This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALS
Metro Bar & Grill, Inc., d/b/a Arnellia's,
City of St. Paul,
Filed May 1, 2001
St. Paul City Council
City Council File No. 00-585
S. Mark Vaught, Six West Fifth Street, Suite 700, St. Paul, MN 55102-1412 (for relator)
Clayton M. Robinson, Jr., St. Paul City Attorney, Virginia D. Palmer, Assistant City Attorney, 400 City Hall, 15 West Kellogg Boulevard, St. Paul, MN 55102 (for respondent)
Considered and decided by Shumaker, Presiding Judge, Randall, Judge, and Peterson, Judge.
U N P U B L I S H E D O P I N I O N
R.A. RANDALL, Judge
Due to serious crime in the area, the St. Paul licensing bureau imposed certain conditions on relator's bar licenses, including that it maintain video surveillance of its exterior. After discovering multiple instances in which the video failed to record crimes, respondent moved to suspend relator's licenses. After a hearing, the ALJ determined that relator was in at least substantial compliance, and that relator's failure to comply with the conditions was inadvertent. After a hearing, respondent passed a resolution suspending relator's license for 45 days, with 15 days stayed. Relator seeks certiorari review. This court stayed the suspension pending appeal. Relator contends that respondent's decision was arbitrary and capricious and not supported by substantial evidence, that it was denied due process and equal protection rights, and that respondent acted in violation of the St. Paul Legislative Code by engaging in ex parte contact. We affirm.
Relator Metro Bar & Grill, Inc., d/b/a Arnellia's (Arnellia's), located in St. Paul, holds a liquor license and Sunday on-sale liquor license, along with several other licenses. The most recent conditions placed on Arnellia's licenses were added in the summer of 1999 after a homicide in May 1999 outside the bar. The conditions were imposed after consultation with neighborhood representatives, the St. Paul Police Department, licensing staff, and Arnellia's employees. Arnellia's agreed to the conditions to the license that took effect on July 8, 1999. Condition No. 11, requires Arnellia's to
maintain in good working order at least [four] video surveillance cameras on the exterior of the building to constantly monitor the exterior of the premises. Tapes must be maintained for [seven] days.
On September 23, 1999, there was an altercation inside Arnellia's between two individuals who then left the bar and went to the rear parking lot and alley area, where one individual shot the other with a handgun. A police office went to Arnellia's to retrieve the tape from the surveillance cameras and was told by the owner, Arnellia Allen, that there was no tape available and that there was no video camera that would have taped the incident. After speaking with her son, Larry Allen (Allen), Arnellia said that the cameras were not on and had not been recording, so there was no tape. Later that day, another police officer spoke with Arnellia and she stated that the rear camera was broken and the tapes she had available were full and she therefore had no tapes to put in the VCR. At the hearing, Allen stated that he had failed to turn the recorder on or put a tape in the recorder that day.
Arnellia's received a violation notice from respondent City of St. Paul (the city) on October 1, 1999, alleging violation of license condition No. 11 for the failure to have a videotape of the September 23, 1999 incident. St. Paul, Minn., Legislative Code § 310.06(b)(5) (2000) allows the city to take adverse action when a licensee or applicant "has failed to comply with any condition set forth in the license."
On October 7, one week later, the police were called to investigate yet another homicide at Arnellia's. Two customers at Arnellia's got into an argument, which continued in the parking lot, where shots were fired. A vehicle in the east parking lot struck one of the parties to the argument, and carried him out into the street where he died. When police arrived, they asked Arnellia's for the surveillance tape, which they obtained and turned over to the homicide unit. Review of the tape indicated that the tape had not been operating until after the victim was killed and the police were called. Allen testified at the hearing that he was responsible for taping on October 7, and that "he must have hit the play button rather than the record button."
Arnellia's received a second notice of violation from the city on November 10, 1999, again alleging violation of license condition No. 11 for the failure to tape the October 7, 1999, incident, under St. Paul, Minn., Legislative Code § 310.06(b)(5).
Arnellia's requested a hearing before an ALJ, pursuant to St. Paul, Minn., Legislative Code § 310.05(c) (2000), which took place on January 26, 2000. The record was held open for submissions of written final arguments and closed on March 7, 2000. The ALJ issued a report to the St. Paul City Council (the council) in which the ALJ found that Arnellia's was
in substantial compliance with the conditions of its license through the installation and operation of a videotaping system attached to its video surveillance cameras. The failure to record the images capture by the video surveillance cameras outside the licensed premises on September 23 and October 7, 1999 was inadvertent by the Licensee.
