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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Fantasies on 5th Avenue, LLC. v State of Alaska, Alcoholic Beverage Control Board (8/9/2019) sp-7394
Notice: This opinion is subject to correction before publication in the P ACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
FANTASIES ON 5TH AvENUE, LLC, )
) Supreme Court No. S-16981
Appellant, )
) Superior Court No. 3AN-17-05294 CI
v. )
)
O P I N I O N
STATE OF ALASKA, ALCOHOLIC )
BEvERAGE CONTROL BOARD, )
No. 7394 - August 9, 2019
)
Appellee. )
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, William F. Morse, Judge.
Appearances: Brian Stibitz, Reeves Amodio LLC,
Anchorage, for Appellant. Harriet D. Milks, Assistant
Attorney General, and Jahna Lindemuth, Attorney General,
Juneau, for Appellee.
Before: Bolger, Chief Justice, Winfree, Stowers, Maassen,
and Carney, Justices.
CARNEY, Justice.
I. INTRODUCTION
After an Anchorage strip club applied to have its liquor license renewed the
Alcohol and Beverage Control Board received multiple objections to the renewal.
Former employees, the Department of Labor, and the Municipality of Anchorage each
alleged wage law violations, untrustworthy management, and unsafe policies. After
three hearings before the Board and one before an administrative law judge, the Board
----------------------- Page 2-----------------------
denied renewal because it was not in the public interest. The club appealed to the
superior court, which affirmed the Board's decision. The club now appeals to us,
arguing it was unreasonable to find that renewal was not in the public interest and that
the club was denied due process in the administrative proceeding. We affirm the
superior court's decision to uphold the Board's determination.
II. FACTS AND PROCEEDINGS
A. Facts
1. The Club's Management
Fantasies on 5th Avenue, LLC is a "strip club business" operating under
various names since 1989. For most of the time between 1989 and 2013 Kathy Hartman
owned the club. In July 2013 Hartman transferred 100% ownership of the club to her
son Travis Gravelle. This transfer occurred approximately one year after a federal
judgment was entered against Hartman in a wage and hour lawsuit over the club's claim
that its dancers were "independent contractors." Gravelle remains the sole owner of
Fantasies.
Gravelle testified that he received no income from his ownership, knew
nothing about the business's operation, had no control over its finances or any of its bank
accounts until after the start of the administrative proceedings regarding the license
renewal, and was only physically present in the club a few times in the past several years.
A former employee testified that Gravelle was not allowed to drink at the club or even
be on the premises.
DespiteGravelle'sownership,evidenceshowed that Fantasies has been run
by Hartman's boyfriend, Eugene Greaves. Greaves referred to himself as the general
manager of Fantasies, but testified that he received no income from the position. As
manager, Greaves classified the DJs, janitors, security, and other workers as contractors
rather than employees, denying them employee benefits. He also required dancers to
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sign agreements to be tenants of the club and pay hourly rent to use the facilities for
dancing.
Fantasies paid no wages to its dancers; their income came solely from tips.
Moreover, they were required to pay rent to Fantasies at the end of each shift from the
tips they had received. If dancers did not make enough to pay rent, they were required
to pay the remainder from the next shift's tips in addition to paying that next shift's rent.
Objections to the club's license renewal included allegations about unsafe
and illegal practices at the club including that Fantasies did not allow workers to make
911 emergency calls from the club. The Board noted two such incidents: no calls were
made when a dancer fell on her head from six feet above the floor or when an intoxicated
customer passed out and suffered seizures. Another complaint noted that Fantasies'
contract with its manager provided a "bonus" when the club made more than $2,000 in
one night, apparently violating the licensing statute which states that "[a] person other
than a licensee may not have a direct or indirect financial interest in the business for
1
which a license is issued."
2. The Current Liquor License
From March 2014 through the denial of its liquor license in July 2016,
Fantasies held liquor license number 1078. Gravelle was Fantasies' sole owner when it
obtained the license. Despite Gravelle's ownership, Greaves worked with the Board to
obtain the license transfer. The Board staff member who interacted with Greaves
testified that she had not even heard Gravelle's voice until the Board's February 2016
meeting. Greaves had obtained a power of attorney from Gravelle and signed all the
necessary paperwork on Gravelle's behalf. The Board staff member testified that this
1 AS 04.11.450(a).
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"raised red flags" and that she had never seen that done in her five years of processing
applications.
