The Appeals Board’s formal summary of what happened

Other than the addition of more paragraph breaks and omission of footnotes and citations for readability, the following is a direct, complete and unedited  “cut and paste” from the Appeals Board’s decision that summarizes one of the ABC Bottlerock circumstances.

 

Appeals Board quotes are in red

 

Some specifics — such as the amounts paid, timing, exhibit details and other minutiae vary among the many licensees prosecuted.

 

However, when dealing with the tied-house issues, all of the Appeals Board’s decisions are almost identical, and use this exact language right down to punctuation errors.

 

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BEFORE THE ALCOHOLIC BEVERAGE CONTROL APPEALS BOARD OF THE STATE OF CALIFORNIA

AB-9515
File: 02-43754; Reg: 14080309

GRGICH HILLS CELLAR, dba Grgich Hills Estate
1829 Saint Helena Highway, Rutherford, CA 94573,
Appellant/Licensee
v.
DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL,
Respondent

Administrative Law Judge at the Dept. Hearing: Sonny Lo
Appeals Board Hearing: January 7, 2016 Sacramento, CA

ISSUED MARCH 28, 2016

Appearances:

Appellant: Rebecca Stamey-White and John W. Edwards, II of Hinman & Carmichael LLP as counsel for Grgich Hills Cellar, doing business as Grgich Hills Estate.

Respondent: Dean Lueders as counsel for the Department of Alcoholic Beverage Control.

FACTS AND PROCEDURAL HISTORY

 

Appellant’s type 02 winegrower license was issued on September 1, 1977. There is no prior record of Department discipline against the license.

 

On April 14, 2014, the Department filed a two-count accusation against appellant. The pertinent language of the tied-house charge within the accusation reads:

 

On or about February 1, 2013, respondent-licensee, by and through its officer(s), agent(s), or employee(s) did, directly or indirectly, furnish, give, or lend a thing of value, to wit: $20,000.00 sponsorship fee, to BR Festivals, LLC, of which Gabriel Meyers and Robert Vogt are managers and/or members, and who are also engaged in the operating, owning, or maintaining of an on-sale premises, namely: Uptown Theatre, LLC, which holds a type 41 on-sale beer and wine eating place license, in violation of Business and Professions Code Section 25500(a)(2).

 

At the October 23, 2014 administrative hearing, documentary evidence was received, and testimony was presented by Israel Hernandez, an agent for the Department; by Gabriel Meyers, a principal of Bottle Rock Festivals LLC; by Lewis Perdue, a journalist who reports on the wine industry; by Elizabeth Kelly Murray, wine club administrator and event coordinator at Grgrich Hills Estate; and by Violet Grgich, vice-president of operations and sales at Grgrich Hills Estate.

 

Following oral argument, the administrative law judge (ALJ) asked for closing arguments in the form of briefs, and the briefs were submitted. Thereafter, the Department issued its decision which determined that the charges had been proved and no defense had been established.

 

Appellant filed a Petition for Reconsideration, but it was denied.

 

The facts of this case inform and define the legal issues presented. Accordingly, we state the facts in some detail because regardless of whether a “narrow” or “broad” interpretation of the pertinent “tied-house” law is applied, the evidentiary supported facts make for the same outcome here.

 

A. The Bottle Rock Napa Valley Festival and Bottle Rock Festivals LLC

 

Bottle Rock Napa Valley 2013 (hereinafter, the “Festival”) was a music and entertainment festival that took place in Napa Valley between May 9, 2013 and May 12, 2013.

 

The Festival featured live music, live comedy, and food, wine, and beer, and was the brainchild of Gabriel Meyers and Robert Vogt. These two created Bottle Rock Festivals LLC (hereinafter, “BRF”) in 2012 to promote and execute the Festival. Both Meyers and Vogt were managers of BRF, but Vogt resigned from his duties in November 2013.

 

Meyers and Vogt sought financing for the Festival through sponsorships. Meyers, the chief marketing individual for BRF, made pitches for funding to the City of Napa, various private enterprises, and equity investors. He also solicited members of the wine industry and sold them sponsorship deals that included ticket packages and hospitality tents for the wineries to promote their product to festival-goers. In addition to Meyers’ efforts,

 

BRF hired independent contractors to solicit alcoholic beverage suppliers and other sponsors for the Festival. Lastly, given the anticipated amount of attendees to the Festival, multiple venues throughout Napa were needed to accommodate the crowds, and BRF sought agreements with said venues for food, wine, and music.

 

The sponsorship monies from all participants in the Festival were placed into a General Operating Account (hereinafter, the “General Account”). The funds in the General Account were used to pay the artists participating in the event as well as BRF’s other obligations as they came due.

 

All of the monies BRF received for the Festival were therefore commingled and, according to Meyers, it is not possible to “trace” where any sponsorship monies — including those paid by appellant (see below) — went with regard to BRF’s liabilities.

 

B. Uptown Theatre LLC

 

The Uptown Theatre (hereinafter, “Uptown”) is licensed by the Department with a retail on-sale beer and wine public eating place license (type 41). BRF rented Uptown as well as another venue, Copia, as venues for VIP “after parties” at the Festival.

 

Meyers testified he believes there was a rental contract between BRF and Uptown, although he never saw it.

 

BRF directed certain functions at Uptown both before and during the Festival. Specifically, BRF told Uptown which events would be held there and at which times. BRF also oversaw the entertainment to be featured at Uptown during the events.

