Nickerson Enterprises, Inc. d/b/a Orphan Annie's Lounge v. Texas Alcoholic Beverage Commission--Appeal from 225th Judicial District Court of Bexar County

No. 04-00-00688-CV
NICKERSON ENTERPRISES, INC. d/b/a Orphan Annie's Lounge,
Appellant
v.
TEXAS ALCOHOLIC BEVERAGE COMMISSION,
Appellee
From the 225th Judicial District Court, Bexar County, Texas
Trial Court No. 2000-CI-12582
Honorable John J. Specia, Jr., Judge Presiding

Opinion by: Alma L. L pez, Justice

Sitting: Tom Rickhoff, Justice

Alma L. L pez, Justice

Sarah B. Duncan, Justice

Delivered and Filed: August 29, 2001

AFFIRMED

In this appeal, we must determine whether there was substantial evidence to support a liquor license suspension and whether the suspension was arbitrary and capricious. We affirm the trial court's judgment.

Facts

The Texas Alcoholic Beverage Commission ("TABC") cited Nickerson Enterprises, Inc., d/b/a Orphan Annie's Lounge (the "lounge") for two separate violations of the Texas Alcoholic Beverages Code (the "Code"). The first violation was for permitting a minor to possess and consume alcohol on the premises. A TABC agent testified that he observed the minor consume alcohol in the lounge. Alternatively, the lounge asserts that the minor was not consuming alcohol and was accompanied by her father. Her father did not testify as to whether he was present at the lounge. The agent testified that he reached over the bar and smelled the beverage that the minor was drinking and determined that it contained alcohol.

The second violation stems from a San Antonio police detective's after-hours observation. The detective observed a person consuming what appeared to be a mixed drink while cleaning the bar at 2:30 A.M. He saw the person pour another drink from a bourbon bottle. The detective entered the lounge and confiscated the bottle from the person and concluded that it was bourbon. However, the lounge contends that liquor distribution was on a metered system (1) that registered the final beverage service at 1:50 A.M.

A hearing was held before an administrative law judge ("ALJ") to consider the alleged violations. The ALJ recommended suspensions of the lounge's mixed beverage permit and after-hours mixed beverage permit. The TABC subsequently issued an order suspending the lounge's alcoholic beverage permits for fifteen days or, in the alternative, the lounge could pay a $4,500 fine to avoid the suspension. The lounge appealed and the district court found that the order was supported by substantial evidence and affirmed the order. The lounge now appeals to this Court.

Standard of Review

An administrative agency's actions are reviewed under the substantial evidence rule. See Tex. Alco. Bev. Code Ann. 11.67(b) (Vernon 1995). Substantial evidence is more than a scintilla of evidence, but less than a preponderance of the evidence. See Texas Health Facilities Comm'n v. Charter Medical-Dallas, Inc., 665 S.W.2d 446, 453 (Tex. 1984); Bustamante v. Bexar County Sheriff's Civil Serv. Comm'n, 27 S.W.3d 50, 52 (Tex. App.-San Antonio 2000, pet. denied). An appellant has the burden to prove that an administrative order is not supported by substantial evidence. See Charter Medical-Dallas, Inc., 665 S.W.2d at 453; Texas Alco. Bev. Comm'n v. Top of the Strip, 993 S.W.2d 242, 249 (Tex. App.-San Antonio, pet. denied). If there is substantial evidence present to support an administrative agency's decision, we are bound to follow the administrative agency's finding. City of Houston v. Richard, 21 S.W.3d 586, 588 (Tex. App.-Houston [1st Dist.] 2000, no pet.); cf. Railroad Comm'n v. Pend Oreille Oil & Gas Co., 817 S.W.2d 36, 41 (Tex. 1991). The TABC order must stand if reasonable minds could have reached the same result. See Top of the Strip, 993 S.W.2d at 249 (noting that courts review reasonableness and not "correctness"). Furthermore, we may not replace the TABC order on the weight of the evidence. See Tex. Gov't Code Ann. 2001.174 (Vernon 2000); see also City of El Paso v. Public Util. Comm'n, 883 S.W.2d 179, 185 (Tex. 1994). The administrative agency is the primary fact-finding body, so our determination must rest solely on consideration of the law. See Richard, 21 S.W.3d at 588.

We are provided with a set of guidelines that indicate when an appellant is prejudiced from administrative findings at a level that exceeds reasonableness, and necessitates reversal. See Tex. Gov't Code Ann. 2001.174(2) (Vernon 2000). TABC's order is reversible when its findings inferences, conclusions, or decisions are "not reasonably supported by substantial evidence ... [or are] arbitrary or capricious." Id. 2001.174(2)(E) & (F).

The lounge has submitted ten separate issues for our consideration. Contrary to the lounge's assertions, issues one through nine form one collective, substantial evidence issue. Issue ten, whether the penalties assessed by the TABC were arbitrary and capricious, is the final issue for our determination. In Texas Alcoholic Beverage Commission v. Top of the Strip, we found that there was substantial evidence present to support the TABC's ruling, and that the ruling was not arbitrary and capricious. 993 S.W.2d 242, 252 (Tex. App.-San Antonio 1999, pet. denied). Following the Top of the Strip blueprint, we must now determine whether reasonable minds could have reached a similar conclusion and whether the penalties assigned to the lounge were arbitrary and capricious.

