By Darren Smith, Weekend Contributor
In a new twist to the bureaucracy retailers in the fledgling retail marijuana business in Washington face, the City Council of Wenatchee has denied a business license to a retailer approved by the State Liquor Control Board, which regulates the industry, to begin setting up shop.
Shaun Preder, an owner on behalf of SMP Retail, LLC last Tuesday filed a lawsuit against the city in Chelan County Superior Court seeking declaratory and injunctive relief for prohibition of plaintiff’s right to sell marijuana. The declaratory relief sought is for the court to find that the city’s prohibition violates state law codified in RCW 69.50.608 and Article XI Section 11 of the Washington Constitution.
If the city elects to litigate the case there could be ramifications throughout the state and possibly others where recreational marijuana is legal.
The precursor of this lawsuit began during a city council meeting on October 24, 2013 when the council voted four to three to uphold a city code, WCC 5.76.020 requiring all business licensees to comply with federal, state, and local laws. An amendment to the code was sought to provide for state licensed marijuana industries to engage in business activities within the city’s jurisdiction. According to the court filings Wenatchee Councilman Bryan Campbell stated “Federal law is superior over the state.” The amendment was rejected.
The lawsuit against the city alleges:
[O]n August, 29, 2013, the United States Department of Justice released the Cole Memo to all United States Attorneys that notes, “[o]utside of [eight listed federal law] enforcement priorities, the federal government has traditionally relied on states and local law enforcement agencies to address marijuana activity through the enforcement of their own narcotics laws.”
The Cole Memo also states that, “enforcement of state law by state and local law enforcement and regulatory bodies should remain the primary means of addressing marijuana-related activity.”
Contrary to the notion that federal law must change before Washington State marijuana laws (as amended by Initiative 502) can take effect and be implemented, the Cole Memo states that a “robust [state regulatory] system may affirmatively address [federal] priorities by, for example, implementing effective measures to prevent diversion of marijuana outside of the regulated system and to other states, prohibiting access to marijuana by minors, and replacing an illicit marijuana trade that funds criminal enterprises with a tightly regulated market in which revenues are tracked and accounted for.
Shaun was one of three prospective retailers to win the Liquor Control Board’s lottery that granted the state licensed right to operate his marijuana business in Wenatchee. Subsequently, he and his business passed the requisite background and financial checks. In an interview with reporters, Shaun has invested nearly $11,000 dollars toward leasing a retail storefront on the expectation he would be granted the right to engage in his business.
According to court papers:
[O]n April 23, 2014 the [State Liquor Control] Board notified SMP Retail that its application had been selected as a potential marijuana retail store in Wenatchee. On May 3, 2014 the Board received a written Notice of Objection to SMP Retail’s marijuana application from Defendant.
Defendant’s Objection stated:
The City disapproves of the application because it violates current City code…It is a conditional precedent to the issuance of a business license under the City code that the business engaged in by the applicant be lawful under any applicable city, state or federal law. The Federal Controlled Substances Act classifies marijuana as a Schedule I Drug. Under federal law it is illegal to grow, manufacture, distribute, or possess marijuana. Consequently, the proposed marijuana production business [sic] would be ineligible to obtain a City business license. If it attempted to operate without a City business license, it would be operating contrary to City code and federal law.
On May 13, 2014 the Board sent SMP Retail a letter stating that SMP Retail had the option to: negotiate with the city concerning its objection, withdraw its retail marijuana license application, or move forward in the State licensing process despite Defendant’s objection. The same day, SMP Retail notified the Board that it would move forward with the State’s licensing process, regardless of Defendant’s objection.
A “catch-22” situation arises with SMP Retail’s bid to enable its business. According to the complaint:
To receive a marijuana retail license from the State, SMP Retail must undergo a final site inspection of its business location by the Board.
The State’s site inspection requires that SMP Retail’s business location be fully operational.
In turn, in order to receive its marijuana retail license, SMP Retail must complete any necessary build-outs prior to the State’s inspection.
