Case Name: DLH, Inc., doing business as Coaches Sports Bar & Grill, appellant, v. Nebraska Liquor Control Commission et al., appellees
Court: Nebraska Supreme Court
Jurisdiction: Nebraska
Decision Date: 2003-07-18
Citations: 266 Neb. 361
Docket Number: No. S-02-033
Parties: DLH, Inc., doing business as Coaches Sports Bar & Grill, appellant, v. Nebraska Liquor Control Commission et al., appellees.
Judges: Hendry, C.J., Wright, Connolly, Gerrard, Stephan, McCormack, and Miller-Lerman, JJ.
Reporter: Nebraska Reports
Volume: 266
Pages: 361–377

Head Matter:
DLH, Inc., doing business as Coaches Sports Bar & Grill, appellant, v. Nebraska Liquor Control Commission et al., appellees.
665 N.W.2d 629
Filed July 18, 2003.
No. S-02-033.
K.C. Engdahl, of Raynor, Rensch & Pfeiffer, for appellant.
Don Stenberg, Attorney General, and Hobert B. Rupe for appellees.
Hendry, C.J., Wright, Connolly, Gerrard, Stephan, McCormack, and Miller-Lerman, JJ.

Opinion:
McCormack, J.
NATURE OF CASE
The Nebraska Liquor Control Commission (Commission) suspended the liquor license of DLH, Inc., after an administrative hearing. The Commission found that DLH allowed a "disturbance" in or about the licensed premises in violation of 237 Neb. Admin. Code, ch. 6, § 019.01F1 (1994). The district court affirmed the Commission's order, and DLH appealed. We removed the case to this court's docket on our own motion pursuant to our statutory authority to regulate the caseloads of the appellate courts of this state. See Neb. Rev. Stat. § 24-1106(3) (Reissue 1995).
BACKGROUND
DLH is a Nebraska corporation doing business as Coaches Sports Bar & Grill. In June 2000, DLH; Duane Hartman Investments, Inc.; and DTR, Inc., doing business as Cheetah's, (Cheetah's) entered into a contract whereby Cheetah's would provide "adult entertainment performers" to its portion of the premises. Cheetah's is a leased property separate but adjacent to Coaches Sports Bar & Grill and is within the licensed premises to be covered by DLH's liquor license.
On three separate occasions, August 10, 16, and 19, 2000, an undercover Lancaster County sheriff's deputy visited Cheetah's. Thereafter, according to DLH, the Commission sent three notices to DLH, one for each occasion, alleging that DLH did allow or permit a "disturbance" in or about the licensed premises in violation of a Commission regulation, § 019.Q1F1. An administrative hearing was scheduled for October 19, 2000.
At the hearing, the State offered the testimonies and investigation reports of the three undercover officers who had visited Cheetah's. The testimonies were consistent. Each officer testified that he observed female dancers dressed in bikini tops and bottoms, which generally covered their genital areas, buttocks, and breasts, engaging in physical contact with patrons. Contact involved the dancers' touching the patrons, among whom were the officers, with their hands and breasts, including rubbing their breasts on patrons' faces. No attempts by employees or owners to stop or prevent the contact were witnessed by the officers. The officers also testified that the patrons often tipped the dancers with dollar bills after such contact. At no time did the officers observe topless dancing or physical contact initiated by the patrons toward the dancers. Nor did the officers observe activity which they believed to endanger the patrons, but if they had, they testified that they would have acted. The officers also testified that they did not inform the owners or management of their surveillance, nor did they inquire whether the dancers were agents or employees of DLH. After the officers testified, the State rested.
Hartman was the only witness called to testify on DLH's behalf. Hartman confirmed that Cheetah's is within the licensed premises of DLH and that a contract existed between DLH and Cheetah's whereby Cheetah's would provide adult entertainment to its portion of the premises. Hartman also testified that after receiving notice of the Commission's allegations in the mail, he notified his attorney to make demand on Cheetah's to comply with Nebraska law. To the best of Hartman's knowledge, Cheetah's complied with the terms made in the demand. In support of Hartman's testimony, DLH offered exhibit 9, an acknowledgment signed by the owner of Cheetah's, agreeing to abide by the laws of Nebraska. Hartman further testified that in July 2000, he applied to the Commission to delicense the space occupied by Cheetah's. Hartman wanted to avoid any question concerning the compliance or noncompliance with liquor laws on Cheetah's portion of the premises. The application was unanimously denied by the Commission. At the conclusion of the hearing, the Commission found DLH to be in violation of its regulation, § 019.01F1. The Commission suspended DLH's liquor license for 30 days, 10 days for each offense.
