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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Holiday Alaska, Inc. v. State, Division of Corporations, Business & Professional Licensing (7/20/2012) sp-6690

Holiday Alaska, Inc. v. State, Division of Corporations, Business & Professional Licensing (7/20/2012) sp-6690

        Notice: This opinion is subject to correction before publication in the PACIFIC  REPORTER . 

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                THE SUPREME COURT OF THE STATE OF ALASKA 



HOLIDAY ALASKA, INC.                             ) 

                                                 )   Supreme Court No. S-14155 

                       Appellant,                ) 

                                                 )   Superior Court No. 3AN-09-10689 CI 

        v.                                       ) 

                                                 )   O P I N I O N 

STATE OF ALASKA, DIVISION OF                     ) 

CORPORATIONS, BUSINESS &                         ) 

PROFESSIONAL LICENSING,                          ) 

                                                 )   No. 6690 - July 20, 2012 

                       Appellee.                 ) 

                                                 ) 



               Appeal from the Superior Court of the State of Alaska, Third 

               Judicial District, Anchorage, Patrick J. McKay, Judge. 



               Appearances: Michael A. Grisham, Dorsey & Whitney LLP, 

               Anchorage,      for  Appellant.    Andy     Harrington,    Assistant 

               Attorney General, Fairbanks, and John J. Burns, Attorney 

               General, Juneau,     for Appellee. 



               Before:      Carpeneti,    Chief   Justice,   Fabe,   Winfree,    and 

               Stowers, Justices.    [Christen, Justice, not participating.] 



               WINFREE, Justice.
 

               FABE, Justice, concurring.
 



I.      INTRODUCTION 



               In  Godfrey   v.   State   of   Alaska,   Department   of   Community   &  Economic 



Development , we upheld a version of AS 43.70.075, Alaska's tobacco endorsement 


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statute, against several due process challenges.1         While those challenges were pending 



the legislature amended the statute to address due process concerns.2  We now consider 



due process challenges to the amended statute, and affirm the superior court's conclusion 



that the amended statute provides due process. 



II.     FACTS AND PROCEEDINGS 



                Holiday Alaska, Inc. (Holiday) sells tobacco at over 25 stores in Alaska, 

and each store holds a tobacco license endorsement from the State.3  The State sought to 



suspend   five   different   Holiday   stores'   tobacco   license   endorsements   following   five 

separate incidents of Holiday employees' illegal tobacco sales to minors.4                 Each case 



resulted in conviction:  One employee was found guilty by default judgment, three pled 



guilty, and one was found guilty at trial. 



                The   State   filed   a   notice   of   intent   to   suspend   the   five   tobacco   license 



endorsements based on the employee convictions, seeking to impose a $300 civil fine 

and a 20-day endorsement suspension against each store.5              Holiday requested a hearing 



before the Office of Administrative Hearings in   each case.              An Administrative Law 



Judge (ALJ) held two hearings. The ALJ first considered the allegations against Holiday 



resulting from four of the convictions and issued a consolidated decision; the ALJ later 



        1       175 P.3d 1198, 1211 (Alaska 2007). 



        2       Ch. 61,  4-6, SLA 2007. 



        3       See AS 43.70.075(a) (requiring tobacco license endorsement for sale of 



tobacco products). 



        4       See AS 11.76.100 (outlining offense of selling or giving tobacco to minor). 



        5       See  AS   43.70.075(d)   (providing   "the   department   shall   impose   a   civil 



penalty," including endorsement suspension, if the endorsement holder or its employee 

is convicted of a negligent tobacco sale offense). 



                                                  -2-                                            6690
 


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considered the allegations against Holiday resulting from one additional employee's 



conviction and issued a separate decision. 



                 Throughout       the   proceedings      Holiday     asserted    various    constitutional 



challenges,      which   the   ALJ   denied   because   he   could   not   "rule   on   a   constitutional 



challenge   that   seeks   to   nullify   the   statute." However,   the   ALJ   allowed   Holiday   to 



present evidence relevant to its constitutional challenges to construct a factual record for 



appeal. 



                 Holiday also presented evidence about its zero-tolerance policies regarding 



underage tobacco sales, which included education programs for new employees and 



possible immediate termination of any employee caught in a government sting operation. 



Holiday presented little or no specific evidence on the factual circumstances of each 



individual sale; in fact, Holiday contested liability in only two of the individual sales. 



In one instance, Holiday argued that the employee's plea bargain made in exchange for 



a dismissal of a more serious charge of selling alcohol to a minor in the same incident 



constituted clear and convincing evidence that no negligent sale occurred.   In the other, 



Holiday argued that the default judgment resulting from the employee's failure to appear 



was clear and convincing evidence that no negligent sale occurred. 



