STATE OF IOWA BEFORE THE DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION

STATE OF IOWA BEFORE THE DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION IN RE: ) ) DOCKET NO. D-2010-00244 Horan, Michael J. ) DIA NO. 10DOCBL121 d/b/a Horan s Cabaret ) 1337 Ave. G. ) Fort Madison, Iowa 52627 ) PROPOSED DECISION ) Liquor License No. LC-5211 ) On December 17, 2010, the Iowa Department of Public Safety (DPS) filed an administrative hearing complaint against Michael J. Horan d/b/a Horan s Cabaret (licensee). The hearing complaint alleged that on or about June 19, 2010, an employee of the licensee sold or supplied an alcoholic beverage to a person under twenty-one years of age, in violation of Iowa Code section 123.49(2)(h). A hearing was held before Administrative Law Judge Margaret LaMarche on February 22, 2011 at 10:00 a.m. Assistant Attorney General John Lundquist appeared for DPS. Sharon Horan appeared for the licensee and was represented by attorney Tom Skewes. Michael Horan was unable to attend the hearing due to a serious health condition. THE RECORD The record includes the Hearing Complaint, Notice of Hearing, the testimony of Lee County Deputy Sheriff Brad Roberts for DPS, the testimony of Brandy Anderson and Sharon Horan for the licensee; and DPS Exhibits 1-6 (See Exhibit Index for description). FINDINGS OF FACT 1. Michael J. Horan and Sharon Horan are each 50% owners of Horan s Cabaret located at 1337 Ave. G. in Fort Madison, Iowa. (Exhibit 6) They have owned this business for 38 years, and Sharon Horan is the manager. Horan s Cabaret is a neighborhood bar that serves beverages and food. The bar is open

Page 2 from 10:00 a.m. to 1:00 a.m. Monday through Saturday. Horan) (Testimony of Sharon 2. On March 18, 2010, the licensee or an employee of the licensee sold, gave, or otherwise supplied an alcoholic beverage to a person under the legal age, in violation of Iowa Code section 123.49(2)(h). Based on this sale, the licensee stipulated to a first violation of Iowa Code section 123.49(2)(h) and paid the $500 civil penalty assessed by the Division. (Exhibits 4, 5) 3. On June 19, 2010, the Lee County Sheriff s Department conducted an alcohol compliance check to determine whether the licensed liquor establishments in Fort Madison would sell alcohol to underage persons. Deputy Sheriff Brad Roberts conducted the compliance check with the assistance of a reserve deputy and an eighteen year old male student ( the buyer ). (Testimony of Brad Roberts; Exhibit 1) Deputy Roberts verified the buyer s date of birth and age by reviewing his valid Iowa driver s license. The buyer s driver s license was printed on a vertical format, which is a cue that the person may be underage. The driver s license clearly showed the buyer s date of birth as 6/17/1992. There was a narrow red band located to the side of the buyer s photograph. The printing on the red band typically states Under 21 until and then provides the exact date when the person will turn 21 years of age. Deputy Roberts made and retained a copy of the buyer s driver s license and returned the original license to the buyer. Most of the photocopied driver s license is legible, but it is very difficult to read the printing that appears on the red band. (Testimony of Brad Roberts; Brandy Anderson; Exhibit 1-4) Deputy Roberts asked the buyer to empty all of his pockets prior to starting the compliance check. The buyer was allowed to carry only his valid driver s license and money to make alcohol purchases. Deputy Roberts took a photograph of the buyer immediately following the compliance check. The buyer s appearance in this photograph is generally consistent with his age. (Testimony of Brad Roberts; Exhibit 1-5) 4. Deputy Roberts dressed in civilian clothes and accompanied the buyer into each licensed establishment. They visited a total of 25 businesses between 8:30 a.m. and 2:00 p.m. on June 19, 2010. Four of the businesses (three bars and one convenience store) sold an alcoholic beverage to the buyer. (Testimony of

