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HomeMy WebLinkAboutItem #2 - Jorgensen - Agenda CorrespondenceCity of San Luis Obispo, City Attorney’s Office, 990 Palm Street, San Luis Obispo, CA, 93401-3249, 805.781.7140, slocity.org MEMORANDUM DATE: December 29, 2020 TO: Administrative Review Board Agenda Correspondence FROM: Markie Jorgensen, Assistant City Attorney and Advisor to the Board SUBJECT: Disclosure of Board Member’s Decision in Hearing Officer Capacity Enclosed is a decision rendered by Administrative Review Board (the “Board”) Member, Alex Karlin, in his capacity as a hearing officer for the City of San Luis Obispo (the “City”), that evaluated similar issues related to COVID-19 restrictions and the City’s enforcement thereof. Board Member Karlin’s decision is a public record. The City is making it available to the Board and appellant in advance of the January 7, 2021 hearing to inform all parties of the existence of this decision by a Board Member and to allow an opportunity to review in advance of the hearing. Agenda Correspondence Item #2 Received December 29, 2020 1 HEARING DECISION ON ADMINISTRATIVE CITATION APPEAL City of San Luis Obispo, California In the Matter of NKT University Square LLC Citation 22050-L 1. Citation number: 22050-L 2. Location of charged violation: 872 Foothill Blvd, San Luis Obispo, CA 3. APN: 052-332-032 4. Date of charged violation: July 27, 2020 5. Name of charged Violator/Appellant: NKT University Square LLC 6. Business name: Same 7. Representative of charged Violator/Appellant: Nick Tompkins, Owner and Manager 8. Description of charged violation: a. SLO City Municipal Code section: 2.24.100 b. Description of charged violation: Emergency Services. Lack of required social distancing and face coverings by persons on premises, in violation of state executive and public health orders and Resolution 11106 (2020) adopted pursuant to SLOMC Chapter 9.22 c. Fine Assessed: $1,000 9. Date of Hearing: November 5, 2020. 10. Name of Hearing Officer: Alex S. Karlin 11. Due Process: The Appellant or their Representative was present at the hearing and was advised of the charged violation(s). The Appellant/Representative was informed that (a) the hearing is a voluntary proceeding held at their request; (b) they are not compelled to make any statement; (c) that any statement they choose to make may be used against them by the City in related or other proceedings; (d) the Hearing Officer has no right to issue subpoenas; (e) this is an informal hearing so the rules of evidence do not apply. The Appellant/Representative was further advised that they have the right (a) to be represented by an attorney or any other person; (b) to testify and to call any other witness testify on their behalf; (c) the present any documents, photographs, maps, or physical evidence that they want; (d) to question any witnesses presented by the City. The Appellant/Representative was informed that any witnesses they presented could be questioned by the City and the Hearing Officer. 2 The Appellant/Representative was advised that the City’s case is based on the City’s documents in the administrative record. The Appellant/Representative confirmed that they had received and had the opportunity to review those documents. Under the City’s Municipal Code and state law, those documents are evidence or proof of the alleged violation and that the City did not need to appear at the hearing to support that proof. They were advised that they could challenge or controvert any of the City’s documents. They were advised that the Hearing Officer cannot make City employees or officials, or any other person to appear at the hearing. However, both the Appellant/Representative and the City can have witnesses appear if they so choose, and if they do testify, you will have an opportunity to ask them questions. The Appellant/Representative was advised that the Hearing Officer is a non-paid volunteer and that he has not talked with anyone about this matter and will only consider the evidence presented at the hearing by the Appellant/Representative or the City. They were advised that after the hearing, the Hearing Officer can either uphold the citation or revoke the citation, but has no authority to reduce or increase the amount of the proposed fine because the amount if set by the City Council. The Appellant/Representative was advised that the Hearing Officer had read the entire administrative record, including the Administrative Citation Appeal Form (and any attachments thereto) that they had submitted. The Appellant/Representative acknowledged that they understood these procedures and rights, had no objections, and elected to proceed with the hearing. 