Circle K. Stores v. Dept. of Alcoholic Beverage Control

Filed 4/10/07 Circle K. Stores v. Dept. of Alcoholic Beverage Control CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

ORIGINAL WRIT PROCEEDINGS. Petition granted.

Solomon, Saltsman & Jamieson, Stephen Warren Solomon and Ralph B. Saltsman for Petitioner.

Edmund G. Brown, Jr., Attorney General, Jacob A. Appelsmith, Assistant Attorney General, Celine M. Cooper and Ivan H. Torres, Deputy Attorneys General, for Respondents.

INTRODUCTION

In this writ proceeding, petitioner Circle K Stores, Inc. (Circle K) seeks an order directing the Alcoholic Beverage Control Appeals Board (the Appeals Board) to vacate and annul an administrative decision affirming an administrative order to suspend Circle Ks liquor license. Circle K asserts that respondent Alcoholic Beverage Control (ABC) violated Circle Ks right to due process and violated the Administrative Procedures Act (APA) by permitting the ABC prosecuting attorney at the administrative trial to provide an ex parte written communication, called a Report of Hearing, to the ABC final decision maker or the advisors to the ABC final decision maker.

In response, the ABC does not dispute that if it provided the ABC prosecuting attorneys Report of Hearing to the ABC final decision maker or the advisors to the decision maker, such a communication would have violated the APAs bar against ex parte communications pursuant to Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. (2006) 40 Cal.4th 1, 4 (Quintanar). Instead, in these writ proceedings, the ABC responds that it did not provide the Report of Hearing to the ABC final decision maker or the advisors to the decision maker. The ABC did not raise this issue at any time during the administrative proceedings. In support of its contention, the ABC submitted declarations from two ABC officials in an attempt to establish that it implemented a screening procedure preventing the ABC prosecuting attorney from providing the written ex parte communication to the ABC final decision maker or the advisors to the ABC final decision maker.

We grant the petition and issue the writ in favor of Circle K. Quintanar unequivocally holds that the ABCs practice of permitting its administrative prosecuting attorneys to provide the ex parte written communications, i.e., Reports of Hearings, to the ABC final decision maker or to the final decision makers advisors constitutes a violation of the APAs ban on ex parte communications. (Quintanar, supra, 40 Cal.4th at p. 17.) In addition, the ABC is barred by statute from presenting to this court new or additional evidence, including the purported evidence regarding its alleged ethical screening procedures. (See Bus. & Prof. Code, 23090.1 & 23090.2.)^[1] Circle K timely raised this issue below during the administrative proceedings. The ABC was required by statute to present its evidence at that time.

PROCEDURAL AND FACTUAL BACKGROUND

1. The Accusation

The ABC issued Circle K an off-sale beer and wine license. On February 10, 2005, the ABC filed an accusation alleging that Circle K sold alcohol to a minor in violation of section 25658, subdivision (a). Specifically, the ABC alleged that on January 9, 2005, a Circle K sales clerk sold beer to a 16-year-old minor decoy during an operation conducted by the Riverside County Sheriffs Department.

2. The Administrative Hearing

Following a hearing, on May 24, 2005, an administrative law judge (ALJ) issued a proposed decision finding that a violation had occurred and that Circle K had not established a defense. The ALJ ordered Circle Ks license suspended for 15 days. The ABC final decision maker then adopted and certified the proposed decision as the final decision.^[2]

3. The Decision of the Alcoholic Beverage Control Appeals Board

Circle K filed an administrative appeal with the Appeals Board. Circle K asserted that the ABC violated its due process rights as a result of an ex parte communication. Circle K asserted that the attorney representing the ABC at the administrative hearing provided an ex parte Report of Hearing to the ABC final decision maker before the ALJ submitted the proposed decision to the ABC final decision maker.

Circle K also filed a motion to augment the record to include the Report of Hearing. The Appeals Board denied the request to augment.

On May 3, 2006, the Appeals Board affirmed the final decision of the ABC. The Appeals Board rejected Circle Ks due process argument. The opinion of the Appeals Board showed that it assumed that the ABC had permitted its prosecuting attorney to provide the ex parte Report of Hearing to the ABC final decision maker. The ABC presented no evidence to the contrary.

The Appeals Board distinguished the Court of Appeal opinion in Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. (Quintanar) (2005) 127 Cal.App.4th 615 (review granted), which was then pending before the California Supreme Court on a petition for review. (On November 13, 2006, the Supreme Court filed its opinion in Quintanar. See Quintanar, supra, 40 Cal.4th 1.)

