IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Transcription

1 IN THE COMMONWEALTH COURT OF PENNSYLVANIA Palmer Social Club : : v. : No C.D : Argued: February 11, 2013 Pennsylvania Liquor Control Board, : Appellant : BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE LEADBETTER FILED: April 10, 2013 The Pennsylvania Liquor Control Board (Board) appeals from the order of the Court of Common Pleas of Philadelphia County, which reversed the Board s denial of Palmer Social Club s application to renew its liquor license for the period extending from November 1, 2010 to October 31, After review, we are constrained to affirm. Palmer Social Club (the Club) operates a private membership club in Philadelphia. In August 2010, the Club applied to renew its liquor license for the upcoming two year period. The application was initially conditionally approved, with the notation that the renewal could be objected to on the grounds that: (1) the Club pleaded guilty in federal court in June 2010 to filing false tax returns; (2) the

2 Club had violated the Liquor Code (Code) 1 in the past (three citations for violations that occurred in 1999, 2003 and 2005 were referenced); and (3) since 2008, six separate incidents of disturbance, including assaults and fights, at or adjacent to the Club had been reported to the Philadelphia Police Department. A final decision on the application was postponed until sentencing was imposed for the Club s guilty plea to filing false tax returns. Both the Club and Michael Weiss, a gentleman described as the Club s principal operating officer, were sentenced in November The Club was fined approximately $562,000 and sentenced to five years probation. Although Weiss is no longer associated with the Club or permitted on the Club premises, his father, Arnett, is the Club s current secretary and treasurer. A hearing on the application to renew followed to determine whether the previously noted objections warranted nonrenewal of the Club s license. 3 1 Act of April 12, 1951, P.L. 90, as amended, 47 P.S According to the Club s attorney, however, Weiss was not an officer but served the Club in a managerial advisory capacity [see Board s Opinion, Findings of Fact Nos. 11, 12 (citing statement by Club s attorney)], and handled the paperwork, including preparation of the Club s tax returns. In performing that task, Weiss apparently kept two sets of books, one that was accurate and one which underreported the Club s revenues; tax returns were completed using the figures that were purposefully understated. See Indictment, United States v. The Palmer Social Club [and] Michael Weiss, 9-15; Reproduced Record (R.R.) at a. According to the Indictment, in 2004, the Club realized revenues in the amount of approximately $1.4 million, but recognized only $528,228, thereby understating its gross receipts on IRS forms by almost $900,000. Id. at 11; R.R. at 229a. The total amount of unreported receipts in 2004 and 2005 was $1,653, Id. at 15, R.R. at 229a. 3 A fourth violation of the Code was added to the list of objections. The violations noted are: (1) violation of Regulation (Reg.) 5.32(a), 40 Pa. Code 5.32(a), on March 6, 2010, for permitting the sound of music or other entertainment (hereinafter referred to as noise ) to be heard outside of the Club [$500 fine imposed]; (2) violations of Reg. 5.32(a) on February 12, 13, and 26, 2005, for permitting noise to be heard outside of the Club [$450 fine imposed]; (3) violations of Reg. 5.32(a) on December 15 and 22, 2002 and January 18, 2003, for permitting noise to be heard outside of the Club [$400 fine imposed]; and (4) violations of Section 406(a)(1) of the Code, 47 P.S (a)(1), on December 13, 1998, February 11 and March 14, (Footnote continued on next page ) 2

3 At the hearing, the Bureau of Licensing entered into evidence documentation evincing the federal guilty plea and corresponding punishment, and the adjudications stemming from the violations of the Code. The Bureau also adduced the testimony of various Philadelphia police officers who responded to multiple disturbances that occurred outside the Club. Most of the disturbances occurred between three and four o clock in the morning in connection with Club closing time and/or after Club personnel had ejected someone from the Club, who, in turn, became combative or disruptive on the street. The officers, some of whom were specifically assigned to a two-person detail for the Club, testified that they would intervene to quell and control the disturbances. According to the officers, Club security personnel would also provide assistance if the officers needed it. For instance, one officer, Sgt. Dandridge, testified that he was involved in an incident that occurred outside the Club on November 9, 2008, at 3:08 a.m. According to Sgt. Dandridge, there were approximately 150 individuals outside of the Club at that time and a fight broke out between two large groups of people. Bystanders encouraged the fighters, stood around, blocking the sidewalk, and engaged in verbal altercations. The officer intervened along with the twoofficer Club detail and other officers were called in for assistance. The officers were required to break up fights, clear and direct traffic around pedestrians in the street, and issue two citations for disorderly conduct. It took the officers approximately 25 minutes or so to control the situation. Although Sgt. Dandridge (continued ) 1999, for selling alcoholic beverages to nonmembers and a violation of Section 102 of the Code, 47 P.S , on February 1, 1999, for improperly admitting members [$400 fine imposed]. 3

