An Opinion in Administrative Law
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TEXAS ALCOHOLIC BEVERAGE BEFORE THE STATE OFFICE COMMISSION VS. OF MANUEL HERNANDEZ, D/B/A NERO'S COCKTAIL LOUNGE PERMIT NOS. MB18534 & LB180535 EL PASO COUNTY, TEXAS ADMINISTRATIVE HEARINGS
The Texas Alcoholic Beverage Commission, Petitioner, brought this action against Manuel Hernandez, Respondent, d.b.a. Nero's Cocktail Lounge, to cancel his permits for violations of the Texas Alcoholic Beverage Code (Code) and the Texas Alcoholic Beverage Commission Rules (Rules). In the event cancellation was denied, the Petitioner requested a suspension of 60 days with a civil penalty of $40,000.00. This proposal recommends a suspension of 60 days with an alternative civil penalty of $60,000.00. A hearing was held in El Paso before an administrative law judge. The sufficiency of jurisdiction and of the notice of hearing, which are set out in the conclusions of law, were stipulated by the parties.
A. Statutory Provisions
Texas Alcoholic Beverage Commission Rule 35.41(a)[a definition]:
Texas Penal Code Sec.
21.01(2): Texas Penal Code
Sec. 21.07(a): Texas Alcoholic Beverage Code Sec. 104.01:
Texas Alcoholic Beverage Code
Sec. 11.61(b): B. Evidence Examined Two Commission agents came to El Paso from
other parts of the state for three days to conduct an undercover operation of
several establishments which serve alcoholic beverages and offer seminude dancing
by young women. On November 30, 1995, the two agents went to Nero's and
saw female employees dancing for customers. In the process, the dancers would
touch the genitals of the customers with their hands. The women asked the agents
if they wanted a dance performed for $10, and Agent Don Likens accepted a dance
from a woman identified as Ruby. While performing her dance, she sat on his lap
and ground her buttocks into his genitals. She also touched his genitals with her
bare breasts. All in all, she made contact with his genitals five or six times during
the dance. On December 1, 1995, Jackie performed a stage dance for the entire
audience. While dancing, she stumbled and appeared uncoordinated. Agent Paul
Tolliver went to give her a tip on the stage and smelled a strong odor of alcohol on
her breath. Agent Likens accepted an individual dance from Jackie and noticed that
she had slurred speech and acted silly. She said to him, "I apologize I'm drunk."
While dancing for Likens, she rubbed her buttocks into his genitals, touched his
genitals with her naked breasts, touched his genitals with her face, and did some
biting on his penis. That same night both agents also observed a young
Hispanic man, about 5'7" and 150 pounds, sitting at a table. When he would get up
periodically to go to the stage, he would stumble and walk into tables. Once he
almost stumbled onto the stage. He would talk to himself loudly. Tolliver tried to
talk to him but had trouble understanding him because of his incoherent speech. He
asked Tolliver where he was. A waitress was seen serving the man two beers while
he was in this state. That night, Tolliver accepted a dance from Julie, who
pulled him to the edge of the bench he was given to sit on. She then proceeded to
rub his genitals with her knee, to rub her buttocks against his genitals, and to rub
her hand on his genitals. She made contact with his genitals a total of seven times.
On December 2, 1995, Likens accepted a dance from Dusty, who intentionally
rubbed his genitals with the back of her head, rubbed his genitals with her bare
breasts, rubbed his genitals with her knees, and sat on his lap in order to rub her
buttocks into his genitals. She made contact with his genitals from four to six times.
Later that night, other TABC agents came into the club and, under the direction
of Likens and Tolliver, photographed and identified the employees mentioned.
Jackie was completely identified as Yakira Talamantes, Julie as Marina Rodriguez,
Dusty as Christina House, and the waitress was Marie Andrews. Ruby, however,
was never found again. The violators, including the intoxicated man, were not
arrested nor was the El Paso Police Department notified because it is TABC policy
not to jeopardize an undercover operation by effecting arrests. The agents did
not believe that any of the acts of sexual contact were accidental but were instead
made with the intention to arouse sexual desires in order to make more money for
additional dances and tips. The agents were fully clothed at all times, and the
dancers each time stripped down to only a G-string while performing the individual
dances for them. The agents said that they at no time pulled the women toward
them or in any way made the dancers touch them. The agents did not see anyone
who looked like a manager walking around the club or talking to the waitresses.
