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WHO’S THE JUDGE? Or, How Those Backroom Decisions Are Made

in News

By Ralph B. Saltsman
with Stephen Warren Solomon and Stephen Jamieson

Avid Beverage News fans who read Legal Ease every month already know that Administrative Law Judges who regularly hear cases brought by the ABC against licensees are employees of the ABC. But that’s only the beginning of the story. It does get worse; read on.

The decisions reached by those Administrative Law Judges are only proposed decisions. Guess who decides to accept, reject or modify those decisions. The Director or Chief Counsel of the Department makes those calls. When a proposed decision is rejected by the Department, a new decision is drafted and signed and adopted by the Department itself. Where an Administrative Law Judge dismisses an accusation against a licensee, the Department can reject that decision and write and adopt a new decision sustaining the accusation and imposing a suspension or even a revocation of the license. When, the judge rules in your favor and you win, the ABC can decide not to accept the judge’s ruling, will hear no testimony, see no witnesses and just stick it to you by taking away your license forever. There may be even more mischief involved where the individual in the Department who issues that new decision is from the same office as the ABC attorney who prosecuted the case to begin with.

Government Code Section 11517, of the Administrative Procedure Act, allows the ABC and other state agencies to reject proposed decisions and to review the record including the transcript of the hearing and to then decide the case anew. This law allows the Department to consider new evidence but also states: “A copy of the record shall be made available to the parties.” Some of this record is obvious. Some, less obvious. Certainly the evidence admitted during the hearing is part of the record. The transcript is also part of the record. In an 11517 situation, all that material should be provided upon request, including the transcript when prepared. What about ABC attorney notes that include observations, opinions about witnesses and evidence, recommendations directly related to whether to accept or reject a proposed decision, and evaluations of admitted evidence and testimony? The APA in Section 11430.10 et seq. specifically disallows ex parte (as in secret and one sided) communication by one party. Are those notes set down on an ABC Form 104 a secret document made during and after the hearing by the ABC attorney trying the case part of the record to be provided to the parties? Are those notes and memos available to the Director or Chief Counsel who ultimately writes the decision? Those notes could be based on personal opinions, biases and prejudices not developed or accounted for by the record. Quite possibly that secret document could be crucial. The Department never discloses the contents of that potentially critical form. Why so important?

Observing the blank Report of Hearing might give some insight:

DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL

REPORT OF HEARING File
Reg.

Date

Place
In Re:

Administrative Law Judge

DBA

Reporter

Address

PARTIES
ABC
PROTESTANT
LICENSEE/APPLICANT

Representatives

Witnesses #1

Witnesses #2

Witnesses #3

Witnesses #4

Exhibits #1

Exhibits #2

Exhibits #3

STIPULATIONS

ISSUES

DISPOSITION
Hearing Completed
Partial
Completion Time:

HEARING TIME
Start _____ __.M.
Close ____ __.M.
Total

Comment:

PETITION
PROTEST
ACCUSATION

RECOMMENDATION

Grant

Deny

Sustain

Overrule

Standard

Aggravated

Mitigated

Dismissed

DISCUSSION (Summarize evidence for and against with reasons for the recommended decision. If necessary to use reverse, please invert.)

______________________________________________________

ABC-104 (11/78)

Other than the obvious, that is, those notes of impressions and evaluations and recommendations could be relied on heavily by the Decision Maker, recent Courts of Appeal decisions make disclosure of those notes a highest priority. In April 2003 and more recently in December 2003, two different Appellate Courts issued decisions that make disclosure of Form 104 critical. The Court of Appeal in Quintero v. Santa Ana (December 23, 2003) reversed an order terminating the employment of a non-sworn Police Department Detention Officer finding an appearance of bias and unfairness by the Personnel Board. The Court noted: “For the Board to allow its legal adviser to also act as an advocate before it creates a substantial risk that the Board’s judgment in the case before it will be skewed in favor of the prosecution. The chance that the Board will show a preference toward… [the prosecutor/adviser], even “‘perhaps unconsciously'” is present and unacceptable.”