4 did not specifically recall whether the fight involved patrons, the officer did note that the citation he wrote following the incident stated that the opposing parties previously fought inside the Club. Reproduced Record (R.R.) at 240a. 4 Another incident involved a report by a woman who was treated for a stab wound that purportedly occurred while she was at the Club. According to the testimony of the Club President, Mohamed El-Laisy, this event was never reported to the Club. The various disturbances described by the officers occurred on November 9, 2008, September 27, 2009, November 4, 2009, and December 26, Mohamed El-Laisy, the Club President, testified in support of the Club s application. Mr. El-Laisy described: (1) the security measures employed by the Club (20-25 member security staff, use of security consultant, use of metal detectors and wands on patrons, and maintenance of a two-person police detail along with extra officers to assist at closing time); (2) membership application procedures; and (3) the noise control measures undertaken by the Club (speakers redirected, volume control added to sound equipment, new noise control firm hired, windows insulated, sound proofing added, exit changed from front of building to the back, 5 and exterior periodically monitored with a walk-around to determine whether sound discernible). Relevant to the conviction for filing false tax returns, El-Laisy testified that in 2004 and 2005, he was an officer of the Club and one of his responsibilities was to take the Club s weekly revenue to Weiss, who did the 4 None of the other disturbances involved a group of this size. 5 This measure occurred following the last citation in 2010 for permitting noise to be heard outside the premises. 4

5 paperwork. He noted that he took the weekly revenue to Weiss s house in a garbage bag for safety reasons so [he] wouldn t get jumped. Notes of Testimony (N.T.) at 83, R.R. at 191a. According to El-Laisy, since the conviction, the Club puts its receipts into a safe at the Club and maintains daily records of Club receipts. The Board refused to renew the application. In doing so, it highlighted some of the Club s shortcomings, such as its failure to detect a weapon used in a stabbing despite metal detectors and wands and the inability to control noise as evidenced by its most recent 2010 citation. The Board also found that the filing of false tax returns constituted an extremely egregious act, and [a] blatant disregard of the law, which was very disconcerting. Board s opinion at 28. The Board noted that it was also troubled by the fact that El-Laisy, who as President is charged with ensuring that the Club complies with the law, delivered the Club s receipts to Weiss in a garbage bag in 2004 and On appeal, the trial court heard additional, brief testimony from El- Laisy, which primarily addressed some of the Club s security measures. El-Laisy also indicated in a very general manner (that is, merely responding yes to counsel s questions) that the Club had taken corrective measures to ensure that it would not repeat its violations of the Liquor Code. 6 After a de novo review of all of the evidence, including that before the Board, the trial court reversed. In concluding that the Club was entitled to renew its license, the trial court found El- Laisy credible and based upon his testimony, found that the Club took corrective measures to prevent further citations for unacceptable noise. While the court also 6 Notes of Testimony (N.T.) at 9 and 13, R.R. at 97a. As to the noise violations, however, El-Laisy did note that: Different measures were taken after each citation from what I recall. Id. at 14, R.R. at 102a. 5

6 found that steps were taken to prevent further sales to nonmembers as well as the improper admission of members, the court noted that it attributed less weight to that adjudication since there was no evidence of similar violations since In addition, the trial court found that of the disturbances reported to the police, the only one that occurred inside the Club was the stabbing, of which El-Laisy was not apprised. The court concluded that that incident alone did not demonstrate a pattern of illegal activity of which the Club should have been aware. As to the other reported disturbances that occurred outside of the Club, the court found that there was no evidence that it occurred due to the manner in which the Club was operated. Finally, with respect to the federal conviction for tax fraud, the court concluded that because of the limited time frame involved (two years), the conduct did not demonstrate a pattern of illegal activity. The court noted the steps [the Club] took to correct and further prevent the circumstances leading up to the federal indictment. The individual responsible for the illegal returns is no longer associated with [the Club and, the Club] now puts its receipts in a safe and makes daily entries of receipts from its operations. Opinion at 11, R.R. at 24a. The court also noted that the Club is complying with the terms of its probation. The present appeal followed. The renewal of a liquor license is discretionary. I.B.P.O.E. of W. Mt. Vernon Lodge 151 v. Pa. Liquor Control Bd., 969 A.2d 642, 648 (Pa. Cmwlth. 2009). Section 470(a.1) of the Liquor Code (Code), 47 P.S (a.1), provides that the Board may refuse to renew a license: (1) if the licensee... its directors, officers... agents or employes [hereinafter collectively referred to as the 6

