E & J Lounge Operating Co. v. City and County of HNL (ICA December 24, 2007)
Overruled by HSC.
Background. E & J Lounge applied for a liquor license w/ the HNL Liquor Commission. After holding a public hearing where neighbors of the lounge opposed the granting of a license, the LC denied the application. E & J Lounge appealed to the circuit ct. on the grounds that the public hearing was a “contested case” and that the other requirements of the Hawaii Administrative Procedures Act (HRS Ch. 91). The circuit court agreed and reversed the denial based on violations in HRS Ch. 91.
Specific Agency Statutes v. the HAPA. HRS Ch. 281 regulates the proceedings of the liquor commission and requires the commission to hold a public hearing to determine the merits of the application for a license. The public hearing comes with procedural requirements like notice to neighbors w/in a proscribed time. The more rigorous procedural requirements under HRS Ch. 91, on the other hand, apply only to the “contested case.” A “contested case” is an agency hearing that (1) is required by law and (2) determines the rights, duties, or privileges of specific parties. HRS § 91-1. A “contested case” is subject to judicial review. HRS § 91-14.
LC not Required to hold two Hearings. The ICA held that the Liquor Commission is not required to hold public hearings under HRS Ch. 281 and a contested case proceeding. First, no statute or law requires the LC to hold both. The ICA distinguished Town v. Land Use Comm’n, 55 Haw. 538, 524 P.2d 84 (1974), where the Hawai’i Supreme Court “determined that a contested-case hearing was required . . . in addition to the statutorily-mandated public hearing.” Unlike Town, according to the ICA, E & J Lounge has no property interest being determined. The ability to sell liquor is a privilege, not a right. Additionally, the Town court looked to legislative intent to see if the agency was exempted from the contested case proceedings. There was none in Town, but the ICA found such intent underlying HRS Ch. 281. Second, a contested case proceeding was not constitutionally required where there is no “property right” being determined. Again, a license is a privilege, and does not constitute a property right.
Contested cases Aren’t the only way to Judicial Review. HRS § 91-14(a) provides judicial review for determinations of contested cases and that “nothing in this section shall be deemed to prevent resort to other means of review, redress, relief, or retrial de novo, including the right of trial by jury, provided by law.” Id. The ICA held that the literal language prohibits judicial review from the denial of a liquor license. Nevertheless, the Hawai’i Supreme Court has found public hearings subject to HRS § 91-14 review. See Singleton v. Liquor Comm’n, County of Hawai’i, 111 Hawai’i 234, 140 P.3d 1014 (2006) (granting of liquor license in compliance w/ HRS Ch. 281 subject to review); Mahuiki v. Planning Comm’n, 65 Haw. 506, 654 P.2d 874 (1982); East Diamond Head Ass’n v. Zoning Bd. of Appeals, 52 Haw. 518, 479 P.2d 799 (1971).
Judge Nakamura’s Dissent. According to Judge Nakamura, although there are “cogent” reasons why the LC should not be subject to the procedural requirements of the HAPA, the HSC in Singleton implicitly held that the public hearing purs. to HRS Ch. 281 is a “contested case.” Thus, the hearing held by the HNL LC was the “contested case” hearing and there was no choice but to comply with the proceedings of the HAPA. Judge Nakamura believed there’s simply no way around it: the City and County conceded that there was a right to appeal the decision and the intervenors—E & J Lounge’s neighbors—urged the ICA to simply ignore Singleton. Judge Nakamura also quoted the legislative history of the HAPA back in 1961: “[t]here has been no real showing why the liquor license application should be excluded [from the definition of a contested case].”
Two Approaches. The majority took the approach that the public hearing under HRS Ch. 281 is not a contested case, and that the LC is not required to hold one in addition to the public hearing. This means that HRS Ch. 91 is inapplicable and that only HRS Ch. 281 controls. This leads to the tough spot. HSC precedent shows that there are agency hearings that are not contested cases, but are subject to HRS § 91-14 review. In the future, it could mean that an agency hearing could fall into one of three types: the true contested case, the public hearing subject to HRS § 91-14 review, and the agency hearing where no review is warranted.
Judge Nakamura doesn’t think there are three kinds. The HSC cases don’t create a third type, but hold that when there is judicial review of the agency hearing, then the hearing itself falls w/in the definition of the “contested case.” This means that in addition to judicial review, there are the burdensome procedural requirements of HRS Ch. 91. Of course this approach has its problems too. The contested case must determine a right or privilege. What does it mean to “determine”? Surely if the license is suspended, the privilege has been affected. But if the license is never granted, then no privilege is conferred. Is that a “determination”? The other issue is the friction between specific statutes and Ch. 91. Perhaps the specific statutes in HRS Ch. 281 knock out Ch. 91 provisions speaking to the same subject (e.g. notice of the hearing), much to the chagrin of gov’t agencies.