UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
East Coast Serv. Indus. Co. Inc., d/b/a Whiskeys 20, Thomas Svoleantopoulos, and Rosalie Sweeney
v. Civil No. 19-cv-1182-JD Opinion No. 2020 DNH 164 N.H. State Liquor Commission, et al.
O R D E R
East Coast Service Industry (“Whiskeys 20”), Thomas
Svoleantopoulos, and Rosalie Sweeney brought this suit alleging
violations of the federal constitution and state law against the
New Hampshire State Liquor Commission (the “Commission”) and its
employees.1 The suit also names the City of Manchester, the
Manchester Police Department, and various officers and employees
of the City of Manchester and the Manchester Police Department.2
The Commission and its employees move to dismiss the claims in
the Amended Complaint. The plaintiffs object.
1 The Commission’s employees named as defendants are Matthew Elliot, Nicolas Cutting, Danielle Ellston, Matthew Culver, Ashley Wright, Joseph S. Plaia, and John Doe 1, and will be referred to collectively as the “employees” except when individually named.
2 The City of Manchester, the Manchester Police Department, and their officers or employees did not respond to the Amended Complaint and there is no proof of service or completed waiver of service filed in the case. Standard of Review
In considering a motion to dismiss, the court asks whether
the plaintiffs have made allegations that are sufficient to
render their entitlement to relief plausible. Manning v. Boston
Med. Ctr. Corp., 725 F.3d 34, 43 (1st Cir. 2013). The court
accepts all well-pleaded facts as true and draws all reasonable
inferences in the non-moving party’s favor. Hamann v.
Carpenter, 937 F.3d 86, 88 (1st Cir. 2019). The court, however,
disregards conclusory allegations that simply parrot the
applicable legal standard. Manning, 725 F.3d at 43. To
determine whether a complaint survives a motion to dismiss, the
court should use its “judicial experience and common sense,” but
should also avoid disregarding a factual allegation merely
because actual proof of the alleged facts is improbable. Id.
The plaintiffs attached several documents to the Amended
Complaint. When evaluating a motion to dismiss, “[t]he court
may supplement the facts contained in the pleadings by
considering documents fairly incorporated therein and facts
susceptible to judicial notice.” R.G. Fin. Corp. v. Vergara-
Nuñez, 446 F.3d 178, 182 (1st Cir. 2006). The court may also
consider “documents the authenticity of which are not disputed
by the parties,” official public records, documents central to
the plaintiff’s claim, and documents sufficiently referenced in
2 the complaint. Watterson v. Page, 987 F.2d 1, 3-4 (1st Cir.
1993).
Background
The plaintiffs operate “Whiskeys 20,” a “restaurant and
late-night lounge” in Manchester, New Hampshire. Doc. 13 ¶¶ 1,
23. Broadly, the plaintiffs allege that the Commission and its
employees violated the federal constitution and New Hampshire
state law by abusing their regulatory powers over alcohol sales,
treating them differently than other liquor license holders, and
subjecting them to unreasonable searches.
A. New Hampshire Liquor Commission and Liquor Licenses
New Hampshire prohibits the sale of any liquor or alcoholic
beverage without a liquor license issued by the Commission. RSA
178:1, I; see RSA 178:2, I (“The commission may issue licenses
. . . .”). On October 27, 2015, the Commission granted Whiskeys
20 a restaurant license. A restaurant license allows its holder
to prepare, cook, and serve food in addition to selling
alcoholic beverages.
3 B. September 29, 2016, Surveillance, Inspection and Warnings
On an unknown date after it was issued a liquor license,3
Whiskeys 20 complained to the Commission that defendant Matthew
Elliot, an investigator with the Commission, “had entered
Whiskeys 20, allegedly with a warrant, and threatened to arrest
Mr. Svoleantopoulos.” Doc. 13 ¶ 49. Then, in October 2016,
Whiskeys 20 wrote another complaint to the Commission, asserting
that Elliot and Nicolas Cutting, another investigator with the
Commission, had retaliated against it for making the earlier
complaint.
Specifically, in the October 2016 complaint, Whiskeys 20
wrote that, on September 29, 2016, Elliot had “engaged in
surveillance of Whiskeys 20 for 30 minutes outside the
establishment.” Id. ¶ 50. “After conducting that surveillance,
Mr. Elliot and Mr. Cutting approached Mr. Svoleantopoulos, and
Mr. Elliot criticized him about providing safe transportation
for a customer.” Id. Elliot also told Svoleantopoulos that he
was “lucky” because they had found an intoxicated customer
outside as opposed to inside Whiskeys 20. Id.
3 The Amended Complaint does not indicate when Whiskeys 20 filed the complaint with the Commission. See doc. 13 ¶¶ 48-49.