7 licensee ] have violated any of the [Commonwealth s laws or the Board s regulations]; (2) if the [licensee has] one or more adjudicated citations under this or any other license issued by the [B]oard (4) due to the manner in which this or another licensed premises was operated while the [licensee] [was] involved with that license. When considering the manner in which this or another licensed premises was being operated, the [B]oard may consider activity that occurred on or about the licensed premises or in areas under the licensee s control if the activity occurred when the premises was open for operation and if there was a relationship between the activity outside the premises and the manner in which the licensed premises was operated. The [B]oard may take into consideration whether any substantial steps were taken to address the activity occurring on or about the premises. Section 470(a.1)(1), (2) and (4). Licensees are held strictly liable for violations of the Liquor Code that occur on the licensed premises. St. Nicholas Greek Catholic Russian Aid Soc y v. Pa. Liquor Control Bd., 41 A.3d 953, 958 (Pa. Cmwlth. 2012). A licensee may be held accountable for third party conduct on or about the licensed premises that violates other statutory provisions, including criminal laws, if the evidence demonstrates a pattern of illegal activity on the licensed premises about which the licensee knew or should have known and failed to take substantial steps to prevent such activity. Philly Int l Bar, Inc. v. Pa. Liquor Control Bd., 973 A.2d 1, 3 (Pa. Cmwlth. 2009). On appeal, the trial court hears the matter de novo. Section 464 of the Code, 47 P.S ; I.B.P.O.E. of W. Mt. Vernon Lodge 151, 969 A.2d at (Pa. Cmwlth. 2009). 7

8 The Board first argues that the trial court either abused its discretion or committed an error of law when it stated that the conviction for filing false tax returns in 2004 and 2005 did not constitute a pattern of illegal activity warranting nonrenewal of the Club s license. The Board posits that the repeated conduct of systematically underreporting receipts in a second set of accounting books and subsequently using those figures for filing two years of tax returns constitutes a pattern of illegal activity warranting nonrenewal. In connection with this argument, the Board also contends that the trial court erred in considering whether the Club had taken substantial steps to prevent similar conduct in the future. According to the Board, corrective measures are not relevant when a licensee s own deliberate, intentional, criminal conduct is at issue. The Board suggests that consideration of corrective measures is relevant only to criminal activity falling under Section 470(a.1)(4), not the licensee s own criminal behavior under subsection (a.1)(1). However, assuming arguendo that consideration of corrective measures is appropriate, the Board implies that the steps that were taken cannot be considered substantial as a matter of law: merely putting cash in a safe, maintaining proper records and terminating all association with Weiss do not constitute substantial steps. 7 While the conduct underlying the federal conviction was egregious, constituting blatant dishonesty (which clearly would support denial of the renewal application if common pleas had so ruled), we cannot reverse the trial court s decision for the reasons asserted. First, nothing in Section 470(a.1)(1) requires 7 The Board also notes that there is no record support for the finding that Weiss is no longer associated with the Club. According to the Board, that information came from the Club s attorney, and was not testified to by El-Laisy. From a review of the transcript, however, it appears that counsel made this statement while he was putting a stipulation on the record. 8

9 nonrenewal of a license when the licensee has violated the laws of the Commonwealth. 8 Rather, it provides that a violation of the Commonwealth s laws or the Board s regulations may serve as the basis for non-renewal. See Section 470(a.1)(1). Thus, the Code gives the adjudicator discretion to determine whether improper or illegal conduct warrants nonrenewal of a license. Second, even if the trial court s holding regarding pattern was incorrect as a matter of law, whether or not the false returns constituted a pattern of illegal activity is simply of no moment. Even a single violation of the law by the licensee is sufficient basis for nonrenewal, and common pleas was made well aware of the conduct underlying the federal charges. Next, the Board s argument that corrective measures may be considered only in connection with third party conduct under Section 470(4), while finding some support in the statutory language, has been explicitly rejected by this court. In Goodfellas, Inc. v. Pennsylvania Liquor Control Board, 921 A.2d 559 (Pa. Cmwlth. 2007), we held to the contrary, explaining that the argument had been rejected previously in U.S.A. Deli, Inc. v. Pennsylvania Liquor Control Board, 909 A.2d 24 (Pa. Cmwlth. 2006). Nonetheless, the Board asserts that even if corrective measures may be considered, the ones taken in this case were not substantial, but rather were insufficient to justify renewal. However, as we stated in Goodfellas: [T]he trial court [enjoys] broad discretion in conducting its de novo review of the Board s decision. The trial court [is] free to consider the corrective measures [the 8 We note that Section 470(a.1)(1) does not include violations of federal law. No one has raised this issue, so it is not before us. However, signing falsified tax records would likely involve either 18 Pa. C.S (crime of false swearing) or 18 Pa. C.S (crime of unsworn falsification to authorities). At all events, we assume arguendo that conviction of a serious federal crime by the licensee would support non-renewal. 9

