                                                                 FILED
                                                            Feb 20 2018, 7:51 am

                                                                 CLERK
                                                             Indiana Supreme Court
                                                                Court of Appeals
                                                                  and Tax Court




ATTORNEYS FOR APPELLANTS                                   ATTORNEYS FOR APPELLEE
Ralph W. Staples, Jr.                                      Curtis T. Hill, Jr.
Indianapolis, Indiana                                      Attorney General of Indiana
Matthew M. Kubacki                                         Andrea E. Rahman
Indianapolis, Indiana                                      Deputy Attorney General
                                                           Indianapolis, Indiana



                                            IN THE
    COURT OF APPEALS OF INDIANA

255 Morris, LLC, et al.,                                   February 20, 2018
Appellants-Petitioners,                                    Court of Appeals Case No.
                                                           49A02-1701-MI-193
        v.                                                 Appeal from the Marion Superior
                                                           Court
Indiana Alcohol and Tobacco                                The Honorable James A. Joven,
Commission,                                                Judge
Appellee-Respondent.                                       Trial Court Cause No.
                                                           49D13-1604-MI-13760



Riley, Judge.




Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018              Page 1 of 12
                                 STATEMENT OF THE CASE
[1]   Appellants-Petitioners, 255 Morris LLC d/b/a Lenny’s Gentlemen’s Club, and

      Jeffrey Moe (Moe) (collectively, Appellants), appeal the trial court’s denial of

      their petition for judicial review of the Appellee-Respondent, Indiana Alcohol

      and Tobacco Commission’s (Commission), decision denying Moe’s renewal of

      a liquor license.


[2]   We affirm.


                                                     ISSUE
[3]   Appellants present us with one issue on appeal, which we restate as: Whether

      substantial evidence supported the Commission’s decision to deny a renewal of

      Moe’s license because the licensed premises had become a public nuisance

      pursuant to 905 IAC 1-27-2.


                       FACTS AND PROCEDURAL HISTORY
[4]   In February 2012, Moe purchased the real property located at 255 West Morris

      Street in Indianapolis, Indiana. Located on the property was Lenny’s

      Gentlemen’s Club (Lenny’s), a “Tavern operating as an Adult Cabaret,” which

      had operated at that venue for at least forty years. (Appellant’s Amended App.

      Vol. II, p. 133). Although Moe had initially purchased the property as an

      investment opportunity, approximately one month later, Moe incorporated 255

      Morris, LLC and “took over operations [at Lenny’s] when he saw there were

      illegal activities.” (Appellant’s Amended App. Vol. II, p. 133). In late 2014 or


      Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 2 of 12
      early 2015, Moe applied for renewal of Lenny’s permit to serve beer, wine, and

      liquor.


[5]   On March 16, 2015, the Alcoholic Beverage Board of Marion County (Local

      Board) conducted a hearing on Moe’s request for renewal. During the hearing,

      Moe presented evidence that since he took over Lenny’s, he has added more

      than fifty security cameras and hired security personnel to secure the premises.

      After instituting a “zero tolerance policy on drugs,” he barred “over fifty

      customers” and now searches the bags of every dancer and bartender.

      (Appellant’s Amended App. Vol. II, p. 155). He testified that after purchasing

      Lenny’s, he reached out to the local Pastor and attended neighborhood

      meetings. Several remonstrators to the request for renewal appeared at the

      hearing and presented evidence in opposition. As part of their evidence, a

      video recording was introduced, showing people loitering and drinking in the

      parking lot outside the establishment in the early hours of the morning, public

      urination, a person firing a weapon in the air, and bullet holes in the back of a

      neighbor’s garage. Officer David Hoffman, the District Commander of the

      Southwest District (Officer Hoffman), stated that while Moe’s “investment in

      security and in personnel [is] admirable, it is still spilling out into the

      neighborhood.” (Appellant’s Amended App. Vol. II, p. 176). Characterizing

      Lenny’s as “a hot spot for sure[,]” the officer concluded that the “business, the

      way it’s effecting [sic] the neighborhood right now is very negative.”

      (Appellant’s Amended App. Vol. II, p. 177). At the conclusion of the hearing,

      the Local Board denied the renewal of the permit. Moe appealed the decision.


      Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 3 of 12
[6]   On October 22, 2015, the Alcohol and Tobacco Commission conducted a

      hearing on Moe’s appeal of the Local Board’s decision. During the hearing,

      Moe presented evidence that there had been no police runs to Lenny’s in the

      past six months. He explained that he had fired security guards for

      “fraternization with the independent contract dancers” and had hired new

      security guards who escort all patrons leaving the premises to their vehicles to

      ensure there is no loitering in the parking lot. (Appellant’s Amended App. Vol.

      IV, p. 22). Officer William Carter, the nuisance abatement sergeant for

      Indianapolis Metropolitan Police District (Officer Carter), affirmed that after a

      spike in numbers for police runs in 2013, the numbers decreased “dramatically”

      in 2014 and continued this trend in 2015. (Appellant’s Amended App. Vol. IV,

      p. 54). However, Officer Carter cautioned that while the number of police runs

      trended downwards, it is the “seriousness of the runs” that should be taken into

      account—“[s]hots fired, [d]isturbance, [t]hings like that.” (Appellant’s

      Amended App. Vol. IV, p. 58). Again, several remonstrators presented

      evidence opposing the renewal of Lenny’s license. A video recording was

      admitted, establishing people loitering in the parking lot after 3:00 a.m., public

      urination, an intoxicated woman being carried from Lenny’s by two men, and a

      girl throwing her drink at another man. A remonstrator testified about “a

      photoshoot out there in the parking lot one night. Dancers coming out of the

      bar, going out there, . . . and they would take turns posing, pushing their boobs

      up, showing their ass, stuff like that.” (Appellant’s Amended App. Vol. IV, p.

      87). Empty alcohol containers and condom wrappers were found on the

      ground on the licensed premises and in neighboring yards.

      Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 4 of 12
[7]   On February 5, 2016, the hearing officer issued his findings of fact, conclusions

      of law, and order denying the permit renewal, based on, in pertinent part,

      “conduct in the parking lot of [Lenny’s] which not only may constitute what

      could be considered a public nuisance, but also threatens the health, peace, and

      morals of the citizens of the state[.]” (Appellant’s Amended App. Vol. III, p.

      41). The Commission adopted the findings on April 19, 2016. That same day,

      the excise police served a revocation order, but this court issued a stay of the

      revocation. On April 19, 2016, Moe filed a petition for judicial review with the

      trial court. On December 29, 2016, the trial court affirmed the Commission’s

      decision, concluding, in relevant part, that 905 Ind. Administrative Code 1-27-2

      properly defined what constitutes a public nuisance: a licensed premises

      becomes a public nuisance when “conduct prohibited by the Indiana Penal

      Code takes place.” (Appellee’s App. Vol. II, p. 105). Finding that the evidence

      in the record provided substantial evidence that violations of the Indiana

      criminal code occurred at Lenny’s and that the Commission’s decision was not

      arbitrary or capricious, the trial court affirmed the denial of Moe’s permit

      renewal application.


[8]   Moe now appeals. Additional facts will be provided as necessary.


                               DISCUSSION AND DECISION
                                              I. Standard of Review


[9]   While the legislature has granted courts the power to review the action of state

      government agencies taken pursuant to the Administrative Orders and

      Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 5 of 12
Procedures Act, this power of review is limited. Ind. Alcohol and Tobacco Com’n

v. Lebamoff Enterprises, Inc., 27 N.E.3d 802, 806 (Ind. Ct. App. 2015). A court

may only set aside agency action that is:


        (1) Arbitrary, capricious, an abuse of discretion, or otherwise not
            in accordance with law;


        (2) Contrary to constitutional right, power, privilege, or
            immunity;


        (3) In excess of statutory jurisdiction, authority, or limitations, or
            short of statutory right;


        (4) Without observance of procedure required by law; or


        (5) Unsupported by substantial evidence.


