BEFORE THE LIQUOR CONTROL COMMISSION

OF THE STATE OF OREGON

In the Matter of the Full On-Premises ) FINAL FINDINGS OF FACT

Sales License Held by: ) CONCLUSIONS OF LAW
) AND ORDER
North House Enterprises, LLC. ) OLCC-08-V-077
Ghassan Samander, Managing Member ) OLCC-08-V-077A
PO Box 6649 )
Portland, OR 97228 )
)
dba EXOTICA INTERNATIONAL )
CLUB FOR MEN )
240 NE Columbia )
Portland, OR 97211 )

HISTORY OF THE CASE

On September 8, 2008, the Oregon Liquor Control Commission (OLCC or Commission)

issued a Notice of Proposed License Cancellation to North House Enterprises, LLC and Ghassan
Samander, Managing Member (collectively Licensee), dba Exotica International Club for Men,
located at 240 NE Columbia, Portland, Oregon. The notice charged Licensee with four
violations: (1) failing to use a wand on all patrons entering the premises after 9:00 p.m., in
violation of a restriction on the license, a violation of OAR 845-005-0355(5); serving patrons
more than one drink at a time in violation of a license restriction prohibiting any patron to have
more than one drink for personal consumption at one time, a violation of OAR 845-005-0355(5);
(3) having a server under the influence of intoxicants while on duty in violation of OAR 845-
006-0345(1); and (4) promoting drink specials after 12:00 a.m. in violation of OAR 845-006-
0345(11)(b). Licensee timely requested a hearing.

On November 24, 2008, OLCC issued an Amended Notice of Proposed License

Cancellation and Notice of Proposed Refusal to Renew License to Licensee. The amended
notice added a proposal to refuse to renew Licensee’s license pursuant to ORS 471.313(4)(g),
because of Licensee’s poor record of compliance with the liquor laws and Commission’s rules.

The Commission referred Licensee’s hearing request to the Office of Administrative

Hearings. The case was assigned to Administrative Law Judge Alison Greene Webster.

Prehearing conferences were held on May 11, 2009 and August 7, 2008. Case Presenter
Kelly Routt represented OLCC, and Attorney Cecil Gill represented Licensee.

The contested case hearing was held in this matter in Tualatin, Oregon, on August 24 and
25 and September 16, 2009, before Administrative Law Judge Webster. Licensee was
represented by Attorney Cecil Gill. Kelly Routt presented the case for the OLCC.

The following witnesses testified at hearing on behalf of OLCC: OLCC Inspector Dana

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Tawney; OLCC Inspector Matthew Cobos; OLCC Inspector Jason Tallmadge; OLCC Regional
Manager Janice Kindrick; and Portland Police Officer Craig Anderson. The following witnesses
testified on behalf of Licensee: Managing Member Ghassan “Gus” Samander; Manager Martel
K. Wilson; Manager Donna Thames, William Olson of NW Beverage Control, employee
Michelle Werner, employee Jocelyn Mugot; employee Joel Ayers; employee Dean Jepson;
patron Michael Butchee and employee Frank Murchie.

The record remained open for written closing arguments, and closed on October 28,
2009, upon receipt of OLCC Staff’s Rebuttal Closing Argument.

The Administrative Law Judge considered the record of the hearing and the applicable
law and issued a Proposed Order mailed November 16, 2009.

Licensee filed Exceptions to the Proposed Order on December 1, 2009. Staff filed
Comments on the Proposed Order on December 1, 2009. The Administrative Law Judge
responded to Licensee’s Exceptions and Staff’s Comments on December 21, 2009.

On April 15, 2010, the Commission considered the record of the hearing, the applicable
law, the Proposed Order of the Administrative Law Judge, Licensee’s Exceptions to the
Proposed Order, Staff’s Comments on the Proposed Order and the Administrative Law Judge’s
Response to Licensee’s Exceptions and Staff’s Comments. Based on this review and the
preponderance of the evidence, the Commission enters the following:

EVIDENTIARY RULINGS

OLCC Exhibits A1 through A13 were admitted into the record. Licensee’s Exhibits P1
through P3, P5 and P6 (pages 1 through 7, 10 and 12), and P8 through P12 were admitted.
Licensee withdrew Exhibits P4 and P7, and pages 8 and 11 of Exhibit 6.

ISSUES

1. Whether, on July 5, 2008, Licensee’s employees failed to use a wand on all patrons
entering the premises between 9:00 p.m. and closing, in violation of a restriction on the license.
OAR 845-005-0355(5).

2. Whether, on the night of July 11 and/or the early morning hours of July 12, 2008,
Licensee’s employees allowed patrons to have more than one drink for personal consumption at
a time, in violation of a restriction on the license. OAR 835-005-0355(5).

3. Whether, on the night of July 11 and/or the early morning hours of July 12, 2008,
Licensee’s employee Alisha Pearson was under the influence of intoxicants while on duty, in
violation of OAR 845-006-0345(1).

4. Whether, on July 12, 2008, Licensee’s employees promoted drink specials after 12:00
a.m., in violation of former OAR 845-006-0345(11)(b).1
1
OAR 845-006-0345, the prohibited conduct rule, was amended and paragraphs were renumbered

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 5. If one or more of the violations are proven, what is the appropriate sanction?

6. Whether the Commission has grounds to refuse to renew Licensee’s license under
ORS 471.313(4)(g) because Licensee did not have a good record of compliance with the liquor
laws of this state while licensed.

7. If so, whether Licensee has shown good cause to overcome the Commission’s refusal
to renew the license.

FINDINGS OF FACT

1. North House Enterprises, LLC and managing member Ghassan “Gus” Samander, dba
Exotica International Club for Men, located at 240 N.E. Columbia, Portland, Oregon have held a
Full On-Premises sales license since June 22, 1999. (Ex. A1.)

2. In September 2005, Licensee violated OAR 845-009-0010(1)(b) when a manager who

supervised employees who mixed, sold or served alcoholic beverages did not have a valid
service permit. Licensee paid a civil penalty in lieu of a license suspension. In August 2006,
Licensee was charged with a violation of ORS 471.315(1)(c) (a history of serious and persistent
problems at or in the immediate vicinity of the licensed premises). In December 2006, Licensee
was charged with a violation of OAR 845-006-0335(3)(b) (minor in prohibited area). Licensee
admitted both violations, and in September 2007, entered into a Settlement Agreement with the
Commission. Licensee paid a civil penalty of $1,485 for the minor in prohibited area violation,
and a penalty of $4,950 for the history of serious and persistent problems violation. As part of
the September 2007 Settlement Agreement, OLCC placed restrictions on Licensee’s license.
(Ex. A1.)

