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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Godfrey v. State, Dept. of Community & Economic Development (11/23/2007) sp-6203
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| RICHARD GODFREY, d/b/a | ) |
| MENDENHALL VALLEY TESORO, | ) Supreme Court No. S- 11894 |
| ) | |
| Appellant, | ) Superior Court No. 1JU-04-375 CI |
| ) | |
| v. | ) O P I N I O N |
| ) | |
| STATE OF ALASKA, DEPART- | ) No. 6203 November 23, 2007 |
| MENT OF COMMUNITY AND | ) |
| ECONOMIC DEVELOPMENT, | ) |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, First Judicial District,
Anchorage, Patricia A. Collins, Judge.
Appearances: Paul M. Hoffman, Robertson,
Monagle & Eastaugh P.C., Juneau, for
Appellant. Cynthia C. Drinkwater, Assistant
Attorney General, Anchorage, and David W.
M rquez, Attorney General, Juneau, for
Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
EASTAUGH, Justice.
MATTHEWS, Justice, with whom FABE, Justice,
joins, dissenting.
I. INTRODUCTION
The State of Alaska, under authority of AS 43.70.075,
administratively suspended Richard Godfreys authority to sell
tobacco for sixty-five days and imposed civil fines because two
of his employees had been convicted under AS 11.76.100(a)(1) of
negligently selling cigarettes to minors. The question here is
whether it was a denial of Godfreys due process rights to impose
these civil penalties against Godfrey without permitting him to
dispute in the administrative proceedings whether his employees
had been negligent. Because even a conviction by plea satisfies
the licensing statute and because Godfrey could challenge in the
administrative proceedings whether the employees had in fact been
convicted or had acted within the scope of their employment, we
conclude that Godfreys due process rights were not violated.
II. FACTS AND PROCEEDINGS
On February 20, 2002, a woman under the age of nineteen
working with the Juneau Police Department purchased a pack of
cigarettes at Mendenhall Valley Tesoro, a gas station and
convenience store owned by Richard Godfrey, d/b/a Mendenhall
Valley Tesoro.1 The clerk who made the sale was Michael Ratzat.
The sale was observed by a Juneau Police Department officer who
cited Ratzat for violating AS 11.76.100(a), which makes it an
offense to negligently sell cigarettes to minors.2 As a
consequence of the citation, Godfrey accepted Ratzats
resignation. Ratzat pleaded guilty and was therefore convicted
of violating AS 11.76.100(a)(1) and fined $200. When Ratzat was
cited he stated that he did not check the identification of the
buyer because he recognized her and thought he had carded her on
a prior occasion.
A similar sale took place on July 28, 2002. The sales
clerk was Julia Laurenzana. Laurenzana looked at the purchasers
identification, which accurately revealed him to be under age.
Nonetheless Laurenzana sold him cigarettes. The Juneau Police
Department officer who observed the sale issued her a citation
for violating AS 11.76.100(a)(1). Laurenzanas employment was
terminated. She pleaded no contest to the citation and was
therefore convicted of violating AS 11.76.100(a)(1) and fined
$300.
The Alaska Department of Community and Economic
Development gave Godfrey notice that it would suspend the tobacco
endorsement to his business license for twenty days and impose a
civil penalty of $300 because of Ratzats conviction, and would
impose an additional suspension period of forty-five days and a
civil penalty of an additional $500 because of Laurenzanas
conviction. This notice marked the initiation of proceedings
under AS 43.70.075, which provides that if either the licensee or
his employee has been convicted of violating AS 11.76.100, the
endorsement will be suspended and civil penalties will be
imposed.3 Godfrey requested an administrative hearing. Two
hearings were conducted, one for each sale. If an employee of
the licensee has been convicted of violating AS 11.76.100, AS
43.70.075(m)(1) limits the questions at the license suspension
hearing to whether the employee was convicted of violating AS
11.76.100 while acting within the scope of the . . . employment.4
Before the first suspension hearing Godfrey moved to
dismiss the suspension proceedings, claiming that AS 43.70.075(m)
is unconstitutional because it denies employers a full and fair
hearing as required by due process. Godfrey argued that
[t]hrough application of statutory collateral estoppel,
respondent is never given a full and fair hearing on whether its
clerk negligently sold tobacco to a person under the age of 19,
[or] whether there was entrapment.5 The hearing officer denied
the motion on the ground an agency, as distinct from a court,
lacks authority to rule that a statute is unconstitutional. At
the outset of the first evidentiary hearing, the hearing officer
ruled that he would make no finding inconsistent with the
employees conviction for the offense but that Godfrey could make
a record relating to his proposed defenses disputing that the
conviction was factually or legally supportable. At the
conclusion of each hearing, the hearing officer found that the
employees were acting within the scope of their employment when
they sold tobacco to minors and that they had been convicted of
violations under AS 11.76.100. The hearing officer therefore
recommended a cumulative suspension period of sixty-five days and
a civil fine totaling $800. The commissioner accepted these
recommendations.
Godfrey appealed to the superior court, which affirmed.
He now appeals to us.
III. DISCUSSION
A. Standard of Review
Whether there was a violation of Godfreys right to due
process is a question of law to which we apply our independent
judgment.6 Likewise, [w]hether a statute violates the Alaska
Constitution is a question of law, which we review de novo,
adopting the rule of law that is most persuasive in light of
precedent, policy, and reason.7
B. Primary Arguments on Appeal
On appeal Godfreys main argument is that his due
process rights were violated because AS 43.70.075 requires
suspension of his tobacco endorsement upon his employees
convictions of negligently selling cigarettes to minors, and gave
Godfrey no opportunity to be heard on his contention the
convictions were not factually or legally supportable.
