Appeals Board Opinion Tears Into ABC and ALJ on Tied-House Rules, Schools Them on The Differences Between Evidence and Speculation

The following excerpts (in red) from the Appeals Board’s opinions exemplify its sharp criticism of the ABC and the ALJs in the 2013 Bottlerock tied-house cases.

These excerpts are a sample, but not a complete compendium of all the Board’s extensive negative comments. Appeals Board quotes are in red

Bold, italic emphasis has been added as well as underlines and additional paragraph breaks. Citations and footnotes have been omitted for readability.

Otherwise these are complete and unedited excerpts from the Appeals Board’s opinions.

Some footnotes and citations have been omitted as well for readability. This article is lengthy because each of the Appeal’s Board’s opinions needs adequate context.

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De minimis slippery slope: “Recognized in logic as a fallacy”

Further, appellant argues that the amount of its “commingled” contribution with other sponsors to Uptown that benefitted, “directly or indirectly,” the BRF principals was so de minimis that it should be excused.

… appellant’s contribution to Uptown was $64.29, out of which the Vogt Trust’s share was $11.10 and Meyers’ share was just over one cent

At oral argument, the Department responded that section 25500(a)(2) does not expressly mention excusing or excepting from its ambit any de minimis financial violation and, were the Board to recognize one, this could lead to groups of suppliers aggregating their trifling (but otherwise illegal) payments to reap the benefits of a tied-house arrangement and avoid the legal consequences.

This Board recognizes that section 25500(a)(2) does not mention de minimus financial benefits as a factor deserving of consideration in the context of tied-house violations….

Moreover, the Department’s stated fear of future “aggregation” ills that may follow if actual de minimis benefits are weighed and considered in tied-house determinations is nothing more than a “slippery slope” argument: an attempt to discredit a proposition by arguing that “its acceptance will undoubtedly lead to a sequence of events . . . which are undesirable.” (Almossawi, An Illustrated Book of Bad Arguments (2013) p. 36.)

This is recognized in logic as a fallacy and should not be a basis in law for drawing a “bright line” beyond which this Board shall never deviate.

… we find that the decision of the Department misapplies the spirit and letter of section 25500(a)(2). …

Altogether, the Department’s decision is not supported by substantial evidence and must be reversed.

No evidence to support Thing of Value

On or about February 19, 2013 . . . did, directly or indirectly, furnish, give, or lend a thing of value, to wit: $20,000.000 sponsorship fee, to BR Festivals, LLC, of which Gabriel Meyers and Robert Vogt are mangers [sic] 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).

Further, the Department argues that Meyers and Vogt were engaged in the ownership of the Uptown Theater because Vogt managed an LLC named Premier Real Estate Investments and Meyers owned a portion of said LLC. Premier Real Estate Investments LLC owned nearly 25% of the Uptown Theater. Thus, both Vogt and Meyers were engaged [involved in the activity] of owning Uptown Theater.

The Board is not persuaded that the evidence supports these allegations.

Control and ownership absurdity

In addition, the Board’s interpretation avoids the absurd result about which appellant warns us – if the Department were able to enforce section 25500(a)(2) in this manner, a winegrower who enters into an otherwise legal and valid contract with a promoter for an event such as the Festival would be subject to liability under the statute if one of the promoter’s principals had invested in a mutual fund that holds stock in an large chain on-sale retail licensee.

It is difficult to imagine the diligence required by the winegrower to discover the tied-house issue in this hypothetical; nevertheless, according to the Department’s reasoning, said winegrower’s license would be subject to discipline.

Now, the Department may well respond to this argument by claiming that, in this hypothetical situation, the “owner” of the licensed establishment has no control over the establishment whatsoever.

This argument would carry water except there is no evidence in the record apart from BRF’s direction of the activities at the Festival as to how Uptown was run and who was actually running it.

This cannot be the result intended by the Legislature when it enacted section 25500(a)(2).

Administrative Law Judge’s decision “A complete mystery”

How the ALJ managed to surmise, based on Meyers’ expressly uncertain testimony — which, notably, also calls into doubt Uptown’s own compensation — that Uptown was fully compensated for its participation in the Festival while Copia was not, is a complete mystery.

What is clear is that a finding that Uptown was fully compensated because of Vogt and Meyers’ interest in Premier — which is subsequently used as a basis for a determination that appellant violated section 25500(a)(2) — is not supported by any evidence in the record.

Wine Executive News subscribers please click here to read this complete 2,748-word article.

Also In This Article:

The full text of the following sections is available to premium subscribers of Wine Executive News.

• The ABC’s “paltry record”

• ABC’s “curious” determinations “grounded in speculation”

• ABC accusation’s “Utter lack of evidence”

• School is in session on LLCs: ABC & AJL earn an “F”

• Owning LLC shares does not prove or imply control

• Appeals Board schools ABC on word definitions and diagramming sentences

• ABC uses Merriam Webster Online Dictionary as a weapon, scores own goal.

• The ALJ’s “Troubling” position on LLC control

• Appeals Board Dismisses the ALJ statements as lacking evidence.

• “No Evidence” to prove ALJ’s subterfuge concerns
  

 

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More examples of  these kinds of comments can be found in the complete texts of the ABC Appeals Board decisions available to Wine Executive News premium subscribers at the links, below.

• Freixenet Sonoma Caves, penalty: license suspension for 15 days, stayed subject to one year’s discipline-free operation by the licensee. Tied-house charges reversed by the Appeal’s Board. Sunday sales issue “remanded to the department for reconsideration in light of this opinion.”.
• Grgich Hills Estate, penalty: license suspension for 15 days, stayed subject to one year’s discipline-free operation by the licensee. Reversed by the Appeal’s Board.
• Silver Oak Cellars, penalty: license suspension for 10 days, stayed subject to one year’s discipline-free operation by the licensee. Reversed by the Appeal’s Board.

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