Opinion
No. A03-306.
Filed January 13, 2004.
Appeal from the City of Forest Lake Klaphake, Judge, Affirmed.
Joseph J. Dudley, Jr., Mark K. Thompson, Dudley and Smith, P.A., St. Paul, Mn (for relator Upper Deck of Forest Lake, Inc., d/b/a Players Beach Club).
Joseph E. Flynn, Pierre N. Regnier, Jardine, Logan O'Brien, P.L.L.P., Lake Elmo, Mn (for respondent City of Forest Lake).
Considered and decided by Klaphake, Presiding Judge, Willis, Judge, and Anderson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Relator Upper Deck of Forest Lake, Inc., d/b/a Players Beach Club (Upper Deck), brings this certiorari appeal challenging a decision by respondent City of Forest Lake that prohibits the issuance of any charitable gambling premises permits at Upper Deck for a period of two years, until December 31, 2004. Upper Deck argues that it was denied due process of law when the city failed to give it adequate notice and an opportunity to be heard. Upper Deck further argues that the city's decision was arbitrary, capricious, and without legal justification.
Because Upper Deck received adequate notice and an opportunity to be heard, and because the city's decision was within its inherent authority to regulate gambling and issue permits and was otherwise supported by substantial evidence in the record, we affirm.
FACTS
Between 1999 and 2002, the Forest Lake Hockey Association operated charitable gambling at Upper Deck under a premises permit issued by the Minnesota Gambling Control Board and approved by city council resolution under Minn. Stat. § 349.213, subd. 2 (1998). In late 2001 and 2002, the board and the Alcohol Gambling Enforcement division of the Minnesota Department of Public Safety conducted extensive investigations into the activities of the hockey association and Upper Deck and its owner, Bo Bogotty.
Following an appearance before the board's Compliance Review Group (CRG) on December 17, 2002, the hockey association agreed to enter into a consent order, under which its premises permit at Upper Deck was revoked for a two-year period. The hockey association further agreed to pay a civil penalty to the board of $4,000 and to reimburse $34,132.20 to its gambling account, an amount that represented excessive and unallowable payments made by the hockey association to Upper Deck and Bogotty.
In late December 2002, the Dead Broke Saddle Club, another charitable gambling organization, applied for a premises permit at Upper Deck to replace the permit revoked under the terms of the consent order. Following two meetings between city staff and state investigators, the city attorney prepared a memorandum summarizing the city's legal options regarding the Dead Broke Saddle Club's premises permit application. The city attorney noted that although the city council "has routinely granted such applications," the hockey association agreed to revocation of its permit due to violations of Minnesota law. The city attorney concluded:
Upper Deck, as lessor of the premises, appears to have been unjustly enriched by the excess payments made by its tenant[, the Hockey Association]. The Upper Deck, as a long term gambling premises lessor, knew, or should have known, that the lease payments and other expenditures made by the lessee were in excess of the amounts permitted by State statutes and rules.
The City Council could consider not allowing the Upper Deck to have a premises permit for a period of two years, the same time period for which the [Hockey Association's] permit license has been revoked.
On January 27, 2003, the city council held a meeting at which it considered the Dead Broke Saddle Club's application. Upper Deck did not receive notice of the meeting, but its owner, Bogotty, heard of the meeting through other means and attended. Bogotty was not allowed to speak during the meeting. The council voted to deny any gambling premises permit at Upper Deck for a period of two years.
Upper Deck objected to the lack of notice and opportunity to be heard, and the city agreed to hold a special meeting on February 19, 2003, for a "[r]ehearing of Upperdeck gambling premises permit and license renewal." Upper Deck appeared at the special meeting through its attorney.
On March 10, 2003, after receiving proposed written findings of fact, the city council approved an order denying the application of the Dead Broke Saddle Club and further "order[ing] that a charitable gambling premises permit for [Upper Deck] shall not be allowed prior to December 31, 2004."
DECISION
On review by certiorari, this court may reverse a decision by a city council only if it is "arbitrary, oppressive, unreasonable, fraudulent, under an erroneous theory of law, or without any evidence to support it." Dietz v. Dodge County, 487 N.W.2d 237, 239 (Minn. 1992). A city has "wide discretion in dealing with matters of local importance." Arcadia Dev. Corp. v. City of Bloomington, 267 Minn. 221, 225, 125 N.W.2d 846, 850 (1964). If the city council has "furnished any legal and substantial basis for the action taken," its decision will be upheld. Senior v. City of Edina, 547 N.W.2d 411, 416 (Minn. App. 1996) (quotation omitted).
I.