Contending that suspension would result in more than $14,000 in
lost profits, in addition to the $800 civil fine, he argues that
subjecting him to sanctions of this magnitude
solely because an employee was found guilty
of a violation in a summary proceeding is
offensive to the due process of law. The
license holder is given no opportunity
whatsoever to dispute whether any law was
actually violated. The license holders
interests are not represented at the summary
criminal proceeding, let alone by someone
with the same interests who is a party.
Godfrey concludes that [i]t is a violation of due process for a
judgment to be binding on a litigant who was not a party or a
privy and therefore has never had an opportunity to be heard.8
The state argues in response that the $300 criminal
fine potentially assessable against employees for the offense of
negligently selling tobacco to minors gives employees sufficient
incentive to contest citations under AS 11.76.100. The state
relies on Godfreys testimony that $300 is a lot of money to these
people sometimes. Considering that the average hourly wage is
$8.00-8.50, the state contends that $300 is almost one weeks
gross pay for a clerk working thirty-five to forty hours a week.
It therefore asserts that clerks have a significant incentive to
contest the criminal charge if they have a basis for doing so.
The state concludes that if clerks do not contest the charges it
is more likely because they do not have a viable defense, not
because they do not have the funds to hire counsel, as Godfrey
asserts. Furthermore, the state notes that the statute requires
a conviction to trigger a suspension. According to the state,
[r]equiring a conviction means that the employee who [is
convicted] . . . has had a right to trial, a right to confront
and question witnesses, a right to subpoena witnesses on his or
her behalf, and [that] the state has had to prove the elements of
AS 11.76.100 beyond a reasonable doubt. This means, according to
the state, it is not unfair to use employee convictions against
licensees because any risk that employee convictions would be
factually or legally improper is purely hypothetical.
The state also argues that AS 43.70.075 is
constitutional because the governments significant interest in
protecting the health of its citizens by regulating tobacco
products outweighs an individuals private economic interest and
the risk of erroneous deprivation of the private interest.
Finally, the state asserts that Godfrey presented no evidence at
the administrative hearings concerning the defenses he contended
he should be able to raise, namely entrapment and absence of
negligence. It follows, the state argues, that even if these
defenses are legally available, this case can be affirmed for
lack of evidence supporting the would-be defenses.
In essence, then, the main dispute is whether the
statute and the procedure the department followed deprived
Godfrey of due process of law because the statute will cause him
a large financial loss without giving him a fair opportunity to
dispute facts that he thinks are inherently relevant.
C. The Licensing Statute
The nature of a licensees exposure to a civil penalty
under AS 43.70.075(d) is not obvious. The superior court appears
to have characterized it as strict liability. Comparing AS
43.70.075 to our holding in Alesna v. LaGrue,9 the superior court
determined that AS 43.70.075 imposes strict liability on
employers for the sale of tobacco to minors by employees acting
in the scope of employment. On appeal, as it did below, the
state seems to characterize the statute as imposing vicarious
liability, arguing that AS 43.70.075 imposes vicarious liability
for mandatory penalties on the retailer based on its employees
illegal acts. According to the state, imposing vicarious
liability under this statute is consistent with how other
jurisdictions have regulated licensees who sell or distribute
dangerous products. Godfrey, observing that the statute does not
impute the employees acts to the licensee or state that the
licensee is strictly liable, characterizes it as unique because
it deprives him of property based entirely on a third persons
criminal conviction.
It is not necessary in this case to distinguish
precisely between the possible theories of civil liability for
violations based on a conviction of the licensees employee. The
initial question is whether the state has the power to impose
such a penalty without giving the license holder an opportunity
to dispute the criminal fault of the employee who has been
convicted of negligently selling tobacco to a minor. The
statute, AS 43.70.075, does not specify a theory of liability.
It simply provides that licensing action is to be taken if the
licensees employee was acting within the scope of employment and
was convicted under AS 11.76.100. Alaska Statute 43.70.075(m)
permits the licensee to dispute whether the employee was acting
within the scope of employment and whether there was a
conviction; nothing in section .075 implicitly or explicitly
makes the issue of the employees negligence material in the
licensing proceeding; only the employees conviction and
employment status are relevant. The text of subsection
.075(m)(1) makes it immaterial whether the conviction was by plea
or judicial finding.10 Alaska Statute 43.70.075 simply requires
proof of conviction, and does not require, or provide for, a de
novo trial or retrial regarding the employees negligence. It is
true that there must be a finding of negligence for a conviction
under AS 11.76.100(a)(1) based on a judicial finding. But a
conviction under AS 11.76.100(a)(1) can alternatively be based on
a guilty plea or a plea of nolo contendere. Alaska Statute
43.70.075(m)(1) authorizes licensing penalties even if the
conviction is based on a plea, and not on a judicial finding.
Thus, the question here is essentially whether due
process requires that the license holder be allowed in the
licensing proceeding to challenge the employees criminal fault.
D. Godfreys Due Process Was Not Violated by the Statute.
A tobacco endorsement is a valuable property interest.
Like liquor licenses and other types of business enterprise
licenses, it is protected by the due process clause of the Alaska
and United States Constitutions.11 Due process of law thus
entitles the holder of an endorsement permitting the sale of
tobacco products to a meaningful hearing before the endorsement
may be removed or suspended.12 Considerations of fundamental
fairness guide our determination of what constitutes a meaningful
hearing.13
To determine what due process requires in particular
disputes we have adopted the sliding scale set out by the United
States Supreme Court in Mathews v. Eldridge.14 We will consider:
First, the private interest that will be
affected by the official action; second, the
risk of an erroneous deprivation of such
interest through the procedures used, and the
probable value, if any, of additional or
substitute procedural safeguards; and
finally, the Governments interest, including
the function involved and the fiscal and
administrative burdens that the additional or
substitute procedural requirement would
entail.[15]
The sale of tobacco products is heavily regulated
because tobacco has hazardous impacts on public health.16 These
impacts are especially great when tobacco products are sold to
minors. In cases involving heavily regulated activities and
commerce in hazardous substances, we have consistently recognized
that administrative sanctions may be imposed without a finding of
intentional or even negligent misconduct.17 The sale of tobacco
products readily falls within this category of commerce.
