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Osburn v. Virginia Department of Alcoholic Beverage Control

Supreme Court of Virginia

February 22, 2018





         In this appeal from a state employee grievance proceeding, we consider whether a hearing officer's decision upholding the termination of a special agent with the Virginia Department of Alcoholic Beverage Control ("ABC") was contrary to law.

         I. Facts and Proceedings

         Linda K. Swim ("Swim") submitted an application to ABC requesting a retail alcohol license for a restaurant known as the Bent Mountain Bistro ("Bistro"). ABC special agent David C. Scott ("Scott") was assigned to review and investigate the application, and special agent Nathan L. Osburn ("Osburn") assisted Scott.

         Upon review of the application, Scott and Osburn developed questions regarding ownership of the Bistro. Although the application stated that Swim was the sole owner, Scott and Osburn were concerned that a man named Benjamin Ward ("Ward") was an undisclosed co-owner. This concern merited further investigation because, if true, Ward's undisclosed ownership was a potential ground for ABC to deny the pending application.[*]

         Scott scheduled a meeting with Swim and a site visit of the Bistro for August 9, 2013. At that time, ABC's Operations Manual 03 ("operations manual") instructed ABC agents to "conduct a site visit to ensure sufficient inventory of qualifying items" before issuing a license. Va. Dep't of Alcoholic Beverage Control, Operations Manual 03, § III(A)(19)(2009).

         When they arrived for the scheduled site visit, Scott and Osburn entered the Bistro through the front door. Scott then remained in the dining area and spoke with Swim while Osburn proceeded to the kitchen. There, Osburn conducted an inspection to ensure that the Bistro was a functional and fully stocked restaurant, as required by ABC regulations.

         After inspecting the kitchen, Osburn walked through an open door into a business office in the back of the Bistro. Once inside, Osburn searched the office. He opened desk drawers and a filing cabinet, and photographed various documents uncovered in the process. One of those documents indicated that Ward was the owner of the Bistro. Osburn did not ask for permission to enter the office, and he did not encounter anyone while conducting his search.

         Swim's application was not approved and, in October 2013, she sent complaints to the Office of the Governor and various members of the General Assembly. Swim's complaints asserted that Osburn and Scott engaged in "professional misconduct" during the site visit. Among other things, Swim alleged that Osburn "rummage[ed] through [her] business records with deliberate indifference to [her] rights" and "seiz[ed] evidence in violation of [her Fourth Amendment] rights."

         ABC conducted an internal investigation and, on April 3, 2014, issued a "Group III" Written Notice ("Notice") terminating Osburn's employment. The Notice stated that Osburn's conduct during the site visit was "contrary to general order/policy" and "constitute[d] an egregious violation of [Swim's] Fourth Amendment [rights]."

         Osburn filed a grievance challenging his termination and, pursuant to Code § 2.2-3000 et seq., requested a hearing before a hearing officer appointed by the Virginia Department of

          Human Resources Management ("DHRM"). A two-day hearing ensued, where Osburn argued that the office search was permissible under the highly regulated industry exception to the warrant requirement because it was authorized by Code § 4.1-204(F), which states that ABC agents "shall be allowed free access" to certain places within the Commonwealth. Alternatively, Osburn argued that he had consent, express or implied, to conduct the search.

         During the hearing, ABC countered that "[Osburn's] entry into the office as part of an applicant investigation . . . [was] not covered under the general inspection provisions as it would be for a [licensee]." ABC asserted that "a site visit of [an applicant] . . . has never risen to the level of an inspection of a licensed premise for which there is statutory and regulatory authority." In addition, ABC presented testimony that "it has not instructed, trained, or permitted its agents to conduct warrantless, non-consensual searches of license applicants or their facilities."

         After considering the arguments and evidence, the hearing officer upheld Osburn's termination. The hearing officer determined that the warrantless search was not permissible under the highly regulated industry exception because "[t]here is no statutory or regulatory provision that an applicant automatically forfeits [F]ourth [A]mendment rights by merely applying for a license." In addition, the hearing officer found that there was "insufficient evidence that [Swim] or anyone else gave consent, expressed or implied, [for] [Osburn's] search of the office." Accordingly, the hearing officer concluded that "termination was warranted and appropriate under the circumstances" because ...

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