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G and N Restaurant Group, Inc. v. City of Chattanooga

Court of Appeals of Tennessee, Knoxville

October 8, 2014

G and N RESTAURANT GROUP, INC. d/b/a CITY CAFÉ DINER
v.
CITY OF CHATTANOOGA

Session July 8, 2014

Appeal from the Chancery Court for Hamilton County No. 11-0671 W. Frank Brown, III, Chancellor

William G. Schwall, Chattanooga, Tennessee, for the appellant, G and N Restaurant Group, Inc. d/b/a City Café Diner.

Kenneth O. Fritz, Chattanooga, Tennessee, for the appellee, City of Chattanooga.

Thomas R. Frierson, II, J., delivered the opinion of the Court, in which Charles D. Susano, Jr., C.J., and D. Michael Swiney, J., joined.

OPINION

THOMAS R. FRIERSON, II, JUDGE

I. Factual and Procedural Background

The plaintiff, G and N Restaurant Group, Inc. ("G & N"), operates a family-style restaurant under the name of City Café Diner ("City Café") within a Best Western Hotel located on Lee Highway in Chattanooga, Tennessee.[1] City Café is open twenty-four hours a day and serves breakfast, lunch, and dinner, with all food items available around the clock. Upon its initial opening in 2004, City Café obtained a permit to sell beer and accordingly limited its beer sales to the hours then prescribed by the defendant, the City of Chattanooga ("the City").

Pursuant to the applicable section of the Chattanooga City Code in effect at the time G & N obtained its beer permit, City Café was not permitted to serve beer during the hours of 3:00 a.m. and 8:00 a.m. on weekdays and 3:00 a.m. and 12:00 noon on Sundays. Section 5-47 of the Chattanooga City Code, as it existed from the time of G & N's opening until the subsequent amendment, provided:

Sec. 5-47. Hours regulated.
(a) No permittee under this article may sell or give away alcoholic beverages or malt beverages or permit the same to be consumed on the premises except during the same hours authorized by the state alcoholic beverage commission for establishments selling liquor by the drink. All beer, glasses and containers must be clear of the tables at the end of serving hours.
(b) No permittee under this article may sell or give away alcoholic beverages or malt beverages or permit the same to be consumed on the licensed premises between the hours of 3:00 a.m. and 8:00 a.m. on weekdays or between the hours of 3:00 a.m. and 12:00 noon on Sundays.

In June 2006, the City's Beer Board approved Ordinance 11845, amending section 5-47 by adding two subsections, to become effective on July 15, 2006. The amendment at issue is subsection (c), which provides in pertinent part:

(c) No permittee whose permit authorizes sale for on premise consumption shall be open for business except during hours authorized by Sub-Section (b) above for consumption of alcoholic beverages on the licensed premises.

Subsection 5-47(d), also added by enactment of Ordinance 11845, prohibits permittees from allowing "any person under the age of twenty-one (21) to be in, frequent or loiter about the premises of the licensee unless such underage person is accompanied by their parent or their legal guardian after 6:00 p.m." Subsection (d) expressly states that it does not apply to permittees whose annual sales of food prepared in a fully functioning kitchen comprise more than fifty percent of total sales. For this reason, subsection (d) does not affect G & N, and its constitutionality has not been questioned in this action.

It is undisputed that prior to the amendment's effective date, G & N had never been cited for a violation of section 5-47. However, on June 21, 2011, City Beer Inspector, Chattanooga Police Department Sergeant Mark Haskins, responded to a report he had received that City Café was open for business twenty-four hours a day by issuing a letter requiring the restaurant to show cause why it was not in violation of subsection 5-47(c). G & N's president, Lee Epstein, appeared before the Chattanooga Beer Board on July 7, 2011, and surrendered G & N's permit to sell beer. Mr. Epstein testified that when he appeared before the Beer Board, he realized his only option was to surrender City Cafe's beer permit if the restaurant were to remain open twenty-four hours a day.

On August 31, 2011, G & N filed a complaint in the Hamilton County Chancery Court, requesting declaratory judgment that subsection 5-47(c) of the City Code was constitutionally invalid, a preliminary injunction restraining the City from enforcing the provision, damages in the amount of $4, 500.00 per month since May 1, 2011, and reasonable attorney's fees. G & N averred that subsection 5-47(c) violated its substantive due process rights under the Fourteenth Amendment of the U.S. Constitution and article 1, section 8 of the Tennessee Constitution. G & N also averred that subsection 5-47(c) created an impermissible classification of one because there were no other twenty-four-hour restaurants in the City that sold beer at the time the amendment to the Code was ratified. The City filed an answer, requesting dismissal of the action.

Following a bench trial conducted on October 21, 2013, the trial court entered a Memorandum Opinion and Order on October 31, 2013, upholding subsection 5-47(c) as constitutional and specifically finding, inter alia, that the subsection did not create a special classification. The court denied G & N's request for declaratory judgment and dismissed its claims with prejudice. G & N timely appeals.

II. Issues Presented

On appeal, G & N presents two issues, which we restate slightly:

1. Whether the trial court erred by finding that subsection 5-47(c) of the Chattanooga City Code is constitutional and does not violate G & N's due process rights pursuant to the Fourteenth Amendment of the United States Constitution and article 1, ...

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