Albarati Brothers, Llc )

NORTH CAROLINA IN THE OFFICE OF ADMINISTRATIVE HEARINGS CUMBERLAND COUNTY 11 ABC 13545 ______ALBARATI BROTHERS, LLC ) T/A DAY N NITE FOOD MART, ) Petitioner, ) ) v. ) DECISION ) NORTH CAROLINA ALCOHOLIC ) BEVERAGE CONTROL COMMISSION, ) Respondent. ) ______

This contested case was heard before Donald W. Overby, Administrative Law Judge, on February 16, 2012 in Fayetteville, North Carolina.

APPEARANCES

For Petitioner: Lonnie M. Player, Jr., Esq. Harvey W. Raynor III, Esq. Law Office of Lonnie M. Player, Jr. 400 Westwood Shopping Center, Suite 210 Fayetteville, NC

For Respondent: K. Renee Cowick, Esq. NC Alcoholic Beverage Control Commission 400 East Tryon Road Raleigh, NC

ISSUES

1. Whether Respondent substantially prejudiced Petitioner’s rights by denying Petitioner’s application for an ABC permit, on or about November 8, 2011?

2. Whether Respondent acted erroneously by denying Petitioner’s application for an ABC permit, on or about November 8, 2011?

3. Whether Respondent acted arbitrarily or capriciously by denying Petitioner’s application for an ABC permit, on or about November 8, 2011? 4. Whether Respondent failed to act as required by law or rule by denying Petitioner’s application for an ABC permit, on or about November 8, 2011?

BASED UPON careful consideration of the sworn testimony of the witnesses presented at the hearing, the documents and exhibits received and admitted into evidence, and the entire record in this proceeding, the undersigned Administrative Law Judge makes the following Findings of Fact. In making these findings of fact, the ALJ has weighed all the evidence and has assessed the credibility of the witnesses by taking into account the appropriate factors for judging credibility, including, but not limited to the demeanor of the witnesses, any interests, bias, or prejudice the witness may have, the opportunity of the witness to see, hear, know or remember the facts or occurrences about which the witness testified, whether the testimony of the witness is reasonable and whether the testimony is consistent with all other believable evidence in the case.

FINDINGS OF FACT

From official documents in the file, sworn testimony of the witnesses, and other competent and admissible evidence, it is found as fact that:

1. Petitioner leased a building at 829 Murchison Road, Fayetteville, NC (the “Property”) in December 2010 in order to open a convenience store.

2. The Property is located across the street from the southern end of Fayetteville State University (“FSU”), and about 200 feet from a commercial center called Bronco Square, which is co-owned by the University.

3. Bronco Square is located across Murchison Road from FSU. Bronco Square contains several businesses, none of which sell alcoholic beverages per an agreement with the landlord. Such agreement has been in place since prior to Chancellor James A. Anderson’s arrival at FSU in April 2008.

4. FSU runs a technology center at Bronco Square for the senior citizens of a nearby housing area.

5. This area has suffered from the perception of being a less than desirable neighborhood, and has been the subject of local efforts to try to correct the perception.

6. Prior to Petitioner’s occupancy of the Property, the building had housed two or more restaurants and at least one store, and had been vacant for a few years before Petitioner leased the property.

7. Mr. Albarati, as one of Petitioner’s owners and operator of the business at 829 Murchison Road, testified that upon taking possession of the Property, he spent over $40,000 renovating and up-fitting the building for its use as a convenience store, in order to make it clean

2 and safe, and different from other stores in the area. Included in the renovations are an alarm system and a camera system.

8. Petitioner applied for ABC permits to sell malt beverages, wine, and fortified wine for off-premises consumption. On July 26, 2011 Petitioner was granted temporary Malt Beverage Off Premise, Unfortified Wine Off Premise and Fortified Wine Off Premise permits for an establishment d/b/a Day N Nite Food Mart, located at 829 Murchison Road, Fayetteville. Petitioner operates other locations in the City of Fayetteville which hold ABC permits.

