Office of the Comm'r v. Appeals Comm'n

• Decision Date: 02 June 2015
• Docket Number: No. 101, 2014,101, 2014
• Citation: 116 A.3d 1221
• Parties: Office of the Commissioner, Delaware Alcoholic Beverage Control, Appellant–Below, Appellant, v. Appeals Commission, Delaware Alcoholic Beverage Control, and Lex–Pac, Inc. d/b/a Hak's Sports Bar & Restaurant, Appellees–Below, Appellees.
• Court: United States State Supreme Court of Delaware

116 A.3d 1221

Office of the Commissioner, Delaware Alcoholic Beverage Control, Appellant–Below, Appellant

v.Appeals Commission, Delaware Alcoholic Beverage Control, and Lex–Pac, Inc. d/b/a Hak's Sports Bar & Restaurant, Appellees–Below, Appellees.

No. 101, 2014

Supreme Court of Delaware.

Submitted: May 13, 2015

Decided: June 2, 2015

Lawrence W. Lewis, Esquire (argued ), Laura L. Gerard, Esquire, Department of Justice, Wilmington, Delaware, Appellant–Below, Appellant.

Andrew G. Kerber, Esquire, Department of Justice, Wilmington, Delaware, Attorney for Appellee–Below, Appellee, Appeals Commission, Delaware Alcoholic Beverage Control.

Adam L. Balick, Esquire (argued ), Melony R. Anderson, Esquire, Balick & Balick, LLC, Wilmington, Delaware, Attorneys for Appellee–Below, Appellee, Lex–Pac, Inc., d/b/a Hak's Sports Bar & Restaurant.

Opinion

HOLLAND, Justice:

This is an appeal by the Delaware Alcoholic Beverage Control Commissioner (the “ABC Commissioner”), from a final judgment of the Superior Court that dismissed his claim against the Delaware Alcoholic Beverage Control Appeals Commission (the “Appeals Commission”) for lack of standing. The Appeals Commission was created by the General Assembly to hear appeals from the ABC Commissioner's decisions, including those granting or denying a liquor license application. In this case, the Appeals Commission overturned the ABC Commissioner's decision to deny an application for a change of license classification by Lex–Pac, Inc. d/b/a Hak's Sports Bar & Restaurant (“Hak's”).

The ABC Commissioner then appealed the Appeals Commission's decision to the Superior Court. Hak's filed a motion to dismiss on the grounds that the ABC Commissioner lacked standing. The Superior Court agreed and dismissed the case. We have concluded that the Delaware Code does not vest the ABC Commissioner with standing to pursue an appeal from a decision by the Appeals Commission. Therefore, the judgment of the Superior Court must be affirmed.

Background

In 2000, the General Assembly enacted several legislative changes to alter the regulation of alcoholic beverage sales in Delaware.¹ By amending Title 4 of the Delaware Code, the General Assembly replaced the previous Commission, composed of five part-time Commissioners, with one full-time ABC Commissioner who has the authority to regulate the manufacture, sale, distribution, and importation of alcohol within Delaware and to resolve disputes between applicants or licensees, determine license violations, and decide whether to grant, deny, cancel, or transfer a liquor license.²

Under its previous configuration, the five-member ABC Commission issued decisions that were final unless appealed by a party to the Superior Court.³ When the General Assembly established the ABC Commissioner's position, however, it also established a three-member Appeals Commission to hear appeals and to “affirm, reverse or modify the decision of the Commissioner.”⁴ Section 301(b) of Title 4 provides that the “Commissioner and 3 members of the Appeals Commission ... shall be appointed by the Governor and confirmed by a majority of the ... Senate....”⁵

As part of these legislative changes, the General Assembly also created a new procedure to consider license applications. The ABC Commissioner decides on all applications in the first instance,⁶ but the process differs slightly depending on whether the application is protested by “at least 10 individuals who are residents of the neighborhood.”⁷ If so, the ABC Commissioner is required to hold a public hearing.⁸ Following that hearing, the ABC Commissioner issues a decision, which:

[S]hall be final and conclusive unless, within 30 days after notice thereof has been mailed by the Commissioner's office, a party to such hearing files an appeal in the office of the Commissioner. Upon receipt of the appeal, the Commissioner shall cause the Chairperson of the Appeals Commission to be advised of the pending appeal and the Chairperson shall cause the Commission to be convened with at least 20 days notice to all parties. The appeal shall be heard by the Appeals Commission, who shall, in accordance with the Administrative Procedures Act ..., review the matter on the record and affirm, reverse or modify the decision of the Commissioner.⁹

