Melmat, Inc. v. Texas Alcoholic Beverage Commission
Docket: No. 05-10-00911-CV
Court: Court of Appeals of Texas; February 28, 2012; Texas; State Appellate Court
An appeal was made by El Cubo against the trial court's judgment that upheld the Texas Alcoholic Beverage Commission's (TABC) order canceling its alcoholic beverage permits. El Cubo raised six issues, asserting that the trial court erred by affirming the TABC's order, which it claimed lacked substantial evidence and adversely affected its rights. The TABC's enforcement action stemmed from two alleged violations of the Texas Alcoholic Beverage Code: soliciting drinks for an employee on April 8, 2009, and selling alcoholic beverages during prohibited hours on May 31, 2009. An administrative law judge conducted a hearing, ultimately siding with the TABC and recommending permit cancellation based on El Cubo's prior violations. The TABC adopted this recommendation, leading to El Cubo's unsuccessful motion for rehearing and subsequent judicial review in district court, which found the TABC's order was backed by substantial evidence.
El Cubo's first two arguments focused on the claim that the trial court wrongly affirmed the TABC's order due to insufficient evidence. The substantial evidence rule applies to administrative decisions, requiring that the overall evidence must allow reasonable minds to reach the agency's conclusion. The burden lies with the party contesting the decision to prove a lack of substantial evidence, and courts do not reassess the agency's factual determinations. The TABC's allegations included both solicitation of drinks for an employee and the unlawful sale of alcoholic beverages, either of which warranted permit cancellation under the relevant code sections. The discussion indicates the need to evaluate the evidence regarding the latter violation specifically.
At the hearing, TABC presented testimony from Officer Diane Swint, an undercover officer who entered El Cubo at 2:15 a.m. on May 31, 2009. Swint testified that while sales of alcoholic beverages are prohibited after 2:00 a.m., officers typically allow a grace period for customers to finish drinks. Upon entering, Swint observed 20-25 customers and noted it did not appear that the establishment was closing. She witnessed customers drinking from styrofoam cups, suggesting that beer sales were occurring after the legal time. Swint purchased a Corona beer from bartender Norma Rodriguez at about 2:20 a.m. and again from a man named David Contreras at approximately 2:30 a.m., both times receiving beer in styrofoam cups. She observed both Rodriguez and Contreras serving other customers and handling cash while El Cubo’s owner, Un Suk Chu, was present.
TABC agent Claudio Ramirez confirmed that Contreras was the manager based on prior inspections. Following Swint's observations, additional officers arrested Rodriguez and Contreras, with Chu found hiding outside. El Cubo argued that the TABC failed to prove Rodriguez and Contreras were employees or agents, citing the absence of employment records or inquiries into their status as a critical flaw in the case. However, the testimony from Swint and Ramirez provided substantial evidence of their roles at El Cubo, which El Cubo did not contest.
El Cubo also claimed there was no substantial evidence of sales during prohibited hours, arguing that Swint's testimony about purchasing beer between 2:20 and 2:30 a.m. was speculative since she did not confirm the time with a watch or clock. While the Texas Peace Officer’s Guide recommends recording the exact time of sales, El Cubo did not provide legal authority to support the claim that such documentation is necessary to establish a violation.
Swint's testimony confirmed she purchased beer at El Cubo between 2:15 a.m. and 2:30 a.m., establishing a clear after-hours sale of alcohol. The Texas Alcoholic Beverage Commission (TABC) did not need to provide evidence of other sales during this time, as Swint's purchase alone constituted a violation. Swint also observed other customers receiving beer in styrofoam cups, supporting the TABC's conclusion that El Cubo violated section 11.61(b)(23) of the Texas Alcoholic Beverage Code. Consequently, the court found no need to address additional violations asserted by the TABC.
El Cubo claimed that the TABC's order prejudiced its rights, but many of its arguments lacked legal authority and did not warrant review. El Cubo's assertions were framed within section 2001.174(2) of the Texas Government Code, which outlines conditions for reversing administrative decisions based on substantial rights violations. El Cubo contended that its constitutional rights were violated by the TABC's alleged improper standard of review and lack of unbiased assessment during rehearing but failed to specify the constitutional provision involved, later referencing due process. However, the cases cited by El Cubo did not support its due process claim, as they pertained to the original administrative hearings, not rehearing motions. The court concluded that any potential errors related to the rehearing process did not infringe on El Cubo's due process rights, as a rehearing is not a due process requirement in administrative matters. Thus, El Cubo's arguments were ultimately unsubstantiated.
