DIVISION OF ALCOHOLIC BEVERAGE CONTROL v. DAVEJOE, L.L.C.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

DIVISION OF ALCOHOLIC

BEVERAGE CONTROL,

Petitioner-Respondent,

v.

DAVEJOE, L.L.C., t/a

KASHMIR GENTLEMEN'S CLUB,

Respondent-Appellant.

_______________________________________________________

June 27, 2014

Submitted April 8, 2014 Decided

Before Judges Messano and Hayden.

On appeal from the Department of Law and Public Safety, Division of Alcoholic Beverage Control, Docket No. S-11-35334.

Stark & Stark, P.C., attorneys for appellant (Joel R. Rosenberg, on the brief).

John J. Hoffman, Acting Attorney General, attorney for respondent (Kevin Marc Schatz, Senior Deputy Attorney General, and Marita A. Kosek, Deputy Attorney General, on the briefs).

PER CURIAM

Defendant DaveJoe, L.L.C., the owner and operator of the Kashmir Gentlemen's Club (Kashmir), appeals from a final determination of the Director of the Division of Alcoholic Beverage Control (the Division) suspending Kashmir's plenary retail consumption license for two years after two of its underage patrons died in an automobile accident shortly after leaving the club. We affirm.

We glean the following facts from the record. On June 27, 2011, Mandy Caudill and her eighteen-year-old boyfriend Jonathan Rothschild drank alcoholic beverages together at Caudill's home beginning at approximately 7:00 p.m. before going to a local restaurant where they had several rounds of alcoholic drinks. Twenty-year-old Ian Drebes, who had also been drinking alcohol, joined them at 10:00 p.m. The three had more drinks together before leaving the restaurant at around midnight and proceeding to Kashmir, where they arrived around 12:30 a.m.

Upon their arrival at Kashmir, the club's bouncer only asked for identification from Drebes, but not Rothschild, whom he recognized from an earlier visit. Both Drebes and Rothschild had fake driver's licenses, which showed their ages to be twenty-three and twenty-one respectively.

Once inside the club, the three friends headed directly to the bar, where the bartender served the two men alcoholic drinks at about 12:35 a.m.1 Over the course of the next hour and a half, the bartender served Rothschild and Drebes a total of five alcoholic drinks each.

The three friends left Kashmir at about 2:00 a.m. At 2:13 a.m., Rothschild and Drebes died in a single-car accident. At the time of death, Rothschild had a blood-alcohol content (BAC) of .162%, and Drebes had a BAC of .157%.

In the wake of the accident, the Division opened an investigation into the circumstances leading to the two deaths. The Division interviewed the bartender, the two dancers who interacted with the decedents, the bouncer, the disc jockey, Caudill, and Kashmir's co-owner about the events of June 27-28, 2011.

According to Caudhill, on the way out of the restaurant before they went to Kashmir, Rothschild was incoherent, argumentative, and slurring his words. Caudill drove Rothschild as, in her opinion, he was too intoxicated to drive. Drebes backed his car into a parked truck and made a cursory examination of the damage before driving away.

Caudill recounted that Kashmir's bouncer did not ask for identification from any of them upon arrival. The bouncer initially contended that he inspected all of their identifications, but later admitted that he only examined Drebes' license. The bouncer further conceded that when he looked at Drebes' license, he did not hold it up to Drebes' face to compare the photo for likeness. Instead, the bouncer stated that he simply used the light on his cell phone to illuminate the license, concluded that "they looked like they were old enough," and allowed all three individuals to enter on that basis.

When questioned by the Division on his training and knowledge on spotting fake driver's licenses, the bouncer had difficulty articulating the telltale characteristics of bona-fide licenses. The bouncer also reported that management had not issued him an ultraviolet light to undertake proper inspection of its patrons' driver's licenses. He admitted that he was "not educated on fake ID's," and "probably need[ed] to learn more."

When interviewed by the Division, the bartender claimed that both Rothschild and Drebes seemed "fine" to her, and that neither appeared to have been drinking previously. She elaborated that the two men "seemed like they loosened up some, like they were having fun," and denied that there were any "red flags" that would have indicated to her that they were becoming intoxicated. At the same time, the bartender recalled asking Drebes whether the group had a designated driver because she observed him "stumbling over his words," even before she served him his last round of drinks. She tempered this explanation, conjecturing that Drebes was probably simply "nervous with the girls that were half naked standing around him."