4 Later the same evening, Elliot provided Svoleantopoulos a
“verbal warning” for having a “disorderly premises” because
there was liquor spilled in the hallway near the bathroom. Id.
¶ 51. Svoleantopoulos told Elliot that the spill was water and
was coming from a bathroom toilet. Elliot also provided a
verbal warning based on an observation that a person was
drinking in the bathroom hallway. Whiskeys 20 alleges that
Elliot’s observation was false.
Finally, “Whiskeys 20 learned it was issued another verbal
warning on September 29 for a ‘statement from [a] purchaser as
to age.’” Id. ¶ 52. Whiskeys 20, however, asserts that the
purchaser was over twenty-one and that Elliot never questioned
Svoleantopoulos about the purchaser.
C. September 2018 Violations and Settlement Agreement
In late 2018, the Commission issued three “Administrative
Notices of Agency Action” to Whiskeys 20, alleging violations of
state liquor laws and regulations. In the administrative
notices, the Commission alleged that, 1) on September 22, 2018,
Whiskeys 20 served an alcoholic beverage to a visibly
intoxicated person; 2) on July 6, 2018, Whiskeys 20 served an
alcoholic beverage to an underage person; and 3) on July 6,
2018, Whiskeys 20 accepted photographic identification that was
5 expired or inconsistent with the appearance of the person who
presented it. Id. ¶ 58.
The plaintiffs allege that, on April 18, 2019, the
Commission and, “upon information and belief,” Culver, “forced”
Whiskeys 20 to sign a Settlement Agreement4 instead of having an
adjudicatory hearing on the allegations. Id. ¶ 62. Three
persons signed the Settlement Agreement: Joseph Plaia; John Doe
1,5 on behalf of “Enforcement & Licensing”; and Svoleantopoulos,
on behalf of Whiskeys 20.
Under the Settlement Agreement, Whiskeys 20 had to pay a
fine, its liquor license was suspended for several days, and it
was assessed eight “points” to its liquor license. Among other
terms in the Settlement Agreement, Whiskeys 20 had to offer
“full course meals” to its customers, it was prohibited from
offering shots to anyone on the premises, and it was prohibited
from permitting entry to any customers under twenty-one years of
age after nine p.m. Id. ¶ 63; doc. 13-3. It was also
prohibited from hosting an “under 21 night.” The Commission
conditioned the renewal of Whiskeys 20’s liquor license on these
terms.
4 The Settlement Agreement is attached to the Amended Complaint. Doc. 13-3.
5 Doe’s signature on the document is illegible.
6 D. Police Calls, Police Detail, and Liquor Commission Inspections
The plaintiffs allege that the City of Manchester and the
Manchester Police Department have required Whiskeys 20 to have a
police detail “every weekend.” Doc. 13 at 3. The plaintiffs
allege that, in the first part of 2019, “the number of calls
made to Manchester PD for service at Whiskeys 20 for various
incidents and/or events was lower than the calls made to two
neighboring bars,” Club Manchvegas and McGarvey’s. Id. ¶ 69.
According to the Amended Complaint, in 2017, 295 calls were made
to Manchester PD for service at Whiskeys 20. In 2018, 191 calls
were made. Ten calls were made through March 2019.
The plaintiffs allege that despite Whiskeys 20’s “pristine
record” for calls to the police, defendants Elliot, Cutting,
Danielle Ellston, Culver, and Ashley Wright have conducted “over
40 premises inspections of Whiskeys 20” between 2017 and March
2019 and have “conducted video and audio surveillance of
Whiskeys 20’s employees.” Id. ¶ 72. The plaintiffs allege that
other bars – such as Club Manchvegas and McGarvey’s – have not
received the same volume of inspections from the Commission.
In June 2019, Whiskeys 20 requested that the police detail
be limited or eliminated. On June 26, the Manchester Police
Department informed Whiskeys 20 that the police detail would not
be eliminated. Each police detail costs Whiskeys 20
7 “approximately $258.” Doc. 13 ¶ 84. Whiskeys 20 has an
outstanding balance of $3,000 for unpaid police detail invoices.
E. July 2019 Overservice Allegations
On July 31, 2019, the Commission issued administrative
notices to Whiskeys 20, alleging that on June 23, 2019, it had
sold an alcoholic beverage to a visibly intoxicated individual.
Another violation notice alleged that Whiskeys 20 had allowed
patrons to self-serve alcoholic beverages. On June 24, the
Commission placed a hold on Whiskeys 20’s liquor license
renewal, which was set to expire on July 31. The Commission,
however, extended Whiskeys 20’s license through December 2,
2019, without a renewal.