3. In the Settlement Agreement ratified by the Commission on September 17, 2007,

Licensee accepted the following restrictions on its license:2

(1) Licensee must obtain Commission approval of any and all managers on the
licensed premises.

(2) Licensee shall not allow any patron to have more than one drink for personal
consumption at one time. A drink is defined as no more than 16 oz. of a malt
beverage, 6 oz. of wine or 2 oz. of distilled spirits, except that Licensee may allow
the sale of a bottle of champagne for two or more patrons.

(3) Licensee will verify the age of minor entertainers before each work shift. The
manager on duty will hold each minor’s identification during the minor

effective May 1, 2009. The current version of the rule prohibiting price reductions on alcoholic
beverages by the drink after midnight is OAR 845-006-0345(10)(a)(C).
2
Licensee already had the restriction requiring Commission approval of any and all managers on the
license prior to the Settlement Agreement. (Ex. A1; test. of Samander.)

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 entertainer’s work shift.

(4) Licensee will have a minimum of four DPSST-certified security persons on

duty from 10 PM to closing every Thursday, Friday and Saturday night. One of
these security persons will be in the parking lot, one will be at the entrance, and
two will be inside the licensed premises.

(5) Licensee will wand all patrons from 9 PM to closing every night.

(Exs. A1 and P1.)

4. With regard to Restriction number 2, Licensee’s managers interpreted the one drink
per patron provision to mean that a patron could be served a shot of distilled spirits with a “beer
back” so long as the volume of the beer was less than 16 ounces. Licensee’s managers
communicated their interpretation of the restriction to the bartenders and servers. Licensee’s
bartenders continued to serve single shots of distilled spirits with a beer “bucket” (6 ounces or
less in a glass) or a beer bottle. (Test. of Samander; test of Thames; test. of Werner.)

5. Since 2003, Licensee has used a computerized beverage dispensing system to control
the volume of liquor dispensed for its most commonly sold brands of distilled spirits. The
system, provided by Northwest Beverage Control, is designed to dispense an ounce of liquor at a
time. The bartender presses a button on the liquor gun for a particular brand, and an ounce of
that brand is dispensed. Although it is possible for a line to “relax” over time and pour slightly
more than an ounce, it is unusual to have the pour amount off by any significant degree (i.e. an
eighth of an ounce or more). Licensee must contact Bill Olson of Northwest Beverage Control
to change or check the calibration on the dispensing system. Neither Licensee nor Licensee’s
employees can override the system to pour more than an ounce at a time, although if the
bartender presses the “short pour” button on the gun, certain brands can dispensed in half ounce
portions. (Test. of Olson; test. of Samander; test. of Werner; Ex. P6.)

6. In late June 2008, Licensee, through counsel, contacted the Commission to inquire
about having some of its license restrictions removed. That contact prompted Inspector
Tallmadge to request undercover observations of the licensed premises to check for “license
restriction violations, VIPS, disorder and minors.” (Test. of Tallmadge; Ex. A3.)

7. At about 11:58 p.m. on Saturday, July 5, 2008, Inspector Tawney arrived at the
premises in an undercover capacity. Tawney saw one security employee outside the premises,
patrolling the parking lot. That person was wearing a bright orange vest. Tawney walked
through the vestibule and into the premises. At the time he entered the premises, Tawney had a
four inch Kershaw stainless steel pocket knife in his front pants pocket. The clip for the pocket
knife (about three inches in length) was visible on the outside of the pocket. Just inside the
interior door, an employee at the entrance stand asked Tawney to pay the $4.00 cover charge.
This employee did not use a wand to check Tawney for weapons, nor did he ask to do a pat
down. Tawney paid the cover charge and walked several feet into the premises to the main bar.
As Tawney got to the bar, the same employee who had collected the cover charge approached
him and asked if he had a knife in his pocket. Tawney handed the pocketknife to the employee.

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Tawney said that he had to use the restroom, and he would take the pocketknife back and put it
in his car when he returned from the restroom. (Test. of Tawney; Ex. A4.)

8. After using the restroom, Tawney retrieved his pocketknife from the employee. He
walked out to the parking lot and placed the pocketknife in the trunk of his car. He then walked
back into the premises through the vestibule and front door. He was not wanded or patted down
when he reentered the premises. (Test. of Tawney; Ex. A4.)

9. Tawney took a seat at the main bar, near the wait station. The front entrance door was
to his right, and he could see as patrons entered the premises. Tawney saw the employee at the
door collecting cover charges and patting down patrons upon entry. Tawney saw 20 to 30
patrons enter the premises. In Tawney’s opinion, the pat downs were cursory, because the
security employee only patted patrons on the sides of the waist, and did not check their backsides
carefully or pat down past the knees to the ankles. Tawney did not see, nor did he hear, a wand
being used on any patrons during his approximately hour and 20 minute visit to the premises.3
(Test. of Tawney; Ex. A4.)

10. At about 1:00 a.m. on July 6, 2008, Tawney saw two patrons enter the premises. The
security employee who had been stationed at the door was away from his station, and these two
patrons entered without being asked to pay a cover charge and without being checked for
weapons. Tawney left the premises around 1:20 a.m. He immediately wrote notes describing his
observations during the premises visit. (Test. of Tawney; Exs. A3 and A4.)

11. At about 11:19 p.m. on Friday, July 11, 2008, Inspectors Tawney and Cobos arrived
at the premises in an undercover capacity for another observation. They heard the beeping sound
of a wand in use as they approached the entrance. Just outside the front doors, they were met by
a security employee who scanned them with a hand held security wand. They were asked to
show the contents of their pants pockets. They did so and were allowed entry into the premises.
Just inside the premises, a second employee collected the $4.00 cover charge from each of them.
The inspectors seated themselves at an open table in a dimly lit area of the club, past the pole
stage and about 45 feet from the main bar. (Test. of Tawney; test. of Cobos; Ex. A4.)

