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Superior Court Holds DBR Has Jurisdiction to Hear Appeals of Fines by Local Licensing Boards

In what it called a case of first impression, the Rhode Island Superior Court has held that the Department of Business Regulation ("DBR") has jurisdiction to hear appeals of fines imposed by local licensing boards.  However, DBR is not required to hold a de novo hearing of those appeals. 

The Rack, Inc. operates a nightclub called Smoke's.  It has a liquor license issued by the City of Providence.  As a result of some disturbances outside the club, the Providence Board of Licenses ("PBL") held a hearing and found that The Rack had commmited three violations and imposed fines totaling $2000.  The letter informing the Rack of fines stated that it could take an appeal to the State Liquor Control Administration at DBR. 

The subsequent procedural history of the case is somewhat convoluted.  The Rack filed a notice of appeal with DBR but then attempted to withdraw the appeal before DBR decided it.  The Rack then filed an administrative appeal in Superior Court.  PBL moved to dismiss the Superior Court appeal arguing DBR had jurisdiction to hear the appeal.  The Rack then attempted to void its attempted withdrawal of the DBR appeal.  DBR subsequently issued an Order of Dismissal finding it lacked jurisdiction to hear the appeal.  The Rack filed a petition for writ of certiorari with the Supreme Court seeking a review of the PBL fine, which petition was denied.  The Rack recommenced its Superior Court appeal but added a count for declaratory judgment seeking a decision as to whether DBR or the Superior Court had jurisdiction to hear an appeal of the PBL fines. 

The Superior Court first found there was clear confusion as to whether DBR or the Superior Court had jurisdiction to hear such appeals and the issue was purely a legal one.  Accordingly, it would be appropriate for the Court to render a declaratory judgment.

The Court then confirmed that the interpretation of an regulatory statute by the administrative agency empowered to enforce it is entitled to "weight and deference."  This is also true when the agency is determining the scope of its statutory jurisdiction, citing the recent U.S. Supreme Court opinion, City of Arlington v. F.C.C., 133 S.Ct. 1863, 1871-73 (2013). 

The Court said there were two statutes that potentially gave DBR jurisdiction to hear such appeals.  One statute addresses decisions by local licensing boards to revoke or suspend a license.  DBR argued that this statute did not give it jurisdiction to hear appeals of fines.  The Court found this interpretation reasonable and well-supported by Supreme Court precedent.

However, the Court also found DBR had implied jurisdiction to hear appeals pursuant to a separate statute that grants it authority to impose fines upon licenses.  Moreover, there is well-established precedent that DBR has authority to supervise the alcohol beverage industry as a "superlicensing" body. 

The Court said DBR was not required to hold a de novo hearing respecting appeals of fines.  It has discretion to dismiss such appeals.  However, DBR must review the record and articulate and document a substantial, non-arbitrary rational for invoking its discretion to dismiss an appeal of fines.  Moreover, its exercise of discretion must be reasonable including a determination that the fine imposed does not amount to a "statewide interest."  Finally, DBR must ensure there is sufficient evidence in the record for the Superior Court to determine whether the fine imposed does not violate the Adminstrative Procedures Act. 

Since the record was not adequate for the Court to conduct that review, it ordered DBR to readjudicate The Rack's appeal of the PBL fines consistent with the Court's ruling.

The Rack, Inc. v. Providence Board of Licenses, P.C. No. 2011-5909 (R.I. Super. July 22, 2013) 

For information on our practice in this area, please see:  http://www.sfandllaw.com/Practice-Areas/Business-Commercial-Litigation.shtml

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