Whiskeys 20 disputed the administrative notices. On
November 5, 2019, after a witness to the alleged overservice
recanted prior statements to the Commission, the Commission
informed Whiskeys 20 that it had elected not to pursue the
administrative notices further. The Commission, however, stated
that it would perform an “audit” of Whiskeys 20 prior to
granting a full renewal of its license. Whiskeys 20 alleges
that it was difficult to schedule events and order alcoholic
beverages while its license was pending expiration.
8 F. Claims The plaintiffs’ Amended Complaint contains seven counts:
• Count I: declaratory judgment; • Count II: violation of equal protection rights under the Fourteenth Amendment; • Count III: violation of procedural due process rights under the Fourteenth Amendment; • Count IV: violation of Fourth Amendment; • Count V: tortious interference with advantageous economic advantages with New Hampshire consumers; • Count VI: intentional infliction of emotional distress; and • Count VII: Negligent infliction of emotional distress.
Count I is brought against the Commission, Plaia, and Doe, and
Counts II through VII are brought against all defendants. The
claims are brought against the defendants in both their official
and individual capacities.
The plaintiffs “seek damages of $20 million, exclusive of
any punitive damages to which they are entitled, and recovery of
their attorney’s fees and costs.” Doc. 13 at 3. Whiskeys 20
also seeks injunctive relief prohibiting the defendants from
engaging in unlawful conduct as alleged in Counts II through IV.
Discussion
The Commission and employees move to dismiss all claims
against them in both their official and individual capacities.
The plaintiffs oppose dismissal of the claims. The Commission
9 and employees filed a reply, and the plaintiffs filed a
surreply.
I. Eleventh Amendment of the United States Constitution
The Commission and employees argue that they are immune
from suit in their official capacities under the Eleventh
Amendment.6 The plaintiffs do not articulate an objection to
dismissal of the Commission as to Counts I through VII or to
dismissal of the employees in their official capacities as to
Counts V through VII, on the basis of Eleventh Amendment
immunity. The Commission is dismissed as a party defendant in
Counts I through VII. The employees in their official
capacities are dismissed as parties in Counts V through VII.
Whiskeys 20 objects to dismissal of the employees in their
official capacities as to Counts I through IV. It contends
that, in Counts I through IV, it seeks prospective injunctive
relief against the employees. Whiskeys 20 argues that the
Eleventh Amendment does not bar suits that seek prospective
injunctive relief against individuals in their official
capacities. The employees replied only as to Count I, which is
6 “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” U.S. Const. amend. XI.
10 a declaratory judgment claim against employees Plaia and Doe
that challenges the validity of the Settlement Agreement based
on a New Hampshire regulation.
A. Immunity for Plaia and Doe as to Count I
Employees Plaia and Doe in their official capacities are
entitled to Eleventh Amendment immunity as to Count I. “Absent
an explicit waiver from the state, the Eleventh Amendment bars
official capacity suits against state actors in federal court
unless the suit seeks prospective injunctive relief.” Caisse v.
DuBois, 346 F.3d 213, 218 (1st Cir. 2003) (citing Rosie D. v.
Swift, 310 F.3d 230, 234 (1st Cir. 2002)). The exception to
Eleventh Amendment immunity discussed in Caisse applies only
where prospective injunctive relief corrects ongoing violations
of federal law. Swift, 310 F.3d at 234; see also Ex parte
Young, 209 U.S. 123, 159-60 (1908). In Count I, Whiskeys 20
does not allege any violation of federal law, and it seeks
declaratory relief rather than prospective injunctive relief.
Therefore, the Eleventh Amendment applies to Plaia and Doe in
their official capacities as to Count I. See Swift, 310 F.3d at
234.
11 B. Waiver In its surreply, Whiskeys 20 asserts that employees Plaia
and Doe failed to raise Eleventh Amendment immunity as to Count
I in their motion to dismiss. Whiskeys 20 contends that Plaia
and Doe raised the argument for the first time in their reply
brief. Therefore, Whiskeys 20 contends, Plaia and Doe have
waived their Eleventh Amendment immunity for this litigation.7
In certain circumstances, a state’s “affirmative conduct in
litigation” can result in its waiver of Eleventh Amendment
immunity for the litigation. See New Hampshire v. Ramsey, 366
F.3d 1, 15-18 (1st Cir. 2004). The motion to dismiss could have
more clearly asserted that Plaia and Doe, like the Commission,
raised Eleventh Amendment immunity as to Count I. Nevertheless,
the employees clarified their position in their reply and made
no affirmative statement of waiver. Moreover, it would be
unusual and inconsistent for the defendants to assert immunity
as to the Commission while waiving immunity for its employees.