10 licensee took] in response to its citations, and to substitute its discretion for that of the Board in determining that those corrective measures warranted the renewal of [the license.] Goodfellas, 921 A.2d at 566 (footnote omitted). Here, the record supports the finding that the Club took some affirmative steps to prevent future Code violations regarding noise levels. 9 As to the conviction for filing false tax returns, while the Club s remedial measures were not extensive, we cannot hold that they are insufficient as a matter of law based on this record. The trial court accepted testimony that Weiss, the only individual whose conduct was shown to be responsible for the Club s criminal conviction, was no longer associated with the Club. There was no evidence offered that any remaining Club officers, including El-Laisy, participated in the illegal conduct or knew that Weiss was committing a crime. More businesslike procedures for handling and recording receipts were implemented, and no evidence was offered that similar dishonesty or conduct occurred following We cannot substitute our judgment for that of the trial court as to whether these measures were sufficient to justify renewal. Finally, the Board contends that the trial court ignored substantial, uncontradicted evidence in concluding that there was no causal connection between the reported disturbances and the manner in which the Club was operated. According to the Board, this faulty conclusion precluded the court from considering whether the Club took appropriate measures to prevent further similar 9 While the evidence of remedial measures was somewhat vague regarding the improper admission of members and service of alcohol to nonmembers, the trial court attributed less significance and weight to those violations. 10

11 disturbances. In making this argument, the Board references this court s opinion in St. Nicholas, wherein we stated: 41 A.3d at 960. It is simply not plausible that violence occurring in an area under the Licensee s control, during or shortly after Licensee s hours of operation, involving Licensee s members who had been drinking inside Licensee s establishment, is not causally linked to the operation of Licensee s business. Here, the Board is really taking issue with the trial court s factfinding. In St. Nicholas, the credited evidence supported findings that the licensee failed to maintain a sufficient security force such that the exterior was frequently unmonitored, failed to maintain a contingency plan when extra-duty police officers were not available, and failed to maintain sufficient communication with the local police department. Here, the uncontradicted evidence of record established a permanent two-member police detail hired at the Club s expense, additional officers available at Club closing, a relatively large Club security detail ready to assist police and no evidence demonstrating that the Club routinely served intoxicated individuals. As noted above, the power to exercise discretion over non-renewals lies with the court of common pleas. This court has held that an abuse of discretion occurs when the trial court ignored substantial, uncontradicted evidence in the record, and the strong inferences drawn from it, see Philly International Bar, Inc., 973 A.2d at 3 (quotations, citation and emphasis omitted), or when there is, inter alia, a manifestly unreasonable exercise in judgment, or a final result that evidences partiality, prejudice, bias, or ill-will. I.B.P.O.E of W. Mt. Vernon Lodge 151, 969 A.2d at 648 (citation omitted). The trial court did not ignore evidence 11

12 here; it simply weighed that evidence differently than did the Board. We cannot say that its decision demonstrates a manifestly unreasonable exercise of judgment, partiality or bias. While we might well have decided the matter differently, without a blatant disregard of evidence, as occurred in Philly International, 10 a material error of law, or clear abuse, we are bound by the trial court s exercise of discretion. Based upon the foregoing, we affirm. BONNIE BRIGANCE LEADBETTER, Judge Senior Judge Colins dissents. 10 In that case, a drug investigation was conducted that involved a licensed establishment. It was undisputed that drugs were purchased inside the licensed premises at the bar from a regular patron on 15 separate occasions. While the licensee s president claimed that he had no knowledge of the illegal activity until the patron was arrested inside the premises, he later acknowledged that there were some incidents where illegal activity was suspected and the people involved were escorted from the establishment. The Board found that the evidence demonstrated that drug activity was permitted to occur on the premises and it was so pervasive that the licensee s principals and employees knew or should have known of it and taken steps to prevent it. The trial court reversed without ever mentioning the uncontradicted evidence of the pervasive, illegal drug activity. 12

13 IN THE COMMONWEALTH COURT OF PENNSYLVANIA Palmer Social Club : : v. : No C.D : Pennsylvania Liquor Control Board, : Appellant : O R D E R AND NOW, this 10th day of April, 2013, the order of the Court of Common Pleas of Philadelphia County is AFFIRMED. BONNIE BRIGANCE LEADBETTER, Judge