Filed 8/28/17 Dept. of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. CA1/3 (unmodified opinion)

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

Petitioner Department of Alcoholic Beverage Control (the Department) issued a 45-day suspension of an on-sale general public premises license held by real party in interest BMGV, LLC, doing business as “Atmosphere” (BMGV). The discipline was imposed based on a sustained accusation that BMGV was maintaining its premises, known as Club Atmosphere, as a disorderly house (Bus. & Prof. Code, §§ 24200, subd. (b), 25601[1]), and creating a law enforcement problem such that the continuation of the license would be contrary to public welfare or morals (Cal. Const., art. XX, § 22; § 24200, subd. (a).) Respondent Alcoholic Beverage Control Appeals Board (the Board) annulled the Department’s decision and recommended dismissal of the accusation on the ground of insufficient evidence. In light of its decision, the Board did not address BMGV’s additional argument that dismissal was warranted on the ground of selective or discriminatory prosecution or BMGV’s challenge to the imposed discipline. We granted the Department’s petition for writ review of the Board’s decision. (§ 23090.)

We agree with the Department that there is substantial evidence in the record to support the sustained accusation against BMGV. However, we believe the Board should address, in the first instance, the remaining outstanding issues ‑ BMGV’s contention that dismissal of the accusation is warranted on the ground of selective or discriminatory prosecution and, if necessary, BMGV’s challenge to the imposed discipline. Accordingly, we annul the Board’s decision and remand the matter to the Board with directions to conduct further proceedings consistent with this opinion.

FACTUAL AND PROCEDURAL BACKGROUND[2]

BMGV operated the licensed premises, as Club Atmosphere, from August 28, 2008 to December 13, 2014.[3] By 2014, the club was the largest nightclub in the Broadway area – an area of San Francisco known for night life and adult entertainment. In 2014, the club operated four nights each week (Thursday through Sunday) and served that year approximately 40,000-50,000 patrons, plus an additional 2,000-6,000 patrons attended private events. There was significant foot traffic on the sidewalk in front of the club, and several public parking lots were located nearby.

On February 13, 2015, the Department filed a two-count accusation, to which BMGV filed a notice of defense. The accusation included 52 subcounts describing various incidents that occurred in 2013 and 2014 for which the Department sought to discipline BMGV for (a) operating the premises as a disorderly house (count one); and (b) creating a law enforcement problem such that continuation of the license would be contrary to public welfare or morals (count two). (Cal. Const., art. XX, § 22; §§ 24200, subds. (a), (b), 25601. ^[4]) An evidentiary hearing was held on several days in July 2015 before an administrative law judge (ALJ). The Department adopted the ALJ’s findings and recommendation that the accusation be sustained and that BMGV’s license be suspended for 45 days (with 15 days conditionally stayed subject to one year of discipline-free operation). The ALJ’s findings and recommendation were based, in pertinent part, on evidence of 13 incidents for “disturbance-fighting” and “resisting arrest,” which demonstrated BMGV was operating a disorderly house and creating a law enforcement problem such that continuation of its license would be contrary to public welfare or morals. The Department also accepted the ALJ’s finding that BMGV had failed to establish that dismissal of the accusation was warranted on the ground of selective or discriminatory prosecution.

BMGV successfully appealed to the Board, which reversed the Department’s decision and remanded the matter with a recommendation to dismiss the accusation. The Board decided, among other things, that there was no substantial evidence supporting the ALJ’s findings with respect to seven incidents and the remaining sustained incidents were “simply too few” and had “insufficient ties” to the club to establish that BMGV had maintained a disorderly house or created a law enforcement problem. In light of its decision, the Board did not address BMGV’s additional contention that dismissal was warranted on the ground of selective or discriminatory prosecution or BMGV’s challenge to the imposed discipline.

On December 16, 2016, the Department filed a timely petition for writ review challenging the Board’s decision. (§ 23090.) We granted the petition and heard oral argument. (§ 23090.1.)