12. Present at the Hearing: a. Hearing Officer: Alex S. Karlin b. City Officials/Representatives i. Mark Amber, Attorney for City of San Luis Obispo ii. Sheryl Fox, Legal Assistant for City of San Luis Obispo iii. John Mazzapezza, Code Enforcement Technician II for City of San Luis Obispo c. Appellant/Representative: Nick Tompkins Owner and Manager of NKT University Square LLC. 13. HEARING OFFICER’S DECISION A. FINDINGS OF FACT Citation 22050-L is against NKT University Square LLC (hereinafter NKT-LLC), which owns the premises at 872 Foothill Blvd. NKT-LLC leases the premises to Club 24, a business that operates a gym at 872 Foothill Blvd. Citation 22050-L states that on July 27, 2020, City of San Luis Obispo Police staff visited 872 Foothill and “noted the following violations;” 3 “The business was observed to be in violation of the current guidelines for business sector operations as described within the State Public Health Officer Order issued on May 7, 2020. Specifically, indoor operations of the gym were observed to be open to the general public and individuals were observed to have been actively utilizing the gym facilities.” On August 18, 2020, NKT-LLC appealed Citation 22050-L. In this appeal, NKT-LLC raises several defenses. First, it argues that NKT-LLC “is not a person” but is, instead, a limited liability company and thus “incapable of wearing a mask or social distancing as required of persons.” Second, it argues that the fine of $1,000 is improper because SLOMC 2.24.100 only authorizes a $500 fine. Third, NKT-LLC says that, under the May 7, 2020 order, a landowner cannot be held liable for the actions of its tenant. On October 23, 2020, NKT-LLC filed a Supplement to its appeal. In the Supplement, NKT-LLC again argued that it is a California Limited Liability Company and thus is not a “person” nor a “person on the premises on July 27, 2020,” and thus cannot be held liable under the SLOMC and related public health orders. NKT-LLC asserts that “it was the owner of the tenant, Club 24, who was present and personally responsible for the cited violations, as well as the members of the club who were not apparently wearing masks or otherwise social distancing.” Next, NKT- LLC argues that SLOMC 9.22 only applies to designated “Safety Enhancement Zones” and only applies to six categories of Safety Enhancement Zone Violations (see SLOMC 9.22.020.B), none of which are covered by Citation 22050-L. The Supplement ends by listing the four orders and emergency proclamations dealing with COVID-19 and states it “can identify no ‘acts’ therein described that require an LLC to wear a mask or observe social distancing.” The hearing on Citation 22050-L this was conducted on November 5, 2020. With the consent of the City and Mr. Tompkins, the hearing was consolidated with the hearing on Citation 22205-L, which involved an identical citation against the premises on 872 Foothill for an alleged violation on August 11, 2020. NKT-LLC mounts the same defenses in both of these matters. At the end of the hearing and after listening to NKT-LLC’s argument opposing the vicarious liability of the landlord for violations by the tenant, I gave the City of San Luis Obispo additional time to provide citation to any relevant law authorizing such vicarious liability. On November 12, 2020, Mark Amber, Attorney for the City of San Luis Obispo responded to my request, citing, SLOMC 1.24.020.D as supporting the imposition of liability on a landlord. On November 12, 2020, Paul Ready, an attorney acting on behalf of NKT-LLC responded to Mr. Amber’s submission, raising arguments concerning the proper interpretation of SLOMC 1.24.020.D. Finally, on November 12, 2020, Mr. Amber pointed to SLOMC 1.24.030.L.5 which states that “there shall be a legally rebuttable presumption that the record owner of a parcel . . . is the person responsible for a code violation on such parcel. In addition, where applicable a commercial lessee, sublessee, or operator of a business on a parcel shall be presumed responsible for code violations relating to the operation of the business.” 4 B. ANALYSIS This nation is facing an enormous public health crisis. The outbreak of the Novel Corona Virus, SARS-CoV-2, commonly referred to as COVID-19, began in this country in February 2020 and since that time the death toll has risen steadily. Over 250,000 deaths in the United States. Over 18,000 deaths in the State of California. Thirty-five deaths and over 5000 cases in San Luis Obispo County. Hundreds of cases and some deaths in the City of San Luis Obispo. Governments and public health officials at all levels have struggled to respond to this pandemic. The State of California and the City of San Luis Obispo have worked extremely hard to establish rules and restrictions that will protect our people and yet allow businesses to operate where possible. The people of California and of San Luis Obispo have, for the most part, responded to this crisis with courage and determination. This is the context for understanding and applying the regulations, orders, and municipal code provisions that underlie Citation 22050. Turning to the specifics of this case, I note that the administrative record supports the fact that on July 27, 2020, patrons and customers of the Club 24 located at 872 Foothill Blvd, were working out indoors, in violation of the State and City health requirements and orders. The record supports the fact that Club 24 was the operator in charge of that gym and that NKT-LLC is the owner of the premises. The City asserts these facts and NKT-LLC does not contest them. The facts are not in issue. Instead, this case focuses on whether, based on these facts, NKT- LLC is or can be held legally liable. I address each of these arguments in turn. 1. Is a Limited Liability Company a “Person” Subject to the SLOMC and the COVID- 19 Emergency Public Health Orders? NKT-LLC argues that SLOMC 2.24.100 “applies only to ‘any person’ who . . . fails to abide by [the] rules and regulations” and that NKT-LLC “is not a person, it is a California