Page 3 Brad Roberts) Sometime that morning a customer warned the licensee s employees that law enforcement was conducting a sting. Sharon Horan left Horan s Cabaret shortly before Deputy Roberts and the buyer arrived. Before she left, Ms. Horan told her employees to be extra careful. (Testimony of Brad Roberts; Brandy Anderson; Sharon Horan; Exhibit 1) 5. Deputy Roberts and the buyer entered Horan s Cabaret at about 11:40 a.m. The buyer went up to the bar and sat down while Deputy Roberts, who is 39 years old, stood approximately two to three feet behind him. Deputy Roberts conceded that the bartender likely thought that the two of them were together although only the buyer placed an order. Employee Brandy Anderson was bartending, and she took the buyer s order for a bottle of Budweiser beer. Ms. Anderson thought the buyer looked very young and asked him for his identification. The buyer gave Ms. Anderson his driver s license, and she examined it. While Ms. Anderson was looking at the driver s license, a second employee (identified as Ginger ) came over and also looked at the driver s license. Brandy Anderson was familiar with the vertical driver s license format and recognized it as a cue that the buyer could be underage. Ms. Anderson was familiar with the red band at the top of the license that typically provided the date that the person would turn 21. However, she noticed that this buyer s driver s license had some features that were not typical. The red band usually appeared at the top of the driver s license above the photograph. On the buyer s driver s license, the red band was located adjacent to the driver s photograph. Ms. Anderson also observed a rectangular punch in the upper left corner of the buyer s driver s license, which she had not seen on other licenses. The rectangular punch described by Ms. Anderson is not visible on the photocopy. When she reviewed the license, Ms. Anderson thought that the printing on the red band stated Under 21 until 6/17/2010. After looking at the red band, Ms. Anderson concluded that the buyer had just turned 21 two days earlier. She recalls that she told the buyer that he just made it before taking his money, making change, and giving him the beer that he ordered. (Testimony of Brandy Anderson; Exhibit 1-4) 6. After purchasing the beer, the buyer handed his driver s license to the deputy. Deputy Roberts then informed Ms. Anderson that he was conducting an underage compliance check and she had just sold alcohol to an underage

Page 4 person. Ms. Anderson was very upset. She told Deputy Roberts that when she looked at the identification she thought that the buyer had just turned 21. Deputy Roberts showed the buyer s license to Ms. Anderson, and she saw that the writing on the red band actually said Under 18 until 6/17/2010 and not Under 21 until 6/17/2010. The printing on the dark band is very difficult to read on the photocopy. However, the first digit after the word Under does appear to be a 1 and not a 2. The last digit in the birth year appears to be a 0 and not a 3. This is consistent with Ms. Anderson s testimony that the printing on the red band provided the date when the buyer turned 18. (Testimony of Brandy Anderson; Brad Roberts; Exhibit 1-1, 1-4) 7. Sharon Horan arrived before Deputy Roberts left the bar s parking lot and asked to see the buyer and his driver s license. Deputy Roberts accompanied Ms. Horan to his car where the buyer was seated in the back seat. The window was rolled down so Ms. Horan could look at the buyer, and the buyer gave her his driver s license. Ms. Horan agreed that the buyer looked very young and stated she would have asked him for identification. Ms. Horan also told the deputy that Brandy Anderson was one of her best employees and had always done an excellent job checking identification. Ms. Horan asked the deputy why he was checking bars so early in the day instead of waiting to check them in the evening when the kids are out. Deputy Roberts told her that they did not have the manpower to conduct the compliance checks at night. (Testimony of Sharon Horan; Brad Roberts; Exhibit 1) 8. Brandy Anderson has worked in businesses selling alcohol for 14 years, and this was the first time that she has ever been charged with selling alcohol to an underage person. Her employer, Sharon Horan, has zero tolerance for underage drinking and frequently reminds her employees to check customer identification. Ms. Anderson was a reliable employee and would not have intentionally sold beer to an underage buyer. (Testimony of Brandy Anderson; Sharon Horan) 9. Sharon Horan receives some notices from the Department of Transportation when changes are made to the drivers license format but does not think that she is notified of every change. She believes that there may be as many as six different formats for the Iowa drivers licenses currently in circulation. In her opinion, this makes it too complicated for the people who have to check identification. (Testimony of Sharon Horan).

