state of iowa before the department of commerce … hole_2012.pdf1. jerry michael o’halloran is...

STATE OF IOWA

BEFORE THE DEPARTMENT OF COMMERCE

ALCOHOLIC BEVERAGES DIVISION

_________________________________________________________________

IN RE: )

) Docket No. A-2012-00018

O’Halloran Properties, LLC ) DIA No. 12ABD004

d/b/a The 9th Hole )

310 6th Ave. )

Grinnell, Iowa 50112 ) PROPOSED DECISION

)

Liquor License No. LC-36058 )

___________________________________________________________________

On March 5, 2012, the Grinnell City Council (local authority) approved the Class

C liquor license renewal application filed by O’Halloran Properties, LLC, d/b/a

The 9th Hole, Liquor License No. LC-36058, (licensee) for the premises located at

310 6th Avenue in Grinnell, Iowa but denied the renewal of the licensee’s

Outdoor Service Area. The licensee filed a timely Notice of Appeal with the

Department of Commerce, Alcoholic Beverages Division (division). A telephone

hearing was held on June 25, 2012 at 10:00 a.m. Attorney William J. Sueppel

appeared for the local authority. Attorney John C. Wagner represented the

licensee. The undersigned administrative law judge presided. The hearing was

recorded.

THE RECORD

The record includes the license renewal application filed on or about February 6,

2012; the Division’s Notice of the Denial to Licensee; Notice of Appeal and

Division's Acknowledgement; Notice of In-Person Hearing; Notice of Telephone

Hearing; and the testimony of Grinnell police officers Dan Johnson and Theresa

Petersen; Grinnell City Clerk Kay Cmelik; and owner Jerry O’Halloran. The

record also includes Local Authority Exhibits 1-4. The licensee objected to ten

pages of photographs, which were included as part of Exhibit 4, and those pages

were excluded from the exhibit for lack of relevance.

DIA NO. 12ABD004

ISSUE

Should the local authority's denial of the licensee's renewal application for its

Outdoor Service Area be reversed by the division because the denial was

arbitrary, capricious, or contrary to law?

FINDINGS OF FACT

1. Jerry Michael O’Halloran is the 100% owner of O’Halloran Properties,

LLC d/b/a The 9th Hole (licensee), which is located at 310 6th Avenue in Grinnell,

Iowa. Late in 2007, Mr. O’Halloran purchased the property where The 9th Hole

is now located. Prior to opening The 9th Hole, Mr. O’Halloran extensively

remodeled the existing building on the property, which had formerly been the

site of a state liquor store. Mr. O’Halloran estimates that he spent more than

$100,000 on new electrical, new plumbing, new bathrooms, a fence on the south

side of the property, and an outdoor cement patio. (Testimony of Jerry

O’Halloran)

2. O’Halloran Properties, LLC, d/b/a The 9th Hole, was issued Liquor License

Number LC 36058 in 2008. Shortly after this initial license was issued, the local

authority approved the licensee’s application for an outdoor service privilege on

the cement patio that is located on the west side of the building. There are two

entry points to the outdoor service area from the bar. The outdoor service area is

not fenced, but it is surrounded by planters with flowers. Patrons currently use

the patio as place to smoke and consume beverages, including alcoholic

beverages. The licensee does not offer any live music on the patio, but there are

outside speakers that play music from the bar’s jukebox. (Testimony of Jerry

O’Halloran; Officer Dan Johnson; Theresa Petersen)

3. The 9th Hole is located in an area that is zoned for commercial use. It is on

a busy highway that has a lot of loud truck traffic. There is a residential area

located immediately south of The 9th Hole’s outdoor service area. The closest

home is about 20-25 feet away from the outdoor service area. (Testimony of Jerry

O’Halloran; Officer Dan Johnson; Theresa Petersen)

4. Dan Johnson has been a Grinnell police officer for five years. His duties

have included serving as the police department’s alcohol compliance officer.

