On appeal from a Final Decision of the Division of Alcoholic Beverage Control.
The opinion of the court was delivered by: Carchman, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Carchman, Lihotz and Ashrafi.
While one usually obtains authorization to sell alcoholic beverages by way of a municipality-issued license, N.J.S.A. 33:1-12.14, when the sales will take place on State property, authorization to sell is obtained by way of a special concessionaire permit issued by the Director of the New Jersey Division of Alcoholic Beverage Control (ABC). N.J.S.A. 33:1-42. The requirements for obtaining a special concessionaire permit are (1) the State or its political subdivision has entered into a contract with the applicant authorizing the sale of alcoholic beverages on the property; (2) the property on which the sale will take place is State property; and (3) the applicant has convinced the Director that it is fit to serve alcoholic beverages. N.J.A.C. 13:2-5.2.
In this appeal, the New Jersey Restaurant Association (NJRA), Park and Orchard Restaurant, Taos Restaurant, Candlewyck Diner, Tredici Restaurant and The Landmark (collectively appellants), all of whom hold municipally-issued plenary liquor licenses, challenge the decision of the Director and the ABC granting an application submitted by Benihana Meadowlands Corp. (Benihana) for a special concessionaire permit, which authorized Benihana to sell alcoholic beverages for on-site consumption within its restaurant. The property on which Benihana proposed to operate its restaurant will be located within Xanadu, the entertainment complex within the Meadowlands Sports Complex, which is owned by the New Jersey Sports and Exposition Authority (NJSEA), a political subdivision of the State of New Jersey. NJSEA had leased the Xanadu real estate to Mills/Mack-Cali (the developer), who then subleased a portion of the building to Benihana.
We conclude that the requirements of N.J.A.C. 13:2-5.2 were met, and we affirm the final decision of the Director and the ABC.
These are the facts adduced from the record. On September 7, 2007, Benihana submitted to Jerry Fischer, Director of ABC, its application for a special concessionaire permit followed by the requisite service on appellants together with published notice in The Bergen Record.
Appellants filed timely notice with Fischer objecting to Benihana's application for the following reasons: 1) Benihana did not satisfy the criteria for receiving a special concessionaire permit because (a) it had not entered a bona fide contract with NJSEA, authorizing the sale of alcoholic beverages; (b) the building in which Benihana would operate was not a public building because it was owned by the developer; and (c) the seventy-five year lease between the developer and NJSEA effectively transferred ownership of the property to the developer; 2) N.J.A.C. 13:2-5.2 was inconsistent with the policy and terms of the ABC Act, and the regulation is invalid; 3) issuing Benihana a special concessionaire permit would (a) "violate New Jersey law concerning municipal control over the retailing of alcoholic beverages", (b) amount to the issuance of a plenary license, which only municipalities may issue, and (c) improperly increase the amount of plenary licenses within the municipality; and 4) issuing Benihana a special concessionaire permit would violate appellants' due process, equal protection and property rights.
Appellants requested that Fischer refer the matter to the Office of Administrative Law (OAL) for a plenary hearing before an administrative law judge (ALJ), claiming that the matter amounted to a "contested case." The Administrative Procedure Act (APA) defines a "contested case" as "any licensing proceeding, in which the legal rights . . . or other legal relations of specific parties are required by constitutional right or by statute to be determined . . . after opportunity for an agency hearing[.]" N.J.S.A. 52:14B-2(b). Additionally, appellants claimed that an ALJ should hear the case because it involved constitutional issues outside of Fischer's area of expertise.
After Fischer conducted a conference with the interested parties, appellants asked that he recuse himself, claiming that he was biased in favor of the developer. In so contending, they relied on a June 23, 2005 advisory opinion that Fischer had issued, which stated that because Xanadu was located on state property, Fischer would entertain applications for special concessionaire permits submitted by Xanadu tenants.
NJRA, one of the appellants in this case, as well as Hartz Restaurant Association (Hartz), had appealed that advisory decision. See In re Determination by Dir. of the Div. of Alcoholic Beverage Control, 392 N.J. Super. 577, 580 (App. Div. 2007) (hereinafter In re Xanadu Permits). We declined to entertain the appeal, concluding that generally "courts in New Jersey do 'not render advisory opinions or function in the abstract.'" Id. at 581 (quoting Crescent Pk. Tenants Ass'n v. Realty Equities Corp., 58 N.J. 98, 107 (1971)). However, we noted that we found "no fault with the Director's assertion of subject matter jurisdiction as a way of beginning the evaluative process, but the underlying issues may not proceed to final resolution on the administrative level before the objections raised by appellants receive an appropriate hearing." Id. at 583-84.
Following the conference, appellants submitted to Fischer a statement of their objections and the facts implicated by the objections. They advanced the same objections as previously noted and repeated their request for a transfer to the OAL. They also added a claim that Fischer's June 2005 advisory opinion was improperly issued because Fischer had failed to comply with N.J.A.C. 13:2-36.1(a), which provides that the ABC Director should issue an advisory opinion only when the matter relates to "issues not previously articulated by the Division or involves a substantial question of general applicability." They later again wrote to Fischer and requested that he recuse himself, arguing Fischer's "demonstrated commitment" to his prior findings and conclusions was "inappropriate as a matter of law and provide[d] an independent basis for" his recusal.