In early November 2015 the Department of Labor and Workforce
Development's Wage and Hour Administration (DOL) notified Fantasies of its intent to
conduct a wage audit of the club for the period between December 2013 and November
2015. The wage investigation was ongoing when Fantasies applied to renew its liquor
license.
B. Proceedings
In November 2015Fantasies applied torenewitsliquor license. Boardstaff
noticed an irregularity in the application and contacted Gravelle for clarification.
Although Gravelle had signed the form, affirming that he had "examined this
application . . . and it [was] true, correct, and complete," he responded that a friend had
filled out the form on his behalf while he was out of town. Board staff considered his
answer to be "a huge red flag" because the applicable statutes and regulations require the
license owner to be personally responsible for its use, and because there had been
previous cases with other licensees violating AS 04.11.450, prohibiting non-licensees
from having a financial interest in the business.
After more thoroughly examining Fantasies' application, Board staff grew
"very concerned about prohibited financial interest" and decided it was necessary for the
application to go before the Board. The Board scheduled a hearing in February 2016 to
consider the license renewal application. Prior to the hearing the Board received
objections from DOL, the Municipality of Anchorage, and four former Fantasies
workers.
DOLobjected based on its investigation, whichhadrevealedthat Fantasies'
dancers should have been classified as employees and that "thirty or more workers did
not receive minimumwage, or any wage, to which they were entitled." The Municipality
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objected to renewing the license until the wage and hour violations were resolved. And
four former workers filed objections alleging that (1) non-licensees had financial
interests, (2) wage and hour laws continued to be broken, and (3) renewal was not in the
best interest of the public. At the hearing the DOL investigator, the Municipality's
attorney, and Fantasies' attorney testified. Because DOL's investigation had not been
completed, the Board deferred its decision until its next scheduled meeting in April.
About a week after the February Board hearing, Fantasies' lawyer sent
DOL a letter asking it to stop its investigation "or Fantasies [would] take appropriate
legal action against [DOL] and [the assigned investigator] personally." As a result, the
DOL staff member temporarily halted the investigation until directed to continue despite
Fantasies' threatened action.
Before the April meeting DOL asked the Board to "withhold any transfer
of the liquor license for [Gravelle] . . . pending resolution of unpaid wages." DOL's
continuing investigation was still "in the process of auditing records to determine wages
due to workers" and "estimate[d] a minimum amount of unpaid wages at $500,000 plus
liquidated damages, for failure to pay minimum wage." The Board nevertheless held a
continued hearing in April. A former Fantasies dancer testified on behalf of herself and
three other former dancers, each of whom had filed written objections with the Board.
The Board once again deferred its decision until its next scheduled meeting at the request
of the Municipality, which had not yet held a public hearing on the protest.
In May DOL concluded its investigation into Fantasies' wage and hour
violations. It found that: workers' services were misclassified as contract labor, no
records of hours were kept, dancers were not paid at all and instead forced to pay rent as
tenants, managers failed to maintain daily and weekly records of hours worked, and the
club either did not maintain or destroyed certain records related to the hiring and firing
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of workers. DOL acknowledged that it had not yet calculated the amount of money
Fantasies owed as a result of the violations.
The Board addressed Fantasies' license renewal for a third and final time
at its July meeting. Based on the objections and testimony from all three hearings, the
2 The
Board determined renewal of Fantasies' license would not be in the public interest.
Board informed Fantasies of its right to a hearing as provided by AS 44.62.330-630.
Fantasies filed a Notice of Defense and Request for a Hearing in August.3
It disputed the Board's findings that renewal was not in the public's best interests, that
non-licensees had direct or indirect financial interests in the license, and that it had
committed wage and hour violations. The administrative hearing took place over three
days in 2016 before an administrative law judge (ALJ). A former dancer, the DOL
investigator, Greaves, Hartman, Gravelle, and two Board staff members testified.
Fantasies' lawyer Brian Stibitz cross-examined the former dancer about
whether she had been given the choice to work as an employee or an independent
contractor. After she repeatedly denied having a choice, he directed her to read a section
of the "Entertainer Lease" she had signed that stated she would be liable for liquidated
damages and attorney's fees if she asserted in any court action that her relationship with
Fantasies was anything other than that of a landlord and tenant. After she read the
section he warned her that it applied to the questions he was about to ask. The Board's
lawyer objected to its relevance, leading to an extended colloquy between the court and
counsel. The ALJ addressed the Board's concern that Stibitz was badgering the witness
by noting that it, too, was "worr[ied] about the . . . intimidating effect of . . . waving [the
2 See AS 04.11.330(a)(1) (requiring denial of renewal application if [B]oard
finds not in best interests of public).
