                                    DA 06-0667

          IN THE SUPREME COURT OF THE STATE OF MONTANA
                                   2007 MT 192



IN THE MATTER OF THE PROTESTS TO
THE APPLICATION FOR TRANSFER OF
OWNERSHIP AND LOCATION OF MONTANA
ALL-ALCOHOLIC BEVERAGES LICENSE NO.
02-401-1287-001, JACKRABBIT RED'S CASINO,
3715-31ST STREET S.W., GREAT FALLS,
CASCADE COUNTY, MONTANA-CAUSE NO: 05-029-LQ.


APPEAL FROM:     District Court of the Eighth Judicial District,
                 In and For the County of Cascade, Cause No. BDV 05-923
                 Honorable Julie Macek, Presiding Judge


COUNSEL OF RECORD:

          For Appellants:

                 Jason L. Harkins, Harkins Law Firm, PC, Billings, Montana

          For Respondents:

                 Michael G. Garrity, Garrity, Avignone & Banick, Bozeman, Montana

                 Keith A. Jones, Special Assistant Attorney General, Department of
                 Revenue, Helena, Montana



                                              Submitted on Briefs: July 3, 2007

                                                         Decided: August 8, 2007


Filed:

                 __________________________________________
                                   Clerk
Justice W. William Leaphart delivered the Opinion of the Court.

¶1     Citizens of Great Falls, Montana (Protestors), appeal from an order of the Montana

Eighth Judicial District Court, Cascade County, affirming a decision of the Montana

Department of Revenue (Department) to approve an application for the transfer of

ownership and location of an all-alcoholic beverages license to Hare’s Ear, Inc. (Hare’s

Ear), under the trade name of Jackrabbit Red’s Casino located in the Flying J Travel

Plaza (Flying J), in Great Falls, Cascade County, Montana. We affirm.

¶2     The issues on appeal are as follows:

       1. Whether the Department is a proper party on appeal; and

       2. Whether the District Court erred in affirming the Department’s approval of

Hare’s Ear’s application for transfer of ownership and location of the liquor license.

                                     BACKGROUND

¶3     Hare’s Ear, a Montana close corporation, filed an application with the Department

for the transfer of ownership and location of All-Alcoholic Beverages License No. 02-

401-1287-001. Hare’s Ear planned to obtain the license, formerly in public use at the

Plum Crazy Casino in Great Falls, Montana, and use it at a Jackrabbit Red’s Casino to be

located on the premises of the Flying J in Great Falls, situated next to Interstate 15 at the

31st Street Southwest interchange. The lease for the bar and casino space between

Hare’s Ear and Flying J was contingent on Hare’s Ear obtaining the liquor license, and,

subsequently, gambling machine permits.

¶4     The Department published a notice that Hare’s Ear had applied for transfer of

ownership and location of the license to Jackrabbit Red’s Casino at the Flying J location.

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The Department received eighty-three letters of protest to the issuance of the license.

Many of them were residents of the Gore Hill area in Great Falls, a subdivision located

approximately a half mile south of the Flying J. The Department held a hearing where

both sides presented witness testimony and exhibits. Because the intended use of the

property was as a casino, and a liquor license is a prerequisite to obtaining gambling

permits, much of the testimony from the protestors consisted of objections to gambling

and its implications on the health and welfare of society. At the hearing, the Protestors

argued that gambling would bring undesirable people into the community, and create a

gambling addiction in the Gore Hill neighborhood. Several residents of the Gore Hill

area voiced their concern about heavy traffic, impaired drivers, the safety of children

bicycling or walking to the truck stop, negatively impacted real estate values, the area

being off regular police beats, zoning restrictions, and little or no evidence of demand.

Some Protestors were opposed to gambling in general because of the toll they had seen

compulsive gambling take on themselves or others they knew. A psychotherapist and a

clinical psychologist testified about the negative impact gambling presents to the health

and welfare of society. A medical doctor with familiarity of gambling addiction testified

that, while not opposed to gambling, she supported creating zoning districts to confine

gambling to specified areas so that gambling addicts could be counseled to avoid those

areas. The Department issued its decision, which included findings of fact, conclusions

of law, order, and opinion, approving the application for the transfer of ownership and

location of the license.



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¶5     The Protestors appealed to the District Court pursuant to the Montana

Administrative Procedure Act (MAPA). The Department appeared in the appeal to the

District Court and participated in briefing. A hearing was held where for the first time,

the Protestors objected to the Department being included as a party. The court allowed

the Department to argue at the hearing in support of its decision to issue the license. The

District Court affirmed the Department’s decision. The Protestors appeal.