In these circumstances, the employees stand in the place of the
Commission, which is the real party in interest in Count I,
7 Alternatively, Whiskeys 20 asks the court to decline to consider the immunity defense for Plaia and Doe on the ground that it was raised for the first time in a reply brief. If the court were to take that route, Plaia and Doe could raise the defense later. See Acevedo Lopez v. Police Dep’t of Com. of Puerto Rico, 247 F.3d 26, 28 (1st Cir. 2001) (“Eleventh Amendment immunity can be raised at any time because of its jurisdictional implications.”). Therefore, the defense will be addressed here.
12 because any decree that the Settlement Agreement is invalid
would operate against the Commission. See Pennhurst State Sch.
& Hosp. v. Halderman, 465 U.S. 89, 101-102 (1984) (“[R]elief
sought nominally against an officer is in fact against the
sovereign if the decree would operate against the latter.”).
For those reasons, Plaia and Doe did not by their conduct waive
Eleventh Amendment immunity for the purpose of this litigation.
See Ramsey, 366 F.3d 1, 15-18. Count I is dismissed as to
employees Plaia and Doe in their official capacities.
II. Remaining Claims Against Employees
The employees move to dismiss the remaining claims against
them after application of the Eleventh Amendment. The remaining
claims against the employees are Count I (declaratory judgment)
as brought against Plaia and Doe in their individual capacities,
Counts II through IV (constitutional claims) against all the
employees in both their individual and official capacities, and
Counts V through VII (state tort claims) against all the
employees in their individual capacities. The plaintiffs object
to dismissal of these claims.
A. Declaratory Judgment (Count I)
The employees argue that Plaia and Doe are incorrectly
named as defendants in Count I, which is Whiskeys 20’s
13 declaratory judgment claim challenging the validity of the
Settlement Agreement. They argue that there is no actual
controversy between Plaia, Doe, and Whiskeys 20 because the
Settlement Agreement sets forth legal relations only between the
Commission and Whiskeys 20. Whiskeys 20 responds, arguing that
“this Agreement was never binding on, and could not have been
legally approved by, NHSLC. Thus, the only interested parties,
for purposes of the Agreement and Count I, are Whiskeys 20 and
Defendants Plaia and John Doe 1.” Doc. 25 at 5-6.
The Settlement Agreement purports to be an agreement
between the Commission and Whiskeys 20. Doc. 13-3 (“The New
Hampshire Liquor Commission accepts the above settlement subject
to the terms and conditions set forth in this agreement.”).
Nowhere does the Settlement Agreement suggest that it is an
agreement between Whiskeys 20, Plaia, and Doe. Rather, Plaia
and Doe signed as agents of the Commission and “Enforcement &
Licensing,” respectively. Doc. 13-3.
Whiskeys 20 has not alleged facts to show that Plaia and
Doe have any legal interest in the validity or invalidity of the
Settlement Agreement in their individual capacities.8 Instead,
8 Whiskeys 20 also argues that, because the Settlement Agreement is invalid, the signatories are interested parties. Whiskeys 20 does not show, however, that allegations of invalidity transform the agreement to one between Whiskeys 20 and the individuals who signed on behalf of the Commission.
14 they signed as agents of a government entity, that is, the
Commission. Therefore, Count I does not state a claim against
Plaia and Doe in their individual capacities. Kentucky v.
Graham, 473 U.S. 159, 165-66 (1985) (“Personal-capacity suits
seek to impose personal liability upon a government official for
actions he takes under color of state law. . . . Official-
capacity suits, in contrast, generally represent only another
way of pleading an action against an entity for which an officer
is an agent.”) (citations and quotation marks omitted).
For those reasons, Count I is dismissed as brought against
Plaia and Doe in their individual capacities. Because all of
the defendants named in Count I have been dismissed, Count I is
dismissed in its entirety.
B. Constitutional Claims (Counts II through IV)
The employees raise qualified immunity as to Whiskeys 20’s
claims that they violated the Equal Protection Clause (Count
II), the Fourteenth Amendment’s Due Process Clause (Count III),
and the Fourth Amendment (Count IV). In the alternative, the
employees argue that Whiskeys 20 fails to state claims for
relief under Federal Rule of Civil Procedure 12(b)(6).
Application of the defense of qualified immunity is a two-step
analysis in which it is first determined whether the facts,
taken in the light most favorable to the plaintiff, show that
15 the defendant violated a constitutional right. Hunt v. Massi,
773 F.3d 361, 367 (1st Cir. 2014). Therefore, for both Rule
12(b)(6) and the defense of qualified immunity, the court
determines whether Whiskeys 20 has stated a constitutional
violation.