DISCUSSION

I. Applicable Law

“The administration of the [Alcoholic Beverage Control] Act, within its scope and purposes, is initially vested in the Department. (Cal. Const., art. XX, § 22; see also § 23000 et seq.) The Department’s decisions are subject to administrative review by the Board. (§ 23084.) After the Board has issued a final order, the Department’s decision is also subject to judicial review in the Supreme Court or the Court of Appeal. (§ 23090.2.) [¶] The scope of review of both the Board and the courts is a narrow one. ‘The review by the board of a decision of the department shall be limited to the questions: [¶] (a) Whether the department has proceeded without, or in excess of, its jurisdiction. [¶] (b) Whether the department has proceeded in the manner required by law. [¶] (c) Whether the decision is supported by the findings. [¶] (d) Whether the findings are supported by substantial evidence in the light of the whole record. [¶] (e) Whether 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.’ (§ 23084.) [¶] [In addition,] Section 23090.2 directs the courts to review, not the Board’s decision, but the Department’s decision, addressing the same enumerated questions. The statute goes on to provide: ‘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.’ (Ibid.) Thus, in deciding the issues before us our role is limited to determining, based upon a review of ‘the whole record of the department,’ whether the Department’s decision is subject to reversal on the grounds specified in section 23090.2. [¶] If the Department’s administrative action declares or applies legal rules, or sets forth conclusions of law which are drawn from adjudicated or undisputed facts, it is subject to review only for insufficiency of the evidence, excess of jurisdiction, errors of law, or abuse of discretion. [Citation.] ‘ “[T]he discretion exercised by the Department. . . ‘ “is not absolute but must be exercised in accordance with the law, and the provision that it may revoke [or deny] a license ‘for good cause’ necessarily implies that its decisions should be based on sufficient evidence and that it should not act arbitrarily in determining what is contrary to public welfare or morals.” ’ [Citations.] Nevertheless, it is the Department, and not the Board or the courts, which must determine whether ‘good cause’ exists for denying a license upon the ground that its issuance would be contrary to public welfare or morals. [Citations.]” ’ [Citations.] Although most cases address the Department’s discretionary powers in the context of the revocation, granting or denial of a license, the same deferential standard of review should and would apply to the Department’s discretionary powers to determine whether there is good cause to suspend a license, since all of the powers derive from the same constitutional source. (Cal. Const., art. XX, § 22.)” (Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. (2002) 100 Cal.App.4th 1066, 1071-1072.)

II. Sufficiency of the Evidence to Support the Department’s Decision

The Department argues that, contrary to the Board’s decision, there was substantial evidence to support the ALJ’s findings, and those findings support the Department’s decision to sustain the accusation against BMGV and suspend its license. We agree with all of the Department’s arguments save one.

“Our review of the Department’s factual findings and conclusions is circumscribed by section 23090.3, which provides that ‘[t]he findings and conclusions of the department on questions of fact are conclusive and final and are not subject to review. Such questions of fact shall include ultimate facts and the findings and conclusions of the department.’ ‘We accept the Department’s findings of fact as conclusive. [Citation.] We indulge ‘all legitimate inferences in support of the Department’s determination.’ [Citation.] A reviewing court may not disregard or overturn the Department’s findings of fact merely because it concludes that contrary findings would be equally or more reasonable. [Citation.] In short, we may not exercise our independent judgment on the evidence. [Citation.]” (Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. (2005) 128 Cal.App.4th 1195, 1205-1206.)

Additionally, Government Code section 11513 addresses the admissibility of evidence generally in administrative hearings. It states: “(c) The hearing need not be conducted according to technical rules relating to evidence and witnesses, except as hereinafter provided. Any relevant evidence shall be admitted if it is the sort of evidence on which responsible persons are accustomed to rely in the conduct of serious affairs, regardless of the existence of any common law or statutory rule which might make improper the admission of the evidence over objection in civil actions. [¶] (d) Hearsay evidence may be used for the purpose of supplementing or explaining other evidence but over timely objection shall not be sufficient in itself to support a finding unless it would be admissible over objection in civil actions.”