12. Shortly before 11:25 p.m., Cobos walked to the bar and ordered a double shot of Jack
Daniels whiskey and a bottle of Coors Light from the bartender, Michelle Werner. At the time
Cobos placed the order, Tawney was still seated at the table. Cobos walked to the bar alone and
there were no other patrons standing near him when he ordered the drinks. Werner handed both
drinks to Cobos, and charged him $15.75.4 At no time did Werner ask if both drinks were for
Cobos, or if one was for another patron’s consumption. Cobos paid the tab, and returned to the
table with both drinks in hand. He sat the two drinks in front of him on the table. (Test. of
Cobos; Ex. A5.)
3
When in use, a hand held security wand will emit a loud “beeping” sound when it detects the presence of
metal, including the metal from a patron’s wristwatch, cell phone or belt buckle. Tawney did not hear
any beeping sounds coming from the premises entry area during this visit to the premises. (Test. of
Tawney.)
4
Licensee charges $5.75 for a single shot of Jack Daniels whiskey. (Ex. A4; test. of Tawney.)

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 13. When Cobos returned to the table with the two drinks, Tawney placed a call to
OLCC dispatch, which put him in contact with Regional Manager Kindrick. Tawney told
Kindrick that Licensee’s bartender had served two drinks to one patron in violation of the license
restriction. Kindrick advised that she was arranging for police support to assist them when they
broke cover. (Test. of Tawney; Ex. P8.).

14. At approximately 11:35 p.m., the inspectors’ noticed that a server, later identified as
permittee Alisha Pearson,5 was having difficulty with her balance. She was noticeably unsteady
on her feet as she walked, and used the tables to steady herself while standing. When she
approached the inspectors’ table, she pointed to the two drinks in front of Cobos. She said, “I
see one, two drinks for him” (while pointing to Cobos) “and none for you” (while pointing to
Tawney). The inspectors noted that Pearson’s speech was slurred. Pearson mentioned that
Cobos was not drinking his drinks, and asked if she could bring Tawney anything. Pearson
appeared to lose her balance as she talked to the inspectors. She lurched forward, and caught
herself with her free hand on the table. She then squatted down to continue talking with the
inspectors. Cobos asked her if she was okay. Pearson said she was just having a bad day.
Tawney ordered a Coors Light, and Pearson said she would be right back with the drink. (Test.
of Tawney; Test. of Cobos; Exs. A4 and A5.)

15. Over the next 20 to 25 minutes, the inspectors watched Pearson make several trips to
and from the bar serving drinks to other patrons in the club, but she did not return to their table
with the beer for Tawney. The inspectors noted that Pearson continued to exhibit unsteadiness
on her feet while walking and standing. (Test. of Tawney; Test. of Cobos; Exs. A4 and A5.)

16. At 11:55 p.m., Regional Manager Kindrick called Tawney to advise that she had
made contact with Portland Police, and that she and they were on their way to the premises.
(Test. of Tawney; test. of Kindrick; Ex. P8.)

17. At midnight or a minute or two after, the club disc jockey called a drink special over
the public address system. The disc jockey, Frank Murchie, announced that, for the next two
songs, shots of Goldschlager, Jagermeister, Jack Daniels and Jose Cuervo would be available for
$3.00 each. Immediately upon hearing the disc jockey announce the drink special, Cobos
checked the time and sent himself a text message on his telephone indicating that Licensee’s
employee had announced a price reduction on alcoholic beverages after midnight for the next
two songs. The text message was sent at 12:02 a.m. (Test. of Cobos; test. of Tawney; Exs. A4
and A5.)

18. Over the next six to eight minutes, the disc jockey made additional announcements
about the $3.00 shot special. Between songs, he announced that the reduced prices on shots
special would be coming to an end shortly. (Test. of Tawney; test. of Cobos.)

19. After the first announcement about the liquor shot special, at approximately 12:03
a.m., Pearson returned to the inspectors’ table and asked if she could get them anything. Tawney
asked what had happened to the Coors Light he had ordered earlier. Pearson looked confused,
5
OLCC issued a service permit to Pearson on October 23, 2007. (Ex. A10.)

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and admitted she had forgotten it. Tawney asked Pearson what she was “high on.” Pearson
responded, “Nothing” and added that she was just very tired. Tawney then asked Pearson if the
$3.00 shot special was still available, and Pearson responded affirmatively. Tawney ordered a
double shot of Jose Cuervo tequila. He chided Pearson about forgetting his earlier order, and
told her not to forget this one. She promised she would be right back with his drink. Pearson’s
speech was still noticeably slurred, and she staggered as she walked from the table to the bar.
(Test. of Tawney; test. of Cobos; Exs. A4 and A5.)

20. At 12:08 a.m., Tawney called Kindrick to report that Licensee was offering a
temporary price reduction on alcoholic beverages after midnight. (Test. of Tawney; Exs. A4 and
P8.)

21. At approximately 12:11 a.m., Pearson returned to the table. Instead of a double shot
in one glass, Pearson served Tawney two shot glasses of Jose Cuervo. Pearson placed the
glasses on the table side by side, with a lemon slice connecting them. As she did so, several
napkins fell off her service tray. Pearson did not offer Tawney the other lemon slice on the tray.
Pearson continued to exhibit problems with her dexterity and balance while serving these shots.
Tawney paid $6.00 for the two shots of tequila, and gave Pearson a $1.00 tip. (Test. of Tawney;
test. of Cobos; Exs. A4 and A5.)

22. Although employees Werner, Wilson, Mugot and Ayers did not notice signs of
intoxication on Pearson during her shift on July 11-12, 2008, they all noted that her demeanor on
that night was different from her norm. Pearson’s usual affect at work was somewhat sad and
depressed, but on that night she seemed much happier. (Test. of Werner; test. of Wilson; test. of
Ayers; test. of Mugot.)

23. Between 12:15 a.m. and 12:20 a.m. on July 12, 2008, Manager Kindrick entered the
premises with five uniformed Portland Police officers. Inspectors Tawney and Cobos retrieved a
camera from the OLCC vehicle, and photographed the drinks they had purchased that night.
They also poured the double shot of Jack Daniels and the two shot glasses of Jose Cuervo into
specimen cups, which they sealed, labeled and seized as evidence. Using a black permanent
marker, Inspector Tawney marked a line on the outside of each cup to indicate the liquid level.
The double shot of Jack Daniels served to Cobos measured 2 ¼ ounces. The combined two shots
of Jose Cuervo served to Tawney measured 2 ½ ounces.6 (Test. of Tawney; test. of Cobos.)

