PER CURIAM.
Stock Enterprises, Inc. ("Stock") appeals the final agency decision of the Division of Alcoholic Beverage Control ("the Division" or "the ABC") upholding the Borough of Sayreville's denial of Stock's application to reactivate its liquor license on premises in the Borough where Stock operates an all-nude dancing club. Applying the governing law and our limited scope of review of administrative decisions by the ABC Director, we affirm.
We briefly summarize the pertinent facts and procedural history.
Stock operates Club 35,
Stock has owned the liquor license for the premises since 1995. The license is known as a "broad C" license, which permits not only the sale of liquor but also the sale of packaged goods.
When it was originally issued in 1995, the license was in use for the entire building, where Stock then owned and operated the Coliseum Nightclub. As described by Stock's counsel in the Borough hearing, Coliseum Nightclub was a strip club during the day and a nightclub at night, with a full liquor license for the entire establishment.
In 2007, Stock was notified by the Borough that its license was subject to suspension due to fights that had occurred on the premises. In response, Stock "pocketed" the license rather than taking the suspension, meaning that the license would be deactivated until it was transferred to a licensed premise, upon approval by the issuing authority.
In November 2007, Stock's establishment changed to an all-nude entertainment club, known as Club 35, with a BYOB policy. Stock had pocketed its full liquor license in order to open Club 35, because all-nude clubs are not allowed to serve alcohol. Consequently, patrons of Club 35 are currently allowed to bring beer, wine, and champagne purchased off-site for consumption in the club. A person must be eighteen years old to enter the club.
In August 2011, Stock filed a place-to-place transfer application with the Borough, seeking to reactivate its liquor license for a portion of the Club 35 premises. Specifically, Stock proposed in its application to use a portion of a Club 35's space, approximately 1200-1500 square feet, for the sale of liquor. This designated space for the licensed sales would include part of Club 35's first floor and the entire second floor.
The Borough held a public hearing on April 23, 2012, to hear objections to Stock's application, in accordance with the Senator Byron M. Baer Open Public Meetings Act,
As described by Stock's counsel, the area for which Stock sought to reactivate its liquor license would be located in the rear of the Club 35 building. That area includes the entire second floor, which could only be accessed through the licensed portion of the space that would be located on a portion of the first floor. Stock's counsel described the reactivation of the liquor license as a way for Stock to provide full bar service to its existing customers. He also represented that there have been few problems recently with Club 35 customers, necessitating fewer police calls than in the past when the business was known as the Coliseum Nightclub. Counsel further represented that he did not expect the current Club 35 customer base to change as a result of the liquor license reactivation. He also clarified that patrons of the proposed licensed business would not be required to stay within the confines of the licensed area; instead they could walk back and forth freely between the licensed area and the unlicensed area.
A few days prior to the Borough hearing, the Borough's Chief of Police conducted a walk-through visit of the premises. Following that on-site inspection, the Police Chief proceeded to oppose Stock's application at the Borough hearing.
The Chief expressed serious concerns about Stock's proposal. His main stated concern was that the proposed use of the license on Club 35's premises would blur the lines between public and private areas, particularly with regard to the consequences that such blurring would have on law enforcement activities. Among other things, the Chief identified concerns about: (1) the police department's ability to conduct inspections effectively in a building that would have licensed and licensed spaces located in close proximity; (2) the potential for increased public safety problems due to an "intensification of alcohol" on the premises; and (3) a likelihood that a fully licensed bar area in the building would attract a "less docile" crowd.
In response to questions from Stock's counsel at the Borough hearing, the Chief acknowledged that there would be two doorways, one for each of the businesses. However, the existence of those two interior doorways did not alleviate the Chief's concerns because both doorways would be accessed through a single, common doorway for entering the premises. The Chief recognized that law enforcement officers eventually would become accustomed to the split layout of the premises. Even so, the Chief expressed concerns that the "average person" would not know, at the point of entering the building, whether he or she was entering the all-nude, unlicensed part of the premises, or whether he or she was instead entering the licensed part.
At the conclusion of the public hearing, the Borough Council members voted unanimously to deny Stock's application. As one Council member remarked on the transcribed record, "As the Chief said ... you can control where the liquor goes, but you can't control where the effects of the liquor go. And I think ... that's a major incompatibility here."
The Borough subsequently adopted a written Resolution of Denial on May 14, 2012. The resolution essentially recites that: (1) Stock was a liquor license holder; (2) Stock was charged with state liquor law violations in 2007; (3) Stock deactivated and pocketed its license in November 2007; (4) Stock was now requesting a place-to-place transfer; and (5) a public hearing was held on April 23, 2012, at which time objections to the application were received. The resolution did not, however, detail the specific reasons for the governing body's denial.
Stock sought review of the Borough's denial by the ABC. Because of the various disputed factual issues, the ABC transferred the matter as a contested case to the Office of Administrative Law ("OAL"). A hearing before an Administrative Law Judge ("the ALJ") was conducted on January 9, 2013. The Borough presented testimony from the Police Chief, who amplified his previous testimony he gave before the Borough Council. In response, Stock presented testimony from its owner, Anthony Acciardi.
