City, SIST settle lawsuit over liquor license

Leader Reporter/March 30, 2006
By Tim Ryan

The City of Shawano has settled a federal lawsuit with the Samanta Roy Institute of Science and Technology (SIST) and one of its subsidiaries over the city’s handling of a liquor license for the Best Western motel.

A dismissal order was issued earlier this month as a result of a settlement agreement between SIST and the city. The settlement did not award SIST any damages or other financial compensation.

City officials – who were aware that the case had been dismissed – said they had not seen the full settlement agreement until they were shown a copy of it by a Leader reporter on Tuesday.

In comments made Wednesday, Mayor Lorna Marquardt said that Richard Carlson, the attorney appointed to represent the city by the city’s insurance company, had the authority to sign off on the agreement.

“It wasn’t something that had to come back to the Common Council,” Marquardt said.

There were, however, some conversations between her office and city attorney Tim Schmid regarding some of the points of the agreement, Marquardt said, particularly relating to the city’s liquor license ordinance.

Schmid was named as a defendant along with the City of Shawano, and so he could not represent the case. Schmid said he could not comment on the agreement.

As part of the agreement, the city will not pursue any action against SIST subsidiary Midwest Hotels and Motels of Shawano, LLC, in regards to whether Midwest was operating the Best Western without a permit last year.

“The state has a greater issue with that than we would,” Marquardt said.

Kalmar Gronvall, managing member of Midwest Hotels, has been charged in Shawano County Circuit Court with party to the crime of selling alcohol, operating a motel and operating a restaurant at the Best Western without a permit. He is scheduled for a jury trial on the matter in August.

The city agreed in the settlement not to use the outcome of that case to take any action to revoke the liquor license at the Best Western, or at any other entity owned by SIST.

The city also agreed not to use facts pertaining to the lawsuit filed against the city as a reason to suspend, revoke, or deny issuance or renewal of any license for any business owned by Midwest, SIST, or any of its subsidiaries.

In addition, the city dropped its counterclaim against SIST – alleging that Midwest engaged in the sale of alcoholic beverages prior to holding a license – and agreed not to seek a suspension or revocation of the license based on that claim.

The city further agreed to review its ordinances covering the issuing of liquor licenses.

In exchange, SIST dropped its lawsuit.

Asked whether she was happy with the settlement, Marquardt said, “I’m always happy when a lawsuit is settled and won’t cost the taxpayers any more money. From that standpoint, I’m happy this is settled.”

City administrator Jim Stadler said he did not feel that SIST has won any victory with the settlement.

“They haven’t gained anything,” Stadler said, because the city was not looking to revoke the Best Western license. “We haven’t given up anything.”

The city last year held up issuing a liquor license to the Best Western until SIST and its subsidiaries paid $85,243 in delinquent property taxes, plus 4 percent interest, owed to the city.

The same requirement will be in place when those licenses come up for renewal this year, Stadler said.

“At the end of June, they’ll be looking to renew and they will be under the same scenario,” he said. “We’ll review the licenses, and if they don’t comply, the licenses won’t be issued.”

Marquardt noted that will also include a requirement that Midwest be current in paying the motel room tax, which remains delinquent for the Best Western and AmericInn, both owned by Midwest Hotels.

Stadler said the city and its attorneys were confident that the city would have won in court, but that there was nothing to be gained from taking it all the way through an expensive legal process.

“City residents can be assured the city has won in this case,” he said. “It’s not to anyone’s benefit to spend a great deal of resources to prove a point that’s already been proven.”

Stadler also noted that, had the city not gone along with the attorney’s recommendation, the city would have had to continue at its own expense rather than the insurance company’s.

“There was not a great deal of choice,” he said, adding that the city was confident in their attorney’s judgment.

SIST attorney Rebekah Brown said SIST was happy with the outcome.

The agreement did not give SIST everything they had been asking, but, Brown said, “we got what we needed.”

She also did not feel that the city made an inordinate amount of concessions.

“Nothing more than was necessary,” she said.

The civil suit maintained that the city violated equal protection laws and interfered with property rights and business operations at the Best Western Village Haus and Villager Family Restaurant, 201 N. Airport Road.

The Best Western was purchased last year by Midwest Hotels and Motels of Shawano, LLC, a subsidiary of SIST.

Most of the allegations in the suit centered around a May 24, 2005, meeting of the Shawano Common Council, at which the council granted Midwest Hotels’ request for licenses at the Best Western but required that delinquent taxes be paid before the licenses could be issued.

Further complicating the issuance of the Best Western licenses at that meeting was confusion over when Midwest Hotels would take over the business or if it already had.

The city required Midwest Hotels to provide a closing statement, as well as a land contract, warranty deed or title to the property before those licenses could be issued.

“No other liquor license holder was required to submit similar documents before issuance of a liquor license,” the lawsuit maintained. “This is a violation of equal protection.”

The suit maintained that the city’s ordinance covering liquor licenses is unconstitutional and violates due process guaranteed by the U.S. Constitution and required by Wisconsin Statutes.

“The City of Shawano ordinance (No.) 7 unreasonably treats liquor licensees, including the Plaintiff, differently than other city license or permit holders,” the suit alleged. The suit also alleged that, “Defendants treated the Plaintiff differently from other liquor license holders in the City of Shawano.” The suit maintained that the city’s ordinance exceeds the powers granted by state statutes.

In agreeing to review its liquor license ordinance, the city made no admission that what it is currently doing is wrong. The agreement states that none of the stipulations should be construed as admission or denial of liability by either party.

“Our ordinance does need to be changed,” Marquardt said. “It’s an old ordinance that’s on the books.”

The change would apply the same standard requiring the payment of delinquent taxes to all licenses, including tobacco and beverage licenses.

Stadler said the city has already been using that standard for all licenses, but that the ordinance needs to be changed to reflect that.

The suit also alleged that the city’s actions deprived the Best Western of revenue and asked for $75,000 in damages. The agreement pays no damages and both sides agreed to pay their own court costs.

The suit also maintained that the city was motivated by racial discrimination against R.C. Samanta Roy, who is of East Indian descent. There is no mention of that claim in the settlement agreement.