Court: Court of Appeals of Kentucky; October 28, 2011; Kentucky; State Appellate Court
The Franklin Circuit Court is evaluating three consolidated appeals concerning Beverage Warehouse, Inc.'s challenge to the issuance of a liquor license to Liquor Barn, which operates across the street from Beverage Warehouse's location. Beverage Warehouse protested Liquor Barn's application based on a St. Matthews Ordinance prohibiting liquor licenses within 700 feet of existing licensed premises, asserting that the distance was less than 361 feet when measured according to the ordinance's specifications. Initially, the St. Matthews City Administrator confirmed this violation but later reversed the decision after Liquor Barn suggested an alternative measurement, which indicated a distance of at least 830 feet. Following this, the administrator approved Liquor Barn's application, prompting Beverage Warehouse to file an additional protest and request for a due process hearing before the license was issued. The ABC denied this hearing request, leading Beverage Warehouse to outline its intent to pursue legal remedies if the license were granted.
Beverage Warehouse petitioned the Franklin Circuit Court for a due process hearing before the ABC Board regarding the issuance of a liquor license to Liquor Barn, arguing that the Fourteenth Amendment and Kentucky Constitution entitled it to such a hearing due to a claimed deprivation of property or liberty interests. The circuit court determined that a liquor license is a privilege, not a property right, referencing case law that established competitors lack standing to challenge license grants unless there are allegations of fraud, bad faith, or collusion. As Beverage Warehouse did not present such allegations and lacked statutory grounds for a due process hearing, the court dismissed its petition. Subsequently, Beverage Warehouse sought to alter the court's decision, while also voicing objections to the license before the St. Matthews City Council, which scheduled a hearing. However, the licenses were issued to Liquor Barn before the council hearing occurred. After the circuit court denied its motion to amend the dismissal order, Beverage Warehouse appealed. During the appeal, additional litigation led to the cases referred to as Beverage Warehouse II and III, where Beverage Warehouse and others appealed the issuance of licenses by the city and county to the Franklin Circuit Court and sought an evidentiary hearing from the ABC, which denied jurisdiction. The circuit court consolidated the appeals but dismissed Beverage Warehouse II as prematurely filed, citing the lack of a final order from the ABC.
KRS 13B.010(2) defines an administrative hearing as a formal proceeding by an agency to adjudicate legal rights, duties, privileges, or immunities of a specific individual. The circuit court determined that its jurisdiction arises only when an aggrieved citizen appeals a final order from a formal adjudicatory hearing conducted by the Board. However, the court found that Beverage Warehouse III involved a different scenario that was appropriately appealed to the Board under KRS 241.200. Consequently, it ruled that the Board erred in dismissing Beverage Warehouse’s appeal for lack of jurisdiction and remanded the case for an evidentiary hearing. Both Liquor Barn and the ABC appealed this ruling, while Beverage Warehouse cross-appealed the dismissal of its earlier case, Beverage Warehouse II. The court consolidated these appeals with Beverage Warehouse I.
Each case pursued by Beverage Warehouse has a distinct procedural approach: Beverage Warehouse I was an original action, Beverage Warehouse II was an appeal under KRS 243.560, and Beverage Warehouse III was an appeal from a final ABC order under KRS 241.200. In Beverage Warehouse III, the circuit court ruled in favor of Beverage Warehouse, granting it a hearing before the ABC Board under KRS 243.550, rendering the issues in Beverage Warehouse I and II moot. The review of these cases involves de novo standard and principles of statutory interpretation, emphasizing the need to ascertain legislative intent from the statute's wording.
In arguing Beverage Warehouse III, it was contended that Administrator King should have denied a liquor license to Liquor Barn due to its proximity to Beverage Warehouse’s location. The Board, however, did not acknowledge relevant statutes governing the authority of city administrators and their relation to the ABC Board, overlooking the comprehensive Alcoholic Beverage Control Act which regulates the liquor industry at various governmental levels.