They observed no signs on any of the walls saying what kind of conduct was
prohibited. The Respondent did not present any witnesses during the liability
phase of the hearing. During the disposition or sanctions phase, he presented only
one witness, the club manager Arturo Hernandez. He had been the manager of
Nero's since July, 1995, and had also managed other topless clubs for at least six
years. He stated that he had been making improvements in the club since he was
hired, but was not very specific. He did not remember anything about the three
nights reviewed above and had first found out about this TABC complaint in April,
1996. In his testimony, he did not try to bring up points demonstrating due
diligence on the dates which were the subject of the investigation, but instead
focused more on concerns for the future. He said there were two managers on
duty from Monday thru Friday but only one on Saturdays. He testified at length
about the types of questions that were asked during employment interviews and
indicated that he was mostly concerned with an applicant's criminal and substance
abuse history. He admitted that it was not normally mentioned in the interview that
the women were never to touch customers on the genitals. A written copy of the
rules was not provided to the new employees upon being hired, supposedly because
many of them don't know how to read. A copy of the rules was on the wall in the
dressing room, but Hernandez had not brought it to the hearing. He said there was
a rule stating that customers could not touch the dancers but admitted there was no
rule prohibiting dancers from making contact with the patrons. He did say that he
was constantly talking to employees about their conduct. In connection with serving
alcohol, there was a rule that a customer could not have more than two alcoholic
drinks on his table at one time, but Hernandez admitted there was no rule setting
any other specific drink limits. For instance, there was no limitation on how many
drinks a person could have per hour. The only other rule for waitresses to follow
was that they were to tell the manager if they saw a customer who was intoxicated.
He stated that the waitresses and dancers were not paid wages. They depended
solely on the fees and tips they received from customers. He admitted that this
practice left it open to abuse. There were no plans to change that policy, but
Hernandez said he would talk it over with the owner. He said not paying wages is
the common practice in the business. On three different nights, dancers at
Nero's engaged in conduct which involved the touching of the genitals of customers
in different manners and with different parts of their own bodies. Four different
dancers performed at four different times for the two TABC undercover agents in a
manner that showed they were clearly intending to arouse or gratify sexual desires.
Their routines were very similar, and it would appear that they were accustomed to
dancing in that style on a regular basis without fear of disciplinary action. It also did
not appear that there were managers present to supervise or prohibit this style of
dancing. There was no rule, written or otherwise, that prohibited sexual contact by
the dancers. No mention was made about sexual contact at the employment
interview. The manager did not make it clear at the hearing that he had taken any
strong and specific steps to prohibit sexual contact even after hearing about the
TABC complaint. Nor did he show that he would take effective steps in the future.
The fact that the only pay the dancers receive is from the customers creates a
strong incentive for dancers to push the limits as far as they can on touching and
sexual enticement. The more they gratify sexual desires the more repeat dance
business and tips they are likely to receive. The manager did not speak of any plans
to end this method of compensation. The agents seemed credible and did not
seem to have any animosity toward Respondent or his establishment or his
employees. The sexual contact was of the kind that would arouse an average,
normal male. The Respondent made an issue of the fact that the agents did not
make or effect any arrests, especially on the intoxicated male who could be driving
home. In an undercover operation, however, peace officers are justified in not
arresting anyone for offenses during an investigation to avoid defeating the purpose
of the operation. This is a normal and understandable practice. On one of the
nights, an employee and a customer each appeared to be highly intoxicated. A
waitress continued to serve beer to the customer in such an intoxicated state. The
manager did not mention the taking of any effective steps to prevent this from
happening again. A rule that prohibits the serving of more than two drinks at a time
to a customer leaves great leeway to waitresses. For instance, a customer could
quickly chug one drink after another and this would not violate any house rule. As
in the case of the dancers, the waitresses make their money strictly from the tips
they get. Once again, this is a wide-open temptation to ignore the fact that a
customer may be too intoxicated to continue to be served. The manager made no
mention of any intention of changing this practice. The manager's testimony was
not very reassuring. One was not convinced that violations would not occur again.
The manager mostly tried to give the assurance that he was concerned with keeping
the lounge open because otherwise many people would lose their jobs and that he
was concerned with not hiring people with a criminal history. C.
Recommendation The Respondent has agreed to 11 suspensions dating back to
1989. Most of these have involved the same sex-related violations as are found in
this case. The latest suspension was agreed in June, 1995, for a period of 45 days
or a civil penalty of $6,750.00 and involved sexual contact and prostitution. In view
of this history, Petitioner requests cancellation. Cancellation would be too harsh at
this point, especially in view of that fact that the penalties assessed up to now
against Respondent have been relatively light. The Staff's acquiescence to these
light penalties in the past works against it. The Respondent was likely lulled into
believing that it would only have to worry about paying light penalties into the
indefinite future. In the alternative, Petitioner requests a suspension of the
maximum allowed of 60 days and a civil penalty of $40,000.00 based on average
income to Nero's of $20,000.00 per month. In view of the two persons who were
grossly intoxicated inside Nero's, a stiff monetary penalty is warranted. Those two
people could have easily driven away from the lounge and killed someone.
