In re Odessa Corp.
Annotate this Case
In re Odessa Corp. (2004-075); 179 Vt. 640; 898 A.2d 1256
2006 VT 35
[Filed 25-Apr-2006]
ENTRY ORDER
2006 VT 35
SUPREME COURT DOCKET NO. 2004-075
NOVEMBER TERM, 2005
In re Odessa Corporation } APPEALED FROM:
}
} Liquor Control Board
}
In the above-entitled cause, the Clerk will enter:
¶ 1. Odessa Corporation, doing business as Champlain Farms,
appeals from the Liquor Control Board's order suspending its license for
seventeen days after finding that one of Odessa's employees sold alcohol to
a minor. Odessa raises numerous claims of error. We affirm.
¶ 2. Odessa operates a convenience store in Winooski, Vermont. In
August 2003, it was notified that a hearing would be held on whether its
license should be suspended or revoked based on an allegation that one of
its employees sold alcohol to a minor. Approximately three weeks before
the hearing, Odessa's attorney, William Simendinger, contacted William
Goggins, the director of the Enforcement Division of the Department of
Liquor Control, seeking to resolve the pending charge without a hearing.
Goggins directed Simendinger, as he had in previous cases, to submit a
written offer of settlement, which he would present to the Board. Two days
before the scheduled hearing, Goggins received a letter from Simendinger
indicating that Odessa would agree to pay $500 to resolve the charge.
Goggins telephoned the Board members and informed them of Odessa's offer.
He read the charge from the notice of hearing and summarized Odessa's
history of prior violations. All three Board members rejected the
proposal, indicating that they would settle the case if Odessa agreed to a
fourteen-day or fifteen-day suspension of its license.
¶ 3. A contested case hearing ensued. On the day of the hearing,
Odessa requested a continuance because one of its witnesses, the store
clerk, failed to appear. The State opposed Odessa's request, noting that
Odessa had failed to subpoena the clerk, and the State had several other
witnesses who had traveled to Montpelier and were prepared to testify. The
Board denied Odessa's request, explaining that Odessa was responsible for
securing its witnesses and the State was prepared and ready to proceed.
¶ 4. Odessa then moved to recuse the Board members and dismiss the
case, asserting that the communications between Goggins and the Board
regarding Odessa's settlement offer violated due process and the Vermont
Administrative Procedure Act. The Board heard evidence and argument on the
motion. Goggins described the settlement process, noting that he had
explained the process to Simendinger in advance without objection. Goggins
testified that he did not discuss the investigation, witnesses, evidence,
or the strength or weakness of the State's case with the Board members.
¶ 5. The State offered the settlement letter into evidence and the
Board admitted it over Odessa's objection. The Board explained that the
letter provided the factual basis for Odessa's claim that the Board should
be recused, and it demonstrated what the communication had been between
Goggins and the Board with respect to Odessa's offer. Simendinger
cross-examined Goggins about his conversations with the Board, inquiring if
Goggins could remember the conversations verbatim. Goggins responded that
he always followed the same procedure in discussing a settlement with the
Board, but he acknowledged that he could not recall his conversations
verbatim. Simendinger then sought to call the Board members as witnesses,
asserting that Goggins had not adequately testified to the substance of his
conversations with the Board. The State objected, arguing that it would be
"extraordinary and inappropriate" for the Board members to become witnesses
at a proceeding they were conducting. The State noted that Goggins had
testified to the conversations and had been subject to cross-examination.
It also explained that Odessa's motion was based on an allegation that the
Board had received "prejudicial evidence" from Goggins, and no evidence
supported such an allegation, nor was there any evidence that the
conversations involved disputed issues of fact as Odessa alleged. The
Board denied Odessa's request that the Board members testify, as well as
Odessa's recusal motion.
¶ 6. The Board then held an evidentiary hearing on the alleged
violation. The arresting officer testified that on the evening in
question, he observed a young woman exiting Odessa's store carrying a large
quantity of beer. She looked obviously underage, and the officer spoke
with her and asked her for identification. She produced a driver's license
but eventually admitted to the officer that the identification was false
and she was underage. The minor identified the clerk who had sold her the
alcohol. The officer spoke to the clerk who informed him that she had sold
alcohol to the minor "dozens of times," and she had not asked the minor for
identification before completing the sale. The officer verified this
latter statement by looking at an "audit trail," a mechanism used by Odessa
to track sales. The minor also testified at the hearing. She stated that
she had purchased a large amount of beer that evening at Odessa's store.
