SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter is before the Administrative Law Court (ALC or Court) pursuant to S.C. Code Ann. §§ 61-2-20 and 61-2-260 (Supp. 2003). The South Carolina Department of Revenue (Department) seeks to impose a fine of $500.00 for Respondent’s first violation of 23 S.C. Code Ann. Regs. 7-200.4 (eff. June 27, 2003). A hearing was held before me on June 22, 2005 at the offices of the Administrative Law Court in Columbia, South Carolina.

FINDINGS OF FACT

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of the evidence:

1. The Court has personal and subject matter jurisdiction.

2. Notice of the date, time, place and subject matter of the hearing was timely given to all parties.

3. Respondent The Spinx Company, Inc., d/b/a The Spinx Company, Inc., 124, which is located at 3226 West Wade Hampton Blvd., Taylors, South Carolina (location) holds a permit (Permit No. 32015681-PBG) issued by the Department that permits it to sell beer and wine for off-premise consumption

4. On September 17, 2004, South Carolina Law Enforcement Division (SLED) agents conducted an investigation of Respondent’s business at the permitted location in conjunction with an underage cooperating individual (UCI), Dustin May, who was nineteen (19) years of age. The UCI entered the location at the above-referenced address and purchased a 24 ounce can of Bud Light beer from the clerk on duty. The clerk did request identification from the UCI and he presented his driver’s license which reflects that he is “Under 21 until 04-21-2006.” The clerk, Glenda Wolfe, then permitted the UCI to purchase the beer.

5. Ms. Wolfe was charged with the transfer of a beer to an individual under the age of twenty-one (21). Additionally, Respondent was issued an administrative citation for permitting an under-aged person to purchase beer on a licensed premises, in violation of Regulation 7-200.4.

6. The Department issued its Final Determination in this matter on February 28, 2005, seeking to impose a $500 fine against Respondent.

7. Stewart Spinx, the founder and chief executive officer of Respondent, appeared at the hearing on behalf of Respondent. His company has seventy six (76) stores in South Carolina and sixteen (16) stores in North Carolina. Respondent’s home office is located in Greenville, South Carolina. Mr. Spinx is active in the National Association of Convenience Stores. Tracy Thomas Lilly and Kristen Renee Warren also appeared on behalf of Respondent. Ms. Lilly has been employed by Respondent for seven (7) years and has been the Director of Human Resources since July 2000. In this capacity, Ms. Lilly is responsible for all personnel files and is knowledgeable of all training given to each new employee. Ms. Warren is the benefits coordinator for Respondent and a former trainer for new employees. She is also knowledgeable in the training that is offered to employees.

8. Each time a new employee is hired, he/she receives a “New Hire Packet” that is reviewed in detail with them during their orientation process and includes a portion on “age sensitive” sales. As part of this packet, new employees must sign a form called the “Spinx Acknowledgment Sheet.” This sheet explains Respondent’s policy on underage alcohol sales and advises employees that the sale of merchandise governed by state, federal and/or local laws to a minor constitutes an action which is “outside of the course and scope of employment.” Employees are instructed to check the identification of every customer for every alcohol purchase and to check the identification of every customer who appears to be under the age of thirty (30) for all other age sensitive products. Furthermore, the form states that if an employee is charged with an illegal sale to a minor, then he/she will be terminated from employment. Management has a “zero tolerance” policy for the sale of age sensitive items to minors, and any employee who violates the policy is automatically terminated notwithstanding their longevity of employment with the company.

Prior to being hired and again at the conclusion of orientation, employees are also given a “Basic Math and Age Sensitive Sales Test.” This test requires the applicant to review and answer questions concerning information contained in sample driver’s licenses. If an employee fails this test, then he/she is not placed in a cashier position where age sensitive items are sold. During orientation, employees also watch training videos, engage in role playing, and view a power point presentation on age sensitive sales. After beginning work at a convenience store, the manager continues hands-on training in age sensitive sales.