 

Again, although Meyers did not know the exact contractual obligation, he testified he believes Uptown was paid the full rental amount for the use of the facility during the Festival.

 

When he was interviewed by Department agents, Vogt told them that alcoholic beverages were served at VIP “after parties” during the Festival, but no evidence was presented throughout the investigation or at the administrative hearing whether appellant’s wines were sold or available at Uptown.

 

At the time of the Festival, Uptown Theatre, LLC was comprised of three members: George Altamura, Sr., who owned a 46.433% interest; the Margaret E. Herman Credit Trust, which owned a 32.133% interest; and Premier Real Estate Investments LLC (hereinafter, “Premier”), which owned a 21.433% interest in Uptown.

 

Premier has numerous members, including Meyers, who has a 0.078% ownership, and the William T. Vogt Special Needs Trust (hereinafter, the “Vogt Trust”), which owns an 80.575% interest in Premier. The Vogt Trust is managed by Robert Vogt for his son.

 

C. Agreement between Appellant and BRF

 

The details of appellant’s sponsorship package were spelled out in the “Winery Sponsorship Contract” (hereinafter, the “Contract”) template BRF used for wineries participating in the Festival.

 

The Contract expressly identified certain venues to be used during the Festival. More specifically, the Contract stated:

 

“The Event shall consist of five days of music and comedy, from May 8, 2013, through May 12, 2013, in downtown Napa, California, at the Napa Valley Expo . . . , the Uptown Theatre . . . , and other venues to be determined.”

 

There were no amendments or modifications to the Contract concerning Uptown before or during the Festival.

 

Appellant did not check Uptown’s alcoholic beverage license status at any time because it did not participate in any events occurring there.  Violet Grgich testified that she was unaware that any events were expected to occur in licensed premises — that appellant was only participating in an event at the fairgrounds — that is, the Napa Valley Expo.

 

On or about February 1, 2013, appellant paid $20,000 to BRF for its sponsorship package. The sponsorship fee entitled appellant to specified benefits:

 

• Appellant was one of only sixty (60) featured wineries at the Festival, and its logo was placed in all media advertising and promoting the Festival.

 

• Appellant had the prerogative to sell its wines exclusively from a VIP hospitality tent through a Department-licensed caterer, Fish Market LLC, who purchased appellant’s wine and then sold it from appellant’s tent. Notably, appellant would not have had the opportunity to sell its wine in this manner at the Festival had it not purchased the sponsorship package.

 

• Appellant had access to the names, emails, Facebook accounts, and Twitter accounts of Festival-goers, which could then be utilized for appellant’s marketing efforts.

• Appellant received sixty (60) VIP 1-day passes for the Festival, valued at $599 each, and another sixty (60) 1-day passes, valued at $199 each, which were given to its employees.

• Appellant received two (2) All-Access “Cellar Rat” passes, which entitled the holders to access all VIP areas and Reserve events.

 

• Appellant was permitted to sell wine by the case or bottle for a 10% commission, and BRF indicated it would purchase up to $10,000 of appellant’s wine to sell at beverage stations throughout the Festival. There was no evidence presented that appellant exercised this particular entitlement.

 

• Appellant’s sponsorship provided it an “[o]pportunity to participate as presenting sponsors of VIP late night after-parties.” None of appellant’s representatives, however, attended these events. Also, appellant did not sponsor any late night after parties.

 

In all, appellant estimated the value of the package it received from BRF, including the VIP passes and “Cellar Rat” passes, was $54,000. Elizabeth Murray testified appellant wanted to sponsor the Festival in order to support Napa Valley and give visibility to a winery that has been operating since 1959.

 

In her view, the sponsorship money was for the VIP ticket package and the placement of appellant’s tent. She did not know how the funds appellant paid to BRF would be dispersed or utilized, and she never intended the sponsorship money to specifically benefit a retail licensee.

 

She did not, however, request an accounting from BRF, and was not concerned with alcoholic beverage licensing because all appellant was doing was buying tickets and arranging to have a booth. Appellant agreed to sponsor the Festival for the following reasons:

 

(1) it was a good marketing event to get appellant’s wine product in front of a younger demographic
— approximately 25,000 to 40,000 patrons according to the Contract;

 

(2) the Festival might help support the Napa community; and

 

(3) there was a charitable component for non-profit organizations that could possibly benefit from appellant’s support. It was not appellant’s intent to sell more wine through their procurement of the $20,000 sponsorship.

 

D. The Department’s Investigation

 

The Department investigated the Festival for potential tied-house violations. Agent Hernandez discovered the potential tied-house problem by conducting a Google search for Bottle Rock Festival. The search revealed that Vogt and Meyers were associated with BRF, and that they also had an ownership interest in Uptown.
Hernandez also searched the Department’s web-based License Query System — which is accessible to the public — as well as documents from the California Secretary of State and the Department’s internal database for licensee information, ABIS.

 

Hernandez’s research revealed that Vogt was the manager and attorney of record for Premier.

 

After the hearing, the ALJ issued his proposed decision determining that appellant violated section 25500, subdivision (a)(2) and section 25600, subdivision (a)(1). The Department adopted the proposed decision and imposed a penalty of fifteen days’ suspension, with all fifteen days stayed subject to one year of discipline free operation.

 

Appellant filed a timely appeal contending:

 

(1) the Department’s decision misapplied section 25500(a)(2);

(2) the Department’s discretion to apply section 25500(a)(2) is circumscribed by the First Amendment;

and

(3) the decision regarding section 25600(a)(1) is not supported by substantial evidence.