South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. John Bush, Jr.

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
John Bush, Jr.
 
DOCKET NUMBER:
97-ALJ-17-0712-CC

APPEARANCES:
Petitioner, South Carolina Department of Revenue: Jeffrey M. Nelson, Esq.

Respondent, John Bush, Jr.: Kenneth E. Allen, Esq.

Parties Present: Both Parties
 

ORDERS:

ORDER

I. Statement of the Case


The South Carolina Department of Revenue (DOR) seeks the revocation of a beer and wine permit and a sale and consumption minibottle license. John Bush, Jr. (Bush) opposes DOR's position and asserts a revocation is inappropriate. Bush's disagreement with DOR's determination places jurisdiction in the Administrative Law Judge Division (ALJD). S.C. Code Ann. § 61-2-260 (Supp. 1997); S.C. Code Ann. § 1-23-310 et. seq. (Rev. 1986 and Supp. 1997). The hearing in this matter was held March 31, 1998 at the Edgar Brown Building, Columbia, South Carolina. Based upon the evidence and the argument presented by the parties, Bush's beer and wine permit and his minibottle license are suspended for 45 days.

II. Issues


1. Did Bush violate §§ 61-4-580(4) and 61-6-1830 (Supp. 1997) by knowingly permitting entertainment, conduct, or practices in which a person is in a state of undress so as to expose the human male or female genitals, pubic area, or buttocks cavity with less than a full opaque covering?

2. Did Bush violate S.C. Code Ann. Regs. 7-17(J) (Supp. 1997) by allowing an individual who was not a member of the private club nor a guest of a member to consume alcoholic beverages sold in sealed containers of two ounces or less upon the licensed premises?



3. If any violation occurred, what is the appropriate sanction?

III. Analysis


A. Improper Conduct


1. Positions of Parties

DOR argues that the private club of L B Dynasty employed female dancers who on February 13, 1997 knowingly exposed their genitals and inserted their fingers inside their vaginas and rectums. Bush does not dispute the fact that the improper activities occurred. However, he notes that his policy prohibits lewd, immoral or improper entertainment and that any improper activity occurring on February 13, 1997 should not result in his permit and license being revoked.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

  1. Bush holds a beer and wine permit and sale and consumption liquor license for a private club known as Food and Beverage Corp., d/b/a L B Dynasty.
  2. The club is located at 6212 Two Notch Road, Columbia, South Carolina.
  3. On February 13, 1997, at approximately 10:00 p.m., two law enforcement officers operating in an undercover capacity entered the licensed premises.
  4. At the private club of L B Dynasty, while in a public forum and in the presence of patrons, several female employees knowingly exposed their genitals and their anuses.
  5. At least one dancer inserted her fingers into her vagina and anus.
  6. The exposing of genitals and anuses was not an isolated event but was an activity repeated numerous times over a period of at least 30 minutes.
  7. The activity was not limited to a single employee but was carried out by at least four of the dancers.
  8. No employee attempted to stop the activity even though several employees were present.
  9. Bush's policy is that such activity should not occur.


3. Discussion

a. Violation

At the pre-hearing stage Bush asserted that his employees' improper actions could not be attributed to him since he has an express policy prohibiting such actions. However, at the hearing, Bush conceded that the violation occurred and conceded that as the holder of the license, he was subject to a fine, suspension, or revocation. Bush's concession is consistent with the controlling law.



1. Background

On February 13, 1997, in a public forum and in the presence of two undercover police officers, several employees at the private club of L B Dynasty knowingly exposed their genitals and anuses and at least one dancer inserted her fingers into her vagina and anus. Such acts violate S.C. Code Ann. §§ 61-4-580(4) and 61-6-1830 (Supp. 1997).

2. Liability of License Holder

i. Statutory Imposition

The fact that an agent or employee committed the violation would not relieve Bush from liability. Other jurisdictions have held that a statute may validly impose liability upon the license holder even when the license holder has no knowledge that prohibited activities are occurring on the licensed premises. Mazza v. Cavicchia, 105 A.2d 545 (N.J. 1954).

