license in the Hawai'i Third Circuit Court in N Group v. Hawai'i County Liquor Commission, Civ. No. 07-1-0168 (Hawai'i 3d Cir. Ct.). (Mot. to Dismiss, Ex. 3 at 1.) It asked the circuit court to reverse and vacate the commission's decision and to enjoin the enforcement of the conditions because, in reaching that decision, the commission violated Plaintiffs due process rights. (Id. at 1, 5-7.)

To date, both administrative appeals in Civ. Nos. 06-1-0189 and 07-1-0168 are pending before the Hawai'i Third Circuit Court. See Hawai'i State Judiciary: Ho'ohiki, http://hoohiki2.courts.state.hi.us/ jud/Hoohiki/main.htm. Nichols, a managing member of Plaintiff, has represented that she has instructed Plaintiffs counsel to withdraw or seek dismissal of both appeals. (Mem. in Opp'n, Nichols' Decl. ? 2.)

LEGAL STANDARDS
I. Subject Matter Jurisdiction

A court's subject matter jurisdiction may be challenged under Federal Rule of Civil Procedure 12(b)(1) ("Rule 12(b)(1)"). "A party invoking the federal court's jurisdiction has the burden of proving the actual existence of subject matter jurisdiction." See Thompson v. McCombe, 99 F.3d 352, 353 (9th Cir.1996). A "court may raise the question of subject matter jurisdiction, sua sponte, at any time during the pendency of the action." See Snell v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir.2002).

On a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the court is not "restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." McCarthy v. United States, 850 F.2d 558, 560 (9th Cir.1988). "Once the moving party converts the motion to dismiss into a factual motion by presenting affidavits or other evidence properly brought before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction." Savage v. Glendale Union High Sch., 343 F.3d 1036, 1040 n. 2 (9th Cir.2003).

"The requirement that the nonmoving party present evidence outside his pleadings in opposition to a motion to dismiss for lack of subject matter jurisdiction is the same as that required under Rule 56(e) that the nonmoving party to a motion for summary judgment must set forth specific facts, beyond his pleadings, to show that a genuine issue of material fact exists." Trentacosta v. Frontier Pac. Aircraft Indus., Inc., 813 F.2d 1553, 1559 (9th Cir. 1987). When ruling on a jurisdictional motion involving factual issues which also go to the merits, the moving party "should prevail only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Casumpang v. Int'l Longshoremen's & Warehousemen's Union, 269 F.3d 1042, 1060-61 (9th Cir.2001).

II. Failure to State a Claim

Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)") permits dismissal of a complaint that fails "to state a claim upon which relief can be granted." "A Rule 12(b)(6) `dismissal is proper only where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory.'" Zamani v. Carnes, 491 F.3d 990, 996-97 (9th Cir. 2007) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001)) ...

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