Respondent should have been well aware of this potential danger, especially in view
of the publicity this kind of problem has received in recent years. Accordingly, this
proposal recommends a 60-day suspension and in lieu a civil penalty of
$60,000.00. 1. Manuel
Hernandez d.b.a. Nero's Cocktail Lounge, 10662 Vista del Sol, El Paso, Texas, is
the holder of a Mixed Beverage Permit No. 18534 and a Mixed Beverage Late
Hours Permit No. 180535, both issued by the Commission on March 27, 1995.
2. On November 30, 1995, female employees of Nero's Cocktail Lounge
touched the genitals of customers while performing individual dances for them.
3. On November 30, 1995, Nero's employee Ruby performed a dance for
TABC Agent Don Likens during which she sat on his lap and ground her buttocks
into his genitals and also touched his genitals with her bare breasts. She made
contact with his genitals five or six times. 4. On December 1, 1995, Nero's
employee Yakira Talamantes ("Jackie") performed a dance for Likens during which
she rubbed her buttocks into his genitals, touched his genitals with her naked
breasts, touched his genitals with her face, and did some biting on his penis. 5.
On December 1, 1995, Nero's employee Marina Rodriguez ("Julie") performed a
dance for TABC Agent Paul Tolliver during which she rubbed his genitals with her
knee, rubbed her buttocks against his genitals, and rubbed her hand on his genitals.
She made contact with his genitals a total of seven times. 6. On December 2,
1995, Nero's employee Christina House ("Dusty") performed a dance for Likens
during which she rubbed his genitals with the back of her head, rubbed his genitals
with her bare breasts, rubbed his genitals with her knees, and sat on his lap in order
to rub her buttocks into his genitals. She made contact with his genitals from four
to six times. 7. Neither Likens nor Tolliver ever pulled the dancers toward
them, and neither one ever made the dancers touch them in any way. 8. The
dancers asked and received $10 in payment for each individual dance, received
additional tips for stage dances, and could accept additional tips for individual
dances. 9. Nero's dancers and waitresses receive no wages but instead depend
for their compensation on what they receive from customers in dance payments
and tips. 10. The contact involved in Findings of Fact 2-6 above was not
accidental but was sexual contact made with the full intention to arouse or gratify
the sexual desires of customers. 11. The arousal of sexual desires was intended
in order to obtain repeat business for the dancers through requests for additional
dances and through tips. 12. The sexual contact was of the kind that would
arouse or gratify the sexual desires of most normal men. 13. On December 1,
1995, Nero's employee Yakira Talamantes ("Jackie") stumbled and appeared
uncoordinated while she danced. She had a strong odor of alcohol on her breath,
talked with a slurred speech, acted silly, and admitted she was drunk. From this, it
is found that she was intoxicated. 14. On December 1, 1995, a young Hispanic
male customer stumbled and bumped into tables whenever he would try to walk
and at one point almost stumbled onto the stage. He talked to himself loudly but
was incoherent while talking to Tolliver. He asked Tolliver where he was. From
this, it is found that the young man was intoxicated. 15. Nero's employee Marie
Andrews served two Coors beers at two different times to the young Hispanic man
while he was in this state of intoxication. 16. On December 2, 1995, TABC
open agents went inside Nero's Lounge and correctly identified and photographed
Yakira Talamantes, Marina Rodriguez, Christina House, and Marie Andrews.
17. The agents were justified in not effecting any arrests for illegal acts because of the sensitive nature of their undercover operation. 18. Nero's does not have a rule prohibiting dancers from touching customers while dancing. 19.
Employment interviews by Nero's managers do not delve much into the touching of
customers or the serving of alcohol to intoxicated persons. 20. The only rules
involving the serving of intoxicated persons, (1) that no person can be served more
than two drinks at one time and (2) that a waitress is to inform the managers of an
intoxicated person, are not very effective in preventing the serving of intoxicated
persons. 21. There was little evidence that the management had exercised due
diligence in preventing the types of acts described in the above findings of fact on
the nights of the TABC investigation last November and December. 22. There
was little evidence that the types of incidents
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The last part of the PFD was accidentally cut off by the web hosts. The respondent Nero's Cocktail Lounge was found liable.