The statute under review here expressly finds the permit holder liable even when the act involved is committed by an agent or employee. See S.C. Code Ann. § 61-4-580 (Supp. 1997) ("No holder of a permit . . . or a servant, agent, or employee of the permittee may knowingly commit any of the following acts. . . ."). Thus, the fact that a violation is committed by an agent or employee rather than the permit or license holder is not, by itself, a persuasive defense.

ii. Policy Ineffective

Further, Bush is liable notwithstanding his policy prohibiting the improper acts. Imposing liability upon a license holder for unauthorized actions of employees is not unusual. See Boyd v. Allen, 97 S.E.2d 864 (N.C. 1957) (sales of beer and whiskey at prohibited times gave rise to a suspension of a permit even where the permit holder had no knowledge of the employees' actions); 48 C.J.S. Intoxicating Liquors § 168 (1981) (cases cited therein addressing gambling on the premises and soliciting prostitution on the premises). More particular to the instant case, where the employee's action was not a sudden or unexpected act, other courts have held the permit holder liable for an employee who exposed her pubic area to customers. Fay v. State Bd. of Alcoholic Control, 227 S.E.2d 298 (N.C. App. 1976); cert. denied 229 S.E.2d 689 (1976). Specifically, where an employee's improper actions are not subjected to control by a standard of reasonable care and diligence, the lack of such control presents strong evidence that the permit holder should be held liable. 48 C.J.S. Intoxicating Liquors § 168 (1981).

Here, the lack of control presents strong evidence of liability. First, the improper activity was not an isolated event but instead involved activity occurring over a period of at least 30 minutes. In addition, the activity was not limited to a single employee. At least three of the dancers exposed their genitals or anuses. Further, no evidence establishes that any employee attempted to stop the improper activity. The mere existence of an alleged policy to prohibit the improper activity is not sufficient care nor diligence to deny liability. Rather, management practices must be vigilant enough to prevent violations of the law. 48 C.J.S. Intoxicating Liquors § 168 (1981).



4. Conclusions of Law

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

1. No holder of a permit authorizing the sale of beer or wine or a servant, agent, or employee of the permittee may knowingly permit lewd, immoral, or improper entertainment, conduct, or practices such as entertainment, conduct, or practices where a person is in a state of undress so as to expose the human male or female genitals, pubic area, or buttocks cavity with less than a full opaque covering. S.C. Code Ann. § 61-4-580(4) (Supp. 1997).

2. A suspension or revocation is proper upon finding that an applicant permits entertainment on the licensed premises where a person is in a state of undress so as to expose the human male or female genitals, pubic area, or buttocks cavity with less than a full opaque covering. S.C. Code Ann. § 61-6-1830(4) (Supp. 1997).

3. A statute may validly impose liability upon the license holder even when the license holder has no knowledge that prohibited activities are occurring on the licensed premises. Mazza v. Cavicchia, 105 A.2d 545 (N.J. 1954).

4. In some instances, a permit holder may be held absolutely accountable for events carried out by employees on the premises. See 48 C.J.S. Intoxicating Liquors § 168 (1981)

5. In some instances, a permit holder may be held liable where an employee exposed her pubic area to customers by actions that were not sudden or unexpected. Fay v. State Bd. of Alcoholic Control, 227 S.E.2d 298 (N.C. App. 1976); cert. denied 229 S.E.2d 689 (1976).

6. Bush as the permit and license holder is liable for the actions of the dancers in this case. See Boyd v. Allen, 97 S.E.2d 864 (N.C. 1957).

7. Management practices must be vigilant enough to prevent violations of the law. 48 C.J.S. Intoxicating Liquors § 168 (1981).

8. Where an agent's improper actions are not subject to reasonable care and diligence, the lack of such care and diligence presents strong evidence that the permit holder should be held liable. 48 C.J.S. Intoxicating Liquors § 168 (1981).