1. Class-of-One Equal Protection (Count II)
Whiskeys 20 alleges that the employees treated it
differently from similarly-situated Manchester bars by
subjecting it to excessive investigations and penalties not
imposed on those other bars. The employees argue that Whiskeys
20’s class-of-one claim is barred by Engquist v. Oregon Dep’t of
Agric., 553 U.S. 591 (2008).9
“The Equal Protection Clause contemplates that similarly
situated persons are to receive substantially similar treatment
from their government.” Davis v. Coakley, 802 F.3d 128, 132
(1st Cir. 2015). The Supreme Court has recognized a “class-of-
one” equal protection claim where “the plaintiff alleges that
she has been intentionally treated differently from others
similarly situated and that there is no rational basis for the
9 Whiskeys 20 argues that the employees failed to sufficiently develop their argument that its class-of-one equal protection claim fails, thereby waiving the argument. The court disagrees and will address the argument.
16 difference in treatment.” Village of Willowbrook v. Olech, 528
U.S. 562, 564 (2000).
In Engquist, the Supreme Court held that class-of-one equal
protection claims cannot be sustained when they challenge “forms
of state action . . . which by their nature involve
discretionary decisionmaking based on a vast array of
subjective, individualized assessments . . . [in which] treating
like individuals differently is an accepted consequence of the
discretion granted.” Caesars Mass. Mgmt. Co. v. Crosby, 778
F.3d 327, 336 (1st Cir. 2015). While Engquist was decided in
the context of public employment decisions, the Supreme Court
hypothesized that a class-of-one equal protection claim could
not be used to challenge speeding tickets issued by law
enforcement officers to some speeders but not others:
[A]llowing an equal protection claim on the ground that a [speeding] ticket was given to one person and not others, even if for no discernible or articulable reason, would be incompatible with the discretion inherent in the challenged action. It is no proper challenge to what in its nature is a subjective, individualized decision that it was subjective and individualized.
Engquist, 553 U.S. at 603-604. Similarly, in Crosby, the First
Circuit held that a class-of-one equal protection claim
challenging a report about a casino operator’s suitability was
inappropriate under Engquist where the casino licensing board
was provided “broad discretionary judgment.” Crosby, 778 F.3d
17 at 337 (“The possibility of mandating or deriving a baseline
against which to assess a claim of treating seemingly similarly
situated individuals differently, . . . is in fact even further
from possibility in casino licensing than in public
hiring. . . . [T]he virtually plenary discretion that defines
the state activity places this case squarely within the Engquist
rule limiting class-of-one redress.”) (citation and quotation
marks omitted). In other words, regulatory decisions to issue
licenses are, generally, highly subjective, discretionary
decisions. In these cases, class-of-one equal protection claims
cannot be sustained. See id.
Like the casino licensing board discussed in Crosby and the
hypothetical law enforcement officer described in Engquist, the
decisions made by the Commission as to licensing and enforcement
are discretionary and highly subjective. Within certain bounds,
the Commission may investigate license applicants and holders,
enforce and punish violations of New Hampshire’s liquor
regulations, and determine whether any license may be renewed.
See RSA 179:57, I; RSA 178:3, XI. For example, RSA 179:57, I
and RSA 178:3, XI, dictate that Commission investigators and
officials conduct “frequent” inspections and permit the exercise
of subjective judgment about licensing renewals. It is
otherwise left to the Commission’s and its investigators’
subjective judgment to determine the timing, frequency, and
18 scope of authorized inspections. Similarly, RSA 179:57, I, and
N.H. Code Admin. R., Liq. (“Liq.”) 603.02 provide the Commission
with discretion to determine what penalty to impose if
violations are found after an investigation.
Given this regulatory structure, investigations by the
Commission, as well as the penalties that may arise from any
violations found, are the types of state action that, by their
nature, involve “discretionary decisionmaking based on a vast
array of subjective, individualized assessments.” See Crosby,
778 F.3d at 336. Therefore, Whiskeys 20’s class-of-one equal
protection claim on the ground of disparate treatment as to
investigations and penalties imposed by the Commission cannot be
sustained. See id. For those reasons, the court dismisses
Count II of the Amended Complaint as against the employees.
2. Procedural Due Process (Count III)
Whiskeys 20 contends that the employees violated its right
to procedural due process under the Fourteenth Amendment. A
procedural due process claim requires the plaintiff to show that
it has a protected property interest and that the defendants
deprived it of that interest without due process. Miller v.
Town of Wenham, Ma., 833 F.3d 46, 52 (1st Cir. 2016). The
employees argue that Whiskeys 20 does not have a protected
19 property interest and that, even if it did, it was not deprived
of the property interest.
a. Existence of Property Interest
Whiskeys 20 asserts that it has a protected property
interest in the renewal of its liquor license. “Property
interests are created and defined by state law.” Frank v. City
of Manchester, No. 9-CV-389-PB, 2011 WL 3489888, at *3 (D.N.H.
Aug. 10, 2011) (citing Leis v. Flynt, 439 U.S. 438, 441 (1979)).
