IRON BAR, LLC VS. TOWN OF MORRISTOWN (NEW JERSEY DIVISION OF ALCOHOLIC BEVERAGE CONTROL)

• Court: New Jersey Superior Court Appellate Division
• Decided: July 19, 2019
• Docket: A-5685-17T3
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-5685-17T3

IRON BAR, LLC,

Petitioner-Respondent,

v.

TOWN OF MORRISTOWN,

Respondent-Appellant. ____________________________

Argued June 4, 2019 – Decided July 19, 2019

Before Judges Messano, Fasciale and Gooden Brown.

On appeal from the New Jersey Division of Alcoholic Beverage Control, Agency Docket No. 50.

Denis Francis Driscoll argued the cause for appellant (Inglesino Webster Wyciskala & Taylor LLC, attorneys; Denis Francis Driscoll, Elnardo Julian Webster, and Owen T. Weaver, of counsel and on the briefs).

Ryder T. Ulon argued the cause for respondent (Schenck Price Smith & King, LLP, attorneys; Ryder T. Ulon and Thomas Joseph Cotton, on the brief). Gurbir S. Grewal, Attorney General, attorney for respondent Division of Alcoholic Beverage Control (Sheena M. Rinkle, Deputy Attorney General, on the statement in lieu of brief).

PER CURIAM

"[T]he sale of alcoholic beverages has always been subject to

extraordinary regulation." Lyons Farms Tavern v. Mun. Bd. of Alcoholic

Beverage Control of Newark, 68 N.J. 44, 49 (1975). Under the statutory scheme

that regulates the licensing of establishments dispensing alcoholic beverages,

"[a] municipality has 'the original power to pass on an application for a . . .

license or the transfer thereof,' but that power is 'broadly subject to appeal to the

Director.'" Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199

N.J. 1, 10-11 (2009) (quoting Blanck v. Mayor & Borough Council of Magnolia,

38 N.J. 484, 492 (1962)). "[T]he Director's review is de novo as to all necessary

factual and legal determinations." Id. at 11 (citing Borough of Fanwood v.

Rocco, 33 N.J. 404, 414 (1960)).

N.J.S.A. 33:1-32 provides:

Subject to rules and regulations, each issuing authority by resolution, first approved by the commissioner, may impose any condition or conditions to the issuance of any license deemed necessary and proper to accomplish the objects of this chapter and secure compliance with the provisions hereof, and all such licenses shall become effective only upon

A-5685-17T3 2 compliance with the conditions so stated and shall be revocable for subsequent violation thereof. [(Emphasis added).]

As used in the statute, the term "issuance" applies to not only the original grant

of a license but also to its transfer and renewal. Lyons Farms Tavern, 68 N.J. at

51-52. The municipality need not obtain the Director's approval before passing

the resolution placing special conditions on a license, but the statute "requir[es]

the Director's approval before any regulations adopted by a municipality become

effective." Gober v. Twp. Comm. of Pemberton, 185 N.J. Super. 323, 333 (Law

Div. 1982).

Iron Bar, LLC (Iron Bar) has operated a bar-restaurant at 5 South Street

in Morristown — The Iron Bar — since 2012, and another bar-restaurant —

Revolution — at adjacent premises, 7-9 South Street, since 2016. The Iron Bar

borders a redevelopment area that has seen significant residential development

in recent years. There are six other licensees on the same South Street block,

with a total approved capacity exceeding 2000. The municipal ordinance

permits alcoholic beverage licensees to sell liquor until 2 a.m.; needless to say,

the exodus from these bars and restaurants creates unique problems.

The Town of Morristown (the Town) approved Iron Bar's application for

a "place-to-place transfer" of a license, first, in 2012, when Iron Bar proposed

A-5685-17T3 3 operating a Mexican restaurant at 9 South Street. The Town conditioned the

approval on the prohibition of alcohol sales after 11 p.m. Iron Bar never opened

the restaurant.

In 2014, Iron Bar again sought approval of a license transfer, proposing

this time a "jazz themed restaurant," called "Iron Bistro," in storefronts at 7 and

9 South Street (the expansion area). Despite opposition from some members of

the public, the Town approved the request. It imposed a similar condition on

the license, i.e., no sales of alcohol in the expansion area after 11 p.m., Sunday

through Thursday, and after 11:30 p.m. on Friday and Saturday.