9. As an additional safeguard, the time clock at each location reminds the employee when clocking in for work that each age sensitive sale mandates that he/she must check the age of the purchaser. There is also a verification device at each convenience store to assist its employees in checking the ages of customers who wish to purchase age sensitive sale items. Furthermore, Respondent has provided training by agents of SLED, when it is available, on the sale of alcohol to minors.

10. Allen Clark is one of Respondent’s nine (9) territory managers. He supervises nine (9) stores, including the store located on Wade Hampton Boulevard in Taylors, South Carolina. Mr. Clark works six (6) to seven (7) days each week and visits each store he supervises at least two (2) to three (3) times each week. All of his stores have “reminders” which serve as aids to its employees to check for “Id’s,” including a pad by each register that states “We Id” and signs on the doors that say “We Id.” There is a calendar by each register to assist the clerk in determining if a customer is of sufficient age to make an age sensitive purchase. Each store has a scanning process which allows the clerk to type in the date of birth of the customer to determine if the customer is old enough to purchase the item. Mr. Clark routinely talks with his clerks about age sensitive sales and he terminates employees if they do not follow proper procedures.

CONCLUSIONS OF LAW

Based upon the above Findings of Fact, I conclude the following as a matter of law:

1. S.C. Code Ann. § 1-23-600 (2005) grants jurisdiction to the ALC to hear contested cases under the Administrative Procedures Act. Specifically, S.C. Code Ann. § 61-2-260 (Supp. 2003) grants the ALC the authority to hear contested case hearings in matters governing alcoholic beverages, beer and wine.

2. Permits and licenses issued by this state for the sale of liquor, beer and wine are privileges to be used and enjoyed only so long as the holder complies with the restrictions and conditions governing them. See Feldman v. S.C. Tax Commission, 203 S.C. 49, 26 S.E. 2d 22 (1943).

3. S.C. Code Ann. § 61-4-580(1)(Supp. 2003) provides:

No holder of a permit authorizing the sale of beer or wine or a servant, agent, or employee of the permittee may knowingly commit any of the following acts upon the licensed premises covered by the holder’s permit:

(1) sell beer or wine to a person under twenty‑one years of age;

….

A violation of any provision of this section is a ground for the revocation or suspension of the holder’s permit.

4. Permitting or knowingly allowing a person under the age of twenty-one (21) to purchase or possess beer upon the licensed premises is a violation against a license or a permit. Such a violation constitutes sufficient grounds for either suspension or revocation of the beer and wine permit. 23 S.C. Code Ann. Regs. 7-200.4 (effective June 27, 2003).

5. The permittee is responsible for all acts of his servants, agents, or employees and cannot seek to avoid the consequences of a violation for lack of personal knowledge. Following that principle, the South Carolina Supreme Court upheld a civil forfeiture of a corporation’s boat based upon an employee’s transporting drugs even though the corporation claimed the use of the boat to transport drugs was without its knowledge. South Carolina Law Enforcement Division v. The "Michael and Lance,” 281 S.C. 339, 315 S.E. 2d 171 (Ct. App. 1984). The Court held that “[a] principal is affected with constructive knowledge of all material facts of which its agent receives notice while acting within the scope of his authority.” Id. at 173, citing Crystal Ice Co. of Columbia, Inc. v. First Colonial Corp., 273 S.C. 306, 257 S.E. 2d 496 (1979). Likewise, the license holder is responsible for the actions and conduct of employees utilizing the permit upon the permitted premises. 48 C.J.S. Intoxicating Liquors § 259 (1981).