Officer Johnson has responded to many calls for service concerning the 9th Hole.

Many of the calls for service have been for neighbor complaints concerning

disturbances, loud music, and loud patrons. The police department maintains

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logs of the calls for service for all bars. The logs show that The 9th Hole has had

considerably more calls for service than the other bars located within its

jurisdiction. (Testimony of Officer Dan Johnson; Exhibit 1)

Many of the noise and disturbance complaints have been made by members of

two families who live near The 9th Hole (the Rupe family and the Jacoby family)

From January 1, 2008 through November 30, 2011, members of the Rupe family

have made 39 complaints about The 9th Hole. During that same time period,

members of the Jacoby family have made 19 complaints. There have been

complaints about loud music, and officers have had to ask the bar employees to

turn down the speakers. The majority of the complaints concerned loud patrons

on the patio who were yelling, cursing, or using vulgar language. (Testimony of

Officer Dan Johnson; Exhibit 1)

5. The city of Grinnell has enacted a noise ordinance (Chapter 53, Grinnell

Code of Ordinances). The stated purpose of the noise ordinance is to “prevent

excessive sound which is a serious hazard to the public health and welfare and

quality of life in the City of Grinnell.” (Section 53.01, Grinnell Code of

Ordinances). The ordinance provides for the measurement of sound and noise

with a sound level meter that meets certain requirements (Section 53.03). The

ordinance allows sound measured at a maximum of 65 decibels in commercial

areas and at a maximum of 55 decibels in residential areas between midnight and

7:00 a.m. (Section 53.04). Violations of the noise ordinance can be charged as

municipal infractions or as simple misdemeanors. (Section 53.08).

The city of Grinnell also has a public peace ordinance (Chapter 40, Grinnell Code

of Ordinances). The city’s public peace ordinance prohibits disorderly conduct,

including “noise.” Noise is defined as making “loud and raucous noise in the

vicinity of any residence or public building which causes unreasonable stress to

the occupants thereof.” (Section 40.03, Grinnell Code of Ordinances).

The licensee has never been charged with violating the city’s noise ordinance.

Officer Johnson has personally only taken one decibel reading at The 9th Hole,

and it was less than 65 decibels. Mr. O’Halloran has been charged with

disorderly conduct based on excessive noise at the licensed premises, but the

disorderly conduct charges were later dismissed. (Testimony of Dan Johnson;

Jerry O’Halloran)

6. On December 30, 2011, Grinnell Police Chief Jody Matherly sent Jerry

O’Halloran a letter concerning the number of Calls for Service and complaints

DIA NO. 12ABD004

that the police department had received for his establishment. The letter was

sent in follow-up to an earlier telephone conversation between Chief Matherly

and Mr. O’Halloran. Chief Matherly attached a summary of the Calls for Service

to the four bars in Grinnell (9th Hole, Eagles, Rabbits, and Gametime) over the

previous four years (2008-2011) and noted Mr. O’Halloran’s agreement that the

number of Calls for Service to his establishment were too high. According to the

statistics compiled by the police department:

a. In 2011, 9th Hole had 35 Calls for Service, including 14 calls for

noise and 4 calls for disturbance. During this same time period, Eagles

had a total of 4 calls for service, Rabbits had 8 calls for service, and

Gametime had 3 calls for service. Of all the calls for service to the other

three bars in 2011, Gametime had just 1 call for noise and Rabbits had 2

calls for disturbance.

b. In 2010, 9th Hole had 18 Calls for Service, including 6 calls for noise

and 5 calls for disturbance. During this same time period, Eagles had a

total of 9 calls, Rabbits had 9 calls, and Gametime had 1 call. Of the calls

for service to the other three bars in 2010, Eagles had 1 call for disturbance

and Rabbits had 3 calls for disturbance.

c. In 2009, 9th Hole had 40 Calls for Service, including 12 calls for


had a total of 5 calls, Rabbits had 13 calls, and Gametime had 2 calls. Of

the calls for service to the other three bars in 2009, Eagles had 1 call for

disturbance and Rabbits had 5 calls for disturbance.

d. In 2008, 9th Hole had 39 Calls for Service, including 17 calls for


had a total of 11 calls, Rabbits had 16 calls, and Gametime had 6 calls. Of

the calls for service to the other three bars in 2008, Eagles had 5 calls for

disturbance, Rabbits had 5 calls for disturbance, and Gametime had 1 call

for disturbance.