limited liability company . . . incapable of wearing a mask or social distancing as required of persons.” Emphasis added. This argument borders on the ludicrous. For over 150 years, Federal, State, and local laws have applied to both natural persons and to legal entities such as corporations, partnerships, and limited liability companies. Under NKT-LLC’s argument, chemical company LLC’s would be immune from environmental laws because companies do not possess hands and arms and thus cannot possibly dump a drum of toxic waste into a river. Under NKT-LLC’s argument a bank or financial company would be immune from fraud or tax evasion because such companies do not have mouths with which to speak lies or defraud the public. Under NKT-LLC’s argument, the only persons subject to such laws would be those natural persons so foolish as to NOT incorporate. This argument is rejected. SLOMC 2.24.100 applies equally natural persons and LLCs. For example, the May 7, 2020 Order of the State Public Health Officer of the State of California specifies that the State will “designate sectors, businesses, establishments, or activities that may reopen” Under NKT- LLC’s argument, “businesses” run by corporations, partnerships and limited liability companies are immune from such closure requirements because (a) they are not natural persons and (b) cannot wear a mask. This is contrary to all established American law and would produce absurd and discriminatory results. Finally, I note that SLOMC 1.24.030.L.5 defines “person” to include “a natural person or a legal entity including, but not limited to, the owners, majority stockholders, corporate officers, trustees, and general partners of a legal entity.” 5 I conclude that limited liability companies are persons subject to the SLOMC and COVID-19 emergency public health orders. 2. Propriety of a $1,000 fine. Next, NKT-LLC argues that the $1,000 fine contained in Citation 22050 is improper because SLOMC 2.24.100 only authorizes a $500 fine. SLOMC 2.24.100 states that it shall be a misdemeanor, punishable by a fine not in excess of five hundred dollars . . . for any person, during an emergency to do certain acts. Emphasis added. This initial phrase seems to support NKT-LLC’s position. SLOMC 2.24.100.B prohibits “any act forbidden by any lawful rule or regulation issued pursuant to this chapter, if such act is of such a nature as to . . . be likely to . . . imperil the lives . . . of inhabitants of this city.” The acts forbidden include those prohibited by Chapter 9.22 of the Municipal Code. In response to the COVID-19 crisis and pandemic, on April 7, 2020, the City of San Luis Obispo adopted City Resolution 11106 (2020 Series). It states that “a city-wide safety enhancement zone shall be in effect at all days and times for the entire City of San Luis Obispo.” Resolution 11106 Section 6. More pertinent to this particular issue, Section 6 of Resolution 11106 states that “any violation of any public health order shall be subject to an immediate fine not to exceed one-thousand dollars.” (Emphasis added.) Based on this language, I conclude that the City of San Luis Obispo is authorized to impose a fine of $1,000 for each violation of any COVID-19 public health order. 3. Can a Landlord be Held Liable for COVID-19 Violations by the Tenant? As stated above, it is not disputed that NKT-LLC’s tenant – Club 24 – was operating the gym on July 27, 2020 when patrons and customers were observed working out indoors, in violation of the COVID-19 orders. NKT-LLC raises the key legal question arguing that it is only the landlord, that it was not aware of the activity or alleged violation, and it should and cannot be held liable under the COVID-19 orders and SLOMC. The City of San Luis Obispo points to two regulations, whereby NKT-LLC is liable. First, the City cites SLOMC 1.24.020.D which states: “D. Strict Liability of the Owner. Because serious code violations may impact public health, welfare, and safety and the adequacy and safety of housing, this chapter is intended to impose strict civil liability upon the owners of real property (or the owner of a business where the violation is caused by or relates to the operation of a business) for all violations of the San Luis Obispo Municipal Code which may occur in the city of San Luis Obispo regardless of the existence of specific or general intent or prior knowledge 6 of such violations and, further, regardless of any intent (or lack thereof) to violate the code.” Second, the City cites SLOMC 1.24.030.L.5, the definition of “person” which states: “[T]here shall be a legally rebuttable presumption that the record owner of a parcel . . . is the person responsible for a code violation on such parcel. In addition, where applicable, a commercial lessee, sublessee, or operator of a business on a parcel shall be presumed responsible for code violations relating to the operation of the business (for example, sign ordinance violations) on that parcel.” Despite these clear provisions in the SLOMC, NKT-LLC seems to focus on the May 7, 2020 order. “There are no provisions within the [May 7] Order which serve to support any fine or citation of a Landowner for the actions of the tenant.” However NKT-LLC points to no provisions of the May 7 2020 Order which would rebut the basic provisions of SLOMC sections 1.24.020.D or 1.24.030.L.5. Nor do any of the other