See I.C. § 4-21.5-5-14(d). An arbitrary and capricious decision is one which is

“patently unreasonable and made without consideration of the facts and in total

disregard of the circumstances and lacks any basis which might lead a

reasonable person to the same conclusion.” Peru City Police Dept. v. Martin, 994

N.E.2d 1201, 1204 (Ind. Ct. App. 2013), trans. denied. “In determining whether

an administrative decision is supported by substantial evidence, the trial court

must examine the whole record to determine whether the agency’s decision

lacks a reasonably sound basis of evidentiary support.” Ind. Alcoholic Beverage

Comm’n v. River Rd Lounge, Inc., 590 N.E.2d 656, 658 (Ind. Ct. App. 1992),

trans. denied. “The party seeking judicial review bears the burden to


Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 6 of 12
       demonstrate that the agency’s action is invalid.” Pendleton v. McCarty, 747

       N.E.2d 56, 61 (Ind. Ct. App. 2001), trans. denied.


[10]   A review of an administrative agency’s decision at the trial court level “is not

       intended to be a trial de novo, but rather the court simply analyzes the record as

       a whole to determine whether the administrative findings are supported by

       substantial evidence.” Whirlpool Corp. v. Vanderburgh Cnty-City of Evansville

       Human Relations Comm’n, 875 N.E.2d 751, 759 (Ind. Ct. App. 2007). A party

       may appeal a trial court’s determination of the propriety of the administrative

       agency’s decision pursuant to the rules governing civil appeals. See I.C. § 4-

       21.5-5-16. “When reviewing an administrative agency’s decision, appellate

       courts stand in the same position as the trial court.” Pendleton, 747 N.E.2d at

       61.


[11]   An appellate court “may not substitute [its] judgment on factual matters for that

       of the agency and are bound by the agency’s findings of fact if [the findings] are

       supported by substantial evidence.” Whirlpool, 875 N.E.2d at 759. Courts that

       review administrative determinations, at both the trial and appellate level,

       review the record in the light most favorable to the administrative proceedings

       and are prohibited from reweighing the evidence or judging the credibility of

       witnesses. Id. While reviewing courts must accept the agency’s findings of fact

       if supported by substantial evidence, no such deference need be accorded an

       agency’s conclusions of law, as the law is the province of the judiciary. Id.

       However, “[a]n interpretation of a statute by an administrative agency charged

       with the duty of enforcing the statute is entitled to great weight, unless this

       Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 7 of 12
       interpretation would be inconsistent with the statute itself.” LTV Steel Co. v.

       Griffin, 730 N.E.2d 1251, 1257 (Ind. 2000).


                                                     II. Analysis


[12]   Moe contends that the Commission’s decision to declare Lenny’s a public

       nuisance was arbitrary and capricious, and unsupported by substantial

       evidence. In reaching its conclusion, the Commission relied on 905 IAC 1-27-

       2, which states:


               If a licensed premises becomes a public nuisance, or the licensed
               premises becomes the scene of acts or conduct which are
               prohibited by the Indiana Penal Code ([I.C. §] 35-41-1-1 et seq.)
               or by the criminal laws of the United States, the premises shall be
               subject to the sanctions specified in [I.C. §] 7.1-2-6-1 through
               [I.C. §] 7.1-2-6-14.


       The Commission, as affirmed by the trial court, interpreted


               A ‘public nuisance’ for purposes of reviewing [Moe’s] permit
               renewal application, can mean a licensed premises (like Lenny’s)
               where conduct prohibited by the Indiana Penal Code takes place.
               Indeed, the portions of the hearing officer’s conclusion of law
               and order discussing ‘public nuisance’ and denying [Moe’s]
               application demonstrate the proper application of law. For
               example, the hearing officer concluded: “In determining whether
               to renew a permit, the Commission may consider whether the
               applicant has allowed the premises to become a public nuisance,
               or the scene of acts prohibited by the Indiana Penal Code.”
               Moreover, the hearing officer recognized “a shared quality
               between criminal acts and what [the Indiana Administrative
               Code] refers to as a “public nuisance.” The Commission applied


       Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 8 of 12
               a correct definition of ‘public nuisance’ when denying [Moe’s]
               permit renewal application.


       (Appellee’s App. Vol. II, p. 104) (internal references to citations omitted).