In his OAL testimony, the Chief emphasized the public safety issues that would be created if the proposed hybrid licensed/unlicensed arrangement on the premises were approved. For example, the Chief noted that a police officer performing inspections of the licensed premises would have to traverse the unlicensed area in order to access the licensed area. The Chief further expressed concerns that persons in the licensed and unlicensed portions of the establishment would be visible to one another, and that they would use common bathroom facilities. The Chief predicted that the split layout would inhibit the police department in enforcing ABC restrictions that apply to employees for the licensed business, because such employees would be able to go freely back and forth to the unlicensed area. The Chief also raised the prospect of increased litigation, in which the lawfulness of police activity on site might be more readily challenged.
Acciardi attempted in his OAL testimony to minimize or ameliorate the Chief's public safety concerns. Acciardi proposed to position security guards at each of the two entrances to the unlicensed and the licensed areas, so as to attempt to prevent customers from carrying hard liquor into the unlicensed, nude establishment. The guards would be employees of either Club 35 or the proposed licensed establishment, depending on where they would stand and what particular doors they would guard. However, Acciardi conceded that only a curtain would divide the licensed and the unlicensed area, and that the two areas would share common bathroom facilities.
Acciardi acknowledged that because Club 35 currently operates with a BYOB policy, it was his understanding that a reactivation of Stock's liquor license would provide it with the opportunity for customers to buy beer, wine, or champagne (but not liquor) in the proposed licensed area. Customers could then bring those purchases to the unlicensed portion of the building, thereby enabling them to consume such alcohol in Club 35.
Responding to the Chief's concerns about employee access, Acciardi testified that because Club 35 and the proposed licensed establishment would be operated as separate businesses, employee lists for each business would be separate as well. In addition, he provided assurances that all employees of both businesses would comply with ABC regulations.
As to his business's anticipated clientele, Acciardi countered the Chief's concerns about the licensed area attracting a more troublesome crowd. Acciardi asserted that the licensed business would cater to male and female customers of all ages, from customers from the age of eighteen to persons in their nineties. He denied that the sale of liquor on the premises would attract riskier patrons.
Acciardi disclaimed that police officers would ever be refused access to the premises in order to conduct inspections of the licensed area. He also asserted that police officers have not been hindered from gaining access to the premises in the past.
The ALJ issued a written decision on April 3, 2013 sustaining the Borough's denial of Stock's application. She concluded that Stock had not met its burden to prove that the Borough's denial was arbitrary or capricious. Her decision cited numerous reasons for that conclusion.
On the whole, the ALJ concluded that the Borough had based its denial of Stock's application on "supporting evidence of safety and regulatory concerns." She found the Chief's testimony at the January 9, 2013 AOL hearing to have established the police department's "credible" concerns about the potential for various safety and regulatory problems that could arise out of an establishment consisting of both licensed and unlicensed businesses. The ALJ was persuaded that these legitimate problems identified by the Chief had "clearly" been raised "in the interest of the public health, safety and welfare."
Given the deference to which the Borough's decision was entitled under the law, the ALJ found that it was reasonable for the Borough to rely on the Chief's many years of experience and his expertise in local law enforcement in determining that the "uniqueness of the proposal could lead to an increase in safety and regulatory problems." The ALJ noted that her standard of review required that she determine "whether there is any reasonable support for the conclusion that has been reached by the local issuing authority." She cited our opinion in
Stock filed exceptions with the ABC Director to the ALJ's determinations. The Director thereafter issued two successive final agency decisions: an original decision dated July 1, 2013, and an amplified final decision dated October 24, 2014 issued while this appeal was pending.
In his original July 2013 decision, the Director concluded that the Borough had justifiably denied Stock's application "because the proposed placement of the licensed premises is in close, direct proximity to the non-licensed, all-nude dancing facility." The Director agreed with the ALJ's determination that the Borough acted reasonably in denying Stock's application, because its concerns about public safety problems and regulatory issues were based on credible evidence, namely the Chief's testimony. The Director also found that the factual and legal determinations of the ALJ, as well as the Borough's reasons for its opposition to the license, were supported by the record and by "sound legal principles." Additionally, the Director noted that Stock had been given a "full and complete hearing" on its application, both at the Borough's public hearing and later at the OAL hearing.
In his subsequent amplified final agency decision in October 2014, the Director explained more fully why he rejected Stock's argument that the Borough's resolution of denial was insufficiently detailed and procedurally defective. Moreover, the Director identified an additional ground for denial of Stock's application under the pertinent ABC regulations. In particular, the Director determined that the proposed split arrangement for the premises — containing an unlicensed portion where all-nude dancing would take place and a second area for the licensed sale of alcoholic beverages — would violate
On appeal, Stock argues that the denial of its application should be reversed because (1) the Borough failed to set forth sufficient reasons for the denial in its resolution; (2) the ALJ should not have heard witness testimony ancillary to the Director's de novo review of the Borough's decision; (3) the denial of its application was arbitrary and capricious; and (4) the lewdness analysis set forth in the Director's amplified decision is flawed. Before we address these specific arguments, we first set forth the legal criteria and the appellate standards of review that must guide our analysis.