                 The     ALJ    concluded      that   Holiday     did   not   overcome      the   statutory 

presumption of negligence established by the convictions,6 and therefore was liable for 



each   violation   and   subject   to   penalty   under   AS   43.70.075(d).      The   ALJ   considered 



Holiday's internal procedures as evidence justifying mitigation of the penalty, but did 



        6        See AS 43.70.075(w) ("[A] conviction . . . by the agent or employee of the 



[licensee]   is   rebuttably   presumed   to      constitute   proof   of   the   fact   that   the   agent   or 

employee   negligently   sold   [tobacco   to   a   minor].   The   [licensee]   may   overcome   the 

presumption by establishing by clear and convincing evidence that the agent or employee 

did not negligently sell [tobacco to a minor]."). 



                                                    -3-                                               6690
 


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                                                      7 

not find the policies rebutted liability entirely.   The ALJ recommended imposing a $300 



penalty and suspending the tobacco license endorsement for 13-20 days in each case, 



with reductions in three instances based on the mitigating evidence of internal policies. 



                The Commissioner adopted the ALJ's recommendations as the final agency 



decision, and Holiday appealed to the superior court.              The superior court upheld the 



Commissioner's         decision    without    modification,     specifically    rejecting   Holiday's 



constitutional arguments. 



                Holiday appeals, presenting only one issue:            whether AS 43.70.075, as 



amended, violates its due process rights. 



III.    STANDARD OF REVIEW 



                 We review issues of statutory interpretation and questions concerning the 



constitutionality of statutes de novo, and adopt the rule of law that is most persuasive in 

light of precedent, reason, and policy.8       We apply our independent judgment to determine 



whether there was a violation of Holiday's right to due process.9 



IV.     DISCUSSION 



        A.      Godfrey v. State 



                In  Godfrey we considered several due process challenges to the former 



        7       See AS 43.70.075(t) (providing that the department may reduce the license 



suspension   period   based   on   evidence   of   the   licensee's   internal   policies   to   prevent 

negligent sales). 



        8       Godfrey   v.   State,   Dep't   of   Cmty.   &   Econ.   Dev.,   175   P.3d   1198,   1201 



(Alaska 2007) (citing Sands ex rel. Sands v. Green, 156 P.3d 1130, 1132 (Alaska 2007); 

State, Dep't of Revenue, Child Support Enforcement Div., ex rel. Husa v. Schofield, 993 

P.2d 405, 407 (Alaska 1999)). 



        9       Copeland v. Ballard, 210 P.3d 1197, 1201 (Alaska 2009). 



                                                  -4-                                            6690
 


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version of Alaska's tobacco endorsement statute.10           The statute permitted the licensee to 



dispute whether its employee was acting within the scope of employment and whether 



there   was   a   conviction,   but   did   not   allow   inquiry   into   the   employee's   underlying 

negligence.11    We explained that the statute: 



                strive[d] to enforce the state's 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       require[d]    the  department      to  suspend    an 

                endorsement   based   on   proof   of   an   employee's  conviction 

                under     AS   11.76.100;     it  does   not  require    proof   of  the 

                employee's actual guilt.[12] 



                Godfrey, the owner of a store licensed to sell tobacco products, argued that 

the statutory scheme was facially unconstitutional because it denied him due process.13 



We     first  considered    Godfrey's    argument     that  the  statute   did  not  provide    him   an 



opportunity to contest issues of "central importance" to the licensing decision, thereby 



denying him due process under Javed v. Department of Public Safety, Division of Motor 

Vehicles.14   We concluded that Javed was not analagous "in light of the inherent danger 



posed by commercial tobacco sales, the legislature's clear intent to regulate tobacco sales 



and to provide firm mechanisms for curtailing tobacco use by minors, and the entirely 



        10      175 P.3d at 1203-07. 



        11      Former AS 43.70.075 (2006). 



        12      Godfrey, 175 P.3d at 1204 (emphasis in original). 



        13      Id. at 1199. 



        14      Id . at 1205 (citing Javed v. Dep't of Pub. Safety, Div. of Motor Vehicles , 



921 P.2d 620, 622-23 (Alaska 1996) (providing that due process requires the accused at 

a driver's license revocation hearing "must be granted the opportunity to fully contest 

issues of 'central importance' to the revocation decision")). 



