7-2404-14734-6

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE DEPARTMENT OF PUBLIC SAFETY

 

 

In the Matter of the License of LTB, Inc.,                             ORDER DENYING MOTION

d/b/a Mugzee’s                                                                      TO COMPEL DISCOVERY

 

 

            On April 5, 2002, subsequent to a Prehearing Conference in this matter, counsel for LTB, Inc., d/b/a Mugzee’s (“Licensee, Respondent”) filed a Motion to Compel Discovery.  On or about April 15, 2002, counsel for the Minnesota Department of Public Safety (“Department”) filed Answers to Interrogatories and a Memorandum of Law in Opposition to the Respondent’s Motion to Compel Discovery.  Counsel for the Licensee filed a Reply Memorandum on April 25, 2002.  The Department filed Supplemental Responses on or about May 8, 2002, and filed an Amended Statement of Charges on May 20, 2002.  The Respondent/Licensee is represented by Neal B. Dieterich, Attorney at Law, 912 Minnesota Building, Fourth & Cedar, St. Paul, Minnesota 55101.  The Department of Public Safety is represented by David L. Ramp, Assistant Attorney General, Suite 500, 525 Park Street, St. Paul, Minnesota 55103-2106.

 

            Based on all the filings and proceedings herein, the Administrative Law Judge makes the following:

 

ORDER

 

            IT IS ORDERED that the Motion to Compel Discovery filed on behalf of LTB, Inc., d/b/a Mugzee’s is DENIED; and

 

            IT IS ORDERED FURTHER that this matter shall proceed to evidentiary hearing at 9:30 a.m. on Wednesday, June 5, 2002, at the Office of Administrative Hearings.

 

 

 

Dated this

29th

day of

May

2002.

 

 

                                                                             

/s/ Richard C. Luis

RICHARD C. LUIS

Administrative Law Judge

 

MEMORANDUM

 

            Mugzee’s has filed a Motion to Compel Discovery.  It asserts that it should be entitled to discovery related to its prior violations of Minn. Stat. § 340A.415.  Mugzee’s argues that although the prior cases are closed, with Mugzee’s paying a fine in each case, it should be entitled to discovery related to those prior investigations and that consideration of evidence related to the prior violations should not be barred by the doctrine of res judicata.  It argues further that the alleged October 26, 2000 violation occurred at a time when Mugzee’s was proceeding with a Chapter 11 filing in Bankruptcy Court and was, therefore, barred by the automatic stay provision of the Bankruptcy Act.  Finally, Mugzee’s argues that the payment plan it has entered into with the Minnesota Department of Revenue is relevant to this case and should affect the outcome of these proceedings.  The Administrative Law Judge cannot agree.

 

            Mugzee’s waived its right to a contested case hearing in each of the prior instances regarding its violations of Minn. Stat. § 340A.415.  Instead, the Licensee elected to pay the assessed fine.  Mugzee’s argues that the doctrine of res judicata should not be applied because it elected not to contest the earlier cases because the cost of hearings would have exceeded the assessed fines.  The two cases cited in support of Mugzee’s argument, Falgren v. Minnesota Board of Teaching, 545 N.W.2d 114 (Minn. 1991) and AFSCME Council 96 v. Arrowhead Regional Corrections Bd., 356 N.W.2d 295 (Minn. 1984) are inapplicable in this instance.  The Falgren case involves issues that were not considered in prior litigation.  In this case, there is no additional issue presented that could not have been raised before.  The AFSCME case is inapplicable here, having held that principles of res judicata (or collateral estoppel) do not apply when the circumstances involve two different types of hearings.  Mugzee’s is not entitled to two types of hearings concerning violations of Minn. Stat. § 340A.415.

 

            It is noted that all of the elements necessary to establish collateral estoppel are also present in this case.  The issue of whether Mugzee’s was violating Minn. Stat.
§ 340A.415 was raised in each prior case, the agency made a final determination in each case, Mugzee’s was a party in each case and had a full and fair opportunity to contest the issue in each prior case.  For these reasons, Mugzee’s is collaterally estopped from seeking discovery to litigate the facts underlying the prior violations in this hearing.

 

            The Licensee’s argument assumes that the factual backgrounds of the prior violations are essential to establish the penalty to be assessed in this instance.  This assumption is misplaced.  Minn. Stat. § 340A.415 (2000) does not require alcohol enforcement to prove a pattern of violations, nor does the statute indicate that a pattern of violations is the only factor to be considered when determining the appropriate penalty.  Indeed, the statute is silent on the factors to be considered in determining the penalty in any particular case.  As noted by the Department, factors such as the dollar volume of alcoholic beverages purchased at retail for resale and the percent the retail purchases are of all sales may be equally significant.

 

            Mugzee’s argues that the automatic stay in the Bankruptcy Code, 11 U.S.C.A.
§ 362(a)(3), prohibited the Department’s enforcement action of October 26, 2000, and that the violation uncovered that day should be ignored when considering any penalty to be assessed against it in the current case.  The Administrative Law Judge does not agree.

 

            Under 11 U.S. Code § 362(b)(4), a governmental unit may act during the pendency of the automatic stay pursuant to its police or regulatory powers.  The automatic stay does not shield a liquor licensee from application and enforcement of valid state and local liquor laws designed to protect public safety.  Under Minnesota law, the “Purpose and object of both systems (state and municipal) are regulation by exercise of the police power of the traffic in intoxicating liquors to protect and to promote the public health, safety, morals, and welfare.”  Stabs v. City of Tower, 40 N.W.2d 362, 367 (1949).  The Minnesota statute that prohibits licensees from purchasing liquor for resale from other retailers, the statute Mugzee’s is accused of violating in this matter, is obviously an exercise of the state’s police powers.  As noted in Intercontinental Packaging Co. v. Novak, 348 N.W.2d 330, 337 (Minn. 1984), retailers cannot purchase liquor for resale from other retailers in order to avoid the problems that would exist inherently if one retailer could control another retailer through the sale of liquor products.

 

            Mugzee’s also seeks discovery pertaining to non-payment of taxes with the Department of Revenue.  The Administrative Law Judge agrees with the argument of the Department on this issue.  Issues concerning the Department of Revenue, its calculation of taxes owed and any repayment plan are immaterial to this proceeding.

 

R.C.L.