The Court in Quintero relied on the Court of Appeal in Nightlife Partners v. Beverly Hills (April 24, 2003) where that court decided that a City Attorney advocate in a permit renewal hearing couldn’t also be an advisor to the Hearing Officer: The Court held: “Here, this same objectionable overlapping of the role of advocate and decision-maker occurred….It requires no citation of authority exactly on all fours with this fact pattern in order to justify the conclusion that…[the City Attorney’s] role as advisor to the decision-maker violated petitioners’ right to due process. There was a clear appearance of unfairness and bias. This was sufficient to support the trial court’s ruling.”

What do these cases mean in the context of decisions rendered by the Department under Government Code Section 11517? Clearly notes of impressions and evaluations and recommendations contained in the Form 104 Report of Hearing constitute a form of advice available to the Trier of Fact making the Department’s decisions under the Administrative Procedure Act. Since the notes are ex parte communication, they shouldn’t be considered but when included should be disclosed. And doesn’t it appear that the Trier of Fact in the Department just might give greater credence to that advice than any argument you the licensee may submit? Does this scenario become even more ominous when the Trier of Fact is an attorney from the same office as the ABC attorney who tried the case and made those notes? There is a long held tradition in the Department where those 11517 decisions have been signed by Chief Counsel for the ABC.

Here are some assumptions: First, the Report of Hearing is included in the file transmitted in an 11517 review; second, the Report of Hearing is available for review by the Trier of Fact; third, the Trier of Fact reviews and relies on the Report of Hearing as part of the decision making process. These are only assumptions since the ABC would rather give up its secret handshake than disclose the contents of one of these secret documents.

In the Department’s 11517 decision making process, it may be assumed the Trier of Fact has access to prosecutorial insight and wisdom in the form of friendly advice in the Report of Hearing crafted by the Department’s advocate in the administrative hearing. Then the blurring of roles between advocate and Decision-Maker is at least as profound as occurred in Nightlife Partners and Quintero. The Due Process violation condemned by those courts is as blatant.

Solomon, Saltsman & Jamieson are attorneys practicing in the areas of ABC law, ABC Appeals Board cases, and all related Land Use Matters such as City and County Conditional Use Permits, Variances, Police and Fire permits, Entertainment law, and Gambling Law; as well as Business and Personal Injury litigation. Solomon, Saltsman & Jamieson can be reached at 800 405 4222.”

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HERE COMES THE JUDGE When Does a Licensee Get To See A Real Judge?

in News

When does a licensee accused of wrong-doing get to see a judge in robes? That is, a real judge. A judge appointed by the governor or elected by the people. A judge who can make decisions on all legal and constitutional issues presented. You know…a genuine judicial officer. Usually it’s never. Usually, it’s an administrative law judge employed by the Department who hears the accusation and issues a proposed decision, not a real judge. It’s the Department which accepts or rejects the proposed decision, not a judge at all. It’s the Appeals Board which reviews those decisions. Members of the Board are gubernatorial appointees but don’t have to be lawyers to be on the Board. They certainly are not judges. Then, the only available review is to the Court of Appeal which consists of real appellate court justices, but the court doesn’t have to take the case, and rarely does. Business and Professions Code Section 23089, allows that licensee to seek appellate court review but also allows the Department the same remedy before the same Court of Appeal. When the ABC seeks discretionary appellate court review, it hires the Attorney General. Many view this system inadequate and unfair.

The Department loses a healthy number of cases before the Board which can reverse a Department decision, affirm that decision or remand the case back to the Department for further proceedings. Reversals of Department decisions are handed down by the Board virtually every time it convenes. A decision rendered by the Board cannot be reviewed by the Superior Court as a matter of right. Parties appearing before most other state agencies do have the right to Superior Court review and therefore a real judge. With ABC cases any party including the ABC can petition only the Court of Appeal for a Writ of Review or the California Supreme Court for a Hearing. Those Courts can grant such petition and review the Board’s decision or summarily deny the request. Either way, as anyone who has had a case before the Court of Appeal knows, it can be an expensive proposition. That’s true whether the Department or the licensee files the petition.

There have been times when it would appear that the Department has not spent its attorney allowance wisely. For example, in 1998 after losing scores of Appeals Board appeals on a question concerning discovery rights in a multitude of jurisdictions (and appellate court districts) the Department filed petitions for review in just about every appellate court and even in the California Supreme Court. The Court, in each instance, summarily denied each petition as did the California Supreme Court. What did that misguided adventure cost the taxpayer in attorneys’ fees paid by the Department to the Attorney General?

