Mike's Smoke, Cigar & Gifts v. St. George City

2015 UT App 158

THE UTAH COURT OF APPEALS

MIKE’S SMOKE, CIGAR & GIFTS,
Petitioner and Appellee,
v.
ST. GEORGE CITY,
Respondent and Appellant.

Memorandum Decision
No. 20140521-CA
Filed June 18, 2015

Fifth District Court, St. George Department
The Honorable Jeffrey C. Wilcox
No. 130500429

Bryan J. Pattison, Thomas J. Burns, Shawn M.
Guzman, and Paula J. Houston, Attorneys
for Appellant
Ryan L. Holdaway and Diane Pitcher, Attorneys
for Appellee

JUDGE KATE A. TOOMEY authored this Memorandum Decision, in
which JUDGES STEPHEN L. ROTH and JOHN A. PEARCE concurred.

TOOMEY, Judge:

¶1 St. George City appeals from a district court order
reversing the City’s revocation of the business license of Mike’s
Smoke, Cigar & Gifts (MSCG). The City argues the district court
employed the incorrect standard in reviewing the City’s
revocation decision. We agree and therefore vacate the order and
remand for further proceedings.

¶2 MSCG is a store licensed by the City to sell cigarettes and
other tobacco-related products. Between March 2012 and
January 2013, the Washington County Drug Task Force
investigated MSCG for the suspected distribution of a controlled
substance. Investigators purchased a product called ‚Reborn‛ at
Mike's Smoke, Cigar & Gifts v. St. George City

MSCG; they later seized MSCG’s inventory of Reborn. A forensic
scientist at the Utah Bureau of Forensic Sciences (the State Crime
Lab) tested samples of Reborn, and determined that it contained
a substance known as XLR11, a structural analog of another
substance called AM-694. Because AM-694 is classified as a
controlled substance under Utah law and MSCG sold a
structural analog of it, the City revoked MSCG’s business
license. MSCG appealed to the City Council.

¶3 During a hearing before the City Council, attorneys for
the City and MSCG argued their respective positions and
proffered evidence. The City presented the State Crime Lab’s
reports in which the forensic scientist attested that the samples
of Reborn contained XLR11, which has a substantially similar
chemical structure to the controlled substance AM-694. Taking
the opposite view, MSCG presented the City Council with two
opinion letters. In the first letter, a chemist opined that XLR11 is
‚substantially structurally different‛ from AM-694 and therefore
is not ‚a structural analog of AM-694.‛ In the second letter, a
chemistry consultant opined that XLR11 and AM-694 are
structurally dissimilar and have different pharmacological
effects.

¶4 Based on the evidence before it, the City Council
determined that the product sold by MSCG contained XLR11. It
then relied on the State Crime Lab’s reports to conclude that
XLR11 is an analog of AM-694 and concluded that MSCG sold
and possessed the product with intent to distribute it in violation
of the Utah Controlled Substances Act. As a result, the City
Council upheld the City’s business-license-revocation decision.

¶5 MSCG petitioned the district court for judicial review of
the City’s decision.1 In its petition, MSCG claimed, first, that the
City’s revocation decision was not supported by substantial

1. Pursuant to a stipulation, the City stayed the revocation of
MSCG’s business license while the matter is pending.

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evidence and, second, that the definition of a controlled
substance analog under the Utah Controlled Substances Analog
Statute (the Analog Statute) was unconstitutionally vague. See
Utah Code Ann. § 58-37-2(g) (LexisNexis 2012). In contrast, the
City contended the City Council correctly interpreted the Analog
Statute and MSCG’s constitutional challenge lacked merit.
Further, the City asserted that substantial evidence in the
administrative record supported the City Council’s revocation
decision.

