To:  Lawrence City Commission

From:  Patricia Sinclair

Re:  Paradise, Inc. – Revocation of Drinking Establishment License

Date:   February 16, 2004

This memo is in regards to the Paradise Café, but it can serve as an example of some of the kinds of lack of definition and procedures, irregularities, oversights, omissions, and informal practices that exist in Lawrence’s licensing of drinking establishments.  It includes my attempt to have the Paradise’s license revoked, the City Commission’s response, followed by a response by Frank Reeb, City Clerk.  I believe that the issue of the city’s responsibility to revoke this license, as well as the problems with the Paradise’s application and status have not been adequately addressed by the city.

Background

A corporate report for Paradise, Inc., d/b/a Paradise Café, was overdue to the Secretary of State’s office since April, 2003, and the corporation had been given an extension until October 15, 2003, to file this report.  Since the state requires liquor applications to be submitted in advance, Paradise, Inc. was still in its extension when the state renewed its license.  By the time they came to the City Commission, the extension had run out and they were in a delinquent status.

Please note that the state of Kansas is very particular about ownership of liquor licenses and establishments and has many regulations about them.  A corporation which has a license can be sold in its entirety and the new owners may continue the license provided they provide information on the new owners and they pass the background checks conducted by ABC.  They also do not allow “silent” or hidden owners and require that anyone with a financial interest in the enterprise be disclosed.

City Commission Meeting December 16, 2003

At the City Commission meeting of December 16, 2003, I asked that the Paradise Cafe not be granted a renewal of their license.  It had lapsed in October, and a call from the City Clerk’s office had brought in their renewal application.  It shares an expiration date with the state license.  Once a license has lapsed, the City Commission has the right to revoke or suspend that license or take other actions including charging the licensee with a misdemeanor ( City Code 4-112 Penalty). The license was renewed despite the fact that the Paradise had discontinued the sale of food and was operating as a bar.  They expressed a hope to return to food service in the future.

Temporary Permit

The Paradise was then operating under a temporary permit recently issued by the City Clerk, even though an application for renewal and accompanying documents had not yet been received.  I have found no place in the city code which allows for this type of permit except for special events on a one-time basis.  I repeatedly asked the City Clerk, Frank Reeb, and David Corliss to cite the section of the code which allows for this with no response.

Email of January 26, 2004

In an email dated January 26, 2004 and sent to members of the Lawrence City Commission and city administrative staff, I requested that the city of Lawrence revoke the city Drinking Establishment License granted to Paradise, Inc. d/b/a Paradise Café and renewed on December 16, 2003.  I stated that the business appeared to be closed, that the Kansas Secretary of State’s office showed the owners, the corporation, was in forfeiture status, that there appeared to be some discrepancies in the information submitted for renewal, and that there might be other cause of which I was unaware.  The state would not have renewed a corporation’s license in this status.

City Commission Meeting February 3, 2004

Since my email went unanswered, I repeated my suggestion during the public comment portion of the February 3, 2004 City Commission meeting.  I referenced a December 23, 2003 Lawrence Journal-World article which reported that the business was having difficulty paying back payroll.  I also suggested that the city might more easily obtain information regarding the corporation and its application to and status with the state which had proven difficult for me, even under the Open Records Act.  I suggested that the establishment had done some remodeling and might not meet current fire safety standards.  After discussion, Mayor Dunfield directed counsel to prepare a memo as to whether the Commission had grounds to revoke the license and to spell those out.

Email of February 5, 2004

On February 5, I emailed the City Commissioners and city administrative staff further information and a suggestion for grounds for revocation.  I reported that the telephone for the Paradise was disconnected. 

I cited the following from the Kansas Secretary of State’s website:  “A forfeited business entity is an entity that has forfeited its charter or its authority to do business in Kansas. The corporation is no longer active and in good standing.  This can occur for a variety of reasons.”

I then cited from the Lawrence City Code 6-106 Revocation.  Chapter 6 deals with licenses, including specifically Drinking Establishment licenses.  It reads, in part:

Except as otherwise provided in this Code, any license issued under the terms and provisions of this Chapter shall be revoked by the board of commissioners of the City for any of the following reasons:

(a)      If a licensee has fraudulently obtained the license by giving false information in the application therefor.

