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reversing a decision of the Adult Entertainment Commission because "there is not substantial evidence established in the record to validate a defense of laches which would warrant dismissing this case on the basis of prejudice resulting from the delay."
Summary of this case from Pike Creek Recreational Servs. v. New Castle Cnty.Opinion
C.A. No. 99A-11-001.
Submitted: March 13, 2000
Decided: May 3, 2000
Upon Appeal from the Adult Entertainment Commission. Reversed.
Thomas H. Ellis, Deputy Attorney General, Department of Justice, Wilmington, Delaware, Attorney for the State of Delaware.
Gregory A. Morris, Liguori, Morris Redding, Dover, Delaware, Attorney for Appellee.
ORDER
1. Before the Court is an appeal stemming from a decision rendered by the Adult Entertainment Commission ("AEC") which barred the State's complaint against Rose Moffitt ("Moffitt") and the Fairways Inn ("Inn") under the equitable doctrine of laches. More specifically, pursuant to a police undercover operation, it was determined that Moffitt violated various statutory code provisions which required that she report new employee information to the AEC within 10 days of employment. Failure to comply triggered the State's right to seek to revoke the license of the establishment. Consequently, subsequent to this discovery, the State filed a complaint against Moffitt and sought to have her business license revoked.
24 Del. C. § 1617 (a)(2).
The AEC found that three employees were not reported to the Division of Professional Regulation, although two of them were later reported. Moffitt contends that it is difficult to obtain the required information on each respective employee and the passage of time makes it difficult to remember. Furthermore, she would allow dancers to try out, but it would not mean that the dancer was an employee. She sought dismissal of the charges pursuant to the equitable doctrine of laches wherein she alleged that the State unnecessarily delayed in bringing the charges and this delay prejudiced her. On this ground, the Commission decided to dismiss the case. Subsequently, the State filed this appeal. After reviewing the submitted briefs, transcript, relevant code provisions and case law, the Court finds the decision is not supported by substantial evidence, nor is it free from legal error. Accordingly, it is reversed.
2. Moffitt owns and operates the Fairways Inn ("Inn") in Smyrna, Delaware, a bar which employs topless dancers for entertainment purposes. Accordingly, the Inn is an establishment regulated by the Delaware Department of Administrative Services, Division of Professional Regulation, and Adult Entertainment Commission. The AEC was established by the General Assembly to issue and revoke licenses of adult entertainment establishments when it recognized that the crimes of obscenity, prostitution and related offenses were oftentimes facilitated through the services of these seemingly legitimate businesses. Adult shows containing acts involving specific sexual activities fall into this category. The goal of curbing this type of behavior is achieved "through the Act's extensive disclosure and licensing provisions." "By requiring disclosure as a condition of licensing, the statute operates to preclude individuals with any history of promoting the crimes of obscenity and prostitution from the operation or ownership of adult entertainment establishments." Compliance with this regulatory scheme requires that any change, including a change in personnel, must be reported to the AEC within 10 days. A licensee's failure to comply with these regulations gives rise to the possibility of license revocation.
Richardson v. Wile, Del. Supr., 535 A.2d 1346 (1988).
6 Id. at 1349.
24 Del. C. § 1622 (a), 1613(b).
Id.; 24 Del. C. § 1617.
3. A review of the record reveals that on July 22, 1998, Detective Michael Eller of the Delaware State Police Special Investigations Unit went to Troop 9 in Odessa, Delaware, to review the Fairways Inn file. The troop maintained a file with information supplied by the AEC which included names, addresses and photo identifications of Inn employees as required by statute. After reviewing the file, Eller proceeded to the Inn to determine if the employees he saw working were documented. Eller observed three dancers working on July 22, 1998, who were not on file. They identified themselves as Elizabeth, Tammi and "Heaven." Subsequent investigation revealed their full names to be Elizabeth Baldwin, Tamara Pierce and Joanna Muscohino. Eller left the Inn around 10 p.m. and later went to the AEC to verify whether the dancers were reported. It was determined that the dancers were not reported.
