STATE OF IOWA BEFORE THE DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION IN RE: ) ) Docket No. A-2012-00018 O Halloran Properties, LLC ) DIA No. 12ABD004 d/b/a The 9 th Hole ) 310 6 th Ave. ) Grinnell, Iowa 50112 ) PROPOSED DECISION ) Liquor License No. LC-36058 ) On March 5, 2012, the Grinnell City Council (local authority) approved the Class C liquor license renewal application filed by O Halloran Properties, LLC, d/b/a The 9 th Hole, Liquor License No. LC-36058, (licensee) for the premises located at 310 6 th Avenue in Grinnell, Iowa but denied the renewal of the licensee s Outdoor Service Area. The licensee filed a timely Notice of Appeal with the Department of Commerce, Alcoholic Beverages Division (division). A telephone hearing was held on June 25, 2012 at 10:00 a.m. Attorney William J. Sueppel appeared for the local authority. Attorney John C. Wagner represented the licensee. The undersigned administrative law judge presided. The hearing was recorded. THE RECORD The record includes the license renewal application filed on or about February 6, 2012; the Division s Notice of the Denial to Licensee; Notice of Appeal and Division's Acknowledgement; Notice of In-Person Hearing; Notice of Telephone Hearing; and the testimony of Grinnell police officers Dan Johnson and Theresa Petersen; Grinnell City Clerk Kay Cmelik; and owner Jerry O Halloran. The record also includes Local Authority Exhibits 1-4. The licensee objected to ten pages of photographs, which were included as part of Exhibit 4, and those pages were excluded from the exhibit for lack of relevance.
Page 2 ISSUE Should the local authority's denial of the licensee's renewal application for its Outdoor Service Area be reversed by the division because the denial was arbitrary, capricious, or contrary to law? FINDINGS OF FACT 1. Jerry Michael O Halloran is the 100% owner of O Halloran Properties, LLC d/b/a The 9 th Hole (licensee), which is located at 310 6 th Avenue in Grinnell, Iowa. Late in 2007, Mr. O Halloran purchased the property where The 9 th Hole is now located. Prior to opening The 9 th Hole, Mr. O Halloran extensively remodeled the existing building on the property, which had formerly been the site of a state liquor store. Mr. O Halloran estimates that he spent more than $100,000 on new electrical, new plumbing, new bathrooms, a fence on the south side of the property, and an outdoor cement patio. (Testimony of Jerry O Halloran) 2. O Halloran Properties, LLC, d/b/a The 9 th Hole, was issued Liquor License Number LC 36058 in 2008. Shortly after this initial license was issued, the local authority approved the licensee s application for an outdoor service privilege on the cement patio that is located on the west side of the building. There are two entry points to the outdoor service area from the bar. The outdoor service area is not fenced, but it is surrounded by planters with flowers. Patrons currently use the patio as place to smoke and consume beverages, including alcoholic beverages. The licensee does not offer any live music on the patio, but there are outside speakers that play music from the bar s jukebox. (Testimony of Jerry O Halloran; Officer Dan Johnson; Theresa Petersen) 3. The 9 th Hole is located in an area that is zoned for commercial use. It is on a busy highway that has a lot of loud truck traffic. There is a residential area located immediately south of The 9 th Hole s outdoor service area. The closest home is about 20-25 feet away from the outdoor service area. (Testimony of Jerry O Halloran; Officer Dan Johnson; Theresa Petersen) 4. Dan Johnson has been a Grinnell police officer for five years. His duties have included serving as the police department s alcohol compliance officer. Officer Johnson has responded to many calls for service concerning the 9 th Hole. Many of the calls for service have been for neighbor complaints concerning disturbances, loud music, and loud patrons. The police department maintains
Page 3 logs of the calls for service for all bars. The logs show that The 9 th Hole has had considerably more calls for service than the other bars located within its jurisdiction. (Testimony of Officer Dan Johnson; Exhibit 1) Many of the noise and disturbance complaints have been made by members of two families who live near The 9 th Hole (the Rupe family and the Jacoby family) From January 1, 2008 through November 30, 2011, members of the Rupe family have made 39 complaints about The 9 th Hole. During that same time period, members of the Jacoby family have made 19 complaints. There have been complaints about loud music, and officers have had to ask the bar employees to turn down the speakers. The majority of the complaints concerned loud patrons on the patio who were yelling, cursing, or using vulgar language. (Testimony of Officer Dan Johnson; Exhibit 1) 5. The city of Grinnell has enacted a noise ordinance (Chapter 53, Grinnell Code of Ordinances). The stated purpose of the noise ordinance is to prevent excessive sound which is a serious hazard to the public health and welfare and quality of life in the City of Grinnell. (Section 53.01, Grinnell Code of Ordinances). The ordinance provides for the measurement of sound and noise with a sound level meter that meets certain requirements (Section 53.03). The ordinance allows sound measured at a maximum of 65 decibels in commercial areas and at a maximum of 55 decibels in residential areas between midnight and 7:00 a.m. (Section 53.04). Violations of the noise ordinance can be charged as municipal infractions or as simple misdemeanors. (Section 53.08). The city of Grinnell also has a public peace ordinance (Chapter 40, Grinnell Code of Ordinances). The city s public peace ordinance prohibits disorderly conduct, including noise. Noise is defined as making loud and raucous noise in the vicinity of any residence or public building which causes unreasonable stress to the occupants thereof. (Section 40.03, Grinnell Code of Ordinances). The licensee has never been charged with violating the city s noise ordinance. Officer Johnson has personally only taken one decibel reading at The 9 th Hole, and it was less than 65 decibels. Mr. O Halloran has been charged with disorderly conduct based on excessive noise at the licensed premises, but the disorderly conduct charges were later dismissed. (Testimony of Dan Johnson; Jerry O Halloran) 6. On December 30, 2011, Grinnell Police Chief Jody Matherly sent Jerry O Halloran a letter concerning the number of Calls for Service and complaints