9. Under the facts of the instant case, no manifest unfairness attaches to imposing a liability to Bush as the license and permit holder.

10. Bush's employees violated S.C. Code Ann. §§ 61-4-580(4) and 61-6-1830(4) (Supp. 1997).

B. Sale to Non-Member


1. Positions of Parties

DOR argues that the private club of L B Dynasty sold beer and a minibottle to two individuals who were neither members nor guests of members. At the prehearing stage Bush argued the two were guests and were entitled to purchase drinks. At the hearing, Bush conceded that the officers were not guests.



2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

1. On February 13, 1997, at approximately 10:00 p.m., two law enforcement officers operating in an undercover capacity entered the licensed premises located at 6212 Two Notch Road, Columbia, South Carolina.

2. No one accompanied the undercover officers onto the premises.

3. No member made prior arrangements with the management to receive undercover agents as guests.

4. An employee at the entrance of the club asked each officer if he was a member.

5. Each officer responded, "No."

6. Both officers were admitted after each paid a seven dollar cover charge.

7. One of the officers was served an alcoholic beverage from a minibottle by the bartender.

8. The officer paid six dollars for the drink and consumed a portion of the drink on the premises.

9. A second officer purchased a beer and consumed a portion of the beer on the premises.

10. The club has a policy of treating all police officers as guests of the manager.

3. Discussion

While at the prehearing stage Bush argued the two were guests and were entitled to purchase drinks, Bush conceded at the hearing that the officers were not guests. Bush's concession is consistent with the controlling law.

A club such as L B Dynasty operating as a bona fide nonprofit organization may hold a minibottle license. S.C. Code Ann. § 61-6-1820 (Supp. 1997). In utilizing that license, however, the club may sell minibottles only to members or guests of members. S.C. Code Ann. § 61-6-1600 (Supp. 1997). Further, the licensed premises can be used to consume minibottles only by members and guests of members. S.C. Code Ann. Regs. 7-17(J). No serious argument can be made that the sales made to the undercover officers were made to guests.

Bona fide guests are limited to those who either accompany a member onto the premises or those for whom the member has made prior arrangements with the management of the organization. S.C. Code Ann. Regs. 7-17(K). Clearly, no one accompanied the undercover officers onto the premises. Equally as clear, no member made prior arrangements with the management since "prior arrangements" cannot consist of a mere unilateral decision by the club to designate all police officers as guests. If such a policy were applied, all undercover agents would be guests and thus no violations would ever result. Such a subterfuge cannot be allowed to stand. See Winter v. Pratt, 258 S.C. 397, 189 S.E.2d 7 (1972) (a subterfuge of a "gift" of liquor was in reality a disguised sale prompting a finding that the "courts will refuse to countenance any trick or subterfuge intended to evade the law.").



4. Conclusions of Law

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

1. A private club operating as a bona fide nonprofit organization may hold a minibottle license. S.C. Code Ann. § 61-6-1820 (Supp. 1997).

2. A private club operating as a bona fide nonprofit organization may sell minibottles only to members or guests of members. S.C. Code Ann. § 61-6-1600 (Supp. 1997).

3. The licensed premises of a private club operating as a bona fide nonprofit organization can be used to consume minibottles only by members and guests of members. S.C. Code Ann. Regs. 7-17(J).

4. Bona fide guests are limited to those who either accompany a member onto the premises or those for whom the member has made prior arrangements with the management of the organization. S.C. Code Ann. Regs. 7-17(K).

5. "Prior arrangements" cannot consist of a mere unilateral decision by the club to designate all police officers as guests.