The criminal provision pertinent here, AS
11.76.100(a)(1), undeniably punishes only sellers who are
negligent.18 Yet the absence of negligence hardly transforms the
act of selling tobacco to a child into lawful conduct which
cannot be regulated. To the contrary, because the criminal code
always bars unincarcerated minors from knowingly possessing
tobacco,19 any sale to a minor, even a non-negligent sale, abets
an unlawful act, regardless of whether the seller could be
convicted of an offense punishable under the criminal code. And
because even non-negligent underage sales cause public harm and
abet unlawful conduct, the state will always have a strong and
legitimate administrative interest in holding individuals
licensed to sell tobacco products strictly accountable for
underage sales, regardless of whether the criminal code
classifies a particular sale as a punishable offense.
Alaska Statute 43.70.075(d) strives to enforce the
states strong interest in preventing all underage sales by
holding licensees liable for any such sale, whether negligent or
not. The clear text of subsection .075(d) unequivocally requires
the department to suspend an endorsement based on proof of an
employees conviction under AS 11.76.100; it does not require
proof of the employees actual guilt:
If a person who holds an endorsement
issued under this section, or an agent or an
employee of a person who holds an endorsement
issued under this section acting within the
scope of the agency or employment, has been
convicted of violating AS 11.76.100 . . . the
department shall suspend the endorsement for
[the applicable period specified in
paragraphs .075(d)(1)-(4)].[20]
The plain language of this provision reflects the
legislatures intent to hinge suspension on proof of the employees
conviction for an underage sale, not on proof of the employees
guilt. Subsection .075(m) confirms this intent by explicitly
limiting the issues at an administrative suspension hearing to
questions concerning the sellers employment status and the fact
of the sellers conviction. In relevant part, subsection .075(m)
provides:
A hearing under this subsection is limited to
the following questions: (1) was the person
holding the business license endorsement, or
an agent or employee of the person while
acting within the scope of the agency or
employment of the person, convicted by plea
or judicial finding of violating AS 11.76.100
. . . .[21]
Furthermore, because subsection .075(m)(1) expressly contemplates
a conviction by plea or judicial finding, it seems clear the
legislature understood that convictions might result from pleas,
without trial findings of negligence. When read together, then,
subsections .075(d) and (m) erase any doubt as to the
legislatures intent to hold licensees civilly liable for selling
tobacco products to minors upon proof of their employees
convictions, without making their liability depend on proof of
their employees negligence.
Godfrey argues that this liability imposed by the
statute is precisely what makes it unconstitutional on its face.
Citing Javed v. Department of Public Safety, Division of Motor
Vehicles,22 he argues that the statute grants him no opportunity
to contest issues of central importance to the licensing decision
because the statute dictates the licensing result.
At first glance, it might appear that what we said in
Javed about revocation applies here. But in light of the
inherent danger posed by commercial tobacco sales, the
legislatures clear intent to regulate tobacco sales and to
provide firm mechanisms for curtailing tobacco use by minors, and
the entirely commercial nature of the licensees interest, Javed
is not analogous. In this case, the legislature sought to
restrict young peoples access to tobacco and, as one mechanism
for doing so, provided for holding a licensee who is without
personal fault administratively liable for the employees illegal
conduct. Regardless of whether the employee is negligent in
making the improper sale, the underlying purpose of the statute
is to protect minors by restricting their access to tobacco.
Thus, unlike the hypothetical situation contemplated in Javed,
there would be nothing irrational about suspending a tobacco
endorsement if the underlying prohibited conduct a sale to a
minor has occurred. Javed is therefore not analogous, because
the central element of the licensing action is whether a minor
purchased tobacco through Godfreys tobacco license, not whether
the employee was indeed negligent.
Moreover, Javed did not involve strict or vicarious
liability theories, and there was no opportunity for any
adjudication whether Javed had actually been driving.23 Here,
each employee had a full opportunity to require the state to
prove both that the sale took place and that the clerk acted
negligently. As the state points out, the penalty amount gave
the employees ample incentive to defend themselves. This
opportunity and incentive to defend oneself, and ones employee,
against conviction was therefore enough to ensure that
procedurally this issue was not foreclosed.
An employees conviction for negligently selling tobacco
to a minor, whether by plea or judicial finding, provides a
reliable basis both for finding that the license holder has given
a minor unlawful access to tobacco and for imposing
administrative sanctions on that ground. Therefore, the
legislatures reliance on the fact of conviction as presumptive
proof of sanctionable conduct has a rational basis and is neither
arbitrary nor capricious. As the state points out, other courts
have viewed analogous legislative provisions as imposing
vicarious liability and have upheld their validity regardless of
the states ability to establish fault.24
Applying the sliding scale of Mathews25 to Godfreys due
process argument convinces us that the administrative hearing did
not deprive him of due process. As we noted above, Godfrey has a
valuable property interest in his tobacco endorsement. But there
was no risk of erroneous deprivation under AS 43.70.075 and the
state has a substantial interest in regulating the sale of
tobacco to minors. Likewise, the statute requires a conviction
before any suspension for an employees sale can be imposed.26
Section .075 allowed Godfrey to dispute whether either employee
had been convicted under AS 11.76.100 and whether either employee
was acting within the scope of his or her employment.27
Furthermore, the state has a substantial interest in protecting
the health of its citizens, especially minors, through the
regulation of tobacco products. The sale of tobacco is a heavily
regulated activity, and the statute was designed to protect the
health of minors by ensuring they do not have access to tobacco.
