Opinion
Civil Action BCD-APP-2023-00003
02-05-2024
POZZI, LLC, Petitioner, v. MAINE BUREAU OF ALCOHOLIC BEVERAGES AND LOTTERY OPERATIONS, et al., Respondents ENERGY NORTH, INC., d/b/a WELLS CLIPPER MART, Party-in-Interest.
Pawel Binczyk, Esq. The Bennett Law Firm, PA, Petitioner. Philip Mantis, AAG, Office of the Attorney General, Respondent. Sandra L. Guay, Esq., Benjamin E. Ford, Esq., Archipelago Law LLP, Party In Interest.
Pawel Binczyk, Esq. The Bennett Law Firm, PA, Petitioner.
Philip Mantis, AAG, Office of the Attorney General, Respondent.
Sandra L. Guay, Esq., Benjamin E. Ford, Esq., Archipelago Law LLP, Party In Interest.
ORDER GRANTING POZZI, LLC'S PETITION FOR REVIEW OF FINAL AGENCY ACTION PURSUANT TO M.R. CIV. P. 80C
Michael A. Duddy, Judge, Business and Consumer Court.
This case, an appeal pursuant to Maine Rule of Civil Procedure 80C, concerns the propriety of a licensing decision made by the Respondent Maine Bureau of Alcoholic Beverages and Lottery Operations (the "Bureau"). Through its petition, dated June 15, 2023, Petitioner Pozzi, LLC ("Pozzi") claims that the Bureau's May 18, 2023, decision to issue Agency Liquor Store License No. AGN-2023-15198 (Wells) to Party-in-Interest Energy North, Inc., doing business as Wells Clipper Mart ("Wells Clipper Mart"), errs as a matter of law, is arbitrary and capricious, and is unsupported by substantial evidence in the record. The appeal is now fully briefed, and the Court heard oral argument on January 31, 2024. For the reasons discussed below, the Court concludes that the Bureau's decision must be vacated and the matter remanded to the Bureau for further proceedings.
RECORD FACTS
During early 2023, the Bureau solicited applications for a single agency liquor store license for the Town of Wells. R. §§ 1 A, IB. In response, Pozzi and four other applicants submitted licensing applications. See R. §§ 3A-3E. As with each application, Pozzi's application provided the Bureau with information regarding its ownership, hours of operation, store security, weekly customer count, value of on-hand inventory, value of retail beer and wine sales and sales of other inventory, employees, store size and amount of shelving space, parking lot capacity, and the store's distance to the nearest licensed agency liquor store in Wells. R. § 3B at 1-9; see R. §§ 3 A, 3C-3E.
Upon receiving the applications, the Bureau sent liquor license inspectors to each of the applicants' stores to inspect the premises and to verify the contents of the applications. See, e.g., R. § 3B at 21. Pozzi's Wells store was inspected on March 20, 2023. R. § 3B at 21, 28. Nine days later, on March 29, 2023, the Bureau held an omnibus hearing on applications not only for the Wells license, but also for agency liquor store licenses in many other municipalities. See R. § 8. Prior to the hearing, however, the Bureau did not make the inspection report available to Pozzi or provide Pozzi with a copy of the inspection report. Pozzi was not provided a copy of its inspection report until the certified hearing record was filed in this litigation. Pet.'s Ex. B ¶ 5. The inspection report is undated and provides no means for determining when it was prepared.
The hearing considered applications for agency liquor store licenses for Bar Harbor, Belfast, Biddeford, Cornish, Portland, Rockport, Saco, South Portland, Topsham, Wells, and Windham. R. § 8 at 2.
As part of its briefing in this matter, Pozzi submitted an affidavit by one of its owners and evidence of text messages it exchanged with its inspector from the Bureau as proof that it was not provided with the inspection report prior to the licensing hearing and that it sought to update the information contained in the report before the hearing. Those exhibits are not a part of the administrative record filed by the Bureau. See Pet's Reply in Supp. of Rule 80C Pet. Ex. B & Attach. 1. Pozzi made no motions requesting the Court take additional evidence or hold a trial of the facts. However, during oral argument, Wells Clipper Mart represented that it, too, was not provided a copy of its inspection report by the Bureau prior to the hearing. Likewise, the Bureau confirmed it is unlikely that the Bureau provided Pozzi with a copy of its inspection report prior to the hearing. No party objected to the Court's consideration of the supplemental evidence provided by Pozzi. Forthat reason, and because the Court is empowered to take evidence beyond the record when confronted with "alleged irregularities in procedure before the agency which are not adequately revealed in the record," 5 M.R.S. § 11006(1)(A) (2024). the Court considers Pozzi's supplemental evidence.
