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Kepa, Inc. v. Virginia Dept. of Health

Court of Appeals of Virginia, Richmond

December 17, 2013

KEPA, INC., d/b/a She-Sha Café and Hookah Lounge

Page 672

Andrew P. Connors (James R. Creekmore, Daleville; Keith Finch, Blacksburg; The Creekmore Law Firm PC, on briefs), for appellant.

Paul Kugelman, Jr., Assistant Attorney General (Kenneth T. Cuccinelli, II, Attorney General, on brief), for appellee.



PETTY, Judge.

[62 Va.App. 617] Kepa, Inc., doing business as She-Sha Café and Hookah Lounge (" She-Sha" ), appeals from an order of the trial court upholding the decision of the Virginia Department of Health (" Department" ) that She-Sha is not exempt from the regulations [1] of the Virginia Indoor Clean Air Act (" VICAA" ). A divided panel of this Court held that She-Sha was not exempt from the regulations of the VICAA and accordingly affirmed the trial court's decision. Kepa, Inc. v. Va. Dep't of Health, 61 Va.App. 696, 740 S.E.2d 26 (2013). We subsequently granted She-Sha's petition for rehearing en banc and stayed the panel decision.[2] On rehearing en banc, we hold that She-Sha is exempt from the regulations of the VICAA because it is a retail tobacco store.


On appeal, we view the evidence in the light most favorable to the Department of Health, the party prevailing [62 Va.App. 618] below. See Hilliards v. Jackson, 28 Va.App. 475, 479, 506 S.E.2d 547, 549 (1998).

She-Sha is a retail tobacco store and restaurant located in Blacksburg, Virginia. The business model for She-Sha involves charging patrons for a flavored, wet tobacco which

Page 673

is heated by a burning coal and then smoked through a water-filled pipe known as a hookah.[3]

She-Sha does not allow its customers to consume any outside tobacco on its premises. Instead, customers pay a fee to rent a hookah filled with hookah tobacco. She-Sha also sells packaged tobacco for customer use off-premises. To go along with hookah and tobacco sales, She-Sha offers customers a menu of food and beverage items.

She-Sha has been in business since 2003, and has nearly half a million dollars in annual revenue. Tobacco and tobacco-related sales, e.g., hookah rentals, accounted for sixty-six percent to sixty-seven percent of She-Sha's revenue in the three months preceding the citations from the Department— December 2009 to February 2010. These sales figures have been consistent since September 2008. [4]

She-Sha is licensed by the Department of Taxation as an " Other Tobacco Product Retailer." As of February 2010, She-Sha had paid a total of $7,208.72 in other tobacco products taxes to the Commonwealth. She-Sha has a " Restaurant and Retail Tobacco Store" business license that was issued by [62 Va.App. 619] the Town of Blacksburg. She-Sha is also " a place where food is served," defined in Code § 15.2-2820 as a " restaurant." Accordingly, She-Sha has a permit/license from the Department to operate as a restaurant.

On January 27, 2010, the Department investigated a complaint that She-Sha was allowing customers to smoke in its place of business. In a Food Establishment Evaluation Report, the Department cited She-Sha for two non-critical violations of the VICAA: (1) failure to post no-smoking signs as required by Code § 15.2-2825(D), and (2) failure to prohibit smoking in non-smoking areas as required by Code § 15.2-2825(F).

She-Sha requested an informal fact-finding hearing to dispute the citations. On March 22, 2010, Dr. J. Henry Hershey, the Director of the New River Health District for the Montgomery County Health Department, conducted the informal fact-finding hearing. On July 8, 2010, Dr. Hershey issued a letter opining that the citations were proper.

She-Sha then requested a formal adjudicatory hearing. She-Sha also renewed its request for a summary case by the Department pursuant to Code § 2.2-4020.1.[5] In its request, She-Sha stipulated that it was a restaurant as defined in the VICAA. By letter dated October 12, 2010, the State Health Commissioner informed She-Sha that a summary case decision was inappropriate at that time, but the Department would consolidate the summary case decision proceeding with the formal hearing She-Sha had requested.

The formal adjudicatory hearing was conducted on March 15, 2011. On May 19, 2011, the hearing officer recommended nine findings of fact and conclusions of law. On June 17, 2011, the Health Commissioner issued a case decision agreeing with and adopting the hearing officer's recommendations. The case decision upheld the violations noted in the report and [62 Va.App. 620] stated that She-Sha is a restaurant subject to the regulations of the VICAA.

She-Sha appealed the Department's decision to the Circuit Court for Montgomery County on August 12, 2011. The circuit court issued a letter opinion, and subsequent final order, holding that She-Sha is not exempt from the VICAA; therefore, it ...

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