Squire Restaurant and Lounge, Inc. v. City and County of Denver

• Decision Date: 14 July 1994
• Docket Number: No. 93CA0541,93CA0541
• Parties: SQUIRE RESTAURANT AND LOUNGE, INC., a Colorado corporation, Plaintiff-Appellant, v. The CITY AND COUNTY OF DENVER; The Department of Excise and Licenses of the City and County of Denver; Mary A. Sylvester, in her capacity as the Director of Excise and Licenses for the City and County of Denver; and The Department of Revenue for the State of Colorado, Defendants-Appellees. . I
• Court: Colorado Court of Appeals

Page 164

890 P.2d 164

SQUIRE RESTAURANT AND LOUNGE, INC., a Colorado corporation Plaintiff-Appellant, v. The CITY AND COUNTY OF DENVER; The Department of Excise and Licenses of the City and County of Denver; Mary A Sylvester, in her capacity as the Director of Excise and Licenses for the City and County of Denver; and The Department of Revenue for the State of Colorado, Defendants-Appellees.

No. 93CA0541.

Colorado Court of Appeals Div. I.

July 14, 1994.

As Modified on Denial of Rehearing Aug. 11, 1994. ^*

Certiorari Denied March 6, 1995.

Irving P. Andrews, John V. Stege, Denver, for plaintiff-appellant.

Daniel E. Muse, City Atty., James Thomas, Asst. City Atty., April L. Snook, Asst. City Atty., Denver, for defendants-appellees City and County of Denver, Dept. of Excise and Licenses of City and County of Denver, and Mary A. Sylvester, in her capacity as Director of Excise and Licenses.

Gale A. Norton, Atty. Gen., Stephen K. ErkenBrack, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., Thomas D. Fears, Asst. Atty. Gen., Denver, for defendant-appellee Dept. of Revenue.

Opinion by Judge BRIGGS.

For over forty-five years plaintiff, the Squire Restaurant and Lounge, Inc., held a liquor license and operated a tavern in the City and County of Denver. In 1992, the Director of the Denver Department of Excise and Licenses (Department) refused to renew the license. Plaintiff sought judicial review in the district court under C.R.C.P. 57 and 106(a)(4), contending that the statutory standard of "good cause" for refusing to renew a liquor license, without more, constituted an unconstitutional delegation of legislative authority and violated plaintiff's right to due process. The district court affirmed the decision refusing to renew the license. On plaintiff's appeal, we reverse and remand with directions.

In our view, the General Assembly has reasonably left to the Department the task of defining "good cause" and providing guidelines for addressing applications to renew liquor licenses. However, because the Department has enacted no such regulations, denial of the request for a renewed license violated plaintiff's right to due process.

I.

In 1991, the Department issued an order setting a renewal hearing for plaintiff's liquor license pursuant to § 12-47-106(1)(b), C.R.S. (1991 Repl. Vol. 5B). The statute authorizes the licensing authority to refuse to renew a liquor license "for good cause shown, subject to judicial review."

The notice of hearing referred to a ten-day suspension earlier in the year for violations of the liquor code and a police report alleging that recently an intoxicated person had been served. The order further noted letters from neighborhood residents asserting there was no longer need or desire for the tavern at that location.

After a public hearing, the hearing officer found that adult inhabitants of the area who desired that the license not be renewed outnumbered those who favored renewal and that the weight of the evidence established that the bar was "dangerous." The officer concluded that the reasonable requirements of the neighborhood would be met without renewing the license. The Director accepted the decision not to renew on the sole basis that, because of other liquor licensed establishments in the area, there was "no longer a reasonable requirement or desire among the adult inhabitants of the immediate area for a liquor license of this type."

In the district court proceedings, plaintiff's challenge to the "good cause" standard relied, in part, on the requirement in § 12-47-105(1)(b), C.R.S. (1991 Repl. Vol. 5B) that the state licensing authority make general rules and regulations as necessary for the proper regulation and control of the sale of liquor. Although many regulations had been issued, it was undisputed that none had been issued pertaining to applications for license renewal.

In affirming the Director's decision, the district court concluded that the Department was not required to promulgate written guidelines for renewal hearings. The court held that the right to due process was satisfied by giving plaintiff the opportunity to present evidence, call witnesses, and cross-examine opposing witnesses before an impartial decision maker.

II.

Plaintiff first contends that the General Assembly has unconstitutionally delegated legislative authority by failing to provide sufficient standards for defining "good cause." We disagree.