Iron Bar appealed the limit on sale hours to the Division of Alcoholic

Beverage Control (ABC). It did so again when the Town approved its renewal

application for the 2015-16 license term with the same conditions. Although the

ABC Director stayed the special condition pending each appeal, the Office of

Administrative Law (OAL) did not hear either appeal before the respective

license terms expired.

In June 2016, when Iron Bar applied to renew its license, the Town again

imposed the same limits for alcohol sales in the expansion area. Iron Bar

appealed to the ABC, and the matter was transferred to the OAL as a contested

A-5685-17T3 4 case. The parties submitted a joint stipulation of facts, and, after two days of

additional testimony, the administrative law judge (ALJ) closed the record.

When the ALJ was appointed as a judge of the Tax Court, however, a

second ALJ was assigned to the case. After both sides agreed to close the record

without further submissions, he rendered an initial decision. The ALJ "found

no nexus between the perceived problems of noise or misbehavior and the

operation of Revolution[,]" and "there was insufficient evidence of substantially

widespread community opposition to the transfer (expansion) sought in this

matter." Because the Town "failed to demonstrate . . . the operation of

Revolution has caused or is linked to any real conditions that threaten the health,

safety, welfare, and morals of the community," the ALJ concluded that the Town

could not "meet the 'necessary and proper' standard . . . in N.J.S.A. 33-1-32."

The ALJ determined "the imposition of the time restriction, including the

inexplicable selection of the closing times, demonstrates that it is arbitrary and

capricious."

The Director adopted the ALJ's initial decision in his final agency

decision. He noted that license-issuing authorities usually impose special

conditions "where there is a pattern of violations of either ABC statutes,

regulations or ordinances, or of the zoning or fire code[,]" but here, "based on

A-5685-17T3 5 the stipulation of facts . . . there were no violations of any State or municipal

ordinances by [Iron Bar]." Recognizing special conditions may be justified by

"a pattern of similar special conditions on other licenses that address a similar

problem[,]" the Director found here, the Town's clerk "expressly stated that no

other licensee has a special condition that limits hours." Additionally, there was

no "widespread public sentiment that the licensee [was] causing a problem that

need[ed] to be addressed[,]" because although "at most, [fourteen] people

expressed concern[] . . . the Chief of Police, a Council woman and . . . other

residents . . . found no problem and did not know the reason for the condition."

Finally, the Director noted that Iron Bar agreed to limit its occupancy for

the entire premises, and the Town conceded The Iron Bar rarely exceeded the

limit. Therefore, the Director found that "even if the limited[-]hours

restriction[s] were in place, the patrons of Revolution would simply move to

[The] Iron Bar . . . and all would leave at 2[] a.m., adding no additional people

onto the street." The Director concluded "the special condition limiting

Revolution's hours [was] arbitrary and unreasonable." The Director's order

declared the special condition limiting the hours "void," and he vacated the stay

and special conditions limiting occupancy to 1043 persons. This appeal

followed.

A-5685-17T3 6 The Town argues the Director's decision was arbitrary, capricious and

unreasonable because it "divested the Town Council of its principal jurisdiction

and primary authority" over licensees, and there was sufficient credible evidence

in the record supporting imposition of the special condition that limited sales.

The Town also argues Iron Bar "materially misrepresented the nature of the

expanded premises." The Town contends the Director's decision to stay and

ultimately void the special condition on Iron Bar's license "violated the

Administrative Procedure Act" (APA), N.J.S.A. 52:14B-1 to -24. Lastly, the

Town contends evidentiary rulings, and OAL's failure to render an initial

decision within forty-five days of closing the record, see N.J.S.A. 52:14B-10(c),

denied the Town a fair hearing and violated its due process rights.

We have considered these arguments in light of the record and applicable

legal standards. We affirm.

Our review of the Director's decision "is limited in scope." Circus

Liquors, 199 N.J. at 9 (citing In re Herrmann, 192 N.J. 19, 27 (2007); In re

Carter, 191 N.J. 474, 482 (2007)).

[W]hile the local issuing authority is vested with discretion in the exercise of any statutory jurisdiction committed to it, nevertheless when the Division determines on appeal that that discretion has been exercised improperly or mistakenly and the court is reviewing the Division's determination, the inquiry

A-5685-17T3 7 becomes one as to whether it can be said that the Director's action was a manifestly mistaken exercise of his own sound discretion.

[Bd. of Comm'rs of Belmar v. Div. of Alcoholic Beverage Control, 50 N.J. Super. 423, 426 (App. Div. 1958) (citing Hickey v. Div. of Alcoholic Beverage Control, 31 N.J. Super. 114 (App. Div. 1954); Rajah Liquors v. Div. of Alcoholic Beverage Control, 33 N.J. Super. 598 (App. Div. 1955)).]

