Fantasies On 5TH Ave., LLC v. State

446 P.3d 360
CourtAlaska Supreme Court
DecidedAugust 9, 2019
DocketSupreme Court No. S-16981
StatusPublished
Cited by6 cases

This text of 446 P.3d 360 (Fantasies On 5TH Ave., LLC v. State) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fantasies On 5TH Ave., LLC v. State, 446 P.3d 360 (Ala. 2019).

Opinion

CARNEY, Justice.

I. INTRODUCTION

After an Anchorage strip club applied to have its liquor license renewed the Alcohol and Beverage Control Board received multiple objections to the renewal. Former employees, the Department of Labor, and the Municipality of Anchorage each alleged wage law violations, untrustworthy management, and unsafe policies. After three hearings before the Board and one before an administrative law judge, the Board denied renewal because it was not in the public interest. The club appealed to the superior court, which affirmed the Board's decision. The club now appeals to us, arguing it was unreasonable to *364find that renewal was not in the public interest and that the club was denied due process in the administrative proceeding. We affirm the superior court's decision to uphold the Board's determination.

II. FACTS AND PROCEEDINGS

A. Facts

1. The Club's Management

Fantasies on 5th Avenue, LLC is a "strip club business" operating under various names since 1989. For most of the time between 1989 and 2013 Kathy Hartman owned the club. In July 2013 Hartman transferred 100% ownership of the club to her son Travis Gravelle. This transfer occurred approximately one year after a federal judgment was entered against Hartman in a wage and hour lawsuit over the club's claim that its dancers were "independent contractors." Gravelle remains the sole owner of Fantasies.

Gravelle testified that he received no income from his ownership, knew nothing about the business's operation, had no control over its finances or any of its bank accounts until after the start of the administrative proceedings regarding the license renewal, and was only physically present in the club a few times in the past several years. A former employee testified that Gravelle was not allowed to drink at the club or even be on the premises.

Despite Gravelle's ownership, evidence showed that Fantasies has been run by Hartman's boyfriend, Eugene Greaves. Greaves referred to himself as the general manager of Fantasies, but testified that he received no income from the position. As manager, Greaves classified the DJs, janitors, security, and other workers as contractors rather than employees, denying them employee benefits. He also required dancers to sign agreements to be tenants of the club and pay hourly rent to use the facilities for dancing.

Fantasies paid no wages to its dancers; their income came solely from tips. Moreover, they were required to pay rent to Fantasies at the end of each shift from the tips they had received. If dancers did not make enough to pay rent, they were required to pay the remainder from the next shift's tips in addition to paying that next shift's rent.

Objections to the club's license renewal included allegations about unsafe and illegal practices at the club including that Fantasies did not allow workers to make 911 emergency calls from the club. The Board noted two such incidents: no calls were made when a dancer fell on her head from six feet above the floor or when an intoxicated customer passed out and suffered seizures. Another complaint noted that Fantasies' contract with its manager provided a "bonus" when the club made more than $2,000 in one night, apparently violating the licensing statute which states that "[a] person other than a licensee may not have a direct or indirect financial interest in the business for which a license is issued."1

2. The Current Liquor License

From March 2014 through the denial of its liquor license in July 2016, Fantasies held liquor license number 1078. Gravelle was Fantasies' sole owner when it obtained the license. Despite Gravelle's ownership, Greaves worked with the Board to obtain the license transfer. The Board staff member who interacted with Greaves testified that she had not even heard Gravelle's voice until the Board's February 2016 meeting. Greaves had obtained a power of attorney from Gravelle and signed all the necessary paperwork on Gravelle's behalf. The Board staff member testified that this "raised red flags" and that she had never seen that done in her five years of processing applications.

In early November 2015 the Department of Labor and Workforce Development's Wage and Hour Administration (DOL) notified Fantasies of its intent to conduct a wage audit of the club for the period between December 2013 and November 2015. The wage investigation was ongoing when Fantasies applied to renew its liquor license.

B. Proceedings

In November 2015 Fantasies applied to renew its liquor license. Board staff noticed *365an irregularity in the application and contacted Gravelle for clarification. Although Gravelle had signed the form, affirming that he had "examined this application ... and it [was] true, correct, and complete," he responded that a friend had filled out the form on his behalf while he was out of town. Board staff considered his answer to be "a huge red flag" because the applicable statutes and regulations require the license owner to be personally responsible for its use, and because there had been previous cases with other licensees violating AS 04.11.450, prohibiting non-licensees from having a financial interest in the business.

After more thoroughly examining Fantasies' application, Board staff grew "very concerned about prohibited financial interest" and decided it was necessary for the application to go before the Board. The Board scheduled a hearing in February 2016 to consider the license renewal application. Prior to the hearing the Board received objections from DOL, the Municipality of Anchorage, and four former Fantasies workers.

DOL objected based on its investigation, which had revealed that Fantasies' dancers should have been classified as employees and that "thirty or more workers did not receive minimum wage, or any wage, to which they were entitled." The Municipality objected to renewing the license until the wage and hour violations were resolved. And four former workers filed objections alleging that (1) non-licensees had financial interests, (2) wage and hour laws continued to be broken, and (3) renewal was not in the best interest of the public. At the hearing the DOL investigator, the Municipality's attorney, and Fantasies' attorney testified. Because DOL's investigation had not been completed, the Board deferred its decision until its next scheduled meeting in April.

About a week after the February Board hearing, Fantasies' lawyer sent DOL a letter asking it to stop its investigation "or Fantasies [would] take appropriate legal action against [DOL] and [the assigned investigator] personally." As a result, the DOL staff member temporarily halted the investigation until directed to continue despite Fantasies' threatened action.

Before the April meeting DOL asked the Board to "withhold any transfer of the liquor license for [Gravelle] ... pending resolution of unpaid wages." DOL's continuing investigation was still "in the process of auditing records to determine wages due to workers" and "estimate[d] a minimum amount of unpaid wages at $500,000 plus liquidated damages, for failure to pay minimum wage." The Board nevertheless held a continued hearing in April.

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446 P.3d 360, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fantasies-on-5th-ave-llc-v-state-alaska-2019.