Sands Fenwick, Inc. v. Alcohol Beverage Control Appeals Commission ( 2022 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
SANDS FENWICK, INC., :
t/a FENWICK SHORES, a :
Tapestry Hotel by Hilton:
:
Appellant, :
:
v. : C.A. No. S21A-10-002 CAK
:
:
ALCOHOL BEVERAGE CONTROL :
APPEALS COMMISSION, :
:
Appellee. :
Submitted: May 2, 2022
Decided: May 31, 2022
Appeal from the Decision of the Alcohol Beverage Control Appeals Commission
dated October 5, 2021
DENIED
MEMORANDUM OPINION AND ORDER
Timothy G. Willard, Esquire, Fuqua, Willard & Schab, P.A., 26 The Circle, P.O.
Box 250, Georgetown, DE 19947, Attorney for Appellant.
Adria B. Martinelli, Esquire, Deputy Attorney General, Delaware Department of
Justice, 820 North French Street, Wilmington, DE 19801, Attorney for Appellee.
KARSNITZ, R. J.
1
BACKGROUND
Sands Fenwick, Inc, trading as Fenwick Shores, a Tapestry Hotel by Hilton
(“Appellant”) is a hotel at 1501 Coastal Highway, Fenwick Island, Delaware.
Appellant applied for a liquor license from the Alcoholic Beverage Commissioner
(the “Commissioner”) to serve alcohol to its guests. The license application also
included variance requests for food and beverage (including alcohol) service on the
second-floor café pool area with a wet bar, speakers, and a paging system.1 The café
is accessible directly from the outside of the hotel without passing through the lobby.
There is no door at the entrance to the café. The bar at the café would be open to the
public. The café measures approximately 15 x 20 feet with 23 chairs, 8 or 9 stools
at the bar and faces Coastal Highway.
On October 20, 2020, the Commissioner held a public hearing on the
application. A number of residents filed letters of opposition or participated in the
hearing (the “Opposing Residents”). The record below includes letters from
Opposing Residents who represented that they lived within one mile of Appellant
and opposed the granting of an alcohol license on the outside patio. Many of the
Opposing Residents who testified at the hearing objected to the outdoor bar, live
1
Wet bars, live entertainment, external speakers, paging systems, and amplification systems are
forbidden on permitted patios, but a variance may be granted at the discretion of the Commissioner.
4 Del. Admin. C. § 704 (6.0, 7.0).
2
entertainment, the external speakers and paging system, and the related noise and
crowds. They alleged that such noise, crowds, and related behavior would be
contrary to the quiet, family-oriented quality of life for which Fenwick Island is
known. Some of the Opposing Residents were represented by counsel, while others
appeared pro se. The Commissioner stated that the following Opposing Residents
participated in the hearing and were therefore parties to the proceedings: Andrew
Bellwar, Richard Benn, Janice Bortner, Mr. Burns, Vicki Carmean, Ginny Clark,
Liane DesRoches, Peter Frederick, Jody Hayden, Warren Hayden, Paul Icard,
Richard Klein, Susan Klein, Amy Kyle, Julie Lee, Natalie Magdeburger, Jacqueline
Napolitano, Melanie Pauley, Kelly Perry, Pamela Pridgeon, Ann Raskausas,
William Rymer, Colleen Sanford, Ms. Tracy, Gail Warburton and Nelli Westwater.
On May 14, 2021, the Commissioner issued a written decision finding that
Appellant met the requirements for a patio permit, but denied the requested variance
for a wet bar and external speakers located on the second-floor café, concluding that
Appellant did not demonstrate good cause for these variances. The Commissioner
noted that, for the variances to be approved, the applicant must show “good cause”
for permitting the forbidden amenities such as external speakers or live
entertainment. He further noted that “good cause” is not defined in the statute but
generally defined to mean that a “party has provided sufficient enough evidence and
3
justification to convince a tribunal to decide a certain way . . . . This Office concludes
the applicant provided no evidence to support the requested variances.”2 The
Commissioner’s decision observed that “[n]o other hotels or restaurants in Fenwick
Island have an outdoor bar.”3 The decision also noted the citizens’ concerns about
the outdoor wet bar, live entertainment, the external speakers and paging system,
and the related noise and associated crowds.