The two Kashmir dancers who interacted with Rothschild and Drebes also described the young men as appearing sober. For example, one dancer stated that "they didn't look drunk" to her. She explained that there was nothing in their mannerisms, either in speech or facial appearance, that would have indicated intoxication. Later in her interview, the dancer conceded that there was a point in the night at which Drebes appeared "f*cked up or not looking too good." She also asked who was the designated driver for the group. Like the bartender, she tempered her statement, explaining: "I would say like after the lap dance [Drebes] was fired up."

The other dancer provided the investigators with equally contradictory narratives of her evening with the two young men. She explained that the young men did not "seem drunk to [her]," and suggested that they had never been to a strip club and were simply over-excited by the girls. However, she indicated that the young men looked very young and had "baby faces." She also noted that at one point in the night, one of the two men had a strong odor of alcohol on his breath, and began mumbling. She reported being "really worried" and noticed "the alcohol is starting to kick in." The dancer also asked who was driving because "[t]hey seemed a little tipsy." Twice she offered to drive them herself.

On August 6, 2012, John Brick, Ph.D., a nationally recognized expert on the pharmacological, physiological, and behavioral effects of alcohol, prepared a report for the Division regarding the incident. Dr. Brick noted that at the time of death, Rothschild and Drebes had BACs over the legal limit. Dr. Brick was able to extrapolate the rate of alcohol metabolism in both Rothschild's and Drebes' bodies. The doctor concluded:

Messrs. Drebes' and Rothschild's blood alcohol level increased steadily throughout the evening and early morning hours so that by about 9:20 p.m. (Rothschild) or 10:20 p.m. (Drebes) reached the concentration that by law, defines alcohol intoxication. Since both decedents were less than the legal age (<21), the applicable legal definition of intoxication is 0.01% . . . . With continued drinking and/or absorption of alcohol, Messrs. Drebes' and Rothschild's blood alcohol level increased further, reaching a concentration of .15% before the service of the last drink (Rothschild) [or] at about the time of service (Drebes).

From this data, Dr. Brick determined that when Rothschild and Drebes arrived at Kashmir that evening, both young men had already surpassed the legal limit of intoxication. Dr. Brick also concluded,

given the nature of [the] accident, namely high speed driving, failure to make the necessary observations, process and respond to roadway conditions, failure to maintain control of [the] vehicle and high blood alcohol levels, it is also my opinion that alcohol intoxication was a significant contributing factor to if not the primary cause of this double fatal crash.

On August 22, 2012, the Division issued a notice of charges against defendant, charging it with four counts of violating the provisions of the Alcoholic Beverage Control Act, N.J.S.A. 33:1-1 to -97, and its related regulations. Specifically, it charged defendant with two counts of serving intoxicated persons, N.J.A.C. 13:2-23.1(b), and two counts of serving persons under the legal age, N.J.A.C. 13:2-23.1(a). Defendant denied the charges.

On February 14, 2013, Joseph Vasil, the Coordinator of the New Jersey Motor Vehicle Commission's Fraudulent Document Training Unit, prepared a certification for the Division analyzing Drebes' and Rothschild's fake driver's licenses. He opined that if Rothschild or Drebes had presented their fake driver's licenses, "Kashmir's employees should have immediately recognized these documents to be counterfeit." Vasil identified six distinct areas in which Kashmir's security should have been able to quickly identify that Rothschild's and Drebes' licenses were not genuine: (1) the licenses' transaction codes did not contain numbers that corresponded to the licenses' dates of issue; (2) the signatures did not overlap with portions of the photographs, as a genuine license's signature would; (3) the ultraviolet images on the main photographs were misaligned; (4) the fraudulent licenses lacked proper lamination on the reverse side; (5) the fraudulent licenses did not emit the correct color of light when a flashlight was shone through them; and (6) the holographic images were inaccurate. Based on these obvious signs in Rothschild's and Drebes' licenses, Vasil reached an expert opinion to a reasonable degree of certainty "that a liquor licensee could not reasonably rely on either of the aforementioned fictitious identifications as a basis upon which to believe that either Messrs. Drebes and/or Rothschild were of legal age to consume alcoholic beverages."