relevant COVID-19 orders provide for any exception to the general rule, set in the Municipal Code, that landowners are and can be liable for COVID-19 violations by their tenants. I conclude that, under the Municipal Code of the City of San Luis Obispo, landlords can be held liable for violations of the COVID-19 Orders by their tenants. Landlords have the power (under the leases) to require that their tenants comply with relevant health and safety regulations. And, given that civil penalties for violations of these regulations, if unpaid, become liens on the real property, Landlords have the incentive to enforce these lease provisions against their tenants. Landlord liability is consistent with the letter and spirit of these laws. 4. Does SLOMC 1.24.020.D Mandate that, wherever possible, the Tenant be Held Liable and Not the Landlord? In its November 12, 2020 email, the lawyer for NKT-LLC argues that, where the violation arises from the activities of the tenant, then the City must hold the tenant responsible and the landlord is not liable. The argument is based on the “OR” provision of SLOMC 1.24.020.D which reads, in pertinent part: “[T]his chapter is intended to impose strict civil liability upon the owners of real property (or the owner of a business where the violation is caused by or relates to the operation of a business).” Emphasis added. NKT-LLC states “Clearly the express provisions seek to hold the owner of the business strictly liable for the violations of the code related to the business operations.” In a related argument, NKT-LLC states that this provision “at the very best, suggests that if the owner of the business has been cited, then the property owner cannot also be cited.” As to the first argument, I agree that SLOMC 1.24.020.D establishes that if a business operation violates the code, then the business owner can be held liable. This does NOT say that the property owner CANNOT be held liable. Indeed, the entire thrust of SLOMC 1.24.020.D is to affirmatively impose liability on the property owner. Under the law the City can cite the landowner. 7 The second argument focuses on the word “or.” In essence, NKT-LLC argues that, under this provision, the City can hold the landlord OR the tenant liable, but not both. The term “or” is a logical and sematic disjunction that creates alternatives. See Reading Law: The Interpretation of Legal Texts, at page 116-119, by Antonin Scalia and Bryan A. Garner (2012). In law, logic, and usage, there are two common meanings of the term “or.” Sometimes, the term “or” denotes an exclusive disjunction, where one or the other alternative must be chosen, but NOT BOTH. Obvious examples abound. Do you want coffee or tea? A person has the option of one or the other, but not both. At other times, the term “or” denotes the inclusive disjunction, where either, or BOTH of the options may be chosen. Do you want cream or sugar? Many people take both. This use of the term “or” is also common. In essence, NKT-LLC argues that SLOMC 1.24.020.D must be read as an exclusive disjunction. I disagree. I see nothing in the municipal code of the City of San Luis Obispo that prevents it from holding both the landlord and the tenant liable for COVID-19 violations. Indeed, holding both liable promotes compliance with these important public safety requirements. Furthermore, even if the City was forced to read SLOMC 1.24.020.D as an exclusive disjunction, forcing it to choose between citing NKT-LLC (the landlord) and Club 24 (the tenant – business operator), this would not exonerate NKT-LLC. This is because, in this case, the City of San Luis Obispo has only cited NKT-LLC and never issued a citation to Club 24. Thus, even under NKT-LLC’s interpretation of SLOMC 1.24.020.D, the law is satisfied.1 C. CONCLUSIONS Based on the foregoing, I conclude: 1. On July 27, 2020, the alleged violations occurred at 872 Foothill Blvd; 2. NKT University Square LLC is the owner of 872 Foothill Blvd; 3. NKT University Square LLC is a California Limited Liability Company; 4. California Limited Liability Companies are “persons” within the meaning of the San Luis Obispo Municipal Code and the relevant COVID-19 Emergency Public Health Orders and can be held liable thereunder; 5. Violations of SLOMC and the relevant COVID-19 Orders, including the April 7, 2020 City of San Luis Obispo adopted City Resolution 11106 (2020 Series) are punishable by a civil fine of up to one thousand dollars; 6. Landlords can be held liable for violations by their tenants of the San Luis Obispo Municipal Code and the relevant COVID-19 Emergency Public Health Orders; and 1 It is noted that the City of San Luis Obispo issued two citations relating to the operation of the gym on July 27, 2020. Citation 22050-L and Citation 22050. However, both of these citations identified NKT-LLC as the alleged violator and neither of them mentioned Club 24 as the violator. If the City wishes to cite the tenant/operator of the business, then the City needs to name the tenant/operator. Here only the landlord was cited. 8 7. NKT University Square LLC is liable for the violations specified in Citation 22050-L. Based on the evidence and statements provided by all parties, the Administrative Citation is Upheld. The fine, in the amount of $1,000 is due and must be paid within 20 days. Signed by: Hearing Officer Alex S. Karlin on November 22, 2020.