Page 4 that the police department had received for his establishment. The letter was sent in follow-up to an earlier telephone conversation between Chief Matherly and Mr. O Halloran. Chief Matherly attached a summary of the Calls for Service to the four bars in Grinnell (9 th Hole, Eagles, Rabbits, and Gametime) over the previous four years (2008-2011) and noted Mr. O Halloran s agreement that the number of Calls for Service to his establishment were too high. According to the statistics compiled by the police department: a. In 2011, 9 th Hole had 35 Calls for Service, including 14 calls for noise and 4 calls for disturbance. During this same time period, Eagles had a total of 4 calls for service, Rabbits had 8 calls for service, and Gametime had 3 calls for service. Of all the calls for service to the other three bars in 2011, Gametime had just 1 call for noise and Rabbits had 2 calls for disturbance. b. In 2010, 9 th Hole had 18 Calls for Service, including 6 calls for noise and 5 calls for disturbance. During this same time period, Eagles had a total of 9 calls, Rabbits had 9 calls, and Gametime had 1 call. Of the calls for service to the other three bars in 2010, Eagles had 1 call for disturbance and Rabbits had 3 calls for disturbance. c. In 2009, 9 th Hole had 40 Calls for Service, including 12 calls for noise and 12 calls for disturbance. During this same time period, Eagles had a total of 5 calls, Rabbits had 13 calls, and Gametime had 2 calls. Of the calls for service to the other three bars in 2009, Eagles had 1 call for disturbance and Rabbits had 5 calls for disturbance. d. In 2008, 9 th Hole had 39 Calls for Service, including 17 calls for noise and 8 calls for disturbance. During this same time period, Eagles had a total of 11 calls, Rabbits had 16 calls, and Gametime had 6 calls. Of the calls for service to the other three bars in 2008, Eagles had 5 calls for disturbance, Rabbits had 5 calls for disturbance, and Gametime had 1 call for disturbance. In his December 30, 2011 letter, Chief Matherly acknowledged that Mr. O Halloran felt harassed by some of his neighbors due to their number of noise complaints. Chief Matherly wrote that he had many Monday morning conversations with the neighbors and that they simply wanted a peaceful nights rest without interruption or damage to their property. Chief Matherly also acknowledged that the neighbors were frustrated because the noise level (at The
Page 5 9 th Hole) was generally at a legal level when measured by the officers. Chief Matherly further noted that he and his officers had witnessed sporadic spikes in noise, which were loud enough to wake people up and disturb the peace and tranquility of the neighborhood but which did not carry a continuous illegal level. Chief Matherly further noted: All noise/disturbance CFS set aside, your bar still leads the way in overall CFS. Finally, Chief Matherly informed Mr. O Halloran that he was referring the information to the Grinnell City Council for their review and would be placing the issue on the Council s agenda for January 16, 2012. Chief Matherly stated that his goal was for Mr. O Halloran to explain his plan to reduce the number of CFS to the council. (Exhibit 1; Testimony of Theresa Petersen) 7. The Grinnell Police Department received 12 additional noise complaints concerning the 9 th Hole on December 5, 6, 8, 10, 11, 16, 17, 24, 25, 26, 29, and 30, 2011. These complaints came from 11 different addresses. (Exhibit 1) 8. Chief Matherly s last day with the city of Grinnell was January 13, 2012. Officer Theresa Petersen, who has been with the Grinnell Police Department for 24 years, became Grinnell s acting police chief. Acting Police Chief Petersen, City Clerk Kay Cmelik, and Jerry O Halloran were all present for three meetings of the Grinnell Public Safety Committee, held on February 6, February 20, and March 5, 2012, when the noise and disturbance issues at The 9 th Hole were discussed. The Grinnell Public Safety Committee consists of three members of the Grinnell City Council. (Testimony of Theresa Petersen; Kay Cmelik; Exhibit 3) City Clerk Kay Cmelik prepares the agendas for the Public Safety Committee meetings and for the city council. The local authority submitted the Grinnell Public Safety Committee agendas and the City Council agendas for February 6, February 20, and March 5, 2012. All three Public Safety Committee agendas include Update on 9 th Hole noise and nuisance issues as one of the agenda items. The handwritten notes of Acting Police Chief Theresa Petersen appear on the three agendas. (Exhibit 2; Testimony of Theresa Petersen) Jerry O Halloran was present for each of these three Public Safety Committee meetings and heard the committee discuss the noise and nuisance issues at length. The full City Council met immediately following these committee meetings. At each of these council meetings, the Public Safety Committee provided a report on The 9 th Hole nuisance and noise issues.