The ALJ recommended that the city dismiss the adverse action against relator.
The Office of License, Inspections, and Environmental Protection (LIEP) filed exceptions to the report and served them by mail upon Arnellia's attorney on May 3, 2000. The public hearing took place on June 7, 2000, before the council, at which time the council requested a staff report from LIEP, then allowed for public comment with 15 minutes allotted to both the people in support of the report and those opposed to the report. The council deliberated after the public hearing closed, moved to adopt the amended findings of fact and conclusions filed by LIEP, and imposed a penalty of a 45-day suspension of the licenses, with 15 of those days stayed. Arnellia's petitioned this court for writ of certiorari seeking to reverse the council's decision.
D E C I S I O N
Municipal authorities have broad discretion in determining "the manner in which liquor licenses are issued, regulated, and revoked." Bourbon Bar & Cafe Corp. v. City of St. Paul, 466 N.W.2d 438, 440 (Minn. App. 1991) (citing Sabes v. City of Minneapolis, 265 Minn. 166, 171, 120 N.W.2d 871, 875 (1963)).
[S]ome local units of government either incorporate by reference all or some of [MAPA's] procedural provisions by official action, or statutes occasionally direct that certain portions of them apply to specified local proceedings.
21 William J. Keppel, Minnesota Practice, § 1.03 (1998). It is uncertain whether the City of St. Paul has adopted rules specifying whether their proceedings will be governed by the Minnesota Administrative Procedures Act (MAPA), Minn. Stat. §§ 14.001-14.69 (2000). A notice of hearing letter from the assistant city attorney, however, suggests that their proceedings are governed by MAPA because the letter stated that "[t]he hearing will be conducted in accordance with the requirements of Minnesota Statutes sections 14.57 to 14.62." Sections 14.57 through 14.62 govern contested case procedures under MAPA. Because the city elected to be governed by MAPA, MAPA is applied in this case.
Pursuant to MAPA, in a judicial review of a city council's decision,
[this] court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative finding, inferences, conclusion, or decision are:
(a) In violation of constitutional provisions; or
(b) In excess of the statutory authority or jurisdiction of the agency; or
(c) Made upon unlawful procedure; or
(d) Affected by other error of law; or
(e) Unsupported by substantial evidence in view of the entire record as submitted; or
(f) Arbitrary or capricious.
Minn. Stat. § 14.69 (2000). Review is limited to "the record before the city council at the time it made its decision." In re License No. 000337 West Side Pawn, 587 N.W.2d 521, 523 (Minn. App. 1998) (citing Minn. Stat. § 14.68 (1996)), review denied (Minn. Mar. 30, 1999). Where a council's decision has a rational basis, "a reviewing court has the duty to exercise restraint and accord appropriate deference to the city council in the performance of its duties." Scott County Lumber Co. v. City of Shakopee, 417 N.W.2d 721, 727 (Minn. App. 1988) (citing White Bear Docking and Storage, Inc. v. City of White Bear Lake, 324 N.W.2d 174, 176 (Minn. 1982)), review denied (Minn. Mar. 23, 1988).
Arnellia's argues that the council acted arbitrarily and capriciously by rejecting the ALJ's findings of fact, conclusions of law and recommendation. Arnellia's claims the council's conclusion is not supported by substantial evidence. Arnellia's further claims that the council's failure to offer any explanation for diverging from the ALJ's findings and recommendation is proof of arbitrary and capricious action.
First of all, it is settled that a city council may accept, reject or modify the report of an administrative law judge. St. Paul, Minn., Legislative Code § 310.05 (c-1) (2000); BAL, Inc. v. City of St. Paul, 469 N.W.2d 341, 343 (Minn. App. 1991). On appeal, the party seeking review bears the burden of proving the agency's decision violates one or more provisions of Minn. Stat. § 14.69. Sleepy Eye Care Ctr. V. Commissioner of Human Servs., 572 N.W.2d 766, 769-70 (Minn. App. 1998).