                                                  -5-                                             6690
 


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commercial       nature   of  the   licensee's   interest."15   We     explained     that  the  statute's 



underlying purpose was to protect minors by restricting their access to tobacco, not to 



punish negligent tobacco sales; the licensing action's "central element" was whether a 



minor purchased tobacco through Godfrey's tobacco license, not whether the employee 

was negligent.16      We also noted that relying on the fact of conviction as presumptive 



proof of sanctionable conduct was rationally based and neither arbitrary nor capricious.17 



                We     then   determined     Godfrey    was    not   denied  due   process    under   the 



Mathews v. Eldridge test, noting the State's interest in protecting minors from tobacco 



and the low risk of erroneous deprivation outweighed Godfrey's economic interest in an 

unsuspended tobacco endorsement.18             We summarized our conclusions by noting that 



"when an industry engages in commercial activity that routinely exposes the public to 



significant   harm,   the   legislature   has   a   legitimate   interest   in   holding   the   industry's 



licensed participants accountable for all conduct in exercising the license, not just for the 

licensee's personal negligence or fault."19 



        B.      The Amended Statutory Scheme 



                Like the former version of the statute, the amended statute provides that if 



a licensee's employee is convicted of violating AS 11.76.100 while acting within the 

scope of employment, the State may impose a civil penalty.20                But the amended statute 



        15      Id. at 1205. 



        16      Id. 



        17      Id. 



        18      Id. (citing Mathews v. Eldridge , 424 U.S. 319, 334-35 (1976)). 



        19      Id. at 1206. 



        20      AS 43.70.075(d). 



                                                   -6-                                             6690
 


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differs    by   establishing    an   employee's      conviction     as  a  rebuttable    presumption       of 



negligence to support a finding of liability. 

                 As before, the licensee may request a hearing to contest liability,21 but the 



amendment   added         subsections     (m)(5)    and   (w),   which   together    allow   evidence     on 



whether      the  licensee   "overc[a]me      the   rebuttable    presumption"      that   an  employee's 



conviction "constitute[s] proof of the fact that the agent or employee negligently sold 



[tobacco   products   to   a   minor]."     The   licensee   "may   overcome   the   presumption   by 



establishing   by   clear   and   convincing   evidence   that   the   agent   or   employee   did   not 



negligently sell [tobacco products to a minor] as alleged in the citation issued to the agent 

or employee."22 



        C.	      The Amended Statutory Scheme Does Not Deny Holiday Due Process 

                 Of Law. 



                 Holiday      repeats  Godfrey's       due   process    challenges,     arguing    that  AS 



43.70.075 violates the Mathews test and denies a meaningful hearing within the meaning 



of  Javed .    But    the   2007    amendment       enhances     procedural     protections    rather   than 



diminishes them:        granting the licensee   the   right to notice of minor offense charges 

pending   against   any   employee,23        allowing   the   licensee   to   overcome   the   rebuttable 



presumption   that   its   employee's   conviction   constitutes   proof   of   a   negligent   sale   of 



        21	      AS 43.70.075(m). 



        22       AS   43.70.075(w).       The   ALJ   stated   without   explanation   that   evidence 



produced under this provision does not negate liability entirely, but instead functions as 

a   basis   for   only   partial   mitigation   of   the   penalty. As   the   superior   court   correctly 

concluded, and both parties agree, this statutory interpretation is incorrect.  If a licensee 

can rebut the presumption established by its employee's conviction, proving by clear and 

convincing evidence that the employee did not negligently sell a tobacco product to a 

minor, then the State has no basis for sanctions under the statute. 



        23       AS 44.29.094(g). 



                                                    -7-	                                              6690
 


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tobacco products to a minor,24 and allowing the licensee to present mitigating evidence 



of its efforts to curtail negligent sales.25     These additional procedural protections serve 



to further diminish the risk of erroneous deprivation.   And although we agree that under 



the   new    statutory   scheme     employee     negligence     now    can  be   an  issue   of  "central 



importance" within Javed 's meaning, we conclude that due process is satisfied because 



subsection (m)(5) provides the licensee the opportunity to present evidence rebutting the 



negligence presumption. 



                Holiday agrees the amended statute is an "improve[ment] over the previous 



version because it allows the endorsement-holder to present evidence about the issue of 



central importance," but claims that the revised statute "does not go far enough to make 



the hearing meaningful."         Specifically, Holiday contends it was denied a meaningful 



hearing because the statute required it to bear the burden of proof in disputing employee 



negligence,   which   is   arguably   difficult   for   the   licensee   when   the   employee   has   no 



incentive to combat the charge. 