Page 5 10. Brandy Anderson was issued a citation for her sale to the buyer on June 19, 2010 and was given a deferred prosecution on the criminal charge. (Exhibit 2; Testimony of Brad Roberts) 11. The buyer was permitted to keep his driver s license following the compliance check. Consistent with his usual practice, Deputy Roberts only retained a photocopy of the driver s license as evidence. Deputy Roberts did not know if the buyer, who is now a college student but has not yet turned 21, still possessed the same license that he had during the compliance check. (Testimony of Brad Roberts) CONCLUSIONS OF LAW Iowa Code section 123.49(2)(h)(2009) provides, in relevant part: 2. A person or club holding a liquor control license or retail wine or beer permit under this chapter, and the person's or club's agents or employees, shall not do any of the following:... h. Sell, give, or otherwise supply any alcoholic beverage, wine or beer to any person, knowing or failing to exercise reasonable care to ascertain whether the person is under legal age, or permit any person, knowing or failing to exercise reasonable care to ascertain whether the person is under legal age, to consume any alcoholic beverage, wine, or beer. (emphasis supplied). The Iowa Code defines "legal age" as twenty-one years of age or more. Iowa Code section 123.3(19)(2009). 185 IAC 4.8 states that the violation of the Act (Iowa Code chapter 123) by any employee, agent, or servant of a licensee or permittee shall be deemed to be the act of the licensee or permittee and shall subject the license to suspension or revocation. The burden of going forward with the evidence to establish a violation is on the party filing the hearing complaint, but the alcoholic beverages division places the burden of proving compliance with the statute on the licensee. See McCrea v. Iowa Department of Transportation, 336 NW2d 427 (Iowa 1983); Iowa Code section 17A.18(3)(2009).

Page 6 The licensee cited State of Iowa v. Hy-Vee, Inc., d/b/a Hy-Vee Food Store, 616 N.W.2d 669 (Iowa App. 2000) in support of its argument that the state is required to show that Brandy Anderson had general criminal intent at the time of the sale. The Hy-Vee case addressed and found unconstitutional the vicarious criminal liability language that was struck from Iowa Code section 123.49(2)(h) effective July 1, 1998. The language that was struck from the statute gave an employer vicarious criminal liability for the violations of its employees, and it is no longer part of the statute. This administrative hearing does not concern vicarious criminal liability for the licensee; it concerns the licensee s liability for administrative sanctions based on an employee violation of Iowa Code section 123.49(2)(h). Brandy Anderson received a deferred prosecution and therefore was not criminally convicted of a violation of Iowa Code section 123.49(2)(h). However, a criminal conviction is not a prerequisite to suspension, revocation, or imposition of a civil penalty under Iowa Code Chapter 123. Iowa Code section 123.39(1)(c)(2009); Jim O. Inc. v. City of Cedar Rapids, 587 N.W.2d 476, 479 (Iowa 1998). The issue in this case is whether or not the preponderance of the evidence supports a finding that Brandy Anderson violated Iowa Code section 123.49(2)(h) on June 19, 2010 by selling an alcoholic beverage to an underage buyer either knowing or by failing to exercise reasonable care to ascertain whether the buyer was under the legal age. If Ms. Anderson violated the statute, then both Iowa Code section 123.49(2)(h) and 185 IAC 4.8 hold a licensee responsible for administrative sanctions for the violations of its employees. The preponderance of the evidence failed to establish that Brandy Anderson sold beer to the buyer knowing that the buyer was under age. Based on her credible testimony and the testimony of Sharon Horan, it is highly unlikely that Ms. Anderson would have sold the beer to the buyer if she knew or recognized that he was under the legal age. This is especially true when she had forewarning that law enforcement was conducting a compliance check that day. However, the preponderance of the evidence does establish that Brandy Anderson sold and served an alcoholic beverage to an eighteen year old buyer on June 19, 2010 without exercising reasonable care to ascertain whether he was under the legal age. Ms. Anderson recognized that the buyer looked very young and asked him for identification. Ms. Anderson looked at the buyer s