Applying the Mathews factors, we conclude that Godfrey was not
denied due process: the states interest and the low risk of
erroneous deprivation outweigh his economic interest in an
unsuspended tobacco endorsement.
It might be argued that fundamental fairness would
preclude the department from treating an employees conviction as
conclusive evidence of prohibited conduct, sale to a minor. That
argument would have no plausible factual foundation here because
Godfrey never put it in genuine dispute, although we assume for
discussions sake that in a given case due process might entitle a
licensee to an opportunity to establish that no underage sale
actually occurred. Nonetheless, here the licensee did not
dispute in the licensing proceedings that underage sales had
occurred, and instead sought to defend on a theory that there was
no negligence. As noted above, because selling tobacco to a
child causes harm and results in unlawful conduct regardless of
whether the act of selling involves negligence, proffered
evidence of non-negligence could not dispel the presumption of
administratively sanctionable conduct established by the fact of
a conviction under AS 11.76.100.
In summary, when an industry engages in commercial
activity that routinely exposes the public to significant harm,
the legislature has a legitimate interest in holding the
industrys licensed participants accountable for all conduct in
exercising the license, not just for the licensees personal
negligence or fault. Here AS 43.70.075 serves the legitimate
social purpose of holding licensed participants accountable: In
the interest of the larger good it puts the burden of acting at
hazard upon a person otherwise innocent but standing in
responsible relation to a public danger.28
E. Godfreys Right to Due Process Was Not Violated.
Godfrey argues that a meaningful hearing would have
allowed him to present defenses regarding his employees conduct.
Regarding Ratzats conviction, Godfrey previously argued he would
have asserted these defenses: Ratzat was not negligent because
he believed he had previously checked the identification of the
person buying tobacco and it was valid; Ratzat was not acting
within the scope of his employment because it was against company
policy to sell tobacco to minors; Ratzat was entrapped in making
the sale to a minor; and Ratzats sale was the result of
government misconduct. Godfrey also sought to raise entrapment
and scope of employment defenses as to Laurenzanas prosecution.
The hearing officer ruled that Godfrey was allowed to raise these
defenses, but stated that he could make no ruling that would
invalidate a criminal conviction.
The hearing officer did not err in describing the
limitations the statute imposed on the agencys ability to
consider the defenses Godfrey wanted to assert. Godfreys
proffered evidence merely would have raised disputes as to
whether the clerks were negligent in making the sales or whether
their conduct should have been criminally excused. Because no
dispute about negligence or criminal fault was relevant under AS
43.70.075 after the employees were convicted, the hearing
officers refusal to consider any such evidence did not violate
Godfreys right to due process.
Godfrey also argues that the hearing failed to comply
with AS 43.70.075 because the department was required to
implement hearing procedures. Godfrey points to AS 43.70.075(m),
which states that a hearing officer shall . . . conduct the
hearing in the manner provided by the regulations of the
department, and argues that the department was required to adopt
procedures for the administrative hearing. But the text of that
subsection does not require the department to adopt procedures;
it only requires the hearing officer to follow procedures if the
department has adopted them. And Godfrey points to no
prejudicial procedural errors attributable to the absence of
regulations, apart from his inability to raise his proffered
defenses to the licensing sanctions.
Moreover, even if the department had promulgated
procedural regulations, they would not have permitted Godfrey to
raise the defenses he wanted to raise. Any procedural
regulations would have conformed to the hearing limitations
expressed or implied in AS 43.70.075. Per that statute, Godfreys
rejected defenses were not relevant, and the department could not
have adopted regulations that would have made them relevant.
Finally, Godfrey contends that the hearings violated
his right to due process because he could not intelligently
prepare a defense or decide to proceed without knowing the rules
that would apply at the hearings. But AS 43.70.075 gave Godfrey
notice of the issues to be determined at the hearings. If he was
surprised by anything the hearing officer said in explanation or
elaboration when the hearings began, he should have asked for a
continuance. He did not. There is no indication Godfreys right
to due process was violated by the way the hearings were
conducted.
IV. CONCLUSION
For these reasons, the opinion of the superior court is
AFFIRMED.
MATTHEWS, Justice, with whom FABE, Justice, joins, dissenting.
The issue in this case can be understood by considering
the following hypothetical. A young woman purchases cigarettes
from a convenience store after showing the clerk an ID indicating
that she is of legal age. In fact, the ID is a well-produced
forgery and the young woman is one year under age. When caught
smoking by a parent, she tells the parent where she bought the
cigarettes and the parent reports her purchase to the police.
The convenience store clerk is charged with the negligent sale of
tobacco products to a minor. The clerk does not believe he was
negligent but pleads no contest to the charge because the
prosecutor has told him that his fine will be $300 and the clerk
knows that it would cost him at least $1000 to hire a lawyer to
defend the case. Assuming that the clerk was not in fact
negligent, does Alaskas system of imposing sanctions on licensees
call for licensee sanctions in these circumstances? Todays
opinion would answer yes because it concludes that actual
negligence in making a sale to a minor on the part of a retail
clerk is not a required condition of imposing sanctions on a
licensee. I would answer the question in the negative because I
think that actual negligence is a required condition to the
imposition of licensee sanctions. Because of this I also
conclude that the statute, AS 43.70.075(m)(1), that precludes a
licensee from offering proof on the issue of clerk negligence,
violates the licensees due process rights. My reasons for
reaching these conclusions follow.
Preliminary Discussion
At the outset I note my agreement with todays opinion
on two points. First, tobacco is a hazardous and addictive
substance that is properly regulated by the State. Consumption
of tobacco, especially by minors, presents a substantial public
health danger. Second, because tobacco use is a hazard and
tobacco sales are regulated, sellers can be subjected to
administrative sanctions on a strict liability basis.1 Strict
liability here means without direct fault, including negligence,
on the part of licensees and without vicarious fault based on the
conduct of licensees employees while acting within the scope of
their employment. Vicarious fault would include the negligence
of a retail clerk who sells tobacco to a minor without taking
reasonable steps to ascertain the age of the purchaser.