SMP Retail has yet to undertake any necessary build-outs for purposes of its State inspection.
Nonetheless, SMP Retail has expended approximately $10,742.50 to date on rental fees to its current landlord, utilities, sewer usage, and the Board’s marijuana license application fee.
In May 2014, SMP Retail applied for a business license from Defendant. To receive a business license from Defendant, Defendant requires that applicants undergo a full site inspection of the business location.
As a result, SMP Retail must complete any necessary build-outs prior to the City’s inspection.
Even if SMP Retail completes a full build-out that would meet the Board’s licensing requirements and also meet Defendant’s licensing requirements, the City will ultimately deny SMP Retail a city business license solely on the basis of the federal law language in WCC 5.76.020.
Though SMP Retail may receive a license to operate from the Board upon a successful final inspection, Defendant will not permit SMP Retail to open its doors due to its prohibition against marijuana businesses.
According to Initiative 502’s author the consequences of Wenatchee challenging the lawsuit, Alison Holcomb said “[I]t could be litigated all the way up to the United States Supreme Court. Expert witnesses, documentary production, and a lot of work time and effort” and could cost the city hundreds of thousands or potentially millions of dollars.
Wenatchee does have possibly a defense in that despite the Cole Memo, federal law is still applicable though the Department of Justice declaring it would not necessarily pursue enforcement against the state legal marijuana industry in Washington. But there do remain issues of pre-emption by Washington State law. Nevertheless it might come down to whether the Wenatchee City Council decides to take on this potentially costly battle; a battle that clearly is against the tide of change. Moreover, Chelan County residents, within which Wenatchee is the county seat, voted fifty two percent in favor of Initiative 502 despite the area being politically conservative.
Wenatchee’s council should take a moment to reflect on the cost of such expensive endeavors. Previously the city voted to construct a general events stadium costing in excess of fifty million dollars, and floating a municipal bond toward its construction. Development costs were over-budget and afterward for a few years the stadium was in the red by millions of dollars per year. The municipal bond to finance the construction was heading toward a default that potentially could bankrupt the city. In the end, the taxpayers rescued the project with a sales tax increase.
The next city council meeting is scheduled for June 12th. Hopefully they will recognize what might be at stake here, because the future might require them to suffer the benefits of their decision.
The court filing can be read HERE. (PDF)
By Darren Smith
Sources:
King5 News
Seattle Times
SMP Retail, LLC v. City of Wenatchee 14-2-00555-0 via Public Disclosure Request
Title XI Section 11: Washington Constitution
Revised Code of Washington: Chapter 69.50 RCW, et seq.
Washington Administrative Code: Chapter 314-55 WAC, et seq.
Wenatchee City Code: WCC 5.76.020
City of Wenatchee, WA
The views expressed in this posting are the author’s alone and not those of the blog, the host, or other weekend bloggers. As an open forum, weekend bloggers post independently without pre-approval or review. Content and any displays or art are solely their decision and responsibility.
Paul C. Schulte
Dredd – so, according to your list, a person could legally sell opium and cocaine ….
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You are a regular BS machine on steroids today.
The marijuana regulations are administered by the same state agency that administers alcohol regulations.
Cities are required to comply with that agencies operations:
“Liquors, local option on sale of — Enforcement of state laws, sharing proceeds of liquor profits and excise tax.
The qualified electors of any code city may petition for an election upon the question of whether the sale of liquor shall be permitted within the boundaries of such city as provided by chapter 66.40 RCW, and shall be governed by the procedure therein, and may regulate music, dancing and entertainment as authorized by RCW 66.28.080: PROVIDED, That every code city shall enforce state laws relating to the investigation and prosecution of all violations of Title 66 RCW relating to control of alcoholic beverages and shall be entitled to retain the fines collected therefrom as therein provided. Every code city shall also share in the allocation and distribution of liquor profits and excise as provided in RCW 82.08.170, 66.08.190, and 66.08.210, and make reports of seizure as required by RCW 66.32.090, and otherwise regulate by ordinances not in conflict with state law or liquor board regulations.” (RCW 35A.66.020).