Nevertheless, at the outset of the six-hour hearing conducted by the Bureau- approximately five hours before the Wells applications were considered-the hearing officer sua sponte admitted Pozzi's inspection report into the evidentiary record, along with all the other inspection reports for all the other municipalities. R. § 8 at 2. However, the contents of the inspection reports-at least for the Town of Wells-were not read into the record. The record does not disclose whether copies of the inspection reports were provided to the Wells applicants during the hearing. Nor does the record disclose whether Pozzi was even present for the 9:00 a.m. commencement of the omnibus hearing, more than five hours before its application for the Wells license was reviewed. See R. § 8 at 1-2. Pozzi was unrepresented by counsel during the hearing. Pet 's Ex. B ¶ 3.
The hearing officer, having announced that the inspection reports would be made part of the record, asked if there were any objections. R. § 8 at 2. None were raised. Id.
Of the eleven municipalities involved in the hearing, applications for the one license available in Wells were the next to last to be considered. See R. § 8 at 8.
During the hearing, Pozzi gave a presentation emphasizing aspects of its business that, in Pozzi's view, make it the optimal candidate for the license. R. § 8 at 3-6. Its representatives answered the hearing officer's clarifying questions regarding the hours of operation for Pozzi's store in Wells, its opening date, customer numbers, staffing, and security system. R. § 8 at 5-6. None of the questions directed to Pozzi concerned its sales or beer and wine inventory. See id. The inspector who performed the inspection of Pozzi's store and prepared the inspection report provided no testimony concerning Pozzi's application.
It is not clear from the record whether the inspector was present for the hearing. The inspector is not specifically identified as an attendee in the hearing transcript, even though the hearing officer announced that all inspectors were present when the hearing began. See R. § 8 at 1. During oral argument, the Bureau represented that the inspector was present for the hearing. Petitioner does not argue that the inspector was not present.
On May 18, 2023, the hearing officer issued the operative decision in this case denying Pozzi's licensing application, and granting License No. AGN-2023-15198 to Wells Clipper Mart. See R. § 10. The Bureau made findings of fact concerning the following aspects of Pozzi's business that are based on Pozzi's inspection report, but which findings are inconsistent with the information provided by Pozzi in its application: (1) the estimated value of Pozzi's beer and wine inventory, (2) the estimated value of Pozzi's inventory of compatible merchandise, and (3) Pozzi's estimated beer and wine sales. See R. § 10 at 4; compare R. § 3B at 4 with R. § 3B at 25. The decision is explicitly based in significant part on Pozzi's inspection report, R. § 10 at 2, even though the inspection report was never provided to or made available to Pozzi until it was submitted as part of the certified administrative record.
As a result, the Bureau denied granting the Wells license to Pozzi. Instead, the Bureau concluded that "[b]ased on the evidence in the record and the Bureau's findings of fact, ... Wells Clipper Mart is the most feasible location for the placement of an agency liquor store as supported by its greater distance from the nearest agency liquor store, beer and wine inventory and beer and wine sales (handling)." R. § 10 at 7.
DISCUSSION
The Court reviews the Bureau's May 18, 2023, decision "for error of law, abuse of discretion or findings not supported by substantial evidence in the record." Murray v. City of Portland, 2023 ME 57, ¶ 13, 301 A.3d 777 (quoting Fitanides v. City of Saco, 2015 ME 32, ¶ 8, 113 A.3d 1088). Pozzi argues that the Bureau's decision to deny its application and award the disputed license to Wells Clipper Mart is arbitrary and capricious, and that it is unsupported by substantial record evidence. Pozzi also argues that the Bureau committed errors of law because its hearing process did not conform with the requirements for adjudicatory proceedings imposed by the Maine Administrative Procedures Act (the "APA"), 5 M.R.S. §§ 8001-11008 (2024). Because the Court agrees with Pozzi that the Bureau's process was inconsistent with due process and its statutory mandate, and thus arbitrary and capricious, the Court does not address whether the Bureau's decision is supported by substantial record evidence.