In Quintanar, supra, 40 Cal.4th 1, the Appeals Board found a violation of the APAs ban on ex parte communications and a violation of due process when the ABC prosecuting attorney provided a Report of Hearing to the ABC final decision maker or the decision makers advisor. There, in three separate cases, following administrative hearings, the administrative law judges issued proposed decisions dismissing the accusations against the liquor licensees. (Id. at p. 5.) Before the ABC rendered its final decisions in the three matters, the ABC prosecutors prepared reports of hearing and sent them to the ABC chief counsel, but not to the licensees. The ABC final decision maker rejected the proposed decisions of the administrative law judges to dismiss the accusations and substituted its own decisions suspending the liquor licensees. The licensees appealed to the ABC Appeals Board. (Id. at p. 6.)

The Appeals Board concluded that the ABCs failure to screen its decision maker from communications with the ABC prosecutors deprived the licensees of the right to a fair trial and constituted a due process violation. The Appeals Board also concluded that the report of hearing constituted an ex parte communication which was prohibited under the APA. (Quintanar, supra, 40 Cal.4th at p. 7.) The Court of Appeal and the Supreme Court affirmed the conclusions of the Appeals Board. (See Quintanar, at pp. 5, 7.)

In the present case, the Appeals Board concluded that Quintanar was distinguishable because here the ALJ issued a proposed decision finding a violation of the liquor laws, which proposed decision was adopted (not reversed) by the ABC final decision maker. The Appeals Board concluded: Where, as here, there has been no change in the proposed decision of the ALJ, we cannot say, without more, that there has been a violation of due process. Any communication between the advocate and the advisor or the decision maker after the hearing did not affect the due process accorded [Circle K] at the hearing.

4. The Writ Proceedings

On May 24, 2006, Circle K filed a petition for a writ of review. Circle K asserted that the ABC prosecutor provided a Report of Hearing to the ABC final decision maker (or the advisor), which constituted an improper ex parte communication under the APA and a violation of Circle Ks right to due process. On June 20, 2006, this court stayed all proceedings pending the Supreme Court filing its opinion in the Quintanar case.

As noted, on November 13, 2006, the Supreme Court filed its opinion in Quintanar, where it concluded that the ABC prosecutors report of hearing to the ABC final decision maker or advisor constituted an improper ex parte communication under the APA. This court then requested briefing from the parties as to whether Quintanar applied to the facts of this case.

Circle K asserted that Quintanar applied and controlled. In its briefing, the ABC acknowledged that if the Report of Hearing was provided to the ABC decision maker or the advisor to the decision, under Quintanar, such a communication would constitute an improper ex parte communication.

However, the ABC asserted for the first time that it had instituted screening procedures and that the Report of Hearing was not provided to the ABC final decision maker or the advisor to the final decision maker. The ABC filed the declarations of John R. Pierce and Judy Carlton in support of this assertion.

Pierce declared that he was Chief Counsel of the ABC. He declared that on September 1, 2004, he issued instructions to screen Reports of Hearings from the final ABC decision maker or the advisors to the final decision maker. Pierce explained that he instructed the staff attorneys that if they prepare a Report of Hearing, it is not to be sent to the Director of the ABC, the Chief Counsel, or to the Hearing and Legal Unit.

Carlton declared that she was the supervisor of the Hearing and Legal Unit of the ABC. She declared that the Hearing Unit served two primary functions: (1) it processes and manages accusations against licensees; and (2) it directs the disciplinary file to the Legal Unit after it receives the proposed decision from the ALJ. According to Carlton, the Legal Unit creates and maintains the official disciplinary files of the licensees.

Carlton further declared that she was aware that on September 1, 2004, Chief Counsel Pierce instituted a screening procedure that the Hearing Unit was not to receive Reports of Hearings from ABC staff attorneys and that the Reports of Hearings were not be placed in the licensees disciplinary files.

Carlton then explained that after the Hearing Unit received a proposed decision from the ALJ, she alone was responsible for directing the disciplinary file to the Legal Unit. The Legal Unit then forwarded the disciplinary file to a staff attorney, the Chief Counsel, the Chief Deputy Counsel and the Director. Carlton declared that she checked the file before it was forwarded by the Legal Unit to ensure that the Report of Hearing was not in the file.