This court reviews an agency's factual findings under the substantial-evidence test. Henry v. Metropolitan Waste Control Comm’n, 401 N.W.2d 401, 404 (Minn. App. 1987). This court should use the substantial-evidence test, after evaluating the evidence on the record, and affirm an agency's decision that is based on reasoned decision-making. Reserve Mining Co. v. Herbst, 756 N.W.2d 808, 825 (Minn. 1977). Substantial evidence is defined as
1) such relevant evidence as a reasonable mind might accept as adequate to support a conclusion; 2) more than a scintilla of evidence; 3) more than some evidence; 4) more than any evidence; and 5) evidence considered in its entirety.
Taylor v. Beltrami Elec. Coop., Inc., 319 N.W.2d 52, 56 (Minn. 1982) (quotation omitted).
Where an agency's decision represents its will and not its judgment, the decision is subject to reversal as arbitrary and capricious. Markwardt v. State, Water Resources Bd., 254 N.W.2d 371, 374 (Minn. 1977). An ALJ's findings should be given due regard even though they are not binding. See In re Application of Orr, 396 N.W.2d 657, 662 (Minn. App. 1986) (stating that hearing examiner's findings should not be taken lightly, although not binding).
Here, the council adopted specific amended findings of fact and conclusions of law. They are all supported by the record. The record shows the council added additional information to five of the ALJ's findings and rephrased one finding. Otherwise the council did adopt the ALJ's findings. The council's substantial change occurred in the conclusion, the penalty phase.
Based on the additional findings that the council made, it reached a different conclusion than the ALJ. Rather than finding Arnellia's in substantial compliance with the conditions, the council did not conclude that the failure to have tapes of the two homicides was inadvertent. It did not view the error on two separate serious incidents as an excuse for noncompliance. Also, the council concluded that Arnellia's had not made serious enough efforts to comply with the taping conditions. The council noted that after receiving notice of a violation, just one week later, there was the second shooting incident. Based on these findings and conclusions, the council concluded that there was a basis for taking adverse action for failure to comply with license conditions.
While an agency's failure to explain its reasons for rejecting an ALJ's finding is "evidence of the agency's desire to exercise its will and not its judgment," it does not require an outright reversal of the agency's decision. Petition of Northern States Power Gas Utility, 519 N.W.2d 921, 925 (Minn. App. 1994). Based on the entire record, the seriousness of the alley crimes, and the weak excuses Arnellia's had for not having usable tapes properly recording, it is reasonable that the council reached a conclusion different than that reached by the ALJ. "Where there is room for two opinions on the matter, such action is not arbitrary and capricious." In re Friedenson, 574 N.W.2d 463, 467 (Minn. App. 1998) (quotation omitted), review denied (Minn. Apr. 30, 1998). On these facts, the council's failure to specifically articulate all its reasons, beyond the amended findings, for reaching its conclusion cannot be called arbitrary or capricious.
Arnellia's argues that the council considered factual testimony not previously submitted or heard by the ALJ in reaching its conclusion that Arnellia's violated the conditions placed on the licenses. Arnellia's claims that the testimony of two particular witnesses was very factual and highly inflammatory because it focused on the violence in the community around Arnellia's. Arnellia's also states that that testimony was "prejudicial" because it supports the council's conclusion and not the conclusion of the ALJ.
St. Paul, Minn., Legislative Code § 310.05 (c-1) states that
[t]he council shall consider the evidence contained in the record, the hearing examiner's recommended findings of fact and conclusions, and shall not consider any factual testimony not previously submitted to and considered by the hearing examiner.
This section also requires the council to allow an opportunity for oral or written arguments alleging error by the ALJ with regard to applying the law or interpreting the facts and relating to the recommended adverse action. Id. One of the steps in a council meeting is a public hearing. Council R. Pro. 10(j). This is generally where members of the public are given an opportunity to comment for or against an issue before the council.
The council did state in its resolution that its decision was
based on the record of the proceedings before the ALJ, including the hearing on January 26, 2000, the documents and exhibits introduced therein, the findings of fact and conclusions of law of the ALJ * * *, the written submissions by counsel for the parties, and the arguments and statements of the parties and the deliberations of the Council in open session on June 7, 2000.
The council makes no reference to the testimony of the people's statements at the public hearing. There is nothing in the amended findings and conclusions that reference anything other than what was on the record already. Arnellia's states in its own brief that the testimony from the witnesses was irrelevant. We conclude that Arnellia's argument on this issue is not persuasive.
Arnellia's argues that the council denied Arnellia's its due process rights by not allowing it an opportunity to rebut and cross-examine witnesses who spoke during the time reserved for public comments.