Even though the State could impose a system that
dispenses with vicarious liability as a predicate to the
imposition of sanctions against a licensee, this is not what AS
43.70.075 does. The statute requires as to sales by clerks
that a clerk be convicted of specified offenses requiring at
least negligence on the part of the clerk. The legislature did
not contemplate that sanctions would be imposed against a
licensee when a clerk acting while exercising reasonable care
sells tobacco products to a minor. Thus, AS 43.70.075 is based
on vicarious, not strict, liability.
Due Process Requires a Hearing on Important Issues.
A tobacco endorsement is a valuable interest. Like
liquor licenses and other types of business enterprise licenses,
it is protected by the due process clauses of the Alaska and
United States Constitutions.2 Due process of law entitles a
holder of an endorsement permitting the sale of tobacco products
to a meaningful hearing before the endorsement may be suspended.3
[C]onsiderations of fundamental fairness guide our
determination of what constitutes a meaningful hearing.4 Until
now we have not examined what makes a hearing meaningful in the
context of a tobacco endorsement suspension proceeding. But we
have spoken of the requirements of fundamental fairness in the
context of drivers license revocation proceedings. In that
context we have held that in a revocation hearing a licensee must
be given an opportunity to challenge issues of central importance
to the revocation decision.5 In Javed v. Department of Public
Safety, Division of Motor Vehicles, that meant that before a
license could be revoked, the licensee who failed a breath test
needed to be afforded an opportunity to present evidence that he
had not been driving.6 The terms of the governing statute
limited the hearing issues in Javed to whether the driver failed
or refused to take the test and whether the arresting officer had
reasonable grounds to believe that the licensee was driving at
the time of intoxication.7 We stated: It is hard to imagine an
issue of more central importance to a drivers license revocation
hearing than whether the person accused of DWI was driving a
vehicle in the first place.8 We therefore held that the statute
in Javed, AS 28.15.166(g), was unconstitutional as applied
because it did not permit that critical issue to be adjudicated.9
The issues of central importance to the suspension of a
tobacco endorsement clearly include whether a sale to a minor
took place and whether the clerk who made the sale was acting in
the scope of his or her employment when the sale took place.
These issues were uncontested in the present case, and they were
decided against Godfrey by the hearing officer. The question is
whether the employees negligence in making the sales was also an
issue of central importance and thus an issue that Godfrey should
have had the right to contest.
Godfrey Is Not Bound by the Clerks Convictions.
Before addressing that question, it is appropriate to
establish at this point that Godfrey cannot constitutionally be
bound by the facts determined in the proceedings against the
clerks. The hearing officer did not make any findings as to
whether either of the clerks were negligent when they made the
sales. Their convictions for the offense of negligent sale of
tobacco products would preclude them from contesting their
negligence in subsequent proceedings, unless the amount at stake
in the prosecution of the negligent sale proceeding was so
limited in comparison to the amount at stake in a subsequent
proceeding that it would be inappropriate to give binding effect
to the former.10 But the clerks convictions could not have
preclusive effect on Godfrey because Godfrey was not a party to
the proceedings against the clerks nor was he in privity with
them.
A judgment against one party may not have preclusive
effect against another party unless the other party can be said
to be in privity with the party against whom the judgment runs.
It is a violation of due process for a judgment to be binding on
a litigant who was not a party or a privy and therefore has never
had an opportunity to be heard.11 In Pennington v. Snow we
observed that before privity may be found to exist, the non-party
must have notice and an opportunity to be heard; the procedure
must insure the protection of the rights and interests of the non-
party, and he must in fact be adequately represented by the
parties.12 In formulating this standard we noted that we are
guided by the requirements of due process.13 Here, Godfrey had
neither notice nor an opportunity to be heard with respect to the
prosecution of the citations against his employees. He thus did
not have the opportunity to litigate whether the employees were
negligent when they made the sales in question.14
Vicarious Fault Employee Negligence Is Required for
Licensee Sanctions.
It is clear based on the text of AS 43.70.075(d) and
(m)(1) that the legislature did not intend to condition the
imposition of sanctions against a licensee only upon direct fault
on the part of a licensee. A clerks act may also cause a
licensee to be sanctioned, but only when the clerk is convicted
of a negligent sale while acting within the scope of his or her
employment. Negligence, of course, is a required element of the
offense of negligent sale, and a clerks conviction is a necessary
predicate to the imposition of sanctions on the licensee. Thus,
employing a literal reading of the relevant statutory sections,
the legislature seems to have intended that there should be no
sanctions against a licensee unless a clerk makes not only a sale
to a minor, but a negligent sale to a minor. Use of a clerks
conviction appears to be a shortcut method of proving both the
fact of the sale and the clerks negligence. But the problem, as
we have seen, is that this method of proof also shortcuts due
process where the licensee has not had an opportunity to be heard
on the underlying issues.
I believe that the legislature intended that there be
no sanctions against a licensee without at least vicarious fault.
In other words, no sanctions against a licensee were contemplated
when a clerk makes a non-negligent sale to a minor. Three
sources support this conclusion: (1) the text of the statutory
system; (2) its legislative history; and (3) the States
concession.
With respect to the text, as explained above,
negligence is required for a clerks conviction, and no sanctions
may be imposed against a licensee without a conviction.
With respect to legislative history, the debates
concerning AS 43.70.075 focused on whether imposing vicarious
liability on licensees sanctioning licensees for an employees
fault rather than the direct fault of a licensee would be unfair
to a licensee. The prevailing view was that imposing licensee
sanctions where employees were at fault was acceptable licensees
could train employees to avoid mistakes.15 No legislator
expressed the view that it would be fair to sanction a licensee
when an employee was not at fault.