¶6 After reading the briefing and listening to oral argument
on the matter, the district court issued its Final Order on Petition
for Judicial Review. In the order, the court acknowledged that its
task was ‚to determine whether the City Council’s decision is
supported by substantial evidence in the record.‛ (Citing 14th St.
Gym, Inc. v. Salt Lake City Corp., 2008 UT App 127, ¶ 10, 183 P.3d
262.) The court then found that ‚there is a disputed issue of fact
as to whether the substance ‘Reborn’ has a substantially similar
chemical structure to a controlled substance analog because such
a finding cannot be made on written opinions by two qualified
experts.‛ Consequently, the court ‚reverse*d+ and remand*ed+
the matter back to the City Council to hold an evidentiary
hearing where the experts can testify under oath and may be
subject to cross examination by counsel.‛2 Based on this ruling,
the court did not reach the underlying merits regarding the
constitutionality of the Analog Statute. The court’s order
concluded, ‚This is the final Order of the Court until after the

2. The district court judge explained this ruling at the hearing,
stating,
[M]y thinking is I need to reverse and remand
sometimes as appellate courts do. I want to reverse
and remand and tell you to have an evidentiary
hearing where the experts are put under oath,
they’re subject to examination and cross-
examination, and then the city council can make a
determination based on an evidentiary hearing.

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City [Council] holds an evidentiary hearing as set forth . . .
above.‛ The City appeals.

I. The District Court’s Order Is a Final Appealable Order.

¶7 As an initial matter, MSCG contends that we lack
jurisdiction, arguing the district court’s order is not a final
appealable order. In particular, MSCG asserts that because the
district court did not rule on the merits of its constitutional
argument by addressing the meaning and interpretation of the
Analog Statute, the issue remained before the court for its
adjudication. MSCG further argues that the language of the
order stating that it ‚is the final Order of the Court until after the
City *Council+ holds an evidentiary hearing‛ indicates that the
district court was not treating the order as final.

¶8 ‚*W+hether an order is final and appealable . . . is a
question of law.‛ Miller v. USAA Cas. Ins. Co., 2002 UT 6, ¶ 18, 44
P.3d 663. A judgment is final if it ‚dispose*s+ of the case as to all
the parties, and finally dispose[s] of the subject-matter of the
litigation on the merits of the case.‛ Bradbury v. Valencia, 2000
UT 50, ¶ 9, 5 P.3d 649 (emphasis, citation, and internal quotation
marks omitted). Put differently, a final judgment ‚ends the
controversy between the parties.‛ Id. (citation and internal
quotation marks omitted).

¶9 To support its position that the district court’s order was
not final, MSCG cites Loffredo v. Holt, 2001 UT 97, 37 P.3d 1070. In
Loffredo, our supreme court dismissed an appeal, concluding that
it lacked jurisdiction because the district court’s order was not
final. Id. ¶ 17. The supreme court reasoned, although the district
court had ruled upon ‚the majority of the claims,‛ it had not
ruled on the issue of attorney fees. Id. ¶ 14. The supreme court
held that for an order to be final, ‚it requires all claims . . . be
decided in order for a decision to be appropriately appealed.‛ Id.

¶10 By contrast, in Zions Management Services v. Record, our
supreme court concluded that a district court’s order was final
for the purposes of appeal because ‚there was nothing left for

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the district court to do.‛ 2013 UT 36, ¶ 26, 305 P.3d 1062. Even
though the controversy persisted in another forum, the order
‚effectively ended the controversy between the parties‛ because
it left ‚no claims pending before the district court.‛ Id. Moreover,
the supreme court further clarified that the district court’s
jurisdiction to enter post-arbitration judgment did not otherwise
affect the finality of the order where no claims remained before
the district court after it issued the order. Id. ¶ 29. Accordingly,
the relevant inquiry for the purposes of finality centers on
whether the order left anything else for the district court to
adjudicate.

¶11 Although it appears counter-factual to conclude that an
order remanding the matter to the City Council for further
proceedings ‚ends the controversy between the parties,‛ the
controversy ended with respect to what the district court could
do. Under Zions’s logic, although the controversy still exists
between the parties in the administrative forum, the order is
final because nothing is left pending before the district court.
Here, unlike Loffredo, the court disposed of all of the parties’
claims, albeit erroneously, when it ‚reverse*d+ and remand*ed+
the matter back to the City Council to hold an evidentiary
hearing‛ and then dismissed MSCG’s constitutional issues based
on that ruling. The court’s order did not rule on the merits of
MSCG’s constitutional argument, but the order did dispose of
the case so far as the court was concerned and effectively
‚end*ed+ the controversy between the parties‛ before the district
court. See Bradbury, 2000 UT 50, ¶ 9 (citation and internal
quotation marks omitted).