In finding BMGV maintained a disorderly house and was a law enforcement problem, the ALJ relied on several subcounts describing 13 incidents which occurred over a 14-month period (November 1, 2013 through December 13, 2014). The Board sustained the ALJ’s findings regarding six incidents and found there was a lack of substantial evidence to support seven additional incidents. There is no dispute as to the ALJ’s findings, adopted by the Department and upheld by the Board, sustaining six incidents. On this writ review the Department limits its arguments to challenging the Board’s determination that there was insufficient evidence to support an additional five incidents.[5] For the reasons which follow, we conclude there was substantial evidence to support four of the five additional incidents.

Subcount Number 4: The ALJ found: “On November 1, 2013, at approximately 1:30 a.m., a woman left Respondent club through the emergency exit, followed by a man a few paces behind her. The woman, who had a large lump on her forehead, reported to a police officer that the man had struck her in the head. A security guard informed a police officer that he, the guard, observed a ‘physical altercation’ between the woman and the man. The police arrested the man and took him to jail. The woman declined to press charges,” from which the ALJ inferred “the woman had grounds to file charges against the man, but chose not to do so.” The Board dismissed this subcount on the grounds that the police officer (Officer Hoge) had not observed the assault, and the ALJ had excluded the victim’s statement as inadmissible hearsay. However, the Board’s decision fails to take into account that a finding that an assault took place does not require “that an eyewitness be produced to testify directly to the [assault]. The connection may be made by circumstantial evidence in the same way that any other fact can be proved.” (Johnson v. Griffith (1941) 19 Cal.2d 176, 179-180.) Additionally, the record shows the ALJ properly admitted the victim’s statement, as well as the statement of the club security guard, as “administrative hearsay” under Evidence Code section 11513, subdivision (d),[6] to “supplement[ ] and explain[ ]” Office Hoge’s personal observations of the physical condition of the victim as she exited the club. (See Lake v. Reed (1997) 16 Cal.4th 448, 461 (Lake).^[7]) Thus, we conclude there was substantial evidence supporting the ALJ’s recommendation to sustain subcount number 4. The Board’s determination to the contrary exceeded its authority to review for substantial evidence regarding that subcount.

Subcount Number 15: The ALJ found: “On March 15, 2014, police officers attempted to arrest two men who were involved in a fight outside of Respondent club. The officer who testified concluded, from the men’s behavior and appearance, that they were intoxicated. The two men resisted arrest. It took five officers to arrest one of the men. One of the security guards at Respondent club admitted to one of the officers that the two men had been patrons at the club.” The Board dismissed this subcount on the grounds that there was no evidence the two men who “resisted arrest” had ever been in the club or been sold alcoholic beverages by BMGV’s employees. To the contrary, the Board determined the only actual connection the altercation had to the club was the fact that the fight took place in the street directly in front of the licensed premises, warranting police assistance from the club security guards in making the arrests. According to the Board, it was simply not logical to infer that a person who was intoxicated outside of the club got intoxicated inside the club as the person may well have entered the club already intoxicated, and to hold otherwise, was mere speculation. However, the Board’s decision ignores evidence from which the ALJ could reasonably find the altercation directly involved club patrons who had been drinking inside the club. Specifically, Officer Baca’s testimony describing his personal observations at the scene, and the portions of his police report (admissible as relevant evidence under Government Code section 11513, subdivision (c); Lake, supra, 16 Cal.4th at p. 461), and under the public employee records exception to the hearsay rule (Evid. Code, § 1280^[8]; Hildebrand v. Department of Motor Vehicles (2007) 152 Cal.App.4th 1562, 1571 (Hildebrand)), describing Lieutenant Martin’s personal observations at the scene (admissible under the public employee records exception to the hearsay rule (ibid.) and properly admitted by the ALJ as administrative hearsay to “ ‘supplement[ ] or explain[ ]’ ” the personal observations of Officer Baca (Lake, supra, at p. 461), and the statements of the club security guards and the two men “who resisted arrest” (also properly admitted by the ALJ as administrative hearsay to “ ‘supplement[ ] or explain[ ]’ ” the personal observations of Officer Baca (ibid.)). The evidence thus established that when Lieutenant Martin arrived at the scene in front of the club, the officer saw a large group of Hispanic males (including the later arrested man) “begin to push at bouncers and start a fight.” When Officer Baca arrived at the scene he saw the ongoing fight initially witnessed by Lieutenant Martin. Officer Baca assisted in the arrest of the Hispanic man, together with some of the club security guards. In seeking an explanation for the fight, Officer Baca spoke with the club security guards who described their initial altercation with one man who was detained but not ultimately arrested (detained man), and the later altercation with the group of Hispanic males including the arrested man who had been seen by Lieutenant Martin as he arrived at the scene. Speaking with police officers, the detained and arrested men admitted they had been inside the club before the fighting witnessed by the police occurred outside the club. One man said he had been drinking in the club, “the bouncers were messing with us,” and he did not know what happened to cause the altercation. The other man said he had arrived at the club on a party bus with friends, he had not consumed any alcoholic beverages on the bus, he had consumed a ‘Jager Bomb” and a couple of other drinks in the club when he arrived, and the club’s “bouncers in the bar had ‘jacked’ him and his friends.” Thus, we conclude there was substantial evidence supporting the ALJ’s recommendation to sustain subcount number 15.