6. Inherent in and fundamental to the powers of an Administrative Law Judge, as the trier of fact in contested cases under the Administrative Procedures Act, is the authority to decide the appropriate sanction when such is disputed. Walker v. South Carolina ABC Comm’n, 305 S.C. 209, 407 S.E. 2d 633 (1991). The Administrative Law Judge, as fact-finder, must impose a penalty based on the facts presented at the contested case hearing. To that end, an Administrative Law Judge must consider relevant evidence presented in mitigation. Mitigation is defined as a lessening to any extent, great or small. It may be anything between the limits of complete remission on one hand and a denial of any relief on the other. In a legal sense, it necessarily implies the exercise of the judgment of the court as to what is proper under the facts of the particular case. 58 C.J.S. Mitigation p. 834, 835 (1948).

7. In this case, the Department seeks to impose a $500 fine against Respondent’s for its first violation of Regulation 7-200.4. See S.C. Revenue Procedure 04-4.

DISCUSSION

South Carolina’s Alcohol Licensing and Regulatory Framework

The South Carolina General Assembly has the sole authority to prohibit or license the transportation, manufacture and sale of alcoholic liquors in this State. S.C. Const. VIII-A, § 1. The General Assembly has provided in Title 61, South Carolina Code of Laws, various licensing and regulatory provisions for the transport, sale and manufacture of alcohol. Furthermore, the General Assembly has provided that the Department has the “sole and exclusive authority to regulate the operation of all locations authorized to sell beer, wine, or alcoholic liquors...” S.C. Code Ann. § 61-2-80 (Supp. 2003). S.C. Code Ann. § 61-4-50 (Supp. 2003) provides that “it is unlawful for a person to sell beer, ale, porter, wine, or other similar malt or fermented beverage to a person under twenty-one years of age.” S.C. Code Ann. § 61-4-90 (Supp. 2003) states that “it is unlawful for a person to transfer to give to a person under the age of twenty-one years for the purpose of consumption beer or wine at any place in the State” and provides in § 61-4-250 that a penalty may be imposed upon the holder of a beer or wine license in lieu of revocation or suspension. Furthermore, S.C. Code Ann. § 61-4-580 (Supp. 2003) reads as follows:

No holder of a permit authorizing the sale of beer or wine or a servant, agent, or employee of the permittee may knowingly commit any of the following acts upon the licensed premises covered by the holder’s permit:

(1)   sell beer or wine to a person under twenty-one years of age:

….

Further, the General Assembly authorized the Department to promulgate regulations necessary for it to carry out the duties imposed upon it under Title 61 for the proper administration and enforcement of the alcoholic laws contained therein.

Regulation 7-200.4

In furtherance of its duty, the Department promulgated Regulation 7-200.4 which provides:

To permit or knowingly allow a person under twenty-one years of age to purchase or possess or consume alcoholic liquors, beer or wine in or on a licensed place of business which holds a license or permit issued by the Department is prohibited and constitutes a violation against the license or permit. Such violation shall be sufficient cause to suspend or revoke the license or permit by the Department.

Accordingly, in order to sustain a violation of Regulation 7-200.4, the Department must show that a permittee permitted or knowingly allowed a person under the age of twenty-one (21) years to purchase a beer at a licensed location.

Respondent’s employee, Glenda R. Wolfe, sold a beer to a person (UCI) under the age of twenty one (21) years on September 14, 2004 at Respondent’s location. At the time of the purchase, the UCI presented his South Carolina driver’s license to Ms. Wolfe which showed that he was not of the legal age to purchase beer in this State. The issues before this Court are whether the beer was sold “knowingly” to the UCI and, if so, whether the act [sale] by Ms. Wolfe is imputed to her employer/permittee [Respondent].

Knowingly

The South Carolina Supreme Court defined the term "knowledge” which must be proven in civil license revocation cases. See Feldman v. South Carolina Tax Comm’n, 203 S.C. 49, 26 S.E.2d 22 (1943). In Feldman, an alleged sale of alcoholic liquors was made by John Rhett Mouzon to LeRoy Sessions, a minor, on October 7, 1942. Mr. Mouzon was a clerk at a store owned by Ben Feldman in the Town of Summerton, South Carolina. In formulating its decision, the South Carolina Supreme Court construed § 1840 of the 1942 Code, a criminal statute which provided that a violation thereof constituted a misdemeanor. The statute read:

No retail dealer shall knowingly sell, offer for sale, barter, or exchange any alcoholic liquors to any person when drunk or intoxicated, nor to a minor, nor to any insane person, and upon violation of any of these provisions, upon conviction, shall suffer the penalties hereinafter provided.