An applicant for a liquor license must advertise their intent by publishing a notice that includes their name, address, and the location for which the license is sought, as mandated by KRS 424.130(l)(b) and KRS 243.360. The notice must also specify the date of application and inform the public that protests can be made to the Department of Alcoholic Beverage Control within 30 days of publication. This notification aims to ensure public awareness and allow for protests against the license issuance (Durbin v. Wood, 369 S.W.2d 125, 126 (Ky.1963)).
KRS 241.170 establishes an alcoholic beverage administrator in cities selling alcoholic beverages, who oversees city licenses with regulations that cannot be less stringent than state statutes or Board regulations. The city administrator must approve a city license application and can refuse it if the applicant or premises do not comply with regulations (KRS 243.450(l)(b)). The Board reviews the administrator's decisions, as outlined in KRS 241.200, allowing appeals within 30 days of the administrator’s order, governed by KRS Chapter 13B.
KRS 243.550 details the hearing procedures for appeals from both city and county administrators, stating hearings can occur in Frankfort or the relevant county, with decisions made by majority vote. Additionally, KRS 243.560 allows appeals to the Franklin Circuit Court from the Board's final orders, permitting applicants or aggrieved citizens to file petitions with the court in accordance with KRS Chapter 13B.
A procedural issue arose regarding whether the Franklin Circuit Court had subject matter jurisdiction in Beverage Warehouse III due to the failure to name the Alcoholic Control Board as a party, as required by KRS 243.560(3).
The Board is not an independent entity but is integrated within the ABC, which suffices to establish subject matter jurisdiction. Liquor Barn and the ABC contend the circuit court erred by allowing an appeal under KRS 241.200, arguing that only applicants and licensees have the right to appeal, referencing Gulley v. American Express to assert that protestors lack recourse for administrative decisions. They claim the circuit court improperly created a right under KRS 243.550 that the legislature did not provide. Liquor Barn further argues that the Board's dismissal of Beverage Warehouse III's appeal, without an evidentiary hearing, did not constitute a final order. They assert that even if an appeal was permissible under KRS 241.200, it was barred by the 'honest error' doctrine and equitable estoppel, with res judicata also preventing the appeal. Both parties state that statutes do not grant Beverage Warehouse the right to a hearing in its appeal concerning the issuance of a license. They emphasize that nonapplicants lack property interests in licenses, making the approval process non-appealable. The ABC clarifies that KRS 241.200 allows appeals only for penalized licensees. The parties argue that without a property or liberty interest, there is no constitutional right to a due process hearing. The cited case involving Lexington Retail Beverage Dealers Association affirmed that licenses do not confer property interests and dismissed complaints based solely on competitive interests. The current case is framed as an appeal to the Board under a claimed statutory right, and it is noted that the legislature did not intend for nonapplicants to appeal the granting of liquor licenses.
A citizen may file a 'protest' under KRS 243.360 regarding the granting of a liquor license. While the language in Gulley could limit the current appeal, it was an original action for declaratory judgment and not an appeal under KRS 241.200. In this context, citizens are authorized by the legislature to appeal administrator orders granting licenses. KRS 243.560 was amended to clarify that costs of an appeal from a final board order may be taxed against either the licensee or the citizen, depending on the outcome. Although KRS 243.560(1) is ambiguous, the addition of subsection (4) affirms the right of aggrieved citizens to appeal. The Supreme Court in 2004 also recognized a citizen’s right to appellate review in such cases. The precedential value of Gulley concerning KRS 243.560 appeals is uncertain, but it does not affect the right to a hearing under KRS 241.200. Liquor Barn and the ABC argue that the circuit court's decision improperly expanded KRS 241.200 and that approving a liquor license is not an 'order.' Statutory interpretation principles dictate that courts should follow clear legislative intent, and when a statute allows for an appeal and is remedial, it should be construed liberally. The right to appeal from a city administrator’s approval of a license is explicitly provided in the statute, contrasting with KRS 243.560, which restricts appeal rights to specific entities.