3 See AS44.62.390(a) (detailing timelimitand substanceofwhat respondent
may file in notice of defense, including request for hearing).
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document] in [the witness's] face." The ALJ ordered Stibitz to move on to a different
topic.
Following three days of hearings, the ALJ affirmed the Board's decision
denying the renewal. The ALJ issued her decision in November 2016, and the Board
adopted it at its February 2017 meeting. The determination was based on:
[DOL]'s finding of ongoing wage-hour violations; public
safety concerns related to suppression of 911 calls;
Mr. Gravelle's complete lack of knowledge of or
involvement in the business; Mr. Greaves's role in "running"
the business and the license; an alleged undisclosed financial
interest by Mr. Greaves and Ms. Hartman; and alleged
undisclosed financial interests through management
agreements.
Fantasies appealed to the superior court. 4 The superior court upheld the
Board's decision in January 2018, finding it had a rational basis for concluding that
renewing Fantasies' license was not in the public interest.
Fantasies appeals, arguing that the superior court erred by affirming the
Board's decision because the Board violated its right to due process and acted
unreasonably by finding renewal would not be in the public interest. Because there is
substantial evidence to support the Board's denial of the renewal application and there
was no deprivation of Fantasies' right to due process, we affirm the superior court's
decision upholding the Board's determination.
III. STANDARD OF REvIEW
"When the superior court acts as an intermediate appellate court, we
independently review the merits of the underlying administrative decision. The specific
4 See AS 44.62.560(a) ("[j]udicial review by the superior court of a final
administrative order may be had by filing a notice of appeal"); Alaska R. App. P.
602(a)(2) (same).
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----------------------- Page 8-----------------------
form our independent review takes is de novo review: We adopt the rule of law that is
most persuasive in light of precedent, reason, and policy." 5
Whenreviewingadministrativedecisionsweusethe"substantial evidence"
test for questions of fact and the "reasonable basis" test for questions of law involving
agency expertise.6 Review of the Board's factual findings is limited to whether there was
substantial evidence in the record to support those findings.7 We do not "weigh the
quality of the evidence relied upon by the [Board]; at issue for the purposes of our review
is simply whether substantial evidence exists."8 "Substantial evidence is 'such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion.' "9
The reasonable basis test applies to the Board's exercise of discretion in
denying Fantasies' license renewal after determining it was not in the public's best
10 When reviewing whether an administrative decision
interest under AS 04.11.330(a).
was reasonable we ask "whether there was a prejudicial abuse of discretion," which we
will find "if the agency has not proceeded in the manner required by law, the order or
decision is not supported by the findings, or the findings are not supported by the
5 Heller v. State, Dep't of Revenue, 314 P.3d 69, 72-73 (Alaska 2013)
(footnotes omitted).
6 Rollins v. State, Dep't of Pub. Safety, 312 P.3d 1091, 1094 (Alaska 2013).
7 Halter v.State, Dep't of Commerce&Econ. Dev., Med. Bd., 990 P.2d 1035,
1037 (Alaska 1999).
8 S. Anchorage Concerned Coal., Inc. v. Municipality of Anchorage Bd. of
Adjustment , 172 P.3d 774, 780 (Alaska 2007).
9 Id. (quoting Leigh v. Seekins Ford, 136 P.3d 214, 216 (Alaska 2006)).
10 See Rollins v. State, Dep't of Pub. Safety, 312 P.3d at 1094 ("[T]he
'reasonable basis' test applies to questions of law involving agency expertise.").
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----------------------- Page 9-----------------------
evidence."11
Weapply our independent judgmenttoquestionsofconstitutionallaw, such
as due process. 12
Iv. DISCUSSION
Fantasies claims the Board unreasonably denied its liquor license renewal
application as not in the public interest under AS 04.11.330(a)(1). Fantasies also claims
it did not receive due process because it had no notice of the basis for denial, no
opportunity to be heard, that AS 04.11.510 (the procedure for license renewal
applications) violatesdueprocess onits face, and that the statutes and regulations applied
are unconstitutionally vague.
A. The Board Did Not Abuse Its Discretion By Denying Fantasies'
License Renewal Application.