Frequently, however, the Department pursues cases to the appellate court where that court’s decision would have significant statewide impact. One current example is the case where the Appeals Board determined that the ALJ in a Southern California case failed to accurately and adequately analyze the apparent age of a minor decoy. The apparent age of the decoy is usually in issue and must satisfy the Department’s rule in that regard. In this case, the Board found the rule was violated based upon the ALJ’s failure. The Attorney General filed a petition for writ, and the matter is presently pending before the Court of Appeal.

In another example, in Northern California, the Court issued a writ where the Appeals Board reversed a decision of the Department where the important question before the court is whether a fake ID manufactured by computer and not the state satisfies the statutory criteria as a defense in a sale to a minor case. Business and Professions Code Section 25660 references “a document issued by a federal, state, county, or municipal government….” The Courts have upheld such reliance when reasonable and in good faith. The Department now argues that unless the ID is actually manufactured by a government, it cannot be the basis for a defense in a sale to minor case. The licensee responds with an obvious truth that the self-manufactured ID may look exactly like an ID issued by the DMV and would seem reliable in every observable way. In this case pending before the Court, the minor purchased the ID on the streets of San Francisco. It is never a surprise when the ALJ buys the Department’s argument and sustains an accusation, and that’s what happened here. However, based upon around fifty years of court of appeal precedent and its own consistent decisions, the Appeals Board reversed saying, among other things, that since the ID looked genuine and real, the fact that it wasn’t actually printed by the DMV didn’t negatively impact the defense of reasonable reliance on what seemed to be an ID issued by the government. The Department relied on the 1968 Court of Appeal case, Kirby v. Appeals Board, for the proposition that reliance on ID that is not issued by the government is not a defense. However, the Court in Kirby was reviewing ID that didn’t purport to come from a governmental entity. The Appeals Board in the case presently before the Court of Appeal determined that where an ID gives every appearance that it came from a governmental entity and appears to satisfy the statutory criteria, the defense is established even it turns out the ID actually came from the streets of San Francisco. If the Court reverses the Appeals Board in this instance, it is conceivable that licensees will no longer be able to rely on computer generated false ID for the sole reason that the computer wasn’t acting on behalf of the government when it manufacture that identification. It will not matter that the ID in question actually looks more like genuine ID than ID actually issued by the DMV but to someone else. Under that circumstance, the computer ID could look more real and realistic than the found ID since the computer ID was tailor-made for the minor presenting the ID to the clerk, bartender, or waitress. In other words, the licensee could rely on real ID that belonged to someone other than the presenting minor but couldn’t rely on ID that was accurate in every way except the date of birth and even had the minor’s own name, physical description, address and photograph incorporated into that identification.

A word to the wise: those computer ID’s don’t pass inspection through scanning devises. The magnetic strip on the back doesn’t have the sophisticated technology to fool a scanning system. That’s coming. At that point, if the Court rules the way the Department wants, licensees will be fully disarmed and defenseless against minors who buy their fake ID’s.

What does this Court review mean to you the licensee? It means that in a system fully weighted in the favor of the ABC, the ABC can still lose cases. Quite clearly the state statutes and the ABC’s rules favor the Department. Many of the laws that enable the Department to go after licensees are strict liability. That means that if the licensee did the act, it doesn’t matter what the licensee was thinking or intended. Accusation sustained. The hearing process favors the Department, and the Department’s burden of proof is not steep. The hearing officers are Administrative Law Judges who are ABC employees, and they only submit a proposed decision to the Department which can reject or accept. The Appeals Board cannot substitute its judgment for the Department in an appeal.

The best assumption as to the inside decision-making process in the Department is that all Appeals Board decisions in favor of licensees are reviewed for viability of a Department petition to the Court of Appeal. Obviously most Appeals Board decisions adverse to the Department do not generate petitions to the Court of Appeal. Most petitions filed with the Court of Appeal are denied without review. Both licensee and Department have the right to file petitions but nnless granted, there is never a real judge in an ABC case.