The Division filed a motion for summary decision on February 28, 2013. The parties convened for oral arguments on June 6, 2013, before Division Director Michael I. Halfacre. On August 6, 2013, the Director granted the Division's motion for summary decision, and simultaneously revoked defendant's liquor license for a period of two years.

The Director determined, based on the observations of all the witnesses interviewed, that both Rothschild and Drebes were apparently intoxicated at the time they were served their last round of drinks, if not sooner. Moreover, even if they did not appear intoxicated, there was no dispute that they were actually intoxicated at Kashmir. Thus, the Director found that defendant was guilty of the first two counts of serving intoxicated persons, N.J.A.C. 13:2-23.1(b).

Next, the Director determined that defendant was guilty of serving persons under the legal age, N.J.A.C. 13:2-23.1(a), and not entitled to the affirmative defense established by N.J.S.A. 33:1-77. The Director found that the affirmative defense was not available as to Rothschild because the bouncer did not ask for his identification. Additionally, the Director determined that defendant's security was impermissibly lax, and that it failed to equip its bouncer with the proper tools or training for counterfeit identification detection. As a result, the Director noted, the bouncer was unable to discern even the most rudimentary hallmarks of fraudulent driver's licenses. Defendant's care in screening underage patrons had been so lax, the Director concluded, that it could not be found to have acted "in good faith" in relying upon Drebes' identification card.

Thus, the Director granted summary decision to the Division finding that "even with all legitimate inferences in [defendant's] favor, [it] failed to raise a genuine issue of material fact." The Director opined that the tragic events that resulted in the loss of two young lives could have been prevented if the bouncer was properly trained and equipped because they would have been turned away at the door, or if the bartender had ceased to serve them, as they were already intoxicated.

In setting the two-year license-suspension penalty, the Director found the deaths of Rothschild and Drebes and defendant's cavalier enforcement policies to be aggravating factors. He rejected all of the proffered mitigating factors, explaining that defendant's lack of prior offenses was no defense because of the severity of this incident; defendant's minimal training was unavailing because it was clearly ineffective; and defendant's full cooperation in the Division's investigation was not a mitigating factor, because it was the duty of any licensee. This appeal ensued.

On appeal, defendant raises the following contentions:

POINT I: Summary decision is inappropriate as to charges 1 and 2 because issues of material fact exist as to whether decedents were "intoxicated" in violation of N.J.A.C.13:2-23.1(b).

POINT II: Summary judgment is inappropriate as to charges 3 and 4 because of the existence of material disputes of fact concerning the good faith and reasonableness of Kashmir's inspection.

poINT III: Revocation is an illegal taking barred by the Fifth Amendment of the U.S. Constitution (not raised below).

POINT IV: The Director's order is a violation of due process because revocation is arbitrary, capricious, and unrelated to any legitimate purpose.

POINT V: The Director committed reversible error by failing to adequately consider mitigating factors.

The scope of our review in an appeal from a final decision of an administrative agency is limited. Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 9 (2009). We must sustain the agency's action in the absence of "a 'clear showing' that it is arbitrary, capricious, or unreasonable, or . . . lacks fair support in the record[.]" Id. at 9-10 (citing In re Herrmann, 192 N.J. 19, 27-28 (2007)). In reviewing an agency's action, we consider:

(1) whether the agency's action violates express or implied legislative policies, that is, did the agency follow the law; (2) whether the record contains substantial evidence to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.

[Mazza v. Bd. of Trs., Police & Firemen's Ret. Sys., 143 N.J. 22, 25 (1995).]

In weighing these considerations, we must recognize, when appropriate, an "agency's 'expertise and superior knowledge of a particular field.'" Circus Liquors, supra, 199 N.J. at 10 (quoting Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992)).

In particular, we must accord "substantial deference" to a determination of the Director of the Division enforcing the State's regulations on the sale of alcoholic beverages. Ibid. "[T]he 'Director has powers of supervision and control which set him apart from any other formal appellate tribunal.'" Ibid. (quoting Blanck v. Mayor & Borough Council of Magnolia, 38 N.J. 484, 491 (1962)). Moreover, because the State's regulation of liquor "'is a subject by itself,'" we cannot indiscriminately apply principles we otherwise apply when we review actions of administrative agencies. Ibid. (quoting Blanck, supra, 38 N.J. at 490).