Appellant appealed the Commissioner’s denial of the variances to the Alcohol
Beverage Control Appeals Commission (the “Appeals Commission”). Appellant
submitted a written argument to the Appeals Commission, and a hearing was held
on August 17, 2021. The Appeals Commission reserved its decision, and published
a Notice of Public Meeting for August 25, 2021, for deliberation and decision.
Appellant was present for the August 25th deliberations. After discussion at the
August 25th meeting, the Appeals Commission voted to affirm the Commissioner’s
decision. A written decision and order were issued by the Appeals Commission on
October 5, 2021.
On October 15, 2021, Appellant filed a Notice of Appeal of the Appeals
Commission’s decision in this Court. Appellant named only the Appeals
2
Appendix filed with Appellant’s Opening Brief at 74.
3
Id. at 71.
4
Commission as a party to the proceedings. Nothing filed with this Court to initiate
the appeal identifies any of the Opposing Residents as parties to the appeal. The
docket reflects that a writ was issued and served on former counsel for some of the
Opposing Residents; however, that counsel indicated he was no longer representing
any of the Opposing Residents for purposes of this appeal. There is no evidence in
the record to suggest that Appellant made any further attempt to serve or provide
notice of this appeal to the Opposing Residents.
Appellant filed an opening brief in support of its appeal on January 3, 2022.
Appellee filed its answering brief on January 24, 2022, and Appellant filed a reply
brief on February 15, 2022. I held oral argument on April 1, 2022, at which I
directed counsel to file supplemental memoranda on the effect of the failure to name
the Opposing Parties on jurisdiction; counsel filed these memoranda on May 2,
2022.
PROCEDURAL ISSUES
Before I address the substance of the appeal on the merits, I first address
whether I lack jurisdiction over this case because of the failure to join the Opposing
Residents as parties to the proceedings. Delaware law pertaining to the issuance of
an alcohol license provides that:
[i]f ten or more persons who reside or own property within one mile of
the premises where the [alcohol] license is to operate or in any
5
incorporated areas located within one mile of the premises where the
license is to operate file a protest against the issuance of the license with
the Commissioner within thirty days from the filing of the application,
then a hearing must be held to consider the application and protest and,
specifically, the concerns of the members of the community within
which the license is to operate.4
As noted above, the Commissioner stated that the Opposing Residents were “parties”
to the proceeding. I agree. A “party” is defined as “each person or agency named
or admitted in any agency proceeding as a party, or properly seeking and entitled as
of right to be admitted as a party to an agency proceeding.”5 A person acting as a
“party” at a hearing would be evidenced by the person’s actual participation as a
member of a group, testifying, cross-examining witnesses, and arguing a position.6
Since the Opposing Residents were not named as parties to this appeal, I must
decide (1) whether the Opposing Parties are necessary parties;7 (2) if so, whether
Appellant’s Notice of Appeal can be amended to include the necessary parties after
the time for perfecting an appeal has elapsed;8 and (3) if joinder is not feasible,
whether the unnamed parties are indispensable parties, and the action should be
dismissed.9
4
4 Del. C. § 541(b).
5
29 Del. C. § 10102(g).
6
Newsome v. Delaware Alcoholic Beverage Control Comm., 1993 WL 258712 at *2 (Del. Super.
July 1, 1993).
7
Super. Ct. Civ. R. 19(a).
8
Id.9
Super. Ct. Civ. R. 19(b). See Trone v. Delaware Alc. Bev. Control Comm’n, 2000 WL 33113799at *4 (Del. Super. Dec. 28, 2000).