Fischer issued an order denying appellants' request for recusal. He explained that none of the reasons that appellants had advanced in support of their request had merit, and he had no pecuniary interest in Benihana's receipt of a special concessionaire permit. Further, Fischer said, the authority to decide contested cases was vested in the agency head, so even if he referred the matter to the OAL, an ALJ would merely issue a recommendation, which Fischer could reject.
He, thereafter, issued a scheduling order that requested additional briefing on whether N.J.A.C. 13:2-5.2 was a valid regulation and whether the Director of the ABC had the statutory authority to grant a special concessionaire permit. He also preliminarily decided that the matter was not a contested case; however, he gave appellants the opportunity to further brief whether Benihana's application implicated any of appellants' constitutionally protected rights and elevated the dispute to a contested case. Assuming that his preliminary decision was correct, Fischer said that he would not transfer the matter to the OAL, and that he would not allow discovery because the right to be heard in a non-contested case did not include such a right.
After receipt of the parties submissions, Fischer entered a final pre-hearing order. In that order, he determined that N.J.A.C. 13:2-5.2 was a valid regulation, and that he had the authority to issue a special concessionaire permit. He found that Hartz had failed to establish a constitutional right to a hearing and again rejected the request to transfer the matter to the OAL as a contested case.
Consistent with his findings in the advisory opinion, Fischer found that the property on which Benihana would operate was owned by a public entity, and that the seventy-five-year lease between NJSEA and the developer did not divest NJSEA of its ownership rights in the property. Further, he found that Benihana had entered into a valid contract with NJSEA, authorizing the sale of alcoholic beverages on the property, and Benihana had satisfied the contract and state-property criteria for receiving a special concessionaire permit.
He then scheduled a hearing at which time evidence could be presented on the last remaining issue - whether Benihana was qualified to receive a special concessionaire permit. Appellants did not appear at the hearing. The only objector who appeared was Hartz.
By order dated December 18, 2008, Fischer granted Benihana's application for a special concessionaire permit, finding that it had satisfied the criteria for receiving a permit, and that it was fit to sell alcoholic beverages. This appeal followed.
On appeal, appellants challenge the issuance of the permit and raise the following issues: (1) Fischer should have recused himself from deciding whether to grant Benihana's application for a special concessionaire permit because he was biased; (2) the hearing that Fischer provided appellants was inadequate to protect appellants' property interests in their liquor licenses and did not comply with our decision in In Re Xanadu Permits, as he stated he would entertain applications for special concessionaire permits submitted by Xanadu tenants; (3) Benihana did not satisfy the criteria for receiving a special concessionaire permit; and (4) issuing Benihana a special concessionaire permit violated the policy of the Alcoholic Beverage Control Act, N.J.S.A. 33:1-1 to -97. We address the issues seriatim.
Appellants contend that Fischer erred in denying their request for recusal, reasoning that Fischer was biased and unable to impartially decide the issues in this case.
In addressing this issue, we consider the powers and responsibilities of the Director. The Director of the ABC is charged with the duty "to supervise the manufacture, distribution and sale of alcoholic beverages in such a manner as to fulfill the public policy and legislative purpose of" the ABC Act. N.J.S.A. 33:1-3. One of the purposes is "[t]o strictly regulate alcoholic beverages to protect the health, safety and welfare of the people of this State." All other purposes stem from this fundament. See N.J.S.A. 33:1-3.1(b) (listing nine other purposes).
Among the powers that the Director may exercise in carrying out the Act's policy and purpose are the powers to adopt rules and regulations and to authorize the sale of alcoholic beverages on property owned or controlled by the State or its political subdivisions, subject to those rules and regulations. N.J.S.A. 33:1-39 and -42.
In furtherance of this authority, the Director adopted N.J.A.C. 13:2-5.2. This regulation establishes the criteria to obtain a special concessionaire permit. In relevant part, the regulation provides:
(a) Application for a special concessionaire permit may be made to the Director by any individual, partnership, corporation, limited liability company, or other type of legal entity who has entered into a contract with the State of New Jersey, or any political subdivision thereof, whereby said person or organization is authorized to sell alcoholic beverages for immediate consumption in any public building or on any property owned by or under the control of the State of New Jersey or any political subdivision thereof. Such permit may also authorize the sale of alcoholic beverages in original containers for off-premises consumption, provided the applicant, with the consent of the governmental agency, establishes to the satisfaction of the Director that there is good cause for such sales. [Ibid.]
Within ten days of filing the application, the applicant must post public notice of its filing. N.J.A.C. 13:2-5.2(d). Any party objecting to the application is entitled to a hearing upon submission of a written objection to the Director:
Upon timely receipt of a duly signed written objection to the issuance of a special concessionaire permit, the Director will afford a hearing to all parties and notify the applicant and the objector of the date, hour and place thereof. No hearing need be held if no objection shall be lodged, but the application shall not be denied without first affording the applicant an opportunity to be heard. [N.J.A.C. 13:2-5.2(f).]