This also applies to Wenatchee:
“Applicability of general law
Powers of eminent domain, borrowing, taxation, and the granting of franchises may be exercised by the legislative bodies of code cities in the manner provided in this title or by the general law of the state where not inconsistent with this title; and the duties to be performed and the procedure to be followed by such cities in regard to the keeping of accounts and records, official bonds, health and safety and other matters not specifically provided for in this title, shall be governed by the general law. For the purposes of this title, “the general law” means any provision of state law, not inconsistent with this title, enacted before or after the passage of this title which is by its terms applicable or available to all cities or towns.” (RCW 35A.11.030)
Paul C. Schulte
Dredd – so, according to your list, a person could legally sell opium and cocaine. Are you sure your list is correct? And the state CANNOT pull the municipality documents and tell them they are no longer a city. That is the silliest thing I have seen on the blog for a week.
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Silly is as silly does.
You are silly.
Title 35A RCW is state law concerning municipalities like Wenatchee, which Wenatchee acknowledges in its own code.
“Notwithstanding anything contained in the existing ordinances of the city to the contrary, the city of Wenatchee, Washington, adopts the classification of noncharter code city endowed with all applicable rights, powers, privileges, duties and obligations of noncharter code cities as set forth in RCW Title 35A as the same now exists, including, but not by way of limitation, those set forth specifically in Chapter 35A.11 RCW and further including any and all supplements, amendments or other modifications of said title hereafter at any time enacted. (Ord. 2002 § 1, 1970)” – (WCC 1.02.010). Without going into it here, that determines what it can and can not do in terms of state law:
(RCW 35A.11.010)
Dredd – you picked the wrong list. You completely missed the point. You are trying to “poison the well.”
Richard, We agree. What changed, in San Diego and other intransigent jurisdictions, were elections that got the drug war proponents who wrote these stupid laws out of office.
Nick S.: Although some earlier cases suggested municipalities could not establish barriers to medical marijuana, recent cases have determined otherwise as there is no legal right to engage in illegal activities, and such activities are unlawful under federal law. Local ordinances having the practical effect of banning medical marijuana have been upheld in California.
Al Zheimers
Simple solution for the city. Pass an ordinance regulating and outlawing certain activities: a) houses of prostitution; b) all night liguor serving bars; c) topless dancing at bars or restaurants (with or without liquor licenses); d) sale or display of marijuana or any drug prohibited by federal law or city ordinance.
A city, like Las Vegas, can prohibit activities which state law does not prohibit. Such as prostitution.
Pass the ordinance. Game over.
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That is what this case is about.
State law and applicable preemption:
(RCW 69.50.608). Remember that the “municipality license” which the city got came from the State, and is based on State Law.
If the State operated like the city is trying to, the State would just pull the city municipality documents and tell them they are no longer a city because they are violating state law.
No, the case is not so simple.
Paul C. Schulte
Dredd – by any farmer or gardener in any place in this state. He is not claiming to have bought local product.
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The proper analysis of that clause is by way of jurisdictional analysis.
Does the municipality have jurisdiction of anything outside its city limits?
No.
Notice the phrase “city limits” because cities are limited to their limits.
The rules of legal hermeneutics require that no absurd interpretation is allowed.
Since “any place in this state” clearly refers to places outside the city limits, outside the jurisdiction, of Wenatchee, that must be considered when construing the city code.
One who must acquire a city license must be operating within the city limits because the city cannot compel a city license outside its city limits jurisdiction.
Thus, “by any farmer or gardener in any place in this state” has nothing to do with the licensee operating within the city limits, rather, it refers to where what is being sold comes from.
Finally, exemption six refers to business activity conducted within the city limits for products that come from anywhere in the state to be sold within the city limits.