¶12 MSCG further asserts that the order is not final based on
its own language. Indeed, the last sentence of the order describes
the order as a final order ‚until after the City *Council+ holds an
evidentiary hearing.‛ Nevertheless, at the hearing the district
court reversed and remanded the issues to the City Council,
dismissed MSCG’s constitutional issues, and then instructed the
parties that they would have thirty days to appeal from it. This
language, however, is surplusage in the face of other indications
that the court intended the order as a final judgment. For these

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reasons, we conclude the order is a final appealable judgment
that is properly before us. Accordingly, we turn to the merits of
the City’s appeal.

II. The District Court Employed the Incorrect Standard in
Reviewing the City Council’s Revocation Decision.

¶13 The City argues on appeal that the district court used the
incorrect standard in reviewing the City Council’s business-
license-revocation decision. In particular, it contends the court
erroneously applied a summary judgment framework to reverse
the City Council’s decision on the basis that a disputed issue of
fact precluded the City Council from making a finding that
Reborn is a structural analog of a controlled substance. MSCG
agrees. ‚Whether the trial court employed the proper standards
presents a legal question which is reviewed for correctness.‛ See
Chandler v. Blue Cross Blue Shield of Utah, 833 P.2d 356, 360 (Utah
1992); see also Searle v. Milburn Irrigation Co., 2006 UT 16, ¶ 14, 133
P.3d 382.

¶14 ‚Judicial review of license revocations by municipalities is
limited to a determination whether the municipality acted
within its lawful authority and in a manner that is not arbitrary
or capricious.‛ Dairy Prod. Servs., Inc. v. City of Wellsville, 2000 UT
81, ¶ 42, 13 P.3d 581 (citation and internal quotation marks
omitted). This court has indicated that a ‚municipality’s license
revocation decision is deemed arbitrary or capricious if it is not
supported by substantial evidence in the record.‛ 14th St. Gym,
Inc. v. Salt Lake City Corp., 2008 UT App 127, ¶ 10, 183 P.3d 262
(citation and internal quotation marks omitted). This standard
does not allow the reviewing court to reweigh the evidence,
Dairy Prod. Servs., 2000 UT 81, ¶ 42, but requires the court to
‚consider all the evidence in the record, both favorable and
contrary, and determine whether a reasonable mind could reach
the same conclusion as the *c+ity,‛ 14th St. Gym, 2008 UT App
127, ¶ 10.

¶15 Although the district court correctly identified the
standard for reviewing the City Council’s decision, it did not

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analyze whether the City Council’s decision was supported by
substantial evidence. Instead, the district court found that ‚there
is a disputed issue of fact as to whether the substance ‘Reborn’
has a substantially similar chemical structure to a controlled
substance analog.‛ Because of this ‚disputed issue of fact,‛ the
district court then reversed the City Council’s revocation
decision for further fact finding. Instead of looking at all the
evidence, both favorable and contrary, to determine if a
reasonable mind could reach the City Council’s decision, the
court seems to have reviewed the decision within the summary
judgment framework. See Utah R. Civ. P. 56(c) (indicating that
summary judgment is appropriate if based on the evidence
‚there is no genuine issue as to any material fact and . . . the
moving party is entitled to a judgment as a matter of law‛).
Whether there is a dispute in material facts is not relevant to the
district court’s review of a municipality’s business-license-
revocation decision. As a consequence, the district court erred by
viewing this case through the prism of the summary judgment
standard.

III. Conclusion

¶16 The district court’s order was final because it disposed of
all of the parties’ claims. But the court erred when it failed to
determine whether the City Council’s business-license-
revocation decision was supported by substantial evidence.
Accordingly, we vacate the order and remand for the district
court to analyze the parties’ claims under the correct legal
standards.3

3. The City asks us to independently review the administrative
record and to resolve these issues, but we decline to do so
without the benefit of the district court’s analysis.

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