In his December 30, 2011 letter, Chief Matherly acknowledged that Mr.

O’Halloran felt harassed by some of his neighbors due to their number of noise

complaints. Chief Matherly wrote that he had many Monday morning

conversations with the neighbors and that they simply wanted a peaceful nights

rest without interruption or damage to their property. Chief Matherly also

acknowledged that the neighbors were frustrated because the noise level (at The

DIA NO. 12ABD004

9th Hole) was generally at a legal level when measured by the officers. Chief

Matherly further noted that he and his officers had witnessed sporadic spikes in

noise, which were loud enough to wake people up and disturb the peace and

tranquility of the neighborhood but which did not “carry a continuous illegal

level.” Chief Matherly further noted: “All noise/disturbance CFS set aside, your

bar still leads the way in overall CFS.” Finally, Chief Matherly informed Mr.

O’Halloran that he was referring the information to the Grinnell City Council for

their review and would be placing the issue on the Council’s agenda for January

16, 2012. Chief Matherly stated that his goal was for Mr. O’Halloran to explain

his plan to reduce the number of CFS to the council. (Exhibit 1; Testimony of

Theresa Petersen)

7. The Grinnell Police Department received 12 additional noise complaints

concerning the 9th Hole on December 5, 6, 8, 10, 11, 16, 17, 24, 25, 26, 29, and 30,

2011. These complaints came from 11 different addresses. (Exhibit 1)

8. Chief Matherly’s last day with the city of Grinnell was January 13, 2012.

Officer Theresa Petersen, who has been with the Grinnell Police Department for

24 years, became Grinnell’s acting police chief. Acting Police Chief Petersen, City

Clerk Kay Cmelik, and Jerry O’Halloran were all present for three meetings of

the Grinnell Public Safety Committee, held on February 6, February 20, and

March 5, 2012, when the noise and disturbance issues at The 9th Hole were

discussed. The Grinnell Public Safety Committee consists of three members of

the Grinnell City Council. (Testimony of Theresa Petersen; Kay Cmelik; Exhibit

3)

City Clerk Kay Cmelik prepares the agendas for the Public Safety Committee

meetings and for the city council. The local authority submitted the Grinnell

Public Safety Committee agendas and the City Council agendas for February 6,

February 20, and March 5, 2012. All three Public Safety Committee agendas

include “Update on 9th Hole noise and nuisance issues” as one of the agenda

items. The handwritten notes of Acting Police Chief Theresa Petersen appear on

the three agendas. (Exhibit 2; Testimony of Theresa Petersen)

Jerry O’Halloran was present for each of these three Public Safety Committee

meetings and heard the committee discuss the noise and nuisance issues at

length. The full City Council met immediately following these committee

meetings. At each of these council meetings, the Public Safety Committee

provided a report on The 9th Hole nuisance and noise issues.

DIA NO. 12ABD004

a. At the Public Safety Committee meeting held on February 6, 2012,

there was a discussion about 9th Hole patrons playing radios in their

vehicles and yelling. According to Ms. Petersen’s notes and recollection,

those present at the meeting discussed the possibilities of addressing the

noise and nuisance issues at The 9th Hole by fencing in the outdoor service

area, by prohibiting patrons from having alcohol outside, by having a

bouncer posted outside, by turning off the outside speakers, by Mr.