6
Necessary Parties
Under this Court’s Civil Rules, a party shall be joined if:
(1) in the person’s absence complete relief cannot be accorded among
those already parties, or (2) the person claims an interest relating to the
subject of the action and is so situated that the disposition of the action
in the person’s absence may . . . as a practical matter impair or impede
the person’s ability to protect that interest.10
“It is well settled that all parties to an appeal who would be directly affected by an
appellate ruling should be made parties to the review proceeding. . . . The rule is ‘a
fundamental question of jurisdiction, which cannot be waived by the parties or
disregarded by the appellate court, and the latter has no power to hear and determine
a case unless all the parties directly affected by the judgment . . . are brought before
it.’”11
In my view, the Opposing Residents, who filed protests and/or participated in
the Commissioner’s hearing below, have an interest in the subject of this action. As
stated above, they were specifically identified as “parties” in the Commissioner’s
decision. If the decision of the Commissioner as affirmed by the Appeals
Commission is reversed, the variance could be granted and alcohol could be served
on the patio, which was opposed by the Opposing Residents. Clearly the Opposing
10
Super. Ct. Civ. R. 19(a).
11
Schlosser & Dennis, LLC v. City of Newark Bd. of Adjustment, 2016 WL 2766119, at *4 (Del.
Super. May 9, 2016) (citing Covey v. Bd. of Adjustment of Sussex Cnty., 2002 WL 970469, at *2
(Del. Super. May 7, 2002)).
7
Residents have an interest in the subject of the action as parties to the agency
proceeding and neighbors of the proposed variance.12 In my view, the absence of
the Opposing Residents from the action also impairs their ability to protect their
interests.13
Appellant points out that the Commissioner’s notice to the Appeals
Commission did not name the Opposing Residents, and that the Appeals
Commission served only Appellant’s counsel and former counsel for the Opposing
Residents, and not the Opposing Residents themselves.14 Since the Commissioner
and the Appeals Commission “controlled” the appellate process, argues Appellant,
it should not be penalized for the failure of the Commissioner and the Appeals
Commission to name the Opposing Residents. I agree that all parties are responsible
for this failure, but this does not absolve Appellant or remove the jurisdictional
defect discussed herein.
12
See Trone, 2000 WL 33113799 at *4; Newsome v. Del. Alc. Bev. Comm’n, 1993 WL 258712 at
*2 (Del. Super. July 1, 1993).
13
See Trone, 2000 WL 33113799 at **4-6 (holding that the Appeals Commission may not
adequately protect the unnamed parties’ interests even when the same end is pursued, because the
unnamed party had more at stake); Hackett v. Board of Adjustment of City of Rehoboth Beach,
794 A.2d 596, 598 (Del. 2002) (holding that while the Board was a nominal party to the appeal,
as the tribunal it has no “interest” in the outcome of judicial review).
14
Former counsel for the Opposing Residents had ceased representing some of the Opposing
Residents and had never represented all the Opposing Residents. Thus, as in Hackett, there is no
basis in the record to impute an ongoing attorney-client relationship, nor would such a relationship
alone create an agency relationship supporting constructive notice.
8
Joinder
Having decided that the Opposing Residents are necessary parties, I next turn
to whether Appellant’s Notice of Appeal can be amended to include the necessary
parties after the prescribed time for perfecting the appeal has elapsed. The statute
of limitations expired thirty days after the Appeals Commission decision was mailed
on October 5, 2021.15 The question, therefore, is whether added claims against the
Opposing Residents “relate back” to the original pleading, such that the notice of
appeal can be amended to include them.16 An amendment to a pleading filed after
the running of the statute of limitations relates back to the original filing date when
the party brought in by the amendment has received notice and “knew or should
have known that, but for a mistake concerning the identity of the proper party, the
action would have been brought against the party.17 As a general rule, appellate
courts in Delaware should “decide the substantive merits of appeals whenever
possible.”18 However, this general rule does not apply to administrative appeals to
this Court, because such application “would supersede the analysis otherwise
required by Superior Court Civil Rules 15 and 19.”19
15
A105.
16
Super. Ct. Civ. R. 15(c).