She stated that she frequently bought beer there. She admitted showing the
officer false identification, and she acknowledged that she was underage at
the time of the sale. Counsel for the Board later asked if the minor's
false identification card would be made an exhibit, and the attorney for
the State replied that it would obtain and submit the identification card.
Odessa's counsel objected, asserting that he would want to cross-examine
the arresting officer, who had been excused, about the identification card.
The Board overruled the objection but the identification card was not
entered into evidence. In January 2004, the Board issued its order
suspending Odessa's license for seventeen days based on its finding that
one of Odessa's clerks had sold "a considerable quantity of beer" to an
underage individual. Odessa appealed.
¶ 7. On appeal, we presume the reasonableness and validity of a
determination made within an administrative agency's expertise, and we
require a clear and convincing showing to overcome the presumption. In re
Capital Inv., Inc., 150 Vt. 478, 480, 554 A.2d 662, 664 (1988). We will
uphold the Board's factual findings unless they are clearly erroneous, and
we will not overturn the Board's decision if there is any reasonable basis
to support its actions. Id. at 480-81, 554 A.2d at 664.
¶ 8. Odessa first challenges the Board's settlement procedure. It
argues that the process unfairly allows settlements to be negotiated
between the prosecutor and the same individuals charged with conducting an
evidentiary hearing on the allegation. According to Odessa, the Board
could not impartially consider the merits of the allegation after
considering and rejecting Odessa's settlement offer, and the sanction
imposed by the Board must be seen as a punishment for Odessa's refusal to
accept the Board's settlement offer. Odessa also argues that the hearing
was unfair because the Board improperly engaged in ex parte communications
about the settlement offer and failed to put its conversations with Goggins
on the record, in violation of the Vermont Administrative Procedure Act
(VAPA), 3 V.S.A. §§ 800-849. Finally, Odessa asserts that the Board
committed reversible error by admitting the settlement offer into evidence.
¶ 9. While we agree that the Board's settlement procedure is
highly flawed, we find no prejudicial error in this case and discern no
basis for disturbing the Board's decision. We begin with our concerns
regarding the settlement procedure. The VAPA allows for the informal
disposition of any contested case by stipulation, agreed settlement,
consent order, or default, unless precluded by law. 3 V.S.A. § 809(d). We
accord agency adjudicators a "presumption of honesty and integrity,"
Withrow v. Larkin, 421 U.S. 35, 47 (1975), and recognize that some
intermixing of roles within administrative bodies is plainly permitted.
See, e.g., id. at 52 (rejecting argument that combination of investigative
and adjudicative functions within agency necessarily creates an
unconstitutional risk of bias in administrative adjudication); In re
Desautels Real Estate, Inc., 142 Vt. 326, 333-34, 457 A.2d 1361, 1364-65
(1982) (rejecting argument that board cannot be "investigators, prosecutors
and judges"). There is no per se violation of due process where, as here,
the Board rejects a settlement offer, conducts a contested case hearing,
and decides the matter on the merits. See Larkin, 421 U.S. at 56 n.24 ("
'The [federal Administrative Procedure] Act does not and probably should
not forbid the combination with judging of instituting proceedings,
negotiating settlements, or testifying.' " (quoting 2 K. Davis, Admin. Law
Treatise § 13.11, at 249 (1958))). Nonetheless, we are extremely troubled
by the Board's ill-considered settlement procedure-one that calls for
informal off-the-record communication between the Department's director of
enforcement and the Board members themselves. This unwritten settlement
procedure appears fraught with potential difficulties; at the very least,
it appears prone to generate litigation on collateral issues like this one.
The Board should set forth its settlement procedure in a written rule that
is made generally available to the public. The Board may choose, for
example, to require that settlement offers be conveyed to it in writing
through its lawyer. But certainly, the procedure should not be one that
allows settlement offers to be conveyed to the Board over the telephone by
the director of enforcement.