(c)      If a licensee has become ineligible to obtain a license under this Chapter.

The licensee would not be eligible to obtain a license at this time due to the fact that the licensee (Paradise, Inc.) is forfeited and without authority to do business in Kansas.  This code also uses the word shall, not may.  I also referenced the ownership ambiguities. 

Lease and Ownership Issues

My inspection of the Paradise Café file revealed that the lease submitted with the application was not in the name of Paradise, Inc.  It was in the name of Schuyler Lister, d/b/a/ Paradise Restaurant Bar and Nightclub and began on September 1, 2002.  I pointed this out to Frank Reeb, but he did not appear to understand my concern.  Mr. Reeb reported that Steve McCoy had indicated that he was the sole owner of Paradise, Inc.

The state does not require that a licensee submit a new lease every year for renewal, unless there is a change or when an option to extend is exercised.  Therefore, it is possible that the state never saw this lease for the past two renewals.

February 10, 2004 Memo Frank Reeb to Mike Wildgen and David Corliss

In a memo to Mike Wildgen and David Corliss from City Clerk Frank Reeb, Mr. Reeb cites state procedures and a conversation with Laura Graham, Asst. Attorney General at the ABC/KDOR.  He also cites from Lawrence’s city code 4-115 B.  He talks about what it would take for Paradise, Inc. to resurrect itself as a corporation.  He also notes that we do not track the status of licensed corporations and would need to treat all licensees equally.

Unfortunately, this is not the legal opinion that I believe the City Commission was seeking.  It also failed to address my specific reference to Chapter 6 in Licenses, cited above, which details when a license shall be revoked, which implies to me that it is not optional.  It also failed to address the fact that, with the Paradise, there appear to be issues other than the forfeiture of the corporation.  It also does not appear that Mr. Reeb discussed the possibility of there being other problems with the licensee and its application with Asst AG Graham.

I did see the lease, not in the corporate name.  For other information, I have only unsubstantiated newspaper reports.  These include a possible misrepresentation of ownership/direction and back wages being reported to a state agency.  I had asked that the city investigate these possibilities as well as the possibility of other financial obligations such as taxes.

City Code v. State Law

One basic question that arises from Mr. Reeb’s memo of Feb. 10 is whether or not the city’s code regarding drinking establishments (as found in Chapters 4, 6, 20, and possibly other places) can be enforced.  Can we revoke a license as stated in the code, or must we rely on the state to do so?

If the latter is the case, then why don’t we share information with the state and cooperate with them in investigating a possible license infraction?

There are at least two instances of other establishments where there was legal action taken by ABC and licenses were surrendered.   I found no mention of these actions in the city files so far, so it would appear that our coordination with the state is minimal.

If we cannot enforce our code, then we ought not to have it.

While it is true that there ought to be fair play for all establishments, it is also true that the public has a right to expect some action on the part of the city when problems with establishments arise, particularly when inaction may lead to more downtown bars.  This inaction for one establishment may also make it difficult to act in the other cases.

Issues of Change and Loss of Legal Non-Conforming Use Status

The Paradise has been remodeled since 1994.  They removed a partial wall, added a stage, and possibly did other remodeling including upstairs.  Our zoning code on legal non-conforming uses (Chapter 20, Article 13) does not allow changes such as these except in certain circumstances and with the approval of the City Commission.  Paradise claims to be exempt from our food sales requirements in the C-3 downtown district due to its licensing from 1994.

They have also been closed down for extended periods of time in the past and there is no record in the files as to the length of any of these closures.  A six month closure would lose any legal non-conforming use status, if such a status existed.  The existence of a license does not prove that a business is in operation.

Additionally, there are concerns of public safety when a drinking establishment remodels and/or changes the nature of their services.  Changes could trigger the loss of a legal non-conforming use status.  Also, the Fire Department would need to inspect and determine whether fire code was met, determine a safe occupancy number, and possibly require that changes be made for public safety.