Finally, Carlton declared that consistent with protocol, no Report of Hearing was transmitted to the Legal Unit in the case for review by the decision maker or the decision makers advisors. Carlton stated that in this case, the Report of Hearing was not placed in the disciplinary file, but instead in the Hearing Units segregated file.

ISSUE PRESENTED

The sole issue presented in this writ proceeding is whether this court may consider the declarations of Pierce and Carlton.

DISCUSSION

Division 9 of the Business and Professions Code is the Alcoholic Beverage Control Act. (See 23000.) Chapter 1.5 is entitled Administration. Chapter 1.5 contains article 5, entitled Judicial Review. Section 23090.1, contained in article 5, provides that in a writ of review proceeding before the Supreme Court or Court of Appeal to contest a final order of the ABC Appeals Board, [n]o new or additional evidence shall be introduced in such court, but the cause shall be heard on the whole record of the department as certified to by the board.

Section 23090.2, also contained in article 5 and entitled Scope of Review, provides: The review by the court shall not extend further than to determine, based on the whole record of the department as certified by the board, whether: [] (a) The department has proceeded without or in excess of its jurisdiction. [] (b) The department has proceeded in the manner required by law. [] (c) The decision of the department is supported by the findings. [] (d) The findings in the departments decision are supported by substantial evidence in the light of the whole record. [] (e) There is relevant evidence which, in the exercise of reasonable diligence, could not have been produced or which was improperly excluded at the hearing before the department. [] Nothing in this article shall permit the court to hold a trial de novo, to take evidence, or to exercise its independent judgment on the evidence. (Italics added.)

Pursuant to the plain wording and unambiguous language of sections 23090.1 and 23090.2, this court is barred from receiving new or additional evidence or from conducting a trial de novo. This includes the evidence regarding the ABCs ethical screening procedures presented in the declarations of Pierce and Carlton.

The ABC responds that the declarations do not constitute new or additional evidence. We reject this argument. Circle K timely raised the issue of the alleged ex parte communication before the Appeals Board, the administrative stage where the issue became relevant. Circle K filed a motion to augment the record with the ABC prosecuting attorneys Report of Hearing. The Appeals Board denied the request to augment.

At no time before the Appeals Board did the ABC seek to submit any evidence that the Report of Hearing was not provided to the ABC final decision maker or the advisors to the final decision maker. Instead, the record shows that the ABC asserted that providing the Report of Hearing to the ABC final decision maker or the advisors did not constitute a denial of due process or a violation of the APA. In other words, the ABC litigated the matter as if the Report of Hearing had been provided to the ABC final decision maker or the decision makers advisors.

The ABC further responds that pursuant to section 23090.2, subdivision (e), it could not have produced the evidence at the administrative stage through the exercise of reasonable diligence. We reject this argument. The first stage at which the issue of the ex parte communication became relevant was before the Appeals Board. The ABC did not raise the issue at that time. In addition, at no time before the Appeals Board did the ABC seek to remand the matter to the administrative trial level to hold a hearing on the issue of to whom the Report of Hearing was distributed.

Thus, pursuant to sections 23090.1 and 23090.2, this court will not consider the declarations of Pierce or Carlton, but must assume, as the Appeals Board did, that the Report of Hearing was provided to the ABC final decision maker or to the advisors of the ABC final decision maker. In conclusion, pursuant to Quintanar, this constituted a violation of the APAs ban on ex parte communications. (Quintanar, supra, 40 Cal.4th at p. 17.)

DISPOSITION

The petition is granted. Let a peremptory writ of mandate issue directing the Appeals Board to vacate and annul the suspension of Circle Ks liquor license.

The stay imposed by this court is vacated. The order to show case is discharged.

Circle K is awarded costs in this proceeding.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

KITCHING, J.

We concur:

KLEIN, P. J.

CROSKEY, J.

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^[1] Unless otherwise indicated, all unspecified statutory references are to the Business and Professions Code.

^[2] In Quintanar, the Supreme Court explained the adjudicatory process before the ABC: Like many state administrative agencies, the Department exercises its adjudicatory power through a two-stage process. In the first (trial) stage, a Department staff attorney, acting as prosecutor, and the licensee present their respective cases to an ALJ at an evidentiary hearing. The ALJ then makes factual findings, prepares a proposed decision, and submits it to the Department. [Citation.] In the second (decision) stage, the Departments director or a delegee considers the proposed decision and elects to adopt it, modify it, reject it and remand for a new hearing, or reject it and decide the case on the record. (Quintanar, supra, 40 Cal.4th at pp. 5-6, fn. omitted.)