If the objection raises issues sufficient to designate the matter as a "contested case," the Director may refer the matter to the OAL for a hearing before an ALJ. N.J.S.A. 52:14B-10;
N.J.S.A. 52:14F-7a. However, such referral is discretionary. In re Application of County of Bergen, 268 N.J. Super. 403, 413 (App. Div. 1993) (explaining that the agency head has the discretion to refer a case to the OAL for a hearing). The APA defines "contested case" as a proceeding, including any licensing proceeding, in which the legal rights, duties, obligations, privileges, benefits or other legal relations of specific parties are required by constitutional right or by statute to be determined by an agency by decisions, determinations, or orders, addressed to them or disposing of their interests, after opportunity for an agency hearing, but shall not include any proceeding in the Division of Taxation, Department of the Treasury, which is reviewable de novo by the Tax Court. [N.J.S.A. 52:14B-2(b).]
If the Director exercises his or her discretion and refers a contested case to the OAL, an ALJ holds a trial-like hearing on the matter. N.J.S.A. 52:14B-10. At the close of the hearing, the ALJ issues a recommendation to the agency head on findings of fact and conclusions or law. N.J.S.A. 52:14B-10(c) and (d). The ALJ's recommendation has no independent force and effect, as the agency Director "has the exclusive right to decide" the case. In re Kallen, 92 N.J. 14, 20 (1983). The statute provides:
[T]he agency head may reject or modify [the ALJ's] findings of fact, conclusions of law or interpretations of agency policy . . ., but shall state clearly the reasons for doing so. The agency head may not reject or modify any findings of fact as to issues of credibility of lay witness testimony unless it is first determined from a review of the record that the findings are arbitrary, capricious or unreasonable or are not supported by sufficient, competent, and credible evidence in the record. [N.J.S.A. 52:14B-10(c).]
We may review the agency head's decision, and when doing so, we apply a deferential standard of review. In re Application of County of Bergen, supra, 268 N.J. Super. at 410.
If we are "satisfied after [our] review that the evidence and the inferences to be drawn therefrom support the agency head's decision, then [we] must affirm even if [we] feel that [we] would have reached a different result itself." In re Tenure Hearing of Young, ___ N.J. ___, ___ (2010) (slip op. at 41) (quoting Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 588 (1988)).
Appellants argue that Fischer should recuse himself from the case and allow an ALJ to decide the matter because Fischer demonstrated that he was unable to remain impartial in reviewing Benihana's application as evidenced by: (1) the absence in Fisher's advisory opinion of the criteria for issuing an advisory opinion contained in N.J.A.C. 13:2-36.1(a), which limits advisory opinions to "issues not previously articulated by the Division" and to "question[s] of general applicability"; (2) satisfaction of neither criterion in N.J.A.C. 13:2-36.1(a); (3) Fischer's clear continued support for the conclusions and findings in his June 23, 2005 advisory opinion; and (4) Fischer's refusal to refer the matter to an ALJ, despite the fact that occasionally in the past applications for special concessionaire permits had been referred to ALJs.
Fischer rejected appellants' request to refer the matter as without basis. With respect to N.J.A.C. 13:2-36.1(a), Fischer said that one of the criteria in that regulation was that the matter involve issues not previously articulated by the Division. While quoting NJRA's appellate brief that his advisory opinion "represent[ed] a novel view of the regulation which apparently was never adopted by the agency before the case at issue", he concluded that no one questioned that the issue was novel.
Fischer did not dispute his continued support of his advisory opinion. While he acknowledged that two years had passed since he issued the advisory opinion, no relative facts had changed. He still believed that special concessionaire permits were available within Xanadu, so long as the applicants established that they were fit to receive the permits and any objectors were given an opportunity to be heard. Finally, Fischer explained that to "expedite the process," he, and not an ALJ, should consider Benihana's application. He said:
Not only do I have almost eight years of experience as Director of the ABC, I am familiar with the history of the issuance of Special Concessionaire Permits by the agency. I must evaluate the exigencies and time constraints of this project and the commensurate public interest demands by resolving disputes in a reasonable time frame. Whether previous ABC Directors decided to transfer matters to the OAL is irrelevant. This is not a basis for recusal.
Even if the matter could be referred to the OAL as a contested case, Fischer said, he would still be the person who would render a final decision in the matter because "an agency head has the exclusive authority to decide contested cases." Application of County of Bergen, N.J. for Approval to Dissolve Bergen County Utils. Auth., 268 N.J. Super. 403, 414 (App. Div. 1993)). He concluded that there was no basis for appellants' request that an ALJ decide the matter.
On appeal, appellants maintain their argument. They contend that Fischer's issuing the advisory opinion - at the request of the developer - without first addressing the requirements in N.J.A.C. 13:2-36.1(a) "calls into question the possible bias of the Director in favor of the Developer." Appellants underscore that in the past the Director referred contested cases to the OAL for a hearing before an ALJ and ...