O’Halloran being present at the bar more often, and by obtaining further

training for employees. The licensee did not implement any of these

suggestions. Although the city’s ordinance does not require outdoor

service areas to be surrounded by a fence, all of the other outdoor services

areas in Grinnell are fenced.

b. At the committee’s meeting on February 20, 2012, several citizens

appeared and complained about noise, yelling and cussing by patrons,

foot traffic in their backyards and between houses, trash blowing into

their back yards, parking, and patrons carrying alcohol off the premises.

There was also discussion of some of the same suggestions that were

raised during the February 6th meeting. In the opinion of Acting Police

Chief Petersen, Mr. O’Halloran was not receptive to implementing these

suggestions.

c. At the committee meeting on March 5, 2012, there was further

discussion of the same noise and nuisance complaints and of the licensee’s

failure to implement the city’s suggestions to reduce the number of

complaints. Mr. O’Halloran recalled that City Council member Byron

Worly commented “we never wanted you there, our hands were tied but

now we are going to take care of it.” On March 5, 2012, the committee

voted to recommend denial of the outdoor service privilege for The 9th

Hole. At the council meeting held later that day, the city council did vote

to deny the outdoor service privilege for The 9th Hole.

(Testimony of Theresa Petersen; Kay Cmelik; Jerry O’Halloran; Exhibit 3)

9. The Grinnell City Council did not provide the licensee with a written

notice of the reasons for the Grinnell City Council’s decision to deny his outdoor

service privilege. In the Notice of Appeal on March 22, 2012, the licensee’s

attorney wrote “Although the city of Grinnell has not updated the City Council

Minutes as of today’s date, the City has received at least some complaints from

neighbors regarding noise and occasional litter and is attempting to use these

DIA NO. 12ABD004

complaints as the basis for denying the Outdoor Service Privilege.” (Testimony

of Kay Cmelik; Jerry O’Halloran; Notice of Appeal)

10. Jerry O’Halloran is usually present at the licensed premises during the

day, but he is not routinely present during the evenings, which is when the

neighbors have complained about noise and other nuisance issues. Mr.

O’Halloran purchased a hand held decibel meter to monitor the level of the noise

on the patio and has set the volume on his juke box at 5 decibels below the

ordinance maximum of 65 decibels. He has not removed the outdoor speakers,

at least in part because there had been complaints that customers were loudly

playing music on their car radios.

Jerry O’ Halloran doubts that The 9th Hole could remain in business without an

outdoor service area. He estimated that the outdoor service area accounts for

half of his business revenue. Mr. O’Halloran also noted that although the

Grinnell Police Department has walked through his business for bar checks as

often as five times a week, he has had no proven violations of the state alcoholic

beverage laws or smoking laws. He further noted that he keeps two trash cans

on his patio and that his employees periodically pick up any trash on the patio

throughout the evening. In addition, Mr. O’Halloran picks up trash in the

parking lot and in the alley near his business every morning. (Testimony of

Jerry O’Halloran)

CONCLUSIONS OF LAW

I. Burden of Proof/Provisions and Standard of Review/Legal Provisions Applicable

to Outdoor Service Areas

The Iowa Alcoholic Beverages Control Act (Iowa Code chapter 123) is an exercise

of the police power of the state, for the protection of the welfare, health, peace,

morals, and safety of the people of the state, and all its provisions shall be

liberally construed for the accomplishment of that purpose. It is declared to be

public policy that the traffic in alcoholic liquors is so affected with a public

interest that it should be regulated to the extent of prohibiting all traffic in them,

except as provided in chapter 123. 1

“Local authority” means the city council of any incorporated city in this state, or