In construing the meaning of the word “knowingly,” the Court held that an employee “knowingly” permits the purchase of beer or wine to an underage person:

…if the clerk knew that the [purchaser] was a minor or had such information, from his appearance or otherwise, as would lead a prudent man to believe that he was a minor, and if followed by inquiry must bring knowledge of that fact home to him, then the sale was made knowingly.” Feldman at 25. (Emphasis added).

In Feldman the Court also stated that “[t]he authorities seem to uniformly hold that in the granting and the revoking of licenses to sell alcoholic liquors, much is left to the discretion of the Court or body charged with that duty. And in most jurisdictions the law does not require the same strictness as to proof and procedure that obtains in actions or criminal prosecutions, generally.”[8] Id. at 25. (Emphasis added).

The “knowledge” requirement espoused in Feldman was specifically addressed by the South Carolina Court of Appeals in Daley v. Ward, 303 S.C. 81, 339 S.E.2d 13 (Ct. App. 1990). There, the Court stated that Feldman “provides authority for a charge which injects a ‘reasonable person’ standard into the definition of ‘knowingly’ as used in these statutes.” Daley at 86. The “reasonable person” standard was defined by Judge Memminger in his charge to the jury in Settlemeyer v. Southern Ry. Co., Carolina Division, 97 S.C. 85, 91, 81 S.E.2d 465, 470 (1914), as that of a man of ordinary care, sense, and prudence, and not what any particular person did or did not do under any particular state of facts.

Considering all the above, this Court concludes that a retail dealer "knowingly” sells an alcoholic beverage to a minor when he/she:

(1) has actual knowledge that a person is under the age of twenty one (21) years; or

(2) has such information from the appearance of the person, or has such other information which would lead a prudent man to believe that the person was a minor and,

upon inquiry, it is made known to him that the person is a minor.

Although the Court in Feldman was addressing a criminal matter, this Court takes judicial notice that the judges of the Administrative Law Court have historically applied the Feldman definitional provision of “knowingly” in civil cases involving violations based upon allegations of alcohol sales to minors, and I concur in that interpretation, usage and application. There is no requirement that the Department prove intent or recklessness (mens rea); it must only meet the “knowledge” test of Feldman.

Applying these standards to the instant case, the UCI was of the appearance that would lead a reasonable person to make further inquiry. Upon such inquiry, a careful reading of the UCI’s driver’s license would have made known to Respondent’s clerk that he was a minor. Accordingly, I find that the Department has met its burden of proving that Respondent violated Regulation 7-200.4 which prohibits the sale of beer to a person under the age of twenty one (21) years.

Scope of authority of its employees in selling alcohol to minors

Respondent argues that the clerk was not acting within the scope of her authority when she sold the beer to the UCI, and thus the violation of Regulation 7-200.4 cannot be imputed to Respondent. Respondent does have written policies and procedures concerning “age sensitive” sales which are explained to its employees and to which they agree to adhere. These written policies specifically state that any alcoholic beverage sale by an employee to a minor is an act committed outside their scope and authority as an employee. Therefore, Respondent argues that given this policy, it cannot be held responsible for the sale of the beer by this employee to the UCI because its employee did not make the sale while acting within her express authority. Respondent further argues that it did not condone, accept, ratify or approve the sale.[9]

