Lime Lounge, LLC v. City of Des Moines

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Lime Lounge, LLC, Appellant, v. City of Des Moines, Iowa, Appellee.

No. 22-0473

Supreme Court of Iowa

March 22, 2024

Submitted February 20, 2024

On review from the Iowa Court of Appeals.

Appeal from the Iowa District Court for Polk County, Robert B Hanson (temporary injunction) and Dustria A. Relph (trial) Judges.

Bar owner seeks further review of court of appeals decision that affirmed district court judgment dismissing challenges to city ordinance. Decision of Court of Appeals and District Court Judgment Affirmed.

Cornelius S. Qualley (argued) and George Qualley IV of Qualley, P.L.C., Des Moines, for appellant.

John O. Haraldson (argued), Assistant City Attorney, Des Moines, for appellee.

Waterman, J., delivered the opinion of the court, in which all participating justices joined. Christensen, C.J., takes no part in the consideration or decision of this case.

Waterman, Justice.

In this appeal, we must decide whether the district court correctly rejected challenges to a City of Des Moines ordinance governing conditional use permits (CUPs) for bars. After noise complaints, the City revoked the CUP for a bar in the East Village, which was upheld in a prior appeal. The bar now challenges the ordinance, arguing it is preempted by Iowa Code chapter 123 as interpreted in Iowa Grocery Industry Ass'n v. City of Des Moines, 712 N.W.2d 675 (Iowa 2006), and violates equal protection and spot zoning prohibitions. The bar filed a motion for a temporary injunction, which the City resisted. The district court granted a temporary injunction allowing the bar to remain open. Several years later, a different judge-after a trial on the merits-lifted the injunction and dismissed the suit. The bar appealed, and we transferred the case to the court of appeals, which affirmed the dismissal. We granted the bar's application for further review.

On our review, we determine the bar's challenges to the CUP ordinance lack merit. Iowa Code chapter 123 allows municipalities to regulate bars through zoning, noise restrictions, and other health and safety measures within their local police powers. The Des Moines CUP ordinance is not preempted by state law, and it easily survives the bar's constitutional challenge under rational basis review. Nor did the City engage in illegal spot zoning. For the reasons further explained below, we affirm the decision of the court of appeals and the district court judgment dismissing the bar's challenge to the ordinance.

I. Background Facts and Proceedings.

Lime Lounge, LLC owns and operates a bar at 435 East Grand Avenue in Des Moines's East Village neighborhood. In 2011, Lime Lounge obtained a CUP from the City of Des Moines Zoning Board of Adjustment (ZBOA)-pursuant to Des Moines Municipal Code § 134-954-to sell wine, liquor, and beer; the Iowa Alcoholic Beverages Division (ABD) of the Iowa Department of Revenue subsequently issued Lime Lounge a liquor control license.

A. The Process to Obtain a Liquor License.

"Alcoholic beverage licensing in Iowa is a joint effort of the applicant, local authority (city or county), and the Iowa Alcoholic Beverages Division (ABD)." Iowa Alcoholic Beverages Div., Licensing Requirements, https://abd.iowa.gov/licensing/licensing-requirements [https://perma.cc/45MH-AZDR]. Enacted in 1934, the "Iowa Liquor Control Act," now entitled the "Iowa Alcoholic Beverage Control Act" and codified as amended at Iowa Code chapter 123, provides the statutory regime for obtaining a liquor license. 1934 Iowa Acts ch. 24 (codified at Iowa Code ch. 93-F1 (Iowa 1935)). "[S]ubject to a handful of exceptions, the general assembly reserved in itself the power to regulate Iowa's alcoholic beverage industry." Iowa Grocery, 712 N.W.2d at 679. Specifically, Iowa Code section 123.37(1) (2019) grants the State the exclusive authority to establish alcohol licenses and permits:

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.