To have a protectable property interest, “a person clearly must
have more than an abstract need or desire for [the benefit]. He
must have more than a unilateral expectation of it. He must,
instead, have a legitimate claim of entitlement to it.” Bd. of
Regents v. Roth, 408 U.S. 564, 577 (1972).
“Permissive” wording in a statute that authorizes the grant
or denial of a license suggests that an applicant for the
license has a limited or no protectable property interest in it.
See Chongris v. Bd. of Appeals, 811 F.2d 36 (1st Cir. 1987)
(holding that applicant for “common victualler’s license” had no
protectable interest where statute stated licensing authorities
“may” grant licenses and that authorities had discretion to
determine whether license was warranted by “the public good”);
see also Scott v. Village of Kewaskum, 786 F.2d 338, 340 (7th
Cir. 1986) (“To the extent a request [for a license] appeals to
20 discretion rather than to rules, there is no property.”).
Accordingly, it is “a rare case in which an application for a
license that the government has discretion to grant or deny will
give rise to a property right protected by the due process
clause.” Frank, 2011 WL 3489888, at *3.
RSA chapter 178 provides the Commission with discretion in
deciding whether a liquor license may be renewed and in
determining what facts are relevant to its decision. Under RSA
178:3, XI, “[t]he commission may consider the licensee’s record
of violations, the manner in which the licensee has operated
during the term of the license, the effect of the license on the
neighborhood or community, and any other facts presented at the
renewal hearing in determining whether to renew the license.”
Considering the permissive wording of RSA 178:3, Whiskeys 20
does not have a protectable property interest in the renewal of
its liquor license sufficient to sustain its procedural due
process claim in this case.
Whiskeys 20 argues that, in Vars v. Citrin, 470 F.3d 414
(1st Cir. 2006), the First Circuit found that holders of liquor
licenses in Rhode Island have some protectable property
interests in them. In Rhode Island, however, the renewal of a
liquor license is presumed: “[A] holder of a [liquor license]
who applies prior to November 15 of the year in which his
license expires is prima facie entitled to a renewal thereof.”
21 Beacon Restaurant, Inc. v. Adamo, 103 R.I. 698, 705 (1968)
(holding that Rhode Island liquor licenses have “some of the
aspects of a property right”). Conversely, New Hampshire law
provides that “[t]here shall be no presumption that any liquor
license shall be renewed.” RSA 178:3, XI.
Whiskeys 20 contends, however, that under RSA 178:3, XI,
the Commission “must” renew a license if the applicant “meets
all of the current requirements for the issuance of a license.”
Doc. 25 at 16. Whiskeys 20 misreads the statute. RSA 178:3,
XI, states that a license “shall not” be renewed “unless the
licensee meets all of the current requirements for the issuance
of a license.” As such, the Commission must deny a liquor
license renewal if the applicant fails to meet the current
requirements for issuance, but it need not grant renewal if the
requirements are met. In other words, meeting the current
requirements for issuance of a liquor license is a necessary
condition for renewal, but meeting those requirements does not
guarantee renewal.
In any event, the Commission has significant discretion in
determining whether the current requirements for issuance are
met and, therefore, in determining whether any license may be
renewed. For example, one condition for the issuance (and
therefore renewal) of a license is that the Commission is
“satisfied” that “[t]he proposed location of the business is an
22 appropriate one, considering the nature of the business, the
nature of the surrounding neighborhood, and the number of
similar businesses in that neighborhood.” RSA 178:3, VII. The
Commission must also be “satisfied” that “the applicant is of
sufficiently good character to leave no substantial doubt that
the proposed business shall be operated in strict accordance
with all applicable state and federal alcoholic beverage control
laws and rules.” Id.
For those reasons, the applicable statutes do not create a
“legitimate claim” to the renewal of Whiskeys 20’s liquor
license. Rather, the Commission is provided broad discretion in
determining whether any license warrants renewal. Because
Whiskeys 20 does not have a protectable property interest in the
renewal of its liquor license, its procedural due process claim
based on delayed renewal or non-renewal must be dismissed. See
Roth, 408 U.S. at 577.
b. Deprivation of Property Interest
The employees also argue, in the alternative, that Whiskeys
20’s procedural due process claim is insufficient because, even
assuming that it has a protected property interest in its liquor
license, it has not alleged a deprivation of its rights without
due process. Because Whiskeys 20 does not have a protected
property interest, there is no need to address the alternative
23 position of the employees. Whiskeys 20’s procedural due process
claim (Count III) is dismissed as to the employees.
3. Fourth Amendment (Count IV)
Whiskeys 20 alleges that the employees violated the Fourth
Amendment by conducting warrantless searches. The employees
assert that Whiskeys 20 has failed to allege any specific
searches or seizures that occurred. They also argue that no
warrant is required to conduct an administrative search.