Substantial Evidence Analysis

1. Selling an Alcoholic Beverage to a Minor

In Texas, a person violates the Code if "with criminal negligence he sells an alcoholic beverage to a minor." Tex. Alco. Bev. Code Ann. 106.03 (Vernon Supp. 2001). The Code requires the determining body to look at the Texas Penal Code to provide the definition of "criminal negligence." See Tex. Alco. Bev. Code Ann. 1.08 (Vernon 1995). Criminal negligence is the lowest degree of culpability defined by the Texas Penal Code. Tex. Pen. Code Ann. 6.02(d)(4) (Vernon 1994). A person acts with criminal negligence when "he ought to be aware of a substantial and unjustifiable risk that the circumstances exist or the result will occur [and t]he risk . . . constitutes a gross deviation from the standard of care that an ordinary person would exercise under all the circumstances as viewed from the actor's standpoint." Id. 6.03(d).

The TABC agent testified that he noticed the minor when he entered the lounge because she looked younger than 21 years of age. He observed the minor push away the drink and the bartender take the drink and put it behind the bar. To confirm his suspicion, the agent collected the minor's beverage that was placed behind the bar and concluded that it did contain alcohol. We have previously determined that an officer's testimony and expertise may rise to the level of substantial evidence. Top of the Strip, 993 S.W.2d at 249-52. In light of our deference to the lower court's analysis of the facts and absence of any factors necessitating reversal, we conclude that a reasonable person could find that the lounge served alcohol to a minor with criminal negligence. See Tex. Gov't Code Ann. 2001.174(2) (Vernon 2000). Therefore, the finding was supported by substantial evidence.

2. Alcohol Consumption on Premises During Prohibited Hours

A liquor license may be suspended when an alcoholic beverage is "consumed on the licensed premises at a time when the consumption of alcoholic beverages is prohibited." Tex. Alco. Bev. Code Ann. 61.71(a)(18) (Vernon Supp. 2001). Section 105.06(c) of the Code elaborates that consumption of alcohol is prohibited at an extended-hours establishment after 2:15 A.M. See Tex. Alco. Bev. Code Ann. 105.06(c) (Vernon 1995).

The detective observed the person inside the lounge consuming what appeared to be a mixed drink at 2:30 A.M. After watching the person pour liquid in his drink from a bourbon bottle, the detective entered the lounge at 2:40 A.M., confiscated the bottle, and concluded that the person had consumed alcohol. The lounge relies on a metering system as a defense, claiming that it was impossible to serve the beverage at 2:30 A.M. It is apparent that reasonable minds could view the evidence differently. However, reasonable minds could also conclude that the lounge was in violation of the Code from the substantial evidence provided by the detective's testimony. See Tex. Alco. Bev. Code Ann. 61.71(a)(18) (Vernon Supp. 2001). Therefore, substantial evidence is present to support the TABC's order against the lounge.

Arbitrary and Capricious Analysis

The lounge asserts that TABC's fifteen-day suspension, or $4,500 fine, was arbitrary and capricious. A court may rule that an administrative agency's order is arbitrary and capricious even if it finds support from substantial evidence. See Tex. Gov't Code Ann. 2001.174(2)(F) (Vernon 2000). The TABC acts arbitrarily and capriciously if it (1) fails to consider legislative directions, (2) takes into account irrelevant factors, or (3) reaches an unreasonable conclusion. See Public Util. Comm'n, 883 S.W.2d at 184; Top of the Strip, 993 S.W.2d at 252. However, we may not substitute our judgment for an administrative agency's judgment on the weight of the evidence on questions committed to the agency's discretion. See Tex. Gov't Code Ann. 2001.174(2)(F) (Vernon 2000). Therefore, we must determine whether the TABC acted within its discretion.

The selection of an appropriate sanction for Code violations is within the TABC's discretion. See Tex. Alco. Bev. Code Ann. 11.61, 11.64 (Vernon Supp. 2001). The TABC is given great latitude to assign sanctions provided the agency stays within the bounds granted by the Code. See Top of the Strip, 993 S.W.2d at 252 (ruling that TABC may sanction party even if party unknowingly violates Code). The sanctions assigned to the lounge stem from two separate violations of the Code. The fifteen-day suspension, or $4,500 fine, for the lounge's violations was well within the sanctioning bounds granted to the TABC. See Tex. Alco. Bev. Code Ann. 11.61, 11.64 (Vernon Supp. 2001). After a thorough review of the record, we find no evidence to support the lounge's claim that the agency's judgment is arbitrary and capricious.

Conclusion

We conclude that the TABC's decision is supported by substantial evidence and the record contains no indication of reversible error. Furthermore, the punishment assessed was not arbitrary and capricious. As a result, we overrule the appellant's ten issues and affirm the judgment of the trial court.

Alma L. L pez, Justice

DO NOT PUBLISH

1. A metering system registers the time and quantity of alcohol served. Appellants claim that it must be used to pour alcohol in the lounge.