Similar to summary judgment, summary decision is granted upon a showing "that there is no genuine issue as to any material fact challenged and that the moving party is entitled to prevail as a matter of law." N.J.A.C. 1:1-12.5(b); see also E.S. v. Div. of Med. Assistance & Health Servs., 412 N.J. Super. 340, 350 (App. Div. 2010). If the moving party properly supports its motion for summary decision, the "adverse party in order to prevail must by responding affidavit set forth specific facts showing that there is a genuine issue which can only be determined in an evidentiary proceeding." N.J.A.C. 1:1-12.5(b). In deciding a summary judgment motion, the evidence must be viewed "in the light most favorable to the non-moving party." Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 329 (2010) (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)).

In New Jersey, establishments that are granted liquor licenses are held strictly liable for violations of the Alcoholic Beverage Control Act, N.J.S.A. 33:1-1 to -97. Div. of Alcoholic Beverage Control v. Maynards Inc., 192 N.J. 158, 180-81 (2007).

It has long been the law in New Jersey that, in the context of the regulation of alcoholic beverages, "the word 'suffer' . . . imposes responsibility on a licensee, regardless of knowledge, where there is a failure to prevent the prohibited conduct by those occupying the premises with his authority."

[Id. at 180 (alteration in original) (emphasis omitted) (quoting Essex Holding Corp. v. Hock, 136 N.J.L. 28, 31 (Sup. Ct. 1947)).]

Defendant argues that the Director improperly granted summary decision regarding the charges for violation of N.J.A.C. 13:2-23.1(b), which provides:

No licensee shall sell, serve or deliver or allow, permit or suffer the sale, service or delivery of any alcoholic beverage, directly or indirectly, to any person actually or apparently intoxicated, or permit or suffer the consumption of any alcoholic beverage by any such person in or upon the licensed premises.

Specifically, defendant contends that material factual disputes existed as to whether Drebes and Rothschild were actually or apparently intoxicated. While we agree that a factual dispute existed as to the apparent intoxication of the young men based on the inconsistent observations of Kashmir's staff, there is no factual dispute that they were actually intoxicated. Defendant presented no competent evidence to contradict Dr. Brick's expert opinion that when both young men arrived at Kashmir, they had already surpassed the legal limit of intoxication and Kashmir's bartender served them at least five drinks each. Additionally, it is uncontroverted that at the time of their deaths less than fifteen minutes after leaving the club, Rothschild's BAC was .162% and Drebes' was .157%, well over the legal limit for adults. As actual intoxication is all that is needed to satisfy a finding of guilt under N.J.A.C. 13:2-23.1(b), we find no reason to overturn the Director's grant of summary decision, which was supported by substantial credible evidence in the record. See Circus Liquors, supra, 199 N.J. at 9-10.

Defendant also argues that the Director improperly granted summary decision regarding the charges under N.J.A.C. 13:2-23.1(a), which provides:

No licensee shall sell, serve or deliver or allow, permit or suffer the sale, service or delivery of any alcoholic beverage, directly or indirectly, to any person under the legal age to purchase or consume alcoholic beverages, or allow, permit or suffer the consumption of any alcoholic beverage by any such person in or upon the licensed premises.

It is well settled that "[s]trict regulation of the distribution of alcoholic beverages, particularly to young people, has repeatedly and emphatically been approved by our courts[.]" N.J. Div. of Alcoholic Beverage Control v. H & H Wine & Spirit Shop, Inc., 216 N.J. Super. 532, 537 (App. Div. 1987). Nevertheless, the inadvertent sale of alcoholic beverages to those under the legal age of consumption can be shielded from liability if the licensee fulfills all parts of the following three-part inquiry:

(a) that the purchaser falsely represented in writing, or by producing a driver's license bearing a photograph of the licensee . . . that he or she was of legal age to make the purchase, (b) that the appearance of the purchaser was such that an ordinary prudent person would believe him or her to be of legal age to make the purchase, and (c) that the sale was made in good faith relying upon such written representation, or production of a driver's license bearing a photograph of the licensee, . . . and appearance and in the reasonable belief that the purchaser was actually of legal age to make the purchase.

[N.J.S.A. 33:1-77.]