A person seeking a liquor license must complete an electronic application, including the information specified in Iowa Code section 123.31, and file the application with the appropriate local authority-the "city council if the premises for which the license or permit is sought are located within the corporate limits of a city, or with the board of supervisors if the premises for which the license or permit is sought are located outside the corporate limits of a city." Id. § 123.32(1)(a). The applicant must also meet several requirements found in section 123.30: they must be "of good moral character"; consent to allowing certain government employees "to enter upon areas of the premises where alcoholic beverages are stored, served, or sold, without a warrant during business hours of the licensee or permittee to inspect for violations of this chapter or ordinances and regulations that cities and boards of supervisors may adopt"; and possess premises that "conform to all applicable laws, ordinances, resolutions, and health and fire regulations." Id. § 123.30(1)(a)-(b), (2).

The local authority then decides to either "approve or disapprove the issuance of a liquor control license, retail wine permit, or retail beer permit." Id. § 123.32(2). The local authority "shall endorse its approval or disapproval on the application and shall forward the application with the necessary fee and bond, if required, to the [ABD]." Id.

Once the application is received by the ABD, if the local authority disapproved the application, "the administrator shall notify the applicant that the applicant may appeal the disapproval of the application to the administrator." Id. § 123.32(6)(a). The application, fee, and bond are also returned to the applicant. Id. If the local authority approved the application, the administrator shall conduct any investigation it "deems necessary to determine that the applicant complies with all requirements for holding a license or permit." Id. § 123.32(6)(b). "The administrator may affirm, reverse, or modify the proposed decision to approve or disapprove the application for the license or permit." Id.

Chapter 123 also provides a fee structure for the application, which we summarized in Iowa Grocery:

The Act assigns specific application fees for liquor licenses and beer and wine permits. The local authority collects these fees. For beer permit applications, the local authority forwards a certified receipt for the fees to the Division, but retains all of the application fees for itself. [Iowa Code] § 123.143(1). In contrast, the fees on liquor licenses and wine permit applications are not retained by the local authority. The local authority sends these fees to the Division and then receives a percentage of the fees back. Id. § 123.36(8). In Des Moines, the fees retained by, or remitted back, to the City are placed in the City's general fund.

712 N.W.2d at 677.

B. The City's Zoning Requirements.

Iowa Code chapter 123 expressly allows local control over zoning, health, and welfare matters. Iowa Code section 123.39(2) provides:

Local authorities may suspend any liquor control license or retail wine or beer permit for a violation of any ordinance or regulation adopted by the local authority. 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.

The City enacted such an ordinance, Des Moines Municipal Code § 134-954, entitled "Selling of liquor, wine and beer," which governs "[t]he use of land in all districts for the sale of alcoholic liquor, wine[,] and beer." Des Moines, Iowa, Mun. Code § 134-954 (2019). Subsection (a) provides a table listing where the sale of alcohol may take place and states that "[t]he sale of alcoholic liquor, wine and beer is permitted only in the zoning districts and subject to the conditions applicable to the business identified in the table." Id. § 134-954(a).

Subsection (b) states that "[a] conditional use permit is required for the use of a premises for the sale of alcoholic liquor, wine[,] or beer, under the circumstances identified in subsection (a), above." Id. § 134-954(b). The Des Moines ZBOA grants the CUPs and can impose "reasonable conditions" in them. Id. The CUP is also subject to "special conditions" found in subsection (c), such as requiring an illuminated parking area, complying with noise ordinances, and placing litter and trash receptacles inside and outside the establishment. Id. § 134-954(c). A CUP is generally required for liquor stores, tobacco stores, taverns and nightclubs, and limited food and retail sales establishments. Id. § 134-954(a), (b).

The ZBOA regulates the process to obtain a CUP. Persons seeking a CUP first set up a preapplication conference with "staff representing various City departments." Next, they submit an application to the City's Permit and Development Center. The application must have the required application fee attached-$300 for a CUP. If the application is approved by the City staff, the applicant then appears at the ZBOA's public hearing. Following the hearing, the ZBOA prepares a decision granting or denying the CUP. The City will not approve a liquor license application until the...