The precursor to KRS 241.200, initially part of the Alcoholic Beverage Control Act in 1939, allowed any aggrieved party to appeal decisions made by City Administrators to the State Alcoholic Control Board. In 1942, the phrase "any party aggrieved" was removed when the statute was revised. Liquor Barn and the Alcoholic Beverage Control (ABC) argue that only parties directly involved in proceedings can appeal, specifically limiting this to applicants or licensees. However, the absence of restrictive language in KRS 241.200 suggests that the legislature intended to allow broader appeal rights. The term "order" in the statute is not defined as "final," indicating that appeals can occur without a prior evidentiary hearing. The legislature could have included limiting language similar to that found in KRS 243.560 if it intended to restrict appeal rights. The circuit court's ruling aligns with prior Supreme Court interpretations, affirming that KRS 241.200 supports appeals from city alcoholic beverage control administrators in relation to administrative decisions. Historical cases illustrate that nonapplicants have successfully appealed against license grants based on proximity concerns and other issues, thereby reinforcing the position that protestors have standing to appeal. The circuit court's decision to grant Beverage Warehouse a hearing, considering potential violations of KRS 243.450 regarding compliance with city regulations, underscores the broader appeal rights established within this statutory framework.
The circuit court's interpretation of the statute is challenged, particularly regarding the validity of licenses issued contrary to city ordinances. KRS 243.450(l)(b) mandates that licenses must be denied if the applicant or premises do not comply with local regulations. It is affirmed that a city can enact ordinances independently of the ABC, as established in City of Bowling Green v. Gasoline Marketers, Inc. However, a city administrator cannot act arbitrarily or unlawfully. The ABC has historically reviewed appeals from protestors, ensuring they have a right to a hearing, which is part of an orderly statutory process that allows for meaningful participation by aggrieved citizens. The licensing process includes a public opportunity to protest, with the city administrator deciding on the application, followed by a potential appeal to the ABC and then to the Franklin Circuit Court, which assesses whether a protestor is an aggrieved citizen. The implications of issuing a liquor license against local ordinances on neighboring property interests are noted. The court recognizes the necessity of judicial review of administrative decisions, affirming the statutory process's integrity. Beverage Warehouse is deemed entitled to a hearing before the ABC Board, while Liquor Barn contests that the ABC's dismissal of the appeal was not a final order. KRS 243.560 and KRS 13B.010(6) are referenced to define a final order in the context of administrative hearings, which involves the resolution of rights, duties, privileges, or immunities of individuals.
The ABC order found it lacked jurisdiction over the appeal, determining that jurisdiction lay with the Franklin Circuit Court, which dismissed the appeal. Beverage Warehouse appealed this dismissal, prompting the ABC to issue a certificate of record to the circuit court that included the relevant briefs and documents. Although no evidentiary hearing occurred, the case was resolved legally in a formal proceeding. Liquor Barn argues that the 'honest error' rule and equitable estoppel prevent a hearing before the Board, citing a precedent where a governmental body could not revoke a permit issued in error if the property owner relied on that permit. However, the applicability of this doctrine is questionable since Liquor Barn continued construction despite Beverage Warehouse's objections. The determination of good faith and related factual issues will be addressed by the ABC Board upon remand.
The review is focused on whether Beverage Warehouse is entitled to a hearing under KRS 241.200, and the applicability of res judicata, which prevents repetitive actions. For res judicata to apply, there must be identity of parties, causes of action, and a prior decision on the merits. Claim preclusion bars re-litigation of previously adjudicated causes. However, Beverage Warehouse's cases do not share the same causes of action, as Beverage Warehouse I was an original action and not a statutory appeal, while Beverage Warehouse II was an appeal regarding a liquor license decision. Consequently, res judicata does not bar the hearing request in Beverage Warehouse III. The Franklin Circuit Court's opinions and orders are affirmed. Beverage Warehouse I remains pending, scheduled for oral argument, but is on hold pending resolutions of Beverage Warehouse II and III. The ABC described the dismissal order as a 'final order' and did not support Liquor Barn’s arguments on appeal. KRS 243.470 and KRS 243.520 govern appeals and hearings related to licensees, respectively.