9. As part of the application, Petitioner submitted a Local Government Opinion (“LGO”) form, which indicated that though there was no objection to the applicant, there was an objection to the location. The LGO was signed by Karen McDonald, City Attorney. The LGO was provided to Respondent prior to the issuance of the temporary permits.

10. Ms. McDonald cites in the LGO the “proximity to a school with a history of underage drinkers and objections from the community.” Additionally, the LGO cited “concerns from the community and university regarding the detrimental effect this type of establishment would have on the area.” Ms. McDonald was not called as a witness.

11. As a result of Petitioner’s application, an investigation was initiated by Alcohol Law Enforcement (ALE) to determine the suitability of both the applicant and the location.

12. The temporary permit was extended from October 23, 2011 to November 23, 2011, in order for the Respondent to complete its investigation of Petitioner.

13. The investigative report completed by ALE contains boxes to be marked concerning compliance with various standards that may be applicable to the type of permit being sought.

14. The investigative report completed for Petitioner’s application was completed by marking all of the boxes in a manner that showed compliance with all of the relevant standards for issuance of a permit for both the applicant and the location. Among the other standards found to be sufficient was the requirement that the business meet the minimum distance requirement between the building and a church or school.

15. The report indicated that both the applicant and the location met the recommendations of the local governing body. It also indicated that another business, unrelated to Petitioner, had previously held an ABC permit at that location. ALE Agent Robert Hebert who completed the investigative report was not called as a witness.

16. Petitioner’s application for an ABC permit was denied, and its temporary permit was revoked, by Official Notice of Rejection on November 8, 2011. The reason given in the denial notice was “The recommendation of the local governing body, through its duly authorized designee pursuant to N.C.G.S. 18B-901(c)(7).”

3 17. Ann Johnson, Director of Permitting and Product Compliance at the Commission, testified at the hearing that she has worked at the Commission for 34 years, during which time her positions have all related to the permitting process. Ms. Johnson indicated that all of the factors enumerated in N.C.G.S. 18B-901(c) were considered and that the only one posing a problem was number seven, “the recommendations of the local governing body.” N.C.G.S. 18B- 901(c)(9) asks that consideration be given to “[w]hether the operation of the applicant’s business at that location would be detrimental to the neighborhood, . . .” It was not found to be problematic by the Commission.

18. Ms. Johnson indicated that letters of objection to Petitioner’s permit application had come in both before and after application was made, objecting to the location because of its proximity to the university and generalized concerns related to under-age drinking. There were no references in the LGO, the letters, or other portions of the application, to specific problems at this location.

19. Ms. Johnson signed the Official Notice of Rejection, but she says the decision was made by others. She disagreed with the rejection and testified that in her opinion, the contents of the letters were insufficient to deny Petitioner’s permit.

20. Dr. James Anderson, Chancellor of FSU, testified at the hearing that he had been Chancellor since April of 2008, and was notified of Petitioner’s application by some of his staff, and had written an objection letter to the Commission. He voiced concerns about a permit at the location because of its proximity to the under-aged students at the university, and because of the negative perception of the neighborhood that visitors to the area may have. He indicated that those concerns predated Petitioner’s occupation of the Property and are unrelated to Petitioner’s business.

21. Dr. Anderson testified that he never visited Petitioner’s business, that he never saw loiterers there, that there were no incidents of under-age drinking related to Petitioner’s business, and that he was unaware of any problems in the community related to Petitioner’s business. He was also unaware that Petitioner had been granted a temporary permit and had been selling beer and wine for several months.

22. Dr. Anderson further testified that in his time at FSU, there have been fewer than 10 incidents of under-age drinking per year at the campus and that the university does not have a problem with under-age drinking. Dr. Anderson disagrees with the LGO’s statement that there was a “history of under-aged drinkers” at the university and that such was a mischaracterization of FSU.