The city initially argues that Upper Deck lacks standing to challenge the city's denial of Dead Broke Saddle Club's application for a premises permit, citing Lindell v. City of Waconia, 71 F. Supp.2d 955, 958 (D. Minn. 1999) (holding that former bar owners lacked standing to bring declaratory judgment action to challenge city ordinance that restricted bar's ability to offer pull-tabs, because right to do so belonged to third-party charities, not to bar owners). However, Upper Deck is not challenging that portion of the city's decision denying the Dead Broke Saddle Club's permit application; rather, Upper Deck challenges the city's two-year prohibition on the issuance of any gambling premises permit at Upper Deck. Because Upper Deck actively participated in the city council proceedings addressing the merits of the permit prohibition, and was directly affected by the outcome of those proceedings, we conclude that it is an aggrieved party for purposes of this certiorari appeal and has standing to challenge the city's actions. See In re Acquisition of Flying Cloud Airport, 226 Minn. 272, 278, 32 N.W.2d 560, 564 (1948) (stating general concept that one who actively participates in proceedings and is specially bound and affected by outcome is party for purposes of certiorari).
II.
Upper Deck argues that it was denied due process of law when the city failed to give it adequate notice and an opportunity to be heard. The city questions whether Upper Deck has a protectable property or liberty interest, without which any procedural due process claim will fail. See Country Liquors, Inc. v. City Council, 264 N.W.2d 821, 825-26 (Minn. 1978).
As stated in Lindell, 71 F. Supp.2d at 958, a bar's desire to have a charitable organization sponsor gambling on the bar's premises does not rise to the level of a legally protected right. We further note that the city's decision here does not appear to affect Upper Deck's ability to continue to operate as a restaurant and sell liquor under its current license. See Anton's, Inc. v. City of Minneapolis, 375 N.W.2d 504, 508 (Minn. App. 1985) (noting city's decision to prohibit dancing in no way affects property owner's basic privilege to sell intoxicating liquor). Nevertheless, we will assume that Upper Deck has articulated some property or liberty interest, based partially on its claims that the city has adversely affected its ability to contract and "has taken away some of the goodwill [it] has enjoyed." See Country Liquors, 264 N.W.2d at 826 (holding that bar has no liberty or property interest in application to transfer dormant or inactive liquor license, but suggesting that "tacit" property right might be identified if existing license were involved and that liberty interest might be implicated if city's decision adversely affected bar's "reputation or personal character").
Although Upper Deck was not provided with notice of the January 27, 2003, city council meeting, it received notice of the February 19, 2003, special meeting, at which the city council reheard the matter. Upper Deck nevertheless complains that this special meeting was not a full evidentiary hearing, that its attorney was not given an opportunity to present evidence or cross-examine adverse witnesses, and that the city failed to provide a transcript. Upper Deck further characterizes this special meeting as "perfunctory" and "meaningless," and asserts that the city had already made its decision at the initial January 27 meeting to not allow any premises permits at Upper Deck for a two-year period.
Due process does not mandate a full evidentiary hearing in every situation. Littlefield v. City of Afton, 785 F.2d 596, 603 (8th Cir. 1986), overruled in part on other grounds, Chesterfield Dev. Corp. v. City of Chesterfield, 963 F.2d 1102, 1104 n. 2 (8th Cir. 1992). Rather, the hearing must be appropriate to the nature of the case. Id. Generally, a property owner is provided procedural due process when he or she is afforded actual notice of city council meetings, attends those meetings, and is given an opportunity to be heard. Id.; Queen Anne Cts. v. City of Lakeville, 726 F. Supp. 733, 735 (D. Minn. 1989). Nor is a transcript necessarily required in these types of proceedings, particularly when the "agreed upon" record appears to accurately present the parties' respective positions. See Honn v. City of Coon Rapids, 313 N.W.2d 409, 418-19 (reversing where "agreed upon" record in certiorari proceeding failed to fully and accurately present parties' respective positions).
Here, the city provided Upper Deck with notice of a rehearing and gave Upper Deck an opportunity to be heard. The parties agree that Upper Deck's attorney was allowed to present detailed arguments in opposition to the city's proposal to deny any premises permits for Upper Deck for a two-year period. Upper Deck essentially admitted at oral arguments before this court that it did not specifically request an opportunity to present additional evidence or witnesses. Nothing in the record suggests that the city would have denied Upper Deck such an opportunity. See In re License of W. Side Pawn, 587 N.W.2d 521, 523 (Minn. App. 1998) (accepting as true city's claim that it would have given licensee opportunity for full hearing had he appeared to exercise his rights), review denied (Minn. Mar. 30, 1999).