                But in Stevens v. State, Alcohol Beverage Control Board,26  we found due 



process     satisfied  by   a  liquor   licensing   statute  requiring    a  licensee,   rather   than   a 

municipality, to carry the burden of persuasion to overcome a valid municipal protest.27 



We explained that while due process requires a licensee "be provided with notice and an 



opportunity to be heard in a meaningful, impartial hearing" before a property interest can 



be taken, the procedures "need not be elaborate," as due process required only that the 



        24      AS 43.70.075(m)(5). 



        25      AS 43.70.075(m)(4). 



        26      257 P.3d 1154 (Alaska 2011). 



        27      Id. at 1160. 



                                                   -8-                                             6690
 


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ABC Board hold a hearing before it suspended a liquor license.28                    We concluded that 



"nothing" about the burden placement on the licensee "would deprive Stevens of notice, 

an opportunity to be heard, or the impartiality or significance of his hearing."29             The same 



holds true here. 



                 Further, in Godfrey we rejected the same argument Holiday makes about 



employee motivation, noting "the penalty amount gave the employees ample incentive 

to   defend   themselves."30      This   determination   was   fundamental   to   our   dismissal   of 



Godfrey's   constitutionality   argument   under  Javed ,31           and   the   2007  amendment   did 



nothing to alter the penalty faced by a convicted employee under AS 11.76.100 or its 



effect on an employee's motivation to contest the charge.                  Holiday has presented no 



reason why an employee would be less motivated under the amended statute to fight an 



erroneous charge:       A conviction may cost the employee his or her job, and the penalty 



represents a measurable percentage of an hourly worker's earnings, providing significant 



motivation to fight an erroneous charge.  And the statutory change requiring notice to a 



licensee of charges against an employee enables the licensee to provide counsel to fight 



        28      Id.  (citing  Thorne   v.   State,   Dep't   of   Pub.   Safety,   774   P.2d   1326,   1329 



(Alaska 1989)). 



        29      Id. 



        30       Godfrey   v.   State,   Dep't   of   Cmty.   &   Econ.   Dev.,   175   P.3d   1198,   1205 



(Alaska 2007). 



        31      Id. ("[T]he penalty amount gave the employees ample incentive to defend 



themselves.   This   opportunity   and   incentive   to   defend   oneself,   and   one's   employee, 

against conviction was therefore enough to ensure that procedurally this issue was not 

foreclosed."). 



                                                    -9-                                              6690
 


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erroneous charges.32  Indeed, in this case Holiday provided several of its employees with 



legal representation and at least one employee went to trial. 



V.     CONCLUSION 



              For these reasons, the superior court's decision is AFFIRMED. 



      32      AS 44.29.094(g). 



                                           -10-                                       6690 


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FABE, Justice, concurring. 



                I agree with the result the court reaches today.            But I write separately to 



emphasize   my   continuing   disagreement   with   the   court's   suggestion   that   the   statute 



satisfies due process because clerks have a "significant motivation" to contest a fine of 

$200 to $300.1 



                I joined Justice Matthews's dissent in Godfrey because I believed that the 



previous version of the statute at issue denied licensees due process.                  In particular, I 



disagreed with the court's reasoning that store clerks had "ample incentive to defend 

themselves."2       In   my   view,   the  potential   fines   of   $200  to  $300,    which    were   not 



accompanied by any risk of legal disability and which "carr[ied] little, if any, public 



opprobrium," provided insufficient incentives for employees to undertake the costly 

endeavor of defending themselves.3          Store clerks, faced with the choice of hiring lawyers 



and taking time off work to defend themselves or simply paying the fines and moving 



on with their lives, could easily decide they were better off doing the latter. 



                As   the   court   notes,   the   amended   statute   includes   additional   procedural 

protections for licensees.4      Most notably, it allows licensees to rebut the presumption of 



negligence on the part of their employees. This amendment allows for an individualized, 



factual determination of whether a licensee is liable.   Additionally, licensees must now 



be   provided   with   notice   of   minor   offense   charges   pending   against   their   employees, 



giving licensees a better opportunity to provide counsel to charged employees   who 



        1        Slip Op. at 9. 



        2        Godfrey   v.   State,   Dep't   of   Cmty.   &   Econ.   Dev.,   175   P.3d   1198,   1205 



(Alaska 2007). 



        3       Id. at 1209 n.10 (Matthews, J., dissenting). 



        4        Slip Op. at 7-8. 



                                                   -11-                                             6690
 


----------------------- Page 12-----------------------

otherwise might not have an incentive to hire lawyers.   Because of these new procedural 



protections, this case differs from Godfrey, and I agree with the court that the amended 



statute satisfies due process. 



                                            -12-                                      6690
 

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