Concerning the States concession that vicarious fault
in the form of clerk negligence is required, the concession is
made explicitly in the caption to the States first argument. The
caption reads, in relevant part, as follows: AS 43.70.075, as a
public welfare statute, is designed to hold employers liable for
the acts of their employees who negligently sell to minors.16
The same concession is repeated in the body of the States brief:
The framework of [AS 43.70.075], which imposes vicarious
liability on a retailer based on its employees illegal acts and
for mandatory penalties, is consistent with how other
jurisdictions have regulated licensees who sell or distribute
dangerous products.17
Conclusion
For the above reasons, negligence on the part of a
clerk is, in my view, an issue of central importance in licensee
sanction proceedings and a licensee is entitled to a meaningful
hearing on this issue. It follows that, to the extent that AS
43.70.075(m)(1) bars such a hearing, it violates a licensees due
process rights.
_______________________________
1 Godfreys brief states that Mendenhall Valley Tesoro is
a limited liability company and that he has managing authority.
But he designated the d/b/a caption for the appeal, connoting a
sole proprietorship. We will assume that Mendenhall Valley
Tesoro is a sole proprietorship.
2 AS 11.76.100 provides in relevant part:
(a) A person commits the offense of
selling or giving tobacco to a minor if the
person
(1) negligently sells a cigarette, a
cigar, tobacco, or a product containing
tobacco to a person under 19 years of age;
(2) is 19 years of age or older and
negligently exchanges or gives a cigarette, a
cigar, tobacco, or a product containing
tobacco to a person under 19 years of age . .
. .
. . . .
(f) A person who violates (a) of this
section is guilty of a violation and upon
conviction is punishable by a fine of not
less than $300.
(Emphasis added.)
AS 11.76.100(f) provides that the negligent sale of
tobacco products to a minor is a violation. A violation is
defined as
a noncriminal offense punishable only by a
fine, but not by imprisonment or other
penalty; conviction of a violation does not
give rise to any disability or legal
disadvantage based on conviction of a crime;
a person charged with a violation is not
entitled
(A) to a trial by jury; or
(B) to have a public defender or other
counsel appointed at public expense to
represent the person . . . .
AS 11.81.900(b)(63). Violations characteristically involve
conduct inappropriate to an orderly society but . . . do not
denote criminality in their commission. AS 11.81.250(a)(6).
3 AS 43.70.075(d) provides in pertinent part:
If a person who holds an endorsement
issued under this section, or an agent or an
employee of a person who holds an endorsement
issued under this section acting within the
scope of the agency or employment, has been
convicted of violating AS 11.76.100, . . .
the department shall suspend the endorsement
for a period of
(1) 20 days and impose a civil penalty
of $300 if the person has not been previously
convicted of violating AS 11.76.100, . . .
and is not otherwise subject to the sanctions
described in (2) (4) of this subsection;
(2) 45 days and impose a civil penalty
of $500 if, within the 24 months before the
date of the departments notice under (m) of
this section, the person, or an agent or
employee of the person while acting within
the scope of the agency or employment of the
person, was convicted once of violating AS
11.76.100 . . . .
(Emphasis added.)
4 AS 43.70.075(m) provides:
The department may initiate suspension
of a business license endorsement or the
right to obtain a business license
endorsement under this section by sending the
person subject to the suspension a notice by
certified mail, return receipt requested, or
by delivering the notice to the person. The
notice must contain information that informs
the person of the grounds for suspension, the
length of any suspension sought, and the
persons right to administrative review. A
suspension begins 30 days after receipt of
notice described in this subsection unless
the person delivers a timely written request
for a hearing to the department in the manner
provided by regulations of the department.
If a hearing is requested under this
subsection, a hearing officer of the office
of administrative hearings (AS 44.64.010)
shall determine the issues by using the
preponderance of the evidence test and shall,
to the extent they do not conflict with
regulations adopted under AS 44.64.060,
conduct the hearing in the manner provided by
regulations of the department. A hearing
under this subsection is limited to the
following questions: (1) was the person
holding the business license endorsement, or
an agent or employee of the person while
acting within the scope of the agency or
employment of the person, convicted by plea
or judicial finding of violating AS 11.76.100
. . . .
(Emphasis added.)
5 (Footnote omitted.) Godfrey listed the defense issues
he would contest if they were not precluded by AS 43.70.075(m),
including whether there was negligence on the part of the clerk
and whether there was entrapment. As to the clerk Ratzat,
Godfrey put the question as follows: was Mr. Ratzat negligent in
the sale, if the person buying had presented an I.D. previously
that showed she was more than 19 years of age, such that it was
reasonable to believe she was still more than 19 years of age.
6 Dominish v. State, Commercial Fisheries Entry Commn,
907 P.2d 487, 492 (Alaska 1995).
7 Sands ex rel. Sands v. Green, 156 P.3d 1130, 1132
(Alaska 2007); State, Dept of Revenue, Child Support Enforcement
Div., ex rel. Husa v. Schofield, 993 P.2d 405, 407 (Alaska 1999).
8 Here Godfrey quotes Parklane Hosiery Co. v. Shore, 439
U.S. 322, 327 n.7 (1979).
9 Alesna v. LaGrue, 614 P.2d 1387, 1391 (Alaska 1980).
10 AS 43.70.075(m) provides in pertinent part that [a]
hearing . . . is limited to the following questions: (1) was . .
. an . . . employee . . . convicted by plea or judicial finding
of violating AS 11.76.100. (Emphasis added.)
11 See, e.g., Hilbers v. Municipality of Anchorage, 611
P.2d 31, 36 (Alaska 1980) (business license protected by due
process); Herscher v. State, Dept of Commerce, 568 P.2d 996, 1002
(Alaska 1977) (hunting guide license); Frontier Saloon, Inc. v.