I. Procedural requirements imposed by the Administrative Procedures Act.
When it acts on an application for an agency liquor store license, the Bureau is required to follow important procedures to ensure that it does not deprive applicants of due process. See 28-A M.R.S. § 453-A (2024). Among those procedures, the Bureau is required to hold a hearing on applications, which hearings must accord with the procedural requirements of the APA. Id. Specifically, a hearing on license applications held by the Bureau must conform with the APA-imposed procedures for adjudicatory proceedings, see 5 M.R.S. §§ 9051-9064 (2024). These APA-imposed procedures ensure that parties before administrative agencies like the Bureau receive a fair and unbiased hearing to which they are entitled pursuant to the Due Process Clause of the United States and State of Maine Constitutions. See Lane Const. Corp. v. Town of Washington, 2008 ME 45, ¶ 29, 942 A.2d 1202 (citation omitted).
An "adjudicator” proceeding" within the meaning of the APA is "any proceeding before an agency in which the legqal rights, duties or privileges of specific persons are required by constitutional law or statute to be determined after an opportunity to be heard." 5 M.R.S. § 8002(1) (2024).
Pursuant to the APA, in the course of a hearing the Bureau must establish a hearing record, which must include any written or documentary evidence received or considered by the Bureau. 5 M.R.S. § 9059(1)(B) (2024). The record must be comprehensive; it must include "[a]ll material ... which [the Bureau] desires to avail itself as evidence in making a decision." Id. § 9059(4). "[N]o other factual information or evidence shall be considered in rendering a decision." Id.
Additionally, as a prerequisite to incorporating any documentary evidence into the hearing record by reference the Bureau must make that document available for examination by the parties participating in the hearing before it is formally received as evidence. Id. § 9059(5). The Bureau is also empowered to take official notice of certain facts. Id. § 9058(1). If the Bureau does take official notice of any facts, it must afford the parties to the hearing "an opportunity to contest the substance or materiality of the facts noticed." Id. Apart from officially noticing facts, the Bureau may utilize its expertise, technical competence and special knowledge in the evaluation of evidence presented to it. Id. § 9058(3).
The above-described APA provisions codify the standard adopted by the Law Court that "administrative bodies have no right to exercise adjudicatory ... functions on the basis of evidence not before [them]." City of Calais v. Calais Water &Power Co., 157 Me. 467, 474, 174 A.2d 36, 40 (1961); see Pub. Utils. Comm 'n v. Cole's Express, 153 Me. 487, 498-99, 138 A.2d 466, 472-73 (1958) ("As a general proposition, it is not proper for an administrative authority to base a decision of adjudicatory nature, or findings in support thereof, upon evidence or information outside the record, and in particular upon evidence obtained without the presence of and notice to the interested parties, and not made known to them prior to the decision ") (citation omitted). A failure by the Bureau to conform with this standard as prescribed by the APA's provisions is grounds for the Court to reverse or modify the Bureau's decision. 5 M.R.S. § 11007(4), (5) (2024).
II. Whether the Bureau committed errors of law in the course of the licensing hearing resulting in the Bureau's licensing decision on appeal.
As noted above, in its operative decision the Bureau concluded that "[b]ased on the evidence in the record and the Bureau's findings of fact,... Wells Clipper Mart is the most feasible location for the placement of an agency liquor store as supported by its greater distance from the nearest agency liquor store, beer and wine inventory and beer and wine sales (handling)." R. § 10 at 7. The Court concludes that the Bureau committed legal error, in more than one instance as discussed fully below, concerning the process it relied upon to reach its decision.
a. The Bureau considered evidence that was not properly admitted to the record.
The Bureau's March 29, 2023, decision denying Pozzi's application and awarding the disputed license to Wells Clipper Mart was based on an evidentiary record comprised of: the license applications, the inspectors' inspection reports, supplemental material provided by applicants, and testimony given by a representative for each applicant. See R. § 10 at 3. In consideration of the APA's procedures described above, the Court concludes the Bureau's reliance on the inspectors' reports as evidence supporting its licensing decision constitutes an error of law. The inspectors' reports were not properly made a part of the evidentiary record and were not properly before the Bureau, and accordingly the reports cannot provide an evidentiary basis for the Bureau to decide whether to accept or deny a licensing application.