23. Reverend Jamale Johnson, Pastor of Mount Sinai Baptist Church, wrote an objection letter to the Commission, and also testified at the hearing. He has been involved with the church’s activities for forty years and lives in the community. The property at issue is about four blocks from the Mount Sinai Missionary Baptist Church.

24. Reverend Johnson’s concerns regarding an ABC permit at Petitioner’s location are speculative and relate to negative behavior that may result, given the proximity of the

4 Property to the church, its apartments, and the students at the university. He has seen loiterers, additional foot traffic, and trash accumulate near other permitted businesses. However, he has not been on Petitioner’s property, has not seen loiterers or trash there, or any other negative behavior associated with Petitioner’s store. He was not aware that Petitioner had a temporary permit and was selling beer and wine for over three months.

25. Alicia Chisolm, a long-term resident of the neighborhood and member of the Cumberland County School Board, also wrote an objection letter and testified at the hearing. She stated that the building had been restaurants during most of its existence. Although her letter was written on School Board letterhead, her objections as cited in the letter were not the opinions of the School Board, but of Ms. Chisolm as a private individual. Others on the School Board were given the exact same form letter to submit if they so choose. Her concerns about the permit are related to the potential for sales of alcohol to under-aged people, given Petitioner’s proximity to FSU. She has not been to Petitioner’s store, has not seen any loitering around it, and was also unaware that the temporary permit had been issued.

26. Carrie Sutton, Vice-President of the Development Board at FSU, wrote an objection letter and also testified at the hearing. She expressed concern that an ABC permittee across the street from FSU would be detrimental to the positive image the local community is trying to cultivate in the area. She has never been to Petitioner’s store, was not aware that they had had a temporary permit, and has no knowledge of any negative behavior arising out of the store’s operation.

27. Ronnie Smith, a longtime Fayetteville resident, former law enforcement officer and a licensed private investigator, testified that he identified the three locations closest to FSU that have ABC permits: a V-Point, .4 miles away from the east side of campus; a BP station, .5 miles away from the southern edge of campus; and a Food Market, .7 miles west of campus.

28. The preponderance of the evidence shows that the concerns cited by Respondent’s witnesses – trash, loitering, under-age drinking, general “negative” behavior - were not caused by or otherwise related to Petitioner’s business, despite the fact that Petitioner had been issued a temporary permit and had sold alcohol for a period of more than three months. Rather, the evidence was that the entire neighborhood surrounding the university has suffered from a less than desirable reputation for some time prior to Petitioner’s presence, and that Petitioner’s business is clean, safe, and otherwise free from the problems with which Respondent’s witnesses are concerned.

29. There was no evidence that the Commission did any investigation into the concerns of the community other than the ALE investigative report, which was positive.

30. The preponderance of the evidence shows that at the time the Commission made its decision to deny the permit, the investigative report provided to it showed that Petitioner and the location met all of the standards necessary to qualify for issuance of an ABC permit.

5 31. The preponderance of the evidence shows that the LGO was based, in part, on a mischaracterization of the local community based on a historical poor perception of the neighborhood, which has nothing to do with this property in particular.

32. The preponderance of the evidence shows that at the time the Commission made its decision to deny the permit, there was no relevant and material evidence that the operation of the store with an ABC permit at that location would be detrimental to the neighborhood. In fact, the brief history of the Petitioner selling alcohol at that location demonstrates that permitting that location would not be detrimental to the neighborhood.

CONCLUSIONS OF LAW

1. The Office of Administrative Hearings has jurisdiction over the parties and the subject matter in this contested case.

2. The grounds for denial cited in the Official Notice of Rejection were the location’s “proximity to a school with a history of underage drinkers and objections from the community. . . . [and] concerns from the community and university regarding the detrimental effect this type of establishment would have on the area.” There were no objections to the applicant.

3. From the evidence presented, primarily the communities concerns are based on a historical perception that the area is generally less than desirable. There is no evidence that this perception is based on fact other than historical, and certainly no evidence that is particular to this location.

