              IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Avalon Country Club at Sharon, Inc., :
                  Petitioner         :
                                     :
           v.                        : No. 1691 C.D. 2015
                                     : Argued: April 12, 2016
Department of Health, Bureau of      :
Health Promotion and Risk            :
Reduction,                           :
                  Respondent         :


BEFORE:         HONORABLE MARY HANNAH LEAVITT, President Judge
                HONORABLE ROBERT SIMPSON, Judge
                HONORABLE DAN PELLEGRINI, Senior Judge


OPINION NOT REPORTED


MEMORANDUM OPINION BY
SENIOR JUDGE PELLEGRINI                                         FILED: May 2, 2016


                Avalon Country Club at Sharon, Inc. (Avalon) has appealed the
Pennsylvania Department of Health’s (Department) denial of its request for exception
from the Clean Indoor Air Act’s (CIAA)1 general prohibition against smoking in
public places by allowing it to operate a tobacco shop and cigar bar at its facility
located at 1030 Forker Boulevard, Hermitage, Pennsylvania. We affirm.2




      1
          Act of June 13, 2008, P.L. 182, 35 P.S. §§637.1-11.

      2
          This matter was decided without a hearing and the parties agree that no facts are in dispute.
               Section 3(a) of the CIAA provides that “an individual may not engage in
smoking in a public place.” 35 P.S. §637.3(a). Pursuant to Section 2 of the CIAA, a
public place includes an enclosed area which serves as a commercial establishment or
an area where the public is invited or permitted, including a facility which provides
food services. Section 3(b) of the CIAA provides for the exceptions to this general
prohibition, which include, inter alia, tobacco shops and cigar bars.                         35 P.S.
§§637.3(b)(3), (9).


               On September 5, 2008, Avalon filed with the Department’s Bureau of
Health Promotion and Risk Reduction (Bureau) two applications for exceptions. The
first exception sought by Avalon was for a Tobacco Shop, which is allowed by
Section 3(b) of the CIAA, 35 P.S. §637.3(b)(3). Section 2 of the CIAA defines a
“Tobacco Shop” as follows:

               ‘Tobacco shop.’ A business establishment whose sales of
               tobacco and tobacco-related products, including cigars, pipe
               tobacco and smoking accessories, comprise at least 50% of
               the gross annual sales. This term does not include a stand-
               alone kiosk or establishment comprised solely of cigarette
               vending machines.


35 P.S. §637.2. The second exception sought by Avalon was to operate a Type I
Cigar Bar in the same building as the Tobacco Shop.3 Section 3(b) of the CIAA, 35
P.S. §637.3(b)(9). Section 2 of the CIAA defines a Type I Cigar Bar as:

       3
         A Type II exception is allowed by subsection (2) of the definition. It allows a cigar bar to
apply for an exception before, on or after September 11, 2008, the effective date of the CIAA, if the
establishment meets the following requirements: (1) the establishment has a valid restaurant liquor
license or an eating place retail dispenser license; and (2) the establishment has total annual sales of
tobacco products, including tobacco, accessories or cigar storage lockers or humidors, of at least
(Footnote continued on next page…)

                                                   2
              (1) An establishment which, on the effective date of this
              section, operates pursuant to an eating place retail
              dispenser’s or restaurant liquor license under the act of
              April 12, 1951 (P.L. 90, No. 21), known as the Liquor
              Code, and is physically connected by a door, passageway or
              other opening and directly adjacent to a tobacco shop.


35 P.S. §637.2 (citation omitted).          As can be seen, Avalon’s applications for
exceptions are intertwined because, without an approved exception to operate a
Tobacco Shop, Avalon cannot operate a Type I Cigar Bar.


              In its Tobacco Shop exception application, Avalon represented that it
met all of the criteria because the Tobacco Shop that it proposed was a business
establishment, and its sales of tobacco and tobacco-related products, including cigars,
pipe tobacco and smoking accessories, were equal to or greater than fifty percent
(50%) of the gross annual calendar year sales of that establishment’s sales.


              As to the Cigar Bar exception application, Avalon contended that it met
all of the Type I Cigar Bar requirements because it had a valid restaurant liquor
license, it was physically connected by a door, passageway or other opening, and it
was directly adjacent to a tobacco shop. As part of the application, Avalon included a
no objection letter to the Cigar Bar application from the Pennsylvania Liquor Control
Board (PLCB). That letter identified 13 serving areas in the restaurant where alcohol
could be served, of which Avalon identified four of those areas as the “Cigar Bar.”
One area (consisting of an area that is 33’ x 16’ x 20’ x 13’) was the location of the

(continued…)

fifteen percent (15%) of the combined gross sales of the establishment. Section 2 of the CIAA, 35
P.S. §637.2.