24. After Tawney and Cobos broke cover, they began interviewing Licensee’s
employees. Cobos approached bartender Werner and asked if she recalled selling him the double
shot of Jack Daniels and bottle of Coors Light. She said she did. He then asked if she was
familiar with the restrictions on Licensee’s license. Werner said she was familiar with the one
drink per patron restriction, but thought that it was okay to sell a double shot with a beer because
only one drink was hard alcohol. Werner advised that management had told the servers it was
okay to serve a shot of hard alcohol with a beer back. Werner admitted that she had made a
mistake selling him a double shot and a beer. (Test. of Cobos; Ex. A5; test. of Werner.)

6
The marked specimen cup containing 2¼ ounces of Jack Daniels whiskey and the marked cup
containing 2½ ounces of Jose Cuervo tequila were offered at hearing for demonstration purposes only,
and were not admitted into evidence.

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 25. Cobos also interviewed server Jocelyn Mugot. Mugot said she had been told by
management that it was okay to serve two drinks to one patron at the same time as long as both
were not shots of hard liquor. (Test. of Cobos; Ex. A5.)

26. Inspector Tawney interviewed Pearson and asked if she was familiar with the license
restriction regarding the number of drinks a patron could be served at one time. Pearson said she
had not been told anything specific. (Test. of Tawney; Ex. A4.)

27. Portland Police Officer Anderson also interviewed Pearson to investigate whether
she was intoxicated on duty. Pearson told the officer that she had consumed a shot and a couple
of beers earlier in the night, before beginning her shift at 10:00 p.m.7 Pearson had slurred
speech, glossy eyes, and difficulty maintaining her balance while talking with the officer.
Officer Anderson asked Pearson to submit to a Horizontal Gaze Nystagmus (HGN) test. She
agreed to do so. Officer Anderson is trained to administer the HGN test. When he administered
the test to Pearson, he observed five of the six clues of intoxication that can be derived from the
test: a lack of smooth pursuit and distinct nystagmus at maximum deviation in both of Pearson’s
eyes and onset of nystagmus prior to 45 degrees in her left eye only. Based on his observations
of Pearson and the results of the HGN test, Officer Anderson also believed that Pearson was
under the influence of intoxicants, namely alcohol, while on duty. (Test. of Anderson; Ex. A9.)

28. Manager Kindrick interviewed the premises’ night manager and part owner, Martel
Wilson. She asked how Licensee measured the shots of distilled spirits. Wilson explained that
Licensee had a computerized beverage dispensing system, which was programmed to dispense
one ounce pours. He showed her the back room, with the bottles of distilled spirits hooked up to
plastic tubing. When Kindrick asked Wilson about the advertised drink specials after midnight,
Wilson mentioned that the DJ (Murchie) was a new employee. (Test. of Kindrick; Ex. A6.)

29. In August 2008, Licensee Samander contacted Bill Olson of Northwest Beverage
Control to check the calibration on the liquor dispensing system. Olson checked the system and
determined that the Jack Daniels line had relaxed slightly, and was dispensing about an ounce
and an eighth, rather than a level ounce. Olson made the appropriate adjustments to fix the
problem. He believes that all of the other lines, including Jose Cuervo, were working properly at
that time. (Test. of Olson.)

30. On August 12, 2008, Manager Kindrick and Inspector Tallmadge met with
Samander, member Martel Wilson and manager Donna Thames to discuss the violations that
allegedly occurred during the July 5-6 and July 11-12 undercover visits to the licensed premises.
During the meeting, Thames advised Kindrick of Licensee’s policy of serving two one ounce
shot drinks to a patron and serving a shot with a beer back. Thames noted that because the
license restriction defined a drink by volume, a double shot in two glasses or a single shot with a
beer back should still fit within the definition of a drink. Kindrick responded that she interpreted

7
When interviewed by Manager Kindrick that same night, Pearson said she had a Madras (a drink
containing vodka, orange juice and cranberry juice) and a hard cider. Kindrick noted that Pearson slurred
her words, and that she exhibited mood swings, quickly changing from angry to apologetic and from sad
to angry. (Test. of Kindrick; Ex. A6.)

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the restriction differently, such that it prohibited a patron from having more than one alcoholic
beverage at a time. Kindrick added that she would get confirmation from the OLCC’s
Administrative Process Division regarding the one drink restriction. At the close of the meeting,
Kindrick warned that the proposed sanction for violating a license restriction could be
cancellation of the license. (Ex. A11; test. of Tallmadge.)

31. By letter dated August 20, 2008, Kindrick advised Licensee (through Licensee’s
counsel) that manager Thames’ interpretation of the one drink per patron restriction was
incorrect. Kindrick stated that Commission’s Administrative Process Division interpreted the
restriction “to prohibit a patron from purchasing, consuming or possessing more than one
alcoholic beverage at a time regardless of the amount of alcohol contained in the drink.” (Ex.
P5.)

32. On November 3, 2008, Licensee applied for renewal of its license. On November
19, 2008, the Commission issued Licensee a Conditional Letter of Authority to Operate pending
a final decision on the violations alleged in the Notice of Proposed License Cancellation issued
September 8, 2008. (Exs. A12 and A13; test. of Kindrick.)

33. Licensee has a battery operated hand held security wand that security staff uses on
patrons entering the premises at night. When the batteries die, the wand becomes inoperable
until the batteries are replaced. Usually, Licensee has replacement batteries on hand at the
premises, but occasionally replacement batteries are not immediately available. When the wand
is inoperable, Licensee’s security staff will pat down patrons entering the premises between 9:00
p.m. and closing to ensure that the patrons are not bringing weapons inside. Occasionally,
security staff will both wand and pat down patrons upon entry. (Test. of Ayers; Exhibits P11 and
P12.)

CONCLUSIONS

1. Licensee’s employees failed to use a wand on all patrons entering the premises after
9:00 p.m. on July 5, 2008, in violation of a restriction on the license.