¶ 10. Notwithstanding our strong concerns about the settlement
procedure generally, no prejudicial error resulted from the Board's
consideration of Odessa's settlement offer on the facts presented in this
particular case. We reject Odessa's assertion that it was denied a fair
hearing before an impartial decision-maker. See Sec'y, Agency of Natural
Res. v. Upper Valley Reg'l Landfill Corp., 167 Vt. 228, 234-35, 705 A.2d 1001, 1005 (1997) ("A fair trial before an impartial decisionmaker is a
basic requirement of due process, applicable to administrative agencies as
well as to the courts."). In its motion to recuse the members of the Board
and dismiss the case, Odessa alleged that the Board members had improperly
prejudged the case and were biased against it because they engaged in
improper ex parte communications with Goggins about the settlement offer.
Odessa failed to substantiate these allegations below, and it fails to
demonstrate on appeal that the Board's consideration of its settlement
offer "create[d] an unacceptable risk of bias to overcome the presumption
of honesty and integrity." In re Crushed Rock, Inc., 150 Vt. 613, 619, 557 A.2d 84, 87 (1988).
¶ 11. Odessa maintains that because the Board engaged in improper
ex parte conversations about its settlement offer, it was thereby denied an
opportunity to defend itself against any off-the-record prejudicial
evidence. We reject this argument. While the VAPA prohibits individuals
who conduct contested case proceedings from communicating with respect to
any issue of fact or law "except upon notice and opportunity for all
parties to participate," 3 V.S.A. § 813, there is no evidence that any
contested issue of fact or law was discussed in this case. The Board's
findings to this effect are supported by the record. Goggins testified to
the process he followed in communicating Odessa's offer to the Board. He
detailed the information that he provided the Board members, and he stated
that he did not discuss the merits of the case with the Board. Given
Goggins' testimony, and the fact that he was subject to cross-examination,
the Board did not err in refusing to testify to the substance of the same
conversations at a proceeding that it was conducting. Cf. V.R.E. 605 ("A
judge sitting at the trial may not testify in that trial as a witness.");
see also 3 V.S.A. § 810(1) (providing that "[i]rrelevant, immaterial, or
unduly repetitious evidence shall be excluded" in contested case
proceedings). This is particularly true because Odessa's motion to dismiss
was based on an allegation that Goggins had disclosed prejudicial
information to the Board.
¶ 12. We reject Odessa's assertion that the Board's refusal to
testify violated 3 V.S.A. § 809(e) because "[u]ndoubtedly, prejudicial
evidence was presented to the Board" that should have been on the record.
Section 809(e) requires that the record in a contested case include, among
other things, "all evidence received or considered." Putting aside
Odessa's failure to identify the allegedly "prejudicial evidence"
considered by the Board, we are not persuaded that the settlement
discussions in this case constituted "evidence" received and considered by
the Board in rendering its decision on the merits of the allegation. In
any event, the record did include Goggins' testimony regarding the
settlement process, and the Board made numerous findings of fact about what
had transpired. These findings are supported by the evidence. Finally, we
note that Odessa initiated the settlement process, it was plainly informed
of what would occur when it submitted its written offer, and it chose to
proceed with the process. Any error in the Board's consideration of
Odessa's offer was invited. See In re Fiorillo Bros. of N.J., Inc., 577 A.2d 1316, 1322 (N.J. Super. Ct. App. Div. 1990) (addressing similar issue,
and explaining that appellants' attorney plainly understood that settlement
offers would be conveyed to administrative board because case could not be
settled without board approval, and thus "it is difficult to imagine why
any settlement offer would be made unless the offer would reach the
Board").
¶ 13. The Board's awareness of the allegation against Odessa and
Odessa's licensing history does not demonstrate that the Board was
incapable of rendering an impartial decision. As the United States Supreme
Court explained in discussing an analogous issue,
The mere exposure to evidence presented in nonadversary
investigative procedures is insufficient in itself to impugn the
fairness of the Board members at a later adversary hearing.
Without a showing to the contrary, state administrators are
assumed to be men of conscience and intellectual discipline,
capable of judging a particular controversy fairly on the basis of
its own circumstances.
Larkin, 421 U.S. at 55 (quotations omitted); see also 2 K. Davis & R.