                                               3
proposed Tobacco Shop, a U-shaped area with open doors that lead to the main lobby
of the country club. There is also an entrance into the Cigar Bar from the lobby. The
remaining areas identified by Avalon were part of a non-smoking restaurant. No
walls separate the smoking and non-smoking sections of the “Cigar Bar” from the
restaurant; rather, the Cigar Bar portion is merely separated from the non-smoking
areas of the restaurant by a large bar. (Finding of Fact 12.)


             After one of its agents visited the premises, the Bureau denied both of
Avalon’s exceptions by letter dated October 1, 2009. The letter denied the Cigar Bar
application because the identified smoking area did not comply with the statutory
requirement that it must be physically separate from the eating area and did not have
a separate air system or a separate outside entrance.           As to the Tobacco Shop
application, the Bureau found that application deficient because it did not include
food, alcohol or other sales that are usually generated at a business establishment of a
country club such as Avalon, making it impossible to calculate whether the Tobacco
Shop projected sales met fifty percent (50%) or more of the gross sales requirements.
On October, 7, 2009 Avalon filed a petition for reconsideration which, on March 19,
2010, the Bureau denied for the same reasons. Avalon timely appealed the Bureau’s
denial of the exception requests to the Secretary of Health on March 24, 2010.


             For reasons not explained, the Department did not certify the record until
September 8, 2014. Avalon was permitted to supplement the record with an affidavit
from its Chief Administrative Officer stating that the Tobacco Shop was being
operated by Havana Cigar Shop, Inc., a separate legal entity formed by Avalon for
the sole purpose of complying with the CIAA. This was the first time it informed the
PLCB that it was not the applicant. By having a separate corporation – albeit wholly


                                           4
owned by Avalon – Avalon was not the actual operator of the Tobacco Shop. As a
result, it contended that it did not need to include Avalon’s sales in the Tobacco
Shop’s projected revenue.      The Department then requested that Avalon submit
additional evidence regarding its corporate governance.


             The Department denied the appeal, finding that Avalon failed to
establish that it is entitled to an exception for a tobacco shop under Section 3(b)(3) of
the CIAA, 35 P.S. §637.3(b)(3), because the Havana Cigar Shop, Inc. and not Avalon
is the party of interest entitled to seek an exception for the Tobacco Shop. It also
found that Avalon failed to meet its burden of proof that it is entitled to an exception
to operate a cigar bar under Section 3(b)(9) of the CIAA, 35 P.S. §637.3(b)(9),
because the proposed Cigar Bar is located within a restaurant and is not connected to
or adjacent to the Tobacco Shop. Avalon filed this appeal, though not challenging
any of the Findings of Fact, contending that the Department erred in denying the
exceptions for both the Tobacco Shop and the Cigar Bar.


                                           I.
                                           A.
             Regarding the Cigar Bar, Avalon contends that the Department erred in
finding that it is not “physically connected by a door, passageway, or other opening
and directly adjacent to a tobacco shop.” Section 2 of the CIAA, 35 P.S. §637.2. The
Department takes the position that the Cigar Bar is not “adjacent” to the Tobacco
Shop because adjacent means “lying near or close to, but not necessarily touching.”
According to the Department, because the Tobacco Shop is within the same building
as the country club, the Cigar Bar cannot be “adjacent to” the Tobacco Shop.
However, just because a tobacco shop is in the same building does not mean that it


                                           5
cannot be physically connected or adjacent to a cigar bar. Having not otherwise
contended that it is not adjacent to the Tobacco Shop, we find the Department erred
in denying the application for the Cigar Bar on this basis.


                                           B.
             Even if it was adjacent to the Tobacco Shop, the Cigar Bar exception
would still be denied based on the Department’s finding that a cigar bar cannot be
located in a restaurant. Avalon contends that under Section 2 of the CIAA, 35 P.S.
§637.2, a “cigar bar” is defined as “[a]n establishment which … operates pursuant to
an eating place retail dispenser’s or restaurant liquor license ... and is physically
connected by a door, passageway or other opening and directly adjacent to a tobacco
shop.” According to Avalon, this definition means that it can operate a cigar bar
within a restaurant. Avalon notes that this definition does not require that a cigar bar
be housed in its own separate building. In essence, what it is arguing is if you are
granted an exception for a tobacco shop, then you can operate a cigar bar in an
establishment with a restaurant liquor license with both smoking and non-smoking
sections.


             While we agree with Avalon that a cigar bar may operate in a restaurant
with a retail liquor license, that does not mean that Avalon can operate a cigar bar in a
restaurant with a retail liquor license that has both smoking and non-smoking
sections. What it means is that the entire Cigar Bar smoking area must be permitted
everywhere throughout the restaurant with the retail liquor license.