2. On the night of July 11 and the early morning hours of July 12, 2008, Licensee’s
employees allowed patrons to have more than one drink for personal consumption at a time, in
violation of a restriction on the license.

3. On the night of July 11 and the early morning hours of July 12, 2008, Licensee’s
employee Alisha Pearson was under the influence of intoxicants while on duty, in violation of
OAR 845-006-0345(1).

4. On July 12, 2008, Licensee’s employees promoted drink specials after 12:00 a.m., in
violation of former OAR 845-006-0345(11)(b).

5. The appropriate sanction is cancellation of the license.

6. The Commission has grounds to refuse to renew Licensee’s license under ORS

Page 9 of 19 – Final Order

471.313(4)(g) because Licensee did not have a good record of compliance with the liquor laws of
this state while licensed.

7. Licensee has not shown good cause to overcome the Commission’s refusal to renew
the license.

OPINION

The burden of presenting evidence to support a fact or position in a contested case rests on
the proponent of the fact or position. ORS 183.450(2). OLCC has the burden of proving its
allegations by a preponderance of the evidence. Metcalf v. AFSD, 65 Or App 761 (1983);
Jody's Restaurant & Lounge (OLCC, Final Order, 97-V-015, August 1997). See also Harris v.
SAIF, 292 Or 683, 690 (1982) (general rule regarding allocation of burden of proof is that the
burden is on the proponent of the fact or position). Proof by a preponderance of the evidence
means that the fact finder is persuaded that the facts asserted are more likely true than not true.
Riley Hill General Contractors v. Tandy Corp., 303 Or 390 (1989).

As noted above, the Commission has charged Licensee with four violations of the liquor
laws: Two violations of restrictions on the license, an intoxicated server on duty and promoting
drink specials after midnight. Each alleged violation is addressed below.

1. Violation One: Failing to Wand All Patrons Entering After 9:00 p.m.

The Commission asserts that Licensee violated OAR 845-005-0355(5) on the night of July
5, 2008 and the early morning hours of July 6, 2008 when Licensee’s employees failed to use a
wand on patrons entering the premises after 9:00 p.m.

OAR 845-005-0355(5) provides as follows:

A licensee or permittee who has a restricted license or permit must exercise

license or permit privileges only in compliance with the restriction(s). Failure to
comply with the restriction(s) is a Category I violation.

The license restriction requires Licensee to “wand all patrons from 9:00 p.m. to closing
every night.” At 11:58 p.m. on July 5, 2008, Inspector Tawney went to the premises in an
undercover capacity and was not wanded upon entry. Inspector Tawney also watched more than
20 patrons enter the premises after him that night, and neither saw nor heard Licensee’s security
wand any of these patrons upon entry. The inspector did, however, see Licensee’s door monitor
do a quick pat down of most of these patrons upon their entry into the premises. Based on
Inspector Tawney’s personal experience (not being wanded on entry and not hearing or seeing
any wand in use during his hour and 20 minute stay at the premises) and his observations that
security staff patted down most of the other patrons who entered after him that night, it is
reasonable to conclude that Licensee’s hand held security wand was out of service at the time of
Inspector Tawney’s undercover visit.

Because the restriction specifically requires that Licensee wand all patrons from 9:00 p.m.

Page 10 of 19 – Final Order

to closing every night, and Licensee’s employees failed to do so between 11:58 p.m. and 1:20
a.m. on the night in question, a lack of compliance with the license restriction has been
established. Licensee’s staff did use an alternative security measure, a physical pat down, on
many of the patrons who entered the premises that night after Inspector Tawney; however,
Licensee’s employees did not strictly comply with the license restriction and a violation of OAR
845-005-0355(5) has been proven.

2. Violation Two: Allowing Patrons to Have More Than One Drink for Personal
Consumption At One Time.

As set out above, restriction 2 on Licensee’s license states as follows:

Licensee shall not allow any patron to have more than one drink for personal
consumption at one time. A drink is defined as no more than 16 oz. of malt
beverage, 6 oz. of wine, or 2 oz. of distilled spirits, except that licensee may allow
the sale of a bottle of champagne per two or more patrons.

The Commission asserts that Licensee’s employees violated this restriction on two
occasions: (1) when Inspector Cobos was allowed to have a double shot of Jack Daniels and a
bottle of Coors Light beer at the same time; and (2) when Inspector Tawney was served two
shots of Jose Cuervo tequila (totaling more than 2 ounces) in separate shot glasses.

a. The double shot of Jack Daniels with a bottle of Coors Light. Under the plain language
of the restriction, Werner allowed Cobos to have more than one drink for personal consumption
at a time. Based on the definition of “drink” set out in the restriction, two ounces of Jack Daniels
whiskey and a bottle of Coors Light beer constitute more than one drink. At hearing, Werner
testified that she saw Cobos and Tawney enter the premises together and thought that Cobos was
ordering drinks for both of them, but her testimony in this regard is not credible. First, Werner
did not offer this explanation for serving two drinks to Cobos when questioned by the inspector
shortly after the sale. Instead, she said she thought it was okay to serve a shot with a beer,
because only one drink was hard liquor. She also admitted to making a mistake by serving a
double shot with a beer back. Werner’s comments to Cobos after the sale were consistent with
Licensee’s (albeit mistaken) belief that serving a single shot with a beer back did not violate the
license restriction.

Furthermore, even if Werner believed that one of the two drinks Cobos ordered was for
another patron’s consumption, she should have confirmed this with the inspector before serving
him two drinks. Regardless of her understanding of the situation, however, Werner violated the
restriction on the license by serving and selling a patron more than one drink for personal
consumption at a time. Server Pearson also allowed Inspector Cobos to have more than one
drink for personal consumption at one time. When she first approached the inspectors’ table, she
commented that Inspector Cobos had two drinks and Inspector Tawney had none. She then took
Inspector Tawney’s drink order without making any attempt to limit Inspector Cobos to
possessing one drink at a time.

b. The double shot of Jose Cuervo served in two glasses. With regard to the double shot

Page 11 of 19 – Final Order

of Jose Cuervo, Licensee violated the “one drink” restriction by volume alone, because Inspector
Tawney was served 2 ½ ounces of distilled spirits at one time. The Commission is persuaded by
the inspectors’ testimony and the demonstrative evidence that the total amount of distilled spirits
in the two shot glasses exceeded 2 ounces. Although Licensee’s computerized beverage
dispensing system is designed to dispense an even ounce of liquor at a time, the record
establishes that it is possible for a line to relax and dispense slightly more than an ounce.
Further, as Ms. Werner testified, it is also possible for a server to pour 2½ ounces by dispensing
two single ounce pours followed by a ½ ounce “short pour.” Regardless of how it happened,
however, Licensee’s employees allowed Inspector Tawney to have more than one drink at one
time. The restriction violation has been proven.