Pierce, Jr., Admin. Law Treatise § 9.8, at 78 (3d ed. 1994) (stating that
an adjudicative decisionmaker is not disqualified simply because of prior
exposure to adjudicative facts). Odessa provides no basis for its
allegation that the Board was prejudiced by its consideration of the
settlement offer, nor has it shown that, by considering the offer, the
Board was "disabled from hearing and deciding on the basis of the evidence
to be presented at the contested hearing." Larkin, 421 U.S. at 55. The
evidence presented at the contested case hearing overwhelmingly established
that the alleged violation occurred. The fact that the Board imposed a
greater sanction than that proposed during the settlement process does not
demonstrate bias. When considering the settlement offer, the Board was
aware only of Odessa's licensing history and the general allegation as
stated in the notice of hearing. At the hearing, the State presented
specific evidence as to the nature of the violation-evidence, for example,
that Odessa's employee sold a large quantity of beer to an individual who
looked "obviously underage," that the clerk did not ask the minor for
identification, and that the clerk had sold the same individual alcohol on
dozens of occasions. The Board made numerous findings of fact, which are
supported by the record, and the Board acted reasonably in concluding that
the violation warranted a seventeen-day suspension.
¶ 14. We turn to Odessa's remaining claims, all of which lack
merit. First, there is no support for Odessa's assertion that the Board
committed reversible error in admitting the settlement offer into evidence.
The settlement offer was not introduced to prove the allegation against
Odessa. Cf. V.R.E. 408 (providing that offers to compromise claim are "not
admissible to prove liability for . . . the claim," and that settlement
offers need not be excluded "if the evidence is offered for another
purpose, such as proving bias or prejudice of a witness" or negating "a
contention of undue delay"). Instead, the State offered the settlement
letter in response to Odessa's motion to recuse the members of the Board.
More specifically, the State offered the letter to demonstrate the
circumstances that led to Goggins' conversation with the Board members and
to "confirm and corroborate" Goggins' testimony. The evidence was clearly
relevant, and the Board did not err in admitting it. See Quirion v.
Forcier, 161 Vt. 15, 21, 632 A.2d 365, 369 (1993) (recognizing that trial
court has broad discretion in ruling on admissibility of evidence, and
party claiming abuse of that discretion bears a heavy burden).
¶ 15. We similarly reject Odessa's assertion that the Board erred
in denying its motion for a continuance. Odessa argues that it was not
obligated to subpoena its own witness, and that by denying its request for
a continuance, the Board essentially deprived it of its ability to present
its case. Odessa suggests that the witness may have been absent due to her
pregnancy, and thus unavailable under Vermont Rule of Evidence 804(a)(4)
and Vermont Rule of Civil Procedure 40(d)(3). Odessa also asserts that it
had made reasonable efforts to secure the witness, and she was therefore
"unavailable" under Vermont Rule of Evidence 804(a)(5).
¶ 16. These arguments are unavailing. The record shows that Odessa
informed the Board that the witness apparently forgot about the hearing.
Odessa acknowledged that it could have subpoenaed the witness to secure her
attendance but it failed to do so. See 3 V.S.A. § 809(h) (providing that a
licensed attorney representing a party before a board may compel by
subpoena the attendance and testimony of witnesses). We fail to see the
relevance of the rules of evidence cited by Odessa, which identify
exceptions to the hearsay rule for "unavailable" witnesses. See, e.g.,
V.R.E. 804(a)(4) (providing that hearsay testimony is admissible where the
declarant "[i]s unable to be present or to testify at the hearing because
of death or then existing physical or mental illness or infirmity"); V.R.E.
804(a)(5) (providing that hearsay testimony is admissible when the
proponent of the statement has been unable to procure the witness's
attendance by process or other reasonable means). Counsel did not seek to
offer any hearsay testimony from this witness, other than a purported
"business record," which, as discussed below, was properly excluded. (FN1)
In any event, counsel's suggestion that its witness may have been absent
due to her pregnancy conflicts with its representation to the Board at the
hearing.
¶ 17. We are equally unpersuaded by Odessa's reliance on Vermont
Rule of Civil Procedure 40(d)(3), which concerns continuances in civil
cases when a witness is sick or otherwise disabled from attending court.