Alcoholic Beverage Control Bd., 524 P.2d 657, 65960 (Alaska 1974)
(liquor license).
12 See Rollins v. State, Dept of Revenue, Alcoholic
Beverage Control Bd., 991 P.2d 202, 211 (Alaska 1999).
13 Javed v. Dept of Pub. Safety, Div. of Motor Vehicles,
921 P.2d 620, 622 (Alaska 1996).
14 Mathews v. Eldridge, 424 U.S. 319, 33435 (1976) (cited
in State, Dept of Health & Soc. Servs. v. Valley Hosp. Assn, 116
P.3d 580, 583 (Alaska 2005)).
15 Id. at 335.
16 Intl Tobacco Partners, Ltd. v. Beebe, 420 F. Supp. 2d
989, 1003 (W.D. Ark. 2006) (recognizing tobacco industry is
heavily regulated); see also Lorillard Tobacco Co. v. Reilly, 533
U.S. 525, 57071 (2001), stating that [f]rom a policy perspective,
it is understandable for the States to attempt to prevent minors
from using tobacco products before they reach an age where they
are capable of weighing for themselves the risks and potential
benefits of tobacco use, and other adult activities. The Supreme
Court has also stated that tobacco use, particularly among
children and adolescents, poses perhaps the single most
significant threat to public health in the United States. FDA v.
Brown & Williamson Tobacco Corp., 529 U.S. 120, 161 (2000).
17 See State v. Hazelwood, 946 P.2d 875, 88084 (Alaska
1997); Alesna v. LaGrue, 614 P.2d 1387, 1390 (Alaska 1980).
18 AS 11.76.100(a) (A person commits the offense of
selling or giving tobacco to a minor if the person (1)
negligently sells a cigarette, a cigar, tobacco, or a product
containing tobacco to a person under 19 years of age . . . .).
19 AS 11.76.105 provides:
(a) A person under 19 years of age may not
knowingly possess a cigarette, a cigar,
tobacco, or a product containing tobacco in
this state. This subsection does not apply
to a person who is a prisoner at an adult
correctional facility.
(b) Possession of tobacco by a minor is a
violation.
20 AS 43.70.075(d) (emphasis added).
21 AS 43.70.075(m).
22 Javed v. Dept of Pub. Safety, Div. of Motor Vehicles,
921 P.2d 620, 622 23 (Alaska 1996) (considering what issues are
of central importance to be determined prior to a drivers license
revocation).
23 921 P.2d at 62324.
24 See, e.g., Randalls Intl, Inc. v. Hearing Bd. of Iowa
Beer & Liquor Control Dept, 429 N.W.2d 163, 165 (Iowa 1988); Hoge
v. Liquor Control Commn, 248 N.E.2d 627, 63233 (Ohio App. 1969).
25 424 U.S. at 33435.
26 See AS 43.70.075(d).
27 See AS 43.70.075(m)(1).
28 United States v. Dotterweich, 320 U.S. 277, 281 (1943);
see also State v. Hazelwood, 946 P.2d 875, 880 (Alaska 1997).
1 See State v. Hazelwood, 946 P.2d 875, 880-84 (Alaska
1997); Alesna v. LeGrue, 614 P.2d 1387, 1390-91 (Alaska 1980).
2 See, e.g., Hilbers v. Municipality of Anchorage, 611
P.2d 31, 36 (Alaska 1980) (business license protected by due
process); Herscher v. State, Dept of Commerce, 568 P.2d 996, 1002
(Alaska 1977) (hunting guide license); Frontier Saloon, Inc. v.
Alcoholic Beverage Control Bd., 524 P.2d 657, 659-60 (Alaska
1974) (liquor license).
3 See Rollins v. State, Dept of Revenue, Alcoholic
Beverage Control Bd., 991 P.2d 202, 211 (Alaska 1999).
4 Thorne v. Dept of Pub. Safety, 774 P.2d 1326, 1329
(Alaska 1989).
5 Javed v. Dept of Pub. Safety, Div. of Motor Vehicles,
921 P.2d 620, 623 (Alaska 1996) (quoting Thorne, 774 P.2d at
1331); see, e.g., Graham v. State, 633 P.2d 211, 216 n.12 (Alaska
1981).
6 921 P.2d at 624.
7 Id. at 623.
8 Id.
9 Id. at 624-25.
10 See Restatement (Second) of Judgments 28(5)(c) (1980);
Pennington v. Snow, 471 P.2d 370, 378 (Alaska 1970):
[T]he amount at stake in the district court
case was far less than amounts involved in
the superior court action. If we were to
hold the findings of the district court
conclusive in this case, we would in effect
be binding the appellant to accept the
consequences of a suit in which she had less
time to prepare her case and less incentive
to adjudicate all of the issues to the
fullest extent.
(Footnote omitted.) Todays opinion states that clerks accused of
the violation of negligent sale of tobacco products to a minor
have an ample incentive to defend themselves and to require the
state to prove both that the sale took place and that the clerk
acted negligently. Slip Op. at 15. This ample incentive
language appears to be a reference to the use of a clerks
conviction in subsequent proceedings. Lack of an adequate
incentive to obtain a full and fair adjudication in an initial
action is a well recognized ground for refusing preclusive effect
to the judgment in the initial action in a subsequent action:
The amount in controversy in the first action may have been so
small in relation to the amount in controversy in the second that
preclusion would be plainly unfair. Restatement (Second) of
Judgments 28 cmt. j. If there were subsequent proceedings with
serious consequences against clerks this exception would apply.
Violations are non-criminal acts punishable only by a fine. They
do not give rise to any legal disability and carry little, if
any, public opprobrium. AS 11.76.100(f); AS 11.81.900(b)(63).