If no members of the community protest, as was the case here, the ABC Commissioner is still authorized to hold a hearing but is not required to do so.¹⁰ After considering an unprotested application, the statute provides that the ABC Commissioner must “render the decision promptly in writing,”¹¹ which “shall be final and conclusive unless, within 30 days after notice thereof has been mailed by the Commissioner's office, the applicant files an appeal in the office of the Commissioner.”¹² The applicant is then entitled to a hearing before the Appeals Commission, following the same procedural requirements as for a protested application.¹³

Under the process mandated at the time the ABC Commissioner filed his appeal in this case,¹⁴ the statute provided that “the decision of the Appeals Commission shall be final and conclusive unless, within 30 days after notice thereof has been mailed by the Appeals Commission, a party to such hearing files an appeal in the Superior Court of the County within which the applicant sought a license.”¹⁵ The provision applied to appeals from both protested and unprotested applications. The statute then stated that:

Unless otherwise agreed by all parties, in every appeal the cause shall be first decided by an arbitration ... by a Superior Court Commissioner from the record, and the Superior Court Commissioner may affirm, reverse or modify the Appeals Commission's decision.... If the Superior Court Commissioner finds that additional evidence should be taken, the Superior Court Commissioner may take the additional evidence or remand the cause to the [ABC] Commissioner for taking additional evidence on the record.¹⁶

The Superior Court could then consider the Superior Court Commissioner's decision, and “reverse or modify the decision of the Superior Court Commissioner or Appeals Commission and render an appropriate judgment” if it found that “the Superior Court Commissioner or Appeals Commission has made an error of law.”¹⁷

ABC Commissioner Denies Hak's Application

In this case, Hak's submitted an application to the ABC Commissioner to change its liquor license classification from a taproom to a restaurant in June 2008. Hak's, which advertised itself as a “Sports Bar/Gentleman's Club,” had been disciplined by the ABC Commissioner in May 2008 for employing female dancers under the age of 21, which was permissible for a restaurant, but not a taproom. Hak's “candidly indicate[d]” that being able to employ people under 21 was its purpose in seeking a license change.

In November 2009, the ABC Commissioner sent a letter to Hak's declaring his intention to deny the application.¹⁸ The letter notified Hak's that it had ten days to petition for a hearing. Hak's declined to seek a hearing, stating that it believed that the application could be decided “on the record,” and noting that it believed “many of the bases that [he] seem[ed] to rely upon ... [were] not part of the record.” Accordingly, the ABC Commissioner issued his official decision denying Hak's request for a change of classification in January 2010.

Appeals Commission Reverses ABC Commissioner

Hak's appealed the ABC Commissioner's decision to the Appeals Commission, which scheduled a hearing in March 2010. At the hearing, Hak's and the ABC Commissioner were both given ten minutes to present oral argument. Hak's contended that the relevant facts were undisputed, but that the ABC Commissioner had erred in his interpretation of the law. Hak's also alleged that some of the ABC Commissioner's findings were not from the record, but instead from the ABC Commissioner's “own research.” Hak's then contended that other restaurants were typically permitted an eight-month trial period to demonstrate that they could achieve sufficient sales of “complete meals,” as required to obtain a restaurant license.

The ABC Commissioner argued, in response, that his decision was based on substantial evidence and should be upheld. He asserted that he was entitled to infer from the record that Hak's was primarily an “entertainment establishment,” not a restaurant. He also argued that Hak's would be unable to restrict underage patrons from entering the “restaurant” at appropriate times, because as a restaurant, it would be required to remain open as a “place of public accommodation.” He did not dispute Hak's claim that other restaurants were routinely granted provisional licenses.

In April 2010, the Appeals Commission issued its decision and order, reversing the ABC Commissioner's decision and granting Hak's application, albeit on a provisional basis. The Appeals Commission adopted, as a whole, the ABC Commissioner's findings of fact as “supported by substantial evidence,” and observed that the “[ABC] Commissioner is vested with discretion to grant or refuse licenses.” Nevertheless, the Appeals Commission approved Hak's change of license, conditioned on proof that “at least 60% of Haks gross revenues are derived from the sale of complete meals” after six months.

The ABC Commissioner then appealed the Appeals Commission's decision to the Superior Court. The Superior Court remanded the case to the Appeals Commission to provide “further explanation,” which resulted in a reissued order with revised findings of fact but the same result for Hak's.¹⁹ In that amended decision and order, the Appeals Commission explained that it found the ABC Commissioner's determination that Hak's “would not operate as a restaurant is not supported by substantial evidence.” The Appeals Commission thus found the ABC Commissioner had abused his discretion in denying the application. Finally, the Appeals Commission noted that “the Commissioner did not dispute the representation by Haks that the ABC Commissioner has...