Fantasies argues that the Board abused its discretion by relying on
"[a]llegations of [l]abor [v]iolations," "Gravelle's [a]lleged [l]ack of [i]nvolvement [i]n
[t]he [b]usiness," an "[e]xpired [m]anagement [a]greement," and "a policy of
discouraging 911 calls," to determine that renewing Fantasies' license was not in the
public interest. When reviewing administrative fact findings in quasi-judicial
proceedings, we have "consistently adhered to the substantial evidence on the whole
record test under AS 44.62.570(c)(2)."13 The Board did not abuse its discretion because
11 See AS 44.62.570(b)(3) (specifying review by superior court, but we
independently review merits of underlying decision).
12 Rollins v. State, Dep't of Revenue, Alcoholic Beverage Control Bd., 991
P.2d 202, 206 (Alaska 1999).
13 State, Alcoholic Beverage Control Bd. v. Decker, 700 P.2d 483, 486
(Alaska 1985), overruled on other grounds by Rollins, 312 P.3d at 1095.
AS 44.62.570(c)(2) states that abuse of discretion is established if the court determines
(continued...)
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----------------------- Page 10-----------------------
there is substantial evidence supporting each of its findings.
Fantasies also argues that regardless of whether there was substantial
supporting evidence, these findings are not listed among the factors the Board may
consider when making a public interest finding under 3 Alaska Administrative Code
(AAC) 304.180, and that the Board therefore erred by considering them. But the
regulation authorizes the Board to make its decision based on any of the enumerated
factors as well as any other factor deemed relevant to the public interest; it does not limit
14 The Board did not abuse its discretion by denying
the Board to the listed factors.
Fantasies' license renewal as not in the public interest.
1. Substantial evidence supports the Board's findings.
The Board decided that renewing Fantasies' license was not in the public
interest based on the following findings: (1) DOL determined that Fantasies
misclassified dancers and other employees to evade wage and hour laws; (2) managers
discouraged dancers from calling 911 during apparent medical emergencies; (3)
Gravelle, the LLC's owner, had little, if any, meaningful knowledge about how the club
was being operated; (4) Gravelle had no understanding of the statutory requirements for
liquor license operation15 or how the license was being operated, and no apparent interest
in how it was being operated; and (5) the club's management agreement gave the
manager an illegal direct financial interest in the license. There is substantial evidence
supporting each of these findings.
13 (...continued)
that the findings are not supported by "substantial evidence in light of the whole record."
14 3 AAC 304.180(a)(4).
15 See, e.g. AS 04.11.010-.700 (licensing), 04.21.010-.080 (general
provisions).
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a. DOL determined wage and hour violations.
The record contains testimony and numerous letters demonstrating
Fantasies' failure to comply with wage and hour laws. The documented violations
included treating dancers as tenants required to pay rent to the club instead of receiving
wages, not keeping adequate records of employee pay, having an operating agreement
that seemed to have been "done after the fact" and back-dated, hindering DOL's
investigation, forcing dancers to "work to pay off a debt for not showing up at work,"
and having employees work for free for the for-profit business. The DOL investigator
testified that it is a "sign[] of labor trafficking, when somebody has to work to pay off
a debt and not earn any money." In May 2016 DOL found Fantasies in violation of wage
and hour laws; its finding provides substantial evidence in support of the Board's
finding.
b. Fantasies discouraged dancers from calling 911 during
medical emergencies.
A former dancer testified that Fantasies' dancers were not allowed to call
911 for apparent medical emergencies at the club. Greaves testified that the dancer's
claim was an "asinine statement," but offered no evidence to refute it. While
acknowledging that the evidence was somewhat limited, the ALJ cited the dancer's
credible description of "two instances of being intimidated out of calling 911 when such
a call would have been appropriate" and noted that Fantasies had not produced any
witness with knowledge of the club's day-to-day operations to dispute her testimony.
The Board's finding is supported by substantial evidence.
c. The owner lacked knowledge of club operations.
Gravelle is Fantasies' sole owner but plays no role in running the club. He
testified that he had never run an LLC before, did not manage the business, did not know
how much money Fantasies made, had no access to the business bank accounts prior to
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----------------------- Page 12-----------------------
the denial of the license renewal, and did not know if Fantasies had any kind of
management agreements with anyone. A former dancer testified that Gravelle had not
even been allowed into the club during open hours more than a couple times over the
past few years. There is substantial evidence to support the finding that Gravelle lacks
knowledge of club operations legally required of a sole owner of an LLC operating a
liquor license.
d. The owner lacked knowledge of legal requirements .
