OAH No. 4-6226-16712-3

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR MORRISON COUNTY

In the Matter of:

The Non-renewal of the Liquor License of ORDER

Gordon K. Wheeler, Sr., d/b/a the Camp Store/Bar/Cafe

On August 9, 2005, the Respondent, Gordon K. Wheeler, Sr., made a Motion to Dismiss or Stay Proceedings. On August 19, 2005, Morrison County (the County) submitted a response to the Respondent’s motions and also issued an Amended Notice of Hearing in this proceeding.

Todd L. Kosovich, Assistant Morrison County Attorney, Government Center, 213 SE 1^st Avenue, Little Falls, Minnesota 56345-3196, is appearing in this proceeding on behalf of the County. Randall D. B. Tigue, Attorney at Law, 3960 Minnehaha Avenue South, Minneapolis, Minnesota 55406 is appearing in this proceeding on behalf of the Respondent. Gordon K. Wheeler, Sr..

Based upon the pleadings and files in this matter and the agreements and arguments made by the parties during the telephone hearing,

IT IS HEREBY ORDERED:

(1) That the Respondent’s Motion to Dismiss is DENIED; and

(2) That the Respondent’s Motion to Stay Proceedings is also DENIED.

Dated this

2nd

day of

September

2005.

/s/ Bruce H. Johnson

BRUCE H. JOHNSON

Administrative Law Judge

MEMORANDUM

The Notice of Hearing Provided the Respondent

With Sufficient Notice

The Respondent’s Motion to Dismiss is based on two contentions. First, he argues that the Notice of Hearing was insufficient because it failed to contain a “’specification of facts’ sufficient to constitute sufficient cause for revoking the license.”[1] Second, he argues more specifically that allegations in the Notice of Hearing relating to distribution of obscene materials cannot be determined in this proceeding.[2] In its Amended Notice of Hearing, the County has withdrawn all allegations relating to distribution of obscene materials. That issue is moot, and that contention can no longer support a motion to dismiss.

As to the Respondent’s more general contention of insufficient notice, the sufficiency of the notice that the County has provided to the Respondent is not measured by constitutional principles of procedural due process of law here. In order for procedural due process rights to be implicated, the Respondent must possess a protected liberty or property interest that could be impaired in this proceeding:

The requirements of procedural due process apply only to the deprivation of interests encompassed by the Fourteenth Amendment’s protection of liberty and property.[3]

This is not a criminal proceeding, so the Respondent’s liberty interest is not implicated. Moreover, since 1953 the Minnesota Supreme Court has held on several occasions that Minnesota law creates no property right in a liquor license “because no person has a vested property right to engage in the liquor business.”[4] And once licensed, “no one can acquire a vested right to continue in a business which is subject to regulation under the police power.”[5] The Respondent’s right to notice, if any, must therefore be found in statute or rule. Although Minn. Stat. § 340A.415 requires hearings relating to suspension or revocation of liquor licenses to be conducted “under sections 14.57 to 14.69 of the Administrative Procedure Act,” there is no such statutory requirement for hearings relating to denial of applications to renew liquor licenses, which is what is at issue inthis proceeding. Nonetheless, as a matter of choice, the County indicated in the Amended Notice of Hearing that “[t]he hearing will be conducted pursuant to the contested case procedures set out in Chapter 14 of Minnesota Statutes,[and] the Rules of the Office of Administrative Hearings, Minn. Rules 1400.5100 to 1400.8500 …” Those provisions of law therefore establish the requirements for sufficiency of notice in this proceeding.

Minn. Stat. § 14.58 provides that a licensing authority must “advise the licensee of the nature of the charges against him or the ground on which revocation was sought.” Minn. R. pt. 1400.5600, subp. 2D provides that “[a] statement of the allegations or issues to be determined together with a citation to the relevant statutes or rules allegedly violated or which control the outcome of the case.” Here, the Amended Notice of Hearing states that the Respondent “is not eligible to hold a liquor license pursuant to Minn. Stat 340A.402,” which provides in part that:

No retail license may be issued to: … (3) a person not of good moral character and repute;

The Amended Notice of Hearing therefore advises the Respondent that the nature of one of the charges against him is that he is not a person of good moral character and repute. The Amended Notice of Hearing also states that “[r]enewal of Gordon K. Wheeler Sr.’s liquor license is not in the public interest pursuant to Minn. Stat 340A.412,” which provides in part that:

(b) No license may be issued, transferred, or renewed if the results of the investigation show, to the satisfaction of the governing body, that issuance, transfer, or renewal would not be in the public interest.

