Bob J. McAdams and The Checkmate Club, Inc. v. Alcoholic Beverage Control Division

ARKANSAS COURT OF APPEALSDIVISION I

JUDGE OLLY NEAL

NOT DESIGNATED FOR PUBLICATION

CA01-732

December 19, 2001

BOB J. McADAMS and THE AN APPEAL FROM PULASKI COUNTY

CHECKMATE CLUB, INC. CIRCUIT COURT, SIXTH DIVISION

APPELLANTS NO. CV 00-9440

V.

HONORABLE DAVID BOGARD,

ALCOHOLIC BEVERAGE CONTROL CIRCUIT JUDGE

DIVISION

APPELLEE AFFIRMED

This is a companion case to Bob J. McAdams and The Colonial Ballroom, Inc., d/b/a The Checkmate Club v. Alcoholic Beverage Control Division, CA01-825, which is also being decided today. Bob J. McAdams and The Checkmate Club have appealed from an order entered by the Sixth Division of the Pulaski County Circuit Court dismissing appellants' petition for a declaratory judgment. The Checkmate Club is a private club in North Little Rock that operates under a Class B private-club permit.

In April 2000, The Checkmate Club requested that its "black-out hours," when it cannot serve alcoholic drinks, be changed from 5:00 a.m. until 10:00 a.m. to 5:00 p.m. until 10:00 p.m. Robert Moore, the Alcoholic Beverage Control Board's director, denied the request on May 3, 2000, in reliance on regulation 5.47 of the agency's regulations.1 Appellants appealed Mr. Moore's decision to the Alcoholic Beverage Control Board (ABC Board), arguing that the General Assembly had not granted it any authority to establish the operating hours of private clubs. The ABC Board found that it is authorized by the General Assembly to adopt regulations affecting all phases of the alcoholic-beverage industry, including the operating hours of private clubs. It also found that its regulations did not authorize the variation of the operating hours requested by The Checkmate Club.

On July 6, 2000, appellants filed a petition for review of the ABC Board's decision and for declaratory judgment in the Third Division of the Pulaski County Circuit Court. In their petition, appellants alleged that the ABC Board has no constitutional or statutory authority to restrict the club's hours of dispensing alcoholic beverages and sought to set aside any such restriction. In response, the ABC Board pled that it is authorized by statute to regulate all phases of the alcoholic-beverage industry. On February 14, 2001, the circuit judge issued an order dismissing appellants' petition and finding that the ABC Board's decision was based upon substantial evidence and was free from any other error of law. Appellants have appealed that decision in CA01-825.

On October 23, 2000, while the Third Division action was pending, Mr. McAdams, as an employee and a member of The Checkmate Club, filed a petition for declaratory judgment in the Sixth Division of Pulaski County Circuit Court. Referring to the ABC Board's order, he asserted that the ABC Board has no authority to impose a black-out on the hours of dispensing alcoholic beverages in a private club and that its regulation purporting to do so violates his rights under the First and Fourteenth Amendments. Mr. McAdams also alleged that there is a question of law as to whether a private club needs a license from theABC Board to dispense alcoholic beverages to its members. He asked the trial court to declare that the ABC Board's regulation of the club's hours is invalid and unconstitutional and that the club requires no license. The ABC Board moved to dismiss on the ground that Mr. McAdams had failed to exhaust all of his administrative remedies and that a lawsuit dealing with these issues was pending in the Third Division of the Pulaski County Circuit Court. The ABC Board filed copies of the Third Division pleadings.

On November 28, 2000, Mr. McAdams filed a motion for summary judgment. Mr. McAdams and The Checkmate Club were both listed as the petitioners on a December 15, 2000, amendment to the motion for summary judgment. In response, the ABC Board noted that, even if appellants meant to add The Checkmate Club as a party to the lawsuit, the lawsuit should still be dismissed because The Checkmate Club was also a party to the pending Third Division action.

On February 6, 2001, the circuit judge entered an order granting the ABC Board's motion to dismiss. He noted that the Third Division action was still pending and stated:

The Petitioners contend in this matter that they are entitled to file a declaratory judgment action in circuit court without first exhausting their administrative remedies before the ABC Board. The Court disagrees. Before the petitioners may file a declaratory judgment action challenging the constitutionality of a particular ABC regulation, they must exhaust the administrative remedies available, and this includes an appeal of the administrative agency's decision regarding constitutionality of that same regulation to a circuit court. Ford v. Arkansas Game & Fish Commission, 335 Ark. 245, 979 S.W.2d 897 (1998). Thus, the Respondent's Motion to Dismiss for Lack of Subject Matter Jurisdiction is hereby GRANTED. This action is hereby DISMISSED, without prejudice.

Appellants argue that the circuit judge erred in dismissing this declaratory-judgment action. Pursuant to Arkansas Rule of Civil Procedure 12(c), a motion to dismiss is convertedinto a motion for summary judgment when matters outside the pleadings are presented to and not excluded by the court. Because it is clear from the wording of the circuit judge's order that he considered matters outside the pleadings, the order should be treated as one for summary judgment. See Ford v. Arkansas Game & Fish Comm'n, 335 Ark. 245, 979 S.W.2d 897 (1998). Summary judgment is appropriate when there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. Id. In making this determination, we review the evidence in the light most favorable to the party resisting the motion and resolve all doubts and inferences in his favor. Id.