Simple solution for the city. Pass an ordinance regulating and outlawing certain activities: a) houses of prostitution; b) all night liguor serving bars; c) topless dancing at bars or restaurants (with or without liquor licenses); d) sale or display of marijuana or any drug prohibited by federal law or city ordinance.
A city, like Las Vegas, can prohibit activities which state law does not prohibit. Such as prostitution.
Pass the ordinance. Game over.
Interesting assessment from a barrister, rafflaw. I agree that this is ridiculous but 8th grade civics taught me Federal law trumps state law. I often think law school is a hindrance to being an attorney. It complicates the simple. Why not just assert the local law is stupid. Why not assert, like many voters did in Ca. when local jurisdictions did this horseshit, that elections matter and vote these idiots out of office.
Great article and great discussion Darren. State law should prevail in my opinion.
Paul C. Schulte
Dredd – this is from the city.
The City disapproves of the application because it violates current City code…It is a conditional precedent to the issuance of a business license under the City code that the business engaged in by the applicant be lawful under any applicable city, state or federal law. The Federal Controlled Substances Act classifies marijuana as a Schedule I Drug. Under federal law it is illegal to grow, manufacture, distribute, or possess marijuana. Consequently, the proposed marijuana production business [sic] would be ineligible to obtain a City business license. If it attempted to operate without a City business license, it would be operating contrary to City code and federal law.
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Paul C. Schulte
Dredd – emphasis mine
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Yes, their position is clear in that respect.
They think they can ignore the state law and resort to federal law to deny a city license (exemption not addressed).
The state law says they can’t, and the state courts will be bound to the state statute.
If the city removes the case to federal court, which they initially can do (it is automatic), then they will have to withstand a motion to remand brought by the SMP plaintiffs.
That they will not be able to do … it will be remanded IMO.
So, back in state court they will lose on the merits.
These are exempt from a Wenatchee city license:
Marijuana comes in at #11, and marijuana products (candy, brownies, etc.) come in at #12 and #13.
Dredd – so, according to your list, a person could legally sell opium and cocaine. Are you sure your list is correct? And the state CANNOT pull the municipality documents and tell them they are no longer a city. That is the silliest thing I have seen on the blog for a week.
I’ve already stated why the loan can’t be called.
samantha – are you a banker?
Dredd – by any farmer or gardener in any place in this state. He is not claiming to have bought local product.
Dredd – emphasis mine
If exemption six is ambiguous, i.e., legally of two or more meanings, then the contra proferendum rule kicks in and it is interpreted against the party who drafted it.
That would be the city.
Thus, the exemption language “The following are exempt from the provisions of this chapter:
…
(6) The selling of fruits, vegetables, berries, butter, eggs, fish, milk, poultry, meats, or any farm produce or edibles raised, caught, produced or manufactured and sold by any farmer or gardener in any place in this state.”
would be interpreted against the City and for the marijuana doods.
Paul C. Schulte
Dredd – no one is saying you cannot sell YOUR OWN product. The shop owner is selling other people’s product and needs a business license. But, just for the sake of argument, you can put a handle on a printing press, but it doesn’t make it portable. I can call myself anything I like, doesn’t make it so.
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You keep evading reality … except you can’t weasel out of this one.
Your side will lose the case.
Dredd – this is from the city.
Legal hermeneutics come into play.
“(6) The selling of fruits, vegetables, berries, butter, eggs, fish, milk, poultry, meats, or any farm produce or edibles raised, caught, produced or manufactured and sold by any farmer or gardener in any place in this state.”
Butter, eggs, fish, milk, poultry, and meats are not planted and grown, yet they are farm products.
Marijuana is planted and grown like vegetables, so it is clearly a farm product too.
Dredd – you will not be able to use that for the plaintiff in this case. It does not fit the situation.
Schulte, you are dodging the issue now. The bank cannot call the loan. Period. The feds even may be able to shut down the bank, but the deed of trust would survive as an asset, then sold through liquidation. You can’t get clean in muddy bathwater no matter how hard you try. At some point you have to quit, then start all over with new water, unless you are content with what you got.