                               STANDARD OF REVIEW

¶6     The standard of review of an administrative decision under MAPA applies to both

the District Court’s review of the administrative decision and this Court’s subsequent

review of the District Court’s decision. Hofer v. Montana DPHHS, 2005 MT 302, ¶ 14,

329 Mont. 368, ¶ 14, 124 P.3d 1098, ¶ 14. The applicable standard of review is as

follows:

       The court may not substitute its judgment for that of the agency as to the
       weight of the evidence on questions of fact. The court may affirm the
       decision of the agency or remand the case for further proceedings. The
       court may reverse or modify the decision if substantial rights of the
       appellant have been prejudiced because:
              (a) the administrative findings, inferences, conclusions, or decisions
       are:
              ...
              (v) clearly erroneous in view of the reliable, probative, and
       substantial evidence on the whole record;
              (vi) arbitrary or capricious or characterized by abuse of discretion or
       clearly unwarranted exercise of discretion . . . .

Section 2-4-704(2), MCA. A finding is clearly erroneous if a review of the record shows

the findings are not supported by substantial evidence, the trier of fact misapprehended

the effect of the evidence, or if a review of the record leaves the Court with the definite


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and firm conviction that a mistake has been committed. Munn v. Montana Bd. of Medical

Examiners, 2005 MT 303, ¶ 15, 329 Mont. 401, ¶ 15, 124 P.3d 1123, ¶ 15 (citations

omitted). We review a District Court’s conclusions of law by determining whether the

District Court correctly interpreted the law. Munn, ¶ 15 (citations omitted).

                                      DISCUSSION

¶7     ISSUE 1: Was the Department a proper party on appeal?

¶8     The Protestors filed a petition for review of the Department’s order allowing the

transfer of the license to Hare’s Ear. The Department appeared in the action by filing a

motion to set a briefing schedule and a brief in opposition to the petition, defending its

decision to issue a license. The Protestors filed a reply, but did not object to the

Department’s presence as a party until the hearing before the District Court. After

listening to the objection, the District Court allowed the Department to present its

argument on the merits. The Protestors again argue on appeal to this Court that the

Department was not a proper party to the action in District Court.

¶9     The District Court’s review of the Department’s decision was confined to the

record, as required by § 2-4-704(1), MCA. Hare’s Ear and the Department made similar

arguments opposing the petition for review to the District Court and on appeal to this

Court. Even assuming arguendo that the Department was not a proper party to this

action, since the District Court could have come to the same conclusion based solely on

Hare’s Ear’s arguments and on its thorough review of the record, any reliance by the

District Court on the Department’s arguments constitutes harmless error. M. R. Civ. P.



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61; see Ekalaka Un. Bd. of Trus. v. Ekalaka Teach., 2006 MT 337, ¶ 22, 335 Mont. 149,

¶ 22, 149 P.3d 902, ¶ 22.

¶10    ISSUE 2: Did the District Court err in affirming the Department’s approval

of Hare’s Ear’s application for transfer of ownership and location of the liquor

license?

¶11    An applicant seeking a liquor license must apply to the Department, and following

an investigation carried out by the Montana Department of Justice, the Department of

Revenue must determine whether the applicant is qualified to receive a license, the

premises are suitable for the business, and that all laws and regulations are complied

with. Section 16-4-402(1) and (2)(a), MCA. Before issuing the license, the Department

must publish a notice of the license application in a newspaper of general circulation.

Section 16-4-207, MCA. If the Department receives a certain number of written protests,

the Department must hold a public hearing to determine whether the applicant is qualified

and whether the application satisfies the requirements for public convenience and

necessity. Section 16-4-207(3) and (4)(b), MCA. Section 16-4-405, MCA, provides that

the Department has grounds to deny an application for a liquor license if any of the

following criteria are met: (1) if the premises proposed for licensing are off regular police

beats and cannot be properly policed by local authorities; (2) city or county zoning

ordinances prohibit a license from being issued at the proposed premises; (3) the welfare

of the people residing in the vicinity of the premises will be adversely and seriously

affected; (4) there is not a public convenience and necessity justification; (5) a possible



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reason for denial listed in a conditional approval letter has been verified; or (6) the

purposes of the licensing code would not be carried out if a license were issued.

¶12    In this case, the Department published a notice that Hare’s Ear had applied for

transfer of ownership and location of the liquor license. The Department received eighty-

three letters of protest to the proposed transfer, a sufficient number to necessitate a

hearing for the determination of public convenience and necessity. The Department

therefore held a hearing in Great Falls, as required by § 16-4-207, MCA.                The

Department considered each component of public convenience and necessity and found

that Hare’s Ear met the criteria.