6. A subterfuge cannot be allowed to evade the law. See Winter v. Pratt, 258 S.C. 397, 189 S.E.2d 7 (1972)

7. The undercover officers were not guests.

8. Bush, through the actions of his employees, violated S.C. Code Ann. Regs. 7-17(J).

C. Penalty


1. Positions of Parties

DOR argues that the extensiveness of the violations warrants a revocation of both the beer and wine permit and the minibottle license. Bush argues that mitigating circumstances should be considered to result in a fine but not revocation.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

1. At the time of the violations, Bush was not actively involved in the operation of the club.

2 Bush was unaware of the violations for several months after the event.

3. Bush is now retired from his former employment and devotes an extensive amount of time to managing the club.

4. Management control of the club is now in Bush.

5. At the time of the event, Bush did in fact have a policy prohibiting improper activity.

6. Bush no longer provides adult entertainment at his club so that future violations of the nature here under review will not occur.

7 Prior to the February 13, 1997 events, Bush had received no beer and wine or liquor violations of any kind.

3. Discussion

Where the General Assembly authorizes a range for an administratively imposed penalty, the administrative adjudicator sitting as the fact-finder may set the amount of the penalty after a hearing on the dispute. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991). Since in this case the severity of the penalty is in dispute, the fact-finder must receive evidence and make a determination on all such factual disputes arising from the contested case. S.C. Code Ann. § 1-23-350 (Rev. 1986).

Here, the degree of the violations is extensive and in the absence of mitigating circumstances warrants a revocation. However, mitigating circumstances are present to a sufficient degree to withhold a revocation. Accordingly, the lesser but very significant penalty of a 45 day suspension is imposed on both the beer and wine permit and the minibottle license.

Here, the lesser penalty is supported by the evidence. First, the evidence shows that at the time of the violation, Bush was not actively involved in the operation of the club. In fact, Bush was unaware of the violation for several months after the event. Such a lack of knowledge underscores Bush's failure to supervise the club. Now, however, Bush is retired from his former employment and devotes an extensive amount of time to managing the club. Thus, management control is now in Bush. Second, at the time of the event, Bush did in fact have a policy prohibiting improper activity. While Bush's failure to supervise allowed the policy to remain unenforced, the existence of the policy is of some note. Third, Bush no longer provides adult entertainment at his club. Thus, future violations will not occur. Finally, prior to the February 13, 1997 events, Bush had received no beer and wine or liquor violations of any kind. Thus, under all of the facts here, a 45 day suspension is proper.

4. Conclusions of Law

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

1. Discretion exist to impose either a suspension or a revocation of a minibottle license for improper entertainment on a licensed premises. S.C. Code Ann. § 61-6-1830 (Supp. 1997).

2. For violations of § 61-6-1830 discretion exist to impose a monetary penalty upon the holder of a liquor license in lieu of suspension or revocation. S.C. Code Ann. § 61-6-4270 (Supp. 1997).

3. Discretion exist to impose either a suspension or a revocation of a beer and wine permit for improper entertainment on a permitted premises. S.C. Code Ann. § 61-4-580 (Supp. 1997).

4. For violations of § 61-4-580 and for a violation of any regulation pertaining to beer or wine, discretion exist to impose a monetary penalty upon the holder of a beer or wine permit in lieu of a suspension or revocation. S.C. Code Ann. § 61-4-250 (Supp. 1997).

5. Where the General Assembly authorizes a range of alternatives for an administratively imposed penalty, the administrative adjudicator sitting as the fact-finder may set the amount of the penalty after a hearing on the dispute. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991).

6. The fact-finder must receive evidence and make a determination on all factual disputes arising from the contested case. S.C. Code Ann. § 1-23-350 (Rev. 1986).

7. Under all of the facts of this case, a 45 day suspension is proper.

IV. Order


Based upon the Findings of Fact and Conclusions of Law, it is hereby ordered:

Bush's beer and wine permit and minibottle license are suspended for 45 days. The period of suspension will commence at 12:01 a.m. on April 13, 1998 and conclude at 12:01 a.m. on May 29, 1998.

AND IT IS SO ORDERED.

RAY N. STEVENS

Administrative Law Judge

Dated: April 2nd, 1998

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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