17
Super. Ct. Civ. R. 15(c)(3).
18
Sussex Med. Investors, L.P. v. Delaware Health Res. Bd., 1997 WL 524056 (Del. Super. Apr.
8, 1997) (citing State Pers. Comm’n v. Howard, 420 A.2d 135, 137 (Del. 1980)).
19
Sussex Medical, 1997 WL 524056 at *3.
9
Delaware law also strictly construes the term “mistake:”
“[A] mistake occurs when the petitioner makes a true mistake as to the
identity or name of the proper party as opposed to where the plaintiff
merely chose the wrong party to sue. That is, ‘[Delaware] courts
generally decline to find a mistake when the plaintiff cannot
demonstrate an intent to include the unnamed party before the
limitations period expired but will find a mistake if the plaintiff
intended to sue certain parties but was misled as to the identity of those
parties.’” 20
This Court “held, and the Supreme Court affirmed, that the petitioners did not make
a mistake as to the identity of the proper party because [that party] participated in
the hearing below, was known to the appellants, ‘and the identity of the proper party
was not difficult to ascertain.’”21 The Court laid out the three-prong test to determine
whether claims against unnamed defendants can “relate back” to the date of the
filing of the original pleading: (1) the claim asserted in the amended pleading must
arise out of the same conduct or occurrence set forth in the original pleading; (2) the
party to be added by the amendment must receive notice of the action within the
required statutory period; and (3) within the same statutory period, the party to be
added to the action knew or should have known that but for a mistake concerning
the identity of the proper party, the action would have been brought against the party
20
Difebo v. Bd. of Adjustment of New Castle Cty., 132 A.3d 1154, 1158 (Del. 2016) (citing CCS
Inv'rs, LLC v. Brown, 977 A.2d 301, 313 (Del. 2009)).
21
Brown v. City of Wilmington, 2007 WL 1828261 at *8 (Del. Super. June 25, 2007).
10
sought to be added to the pleading.22 In this case, the first prong of the test is
satisfied because the amendment would involve the same conduct or occurrence set
forth in the original appeal. Appellant does not satisfy the second prong of the test,
because there is no evidence that the Opposing Residents received notice of the
action within the required statutory period, aside from service on the former counsel
of some of the Opposing Residents. Even as to those residents, who were at one time
represented by counsel, such notice is insufficient.23 Appellant does not satisfy the
third prong of the test because there is no evidence that the Opposing Parties “knew
or should have known” of the appeal “but for a mistake concerning the identity of
the proper party.”24 Appellant “did not make a mistake as to the identity of the proper
party because [that party] participated in the hearing below, was known to the
appellants, ‘and the identity of the proper party was not difficult to ascertain.’”25
Appellant has not demonstrated an intent to include the unnamed party before the
limitations period expired.26
22
Id.23
Id. at *10 (noting that an appellant may not assume that an ongoing attorney-client relationship
exists at the close of an administrative proceeding).
24
Id. at *8.
25
Id.
26
Id. at *12-14 (citing Trone, 2000 WL 33113799 at *4, aff'd, Trone v. Delaware Alcoholic
Beverage Control Comm'n, 757 A.2d 1278 (Del. 2000); Johnson v. Paul's Plastering, Inc., 1999
WL 744427, at *2 (Del. Super. July 30, 1999); Mancari v. A.C. & S., Inc., C.A. No. 82C-JL-80,
Poppiti, J. (Del. Super. Nov. 1, 1985) (not available on-line); Levine v. New Castle County
Vocational-Technical Sch. Dist., C.A. No. 81C-AP-14, O'Hara, J., at 506 (Del. Super. July 20,
1983) (not available on-line)).
11
In my view, this is not a case of “mistake.” The Opposing Residents were
identified as parties by name and known to Appellant, yet Appellant cannot
demonstrate that it attempted or intended to provide them with notice of this matter.
Thus, Appellant’s claims against the Opposing Residents cannot “relate back” to the
date of the filing of the original pleading. Therefore, even if the Opposing Residents
were joined to the original pleading, the claims against them would not have been
filed within the prescribed statute of limitations.