the county board of supervisors of any county in this state, which is empowered

1 Iowa Code section 123.1 (2011).

DIA NO. 12ABD004

by Iowa Code chapter 123 to approve or deny applications for retail beer or wine

permits and liquor control licenses; empowered to recommend that such permits

or licenses be granted or issued by the division; and empowered to take other

actions reserved to them by Iowa Code chapter 123.2

Liquor license applications are filed with the appropriate city council if the

premises for which the license or permit is sought are located within the

corporate limits of the city.3 The local authority shall either approve or

disapprove the issuance of the liquor license and shall endorse its approval or

disapproval on the application and shall forward the application with the

necessary fee and bond, if required, to the division.4

An applicant for a liquor control license may appeal from the local authority's

disapproval of an application for a license or permit to the administrator. In the

appeal the applicant shall be allowed the opportunity to demonstrate in an

evidentiary hearing conducted pursuant to chapter 17A that the applicant

complies with all of the requirements for holding the license or permit.5

Therefore, when a license application is denied, the burden of proof is on the

applicant/licensee to demonstrate that it complies with all of the requirements for

holding a liquor license/beer permit in the state of Iowa. In this case, the local

authority granted the licensee’s renewal application for its class C liquor license but

denied or refused to approve the licensee’s request to renew its Outdoor Service

Privilege.

"Licensed premises" or "premises” is defined by statute to mean “all rooms,

enclosures, contiguous areas, or places susceptible of precise description

satisfactory to the administrator where alcoholic beverages, wine, or beer is sold

or consumed under authority of a liquor control license, wine permit, or beer

permit. A single licensed premises may consist of multiple rooms, enclosures,

areas or places if they are wholly within the confines of a single building or

contiguous grounds.6 Therefore, Iowa Code chapter 123 permits a contiguous

outdoor service area to be included in the licensed premises. The statute

provides no further reference to “contiguous areas” or to outdoor service areas.

2 Iowa Code section 123.3(21)(2011). 3 Iowa Code section 123.32(1)(2011). 4 Iowa Code section 123.32(2)(2011). 5 Iowa Code section 123.32(7)(2011). 6 Iowa Code section 123.3(20)(2011) (emphasis supplied).

DIA NO. 12ABD004

The Division’s rules, however, do address outdoor service areas. 185 IAC 4.13

provides:

185-4.13(123) Outdoor service. Any licensee or permittee having

an outdoor, contiguous, discernible area on the same property on

which their licensed establishment is located may serve the type of

alcoholic liquor or beer permitted by the license or permit in the

outdoor area. After a licensee or permittee satisfies the

requirements of this rule, they may serve and sell beer or liquor in

both their indoor licensed establishment and in their outdoor area

at the same time because an outdoor area is merely an extension of

their licensed premises and is not a transfer of their license. A

licensee or permittee, prior to serving in the outdoor area, must file

with this division:

1. A new diagram showing the discernible outdoor area.

2. A letter from licensee or permittee telling what dates the

outdoor area will be used.

3. A letter from local authority approving the outdoor area.

4. A letter from the insurance and bonding companies

acknowledging that the outdoor area is covered by the dramshop

insurance policy and the bond.

(emphasis supplied)

II. Notice

At hearing, the licensee argued that the local authority’s denial of the Outdoor

Service Privilege should be reversed because it was never given valid notice of the

City Council’s rationale for the denial. Neither the Division’s statute nor its rules

explicitly require a written (or oral) statement of the reasons for a license denial or

denial of the Outdoor Service Area. Nevertheless, the Division’s rules do provide

that the scope of evidence in the proceeding shall be confined to the issues as to

which the parties received notice prior to the hearing unless the parties waive their

right to such notice or the presiding officer determines that good cause exists to

expand the issues (and allows the licensee a continuance to prepare on the new

issues.) 7

7 185 IAC 10.21(3).

DIA NO. 12ABD004

In this case, the licensee was given clear notice that the city council denied renewal

of the outdoor service privilege because of the noise and nuisance issues raised

through complaints and calls for service. This notice was provided to the licensee

through the police chief’s December 31, 2011 letter and attached documents and

through the discussion at three Public Safety Committee meetings and three city

council meetings for which the licensee was present. Moreover, the license

acknowledged that these were the issues in its Notice of Appeal. The licensee

clearly had adequate notice that noise and nuisance issues related to the outdoor

service areas were the reason for the denial.