4. The Investigative Report completed by Respondent’s agent indicates that Petitioner met all statutory criteria necessary for issuance of an ABC permit at Petitioner’s location.

5. The Investigative Report indicates that an ABC permittee has operated at Petitioner’s location in the past.

6. The Investigative Report is devoid of evidence that Petitioner had ABC violations at that location at any time. There is no evidence of record that Petitioner has had ABC violations at any of his other permitted locations in the Fayetteville area.

7. The testimony of each of Respondent’s witnesses, each of whom wrote a letter objecting to issuance of the permit at that location, was that there were no problems or negative effects of Petitioner’s operation, even while the Petitioner had a temporary permit for more than three months and did in fact sell alcohol at this location. Thus, the grounds for the LGO’s objection that are based on detrimental effect are contrary to fact and of little probative value.

8. Dr. James Anderson, Chancellor of FSU, testified that although the Petitioner’s location is close to the university, the university does not have a “history of under-aged drinkers”

6 as contended by Karen McDonald, City Attorney for Fayetteville, in the LGO. Thus, the foundation for the LGO’s objection that is based on this contention is not grounded in fact.

9. Respondent’s head of permitting, who signed the Official Notice of Rejection, testified that the contents of the letters submitted to Respondent were general objections, not specific to Petitioner, and that they were insufficient to deny issuance of Petitioner’s permit.

10. The decision to deny the permit based on the Local Government Opinion, when said opinion is grounded in facts that are erroneous or of little probative value, is not justified.

11. The preponderance of evidence establishes that the Commission acted erroneously and acted arbitrarily or capriciously in denying Petitioner’s application for off- premises malt beverage, fortified wine, and unfortified wine permits.

12. In Lewis v. N. Carolina Dept. of Human Res., 92 N.C. App. 737, 740, 375 S.E.2d 712, 714 (1989) the Court of Appeals articulated the “arbitrary and capricious” standard:

The “arbitrary or capricious” standard is a difficult one to meet. Administrative agency decisions may be reversed as arbitrary or capricious if they are “patently in bad faith,” id., or “whimsical” in the sense that “they indicate a lack of fair and careful consideration” or “fail to indicate ‘any course of reasoning and the exercise of judgment’....” Other jurisdictions have found that imposing procedural requirements-even those “within the letter of the statut[e]”-may be arbitrary and capricious if that imposition “result[s] in manifest unfairness in the circumstances.” (Internal citations and references omitted).

13. The Supreme Court has adopted this standard as well. See e.g.; Mann, 356 N.C. 1 at 16, 565 S.E.2d 9 at 19 (2002)

14. The actions taken in denying this applicant’s permits “indicate a lack of fair and careful consideration” and “fail to indicate any course of reasoning and the exercise of judgment.” Further, while the denial of permits may have been within the letter of the law, “it results in manifest unfairness” under the circumstances of this particular contested case.

15. The Petitioner established by the preponderance of the evidence that it was entitled to the permit for which it applied.

DECISION

Based upon the foregoing Finding of Fact and Conclusions of Law, the undersigned Administrative Law Judge recommends that the Respondent’s “Official Notice of Rejection” be REVERSED and Petitioner be granted ABC permits.

7 It is hereby ordered that the agency serve a copy of the final decision on the Office of Administrative Hearing, 6714 Mail Service Center, Raleigh, NC 27699-6714, in accordance with G.S. §150B-36(b).

NOTICE

The agency making the final decision in this contested case is required to give each party an opportunity to file exceptions to this recommended decision and to present written arguments to those in the agency who will make the final decision. G.S. §150B-36(a).

The agency is required by G.S. §150B-36(b) to serve a copy of the final decision on all parties and to furnish a copy to the parties’ attorney on record and to the Office of Administrative Hearings.

The agency that will make the final decision in this contested case is the NC Alcoholic Beverage Control Commission.

This is the 1st day of May 2012.

______Donald W. Overby Administrative Law Judge