by Gary Taylor
Iowa Court of Appeals, February 8, 2023
Lime Lounge owns and operates a bar in the East Village of Des Moines. To sell alcoholic beverages in Iowa an establishment must obtain a liquor control license from the state Alcoholic Beverages Division (ABD). Among other requirements, the applicant for the license must first file the application with the local authority – in this case the city of Des Moines – for its approval. If the local authority disapproves of the application, the applicant has the ability to appeal the decision to the administrator of the ABD.
To sell alcoholic beverages in Des Moines an establishment must, among other things, be granted a conditional use permit (CUP), which places different requirements on establishments than the liquor control license. Depending on the type of business it is engaged in, a business is required to meet standards related to noise, litter, hours of operation, and others. The city will not consider a liquor control license application until the CUP is approved.
Lime Lounge obtained a CUP from the Des Moines Zoning Board of Adjustment (ZBA) and had their liquor control license approved in 2011. In 2015, the ZBA amended Lime Lounge’s CUP after multiple noise complaints. The ZBA revoked Lime Lounge’s CUP in March 2016. Lime Lounge challenged the revocation, but the revocation was upheld on appeal. On May 14, 2019, Des Moines filed a complaint with the ABD to revoke Lime Lounge’s state liquor license on the basis of the establishment’s failure to comply with local ordinances. Lime Lounge resisted the city’s complaint by filing a temporary injunction, but the district court dismissed Lime Lounge’s suit. Lime Lounge appealed.
Preemption. Lime Lounge’s first argument was that the Des Moines zoning code requirement of a CUP for an establishment selling liquor was preempted by the state alcoholic beverage control law found in chapter 123 of the Iowa Code because the zoning code requires an additional permit and fees in order to obtain a state liquor license. Lime Lounge asserted that the doctrine of express preemption, which “applies where the legislature has specifically prohibited local action in a given area,” rendered the Des Moines ordinance illegal.
Courts will look to the “specific language used by the legislature” to determine whether express preemption applies. Although Iowa Code section 123.37(1) provides, “The power to establish licenses and permits and levy taxes as imposed in this chapter is vested exclusively with the state. Unless specifically provided, a local authority shall not require the obtaining of a special license or permit for the sale of alcoholic beverages at any establishment….” the Court of Appeals determined that this did not apply to the city’s CUP permitting scheme because the zoning provisions related to the use of land. It agreed with the conclusion of the district court that “[t]he ordinance does not require a permit for the sale of alcohol, it requires a permit to use certain premises for the sale of alcohol. It’s a land-use regulation, not a regulation on the sale of alcohol. Thus, the requirement to obtain a CUP is not a permit requirement ‘for the sale of alcoholic beverages'” as contemplated by chapter 123. The Court of Appeals further observed that chapter 123 provides:
Local authorities may adopt ordinances or regulations for the location of the premises of liquor control licensed and retail wine or beer permitted establishments and local authorities may adopt ordinances, not in conflict with this chapter and that do not diminish the hours during which alcoholic beverages may be sold or consumed at retail, governing any other activities or matters which may affect the retail sale and consumption of alcoholic beverages and the health, welfare and morals of the community involved.Iowa Code 123.39(2)
Equal Protection. Lime Lounge also asserted the the Des Moines zoning ordinance violates the Equal Protection clause of the Iowa and United State Constitutions, which has been interpreted by courts to direct that “all persons similarly situated should be treated alike.” Whether this ideal has been met in the context of economic legislation is determined through a “rational basis” test. If the regulation is “rationally related to a legitimate governmental purpose” then the regulation will be deemed valid.
Lime Lounge alleged the varied requirements—particularly the necessity of obtaining a CUP and the fees necessary to do so—imposed on different establishments such as restaurants, bars, and retail establishments are arbitrary, and that the municipal ordinance allows the ZBA to “impose virtually any condition which it can contemplate—and, more onerously—on an individualized basis.”
The court disagreed with both allegations. The city has a legitimate purpose in ensuring the health, welfare, and safety of the community. The distinctions drawn in the ordinance between bars, restaurants and other retail establishments is rationally related to that purpose because each has different characteristics of operation. For example, bars tend to operate later in the evening than restaurants, create more noise from music and patrons, and have increased law enforcement requirements. Requiring additional permitting for these and other businesses that are more likely to exhibit greater nuisance behaviors is rationally related to protecting the community.
The court also disagreed that the ordinance allows the ZBA “unfettered discretion” in imposing permitting restrictions. The ZBA is in fact constrained by criteria found in the ordinance for imposing conditions related to public health and safety, noise, traffic congestion, and nuisance prevention. The East Village of Des Moines is a mixed-use neighborhood, containing both commercial and residential buildings. Tailoring certain zoning restrictions related to noise, congestion, and other nuisance behavior to the specific circumstances of the area is rationally related to promoting the community’s welfare.
Spot zoning. Finally Lime Lounge asserted that the code section amounted to illegal spot zoning, but the court dismissed that assertion by noting the similarities between the city’s treatment of Lime Lounge and those of several of its East Village contemporaries. Furthermore, the noise restrictions and other directives limiting nuisance behavior fall squarely within the city’s police power.