In response, Whiskeys 20 argues that employees Elliot and
Cutting entered Whiskeys 20 on September 29, 2016, “for no
purpose other than to threaten” Svoleantopoulos. Doc. 25 at 19-
20 (citing Doc. 13 ¶ 49). Whiskeys 20 contends that Elliot
conducted “illegal surveillance” that evening and that he
entered again to provide Whiskeys 20 two verbal warnings. Doc.
25 at 20.
“The right of the people to be secure in their persons,
houses, papers, and effects, against unreasonable searches and
seizures, shall not be violated . . . .” U.S. Const. amend. IV.
“A search within the meaning of the Fourth Amendment occurs
whenever the government intrudes upon any place and in relation
to any item in which a person has a reasonable expectation of
privacy.” United States v. Moss, 936 F.3d 52, 58 (1st Cir.
2019).
24 a. External Surveillance and Public Spaces
Not every surveillance or entrance into a building is a
search within the meaning of the Fourth Amendment. See Katz v.
United States, 389 U.S. 347, 350-51 (1967). The Fourth
Amendment does not preclude the type of external surveillance
that is alleged in the Amended Complaint. See California v.
Ciraolo, 476 U.S. 207, 213 (1986) (concluding that visual
surveillance of a property from a public space is not a “search”
under the meaning of the Fourth Amendment). As to Elliot’s
entries into the business premises to observe or to provide
Whiskeys 20 or Svoleantopoulos “verbal warnings,” the claim is
also insufficient. The observations that led to the “verbal
warnings” occurred near a “hallway floor by the bathroom,” which
would be a public area of Whiskeys 20 for which Whiskeys 20 has
no reasonable expectation of privacy. See Katz, 389 U.S. at 351
(“[T]he Fourth Amendment protects people, not places. What a
person knowingly exposes to the public, even in his own home or
office, is not a subject of Fourth Amendment protection.”).
b. Administrative Search Exception
Even if Elliot or Cutting entered a space in which Whiskeys
20 held a reasonable expectation of privacy to observe or to
25 provide Svoleantopoulos with “verbal warnings,”10 the
administrative search exception to the warrant requirement
applies. Administrative searches or seizures pursuant to a
regulatory scheme that meets the Fourth Amendment’s standards
are exempt from the warrant requirement. See United States v.
Maldonado, 356 F.3d 130, 134-35 (1st Cir. 2004). Such a
regulatory scheme must meet a three-prong test to be reasonable
under the Fourth Amendment: “First, there must be a substantial
government interest that informs the regulatory scheme pursuant
to which the inspection is made. Second, the warrantless
inspections must be necessary to further the regulatory scheme.
Finally, the implementation of the statutory inspection program
must provide a constitutionally adequate substitute for a
warrant.” See State v. Gness, 166 N.H. 1, 4-5 (2014);
Maldonado, 356 F.3d at 135 (noting the same criteria).
Whiskeys 20 does not contest that New Hampshire has a
substantial government interest in regulating establishments
that serve liquor, and the New Hampshire Supreme Court has
already provided persuasive reasoning in support of the
necessity of warrantless administrative inspections under New
Hampshire’s liquor regulation scheme. “Requiring investigators
10While the observations leading to the issuance of the verbal warnings occurred in a public area, the Amended Complaint does not allege where Elliot was when he provided the verbal warnings themselves to Svoleantopoulos.
26 to obtain a warrant before inspecting a licensee’s commercial
premises or records would impede the inspectors’ abilities to
detect violations of state liquor laws and to quickly and
efficiently investigate wrongdoing that may pose a threat to
public safety.” Gness, 166 N.H. at 5 (quoting In re Morgan, 114
N.H 44, 50 (1999)). Therefore, warrantless searches in the
liquor industry “allow investigators to quickly investigate
potential wrongdoing, and deter statutory violations.” Gness,
166 N.H. at 6.
Finally, the New Hampshire Supreme Court has also
persuasively explained that Commission investigators do not have
unlimited discretion in their searches and are subject to
limitations sufficient to be a substitute for a warrant. See
id. at 7-8 (“RSA title XIII provides articulable guidelines that
limit investigators' discretion during inspections. . . . By
detailing the conditions that constitute license violations, the
statute guides investigators during both annual inspections and
premises checks.”). In this case, the alleged illegal search
and seizure involved an entry during which Elliot provided a
verbal warning to Svoleantopoulos about a potential violation of
New Hampshire’s liquor code and regulations. The alleged
intrusion was for a minimal duration and a limited purpose that
conformed to RSA title XIII and the liquor code. See Liq.