¶13    The Department also looked at the other disqualifying factors under § 16-4-405,

MCA. Based on the evidence offered at the hearing, it found that the proposed premises

was not off regular police beats, was not situated in a zoned area where the sale of

alcoholic beverages is prohibited by ordinance, residents or other retail licensees located

in the vicinity would not be adversely and seriously affected, the applicant and premises

complied with eligibility or suitability criteria provided by code, and that the purposes of

the licensing code would be carried out if a license was issued.          The Department

considered these factors, weighed the evidence, and then made a determination that the

liquor license should be issued because all laws were complied with and there was no

reason to deny the license. The Department noted that there was nothing unique about

the specific location that presented a dangerous, inappropriate, or otherwise unsuitable

situation. Further, it noted that the policy arguments that the Protesters made with regard



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to gambling would be more appropriately brought up in the legislature and with the city

or zoning commission.

¶14    The Protestors are appealing the Department’s conclusion that transferring the

liquor license to Hare’s Ear would not adversely or seriously affect the welfare of

residents in the vicinity. They contend that the transfer of the liquor license, which

would then lead to the issuance of gambling machine permits, would indeed adversely

and seriously affect the welfare of Gore Hill residents. They argue that the Department

misapprehended the effect of the evidence provided by the residents, a clinical

psychologist, psychiatrist, and medical doctor that gambling is bad for a community. The

Protestors urge this Court that the transfer of the liquor license should not have been

approved.

¶15    The Protestors’ arguments in opposition to the liquor license and gambling raise

very broad policy-type concerns. They argue that gambling can be addictive and lead to

criminal behavior for some individuals, gambling should not be legal, or gambling should

be restricted to certain areas of Great Falls.      As the Department indicated, these

arguments are better left to the legislature, which has chosen to legalize gambling. The

most specific objection to the Jackrabbit Red’s Casino was that, given its very busy,

visible location, it would draw people in and the residents of Gore Hill, when driving by,

would encounter dazed gamblers.          Nonetheless, the Protestors failed to provide

substantial evidence that demonstrated how Jackrabbit Red’s Casino, located at least a

half mile from the nearest home, would adversely affect the residents in the vicinity.



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¶16    A review of the record shows that there is substantial evidence to support the

Department’s findings and that it did not misapprehend the effect of the evidence.

Further, we are not left with a definite or firm conviction that a mistake has been

committed. Hare’s Ear and the Department have demonstrated compliance with all laws

with regard to the transfer of the liquor license, and there is no substantial evidence that

would require that the Department deny the license.

¶17    We affirm the judgment of the District Court affirming the Department’s approval

of Hare’s Ear’s application for transfer of ownership and location of Montana All-

Alcoholic Beverages License No. 02-401-1287-001.


                                            /S/ W. WILLIAM LEAPHART

We concur:

/S/ JAMES C. NELSON
/S/ PATRICIA COTTER
/S/ JOHN WARNER
/S/ JIM RICE



Justice Jim Rice specially concurring.


¶18    I concur with the Court’s opinion.

¶19    The District Court concluded that although the Protestors’ generalized anti-gaming

arguments “certainly are something to consider, they do not rise to the level of proof

that’s required under [§ 16-4-405(3)(a), MCA].”        I agree with the District Court’s

statement.


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¶20    In choosing to legalize and regulate gaming, the Legislature was aware of the

potential adverse consequences of the activity, and enacted legislation requiring

Department review and approval prior to the opening of gaming establishments.

Evidence of generalized gaming concerns is relevant in these proceedings and, depending

on the proposed site of a gaming establishment, could be sufficient to prove a serious

adverse impact upon “the welfare of the people residing . . . in the vicinity.” Section 16-

4-405(3)(a), MCA. An example may be an attempt to locate an establishment directly

adjacent to a school, hospital or church, the impacts upon which may be fairly self-

evident. However, in the more typical case, as here, such generalized proof will be

insufficient without evidence of adverse impacts specific to the vicinity of the proposed

location. Here, such evidence was insufficient, the evidence in support of the application

was substantial, and the Department’s determination was appropriately entered.

¶21    Lastly, a significant portion of the Protestors’ briefing is dedicated to discussing

the anti-gaming remarks made during the 1972 Constitutional Convention for the purpose

of demonstrating that generalized gaming concerns are sufficient, in and of themselves, to

prevail herein. However, despite the individual remarks made at the Convention, the

delegates ultimately granted the Legislature, in Article III, Section 9, clear authority to

legalize forms of gambling.     The Legislature has done so by way of the statutory

provisions at issue herein, and the Court has correctly applied them.



                                                               /S/ JIM RICE



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