Relying on isolated portions of the record, however, BMGV argues it should not have been held liable for the circumstances giving rise to subcount number 15 because “the evidence confirmed that Atmosphere staff acted properly,” “t would be both unfair and counterproductive to apply [the statutes] to a licensee that has properly exercised its limited powers to control patron misconduct,” and “[a]s for the glib assertion that the Club should have cut off service earlier, the evidence was unrefuted that it is not always easy to tell when a patron is overconsuming, because many arrive ‘preloaded’ with alcohol or other drugs and interaction with even a small amount pushes them over the edge.” However, the ALJ was not required to accept the evidence cited by BMGV, even if supported in part by evidence submitted by the Department. “It is well settled that the trier of fact may accept part of the testimony of a witness and reject another part even though the latter contradicts the part accepted. [Citations.] As [the court] said in [i]Nevarov v. Caldwell (1958) 161 Cal.App.2d 762, 777 [327 P.2d 111], ‘the [trier of fact] properly may reject part of the testimony of a witness, though not directly contradicted, and combine the accepted portions with bits of testimony or inferences from the testimony of other witnesses thus weaving a cloth of truth out of selected available material. [Citations.]” (Stevens v. Parke, Davis & Co. (1973) 9 Cal.3d 51, 67-68.) BMGV is in effect attempting “to reargue those factual issues decided adversely to” it, which is contrary to our standard of review. (Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388, 398-399 (Hasson).) Thus, our conclusion that substantial evidence supports the ALJ’s recommendation to sustain subcount number 15 stands.

Subcount Number 28: The ALJ found: “On August 10, 2014, a crowd ‘spilled’ out of Respondent club onto the sidewalk and then to the parking lot. Multiple fights broke out. Many police officers, including officers from other districts of San Francisco, tried to stop the fights. Some of the fighters resisted arrest. One of the fighters elbowed one of the officers in the face, resulting in a laceration under his right eye and breaking his glasses. Another fighter swung at one of the officers and hit him.” The Board dismissed this charge on the ground there was no evidence the individuals involved in the fights were connected to the club. In our view, the Board’s decision ignores the testimony of Officer Baca who was present at the club on the date of the incident, as well as the on-scene observations of Officer Takaoka, recounted in his police report, which was admissible under Government Code section 11513, subdivision (c) (Lake, supra, 16 Cal.4th at p. 461), and under the public employee records exception to the hearsay rule (Evid. Code, § 1280; Hildebrand, supra, 152 Cal.App.4th at p. 1571). When asked about the focus of his attention when he arrived at the scene, Officer Baca testified his attention was focused on Club Atmosphere “[b]ecause that’s where the fights were originating from, in front of the club. It was so many people, and all those people coming out were starting the fights in the street and in the parking lot.” Officer Baca testified that he saw “people piling out of the club” and “they were screaming and yelling and pushing each other and trying to throw fists at whoever they were trying to hit.” He further testified there were “a mixture of males and females all fighting each other” and “they were enraged,” and “screaming, yelling, cursing.” In his police report, Officer Takaoka recounted that he had responded to the scene and saw “about one hundred persons in front of the Club. . . . [¶] [He] saw several fights in progress that involved groups of two to six persons. There were males and females involved in the fights. Club security as well as arriving police officers were attempting to stop the fights. [¶] Suddenly, about another hundred patrons exited the Club. Everyone appeared to be arguing, yelling and/or screaming. A large portion of the crowd headed east on the sidewalk. Suddenly, several fights broke out on the sidewalk and police units took action to stop the fights.” Based on the personal observations of Officer Baca and Officer Takaoka, the ALJ reasonably inferred the fight that had originated within the club was “ ‘a continuous fight in progress.’ ” The Board’s finding to the contrary exceeded its authority to review for substantial evidence relating to subcount number 28.

