Virginia Dep't of Health v. Kepa, Inc.

Supreme Court of Virginia·Decided January 8, 2015·No. 140100·Published

Opinion

PRESENT: Lemons, C.J., Goodwyn, Millette, Mims, McClanahan, and Powell, JJ., and Russell, S.J.

VIRGINIA DEPARTMENT OF HEALTH OPINION BY

v. Record No. 140100 JUSTICE WILLIAM C. MIMS January 8, 2015

KEPA, INC., d/b/a SHE-SHA CAFÉ AND HOOKAH LOUNGE

FROM THE COURT OF APPEALS OF VIRGINIA In this appeal, we consider whether the Court of Appeals erred in construing the Virginia Indoor Clean Air Act to exempt a retailer of tobacco and tobacco products from regulation, despite the fact that it also serves food.

I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW A. Background Kepa, Inc. has owned and operated She-Sha Café and Hookah Lounge ("She-Sha") in Blacksburg since 2003. She-Sha sells tobacco and tobacco products to its customers. Customers may purchase tobacco to smoke on-site through "hookahs," which are available for rent at the café, or to smoke off-site. 1 It also sells food for on-site consumption in the same area where tobacco is smoked.

She-Sha is licensed as a "Food Establishment,"

specifically a "Full Service Restaurant," by the Virginia

1 A "hookah" is a "pipe for smoking that has a long flexible tube whereby the smoke is cooled by passing through water." Webster's Third New International Dictionary 1088 (1993).

Department of Health ("Department"). It is also licensed as an "Other Tobacco Product Retailer" by the Virginia Department of Taxation. On its business license application to the Town of Blacksburg, She-Sha lists the nature of its business as "Restaurant and Retail Tobacco Store."

On January 22, 2010, the Montgomery County Health Department received a complaint indicating that She-Sha was allowing customers to smoke in its restaurant in violation of the Virginia Indoor Clean Air Act, Code § 15.2-2820 et seq. ("VICAA"), which went into effect on December 1, 2009. VICAA makes smoking in restaurants generally unlawful, subject to six narrow exceptions. Code § 15.2-2825(A)(1) through (A)(6). On January 27, 2010, the Department conducted an investigation and subsequently charged She-Sha with two violations. 2

B. Relevant Statutory Provisions and Material Proceedings Below

At issue in this appeal is the proper interpretation of two statutory provisions from VICAA that appear to conflict when applied to She-Sha. First, Code § 15.2-2821, which states VICAA's general applicability, provides:

2 The Department charged She-Sha with violating Code § 15.2- 2825(D), which requires restaurants to post "No Smoking" signs in non-smoking areas, and Code § 15.2-2825(F), which prohibits smoking in any non-smoking area of a restaurant. She-Sha agrees that it had not posted any "No Smoking" signs and that it had not divided its establishment into smoking and non- smoking areas.

Nothing in this chapter shall be construed to:

1. Permit smoking where it is otherwise prohibited or restricted by other applicable provisions of law; or

2. Regulate smoking in retail tobacco stores, tobacco warehouses, or tobacco manufacturing facilities.

Next, Code § 15.2-2825, which prohibits smoking in restaurants, provides in relevant part:

A. Effective December 1, 2009, smoking shall be prohibited and no person shall smoke in any restaurant in the Commonwealth or in any restroom within such restaurant, except that smoking may be permitted in:

. . . .

3. Any restaurants located on the premises of any manufacturer of tobacco products;

. . . .

5. Any portion of a restaurant that is constructed in such a manner that the area where smoking may be permitted is (i)

structurally separated from the portion of the restaurant in which smoking is prohibited and to which ingress and egress is through a door and (ii) separately vented to prevent the recirculation of air from such area to the area of the restaurant where smoking is prohibited.

It is also relevant to note that, for the purposes of VICAA, a "Restaurant" is "any place where food is prepared for service to the public on or off the premises, or any place where food

is served." Code § 15.2-2820. However, the term "retail tobacco store" is undefined in the Act.

She-Sha requested an informal hearing to contest the charges. On July 8, 2010, the Department upheld the violations, stating that She-Sha was "properly labeled as a restaurant" and that none of the exceptions in VICAA applied to the establishment.

After the informal hearing, She-Sha requested a formal hearing pursuant to the Virginia Administrative Process Act, Code § 2.2-4000 et seq. At the hearing, She-Sha claimed it was a "retail tobacco store," and thus, exempt from regulation under VICAA as provided in Code § 15.2-2821(2). She-Sha presented evidence, which the Department did not contest, that it derived approximately two-thirds of its revenue from tobacco-related sales.

In his findings of fact and conclusions of law, the hearing officer noted that the Department's official interpretation of Code § 15.2-2825 treats all establishments meeting the definition of a "restaurant" in Code § 15.2-2820 as

subject to regulation under VICAA. 3 The hearing officer also found that the General Assembly had "specifically exempted stand alone retail tobacco stores and restaurants operation [sic] on the premises of tobacco manufacturing facilities." He reasoned that, by not specifically exempting "restaurants operating within retail tobacco stores," the General Assembly had signaled its intent to regulate establishments such as She- Sha. The State Health Commissioner concurred with the recommendations contained in the letter and upheld the charged violations.

She-Sha appealed the Department's decision to the Circuit Court of Montgomery County. After considering the record compiled during the administrative proceedings and the oral arguments of both parties, the circuit court ruled that VICAA did not provide an exemption for She-Sha's establishment. Thus, the circuit court found that the Department did not make an error of law when it interpreted VICAA to regulate hookah bars that serve food in areas where smoking occurs.

Next, She-Sha pursued its case to the Court of Appeals. A three-judge panel affirmed the circuit court by a 2-1 vote in a

3 Department Program Implementation Manual 09-02 states that "[h]ookah bars are subject to the [smoking] ban if they prepare and serve food." Virginia Department of Health, Program Implementation Manual #09-02, at 6 (Sept. 17, 2009). It also notes that a hookah bar may continue to serve food if it erects "a structural separation between the non-smoking area and the smoking areas." Id.

published opinion. Kepa, Inc. v. Virginia Dept. of Health, 61 Va. App. 696, 740 S.E.2d 26 (2013) (Kepa I). The majority found that to adopt She-Sha's reading of Code § 15.2-2821, and exempt She-Sha from regulation as a "retail tobacco store," would force a conflict with Code § 15.2-2825. Id. at 707, 740 S.E.2d at 32. Noting that a court interpreting "multiple, related statutory provisions must give full effect to each provision while remaining true to the purpose and intent behind them," the majority concluded that the General Assembly did not intend to provide an exemption to "retail tobacco stores not operating exclusively as such." Id.

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