As a liquor license owner, Gravelle is required to understand the laws
16 But Gravelle was not aware of the club's day-to-day operations and
controlling its use.
consequently had no means of knowing whether the club was in compliance with these
laws. Gravelle testified to knowing nothing about the business's finances or tax returns,
even though Fantasies' income and losses were attributed to Gravelle for tax purposes.
Much of Fantasies' paperwork was not even signed by Gravelle, but by Greaves through
the power of attorney that Gravelle had given him. Only Greaves had been involved in
applying for Board renewal, further illustrating Gravelle's divorce from operating the
license he owned. The Board staff member testified she had never met nor even heard
Gravelle's voice until the first Board meeting in February 2016. There was no evidence
that he had attempted to learn the laws or anything about the operation of the license.
Thefinding that Gravellehad no understanding of the requirements for operating aliquor
license is supported by substantial evidence.
e. A non-owner had a direct financial interest in the license.
The ALJ heard evidence that Fantasies had a number of managers over the
preceding ten years. Some, but not all, of them had written management agreements
16 AS 04.21.030 ("The licensee has a duty to exercise that degree of care that
a reasonable person would observe to ensure that a business under the person's control
is lawfully conducted.").
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with Fantasies. The Board found that the lack of paperwork relating to these managers
left the Board unable to determine who was responsible for potential violations in
operating Fantasies' license.
One of the two management agreements presented to the Board contained
an incentive clause reading:
As an added Incentive for the Manager, where the daily gross
revenue exceeds two thousand dollars, the Manager shall
receive seventy per cent of that amount above two thousand
dollars, and the Owner shall receive thirty per cent of that
amount over two thousand dollars. This shall apply for each
and every day over said amount.
Alaska Statute 04.11.450(a) mandates that "[a] person other than a licensee may not have
a direct or indirect financial interest in the business for which a license is issued."
Fantasies' agreement to pay its manager 70% of revenue exceeding $2,000 clearly gave
the manager a "direct . . . financial interest in the business for which [the] license is
issued." This management agreement alone provides substantial evidence of a non-
licensee having a direct financial interest in the license.
2. The evidence supports finding renewal is not in the public
interest.
"An application requesting renewal of a license shall be denied if . . . the
[B]oard finds, after review of all relevant information, that renewal of the license would
17 We have held that other sections of the
not be in the best interests of the public."
alcohol licensing statutes "authorize[] broad discretion in denial [of liquor licenses] for
any reason found incompatible with the public interest."18 And the regulation
17 AS 04.11.330(a)(1).
18
Decker, 700 P.2d at 487 (second alteration in original), overruled on other
grounds by Rollins, 312 P.3d at 1095.
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----------------------- Page 14-----------------------
implementing those statutes authorizes the Board, when deciding whether to renew a
liquor license, to exercise its discretion to consider the applicant's past criminal acts
involving "moral turpitude," violations of statutes or regulations governing alcoholic
beverages, violations of another state's laws governing alcoholic beverages, and felonies
19 The regulation also allows the Board to consider
committed in the preceding ten years.
whether the applicant is "untrustworthy, unfit to conduct a licensed business, or a
potential source of harm to the public;" whether the applicant has permitted "sexual
contact" on the licensed premises; and "all other factors the [B]oard in its discretion
determines relevant tothepublicinterest."20 Fantasiesargues that becausethisregulation
does not explicitly list the exact findings the Board made, its findings are not valid bases
to deny renewal.
But Fantasies misunderstands the regulation. The factors the Board may
consider "include" those listed in the statute, but the list is not exhaustive.21 And
3 AAC 304.180(a)(4) explicitly gives the Board even greater discretion by allowing it
to consider "all other factors the [B]oard in its discretion determines relevant to the
public interest." The findings on which the Board based its denial of Fantasies' renewal
thus relate to factors it was authorized to consider in determining whether the renewal
is in the public's best interest.
B. Fantasies Received Due Process.
Fantasies asserts four violations of due process. It challenges the process
19 3 AAC 304.180(a)(1).
20 3 AAC 304.180(a).
21 3 AAC 304.180(a) ("The factors the board will, in its discretion, consider
in determining whether it is in the public interest to . . . refuse to renew or transfer a
license include . . . .).
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----------------------- Page 15-----------------------
provided in the statutory renewal procedure, arguing that the club received no notice of
the basis or opportunity to be heard, and that the specific license renewal process set out
22 In addition Fantasies argues that
in AS 04.11.510 does not comply with due process.