             What is proposed by Avalon, a restaurant with smoking and non-
smoking sections, is not a cigar bar, but a normal restaurant which is a “public place.”


                                           6
As defined in Section 2 of the CIAA, 35 P.S. §637.2, a public place is “an enclosed
area which serves as a workplace, commercial establishment or an area where the
public is invited or permitted.” This includes, among other things, a facility which
provides “food,” i.e., a restaurant. No smoking is permitted in an establishment that
serves food – even if it has a retail liquor license – unless it falls within the exception
set forth in Section 3(b)(10) of the CIAA, 35 P.S. §637.3(b)(10), which allows
smoking in a drinking establishment.


             Section 2 of the CIAA defines a Type II Drinking Establishment as:

             An enclosed area within an establishment which, on the
             effective date of this section:

                   i. Operates pursuant to an eating place retail
             dispenser’s license, restaurant liquor license or retail
             dispenser’s license under the Liquor Code [Act of April 12,
             1951 (P.L. 90, No. 21)];

                   ii. Is a physically connected or directly adjacent
             enclosed area which is separate from the eating area, has a
             separate air system and has a separate outside entrance;

                    iii. Has total annual sales of food sold for on-
             premises consumption of less than or equal to 20% of the
             combined gross sales within the permitted smoking area of
             the establishment; and

                    iv. Does not permit individuals under 18 years of
             age.


35 P.S. §637.2. The statutory scheme then is that a public place that has a retail or
restaurant liquor license should be smoke free unless it is (1) a “cigar bar” where
smoking is allowed everywhere, or (2) a “drinking establishment” which may be


                                            7
adjacent to a restaurant but is a separately enclosed space with a separate ventilation
system that protects customers in the smoke-free area from coming into contact with
that smoke.


              Because Avalon’s Cigar Bar exception application does not propose to
have smoking everywhere in the restaurant, it does not fall within the exception, and
the Department properly denied the exception on that basis alone.


                                          II.
              Avalon contends that the Department erred in denying the exception for
the Tobacco Shop because, although it applied for the exception, Havana Cigar Shop,
Inc. was the owner/operator. The Department based its denial on Section 3(c) of the
CIAA, 35 P.S. §637.3(c), which states that in order to obtain an exception to the
CIAA's smoking ban, “a drinking establishment, cigar bar or tobacco shop must
submit a letter, accompanied by verifiable supporting documentation, to the
department claiming an exception.” The evidence is undisputed that Avalon's Board
of Directors established a Tobacco Shop as a separate legal entity called the Havana
Cigar Shop, Inc.


              We agree with the Department that Section 3(c) of the CIAA requires
that an application for a tobacco shop exception be submitted by the owner/operator.
As the Department points out, it does make a difference here because whoever
applies for the exception must establish that the sales of tobacco do not exceed fifty
percent (50%) of its gross annual sales. If Avalon is the applicant, Avalon must
submit the application and establish that its sales of tobacco exceed fifty percent
(50%) of its gross annual sales – which it has failed to do. If, as Avalon claims, the


                                          8
Havana Cigar Shop, Inc. is the actual applicant, it must be the one to submit an
application for an exception. It argues that it should not be required to guess.


             Who is the applicant here also makes a difference as to whether we have
jurisdiction over this matter. If, as the Department claims, Avalon is the applicant,
we will affirm the Department’s decision because Avalon has not made out that sales
of tobacco exceed fifty percent (50%) of its gross annual sales. However, if Havana
Cigar Shop, Inc. is the applicant, we must quash the appeal because Havana Cigar
Shop, Inc. has not appealed that determination to us. Because we should not be
forced to guess and the only party before us is Avalon, we will affirm the
Department’s denial of Avalon’s application for a Tobacco Shop for the reasons
stated.


             Accordingly, for the foregoing reasons, we affirm the Department’s
decision.



                                 _____________________________________
                                 DAN PELLEGRINI, Senior Judge


Judge Simpson concurs in the result only.




                                            9
           IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Avalon Country Club at Sharon, Inc., :
                  Petitioner         :
                                     :
           v.                        : No. 1691 C.D. 2015
                                     :
Department of Health, Bureau of      :
Health Promotion and Risk            :
Reduction,                           :
                  Respondent         :




                                   ORDER


            AND NOW, this 2nd day of May, 2016, it is hereby Ordered that the
decision of the Department of Health, Bureau of Health Promotion and Risk
Reduction, is affirmed.



                              _____________________________________
                              DAN PELLEGRINI, Senior Judge