Again, relying on isolated portions of the record, BMGV argues it should not have been held liable for the circumstances giving rise to subcount number 28 because “the evidence does not support the inference that the [Department] seeks – that Atmosphere was responsible for the fight;” “[h]ow the fighing began and who started it was not proven,” and “no evidence support[ed] that all of the fighters came from Atmosphere.” BMGV also argues that “[e]ven if some of those leaving Atmosphere became involved in the fighting, the [Department] failed to introduce any evidence that they did so willingly, as opposed to being attacked by others in the street;” and “[h]olding only Atmosphere, but not any other club on Broadway, solely responsible for the fight on this flimsy evidence would be a travesty.” We reject BMGV’s contentions. Because the ALJ’s recommendation to sustain subcount number 28 is supported by substantial evidence, “it is of no consequence that the [trier of fact] believing other evidence or drawing other reasonable inferences, might have reached a contrary conclusion. [Citations.]” (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 874.)

Subcount Number 39: The ALJ found: “On October 31, 2014, patrons exited Respondent club intoxicated and belligerent.” The Board dismissed this subcount on the ground the facts referred to derived from a computer-assisted dispatch (CAD) report, and no witnesses otherwise corroborated the incident. Here again, the Board failed to consider the testimony of Captain Lazar who was present at the club on the date of the reported incident. On the evening of October 31, 2014, Captain Lazar, as the commanding officer on partrol in the Broadway area, was tasked with the duty of assessing the big picture regarding club patrons. His responsibilities included making an assessment of how people were behaving when they came out of the club, were “they overly intoxicated,” and had the club provided for “added security.” On the evening in question, Captain Lazar personally observed intoxicated and belligerent individuals exiting the club. He testified that, “[s]ince May of 2014,” he was concerned the club employees were “serving . . . intoxicated persons,” and the night of October 31, 2014, was “no different. People were coming out, they were intoxicated.” Captain Lazar also believed that if a club had the potential for problems, there was a need for adequate security to manage the club. According to Captain Lazar, Club Atmosphere had problems but “did not employ” or have additional security, which “was quite evident on Halloween when people were coming out and they were fighting with police and they were intoxicated and things were happening all around us.” As a consequence of his observations on the evening of October 31, 2014, Captain Lazar requested assistance from other stations in the city. After gunshots “rang out and the crowd that had left from Atmosphere was in the street,” Captain Lazar “had to request every available police officer in San Francisco to respond to the 400-block of Broadway in order to make the scene safe, to apprehend the shooter, to establish a large crime scene, and to manage a very intoxicated and hostile crowd.”[9] On this record, we have no trouble concluding there was substantial evidence to support the ALJ’s recommendation to sustain subcount number 39. The Board’s finding to the contrary exceeded its authority to review for substantial evidence relating to that subcount.

Subcount Number 24: The ALJ found that “[o]n July 12, 2014, police officers responded to a fight, involving approximately fifteen persons, occurring in front of Respondent club. One of the persons in the fight told one of the officers that the fight had started inside the club.” The Board determined this subcount should have been dismissed because there was no admissible evidence proving that the individuals involved in the fight were ever in the club. In so concluding, the Board referenced the testimony of Officer Milligan, who had responded to a call regarding the fight. Officer Milligan admitted the participants involved in the fight could have come from other clubs. The Board also found that the statement by one of the fighters that the fight started inside the club was inadmissible hearsay. We agree with the Board. The Department’s decision on this subcount, as distinguished from the subcounts above, is not supported by substantial evidence. Indeed, the only evidence that supports a finding that the fight originated in the club was the hearsay statement of one of the fighters, which evidence, standing alone, is not sufficient to sustain this subcount. (Cf. Lake, supra, 16 Cal.4th at p. 461 [hearsay statement of witness may be considered only to supplement or explain other nonhearsay evidence that supports the finding].)