AS 04.11.330(a)(1) and 3 AAC 304.180 - allowing denial of an application when a
license would not be in the public's best interests - are unconstitutionally vague. The
due process clauses of both the United States and Alaska Constitutions require "that
adequate notice and a meaningful opportunity to be heard . . . be afforded to liquor
licensees before their licenses can be suspended."23 This due process requirement
similarly applies when a license's renewal is denied. Fantasies received adequate notice
and an opportunity to be heard in the three Board hearings, as well as through written
notices of hearings, decisions, and opportunities to appeal, and in the subsequent hearing
before the ALJ.
1. Fantasies received an opportunity to be heard.
Due process "merely require[s] the Board to hold a hearing before it [can]
suspend a liquor license. . . . [T]he hearing need not be elaborate, and the Board need not
make written findings or even file a written opinion explaining its action so long as it
22 While AS 04.11.510 lays out the general procedure for actions on license
applications, suspensions, and revocations, Fantasies received more opportunity to be
heard than the statute requires, having been provided three Board hearings, an
administrative appeal, and a superior court appeal. Because we find that Fantasies
received due process and thus was not injured by the purportedly deficient statute, we
decline to address this purely legal issue. See State v. Am. Civil Liberties Union of
Alaska , 204 P.3d364,368-69 (Alaska2009) ("[W]hileAlaska'sstanding rulesareliberal
this court should not issue advisory opinions or resolve abstract questions of law."
(alteration in original) (quoting Bowers Office Prods., Inc. v. Univ. of Alaska , 755 P.2d
1095, 1097-98 (Alaska 1988))).
23 FrontierSaloon,Inc. v. AlcoholicBeverage Control Bd., 524 P.2d 657, 661
(Alaska 1974); see also Rollins v. State, Dep't of Revenue, Alcoholic Beverage Control
Bd., 991 P.2d 202, 211 (Alaska 1999).
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----------------------- Page 16-----------------------
24
reached its decision after hearing the appellant's presentation." Fantasies was entitled
to "an opportunity to be heard in a meaningful, impartial administrative hearing in full
25 Fantasies received three such
compliance with the Administrative Procedures Act."
opportunities before the Board and an additional opportunity before an ALJ.
Fantasies' attorney attended all three Board hearings and the ALJ hearing
on the club's behalf, vigorously questioned witnesses, testified himself, and answered
Board questions during two of the meetings. Fantasies claims it is entitled to more
process despite the licensing statute's lack of requirement of any hearing: the Board
"may review an application for the . . . renewal . . . of a license without affording the
26
applicant notice or hearing." The fact that Fantasies participated in multiple hearings
more than satisfies due process.
2. Fantasies received notice of the basis for denial of the license
renewal.
Fantasies argues that it had no notice of the reasons why its license renewal
was denied either at the Board meetings or at the administrative hearing. Fantasies also
argues that it was denied notice before the administrative hearing that the 2014
management agreement was a basis for non-renewal. Alaska Statute 04.11.510(b)
allows the Board to review a renewal application "without affording the applicant notice
or hearing." We have nonetheless held that due process requires both notice and a
hearing before the Board can take an individual's property interest in a liquor license.27
24 Rollins v. State, Dep't of Revenue , 991 P.2d at 211 (citing Frontier Saloon ,
524 P.2d at 659).
25 Id.
26 AS 04.11.510(b) (emphases added).
27 Stevens v. State, Alcoholic Beverage Control Bd., 257 P.3d 1154, 1160
(continued...)
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----------------------- Page 17-----------------------
But "[t]hese procedures 'need not be elaborate,' . . . and due process 'merely require[s]
28
the [ABC] Board to hold a hearing before it [can] suspend a liquor license." Fantasies
received three separate hearings before the Board during which it was presented with the
objections to its renewal and had an opportunity to refute them. The same written
objections to the renewal were before the Board at each hearing. Fantasies received
adequate notice through the Board hearings and written objections.
Fantasies claims that it was not until the administrative hearing that the
Board raised the issue of the management agreement violating the license. The Board's
written notice of denial following its vote to deny renewal must state "the reason for the
29 The Board's notification letter to Fantasies
denial in clear and concise language."
stated that, "per AS 04.11.330(a)(1) . . . the renewal of the license would not be in the
best interest of the public." The letter also refers to the three Board hearings, during
which former workers and DOL objected due to non-licensees having financial interests
in the license.