Indispensable Parties
Since joinder is not feasible here, I must determine whether the Opposing
Residents are indispensable parties.27 If a party is necessary for a just adjudication,
I must dismiss the action for failure to join an indispensable party if that party cannot
be joined.28 The four factors for determination of whether a party is “indispensable”
are: (1) the extent to which a judgment rendered in the person's absence might be
prejudicial to the person or those already parties; (2) the extent to which, by
protective provisions in the judgment, by the shaping of relief, or other measures,
the prejudice can be lessened or avoided; (3) whether a judgment rendered in the
person's absence will be adequate; and (4) whether the plaintiff will have an
27
Super. Ct. Civ. R. 19(b).
28
Brown, 2007 WL 1828261 at *3. See also Hackett, 794 A.2d at 598 (Del. 2002) (holding that
the property owner was an indispensable party to the appeal under Rule 15(b) and creates a “non-
amenable defect”).
12
adequate remedy if the action is dismissed for nonjoinder.29 Under these factors, I
find that the Opposing Residents are indispensable parties.
First, a decision granting the previously denied variance would prejudice the
Opposing Residents. Appellant argues that the Opposing Residents’ arguments
have already been made on appeal. However, although the Appeals Commission is
seeking the same result as the Opposing Residents in this case, their interests are
distinct.30 Second, there are no measures which can lessen the prejudice to the
Opposing Residents. To the extent any of them had constructive notice of this appeal
(there is no evidence of such constructive notice in the record), any potential for
them to intervene in the appeal does not control the determination of whether they
are indispensable.31 If, as advocated by Appellant, Appeals Commission’s decision
below was reversed, the variance would be granted to Appellant and the Opposing
Residents would have no further recourse. “There is no middle ground to lessen the
blow.”32 The alternatives proffered by Appellant (monitoring of the hotel’s
29
Super. Ct. Civ. R. 19(b).
30
See Trone, 2007 WL 1828261 at * 6 (holding that the Appeals Commission may not adequately
protect the unnamed parties’ interests even when the same end is pursued, because the unnamed
parties had more at stake); See also Hackett, 794 A.2d at 599 (holding that while the Board was a
nominal party to the appeal, as the tribunal it has no “interest” in the outcome of judicial review).
31
See Sussex Medical, 1997 WL 524056 at *11 (holding that the successful applicants did not
have a duty to intervene to protect their interests); Trone, 2007 WL 1828261 at *7 (holding that
the prejudice to the unnamed party in an appeal of a decision by the Alcoholic Beverage Control
Commission “could not be lessened or avoided.”).
32
Trone, 2007 WL 1828261 at *7.
13
operation of the wet bar, limiting hours of operations) are not realistic. Third, a
judgment rendered in the Opposing Residents’ absence would be inadequate. The
Opposing Residents, who would be directly affected by a judgment on the merits of
this appeal, must be included in the appeal for the judgment to be adequate.33 Fourth,
I must consider whether Appellant would have an adequate remedy if the action
were dismissed for nonjoinder. Appellant can reapply for a variance at any time.
Appellant stated at oral argument that the Commissioner had specifically suggested
that Appellant do so. Appellant can appeal to the Delaware Supreme Court. Even if
there were no adequate remedy for Appellant, any equitable considerations in
conjunction with this factor are not sufficient to change the outcome. This Court has
considered this issue and dismissed the action for failure to join an indispensable
party, despite the lack of remedies for the appellant.34 Although Appellant “may well
not have an alternative forum” if the appeal is dismissed, “such dismissal . . . will
not offend equity and good conscience because nothing prevented [appellant] from
naming the [proper parties] in the first instance.”35
SUBSTANTIVE ISSUES
Even if I were to disregard the jurisdictional defect and consider this appeal
33
Id. (citing Sussex Medical, 1997 WL 524056 at *11).
34
Id. at *7; Sussex Medical, 1997 WL 524056 at **11-12.