The ABC still loses cases before the Board. Usually the appellate court stays out. Even with no real judges ever involved, most licensees choose to stand and defend since even a seemingly low grade offense can have such dire consequences. More accurately, most licensees have no choice but to stand and defend against Department accusations. For example, a first offense of a sale to a minor looks like it can be resolved with payment of a fine. But the ABC or the local police will always be back; a second offense if sustained and affirmed on appeal would lead to a suspension; a third such offense will trigger the Department’s revocation machine. It’s not easy, and it takes a lot of experience and expertise because the Department hates to lose. But when in the right hands, defeating the Department is always within reach. Real judge or no real judge.

Solomon, Saltsman & Jamieson are attorneys practicing in the areas of ABC law, ABC Appeals Board cases, and all related Land Use Matters such as City and County Conditional Use Permits, Variances, Police and Fire permits, Entertainment law, and Gambling Law; as well as Business and Personal Injury litigation. Solomon, Saltsman & Jamieson can be reached at 800 405 4222.”

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HELP! What Can Be Done to Make Applying For a License Fair?

in Alcoholic Beverage Licensing

By Ralph B. Saltsman with Stephen Warren Solomon and Stephen A. Jamieson

Applying for a new or original ABC license is so daunting that many legitimate, potentially successful businesses don’t even try. Why bother? Some cities’ zoning regulations and processes are so tough that a year or two can be taken just wrangling through the city system. And then there’s the Public Convenience or Necessity requirement. That’s the legislature’s gift to municipalities that grants virtual veto power to cities in many ABC applications. And we haven’t even reached the ABC application stage.

Picture this: one of the nation’s finest chefs wants to come to the California food scene. He and his corporate financial partners are excited at the prospect of establishing a fine dining experience in the heart of Southern California’s movie industry backyard. Or perhaps the Northern California bay area holy ground of wine and food. After obtaining the backing of city government and civic leaders, the restaurateur still must go through the city process for a year or so.

The process through the municipal zoning system can be even more difficult for the convenience store, supermarket, or grocery, large or small. But in this scenario, the restaurateur is spending money at a frightening clip. Assistant chefs are hired as is a management staff, and a wait crew. Promotions, menus, equipment, furnishings and the long term lease are draining resources. When does this place open? Wait. Who applied for an ABC license? How long does it take? Is it as simple as, say, getting a license to sell alcohol in a restaurant in Louisiana? Let’s hope the ABC application was filed contemporaneously with the city zoning applications. But that’s not our scenario. In our example, the application was filed a month ago. The 30 day posting is just coming down. Now, either there are protests or there aren’t. If there are not protests filed, the ABC can conclude the investigator’s report required by Business and Professions Code Section 23958 and issue the license. If there are protests….

Once a protest is filed, the Department is presently required to conduct a hearing before the license can be issued pursuant to section 24015. Even if the Department truly wants to issue the license, there must be a Hearing on Protest concluded first. After the hearing, the Administrative Law Judge issues a Proposed Decision, and the Department will certify the decision if it is acceptable to the Department. That certification usually follows around 60 days after the hearing is concluded. What if the protestant loses? Can that protestant appeal the decision under Business and Professions Code Section 23081? Of course. The appeal typically takes another eight to twelve months or even longer. In the meantime, no license? Yes and no.

In 1994 (effective January 1, 1995) the legislature created the Interim Retail Permit in Section 24044.5. The IRP is issued by the Department in 120 day periods within the Department’s discretion if an application is protested and if the Department determines through its investigation that the license should be issued. That IRP can be the difference between success and failure since it allows the applicant an opportunity to open. There has been a hitch, perhaps until early this year. The Department has taken the position that in order to determine if there really are protests in order to make an applicant eligible for the IRP, the protests had to be verified. That process is in itself lengthy and time consuming.

If there are protests received by the Department, the ABC ships the protests up to Hearing and Legal up in Sacramento where an overworked clerical desk sends notices to those protestants requesting verifications to those protests. The verification is a statement that the allegations made in the protest are true or are true based on information and belief. It doesn’t matter if the allegations really are true; the protest still has to be verified. The protestant is given 10 days to respond by signing and returning the verification. Waiting to see if protest verifications will be returned can be and has been a significant log jam. However, an innovative applicant working with the innovative folks at the LA/Metro District Office in Southern California with permission from Southern Division Headquarters early this year asked the question: Why wait for the verifications? The IRP statute doesn’t say “Verified Protest;” it says “…has been protested….”