The New Jersey Alcoholic Beverage Control Act,
The Director's extensive regulatory powers stem from the Legislature's recognition that "[t]he retail alcoholic beverage industry is one of the most highly regulated industries of the State[.]"
Municipalities, as the "issuing authorities," also play an important role in the regulatory scheme. "A municipality has `the original power to pass on an application for a [liquor] license or the transfer thereof,' but that power is `broadly subject to appeal to the Director.'"
When an appeal from a municipal decision is pursued by a licensee or other aggrieved party, such appeals are first presented to the Director. If there are contested factual issues, then the matter is referred to the OAL for a hearing before an ALJ. After such a hearing, the ALJ then issues an Initial Decision. The Director then has the authority to adopt, reject, or modify the ALJ's decision.
"[T]he Director's review is de novo as to all necessary factual and legal determinations."
Our scope of judicial review from final agency decisions of the Director is quite narrow. "When evaluating an action of the Director of Alcoholic Beverage Control, substantial deference is owed to the Director."
Thus, as with appeals from other administrative agencies, appellate review of decisions by the Director is limited in scope.
That said, pure questions of law relating to liquor licensure and procedures are examined by appellate courts de novo.
The first issue raised by Stock concerns the failure of the Borough's resolution to specify in written form the particular reasons why the governing body rejected Stock's application. In particular, Stock contends that the resolution does not comply with
Stock argues that this regulation should be construed to require a municipal authority, when either (as here) denying a license application or rejecting an objection to such an application, to "state the reasons therefor" in writing. Because the Borough's resolution here fails to specify those reasons, Stock contends that the ensuing administrative proceedings in this case, both in the OAL and before the Director, were flawed, ab initio. Consequently, Stock maintains that the Director's final agency decisions must be reversed because of this procedural flaw.
The Borough and the Director contend in opposition that
We concur with Stock that the regulation should be construed to require the resolution or other written memorialization of the local authority's decision to express, at least in summary fashion, the reasons for the denial. By analogy, as a general principle of sound administrative practice and judicial review, state agencies must articulate in their final decisions the specific reasons they relied upon in reaching their determinations. "[N]o matter how great a deference the court is obliged to accord the administrative determination which it is being called upon to review, it has no capacity to review at all unless ... the agency has stated its reasons grounded in [the] record for its action."
In fact, the ABC itself has interpreted
At oral argument, the Deputy Attorney General representing the Director contended that this language in the 1991 Bulletin advising that the reasons for denial "should be" contained in the resolution was merely aspirational and not mandatory. We disagree with this reading of the regulation, regardless of the current Director's position concerning the import of the 1991 Bulletin. To enable meaningful administrative and judicial review of the local body's action, the reasons should be expressed, or at least summarized, within the resolution itself. The oral testimony of a witness, such as the Police Chief here, cannot suffice.
That said, we do not endorse the remedy for this deficiency that has been advocated by Stock. The omission of the Borough's reasons from the resolution, while unfortunate, is harmless, given the subsequent full-blown proceedings that occurred in the OAL, in which the ALJ heard testimony from not only the Police Chief but also from Stock's owner. The ALJ then detailed and adopted the reasons for denial of Stock's application. Stock was not prejudiced by this de novo procedure. Thereafter, the Director also made plain why the application was appropriately rejected. We discern no legal or equitable reasons to require the Borough to consider the application again, or to remand the matter for the Borough to memorialize reasons for denial that are clearly apparent from the present record. The defects in the Borough resolution were cured by the subsequent proceedings.
Stock's related argument that the de novo proceedings before the ALJ were improper requires little comment. It has been well-established in case law, even dating before the creation of the OAL in 1978, that the de novo review of municipal decisions on liquor licenses may entail the presentation of additional testimony and other evidence before an administrative tribunal.
Apart from this tradition of expansive de novo administrative review in ABC cases, we perceive no prejudice to Stock in the OAL proceedings that took place here. The ALJ gave both sides a fair opportunity to present testimony and exhibits, and she fairly and thoroughly considered those proofs.
We also reject Stock's assertion that the denial of its transfer application was arbitrary and unreasonable. To the contrary, there is ample evidence in the record, particularly the compelling testimony of the Police Chief, to support the Borough's denial and the Director's final agency decision ratifying that denial. The mixed-use arrangement within the building proposed by Stock would undoubtedly create law enforcement and regulatory compliance problems. The access of patrons from the licensed portion of the building to the unlicensed nude-dancing portion, the common bathroom, the close proximity of the two operations, and the negative past history of the premises that precipitated the earlier suspension of its license were all legitimate considerations, among many others, to justify the denial. Stock has not sustained its heavy burden to demonstrate that the Division misapplied its expertise and authority in this case.
Although it is unnecessary to reach this independent basis for denial, we briefly express our agreement with the Director that Stock's proposed arrangement would also violate the lewdness prohibition set forth in
Without question, all-nude dancing is an activity that constitutes a form of "lewdness."
We further agree with the Director's conclusion that the proposed split arrangement within the building to house both nude dancing and the licensed sale of liquor would basically comprise activity "on or about the licensed premises" within the meaning of
Affirmed.