As noted above, the Bureau did not provide Pozzi a copy of the inspection report prior to admitting the report into evidence at the hearing held on March 29, 2023. It had only a narrow opportunity-nine days-to do so. Similarly, the Bureau did not notify Pozzi that its inspection report was completed and provide Pozzi with a link or other means to access the report prior to admitting the report into evidence at the hearing. At the hearing, the hearing officer admitted the inspection report into evidence in a perfunctory manner, along with dozens of other reports, without first passing out copies to Pozzi or the other applicants, or giving applicants an express opportunity to review the inspection reports and formulate objections before the reports were offered into evidence. Accordingly, the Bureau failed to make Pozzi's inspection report "available for examination by the part[y] before being received in evidence." 5 M.R.S. § 9059(5). The Bureau thus erred as a matter of law in relying for its decision on documentary evidence that should not have been made a part of the record.
The inspection was performed on March 20, 2023. The report corresponding to Pozzi's inspection, however, is undated. The record does not establish when the report itself was completed by the inspector. During oral argument, the Bureau offered the assumption that the report was completed on the same date of the inspection. Even if that assumption is correct, it would only make the due process violation worse, because it would establish that for the nine days prior to the hearing the Bureau failed to make the inspection report available to Pozzi for examination.
The Court concludes that the Bureau's failure to make available its inspection report, which it relied on as evidence in support of its decision, to Pozzi prior to admitting the report into evidence at the start of the omnibus hearing runs afoul of the APA's requirements, constitutes legal error, and offends due process. See § 9059(4), (5); City of Calais, 157 Me. at 474, 174 A.2d at 40; Cole's Express, 153 Me. at 498-99, 138 A.2d at 472-73; see also Toothaker v. Me. Dep't of Corr, No. AP-20-11, slip op. at 1-2 (Me. Super. Ct. June 6, 2022). Because it is not the product of a fair and transparent process, the Bureau's decision is arbitrary and capricious. Hopkins v. Dep't of Human Servs., 2002 ME 129, ¶ 12, 802 A.2d 999 (citation omitted). Pozzi was prejudiced by the Bureau's failure to make its inspection report available to it prior to the hearing because it could not meaningfully clarify, correct or rebut the inspector's findings. See id. ¶ 13.
b. Whether Pozzi waived its objection to the Bureau's consideration of evidence that was not properly made a part of the record.
Pozzi did not object when the hearing officer announced that the inspection reports would be made part of the record. It was thus suggested at oral argument that Pozzi waived its right to challenge the Bureau's reliance on the inspection report. Ordinarily, a party's failure to timely object waives the issue for subsequent review. See Maddocks v. Unemployment Ins. Comm'n., 2001 ME 60, ¶ 15, 768 A.2d 1023 (citing New England Whitewater Ctr, Inc. v. Dep't of Inland Fisheries and Wildlife, 550 A.2d 56, 60 (Me. 1988)). The rule is somewhat relaxed, however, in the context of an APA hearing. "When a party is not aware, or is not chargeable with responsibility to be aware" of such an objection, "as for example when a party is not represented by counsel, the failure to make timely objection ... rarely will lead to a forfeiture by procedural default." Id. (quoting Sewall v. Spinney Creek Oyster Co., 421 A.2d 36, 39-40 (Me. 1980)).
In this case, the hearing was conducted in an omnibus fashion involving eleven municipalities. All inspection reports for all municipalities were quickly made part of the record at the start of the hearing-many hours and many towns before the Wells license and Pozzi's application were even considered. Pozzi was unrepresented at the hearing, see Pet.'s Ex. B ¶ 3, and it is not even clear that representatives of Pozzi were present when the inspection reports were made part of the record. Even if Pozzi was present, since the Bureau failed to make Pozzi's inspection report available for examination before making it a part of the record, Pozzi cannot be charged with failing to make an objection. Thus, Pozzi did not waive its right to challenge the Bureau's handling and use of its inspection report.
c. The Bureau took official notice of certain facts but did not provide Pozzi an opportunity to clarify, contest or rebut them.
Another issue-of-consequence regarding the Bureau's hearing process concerns facts that the Bureau apparently relied upon but which were not supported by record evidence and of which the Bureau did not take official notice.