Licensee also violated the restriction by serving the double shot in two glasses. The
restriction is a two-part restriction: No more than one drink may be possessed at a time and each
drink possessed may not exceed the quantity limit specified for the type of beverage.
Restrictions are generally written with an eye toward their eventual enforcement. This restriction
appears to have been written in two parts to include the underlying concept of a single container
for a drink, to facilitate visual enforcement of the restriction by staff while working undercover.
A licensee may not get around this restriction by serving smaller amounts in multiple containers.

A preponderance of the evidence demonstrates that both violations of the restriction have
been established.

3. Violation Three: Permittee Under The Influence While On Duty.

The next issue is whether Licensee’s former employee Alisha Pearson was intoxicated
while on duty. OAR 845-006-0345(1) identifies the following as a prohibited conduct:

(1) Drinking on Duty: No licensee or permittee will drink or be under the

influence of intoxicants while on duty. "On duty" means from the beginning of a
work shift that involves the sale or service of alcoholic beverages, checking
identification or controlling conduct on the premises, to the end of the shift
including coffee and meal breaks. "A work shift that involves the sale and service
of alcoholic beverages" includes supervising those who sell or serve, check
identification or control the premises. Being under the influence of intoxicants on
duty is a Category II violation. Drinking on duty is a Category III violation.

The Commission has held that a person is "under the influence of intoxicating liquor"
when that person:

displays not only all well-known and easily-recognized conditions and degrees of
intoxication, but any abnormal mental or physical condition which is the result of
indulging in any degree in intoxicating liquors, which tends to deprive one of that
clearness of intellect and control of himself which he would otherwise possess.

Bill's Place (OLCC, Final Order, 88-V-001, July 1988). In Eagle's Nest (OLCC, Final Order,
85-V-052, February 1986), the Commission found a person was under the influence of

Page 12 of 19 – Final Order

intoxicating liquor when he was disoriented, unsteady on his feet, spoke with a slur and smelled
of alcoholic beverages. And, in 7-Eleven Food Store No. 29526 (OLCC, Final Order, 96-V-034,
March 1997), the Commission determined that a store clerk was under the influence of
intoxicants on duty based on the following factors: red and watery eyes, slurred speech,
staggering walk, swaying while standing, odor of alcoholic beverages on his breath and unkempt
appearance.

A preponderance of the evidence establishes that Licensee’s employee, permittee Alisha

Pearson, was under the influence of intoxicants while on duty during her shift on July 11-12,
2008. Pearson exhibited a number of well-known and easily recognized signs of intoxication,
including difficulty in walking and standing, slurred speech, unusual conduct or demeanor,
confusion, difficulty with divided attention and mood swings.8 These indicia of intoxication
were observed by Inspectors Tawney and Cobos, Manager Kindrick and Officer Anderson, all of
whom reasonably believed that Pearson was intoxicated. Although the coworkers who testified
at hearing did not believe Pearson was intoxicated while on duty, they all noted a marked
difference in her demeanor that night. They all acknowledged that she appeared much happier
than her normal mood. As noted above, unusual conduct or demeanor is a recognized sign of
intoxication. In addition, Pearson admitted to both Officer Anderson and Manager Kindrick that
she consumed alcoholic beverages before starting her shift, even though her statements about
what and how much she drank were not consistent. Finally, the presence of nystagmus in
Pearson’s eyes during the HGN test provides further evidence that she consumed alcoholic
beverages prior to her shift and was under the influence of those intoxicants while on duty.9

The violation of OAR 845-006-0345(1) has been established.

4. Violation Four: Promoting Temporary Price Reductions After Midnight.

Former OAR 845-006-0345(11) identified the following as prohibited conduct:

(11) Promotions. Prohibited practices include:

***
(b) Temporary price reductions on alcoholic beverages after 12:00 midnight.

The Commission alleges that Licensee violated this provision when Licensee’s disc
8
See OAR 257-025-0010, which lists acts, signs and symptoms that are typically present in circumstances
of intoxicant impairment. The list includes difficulty in walking or unusual walking, difficulty standing,
difficulty following directions, speech difficulty or unusual speech patterns, disorderly or unusual conduct
or demeanor, evidence of mental disturbance, mood swings, difficulty with divided attention and
bloodshot and/or watery and/or glassy eyes.
9
In its closing brief, Licensee asserts that the HGN test results were unreliable because Officer Anderson
observed only five of the six possible clues. Licensee argued that one eye cannot have an indicator of
impairment while the other does not unless the test subject has brain damage or some other neurological
disorder. The Commission has found no authority to support this contention. The HGN test is an
approved field sobriety test. OAR 257-025-0012. Officer Anderson is trained to administer the test.
Officer Anderson saw five of the six possible clues when he administered the HGN to Pearson, which is
further evidence that she was under the influence of intoxicants while on duty.

Page 13 of 19 – Final Order

jockey, Frank Murchie, promoted drink specials, specifically the $3.00 shot special on
Goldschlager, Jagermeister, Jack Daniels and Jose Cuervo, after midnight on July 12, 2008.

Murchie testified that he was aware of the prohibition on promoting drink specials after
midnight, and that although Licensee often offered drink specials between 9:00 p.m. and
midnight, he was careful not to announce the last special after 11:45 or so. He asserted that he
did not announce a drink special after midnight on the date in issue. Conversely, both Inspector
Cobos and Inspector Tawney testified that during their visit to the premises on July 11-12, 2008,
they heard the disc jockey announce a shot special after midnight. Immediately upon hearing the
first announcement for the two song shot special, Inspector Cobos checked the time and sent
himself a text. The time, as documented by his text message, was 12:02 a.m. After considering
the conflicting testimony, the Commission finds the inspectors’ testimony regarding the timing
of the shot special announcement more reliable than that of disc jockey Murchie.