Before a hearing with an ALJ, the Administrative Procedure Act requires
that the hearing file include a statement of issues specifying the statute with which
compliance must be shown and the "particular matters that have come to the attention of
27 (...continued)
(Alaska 2011) (requiring merely that Board hold hearing before suspending license); see
also Frontier Saloon, Inc., 524 P.2d at 661 (holding that state and federal due process
clauses require hearing before license can be suspended by Board).
28 Stevens, 257 P.3d at 1160 (third, fourth, and fifth alterations in original)
(quoting Rollins v. State, Dep't of Revenue, 991 P.2d at 211).
29 AS 04.11.510(b)(1). Written notice was provided to Fantasies on July 21,
2016, the day after its application was denied at the Board meeting.
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30
the initiating party and that would authorize a denial of the agency action sought." But
there is no similar requirement for the Board, only for the party initiating the ALJ
hearing, and the Act does not include such requirements for an agency's notice of denial.
We have considered cases where the Board provided more detailed findings of fact
explaining why it denied a license, specifying the precise reasons it found granting a
31 But we have upheld the final decision in
license would not be in the public interest.
other contexts so long as "the subject matter remains the same[,] the public has been
reasonably notified," and it is "a logical outgrowth of that notice."32
Consideration of the management agreement is a logical outgrowth of
DOL's initial concerns listed in its January 2016 letter to the Board. The agreement
violated AS04.11.450, prohibiting non-licensees fromhaving direct or indirect financial
interests in the licensed business. DOL's initial objection letter asserted that it "ha[d]
ascertained credible information that . . . a person(s) other than the licensee has direct and
indirect financial interest in the business." The management agreement is evidence that
directly supports DOL's objection.
Furthermore, Fantasies itself listed the issue of a prohibited financial
interest in its request for the administrative hearing. Having itself noted that this issue
30 AS 44.62.370(a).
31 See State, Alcoholic Beverage Control Bd. v. Decker, 700 P.2d 483, 487
(Alaska 1985) (affirming Board's denial of liquor license as not in public interest
because it would contribute to teenage drinking at nearby schools and was not necessary
to serve area's reasonable alcohol requirements), overruled on other grounds by Rollins
v. State, Dep't of Pub. Safety, 312 P.3d 1091, 1095 (Alaska 2013).
32 Trs. for Alaska v. State, Dep't of Nat. Res., 795 P.2d 805, 808-09 (Alaska
1990) (finding adequate notice because potential for offshore facilities to support oil
development was "logical outgrowth" of notice saying sale could occur without onshore
support from specific site).
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was a basis for its appeal to the ALJ, Fantasies cannot now prevail on a claim that it had
no notice that evidence relating to the issue of a prohibited financial interest would be
raised at the administrative hearing.
3. The licensing laws are not unconstitutionally vague.
Both AS 04.11.330(a)(1) and 3 AAC 304.180(a)(4) authorize the Board to
33
deny a license application if it finds that renewal is not in the public's best interests.
Fantasies argues that both the statute and the regulation are unconstitutionally vague.
"[A] law may be unconstitutionally vague if the scope of exceptions and the scope of
34
We consider two elements in evaluating whether a law is void
defenses are unclear."
for vagueness: "First . . . whether there is a history or a strong likelihood of arbitrary
enforcement and uneven application. Second . . . whether the regulation provides
35
adequate notice of prohibited conduct." Because there is no history of arbitrary
enforcement and Fantasies was given notice, these laws are not vague as applied to
36
Fantasies' denial.
33 "An application requesting renewal of a license shall be denied if . . . the
[B]oard finds . . . that renewal of the license would not be in the best interests of the
public." AS 04.11.330(a)(1). "The factors the [B]oard will, in its discretion, consider
in determining whether it is in the public interest to . . . refuse to renew . . . a license
include . . . all other factors the [B]oard in its discretion determines relevant to the public
interest." 3 AAC 304.180(a)(4).
34 Halliburton Energy Servs. v. State, Dep't of Labor, 2 P.3d 41, 50 (Alaska
2000).
35 Id.
36 See id. ("When evaluating whether [a regulation] is void for vagueness, we
must determine whether the regulation is vague as applied to the particular conduct for
which a citation was issued.").
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a. The Board did not arbitrarily enforce the statute or
regulation against Fantasies.
Fantasiesclaims that theBoardarbitrarilyenforced AS04.11.330(a)(1)and
3 AAC 304.180. But this claim is made without analysis or explanation. Consequently,
37
any claims of arbitrary enforcement by the Board are waived.