At hearing, the local authority offered testimony and exhibits (Exhibits 2, 4) that

pertain to incidents that occurred at The 9th Hole after the decision had already

been made to deny renewal of the Outdoor Service Privilege. These incidents, most

of which did not concern noise or nuisance, did not form the basis for the denial at

issue in this case. Although the licensee did not object to the admission of these

exhibits at hearing, they were not relied on in making this proposed decision on the

Outdoor Service Area.

III. Analysis of the Local Authority Denial of Outdoor Service

185 IAC 4.13 specifically and explicitly requires applicants to obtain a letter from

the local authority approving any proposed Outdoor Service Area before using

the outdoor area to serve beverages. Neither Iowa Code chapter 123 nor the

Division’s rules set forth any specific legal standards or limits on the local

authority's discretion to withhold its approval for an outdoor service area. In

contrast to the limits placed on a local authority’s discretion to deny liquor

license applications, the regulatory scheme appears to give local authorities

extremely broad discretion to approve or disapprove outdoor service areas. This

makes sense from a policy standpoint. The outdoor service and consumption of

alcoholic beverages has a far greater potential to adversely impact the neighbors of

a licensed liquor establishment and the public at large than indoor service.

Nevertheless, the local authority’s decision to deny or withhold approval for an

Outdoor Service Area must still be subject to review by the Division to ensure that

the local authority’s exercise of discretion was not wholly irrational, arbitrary, or

capricious.

In this case, the local authority approved the licensee's initial application for

outdoor service privilege in 2008 and then renewed the Outdoor Service

Privilege in 2009, 2010, and 2011. The local authority denied the renewal

application for the Outdoor Service Privilege in 2012, after reviewing the record

DIA NO. 12ABD004

of service calls and listening to the neighbor’s complaints about noise and other

nuisance issues. Repeated noise complaints are a legitimate reason to deny an

outdoor service area when it is located close to residential areas. Although the

local authority has not established any licensee violations of its noise or nuisance

ordinances, the Grinnell Police Department has repeatedly responded to service

calls concerning noise complaints. The local authority has repeatedly

communicated these concerns to the licensee but has not seen significant

improvement or reduction in the number of complaints.

This record would not have been adequate to support a decision by the local

authority to deny renewal of the liquor license or to impose administrative

sanctions on the liquor license for ordinance violations. Nevertheless, while

reasonable persons could disagree about whether the licensee’s Outdoor Service

Area should have been approved, the local authority's decision in this matter

was not irrational, arbitrary, or capricious. It is likely that there will be less noise

emanating from the licensed premises if alcoholic beverages are not allowed to

be served and consumed on the outdoor patio. The local authority gave the

licensee notice of its concerns and an opportunity to take steps to reduce the

noise from its Outdoor Service Area prior to denying the renewal application.

Under these circumstances, the division should defer to the local authority's

decision. It should be noted that this proposed decision only restricts the serving

and consumption of alcoholic beverages in the outside patio area and does not

prevent the licensee from allowing customers to smoke in the outside patio area.

DECISION AND ORDER

IT IS THEREFORE ORDERED, that the decision of the city of Grinnell to deny

the renewal application for Outdoor Service, which was filed by O’Halloran

Properties, LLC, d/b/a The 9th Hole, is hereby AFFIRMED.

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

DIA NO. 12ABD004

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 29th day of June, 2012.

Margaret LaMarche

Administrative Law Judge

Iowa Department of Inspections and Appeals

Administrative Hearings Division

Lucas State Office Building-Third Floor

Des Moines, Iowa 50319

cc: See attached mailing list.

DIA NO. 12ABD004

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