It is undisputed that, after announcing that the shot special would last for the next set of
two songs, the disc jockey repeated the promotion two or three times over the next six to eight
minutes. He announced between songs that the special would be coming to an end shortly.
Further, it was at least three minutes after midnight when permittee Pearson returned to the
inspectors’ table and advised Inspector Tawney that the shot special was still available. Then, a
few more minutes passed before Pearson served the two shots to the table and charged Tawney
the reduced price of $3.00 per shot. Consequently, as set out in the findings above, the
Commission has established that Licensee’s employees promoted a temporary price reduction on
shots of distilled liquors after midnight in violation of former OAR 845-006-0345(11).

5. Sanction

As set out in OAR 845-005-0355(5), the failure to comply with a restriction on the license
is a Category I violation. A Category I violation is one that makes the licensee ineligible for a
license. OAR 845-006-0500(7)(a)(A). Under the Commission’s guidelines, the standard penalty
for a first Category I violation is cancellation of the license. OAR 845-006-0500(7), Exhibit 1.

In prior cases, the Commission has held that cancellation of a license may only result from
substantial violations of license conditions and restrictions. In Oceanside Restaurant & Lounge
(OLCC, Final Order, 88-V-123, August 1989), the Commission identified the following factors
to consider in determining whether a violation of license restrictions is substantial:

(a) the timing of the violation, with breaches early in the contract considered
more likely to be substantial;
(b) whether the violation was willful;
(c) the number of violations;
(d) whether the hardship on the licensee outweighs the importance of the
conditions in ensuring compliance with the license condition.

The Oceanside Restaurant & Lounge factors are not required elements, but are to be
examined as factors in weighing in favor of or against a determination that a restriction violation
is substantial enough to warrant the presumed penalty of cancellation. Bettie Ford’s (OLCC

Page 14 of 19 – Final Order

Final Order, 06-V-121, June 2007).

(a) Timing. In Dad’s Restaurant & Lounge (OLCC Final Order, 06-V-029, December
2007), the Commission determined that restriction violations that occurred within a year of the
restriction were substantial. Here, Licensee accepted the license restrictions in September 2007
and the violations occurred in July 2008, 10 months later. Therefore, this factor weighs against
Licensee.

(b) Willfulness. The Commission has held that violations were committed willfully when
the licensee’s employees were aware of the license restrictions and voluntarily and intentionally
failed to comply with them. See, e.g., Dad’s Restaurant & Lounge. Here, the server’s service of
two drinks to Inspector Cobos at one time was an intentional and voluntary act,10 which weighs
against Licensee. On the other hand, the fact that the inspectors were served double shots of
distilled spirits exceeding two ounces may be attributable to a glitch in the computerized
beverage dispensing system rather than an employee’s intentional disregard of the one drink
restriction, but service of a double in two glasses was intentional and voluntary. Further,
Licensee’s security staff’s lack of compliance with the wanding requirement was willful. The
record establishes that Licensee has only one wand. When the wand becomes inoperable,
Licensee’s security staff will, on most occasions, use a cursory pat down method to check
patrons for weapons instead. But, even then, the record establishes that not all patrons entering
the premises were patted down or wanded by security. In light of all these considerations, this
factor weighs against Licensee.

(c) Number of Violations. During his July 5-6, 2008 visit, Inspector Tawney saw 20 to 30
patrons enter the premises without being wanded. Most, but not all, of these patrons were patted
down upon entry instead. As noted above, Licensee’s staff’s lack of compliance with the
wanding requirement was likely due to the wand being temporarily inoperable. When the
inspectors returned to the premises on the night of July 11, the wand was in use. Because the
failure to wand all patrons on entry occurred on the same night and likely for the same reason,
the violation, though repeated, is appropriately considered as a single incident.

The violation of the one drink per patron restriction was, however, repeated. Both server
Werner and server Pearson violated the restriction by allowing Inspector Cobos to have two
drinks at one time. And, both inspectors’ double liquor shots (different brands dispensed from
different lines) exceeded two ounces. Therefore, this factor weighs against Licensee.

(d) Hardship/Importance of Conditions. In Dad’s Restaurant & Lounge, the Commission

found that the fourth Oceanside factor counts against a licensee where “the breach strikes at the
very heart of the restriction or condition placed on the licensee, as the licensee would not be a
good risk for compliance with alcoholic beverage laws without the restriction.” Final Order at
15.

The restrictions at issue in this case – requiring wanding of all patrons entering after 9:00

Inspector Cobos approached the bar alone and ordered a double shot of whiskey and a bottle of beer.
10

Without asking if he was ordering for another person’s consumption, the server knowingly served Cobos
more than one drink, as “drink” is defined in the license restriction.

Page 15 of 19 – Final Order

p.m. and limiting patrons to one drink at a time – were imposed on the license to prevent future
problems following Licensee’s history of serious and persistent problems in 2006. As a result of
the violation of ORS 471.315(1)(c), Licensee faced cancellation of its license. Licensee admitted
the violation and restrictions were imposed on its license in lieu of cancellation. The restrictions
are not particularly onerous and (despite Licensee’s misunderstanding regarding the definition of
a drink) easy to follow. Although the loss of the liquor license is a harsh sanction, the violations
established go to the heart of the license restrictions. This factor weighs against Licensee.

In this case, all four Oceanside factors weigh against Licensee, rendering the restriction
violations substantial enough to warrant the presumed penalty of license cancellation. But, even
if these restriction violations alone did not warrant cancellation, the Commission has also proven
that Licensee’s employees violated other liquor law provisions.

As found above, Licensee’s employee Pearson was under the influence of intoxicants on
duty in violation of OAR 845-006-0345(1), and employee Murchie promoted temporary price
reductions after midnight in violation of former OAR 845-006-0345(11)(b). An employee under
the influence of intoxicants on duty is a Category II violation, the standard penalty for which is a
30 day suspension. Promoting temporary price reductions after midnight is a Category III
violation, the standard penalty for which is a 10 day suspension or a fine of $1,650.