The traditional statement of the "nondelegation" doctrine is that the General Assembly may delegate power to an administrative agency only if it has provided sufficient standards to guide the agency's exercise of that power. Cottrell v. City & County of Denver, 636 P.2d 703 (Colo.1981). However, our supreme court in Cottrell recognized the impracticality and inappropriateness in many contexts of requiring anything more than the most broad and general standards to guide administrative action. The court observed that, as a result, violation of the doctrine has been an argument frequently invoked but seldom sustained. Consistent with its observation, the court in Cottrell held that the Denver city charter provided sufficient standards in delegating authority to set water-rates by requiring that they be "as low as good service will permit" and "uniform as far as practicable."

The holding in Cottrell followed the court's earlier decision in Elizondo v. State, 194 Colo. 113, 570 P.2d 518 (1977). In that case the court rejected a challenge to the General Assembly's delegation to the Colorado Department of Revenue of the authority to suspend driver licenses and, if suspended, to issue probationary licenses.

The challenged provision in Elizondo was part of the Uniform Safety Code of 1935, which had as its purpose the protection of public safety on Colorado highways. The supreme court found this sufficient to guide the agency's exercise of its authority in adopting regulations and conducting hearings.

Here, the delegation to the Department of the authority to adopt regulations and conduct hearings on applications to renew licenses is part of the Colorado Liquor Code, § 12-47-101, et seq., C.R.S. (1991 Repl. Vol. 5B). The Code was enacted to control the manufacture, distribution, and sale of liquor for the protection of the economic and social welfare and health, peace, and morals of the people of this state. Section 12-47-102, C.R.S. (1991 Repl. Vol. 5B).

This broad scheme, like that in question in Elizondo, enables the Department "to utilize its expertise in determining what specific facts may be relevant to granting or denying ... licenses." Elizondo v. State, supra, 570 P.2d at 521. Accordingly, we conclude the delegation of legislative authority to the Department to adopt regulations and conduct hearings was not unconstitutional. See also People v. Willson, 187 Colo. 141, 528 P.2d 1315 (1974); Lloyd A. Fry Roofing Co. v. Department of Health, 179 Colo. 223, 499 P.2d 1176 (1972).

III.

Plaintiff next contends that, because the Department has not adopted any regulations defining "good cause" for not renewing a license, its refusal to renew the license violates plaintiff's right to due process. In the circumstances presented here, we agree.

A.

Because challenges to delegation are seldom sustained, important repositories of power delegated to administrative bodies are largely insulated from the constraining force of the democratic process. The supreme court in Cottrell therefore concluded that another mode of protecting individuals against the uncontrolled exercise of this discretionary power is necessary.

We now make explicit that the test is not simply whether the delegation is guided by standards, but whether there are sufficient statutory standards and safeguards and administrative standards and safeguards, in combination, to protect against unnecessary and uncontrolled exercise of discretionary power. The guiding consideration is whether these constraints are sufficient to insure that administrative action will be rational and consistent in the first instance and that subsequent judicial review of that action is available and will be effective.

Cottrell v. City & County of Denver, supra, at 709; see also, Posters 'N' Things, Ltd. v. United States, 511 U.S. 513, 114 S.Ct. 1747, 128 L.Ed.2d 539 (1994).

In Elizondo v. State, supra, the Department of Revenue had been delegated the discretionary authority to issue probationary licenses. However, the Department had failed to adopt rules and regulations limiting the exercise of that power. The supreme court determined the plaintiff's right to due process had been violated.

By failing to follow [the] statutory suggestion [to adopt rules and regulations], the Department has left the granting or denial of probationary drivers' licenses solely to the unfettered discretion of individual hearing officers. As a result, neither the public nor the courts have any means of knowing in advance what evidence might be considered material to any particular decision. Nor is there any assurance that each hearing officer will not, consciously or subconsciously, follow standards quite different from those applied by his or her colleagues.

[A]lthough the hearing officer's integrity is not questioned, in this case as in every other, there is no way for a reviewing court to determine whether a hearing officer has or has not abused his discretion. Without some stated guidelines, and specific findings of fact, judicial review is a hollow gesture.

Elizondo v. State, supra, 570 P.2d at 521.

Other courts have raised similar concerns in addressing challenges to refusals to issue or renew liquor licenses. For example, the Supreme Court of North Dakota in Mini Mart, Inc. v. City of Minot, 347 N.W.2d 131 (N.D.1984) held that, although state law vested in municipalities discretion to decide whether to grant a liquor license, a municipality must prescribe reasonable rules and regulations to govern the exercise of that...