St. Paul, Minn., Legislative Code § 310.05(c) outlines relator's due process rights. In front of the ALJ, Arnellia's had an opportunity to present evidence and "meet adverse testimony or evidence by reasonable cross-examination and rebuttal evidence." Id. During the council process, the parties are provided opportunity to present oral or written arguments alleging error of law and interpretation of facts by the ALJ and to present argument regarding the adverse action proposed. Id., (c-1). There is no reference to an opportunity to cross-examine and rebut citizens who rise to speak to an issue in front of the city council at a public hearing.
We conclude Arnellia's was provided reasonable due process throughout the proceedings, both before the ALJ and the council.
Arnellia's claims that the difference between the ALJ's recommendation of dismissal and the council's imposition of a 45-day suspension is stark enough in itself and arguably arbitrary and capricious per se. Arnellia's further asserts that the penalty becomes even more burdensome and outrageous when measured against the penalties contained in St. Paul, Minn., Legislative Code § 409.26 (2000). Arnellia's argues that considering the violations happened because of a broken camera on one occasion and hitting "play" rather than "record" the other time, the penalty is excessive compared to penalties outlined for more serious and deliberate acts.
Section 409.26 provides penalties for various offenses regarding intoxicating and nonintoxicating liquor licenses ranging from fines to 15–day suspensions and revocation. While these are presumptive penalties, the council reserves the discretion to deviate from the proposed penalties in individual cases "where the council finds and determines that there exist substantial and compelling reasons" to do so. Id. When they deviate, they are required to give written reasons specifying why the imposed penalty is more appropriate than the presumptive penalty. Id.
None of the presumptive penalties under Section 409.26 specifically reference violating conditions placed on licenses. According to Section 409.26, a licensee may be penalized by revocation of its license for committing certain violations, even if it is the licensee's first offense. Such violations include "[c]ommission of a felony related to the licensed activity" and "[s]ale of alcohol beverages while license is under suspension." Further, if a licensee "[r]efus[es] to allow city inspectors or police admission to inspect premises" or "[f]ail[s] to comply with statutory, and ordinance requirements for liability insurance," the licensee can be penalized with a 15-day suspension or revocation, respectively, if it is the licensee's second offense.
Based on the history of violence around Arnellia's, the egregiousness of the crimes, and the conditions that were already imposed on Arnellia's, which Arnellia's agreed to but did not follow, it was not unreasonable to impose a 45-day suspension with a 15-day stay for repetitively violating conditions of a license. The conditions were placed on Arnellia's license to address real violence and real problems caused by patrons in and around Arnellia's. After receiving the first violation notice, Arnellia's did not have sufficient safeguards in place to protect against another serious mistake. The seriousness of the violations cannot be disputed; both times the problem was caused by Arnellia's personnel incorrectly running the system incorrectly.
Based on these facts, the imposed penalty was not arbitrary and capricious. The penalty did not violate Arnellia's equal protection rights.
V. Ex Parte Contacts.
Arnellia's asserts that the council engaged in ex parte communication with each other or others regarding the adverse action. Arnellia's concedes that there is no direct evidence that such contacts occurred. This assertion is based on claimed circumstantial evidence, such as: (1) the council took thirty minutes to consider and reject the ALJ's recommendation, (2) the council's president handed the meeting over to council member Blakey, which "seemed prearranged," (3) only three of the council members participated in the deliberations, (4) Blakey, whose district includes Arnellia's establishment, was the primary participant in the discussion, (5) the severity of the penalty as measured against the ALJ's recommendation, and (6) the decision was so "swift and virtually unopposed or questioned that it begs the question of ex parte contact." Arnellia's urges that this court would be on "sound ground" to conclude that improper contact among council members took place and that the severe penalty had been prearranged before the hearing.
Ex parte contact is discussed in St. Paul, Minn., Legislative Code § 310.05 (c-2) (2000). It states that in cases of adverse hearings on license matters,
council members shall not discuss the license matter with each other or with any of the parties or interested persons involved in the matter unless such discussion occurs on the record during the hearings * * * or during the council's final deliberations.
The city argues that several of Arnellia's assertions are standard procedure in council hearings, such as the council member in whose district Arnellia's is located leading the discussion and the total of thirty minutes allowed for public testimony. The fact that the council reached a different conclusion than the ALJ does not, by itself, support an argument of ex parte contact. Finally, we note that the penalty levied on Arnellia's was less severe than the 60-day suspension originally proposed by the Office of LIEP.