"Without a 'clear showing' that it is arbitrary, capricious, or unreasonable, or

that it lacks fair support in the record, an administrative agency's final quasi -

judicial decision should be sustained, regardless of whether a reviewing court

would have reached a different conclusion in the first instance." Circus Liquors,

199 N.J. at 9-10 (quoting Herrmann, 192 N.J. at 27-28). In making this

determination, we review:

(1) whether the agency's action violates express or implied legislative policies, that is, did the agency follow the law; (2) whether the record contains substantial evidence to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.

[Id. at 10 (quoting Mazza v. Bd. of Trs., Police & Firemen's Ret. Sys., 143 N.J. 22, 25 (1995)).]

While we generally defer to an "agency's interpretation of a statute" it is

charged with enforcing, Thompson v. Board of Trustees, Teachers' Pension &

A-5685-17T3 8 Annuity Fund, 449 N.J. Super. 478, 483 (App. Div. 2017), aff'd o.b., 233 N.J.

232 (2018), we accord "substantial deference" to the Director's decision. Circus

Liquors, 199 N.J. at 10.

In enforcing the State's alcohol regulations, the "Director has powers of supervision and control which set him apart from any other formal appellate tribunal." Because of the "sui generis nature and significance" of the State's liquor regulations, "it is a subject by itself, to the treatment of which all the analogies of the law, appropriate to other administrative agencies, cannot be indiscriminately applied."

[Ibid. (quoting Blanck, 38 N.J. at 490-91).]

"Still, we are not 'bound by an agency's interpretation of a statute or its

determination of a strictly legal issue, particularly when that interpretation is

inaccurate or contrary to legislative objectives.'" S.L.W. v. N.J. Div. of Pensions

& Benefits, ___ N.J. ___, ___ (2019) (slip op. at 10) (quoting Mount v. Bd. of

Trs., Police & Firemen's Ret. Sys., 233 N.J. 402, 418-19 (2018)).

The Town argues that the Director divested the municipality of its primary

power to regulate licenses, and first the ALJ and then the Director failed to

consider credible evidence demonstrating public sentiment against the

concentration of bars in the area and public support for the special condition.

Certainly, public sentiment is a valid consideration for the Director when it

relates to "dangers to the public health, safety, morals and general welfare

A-5685-17T3 9 commonly recognized as incidents of the sale and consumption of alcohol."

Lyons Farms Tavern, Inc. v. Mun. Bd. of Alcoholic Beverage Control of

Newark, 55 N.J. 292, 307 (1970). In Lyons Farms Tavern, the public sentiment

against renewal was considered "substantial" when "neighbors, local residents,

three neighborhood and civic associations with sizable memberships, two

Rabbis serving local and community interests, and by representatives of the

nearby Beth Israel Hospital[,]" objected. Id. at 297.

Before the ALJ, however, while several residents and a councilmember

testified about the problems caused by the crowds, i.e., public urination and

vomiting near the premises, it was undisputed that Iron Bar had not violated any

ABC regulations, municipal ordinances, or fire codes. The municipal clerk

testified that the Town had not imposed a special condition on any other

licensee. The Chief of Police testified that the large crowds on the sidewalks

and streets near the premises were mostly attributable to The Iron Bar and not

Revolution; he could not explain why the special condition was initially imposed

or why the Town chose the specific times for the special condition to go into

effect. Another councilmember testified that she did not support the special

condition, and that she voted in favor of it only to assure approval of the

application. In short, there was more than sufficient credible evidence in the

A-5685-17T3 10 record for the Director to conclude there was not widespread public s entiment

in favor of the special condition and that Iron Bar had no history of violations,

i.e., there was no nexus between the special condition and the alleged problems .

In Belmar, the Director voided special conditions the municipality

repeatedly placed on a hotel's license, severely restricting the location within the

establishment where liquor could be sold. 50 N.J. Super. at 425. The Director

found there had been "no trouble" at the licensed premises during the prior two

years, and it was "unfair" that none of the other eight hotels in town was

subjected to "these obviously crippling conditions." Id. at 426. In affirming the

Director's decision, we said, "This is the kind of decision which was intended

by the Legislature to be committed to his expert judgment and it should not be

overruled by the court in these circumstances." Ibid. The same is true in this

case.