The only articulated
claim of arbitrary enforcement is against DOL, claiming that DOL arbitrarily filed an
objection to Fantasies' license with the Board when it had settled with two restaurants
for unpaid wages in an unrelated matter. The question of arbitrary enforcement by DOL
is not properly before us because this is not a review of DOL's actions; DOL investigates
claims of wage violations and routinely shares information with other agencies when
relevant.
b. The licensing laws provide adequate notice of conduct
that is not in the public's best interests.
A law which "either forbids or requires the doing of an act in terms so
vague that [people] of common intelligence must necessarily guess at its meaning and
38
differ as to its application violates the first essential of due process of law." As used
in the statute and regulation, the term "best interests of the public" is not vague. The
statute lists a number of factors that can lead to a determination that renewal would not
be in the public interest, including criminal acts, violations of regulations or other laws,
untrustworthiness, unfitness to conduct a licensed business, being a potential source of
37 See Windel v. Carnahan , 379 P.3d 971, 980 (Alaska 2016) ("[W]here a
point is given only a cursory statement in the argument portion of a brief, the point will
not be considered on appeal.") (quoting Burts v. Burts , 266 P.3d 337, 344 (Alaska
2011)).
38 Halliburton, 2P.3dat51(quoting LazyMountainLandClub v. Matanuska-
Susitna Borough Bd. of Adjustment & Appeals, 904 P.2d 373, 382 (Alaska 1995)).
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39
public harm, and allowing sexual contact on the licensed premises. The regulation
names these factors and allows the Board to consider "all other factors the [B]oard in its
discretion determines relevant to the public interest."40 While this scope is broad, it is
not unconstitutionally vague: the regulation lists the very factors on which the Board
decided to deny Fantasies' renewal application. Factors such as prohibiting 911 calls
during medical emergencies can easily be understood by those with "common
intelligence" as not in the public interest.41
Each of the Board's findings correlates to the licensing laws. The Board's
finding that Fantasies violated wage and hour laws was based upon DOL's investigation
which determined that Fantasies violated AS 04.21.030's requirement that a business be
lawfully conducted. This in turn satisfies 3 AAC 304.180(a)(1)(B), listing "a violation
of AS 04" as one factor to be considered in determining whether license renewal is in the
public's best interest.
The Board's finding that Fantasies discouraged dancers from calling 911
during medical emergencies is not only generally against the public interest, it is also "a
potential source of harm to the public," a factor listed under 3 AAC 304.180(a)(2).
Additionally, the finding that Gravelle lacks knowledge of club operations suggests he
is "unfit to conduct a licensed business," another factor enumerated under 3 AAC
304.180(a)(2). The finding that Gravelle does not know the legal requirements for
operating Fantasies' license similarly indicates that he is "unfit to conduct a licensed
business" as well as "untrustworthy" because he had signed a document claiming
familiarity with Title 4 of the Alaska Statutes and its regulations. Both of these factors
39 3 AAC 304.180(a)(1)-(3).
40 3 AAC 304.180(a)(4).
41 Halliburton, 2 P.3d at 51.
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are listed in 3 AAC 304.180(a)(2). And the finding that a management agreement gives
a manager a direct financial interest in the license also demonstrated that Fantasies
42
violated AS 04.11.450(a). Failure to lawfully conduct business is a factor listed in 3
AAC 304.180(a)(1)(B).
In addition to the specific listed factors on which the Board based its
decision, it had discretion to consider "all other factors . . . relevant to the public interest"
under 3 AAC 304.180(a)(4). Even if the factors on which the Board based its decision
were not specifically listed for its consideration, it is apparent that people "of common
intelligence" would consider most, if not all, of these factors relevant to the public
interest.43
TheBoard'sdenial ofFantasies' licenserenewal as notin thepublicinterest
is not unconstitutionally vague. The Board's findings are included in the list of factors
the Board may consider. A regulation need not explicitly list every permutation of
proscribed behavior "[s]o long as the mandate affords a reasonable warning . . . in light
44
of common understanding and practice[s]."
v. CONCLUSION
We AFFIRM the superior court's decision upholding the Board's
determination denying the renewal of Fantasies' liquor license number 1078 and find no
due process violation.
42 AS 04.11.450(a) ("A person other than a licensee may not have a direct or
indirect financial interest in the business for which a license is issued.").
43 See Halliburton, 2 P.3d at 51.
44 Id. (first alteration in original) (quoting vanco Constr., Inc. v. Donovan,
723 F.2d 410, 412 (5th Cir. 1984)).
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