Page 6 a. At the Public Safety Committee meeting held on February 6, 2012, there was a discussion about 9 th Hole patrons playing radios in their vehicles and yelling. According to Ms. Petersen s notes and recollection, those present at the meeting discussed the possibilities of addressing the noise and nuisance issues at The 9 th Hole by fencing in the outdoor service area, by prohibiting patrons from having alcohol outside, by having a bouncer posted outside, by turning off the outside speakers, by Mr. O Halloran being present at the bar more often, and by obtaining further training for employees. The licensee did not implement any of these suggestions. Although the city s ordinance does not require outdoor service areas to be surrounded by a fence, all of the other outdoor services areas in Grinnell are fenced. b. At the committee s meeting on February 20, 2012, several citizens appeared and complained about noise, yelling and cussing by patrons, foot traffic in their backyards and between houses, trash blowing into their back yards, parking, and patrons carrying alcohol off the premises. There was also discussion of some of the same suggestions that were raised during the February 6 th meeting. In the opinion of Acting Police Chief Petersen, Mr. O Halloran was not receptive to implementing these suggestions. c. At the committee meeting on March 5, 2012, there was further discussion of the same noise and nuisance complaints and of the licensee s failure to implement the city s suggestions to reduce the number of complaints. Mr. O Halloran recalled that City Council member Byron Worly commented we never wanted you there, our hands were tied but now we are going to take care of it. On March 5, 2012, the committee voted to recommend denial of the outdoor service privilege for The 9 th Hole. At the council meeting held later that day, the city council did vote to deny the outdoor service privilege for The 9 th Hole. (Testimony of Theresa Petersen; Kay Cmelik; Jerry O Halloran; Exhibit 3) 9. The Grinnell City Council did not provide the licensee with a written notice of the reasons for the Grinnell City Council s decision to deny his outdoor service privilege. In the Notice of Appeal on March 22, 2012, the licensee s attorney wrote Although the city of Grinnell has not updated the City Council Minutes as of today s date, the City has received at least some complaints from neighbors regarding noise and occasional litter and is attempting to use these
Page 7 complaints as the basis for denying the Outdoor Service Privilege. (Testimony of Kay Cmelik; Jerry O Halloran; Notice of Appeal) 10. Jerry O Halloran is usually present at the licensed premises during the day, but he is not routinely present during the evenings, which is when the neighbors have complained about noise and other nuisance issues. Mr. O Halloran purchased a hand held decibel meter to monitor the level of the noise on the patio and has set the volume on his juke box at 5 decibels below the ordinance maximum of 65 decibels. He has not removed the outdoor speakers, at least in part because there had been complaints that customers were loudly playing music on their car radios. Jerry O Halloran doubts that The 9 th Hole could remain in business without an outdoor service area. He estimated that the outdoor service area accounts for half of his business revenue. Mr. O Halloran also noted that although the Grinnell Police Department has walked through his business for bar checks as often as five times a week, he has had no proven violations of the state alcoholic beverage laws or smoking laws. He further noted that he keeps two trash cans on his patio and that his employees periodically pick up any trash on the patio throughout the evening. In addition, Mr. O Halloran picks up trash in the parking lot and in the alley near his business every morning. (Testimony of Jerry O Halloran) CONCLUSIONS OF LAW I. Burden of Proof/Provisions and Standard of Review/Legal Provisions Applicable to Outdoor Service Areas The Iowa Alcoholic Beverages Control Act (Iowa Code chapter 123) is an exercise of the police power of the state, for the protection of the welfare, health, peace, morals, and safety of the people of the state, and all its provisions shall be liberally construed for the accomplishment of that purpose. It is declared to be public policy that the traffic in alcoholic liquors is so affected with a public interest that it should be regulated to the extent of prohibiting all traffic in them, except as provided in chapter 123. 1 Local authority means the city council of any incorporated city in this state, or the county board of supervisors of any county in this state, which is empowered 1 Iowa Code section 123.1 (2011).