35
Sussex Medical, 1997 WL 524056 at *12.
14
on the merits, I would still deny it, for the reasons discussed below.
Standard of Review
My review of a decision by the Appeals Commission, in the absence of fraud,
shall be limited to “whether the agency’s decision is supported by substantial
evidence on the record and is free from legal error.”36 “The Superior Court’s review
shall take into account the experience and specialized competence of the agency and
the purpose under which the agency acted.”37 “Substantial evidence means such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.”38 It is greater than a scintilla but less than a preponderance of the
evidence.39 As such, “[i]t is a low standard to affirm and a high standard to
overturn.”40 I do not weigh the evidence, resolve questions of credibility, or make
my own factual findings. I simply determine whether the evidence is legally
adequate to support the agency’s factual findings.41 “[I]f the Board’s findings and
conclusions are found to be based upon substantial evidence and there is no error of
law, the Board’s decision must be affirmed.”42
36
4 Del. C. § 541(d) (referencing the Administrative Procedures Act, Title 29, Chapter 101).
37
Id.
38
Delaware Alcoholic Beverage Control Comm’n v. Newsome, 690 A.2d 906, 910 (Del. 1996)
(citations omitted).
39
Id.40
Rooney v. Del. Bd. of Chiropractic, 2011 WL 2088111, at *3 (Del. Super. Apr. 27, 2011).
41
Johnson v. Chrysler Corp., 213 A.2d 64, 66 (Del. 1965).
42
Sokoloff v. Bd. of Med. Practice, 2010 WL 5550692, at *5 (Del. Super. Aug. 25, 2010) (emphasis
supplied).
15
Substantial Evidence and Good Cause
In applying this standard, Appellant argues that it established substantial
evidence supporting good cause for the variances as an “integral amenity.”
Appellant contends that both the Commissioner and the Appeals Commission
ignored evidence presented by Appellant that a luxury hotel of this caliber, which is
part of the Hilton Hotels’ Tapestry Hotel brand, requires the variances as an essential
part of its amenities, and that potential guests of this type of hotel insist on such
amenities. However, the applicable regulations provide that a patio shall have no
external speakers, audible paging system, or wet bar absent a variance shown for
good cause: “The Commissioner may authorize variances for good cause shown to
the inspection standards for individual patio requests.”43 In this case, the
Commissioner found, and the Appeals Commission affirmed, that good cause was
not shown for patio variances for the patio given the objections of the Opposing
Residents. Although Appellant asserted that the patio area would be accessible only
to hotel guests, the café is accessible directly from the outside of the hotel without
passing through the lobby. There is no door from the outside, just open steps to the
café. The bar at the café would be open to the general public. The Opposing
Residents testified that they were opposed to the Commissioner granting a variance
43
4 Del. Admin. C. § 704 (6.0, 7.0).
16
for the café because it would disrupt the family-oriented nature of the town.
Substantial evidence supports the Commissioner’s finding that good cause was not
demonstrated for granting a variance for the café area, permitting external speakers,
a wet bar, and live entertainment on the outdoor patio given the objections of the
Opposing Residents. Furthermore, the regulations provide that the Commissioner
“may” grant variances for good cause, which means the grant is discretionary.44
Thus, even if I might find that good cause was shown for a variance, the
Commissioner retains discretion as to whether to grant the variance, and I will not
substitute my judgment for that of the Commissioner.
CONCLUSION
For the reasons stated above, this appeal must be dismissed because of the
inability to join indispensable parties. Even were I to consider the merits of the
appeal, the record contains substantial evidence to support the decision of the
Commissioner and the Appeals Commission, and Appellant has not demonstrated
any error of law. Therefore, I DENY Appellant’s appeal from the decision of
the Appeals Commission. This appeal is DISMISSED.
44
Jama v. Immigr. & Customs Enf't, 543 U.S. 335, 346 (2005).
17
IT IS SO ORDERED.
/s/ Craig A. Karsnitz
cc: Prothonotary
18