Pursuant to Neb. Rev. Stat. § 84-917 to 84-919 (Reissue 1999) of the Administrative Procedure Act (APA), DLH appealed the Commission's decision to the district court. The district court, in affirming the Commission's order, found that (1) the type of business that occurs in Cheetah's does fall under the Commission's authority to regulate dancing where alcohol is sold; (2) DLH did allow a disturbance in violation of the regulation on three separate occasions; and (3) it was DLH's responsibility, as a liquor license holder, to ensure that the dancers were not violating any of the Commission's regulations.
ASSIGNMENTS OF ERROR
DLH assigns, rephrased, that the district court erred in (1) finding that the Commission did not exceed its statutory authority in promulgating rules and regulations § 019.01F and 019.01F1; (2) affirming suspension of DLH's liquor license for violation of a regulation which is not prohibitory but merely definitional; (3) affirming suspension of DLH's liquor license for violation of a regulation, § 019.01F, which was never alleged to be violated in the Commission's complaint or order; (4) relying upon Major Liquors, Inc. v. City of Omaha, 188 Neb. 628, 198 N.W.2d 483 (1972), in affirming the order of the Commission; (5) concluding that the Commission has authority to regulate "dancing" where alcohol is sold; and (6) determining that DLH is responsible for "dancers" at the licensed premises notwithstanding the absence of evidence adduced at the time of trial by the Commission to establish either employment or agency of the individuals by DLH.
STANDARD OF REVIEW
Appeals from orders or decisions of the Commission are taken in accordance with the APA. Neb. Rev. Stat. § 53-1,116 (Cum. Supp. 2002); City of Omaha v. Kum & Go, 263 Neb. 724, 642 N.W.2d 154 (2002). Proceedings for review of a final decision of an administrative agency shall be to the district court, which shall conduct the review without a jury de novo on the record of the agency. City of Omaha v. Kum & Go, supra. A judgment or final order rendered by a district court in a judicial review pursuant to the APA may be reversed, vacated, or modified by an appellate court for errors appearing on the record. Id. When reviewing an order of a district court under the APA for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. Id.
To the extent that the meaning and interpretation of statutes and regulations are involved, questions of law are presented, in connection with which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below. Id.
ANALYSIS
The Commission's "disturbance" regulation at issue in this case provides:
019.01F Disturbance: No licensee or partner, principal, agent or employee of any licensee shall allow any unreasonable disturbance, as such temí is defined hereunder, to continue without taking the steps, as set forth hereunder, within a licensed premise or in adjacent related outdoor areas.
019.01F1 A "disturbance" as used in this section shall mean any brawl, fight, or other activity which may endanger the patrons, employees, law enforcement officers, or members of the general public within licensed premises or adjacent related outdoor area. Such term shall include incidents involving, but not necessarily limited to: drug dealing; intoxicated individuals; soliciting of prostitution; or any physical contact between the licensee's agents or employees and its customers, involving any kissing, or any touching of the breast, buttock, or genital areas.
019.01F4 A licensee who has conformed with the procedure as set forth in this section shall be deemed to have not permitted a disturbance to occur and continue.
(Emphasis supplied.) The unreasonable disturbance specifically complained of in this case, which we limit our analysis to, is any physical contact between the licensee's agents or employees and its customers, involving any kissing, or any touching of the breast, buttock, or genital areas. See § 019.01F1.
In this appeal, DLH argues that the Commission, an administrative agency, exceeded its statutory authority in promulgating its disturbance regulation. Our review is guided by the following principles of law: The Legislature may delegate to an administrative agency the power to make rules and regulations to implement the policy of a statute. Governor's Policy Research Office v. KN Energy, 264 Neb. 924, 652 N.W.2d 865 (2002). However, an administrative agency is limited in its rulemaking authority to powers granted to the agency by the statutes which it is to administer, and it. may not employ its rulemaking power to modify, alter, or enlarge portions of its enabling statute. County Cork v. Nebraska Liquor Control Comm., 250 Neb. 456, 550 N.W.2d 913 (1996).
In determining whether the Commission exceeded its statutory authority, we must interpret its enabling legislation. To the extent that the meaning and interpretation of statutes and regulations are involved, questions of law are presented, in connection with which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below. American Legion v. Nebraska Liquor Control Comm., 265 Neb. 112, 655 N.W.2d 38 (2003); Kosmicki v. State, 264 Neb. 887, 652 N.W.2d 883 (2002); City of Omaha v. Kum & Go, 263 Neb. 724, 642 N.W.2d 154 (2002).
The Commission is empowered to adopt and promulgate rules and regulations to carry out the Nebraska Liquor Control Act, Neb. Rev. Stat. § 53-101 to 53-1,122 (Reissue 1998 & Cum. Supp. 2002), including provisions covering any and all details which are necessary or convenient to the enforcement of the intent, purpose, and requirements of the act. City of Omaha v. Kum & Go, supra. In order for a regulation to be "necessary or convenient" to the enforcement of the Nebraska Liquor Control Act, the Commission must show some nexus between the regulation and alcoholic liquors. County Cork v. Nebraska Liquor Control Comm., supra. The Commission may not, however, adopt rules and regulations that are in conflict with the act. The power to regulate must be exercised in conformity with all the provisions of the act and in harmony with its spirit and expressed legislative intent. City of Omaha v. Kum & Go, supra. According to § 53-101.05:
The Nebraska Liquor Control Act shall be liberally construed to the end that the health, safety, and welfare of the people of the State of Nebraska are protected and temperance in the consumption of alcoholic liquor is fostered and promoted by sound and careful control and regulation of the manufacture, sale, and distribution of alcoholic liquor.