Page 8 by Iowa Code chapter 123 to approve or deny applications for retail beer or wine permits and liquor control licenses; empowered to recommend that such permits or licenses be granted or issued by the division; and empowered to take other actions reserved to them by Iowa Code chapter 123. 2 Liquor license applications are filed with the appropriate city council if the premises for which the license or permit is sought are located within the corporate limits of the city. 3 The local authority shall either approve or disapprove the issuance of the liquor license and shall endorse its approval or disapproval on the application and shall forward the application with the necessary fee and bond, if required, to the division. 4 An applicant for a liquor control license may appeal from the local authority's disapproval of an application for a license or permit to the administrator. In the appeal the applicant shall be allowed the opportunity to demonstrate in an evidentiary hearing conducted pursuant to chapter 17A that the applicant complies with all of the requirements for holding the license or permit. 5 Therefore, when a license application is denied, the burden of proof is on the applicant/licensee to demonstrate that it complies with all of the requirements for holding a liquor license/beer permit in the state of Iowa. In this case, the local authority granted the licensee s renewal application for its class C liquor license but denied or refused to approve the licensee s request to renew its Outdoor Service Privilege. "Licensed premises" or "premises is defined by statute to mean all rooms, enclosures, contiguous areas, or places susceptible of precise description satisfactory to the administrator where alcoholic beverages, wine, or beer is sold or consumed under authority of a liquor control license, wine permit, or beer permit. A single licensed premises may consist of multiple rooms, enclosures, areas or places if they are wholly within the confines of a single building or contiguous grounds. 6 Therefore, Iowa Code chapter 123 permits a contiguous outdoor service area to be included in the licensed premises. The statute provides no further reference to contiguous areas or to outdoor service areas. 2 Iowa Code section 123.3(21)(2011). 3 Iowa Code section 123.32(1)(2011). 4 Iowa Code section 123.32(2)(2011). 5 Iowa Code section 123.32(7)(2011). 6 Iowa Code section 123.3(20)(2011) (emphasis supplied).
Page 9 The Division s rules, however, do address outdoor service areas. 185 IAC 4.13 provides: 185-4.13(123) Outdoor service. Any licensee or permittee having an outdoor, contiguous, discernible area on the same property on which their licensed establishment is located may serve the type of alcoholic liquor or beer permitted by the license or permit in the outdoor area. After a licensee or permittee satisfies the requirements of this rule, they may serve and sell beer or liquor in both their indoor licensed establishment and in their outdoor area at the same time because an outdoor area is merely an extension of their licensed premises and is not a transfer of their license. A licensee or permittee, prior to serving in the outdoor area, must file with this division: 1. A new diagram showing the discernible outdoor area. 2. A letter from licensee or permittee telling what dates the outdoor area will be used. 3. A letter from local authority approving the outdoor area. 4. A letter from the insurance and bonding companies acknowledging that the outdoor area is covered by the dramshop insurance policy and the bond. (emphasis supplied) II. Notice At hearing, the licensee argued that the local authority s denial of the Outdoor Service Privilege should be reversed because it was never given valid notice of the City Council s rationale for the denial. Neither the Division s statute nor its rules explicitly require a written (or oral) statement of the reasons for a license denial or denial of the Outdoor Service Area. Nevertheless, the Division s rules do provide that the scope of evidence in the proceeding shall be confined to the issues as to which the parties received notice prior to the hearing unless the parties waive their right to such notice or the presiding officer determines that good cause exists to expand the issues (and allows the licensee a continuance to prepare on the new issues.) 7 7 185 IAC 10.21(3).