In their applications, each Wells applicant identified the agency liquor store in Wells nearest to the applicant's store and the distance between them. That information was validated by the inspectors' reports. Consistent with its authority, see 28-AM.R.S. § 453-A(5), the Bureau based its decision to award the license to Wells Clipper Mart, in part, on its finding that Wells Clipper Mart's store is located the greatest distance from the nearest agency liquor store relative to the other applicants' stores. R. § 10 at 7. In its opposition to the petition, the Bureau expanded upon this rationale and indicated that the Bureau's licensing decisions are guided, in part, by its conceptualization of a statewide team of stores and its goal to maximize growth within that team or network. Resp't Opp'n Br. at 7. The Bureau's stated reliance on this concept and goal is inconsistent with the rationale given by the Bureau in its decision.
To the extent that the Bureau considered the locations of agency liquor stores in Wells beyond the stores closest to each applicant's store as identified by each applicant, there is no record evidence of the number of agency liquor stores in Maine, let alone Wells, or their locations relative to one another. The Bureau did not take official notice of such facts, nor did it consider documentary or other evidence that establishes the stores' locations and distance between them. It may be that the Bureau relied on its expertise or specialized knowledge in this matter to reach its decision, but it did not identify either as a basis for its rationale until oral argument. To the extent that the Bureau considered the locations of agency liquor stores in Wells beyond identifying the closest agency liquor store to each applicant's store as a basis for its decision, it committed legal error by not providing Pozzi and the other applicants with an opportunity to contest the substance or materiality of the facts noticed. See 5 M.R.S. §§§ 9058(1), 11005.
d. Necessity of a remand.
Meaningful adherence to the APA's procedures is important to not only enable meaningful judicial review, but to ensure comprehensive and fair administrative procedures. See Lane Const. Corp., 2008 ME 45, ¶ 29, 942 A.2d 1202. This is because these procedures are used frequently to establish or resolve the rights of parties. Much may be at stake. The Court appreciates the challenges associated with coordinating and conducting a licensing hearing like the one at issue, and the hard work and time that the Bureau and the applicants invested in preparation for the hearing. Regrettably, a remand is necessary in this case. Because the Bureau did not comply with the APA's requirements for the admission of evidence into the hearing record, it erroneously relied on evidence that was not properly before it when it made its findings of fact and conclusions of law. As a consequence, Pozzi was denied its right to review, challenge or seek clarity about evidence upon which the Bureau relied in reaching its licensing decision. Remand is necessary for the Bureau to render a licensing decision based on a proper record. See § 11007(4), (5).
CONCLUSION
For the foregoing reasons, the entry shall be:
1. Petitioner Pozzi, LLC's Petition for Review of Final Agency Action Pursuant to Maine Rule of Civil Procedure 80C is GRANTED.
2. The Respondent Maine Bureau of Alcoholic Beverages and Lottery Operations' May 19, 2023, Decision to Approve License Application and Issuance of License No. AGN-2023-15198 is VACATED.
3. The matter is REMANDED to the Bureau to hold a new evidentiary hearing on the applications for of License No. AGN-2023-15198 (Wells) consistent with the procedural requirements imposed by the Maine Administrative Procedure Act.
4. In anticipation of the new hearing, the Bureau must conduct a new inspection for each Wells applicant to enable applicants to submit updated information to the Bureau.
5. Inspection reports must contain the date of inspection, and the date the written report is completed. No less than fourteen (14) days before the hearing, the Bureau must provide applicants with either (1) a copy of their report or (2) notice instructing applicants how and where to access the reports.
6. If the hearing is held in an omnibus fashion with other municipalities, then inspection reports should only be moved into evidence at the start of the portion of the hearing dedicated to the subject municipality. Reports should be admitted only when the corresponding applications will be considered.
SO ORDERED.
Pursuant to M.R. Civ. P. 79(a), the Clerk is instructed to incorporate this Order by reference on the docket for this case. BCD-APP-2023-00003 Pozzi, LLC d/b/a Bow Street Beverage Wells Petitioners(s) v. Maine Bureau of Alcoholic Beverages and Lottery Operations, et al. Respondent(s)
Party Name: Attorney Name: Petitioner Pawel Binczyk, Esq. The Bennett Law Firm, PA 75 Market Street, Suite 201 Portland, ME 04101 Respondent Philip Mantis, AAG Office of the Attorney General 6 State House Station Augusta, ME 04333-0006 Party In Interest Sandra L. Guay, Esq. Benjamin E. Ford, Esq. Archipelago Law LLP 1 Dana Street, 4th Floor Portland, ME 04101