Publicly funded counsel are not provided in prosecutions for
violations. AS 11.81.900(b)(63)(B). The cost of hiring an
attorney to defend such charges far exceeds the small fines
associated with them in this case, $200 for Ratzat and $300 for
Laurenzana. In the present case, however, the only subsequent
proceedings are against the licensee. The lack of an adequate
incentive on the part of the clerks to defend themselves would
also bar preclusive use of their convictions in a proceeding
against the licensee, except that, for the reasons explained in
the discussion that follows in the text of this dissent, the
licensee cannot be bound by them because he was not a party to
the prosecutions against the clerks and did not assume control of
their defenses. See Restatement (Second) of Judgments 39: A
person who is not a party to an action but who controls or
substantially participates in the control of the presentation on
behalf of a party is bound by the determination of issues decided
as though he were a party.
11 Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n.7
(1979).
12 Pennington, 471 P.2d at 375-76.
13 Id. at 375.
14 To the extent that todays opinion suggests that the
opportunity to be heard requirement is satisfied because a
licensee has the opportunity to defend his clerk in a violation
proceeding, Slip Op. at 15, the court ignores a number of
considerations. First, the licensee may not have notice of the
charges. In this case the hearing officer found that Godfrey
lacked notice of Laurenzanas citation and court proceeding. The
hearing officer did not make a finding either way with regard to
Ratzat, though Godfrey claims he lacked notice of this proceeding
as well. Second, the employee may not want to be defended. The
employee may want to pay a small fine and put the matter to rest
rather than be engaged in a potentially long adversarial
proceeding. Third, even if the employee agreed to a licensee-
sponsored defense, the licensees interests may conflict with the
employees, rendering licensee control inappropriate. Finally,
assuming that the licensee undertook a vigorous defense on behalf
of his employee, this could radically alter what the legislature
meant to be a brief and simple proceeding for a mere violation.
15 The State characterizes the 1989 debates concerning the
bill that became AS 43.70.075 as follows:
Some legislators expressed concern about the
bill, observing that it could adversely
affect a vendors license when in fact an
employee was at fault. But other
representatives pointed out that the
suspension periods would work as an incentive
to curtail the sale of tobacco to minors
because vendors would be more likely to hire
scrupulous employees and to educate them.
See An Act Relating to Tobacco and Products Containing Tobacco:
Hearing on H.B. No. 141 Before the S. Comm. on Cmty. & Regl
Affairs, 16th Leg., 1st Sess. (Alaska Apr. 27, 1989); Relating to
Retail Sale of Tobacco, Tobacco Products, and Devices for Smoking
Tobacco: Hearing on H.B. No. 141 Before the H. Comm. on Fin.,
16th Leg., 1st Sess. (Alaska Apr. 7, 1989); An Act Relating to
Retail Sale of Tobacco, Tobacco Products, and Devices for Smoking
Tobacco: Hearing on H.B. No. 141 Before the H. Comm. on Fin.,
16th Leg., 1st Sess. (Alaska Mar. 30, 1989); An Act Relating to
Retail Sale of Tobacco, Tobacco Products, and Devices for Smoking
Tobacco: Hearing on H.B. No. 141 Before the H. Comm. on the
Judiciary, 16th Leg., 1st Sess. (Alaska Mar. 17, 1989). With
respect to the 2001 amendments to AS 43.70.075, which increased
sanctions and made them mandatory, the State characterized the
debates as follows: Representative Joe Hayes expressed concern
that the suspension periods would essentially punish the business
for the employees mistake. Representative Meyer responded that
businesses are responsible for their employees and need to make
sure that employees are adequately trained. See An Act Relating
to the Offense of Selling or Giving Tobacco to a Minor, to the
Accounting of Fees from Business License Endorsements for Tobacco
Products, to the Disclosure of Certain Confidential Cigarette and
Tobacco Product Information, to Notification Regarding a
Cigarette Manufacturers Noncompliance with the Tobacco Product
Master Settlement Agreement, to Business License Endorsements for
Sale of Tobacco Products, to Citations and Penalties for Illegal
Sales of Tobacco Products; and Providing for an Effective Date:
Hearing on H.B. No. 228 Before the H. Comm. on Labor and
Commerce, 22d Leg., 1st Sess. (Alaska Apr. 18, 2001).
16 (Emphasis added.)
17 (Emphasis added.) In its discussion of licensee
sanctions in other jurisdictions, the State repeatedly adverts to
the requirement of vicarious liability. It argues, [c]riminal
liability may be found against an accused although the accused is
only vicariously liable for the act because such an act comes
under the rubric of public welfare offense. (Emphasis added.)
The State further observes that there are numerous statutes
involving licensing of sellers of alcoholic beverages, a
similarly age-restricted product, which hold employers
vicariously liable for their employees negligent or criminal
conduct. (Emphasis added.) The States brief features the
following quotation from a California court:
It has long been recognized that statutory
public welfare offenses such as here involved
require neither guilty knowledge nor intent.
Thus, although ordinarily an innocent
employer cannot be held liable for this
misconduct of an employee, such an employer
will nonetheless be held accountable whenever
the offense involved consists of a violation
of a general public welfare regulation.
(Emphasis added.)
The explanatory footnote accompanying this quotation in the
States brief states:
Aantex Pest Control Co. v. Structural Pest
Control Board, 166 Cal. Rptr. 763 (Cal. App.
1980) (license revocation upheld based on
employees negligent use of an exterminating
agent, even though employer lacked knowledge
of companys possession of the chemical and of
employees use of it); see also Camacho v.
Youde, 157 Cal. Rptr. 26, 28 (Cal. App. 1979)
(upholding 60-day license suspension based on
an employees negligent conduct in applying
pesticides; no due process violation because
the objective of an administrative proceeding
relating to a license suspension is to
protect the public.)[.] (Emphasis added.)
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