The record further shows that Upper Deck and its attorney were fully aware of the investigations by state agencies into the activities of the hockey association and Upper Deck. The attorney had numerous conversations and corresponded repeatedly with the investigators regarding the evidence relied upon in their reports and regarding their conclusions. While Upper Deck claims that it was not provided with a copy of the reports until after March 10, 2003, the date that the city council issued its order denying the premises permit application, its attorney submitted a January 30, 2003, "Notice of Claim" to the city in which it responded to the evidence against it and referred to the investigations. Upper Deck cannot now complain that it was taken by surprise or otherwise prejudiced, or claim that it was unable to adequately prepare a response to the city's proposed action. We therefore reject Upper Deck's claim that it was denied due process of law. See Barton Contracting Co. v. City of Afton, 268 N.W.2d 712, 716 (Minn. 1978) (holding that special use permit applicant was not denied due process, where he was given opportunity to present information and argument to rebut opposing statements, even though he was not allowed to cross examine those who had made those statements and he did not receive advance copies of written materials presented at the city council meeting).
III.
Upper Deck argues that the city's decision to not allow any gambling premises permits at its location for two years has no legal basis and is unsupported by substantial evidence. We disagree.
The city was acting within the authority granted to it by statute when it considered and acted upon this application for a gambling premises permit. See Minn. Stat. § 349.213, subd. 2 (2002) (providing that gambling control board "may not issue or renew a premises permit . . . unless the organization submits a resolution from the city council . . . approving the premises permit"). "Lawful gambling is a heavily regulated industry, and Minnesota has an interest in tight administrative controls over gambling generally." Holbrook v. Gambling Control Bd., 532 N.W.2d 578, 582 (Minn. App. 1995) (quotation omitted). A city has broad discretion to determine whether to issue permits or licenses in order to regulate these types of activities, and has the authority to act when necessary to protect the welfare of the city and its residents. See Greater Duluth COACT v. City of Duluth, 701 F. Supp. 1452, 1456 (D. Minn. 1988) (indicating that government's authority to regulate intoxicating liquors and gambling is in same class); Polman v. City of Royalton, 311 Minn. 555, 555, 249 N.W.2d 466, 467 (1977) (involving authority to regulate liquor licensing). We therefore conclude that the city was acting within its inherent authority when it decided to disallow any premises permits at Upper Deck for a period of two years.
Upper Deck further argues that the city's decision is arbitrary and capricious and not supported by substantial evidence in the record. It claims that the evidence relied upon by the city was "simply unchallenged and unsubstantiated allegations" and that the city failed to consider important aspects of the issue, relied entirely on one side of the story as set out in the investigative reports, did not consider the manner in which the investigations were carried out, and had already made its decision before the February 19, 2003, special meeting.
The city council was entitled to rely on written reports by state investigators in this administrative proceeding, even if those reports might not be otherwise admissible in a civil or criminal trial. See Sabes v. City of Minneapolis, 265 Minn. 166, 175, 120 N.W.2d 871, 877-78 (1963) (holding that "written reports of members of the morals squad, reciting their personal observations and experiences with respect to the solicitation of customers by prostitutes [in certain bars], were admissible in this administrative proceeding" to revoke liquor licenses). Here, the written reports not only recite the investigators' personal observations based on interviews and information obtained from many sources, including Bogotty and his attorney, but also refer to numerous documents regarding payments and invoice information relative to excessive expenditures made by the hockey association to Upper Deck. The city council could properly consider and base its decision on this type of evidence.
Substantial evidence is defined to include "[s]uch relevant evidence as a reasonable mind might accept as adequate to support a conclusion" or more than a "scintilla" of evidence. CUP Foods, Inc. v. City of Minneapolis, 633 N.W.2d 557, 563 (Minn. App. 2001), review denied (Minn. Nov. 13, 2001). A city council acts arbitrarily or capriciously if its decision is based on whim or is devoid of articulated reasons. Id. at 565.
The city council here was presented with evidence that (1) Upper Deck received charitable funds from its prior lessee, the hockey association, in excess of the amounts permitted by law; (2) the hockey association had to reimburse its gambling account the amounts that it overpaid to Upper Deck; and (3) the hockey association lost its license for a two-year period of time. The evidence further supports the conclusion that Upper Deck, as a long-term gambling premises lessor, either knew or should have known that the lease payments and other expenditures made by the hockey association were in excess of the amounts permitted by state law.
Based on this evidence, the city council decided to deny any gambling premises permits at Upper Deck for the same two-year period. Given the city's broad discretion to regulate gambling and to insure that unlawful and excessive expenditures are not made by charitable organizations to lessors, we cannot conclude that the city's decision is arbitrary, capricious, or unsupported by substantial evidence in the record. See CUP Foods, 633 N.W.2d at 564 (affirming, as supported by substantial evidence, city's decision to revoke business licenses based on indirect evidence that illegal drug buys took place in and around place of business and that business owner knew crime was an ongoing problem but failed to make concerted efforts to improve security and reduce crime); Anton's, 375 N.W.2d at 508 (affirming, as not arbitrary and capricious, city's denial of license to allow dancing on premises, where evidence established that allowing dancing would be incompatible with surrounding area and increase likelihood of disturbances).
We therefore affirm the city council's decision.