As the State points out, even if Rule 40(d) were applicable, it
specifically requires an affidavit from a reputable physician to support
such a claim. V.R.C.P. 40(d)(1). No such affidavit was offered here. The
Board acted within its wide discretion in denying the motion based on its
finding that Odessa was responsible for securing the attendance of its own
witnesses, and that the delay would be unfair to the State. See State v.
Ahearn, 137 Vt. 253, 267, 403 A.2d 696, 705 (1979) (stating that a motion
for continuance is addressed to the "sound discretion" of trial court, and
this Court will not interfere with trial court's decision if there is a
reasonable basis for court's discretionary action).
¶ 18. Odessa next challenges several of the Board's evidentiary
rulings and related findings. It argues that the Board should have
admitted the store clerk's written statement about the disputed sale as a
business record under Vermont Rule of Evidence 803(6). It also asserts
that the Board gave undue weight to the testimony of the police officer.
Finally, it argues that the Board should have obtained and considered
evidence that it had objected to both during and after the hearing. We
find these arguments without merit.
¶ 19. First, the Board did not abuse its discretion in excluding a
written statement that the store clerk prepared after the incident. At the
hearing, the State objected to the introduction of this document on hearsay
grounds. Odessa maintained that the document was admissible as a business
record under Rule 803(6). The Board excluded the statement as inherently
unreliable hearsay, and it did not err in doing so. Rule 803(6) provides
that a record will not be excluded as hearsay "if kept in the course of a
regularly conducted business activity, and if it was the regular practice
of that business activity to make the . . . record, . . . unless the source
of information or the method or circumstances of preparation indicate lack
of trustworthiness." Putting aside whether this document could be
considered the product of a "regularly conducted business activity," the
Board found the statement untrustworthy, and we defer to its finding. See
also Palmer v. Hoffman, 318 U.S. 109, 113 (1943) (interpreting similar
hearsay exception, and stating that the "fact that a company makes a
business out of recording its employees' versions of their accidents does
not put those statements in the class of records made 'in the regular
course' of the business" under hearsay exception). While the rules of
evidence for contested cases are relaxed under certain circumstances, this
is not a case where the evidence was "of a type commonly relied upon by
reasonably prudent [people] in the conduct of their affairs" and "necessary
to ascertain facts not reasonably susceptible of proof" under the rules of
evidence. 3 V.S.A. § 810(1) (setting forth rules of evidence for contested
cases). Odessa could have secured the presence of its witness to testify
to the evening's events, but it failed to do so.
¶ 20. We also reject Odessa's argument that the Board somehow erred
by crediting the testimony of the arresting officer that the minor did not
look like the photograph on her identification card. Despite Odessa's
argument to the contrary, this issue is irrelevant to the Board's ultimate
conclusion because the clerk in this case did not ask the minor for her
identification before making the sale. Finally, we reject Odessa's
assertion that it was prejudiced because evidence that it sought to exclude
at the hearing-the minor's false identification card-was never entered into
evidence. The record shows that at the close of the State's case, the
Board's counsel asked if the minor's false identification could be made an
exhibit; the attorney for the State indicated that he would obtain the
driver's license and submit it to the Board. Odessa's counsel objected and
renewed its objection in its post-trial memorandum. The Board overruled
the objection, but the license was not admitted into evidence. Odessa now
argues that the Board was wrong to authorize the submission of evidence
after the close of the hearing, and it was prejudiced when the evidence was
not submitted. This argument is illogical, and no prejudice is
demonstrated. The minor did not use her false identification to purchase
the alcohol. Moreover, as Odessa sought to exclude this evidence at the
hearing, we simply cannot credit its assertion that it was somehow
prejudiced when the evidence was not submitted to the Board. The Board's
findings in this case are amply supported by the record, and they support
the Board's conclusion that one of Odessa's employees sold alcohol to a
minor.
Affirmed.
BY THE COURT:
_______________________________________
Paul L. Reiber, Chief Justice
_______________________________________
John A. Dooley, Associate Justice
_______________________________________
Denise R. Johnson, Associate Justice
_______________________________________
Marilyn S. Skoglund, Associate Justice
_______________________________________
Brian L. Burgess, Associate Justice
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Footnotes
FN1. The availability of the witness is immaterial for purposes of
determining the admissibility of the business record under Vermont Rule of
Evidence 803(6).
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