Here, it is undisputed that Kashmir sold alcohol to persons under the legal drinking age, resulting in a violation of N.J.A.C. 13:2-23.1(a). Moreover, we are satisfied that there is sufficient credible evidence in the record to support the Director's finding that defendant did not satisfy the requisite elements of the affirmative defense under N.J.S.A. 33:1-77. First, the bouncer admitted that he did not card Rothschild, making the affirmative defense of good faith totally unavailable as to the third charge, which concerned Rothschild.

As to Drebes, at the summary decision stage, the first two prongs arguably could be satisfied since he presented identification that he was over twenty-one, and there was a factual dispute as to whether Drebes appeared to an ordinary prudent person to be twenty-one. That said, we are in accord with the Director that no factual dispute existed as to the final prong. The record reveals that the bouncer gave only a cursory glance at Drebes' fake license, and the club had a lax enforcement policy as well as an absence of training or proper equipment to effectively screen underage patrons. Finally, defendant has presented no competent evidence to contradict Vasil's report, which concluded that Kashmir employees should have immediately recognized that the license was fake and could not reasonably rely on it as proof of age. Thus, as no genuine dispute existed concerning the absence of good faith, we discern no reason to disturb the Director's decision, which was not arbitrary, capricious, or unreasonable. See Circus Liquors, supra, 199 N.J. at 9-10.

Defendant also contends that the two year license suspension was "extremely severe" and did not properly account for mitigating factors. We disagree.

"[A]ppellate review of an agency's choice of sanction is limited. Courts generally afford substantial deference to the actions of administrative agencies . . . because of the expertise and superior knowledge of agencies in their specialized fields, and because agencies are executive actors[.]" In re Suspension or Revocation of License Issued to Zahl, 186 N.J. 341, 353 (2006) (internal quotation marks and citations omitted). We "'will modify a sanction only when necessary to bring the agency's action into conformity with its delegated authority.'" Maynards, supra, 192 N.J. at 183 (quoting Zahl, supra, 186 N.J. at 353-54). "Distilled to its essence, then, 'the test in reviewing administrative sanctions is whether such punishment is so disproportionate to the offense, in light of all the circumstances, as to be shocking to one's sense of fairness.'" Id. at 184 (quoting Zahl, supra, 186 N.J. at 354).

The penalty for a first-time violation of N.J.A.C. 13:2-23.1(a) and (b) is ordinarily a fifteen- or thirty-day license suspension for each charge. N.J.A.C. 13:2-19.11(i). However, the Director may adjust that penalty based on a finding of aggravating or mitigating factors. N.J.A.C. 13:2-19.13. The possible penalties available to the Director includes license revocation, even for a first-time offense, in cases where the violation was sufficiently egregious. Indeed, the regulation makes clear that

if death or serious injury occurred as a result of the incident that gave rise to the violation, the Director may revoke the license, even if it is a first violation. The licensee has the burden of demonstrating mitigating circumstances.

[N.J.A.C. 13:2-19.13(c).]

In this case, the Director considered and rejected defendant's proffered mitigating factors. In setting the penalty, the Director emphasized the deaths of two young men, the egregiously derelict enforcement procedures at Kashmir, and the lack of training and equipment. The resulting decision revoking appellant's liquor license for two years, although severe, was not, in light of all the circumstances, so inconsistent with the offense as to shock our sense of fairness. See Maynards, supra, 192 N.J. at 184. Therefore, we decline to modify it.

Defendant's remaining arguments do not warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). It is well-settled that defendant did not have a protectable property interest in its liquor license, and thus no violation of the Takings Clause, U.S. Const. amend. V, occurred. See In re Xanadu Project at Meadowlands Complex, 415 N.J. Super. 179, 198 (App. Div.), certif. denied, 205 N.J. 96 (2010). Additionally, while due process protections attach to the revocation, suspension, or denial of a liquor license, defendant's due process rights were satisfied here by the notice the Division gave it and the opportunity it had to contest the charges. See id. at 198-99.

In sum, we conclude that there is sufficient evidence in the record to support the Director's conclusion that defendant failed to operate its business in the manner required by N.J.A.C. 13:2-23.1(a) and (b) and that the penalty was appropriate.

Affirmed.

1 Caudill did not drink while at Kashmir.