Rule 12(b)(8) of the Arkansas Rules of Civil Procedure provides that a defense may be made by motion on the ground that another action between the same parties arising out of the same transaction or occurrence is pending. When a suit is brought while another suit is pending between the same parties concerning the same subject matter, the trial court where the second suit is brought has no choice but to dismiss the second suit. Patterson v. Isom, 338 Ark. 234, 992 S.W.2d 792 (1999); Mark Twain Life Ins. Corp. v. Cory, 283 Ark. 55, 670 S.W.2d 809 (1984). Clearly, Rule 12(b)(8) gave the circuit judge grounds to dismiss the complaint.

Additionally, the exhaustion-of-remedies doctrine required dismissal of this action. The Administrative Procedure Act, in Ark. Code Ann. § 25-15-207 (Repl. 1996), provides for petitions for declaratory judgment in circuit court concerning the validity of agency rules that threaten to injure the petitioner. See Douglass v. Nationwide Mut. Ins. Co., 323 Ark. 105, 913 S.W.2d 277 (1996). However, requests for declaratory relief should be denied where issues are not ripe or there are ongoing administrative or judicial proceedings wherethe issue may be resolved. In UHS of Arkansas, Inc. v. Charter Hospital of Little Rock, Inc., 297 Ark. 8, 12-13, 759 S.W.2d 204, 206 (1988), the supreme court explained:

Declaratory judgment statutes are intended to supplement rather than supersede ordinary causes of action. Consequently, when another action between the same parties, in which all issues could be determined, is actually pending at the time of the commencement of an action for a declaratory judgment, the court abuses its discretion when it entertains jurisdiction. Mid-State Const. Co. v. Means, 245 Ark. 691, 434 S.W.2d 292 (1968); City of Cabot v. Morgan, 228 Ark. 1084, 312 S.W.2d 333 (1958). If this were not the law, one could be charged in circuit court with violating the law, and the accused could seek a declaratory judgment in chancery court that the law was unconstitutional. Aside from the fact that the courts might rule differently, creating unnecessary confusion, such a system would create an extra burden on the trial courts, increase the appellate load, and thoroughly confuse the law enforcement agencies and the public.

In Ford v. Arkansas Game & Fish Commission, supra, Ford had a hearing before the Commission pursuant to the Administrative Procedure Act. Before the hearing was complete, he filed for a declaratory-judgment action, contending that the statute being applied to him was unconstitutional. The trial court dismissed the action because Ford had not exhausted his administrative remedies. Ford argued on appeal that he was not required to exhaust his administrative remedies because he was raising a constitutional claim which, he said, the agency was incapable of deciding. The supreme court affirmed and stated:

Ford was not entitled to file a declaratory-judgment action under Ark. Code Ann. § 25-15-207 before he exhausted his administrative remedies before the Commission. Instead of filing a declaratory judgment action, Ford should have raised his constitutional arguments before the Commission, and then appealed the Commission's final ruling to the circuit court pursuant to Ark. Code Ann. § 25-15-212 (Repl. 1996).

335 Ark. at 251-52, 979 S.W.2d at 900. A basic rule of administrative procedure requires that the agency be given the opportunity to address a question before resort is made to the courts. Dynamic Enters., Inc. v. Taylor, 38 Ark. App. 184, 832 S.W.2d 278 (1992). AccordRegional Care Facilities, Inc. v. Rose Care, Inc., 322 Ark. 780, 912 S.W.2d 406 (1995); Hankins v. McElroy, 313 Ark. 394, 855 S.W.2d 310 (1993); Rehab Hosp. Servs. Corp. v. Delta-Hills Health Sys. Agency, Inc., 285 Ark. 397, 687 S.W.2d 840 (1985). See also Ragon v. Great Am. Indem. Co., 224 Ark. 387, 273 S.W.2d 524 (1954).

Therefore, based on these cases, we hold that the circuit judge correctly dismissed the declaratory-judgment action because appellants had not yet exhausted their administrative remedies.2

Affirmed.

Stroud, C.J., and Hart, J., agree.

1 When the regulations were recently republished, regulation 5.47 was erroneously listed as regulation 5.48.

2 We note that, in addition to the appeal from Third Division Circuit Court in CA01-825, Mr. McAdams has filed an appeal to this court from a chancery court decision involving the same issues in B.J. McAdams v. Alcoholic Beverage Control Division, CA01-691. The record in that case reveals that Mr. McAdams has filed yet another lawsuit involving these issues in the Sixth Division of the Pulaski County Circuit Court. Obviously, appellants cannot continue to litigate the same issues in different forums indefinitely. At some point, they will be forced to consider whether the pursuit of endless litigation on this subject is worth the likelihood of sanctions under Arkansas Rule of Civil Procedure 11.