United States Court of Appeals, District of Columbia Circuit
September 20, 2018
from the United States District Court for the District of
Columbia (No. 1:16-cv-02076)
Brendan J. Klaproth argued the cause and filed the briefs for
Richard S. Love, Senior Assistant Attorney General, Office of
the Attorney General for the District of Columbia, argued the
cause for appellees. With him on the brief were Karl A.
Racine, Attorney General, and Loren L. AliKhan, Solicitor
General. Caroline S. Van Zile, Deputy Solicitor General,
entered an appearance.
Before: Garland, Chief Judge, and Rogers and Griffith,
Rogers, Circuit Judge.
appeal arises from conditions placed by the D.C. Alcoholic
Beverage Control Board on the liquor license of the Alibi
restaurant. The court must decide whether the curable defect
exception to issue preclusion allows a plaintiff to establish
standing under Article III of the Constitution based on
events that arose after the initial complaint was filed, and
whether the license conditions violate appellants' First
and Fifth Amendment rights. The district court had ruled the
original complaint controlled its jurisdiction as to most of
HRH Services, LLC's constitutional claims. On the merits,
it ruled that HRH's retaliation allegations and
Scahill's nearly identical constitutional allegations
failed to state a claim.
by Supreme Court instruction and precedent from our sister
circuits, we hold that HRH properly invoked the curable
defect doctrine and that the district court was wrong to
reject HRH's proposed second amended complaint that would
have cured the standing defect. We deny on the merits
HRH's claims that were dismissed for lack of standing,
and consequently HRH's unconstitutional conditions claim
fails as well. HRH's compelled speech claim is foreclosed
by Full Value Advisors, LLC v. SEC, 633
F.3d 1101, 1109 (D.C. Cir. 2011), which held that required
notification of the government does not constitute compelled
speech. HRH's commercial association claim is foreclosed
by Roberts v. U.S. Jaycees, 468 U.S. 609, 620
(1984), and City of Dallas v. Stanglin, 490 U.S. 19,
affirm the dismissal of HRH's First Amendment retaliation
claim because even assuming the facts alleged in the
complaint are true, the record shows that retaliation was
"not a plausible conclusion," Ashcroft v.
Iqbal, 556 U.S. 662, 682 (2009). We also affirm the
dismissal of Scahill's claims. His commercial association
claim fails for the same reasons as HRH's; his freedom of
movement claim fails under the court's precedent; and his
procedural due process claim fails to identify a cognizable
liberty or property interest.
January 2015, HRH Services, LLC, d/b/a The Alibi
("HRH") applied to the D.C. Alcoholic Beverage
Control Board for a license to serve alcoholic beverages at
the Alibi restaurant. Rachel Traverso and her father Richard
Traverso were identified as co-owners of HRH, but the Board
was concerned about the possible involvement of Martin
Scahill, who had been part owner of the previous restaurant
at that location, which was fined by the Board for allowing
underage drinking. Scahill had originally applied with two
others for a liquor license at the same location before
withdrawing the application when the Board raised issues
regarding his qualifications. He also had been working at the
Alibi restaurant. The Board "required HRH to demonstrate
that it was not engaging in subterfuge to allow Mr. Scahill
to obtain a license without the legally required review of
his qualifications for licensure." ABC Board Order at 3
(May 18, 2016) ("2016 Board Order"). At a hearing
on HRH's application, HRH informed the Board it had
served a barring notice on Scahill that he could not be on
the premises and stated it would accept other license
conditions as the Board deemed necessary. See id.
18, 2016, the Board granted HRH a liquor license with
conditions. The conditions required HRH to "maintain a
barring notice against Martin Scahill to prohibit him from
entering or accessing the licensed premises for a period of
five years" and to notify the Metropolitan Police
Department ("MPD") of any violations. The
conditions also prohibited HRH from "directly or
indirectly transfer[ing] or attempt[ing] to transfer
ownership" of the business to Scahill, providing him
"access or control over any financial accounts
maintained by the business," and "employ[ing] [him]
as a manager, employee, independent contractor, or
volunteer" at the restaurant. 2016 Board Order at 36-37.
The Board denied HRH's motion for reconsideration.
and HRH thereafter unsuccessfully attempted to have the
license conditions set aside on statutory grounds. The D.C.
Court of Appeals dismissed HRH's petition for review
under the D.C. Administrative Procedure Act
("DCAPA") for lack of standing because of its lack
of aggrievement. HRH Servs., LLC v. D.C. Alcoholic
Beverage Control Bd., No. 16-AA-758, Order at 1 (D.C.
Oct. 13, 2016). The court rejected on the merits
Scahill's claims under the DCAPA that the imposition of
the license conditions exceeded the Board's authority and
was unsupported by the evidence and arbitrary and capricious,
holding the Board acted within its discretion. Scahill v.
D.C. Alcoholic Beverage Control Bd., No. 16-AA-775, Mem.
Op. and J. at 5-7 (D.C. Feb. 8, 2018).
and HRH also seek to have the license conditions set aside on
constitutional grounds. After filing a complaint in the U.S.
district court on October 18, 2016, Scahill filed an amended
complaint on December 28, 2016, adding HRH as a plaintiff and
arguing that the license conditions violated their First and
Fifth Amendment rights. The district court granted the
government's motion to dismiss the amended complaint for
lack of standing and failure to state a claim. Scahill v.
District of Columbia, 271 F.Supp.3d 216 (D.D.C. 2017);
see Fed. R. Civ. P. 12(b)(6). Except as to HRH's
First Amendment retaliation claim based on appellants'
legal challenges to the license conditions, the district
court ruled that issue preclusion prevented HRH from
re-litigating its standing in view of the D.C. Court of