The Amended Notice of Hearing goes on to specify that Mr. Wheeler is not a person of good moral character and repute and that renewal of his liquor license would not be in the public interest because he engaged in certain conduct between March 31 and April 15, 2005, that meets the definition of certain, enumerated criminal laws of the State. The ALJ therefore concludes that the notice provided to the Respondent meets the sufficiency standards set forth in Minn. Stat. § 14.58 and Minn. R. pt. 1400.5600, subp. 2D.

II.

Proceedings in this Matter Should Not be Stayed

The Respondent argues in the alternative that the proceedings to deny renewal of his liquor license should be stayed pending resolution of the criminal case against him. He argues that this matter and the pending criminal case overlap and involve identical allegations, thus raising concerns about implication of his Fifth Amendment rights The Respondent also contends that judicial economy would better be served by staying the administrative proceeding because if he is convicted of a felony, the felony conviction alone would be the basis for license revocation without the County having to prove up criminal charges.

On the other hand, the County argues that a stay of these proceedings would prevent it from “doing its duty to control establishments selling liquor within its jurisdiction.”[6] The County indicated that the Respondent’s bar is near the entrance to Camp Ripley and given the large call up of National Guard forces, the interests of the public and Guard members may be prejudiced by the delay. According to the County, “the citizens of Morrison County have an interest in assuring that liquor licensees operate their premises within the law.”[7] Finally, with respect to Mr. Wheeler’s Fifth Amendment privilege against self-incrimination, Morrison County points out that no interrogatories or other discovery has been served on Mr. Wheeler. The County maintains that all the evidence it intends to present at the hearing has already been gathered and copied for the Respondent (namely, the statements of undercover police officers). The County does not anticipate anything in the administrative hearing that would require the defendant to testify against himself.

An issue similar to this arose in Schuessler v. Benchmark Marketing and Consulting, Inc.[8] There, the Nebraska Supreme Court set out the following standards for determining whether to grant a stay of civil proceedings pending final disposition of criminal proceedings:

There is no constitutional right to have civil proceedings stayed pending the outcome of a criminal investigation. Afro-Lecon, Inc. v. U.S., 820 F.2d 1198 (Fed.Cir.1987); S.E.C. v. First Financial Group of Texas, Inc., 659 F.2d 660 (5th Cir.1981); Southwest Marine, Inc. v. Triple A Mach. Shop, Inc., 720 F.Supp. 805 (N.D.Cal.1989). However, courts inherently possess the power to stay such proceedings when required by the interests of justice. American Life Ins. Co. v. Stewart, 300 U.S. 203, 57 S.Ct. 377, 81 L.Ed. 605 (1937); Landis v. North American Co., 299 U.S. 248, 57 S.Ct. 163, 81 L.Ed. 153 (1936); Afro-Lecon, Inc., supra.

The burden of establishing that a proceeding should be stayed rests on the party seeking the stay. See, Landis, supra; Gold v. Johns-Manville Sales Corp., 723 F.2d 1068 (3d Cir.1983); Dentsply Intern., Inc. v. Kerr Mfg. Co., 734 F.Supp. 656 (D.Del.1990). Furthermore, when the moving party seeks to stay a trial, the decision of whether to grant the motion is vested in the discretion of the trial court, and its decision will not be overturned on appeal absent an abuse of that discretion. See, American Life Ins. Co., supra; Landis, supra; Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899 (9th Cir.1989); General Dynamics Corp. v. Selb Manufacturing Co., 481 F.2d 1204 (8th Cir.1973), cert. denied 414 U.S. 1162, 94 S.Ct. 926, 39 L.Ed.2d 116 (1974). In making its decision, the trial court should balance the competing needs of the parties, taking into account, among other things, the interest of the courts, the probability that proceeding will work a constitutional violation on the movant, the presence or absence of hardship or inequity, and the burden of proof. See, American Life Ins. Co., supra; Landis, supra; Gold, supra; Wehling v. Columbia Broadcasting System, 608 F.2d 1084 (5th Cir.1979), reh'g denied 611 F.2d 1026 (5th Cir.1980); General Dynamics Corp., supra; Gordon v. Federal Deposit Insurance Corporation, 427 F.2d 578 (D.C.Cir.1970).[9]

In support of his motion for a stay, the Respondent relies on SEC v. Healthsouth Corp.,[10] where the U. S. District Court for the Northern District of Alabama stayed resolution of a civil proceeding by the SEC against a corporation and its president who were subject to criminal charges involving essentially the same conduct. The court stated that in ruling on a motion to stay proceedings a court must consider a variety of factors including:

… the extent to which the Defendant’s Fifth Amendment rights are implicated, the interest of the Plaintiff’s proceeding expeditiously with this litigation and the potential prejudice to the Plaintiffs from delay, the burden any particular aspect of the proceedings may impose on the Defendant, the efficient use of judicial resources, the interest of persons not parties to the civil litigation and the interest of the public in the pending civil and criminal litigations. [citations omitted] Other courts have added factors such as the extent to which the criminal and civil cases overlap, the status of the case, including whether the Defendant has been indicted.[11]

Unlike SEC v. Healthsouth Corp, this proceeding does not involve issues that are essentially the same as the criminal proceedings that are pending against the Respondent. The issues here are: (1) whether the Respondent is a person of good moral character and repute; and (2) whether renewing his liquor license is in the public interest. In its Amended Notice of Hearing, the County has indicated that in meeting its burden of proof on those issues, it will be relying, in part, on evidence that the Respondent has engaged in conduct that meets the definition of certain offenses described in Minnesota’s criminal code.[12] Moreover, subsequent acquittal of the Respondent of the pending criminal charges would not necessarily establish his eligibility to hold a liquor license.[13] The relationship here between this administrative proceeding and the criminal law is analogous to the way that relationship exists in legislation pertaining to disqualification of individuals having direct contact with persons served by programs licensed by the Minnesota Department of Human Services.[14] Although the ultimate issue there is risk of harm to the persons served, the Legislature allows that risk of harm to be established by “a preponderance of the evidence indicat[ing] the individual has committed an act or acts that meet the definition of any of the crimes listed in section 245C.15 … “[15]

Balanced against the Respondent’s interests are the County’s interests in proceeding with the hearing in this matter. In Bird v. Department of Public Safety,[16] the Minnesota Court of Appeals indicated that the State’s interest in regulating the sale of intoxicating liquors is so strong and compelling that liquor license holders lack the constitutional property interest protection that holders of other kinds of business licenses might possess.[17] The Court described the underlying policy considerations in the following way:

The Minnesota Supreme Court has consistently adhered to a policy of granting to municipalities a broad discretion in matters involving liquor licenses. The policy emanating from the supreme court's decisions reflects a concern for the abuse which could result from the dispensation of liquor. * * * Restrictions imposed on liquor licenses are particularly necessary to protect the safety, health, and morals of the public. The statutes regulating liquor sales are permeated with a recognition that this strict regulation and control is necessary for the public good.[18]

In conclusion, the issues to be adjudicated in this proceeding and in the pending criminal proceeding are not identical. Rather, it is more a matter that some of the same evidence might be tendered in both proceedings. Moreover, the Respondent’s Fifth Amendment rights are not necessarily and directly implicated in this proceeding. With respect to judicial economy, the outcome in the criminal proceedings will not necessarily affect the necessity of conducting this proceeding. Additionally, the County, as the State’s delegate, has a strong and compelling public interest in ensuring that it issues and renews liquor licenses in a way that protects the safety, health, and morals of the public. In recognition of that public interest and responsibility, the Legislature has granted the County very broad statutory discretion in deciding when and to whom to grant liquor license applications and renewals. Therefore, after balancing these factors, the ALJ concludes that this proceeding should not be stayed pending completion of the criminal proceeding that is pending against the Respondent.

B. H. J.

[1] Respondent’s Memorandum of Points and Authorities in Support of Motions (Respondent’s Memorandum of Law) at p. 3.

[3] Board of Regents v. Roth, 408 U.S. 564, 572 (1972).

[4] Arens v. Village of Rogers, 61 N.W.2d 508, 519 (1953), appeal dismissed, 347 U.S. 949, 74 S.Ct. 680, 98 L.Ed. 1096 (1954). See also, e.g., Country Liquors, Inc. v. City Council of the City of Minneapolis, 264 N.W.2d 821, 826 (Minn. 1978).

[5] Federal Distillers, Inc. v. State, 229 N.W.2d 144, 154 (Minn. 1975).

[6] Memorandum of Morrison County in Response to the License Holder’s Memorandum of Law (County’s Memorandum of Law) at p. 6

[12] With regard to the first issue, the County has indicated, in essence, that it will be attempting to prove the Respondent’s bad moral character with evidence that he has engaged in conduct that meets the definition of certain offenses. It is permissible for the County to do that. The Minnesota Rules of Evidence do not apply in administrative hearings conducted under Chapter 14. See Minn. Stat. § 14.60, subd. 1. But even if they did, such evidence would be admissible under Rule 404, which allows evidence of wrongful acts to prove character or reputation when it is an issue, rather than to prove that an individual acted on some occasion in conformity with a prior bad act.

[13] For example, evidence that persons other than the Respondent have been engaging in conduct defined as criminal on the premises might be relevant in determining whether the public interest favors renewing the Respondent’s liquor license.