Also, Respondent notes that this Court applies a “strict liability” standard to alcohol beverage retail dealers in these cases involving sales to minors. It argues the Court, through its decisions, impute the acts of the employees [sales clerks] to the retail dealer since many of them cite the proposition that “the license holder is responsible for the actions and conduct of employees utilizing the permit upon the permitted premises.” See 48 C.J.S. Intoxicating Liquors § 168 (1981). Respondent posits that this Court should examine those provisions of

§ 168 which immediately follow the above because they further explain and possibly delimit the responsibility/culpability of a retail dealer in alcohol sales made by employees to minors. These provisions read as follows:

The owner of a liquor license has the responsibility to see to it that the license is not used in violation of law, and he is responsible for the conduct of his employees, although he is not responsible for their every single act. While the licensee is not an insurer that an agent or servant will not in any particular way violate any law of the state, such licensee nevertheless has a duty to exercise reasonable care and diligence to see that the licensed place of business is conducted in a lawful manner and that its employees do not violate any of the laws of the state.

Respondent argues that in lieu of applying this “strict liability” to the retail dealer, this Court should make further inquiry in these violation cases to determine whether the owner exercised reasonable care and diligence in managing its employees in an effort to prevent these illegal sales and the resulting violation charges.

The Department argues that the position advanced by Respondent is without merit for

three reasons:

(1) it is contrary to many prior decisions of the judges of this Court; [10]

(2) such an application is contrary to the South Carolina Constitution and the statutory scheme in this state concerning alcoholic licenses and sales; and

(3) it is contrary to the legislative intent in enacting a prohibition on the sale of alcohol to individuals under the age of twenty-one (21) years.

Neither the statutes, regulations or case law applicable to these administrative violations require or even suggest that this Court should inquire into or apply a “standard of care” by the retail dealer or the sales clerk based upon its actions prior to or coexistent with the sale of an alcoholic beverage to a minor. The application of a standard of care doctrine is applicable to tort cases, not administrative law cases. This Court is only concerned with whether an unlawful act occurred, and, if so, what penalty should accorded to the retail dealer. This Court cannot allow a licensee to escape responsibility for the unlawful actions of its employees and avoid the consequence of the violation as it would be contrary to our Constitution and the statutory scheme in this State governing alcohol licensing and sales. Furthermore, permits and licenses issued by this State for the sale of liquor, beer and wine are not contracts or property rights but privileges to be used and enjoyed only so long as the holder complies with the restrictions and conditions governing them. See Feldman v. S.C. Tax Commission, 203 S.C. 49, 26 S.E. 2d 22 (1943). Therefore, I find that Respondent, through the act of its employee Glenda Wolfe, violated Regulation 7-200.4.

Notwithstanding, the Court is cognizant of the extensive efforts Respondent has put forth to prevent the sale of alcoholic beverages to underage individuals. Respondent has written policies and provides detailed training to its employees on the subject of age sensitive sales. Respondent also has numerous safeguards in place to help prevent underage sales and to remind employees about proper procedures to follow when selling age sensitive items. Respondent’s zero tolerance policy on underage sales provides that any employee that violates sells an age sensitive item to a minor is automatically terminated, as was Ms. Wolfe. Despite these measures, however, Respondent’s employee still sold beer to a minor. Nevertheless, this sale clearly does not represent Respondent’s philosophy concerning sales to minors. Therefore, I find that the appropriate penalty in this case is to impose a fine in the amount of two hundred and fifty dollars ($250.00), which must be remitted to the Department within thirty (30) days of the date of this Order.

ORDER

Accordingly, based upon the foregoing,

IT IS HEREBY ORDERED that Respondent must remit a fine in the amount of two hundred and fifty dollars ($250.00) to the Department within thirty (30) days of the date of this Order for its violation of Regulation 7-200.4. Respondent is also cautioned that future violations may result in a fine, suspension and/or revocation.

AND IT IS SO ORDERED.

__________________________________

Marvin F. Kittrell

Chief Administrative Law Judge

August 2, 2005

Columbia, South Carolina