Page 10 In this case, the licensee was given clear notice that the city council denied renewal of the outdoor service privilege because of the noise and nuisance issues raised through complaints and calls for service. This notice was provided to the licensee through the police chief s December 31, 2011 letter and attached documents and through the discussion at three Public Safety Committee meetings and three city council meetings for which the licensee was present. Moreover, the license acknowledged that these were the issues in its Notice of Appeal. The licensee clearly had adequate notice that noise and nuisance issues related to the outdoor service areas were the reason for the denial. At hearing, the local authority offered testimony and exhibits (Exhibits 2, 4) that pertain to incidents that occurred at The 9 th Hole after the decision had already been made to deny renewal of the Outdoor Service Privilege. These incidents, most of which did not concern noise or nuisance, did not form the basis for the denial at issue in this case. Although the licensee did not object to the admission of these exhibits at hearing, they were not relied on in making this proposed decision on the Outdoor Service Area. III. Analysis of the Local Authority Denial of Outdoor Service 185 IAC 4.13 specifically and explicitly requires applicants to obtain a letter from the local authority approving any proposed Outdoor Service Area before using the outdoor area to serve beverages. Neither Iowa Code chapter 123 nor the Division s rules set forth any specific legal standards or limits on the local authority's discretion to withhold its approval for an outdoor service area. In contrast to the limits placed on a local authority s discretion to deny liquor license applications, the regulatory scheme appears to give local authorities extremely broad discretion to approve or disapprove outdoor service areas. This makes sense from a policy standpoint. The outdoor service and consumption of alcoholic beverages has a far greater potential to adversely impact the neighbors of a licensed liquor establishment and the public at large than indoor service. Nevertheless, the local authority s decision to deny or withhold approval for an Outdoor Service Area must still be subject to review by the Division to ensure that the local authority s exercise of discretion was not wholly irrational, arbitrary, or capricious. In this case, the local authority approved the licensee's initial application for outdoor service privilege in 2008 and then renewed the Outdoor Service Privilege in 2009, 2010, and 2011. The local authority denied the renewal application for the Outdoor Service Privilege in 2012, after reviewing the record
Page 11 of service calls and listening to the neighbor s complaints about noise and other nuisance issues. Repeated noise complaints are a legitimate reason to deny an outdoor service area when it is located close to residential areas. Although the local authority has not established any licensee violations of its noise or nuisance ordinances, the Grinnell Police Department has repeatedly responded to service calls concerning noise complaints. The local authority has repeatedly communicated these concerns to the licensee but has not seen significant improvement or reduction in the number of complaints. This record would not have been adequate to support a decision by the local authority to deny renewal of the liquor license or to impose administrative sanctions on the liquor license for ordinance violations. Nevertheless, while reasonable persons could disagree about whether the licensee s Outdoor Service Area should have been approved, the local authority's decision in this matter was not irrational, arbitrary, or capricious. It is likely that there will be less noise emanating from the licensed premises if alcoholic beverages are not allowed to be served and consumed on the outdoor patio. The local authority gave the licensee notice of its concerns and an opportunity to take steps to reduce the noise from its Outdoor Service Area prior to denying the renewal application. Under these circumstances, the division should defer to the local authority's decision. It should be noted that this proposed decision only restricts the serving and consumption of alcoholic beverages in the outside patio area and does not prevent the licensee from allowing customers to smoke in the outside patio area. DECISION AND ORDER IT IS THEREFORE ORDERED, that the decision of the city of Grinnell to deny the renewal application for Outdoor Service, which was filed by O Halloran Properties, LLC, d/b/a The 9 th Hole, is hereby AFFIRMED. Pursuant to the administrative rules of the division, any adversely affected party may appeal a proposed decision to the Administrator of the Alcoholic Beverages Division within thirty (30) days after issuance of the proposed decision. In addition, the Administrator may initiate review of a proposed decision on the Administrator's own motion at any time within thirty (30) days following the issuance of a proposed decision. 185 IAC 10.27(1) and (2). Requests for review shall be sent to the Administrator of the Alcoholic Beverages Division, 1918 S.E. Hulsizer, Ankeny, IA 50021. Unless otherwise ordered, each appealing party may file exceptions and briefs within thirty (30) days of the
Page 12 notice of appeal or order for review. Within thirty (30) days thereafter, any party may file a responsive brief. The Administrator may shorten or extend the briefing period as appropriate. The Administrator may resolve the appeal on the briefs or provide an opportunity for oral argument. 185 IAC 10.27(6). The administrator may affirm, reverse or modify the proposed decision. A party who is adversely affected by the proposed decision shall not be deemed to have exhausted administrative remedies unless the adversely affected party files a request for review of the proposed decision within the time provided and the Administrator has reviewed the proposed decision and has affirmed, reversed, or modified the proposed decision. Dated this 29th day of June, 2012. Margaret LaMarche Administrative Law Judge Iowa Department of Inspections and Appeals Administrative Hearings Division Lucas State Office Building-Third Floor Des Moines, Iowa 50319 cc: See attached mailing list.
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