In the case presently before us, we must decide whether a nexus exists between the regulation and alcoholic liquor. The regulation prohibits any physical contact between the licensee's agents or employees and its customers, involving any kissing, or any touching of the breast, buttock, or genital areas. We conclude such nexus exists.
In County Cork v. Nebraska Liquor Control Comm., supra, we said that for a regulation to be "necessary or convenient" to the enforcement of the Nebraska Liquor Control Act, the Commission must show some nexus between the activity and alcoholic liquor. In County Cork, the activity was the sale of tobacco to a minor, which was alleged to be "other illegal activity" under the act. We held that there was no nexus, and the Commission exceeded its statutory authority in promulgating the "other illegal activities" regulation under which County Cork's license was suspended. In County Cork, we relied upon Major Liquors, Inc. v. City of Omaha, 188 Neb. 628, 198 N.W.2d 483 (1972), wherein this court recognized a nexus between the sale of alcohol and topless dancing. In DLH's case, the activity prohibited by the regulation was the touching of the breast which occurred in this case. The regulations at issue in this case are for the protection of those persons enumerated: patrons, employees, law enforcement officers, or members of the general public within the licensed premises or adjacent outdoor area. The nexus between the activity and alcoholic liquor is apparent in the regulation. The regulations, by their terms, prohibit sexual contact occurring on the licensed premises or in adjacent related outdoor areas as a logical means of protecting patrons, employees, and others on the premises or in adjacent related outdoor areas from activity which could lead to contact endangering those persons within the licensed premises or in adjacent related outdoor areas.
Having concluded that the Commission's regulation is valid, we address DLH's remaining assignments of error. Proceedings for review of a final decision of an administrative agency shall be to the district court, which shall conduct the review without a jury de novo on the record of the agency. American Legion v. Nebraska Liquor Control Comm., 265 Neb. 112, 655 N.W.2d 38 (2003). A judgment or final order entered by a district court in a judicial review pursuant to the APA may be reversed, vacated, or modified by an appellate court for errors appearing on the record. Morrissey v. Department of Motor Vehicles, 264 Neb. 456, 647 N.W.2d 644 (2002); Davis v. Wimes, 263 Neb. 504, 641 N.W.2d 37 (2002). When reviewing an order of a district court under the APA for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. Hass v. Neth, 265 Neb. 321, 657 N.W.2d 11 (2003); American Legion v. Nebraska Liquor Control Comm., supra. An appellate court will not substitute its factual findings for those of the district court where competent evidence supports the district court's findings. Kosmicki v. State, 264 Neb. 887, 652 N.W.2d 883 (2002); City of Omaha v. Kum & Go, 263 Neb. 724, 642 N.W.2d 154 (2002).
The record in this case supports the district court's findings that DLH failed to prevent or stop an unreasonable disturbance in violation of § 019.01F. It is undisputed that the physical contact complained of occurred within the licensed premises covered by DLH's liquor license. Furthermore, each officer testified that no attempt was made by DLH or anyone else to stop the physical contact on the three occasions. As the liquor licensee, it is DLH's responsibility to ensure that Cheetah's is in complete compliance with the Commission's rules and regulations.
The record also contains the contract between DLH and Cheetah's, which includes a provision that adult entertainment was to be provided. In addition, the officers testified that the dancers on the licensed premises were receiving tips from patrons. From this evidence, one could reasonably infer that the dancers were agents or employees of DLH.
Finally, the record contains, as DLH asserts, that the Commission found DLH to be in violation of § 019.01F1 and that the district court found DLH to be in violation of § 019.01F. Nonetheless, the district court's finding, on its de novo review, is not arbitrary and capricious, and thus we do not consider this finding to be reversible error.
We note that we have considered all other assignments of error not specifically addressed in this opinion and find them to be without merit. See, Kubicek v. City of Lincoln, 265 Neb. 521, 658 N.W.2d 291 (2003); Woodward v. Andersen, 261 Neb. 980, 627 N.W.2d 742 (2001).
CONCLUSION
The Commission did not exceed its statutory authority in promulgating its "disturbance" regulation prohibiting any physical contact between the licensee's agents or employees and its customers, involving any kissing, or any touching of the breast, buttock, or genital areas. We also conclude that the district court's findings are supported by competent evidence. Therefore, we affirm the district court's affirmance of the Commissions' order suspending DLH's liquor license.
Affirmed.