Page 7 identification and another employee also looked at it. However, the Division has consistently held that the reasonable care standard requires more than just requesting the customer s identification. The licensee or employee must also carefully examine the customer s identification to verify that the person is in fact over 21. 1 Careful examination of the driver s license includes looking at the person s date of birth and then calculating or determining whether the person is underage. A careless review of the identification, including miscalculating the buyer s age, constitutes a failure to exercise reasonable care. The fact that this buyer entered the bar before noon and was accompanied by a person over the legal age does not abrogate or eliminate the seller s obligation to exercise reasonable care to ascertain if the buyer is underage. Although Brandy Anderson asked the buyer for his identification, she did not examine his driver s license carefully enough to determine that he was only 18 years old. The buyer s date of birth appeared plainly on the driver s license and clearly indicated that the buyer was only 18 years old. Based on this record, it is likely that Ms. Anderson reviewed the date on the red band next to the buyer s photograph (June 17, 2010) and assumed that this was the date that the buyer turned 21. Ms. Anderson failed to notice that the date on the band indicated when the buyer turned 18 and not 21 and failed to carefully review the buyer s birth date. This constituted a failure to exercise reasonable care to ascertain if the buyer was under legal age. The preponderance of the evidence further established that the licensee had a prior violation of Iowa Code section 123.49(2)(h), which occurred on March 18, 2010. The licensee was administratively sanctioned for this violation and paid a $500 civil penalty. The licensee s second violation of Iowa Code section 123.49(2)(h) on June 19, 2010 occurred just three months after the first violation. Iowa Code section 123.50 provides, in relevant part: 123.50 Criminal and civil penalties.... 3. If any licensee, or employee of a licensee is convicted or found in violation of section 123.49, subsection 2, paragraph "h", the administrator or local authority shall, in addition to criminal 1 Administrator s Final Order, Docket No. D-2008-00069, p. 6 (referencing Dockets Nos. D-2006-00030 and A-2006-00016).

Page 8 penalties fixed for violations by this section, assess a civil penalty as follows: a. A first violation shall subject the licensee or permittee to a civil penalty in the amount of five hundred dollars. Failure to pay the civil penalty as ordered under section 123.39 shall result in automatic suspension of the license or permit for a period of fourteen days. b. A second violation within two years shall subject the licensee or permittee to a thirty-day suspension and a civil penalty in the amount of one thousand five hundred dollars. e. For purposes of this subsection: (1) The date of any violation shall be used in determining the period between violations.. (emphasis supplied). Unless otherwise specifically provided by the general assembly, use of the word shall in a statute enacted after July 1, 1971 imposes a duty. Iowa Code section 4.1(30)(2009). The legislature has mandated that the administrative sanction for a second violation of Iowa Code section 123.49(2)(h) within a period of two years is a $1500 civil penalty and a 30 day license suspension. The administrative law judge has no discretion to mitigate a statutorily mandated penalty under Iowa Code section 123.50. ORDER IT IS THEREFORE ORDERED, pursuant to Iowa Code section 123.50(3)(b), that for a second violation of Iowa Code section 123.49(2)(h) within a period of two years, Liquor License No. LC-5211, issued to Michael J. Horan d/b/a Horan s Cabaret is suspended for a period of thirty (30) days, beginning at 6:00 a.m. on Monday, April 18, 2011 and ending at 6:00 a.m. on Wednesday, May 18, 2011. IT IS FURTHER ORDERED that Michael J. Horan d/b/a Horan s Cabaret shall pay a civil penalty of fifteen hundred dollars ($1500.00) for its second violation of Iowa Code section 123.49(2)(h), within a period of two years. The $1500 civil

Page 9 penalty shall be paid to the Iowa Department of Commerce, Alcoholic Beverages Division, within thirty (30) days from the date of the final decision. IT IS FURTHER ORDERED that no alcoholic liquor, wine, or beer may be sold, dispensed or consumed on the premises during the period of suspension. Pursuant to the administrative rules of the division, any adversely affected party may appeal a proposed decision to the Administrator of the Alcoholic Beverages Division within thirty (30) days after issuance of the proposed decision. In addition, the Administrator may initiate review of a proposed decision on the Administrator's own motion at any time within thirty (30) days following the issuance of a proposed decision. 185 IAC 10.27(1) and (2). Requests for review shall be sent to the Administrator of the Alcoholic Beverages Division, 1918 S.E. Hulsizer, Ankeny, IA 50021. Unless otherwise ordered, each appealing party may file exceptions and briefs within thirty (30) days of the notice of appeal or order for review. Within thirty (30) days thereafter, any party may file a responsive brief. The Administrator may shorten or extend the briefing period as appropriate. The Administrator may resolve the appeal on the briefs or provide an opportunity for oral argument. 185 IAC 10.27(6). The administrator may affirm, reverse or modify the proposed decision. A party who is adversely affected by the proposed decision shall not be deemed to have exhausted administrative remedies unless the adversely affected party files a request for review of the proposed decision within the time provided and the Administrator has reviewed the proposed decision and has affirmed, reversed, or modified the proposed decision. Dated this 9 th day of March, 2011. Margaret LaMarche Administrative Law Judge Iowa Department of Inspections and Appeals Division of Administrative Hearings Wallace State Office Building-Third Floor Des Moines, Iowa 50319

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