In sum, and based on our review of the record, we conclude the ALJ’s recommendation to sustain the accusation against BMGV is supported by the six undisputed incidents, as well as the four additional incidents for which we find there is substantial evidence. These ten incidents establish BMVG’s club patrons were involved in incidents of public intoxication, resisting arrest, fighting, as well as assault and battery. (See, e.g., Coleman v. Harris (1963) 218 Cal.App.2d 401, 404 [because section 25601 “imposes the affirmative duty of maintaining lawfully conducted premises, it is unnecessary that the evidence show active participation on the part of the license holder in the acts which have rendered the premises injurious to the public morals”].) The ALJ acknowledged that “[t]he incidents in this case involve typical ‘disorderly house’ and ‘police problem’ incidents: public drunkenness, fighting, minor injuries to persons. There was no evidence of anyone using a knife, a gun, or any other weapon. And, there was no evidence of anyone being seriously injured or killed.” Nonetheless, as the ALJ further found, “[a]lthough the incidents are typical, they are quite significant. Because of the incidents at the . . . club, the police captain for the district in which [the] club is located on many occasions had to 1) assign officers to work overtime to handle those incidents, and 2) request assistance from police officers from other districts to handle those incidents. On at least one occasion, the captain had to request every available officer in the city to handle fights at [the] club.” For the same reasons, we conclude the record more than adequately supports the ALJ’s recommendation that the number of sustained subcounts warranted suspension of BMGV’s license. In our view, the Board’s contrary decision “is tantamount to an attempt by the . . . Board to reweigh the evidence in the record and, by thus reaching a conclusion which it considers more reasonable, to usurp the function of the Department. This, the . . . Board cannot do. [Citation.]” (Harris v. Alcoholic Beverage Control Appeals Board (1963) 212 Cal.App.2d 106, 119.)

Lastly, we find unavailing BMGV’s argument that we should uphold the Board’s decision because there was no substantial evidence to support the ALJ’s finding that the club “uniquely burdened” the police department. BMGV asks us to consider evidence that was apparently found not persuasive by the ALJ from which we are to conclude that the club did not “uniquely” burden the police department. However, as we have previously noted, we do not review the ALJ’s findings for substantial evidence that would support findings in favor of BMGV, as it suggests. Rather, our authority is limited to determining whether there is substantial evidence to support the ALJ’s findings. If there is substantial evidence to support those findings, “no matter how slight it may appear in comparison with the contradictory evidence, the judgment must be upheld.” (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 631.) By its argument, BMGV is in effect again attempting “to reargue . . . those factual issues decided adversely to” [it] . . ., contrary to established precepts of appellate review.” (Hasson, supra, 32 Cal.3d at pp. 398-399.)

II. Dismissal Based on Selective or Discriminatory Prosecution and
Appropriateness of Imposed Discipline

Because the Board recommended dismissal of the accusation on the ground of insufficient evidence, it did not rule on BMGV’s additional contentions that dismissal was warranted on the ground of selective or discriminatory prosecution or that the imposed discipline was “grossly disproportionate” when compared to discipline imposed in other cases. We find the Board should resolve these outstanding issues in the first instance. Our decision should not be read and we express no opinion on how the Board should rule on these issues.

DISPOSITION

The Board’s decision under review is annulled and the matter is remanded to the Board for further proceedings consistent with this opinion. The parties shall bear their own costs on this writ review.

_________________________

Jenkins, J.

We concur:

_________________________

McGuiness, P. J.

_________________________

Pollak, J.

Dept. Of Alcoholic Bev. Control v. Alcoholic Bev. Control Appeals Board, A150055