In August, 1998, Eller returned to the Inn and observed a white male mopping the floor and serving drinks to patrons. Further investigation established this individual, Francis Gott, was also not reported to the AEC. In September, 1998, an officer retrieved job applications from Moffitt which demonstrated that yet another dancer, Sylvia Lewowas, was not reported to the AEC. Around this time, Captain Hancock, who was responsible for conducting criminal background checks of new employees of adult entertainment establishments, requested that the Division of Professional Regulation issue a subpoena for the payroll records of the Inn. Subsequently, the AEC conducted a hearing for renewal of Moffitt's license to operate the Inn. None of the aforementioned information was disclosed to the AEC at that time. The concern was that the investigation was still ongoing and it would be premature to disclose any information until it was concluded.
In March, 1999, Eller met with Moffitt to discuss the job applications of Baldwin, Lewowas and Muscohino. Moffitt admitted that these individuals danced at the Inn in 1998; however, information about Baldwin was never submitted to the AEC and the information regarding the other two women was not submitted until September, 1998, a full two months after they were observed working there.
4. As this meeting signaled the end of the investigation, the State filed a complaint against Moffitt and the Inn with the AEC on April 30, 1999. A hearing was held in July, 1999, at which time it was undisputed that violations occurred. However, Moffitt argued the complaint should be barred under the doctrine of latches. Specifically, Moffitt alleged that the State delayed excessively in filing the complaint and this delay prejudiced her because her memory faded and she was now unable to find the employees about whom information was not filed. In October, 1999, the Commission released its decision. It conceded that Moffitt violated relevant code provisions, but nevertheless barred the complaint under the equitable doctrine of laches. A timely appeal followed.
5. The Supreme Court and this Court have repeatedly emphasized the limited appellate review of the factual findings of an administrative agency. The function of the reviewing Court is to determine whether the agency's decision is supported by substantial evidence. Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. The appellate court does not weigh the evidence, determine questions of credibility, or make its own factual findings. It merely determines if the evidence is legally adequate to support the agency's factual findings and if the findings are free of legal error.
General Motors v. Freeman, Del. Supr., 164 A.2d 686, 688 (1960); Johnson v. Chrysler Corp., Del. Supr., 213 A.2d 64, 66-67 (1965).
Oceanport Ind. v. Wilmington Stevedores, Del. Supr., 636 A.2d 892, 899 (1994); Battista v. Chrysler Corp., Del. Super., 517 A.2d 295, 297 (1986), app. dism., Del. Supr., 515 A.2d 397 (1986).
Johnson at 66.
Morgan v. Anchor Motor Freight, Inc., Del. Super., 506 A.2d 185 (1988).
6. As previously noted, it was undisputed at the hearing that Moffitt violated statutory provisions pertinent to maintaining a license for an adult entertainment establishment. Instead, the complaint was barred pursuant to the defense of laches. Laches is an affirmative defense. The party raising it must establish that the plaintiff was aware that some violation occurred and unreasonably delayed the litigation which materially prejudiced the other party. In the case at bar, one month after the ongoing investigation of the Inn was concluded, a complaint was filed. While it is not clear to the Court how this delay alone would establish prejudice, it does appear unreasonable that the AEC would not have been appraised of the possible violation since the investigation was, in a practical sense, concluded. The witnesses Moffitt claims she cannot locate are the very dancers whom provided the initial evidence to Detective Eller that ultimately led to the charges against her. This Court also notes that these same witnesses could conceivably give helpful information to the licensee, but a bare statement of prejudice is not enough. As such, the Court finds that there is not substantial evidence established in the record to validate a defense of laches which would warrant dismissing this case on the basis of prejudice resulting from the delay.
U.S. Cellular v. Bell Atlantic Mobile, Del. Supr., 677 A.2d 497 (1996).
Id.
THEREFORE, this case is remanded to the Adult Entertainment Commission for further proceedings not inconsistent with this order. IT IS SO ORDERED.