602.01(b) (“Upon detecting conditions which could cause or
27 otherwise lead to violations, the investigator shall discuss the
problem and corrective action with the person in charge at the
licensed business, and issue a notice and record of agency
instruction.”).
c. Motive
Whiskeys 20 contends that Elliot and Cutting did not enter
on September 29 to provide Svoleantopoulos warnings or to
conduct a legitimate investigation. Rather, it asserts that
Elliot and Cutting wanted to retaliate against Whiskeys 20 or
Svoleantopoulos for filing complaints about Elliot. An
officer’s subjective motivations, however, are irrelevant to
whether a warrantless search or seizure is objectively
reasonable under the Fourth Amendment. See, e.g., Brigham City,
Utah v. Stuart, 547 U.S. 398, 404 (2006) (“The officer’s
subjective motivation is irrelevant.”); United States v.
Favreau, 886 F.3d 27, 30 (1st Cir. 2018) (“[The officers’]
ulterior motive is of no consequence under the Fourth
Amendment.”).
d. Other Grounds
As to any other Fourth Amendment violation that Whiskeys 20
sought to allege, the Amended Complaint is too vague to state a
claim. The Amended Complaint states that unspecified defendants
28 conducted “numerous searches and inspections” of Whiskeys 20 and
that these defendants “upon information and belief” “acted
without good faith and without reasonable belief that probable
cause existed for the searches and inspections.” Doc. 13
¶¶ 160, 162. These general statements fail to provide adequate
notice to the court and the defendants about the factual basis
for Whiskeys 20’s legal claims.
For the foregoing reasons, Count IV of the Amended
Complaint is dismissed.
C. State Law Tort Claims (Counts V through VII)
The employees contend that the court should decline to
exercise supplemental jurisdiction over the state law tort
claims (Counts V through VII) if the court dismisses the federal
claims in this case. They also contend, in the alternative,
that they are entitled to official immunity under RSA 99-D:1 as
to the state law counts and that the state law counts fail to
state claims upon which relief can be granted.
1. Supplemental Jurisdiction
Although the court has dismissed all the federal claims
brought against the employees, it has not dismissed the federal
claims as against the City of Manchester, the Manchester Police
Department, or their officers and employees. Because at this
29 point federal claims remain pending, it is not appropriate to
decline supplemental jurisdiction. See 28 U.S.C. § 1367(c)
(“The district courts may decline to exercise supplemental
jurisdiction over a claim . . . if . . . the district court has
dismissed all claims over which is has original jurisdiction.”).
2. Official Immunity Under New Hampshire law, state officials are immune from
liability “for decisions, acts or omissions that are: (1) made
within the scope of their official duties while in the course of
their employment; (2) discretionary, rather than ministerial;
and (3) not made in a wanton or reckless manner.” Farrelly v.
City of Concord, 168 N.H. 430, 437 (2015); see also RSA 99-D:1
(adopting a statutory official immunity for all state officers
and employees). The employees assert that any acts or omissions
by them were “within the scope of their official duties while in
the course of their employment,” were discretionary, and were
“not made in a wanton or reckless manner.” See Farrelly, 168
N.H. at 437. The plaintiffs11 object, arguing that “Counts V-VII
all allege facts that demonstrate [these] Defendants acted in a
‘wanton or reckless manner’ when, among other things, they
11 Whiskeys 20 is the plaintiff as to Count V, while Svoleantopoulos and Sweeney are the plaintiffs as to Counts VI and VII.
30 conducted warrantless, open-ended inspections and improper
compliance checks of Whiskeys 20’s premises.” Doc. 25 at 21.
The facts of the Amended Complaint, taken as true,
establish that the employees’ acts or omissions were “made
within the scope of their official duties while in the course of
their employment” and were “discretionary, rather than
ministerial.” See Farrelly, 168 N.H. at 437-40. As to
wantonness or recklessness, the inspections of Whiskeys 20 that
are sufficiently identified in the Amended Complaint were not
improper.
The plaintiffs also allege that the employees caused them
substantial damages by delaying renewal of Whiskeys 20’s liquor
license while the violations that had been noticed were being
reviewed. Those violations were ultimately dismissed. The
Amended Complaint contradicts the plaintiffs’ argument as the
Commission extended Whiskeys 20’s license so that it did not
lapse during the investigation. Furthermore, once the
Commission learned that its principal witness had recanted his
statements, it rescinded its allegations.
The other allegations of misconduct in the Amended
Complaint similarly fall outside the scope of “wanton” or
“reckless”. For those reasons, the employees are entitled to
official immunity as to the state law tort claims: Count V
(tortious interference), Count VI (intentional infliction of
31 emotional distress), and Count VII (negligent infliction of
emotional distress). Those claims are dismissed as against the
employees.
Conclusion
For the foregoing reasons, the motion to dismiss (doc. no.
22) by the Commission and employees is granted.
SO ORDERED.
__________________________ Joseph A. DiClerico, Jr. United States District Judge
September 17, 2020
cc: Counsel of Record.