We also reject the Town's assertion that Iron Bar "materially

misrepresented" the nature of its intended business as it approved both prior

applications because Iron Bar said it intended to operate restaurants in the

expansion area. First, at oral argument before us, the Town acknowledged there

was a hearing before the municipal council on Iron Bar's 2016-17 renewal. We

were not provided with a transcript of that hearing, but, we have no reason to

A-5685-17T3 11 assume the Town was denied the opportunity to fully investigate Iron Bar's

intention at the time of the hearing, or that it actually misrepresented its

intention. Secondly, it is disingenuous to assert that Iron Bar assented to the

special condition when it twice exercised its right to appeal the special

condition, but because of delays unexplained by this record, the issue was never

decided on the merits in the OAL.

The Town also argues that the Director failed to adopt regulations

regarding the issuance of licenses with special conditions, and the lack of

regulations violates the APA. 1 See Metromedia, Inc. v. Dir., Div. of Taxation,

97 N.J. 313, 329 (1984) ("An agency determination that is intended to be applied

as a general standard and with widespread coverage and continuing effect can

. . . be considered an administrative rule . . . ."). If "the . . . agency determination

constitute[s] a rule, . . . its adoption require[s] compliance with [the] statutory

rule-making procedures" of the APA. Id. at 334.

However, "an agency decision in a contested case is not an administrative

rule." G. & J.K. Enters., Inc. v. Div. of Alcoholic Beverage Control, 205 N.J.

Super. 77, 85 (App. Div. 1985); see also N.J.S.A. 52:14B-2 (the definition of

1 The Town's challenge to the Director's issuance of a stay pending final decision is moot. Redd v. Bowman, 223 N.J. 87, 104 (2015). A-5685-17T3 12 "'[a]dministrative rule' or 'rule' . . . does not include . . . agency decisions and

findings in contested cases"). "An administrative agency need not adopt rules

and standards precisely detailing every broad grant of conferred authority." G.

& J.K. Enters., 205 N.J. Super. at 85 (citing Mitchell v. Cavicchia, 29 N.J. Super.

11, 14 (App. Div. 1953)). We reject the Town's argument, without prejudice to

its ability to file an appropriate rulemaking petition under the express provisions

of the APA. See N.J.S.A. 52:14B-4(f).

Finally, we reject the Town's arguments that the OAL's delay in issuing

an initial decision and evidentiary rulings made by the ALJ during the hearing

denied it a fair hearing and due process. The arguments require scant comment

in a written opinion. R. 2:11-3(e)(1)(E).

The ALJ conducted a voir dire of the Town's proposed expert, a municipal

planner. She rejected admission of his expert report because he admitted having

no knowledge of ABC law or procedures. Nevertheless, she permitted him to

testify as an expert in planning and to identify video footage of the area showing

the crowds.

Iron Bar proffered the testimony of a former director of the Division. With

the Town's consent, the judge permitted him to testify about ABC procedures,

A-5685-17T3 13 and he opined about the scope and extent of municipal power under N.J.S.A.

33:1-32.

In an administrative proceeding, the judge may admit expert testimony if

it "will assist . . . to understand the evidence or determine a fact in issue."

N.J.A.C. 1:1-15.9(b). "A judge sitting on a bench trial is in the best position to

determine if expert testimony on a particular issue will assist that judge." N.J.

Div. of Youth & Family Servs. v. Z.P.R., 351 N.J. Super. 427, 439 (App. Div.

2002) (citing Wilkerson v. Pearson, 210 N.J. Super. 333 (Ch. Div. 1985)). We

see no mistaken exercise of the judge's discretion in limiting the testimony of

the planner. The Town's essential argument, which was supported by the

proffered expert witness, about the effect of numerous licensed premises in close

proximity to a rapidly developing residential area was not lost on the ALJ or the

Director.

While an expert may not address matters of law which are the

responsibility of the court to decide, see, e.g., Troxclair ex rel. Troxclair v.

Aventis Pasteur, Inc., 374 N.J. Super. 374, 384-85 (App. Div. 2005) (noting

court has no obligation to accept expert's statutory interpretation), permitting

the former ABC Director to testify was harmless error. R. 2:10-2. Neither the

ALJ's initial decision nor the Director's final decision even cited the testimony.

A-5685-17T3 14 Lastly, any delay between closing the record and rendering the initial

decision was harmless, particularly since the second ALJ offered the Town an

opportunity to supplement the record when he assumed control of the case, and

the Town declined.

Affirmed.

A-5685-17T3 15