The Department convened a meeting in Sacramento early April to discuss the application nightmare. Senior ABC management was present, including newly appointed Director Jerry Jolly as were a number of industry leaders and consultants. This group discussed the concept of taking LA/Metro’s innovative approach to IRP issuance, that is, not waiting for verifications to be returned before issuing an IPR. We concluded that this system should be employed statewide. There’s more.

Ann Hall, Government Affairs, 7-11, is leading a legislative effort to further assist applicants. AB 2296, (Leno and Aghazarian) if passed during this legislative session, will allow the Department greater leeway in dismissing protests. Part of this proposed legislation may require that in order for a protest to go to hearing, the protestant must submit a written request. New Section 24015 would now read, in relevant part:

(b) Any person who has filed a timely verified protest that has been accepted pursuant to this article may request that the department conduct a hearing on the issue or issues raised in the protest. The request shall be in writing and shall be filed with the department within 15 calendar days of the date the department notifies the protesting party of its determination as required under subdivision (a).

The proposed legislation also provides:

(d) If a request for a hearing is filed with the department pursuant to subdivision (b), the department shall schedule a hearing on the protest. The issues to be determined at the hearing shall be limited to those issues raised in the protest or protests of the person or persons requesting the hearing.

(e) Notwithstanding that a hearing is held pursuant to subdivision (d), the protest or protests of any person or persons who did not request a hearing as authorized in this section shall be deemed withdrawn.

(f) If no request for a hearing is filed with the department pursuant to this section, any protest or protests shall be deemed withdrawn and the department may issue the license without any further proceeding.

One hopes that both the legislature and the Department would expend best efforts to assist beleaguered applicants. The process should not be so time consuming and so unwieldy that it discourages hopeful businesspersons who desire to license premises to the benefit of the community. Certainly, some licenses just shouldn’t be issued. The Department is required to conduct an investigation and exercise its discretion to issue or not issue. There is a hearing process wherein an Administrative Law Judge hears evidence in support of and against licensure and then issues a proposed decision discussing all salient information and recommending issuance or denial. However, for the process to be fair, it cannot be so brutal as to discourage potential businesses from even beginning the application process.

Obviously there are safeguards for the legitimate protestant. For example, Rule 61.4 requires the Department to deny an application for premises within 100 feet of a residence unless the applicant can affirmatively establish that the operation of the business would not interfere with the quiet enjoyment of the property by the residents. Section 23958.4 requires a determination of public convenience or necessity by either the city (or county) or the ABC depending upon the type of license in question if there is an undue concentration of licenses in the census tract or if the proposed license is sited in a high crime reporting district.

There will always be friction between business and residence. There should be a legal forum for those conflicts to be aired. Today there are several opportunities for the issues to be discussed. Zoning regulations of municipalities and counties provide such a forum. The ABC Act provides for such a forum. Creating a repetition well known by the industry. An applicant usually gets to meet his or her or its protestants at several levels. But fair is fair. There must be a better balance between the legitimate interests of business and residential community. A protestant should be not be empowered to hold our world renowned chef hostage as he attempts to bring that fine dining experience to California. The same holds true for the company that wants to open that supermarket really needed by the community; or the husband and wife who want to bring their small grocery to a neighborhood that so wants that corner building occupied by exactly that type of “mom and pop” enterprise; or the family whose life is dedicated to their cafe serving ethnic foods from their tradition and history. Legal assistance is nearly always needed, but let’s hope the Department’s new direction can give them a fighting chance to succeed.

Solomon, Saltsman & Jamieson are attorneys practicing in the areas of ABC law, ABC Appeals Board cases, and all related Land Use Matters such as City and County Conditional Use Permits, Variances, Police and Fire permits, Entertainment law, and Gambling Law; as well as Business and Personal Injury litigation. Solomon, Saltsman & Jamieson can be reached at 800 405 4222.”

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Articles posted on our website, were to the best of our knowledge correct at the time they were written, but laws change continuously so no one should rely on what is written in any article as the current state of the law. The reader should always consult a practicing lawyer for an evaluation of how the current law affects any particular factual situation at the time when it occurs. The badges for AVVO®, Million Dollars Advocates Forum®, Martindale Hubbel AV Preeminent®, SuperLawyers®, and BestLawyers®” have been awarded to various specific attorneys at Solomon Saltsman and Jamieson.  See each attorney’s profile for which badges are specifically assigned to him or her.
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