[13]   Reading a knowledge requirement into the statute and claiming that the

       “permittee must have some knowledge of the illegal behavior and allowed the

       illegal behavior to continue,” Moe focuses this court’s attention on our decision

       in Ind. Alcohol Beverage Com’n v. River Road Lounge, Inc., 590 N.E.2d 656, 658

       (Ind. Ct. App. 1992), trans denied. While we agree with Moe’s reading of River

       Road Lounge, we hasten to point out that River Road Lounge, decided in 1992,

       was based on an earlier definition of public nuisance under 905 IAC 1-27-2,

       which stated: “The permittee allows the licensed premises to become a public

       nuisance or to become the scene of acts or conduct prohibited by the laws of the

       United States or Indiana.” See id (citing 905 IAC 1-27-2). On December 2,

       2001, the rule was readopted with amendments that struck the phrase,

       “permittee or applicant for a permit allows.” See 25 Ind. Reg. 1351 (Jan. 1,

       2002). Accordingly, the provision deleted the requirement that “the permittees

       [] have direct or indirect knowledge” in exchange for acts or conduct that

       violate Indiana criminal law. See id. Therefore, the relevant issue becomes

       whether there is substantial evidence that there is illicit behavior occurring on

       Lenny’s premises, regardless of whether Moe acquiesced to this behavior. We

       find there is.


[14]   Indiana’s criminal code defines recklessness as “a person who recklessly,

       knowingly, or intentionally performs an act that creates a substantial risk of
       Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 9 of 12
       bodily injury to another person.” I.C. § 35-42-2-2. The record supports

       evidence that a person fired a weapon in the air at Lenny’s parking lot and the

       back of the neighbor’s garage, adjacent to Lenny’s parking lot, is riddled with

       bullet holes. See Woods v. State, 768 N.E.2d 1024, 1027-28 (Ind. Ct. App. 2002)

       (firing several gun shots in a residential area supported a charge for criminal

       recklessness). Likewise, the evidence establishes several incidences of public

       nudity, which is defined, in part, as “the showing of the human or female

       genitals, pubic area, or buttocks.” See I.C. § 35-45-4-1(d). Remonstrators

       testified to several instances of men urinating outside Lenny’s at different times,

       and a woman who “drops her drawers” to go to the bathroom. (Appellant’s

       Amended App. Vol. II, p. 168). Furthermore, disorderly conduct, a Class B

       misdemeanor, is defined as a “person who recklessly, knowingly, or

       intentionally . . .engages in fighting or in tumultuous conduct.” I.C. § 35-45-1-

       3(a). Testimony establishes that there are assaults in the parking lot, an

       intoxicated woman was being carried by two men, and a girl threw her drink at

       another person.


[15]   In response to the charges brought by the remonstrators, Moe counters that

       over the years he has made a serious investment in improving Lenny’s and

       preventing illegal behavior. He emphasized several affirmative steps, including:

       adding about fifty security cameras, security searches of patrons and employees

       for drugs and weapons, barring patrons for illegal activity, and reducing

       operating hours in response to neighborhood concerns. However, these steps

       were taken shortly after Moe procured Lenny’s in 2012 and did not prevent the


       Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 10 of 12
       illegal behavior documented by the remonstrators in 2015. While we do not

       doubt Moe’s commitment, we also note the testimony of Officer Hoffman who

       stated that even though Moe’s “investment in security and personnel [is]

       admirable, it is still spilling out into the neighborhood” and is affecting the

       neighborhood in a “very negative” way. (Appellant’s Amended App. Vol. II,

       pp. 176, 177). Whereas the number of police runs to Lenny’s have decreased

       “dramatically” in 2014, and continued that trend in 2015, the “seriousness of

       the runs” has not altered. (Appellant’s Amended App. Vol. IV, pp. 54, 58).

       Therefore, viewing the evidence in favor of the Commission’s decision, we

       cannot say that the Commission’s conclusion that Lenny’s constituted a public

       nuisance was arbitrary or capricious. See May v. Dep’t of Natural Res., 565

       N.E.2d 367, 373 (Ind. Ct. App. 1991) (“[O]nly evidence supporting the

       agency’s stated reasons can be considered, as those are the grounds on which

       the decision was made”). Therefore, we affirm the Commission’s denial of

       Moe’s request for permit renewal.


                                              CONCLUSION
[16]   Based on the foregoing, we conclude that substantial evidence supported the

       Commission’s decision to deny Moe’s license because the licensed premises had

       become a public nuisance.


[17]   Affirmed.


[18]   Baker, J. and Brown, J. concur



       Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 11 of 12
Court of Appeals of Indiana | Opinion 49A02-1701-MI-193 | February 20, 2018   Page 12 of 12