El Cubo claims its constitutional rights were violated due to the TABC imposing a harsher punishment compared to similar cases, presumably invoking the right to equal protection. To support a claim of discriminatory enforcement, a defendant must demonstrate it was singled out for prosecution while similarly situated entities were not, and that such discrimination was based on impermissible factors like race or religion. El Cubo failed to establish that it faced discrimination on any of these grounds, merely asserting it was treated differently from other businesses. Its evidence consisted of two TABC orders from different cases, which were not factually comparable to its own situation. Consequently, El Cubo did not demonstrate that the TABC’s order was discriminatory or violated any constitutional or statutory provisions.
Additionally, El Cubo contends that the TABC exceeded its statutory authority in canceling its permit, arguing that the punishment was greater than allowable under the Texas Administrative Code's schedule of penalties. However, this schedule is not binding in contested cases. El Cubo also asserted that the conduct described in the findings did not constitute a statutory violation, specifically referencing section 11.61 of the Alcoholic Beverage Code, which allows for permit suspension or cancellation for prohibited sales. The findings indicated that employees of El Cubo sold alcohol after the permitted hours, thus supporting the TABC's action. Lastly, El Cubo repeated arguments concerning alleged errors in the TABC's evidence regarding employment status and timing of sales, which have already been addressed and will not be reconsidered.
El Cubo argues that the Texas Alcoholic Beverage Commission (TABC) incorrectly applied section 106.14 of the Alcoholic Beverage Code by concluding it does not pertain to the sale of alcohol during prohibited hours. El Cubo asserts that section 106.14 is relevant only for sales to minors or intoxicated persons. However, TABC's determination specifies that section 106.14 does not apply to after-hours sales, which encompass all sales irrespective of the purchaser's status. Consequently, the enforcement action under section 11.61(23) is unaffected by section 106.14. El Cubo has not demonstrated that it qualifies under the provisions of section 106.14 concerning minors or intoxicated persons, nor has it established itself as a private club, leading to the conclusion that TABC's order was legally sound.
El Cubo further claims that the TABC's order was arbitrary and capricious, arguing that the permit cancellation was excessively punitive given the circumstances, thus constituting an abuse of discretion. While the TABC enjoys broad discretion in sanctioning, such discretion may be deemed abused if it neglects relevant legislative factors or reaches an unreasonable conclusion. The legislature allows TABC to relax provisions regarding permit sanctions under specific conditions, such as lack of due diligence or unintentional violations. However, these conditions are discretionary, not obligatory, and it is not necessary for El Cubo to prove a knowing violation of the code.
El Cubo has a history of multiple code violations, including after-hours sales, for which it received warnings and fines. Officer Swint testified that she observed the bar owner, Ms. Chu, present during prohibited sales hours, with staff selling beer after the allowed time. Despite arriving during the time of the violations, there were no signs that the establishment was closing down. Other officers found Chu hiding in the parking lot when they arrived to make arrests. The order indicates that the frequency and nature of El Cubo's violations raise serious concerns about Chu's ability to manage the bar in compliance with legal requirements, which could jeopardize public health and safety.
El Cubo argued that Chu's immigrant status and limited English proficiency should mitigate punishment; however, it did not claim she was unaware of the code requirements. Evidence showed she was aware of past violations and present during the current violations. El Cubo did not cite any legal requirement for the TABC to consider language barriers in sanctions. The review concluded that the TABC's order to cancel El Cubo’s permits was justified and not arbitrary, and it did not violate El Cubo’s rights. Additionally, since El Cubo's arguments were rejected, it was not entitled to attorneys’ fees or costs. The court affirmed the trial court’s judgment and noted that El Cubo's reference to Ackley v. State was irrelevant to proving employment status, as the evidence indicated sales occurred after the legal closing time, making the argument unnecessary.