Pursuant to OAR 835-006-0500(8), “numerous violations within the two-year period,

regardless of the type, may indicate such a disregard for the law or failure to control the premises
so as to warrant cancellation of the license or permit." Here, considering the severity and
number of violations proven (two Category I restriction violations, one Category II violation and
a Category III violation), plus the prior adjudicated Category I violation for a history of serious
and persistent problems at the premises between January 2006 and August 2006, cancellation of
the license is warranted. See, e.g., Cabaret Lounge (OLCC Final Order, 08-V-061, October
2009) (five Category III violations within a 10 month period warranted cancellation); see also
Bettie Ford’s, Final Order (four violations, consisting of two license restriction violations, the
sale of alcoholic beverages in a manner other than the license permits and a Category III
violation for permitting an employee to sell, mix or serve without a valid permit warranted
cancellation of the license); Dad’s Restaurant & Lounge, Final Order (three violations,
consisting of two substantial restriction violations and a Category V violation, failing to notify
the Commission before substantially reducing food service, warranted cancellation of the
license.)

6. License Refusal

The Commission also proposes to refuse to renew Licensee’s license based on Licensee’s
compliance history. Pursuant to ORS 471.313(4)(g), the Commission “may refuse to license any
applicant * * * if the Commission has reasonable ground to believe any of the following to be
true”:

(4) That the applicant:

Page 16 of 19 – Final Order

 ***
(g) Did not have a good record of compliance with the alcoholic liquor laws of the
state and the rules of the Commission when previously licensed.

The Commission may count as evidence of a poor record of compliance charges that are
proved for the first time during the license refusal contested case, as long as the Commission
gives reasonable notice of the charges and provides the applicant an opportunity to contest the
charges. Riverside Restaurant & Lounge (OLCC, Final Order, 94-L-008, December 1996).

In this case, Licensee was given reasonable notice of the charge and an opportunity to
contest it. In the course of this contested case, the Commission has proven the four violations
alleged in the notice, two Category I violations one Category II and one Category III. In
addition, as noted above, in 2006, Licensee had a history of serious and persistent problems,
another Category I violation, along with a Category IV violation for a minor in a prohibited area.
This record of five serious violations in two years gives the Commission reasonable grounds to
believe that Licensee did not have a good record of compliance sufficient to justify the refusal to
renew the license. See, e.g., Lotsa Luck (OLCC Final Order, 08-V-054, April 2009) (a willful
restriction violation committed by the licensee six months after the restriction was imposed
provided grounds to refuse to renew the license); see also Cedars Restaurant & Lounge (OLCC
Final Order, 08-V-099, October 2009) (two Category I violations within two years, one with
aggravating circumstances, and a Category III violation constitutes a poor record of compliance).

7. Good Cause Exception.

The Commission has held that a prior record of violations may be overcome as a ground
for refusal where the evidence shows that despite the violation record, the applicant would not be
a poor risk for future compliance with the alcoholic beverage laws. See, e.g., Crane Supply
Tavern (OLCC, Final Order, 85-L-019, August 1985) (evidence established that future violations
were unlikely and the area had a need for the license); Hale’s Tavern (OLCC, Final Order, 85-L-
010, June 1985) (good cause shown where applicant had only one violation in nine years as a
licensee, the violation was committed by applicant’s employee rather than the applicant
personally and the applicant took swift action to prevent recurrence of violation). Factors to be
considered in determining the existence of good cause include the period of time without
violations as a licensee, the nature and seriousness of the violations, whether the violations were
mitigated or aggravated, and acceptance of responsibility for the violation. See, e.g., Quincy
Store (OLCC Final Order, 02-V-008/L-001, December 2002.)

The burden is on the licensee to demonstrate that it is a good candidate for future
compliance with the liquor laws. See Dad’s Restaurant & Lounge, OLCC Final Order at 23.
Licensee notes that, by the time of hearing, it had been more than a year since the violations
occurred. Licensee also asserts that, since the restrictions were imposed and with the exception
of the violations at issue, it has been in compliance with the law. Licensee has also had its
beverage dispensing system recalibrated to avoid heavy pours.

The question remains whether Licensee has shown that future violations would be

Page 17 of 19 – Final Order

unlikely. If Licensee were to purchase a second security wand or keep sufficient replacement
batteries on hand, future violations of the wanding requirement would be unlikely. But, Licensee
could have taken these preventative steps to ensure compliance with the restriction before the
violation occurred. Second, since Licensee’s servers allowed the inspectors to have more than
one drink at a time, Licensee has obtained clarification as to whether, under this restriction, it
was permitted to serve a shot of distilled spirits with a beer back and/or a double shot (two
ounces) in two glasses. But, even with a clear understanding of the one drink per patron
restriction, these violations could reoccur if the servers disregard the restriction, if they
mistakenly assume that a second drink is ordered for another patron’s consumption or if the
dispensing system lines relax.

In essence, what Licensee has shown is that, despite its poor compliance history (five
serious violations within two years), it has, since mid-July 2008, complied with the restrictions
on its license and the liquor laws. But, this 15 month record of compliance is not enough to
persuasively demonstrate that future violations would be unlikely. Also, Licensee has not
accepted responsibility for the violations at issue in this case. Consequently, Licensee has not
persuasively demonstrated that it is a good candidate for future compliance with the liquor laws.

FINAL ORDER

The Commission orders that the Full On-Premises Sales license held by North House
Enterprises, LLC, Ghassan Samander, Managing Member, dba Exotica International Club for
Men, located at 240 N.E. Columbia, Portland, Oregon be CANCELLED.

It is further ordered that the application to renew the Full On-Premises Sales license held
by North House Enterprises, LLC, Ghassan Samander, Managing Member, dba Exotica
International Club for Men, located at 240 N.E. Columbia, Portland, Oregon be REFUSED.

It is further ordered that notice of this action, including the reasons for it, be given.

Dated this 21st day of April, 2010.

/s/ Stephen A. Pharo

Stephen A. Pharo
Executive Director
OREGON LIQUOR CONTROL COMMISSION

Mailed this 21st day of April 2010.

THIS ORDER IS EFFECTIVE ON THE DATE MAILED.

NOTICE: You are entitled to judicial review of this Order. Judicial review may be obtained
by filing a petition for judicial review within 60 days from the service of this Order.
Judicial review is pursuant to the provisions of ORS Chapter 183.

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Page 19 of 19 – Final Order