Marijuana Retailer Sues City Of Wenatchee, Washington After Denial Of Business License

By Darren Smith, Weekend Contributor

Entreating the GodfatherIn 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.

City of Wenatchee LogoWenatchee 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

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105 thoughts on “Marijuana Retailer Sues City Of Wenatchee, Washington After Denial Of Business License”

  1. Paul C. Schulte

    Dredd – it is hard not to understand the Federal law in this case. However, they are not trying to execute federal law.
    ===========================
    execute
    1. to carry out; accomplish:
    2.to perform or do:

  2. Paul C. Schulte

    Dredd – it is not clear that you do know what the applicable federal law is because of the illogical tact you have taken.
    ================================
    Well then, this is your opportunity to shine with your knowledge of how the city of Wenachee applies whatever federal law you think applies to extinguish state law.

    Enlighten us instead of hiding all that knowledge.

  3. Paul C. Schulte

    Dredd – you know what the federal law is.
    =====================
    That is correct.

    But you obviously don’t, so that is why I asked you to tell us what you think the applicable federal law is which the city of Wenachee is applying in this factual context.

    1. Dredd – it is not clear that you do know what the applicable federal law is because of the illogical tact you have taken.

  4. Al Zheimers

    Of course the city of Wenachee has zoning laws and building codes which need to be enforced. And boy is that pot house a mess. Close it down until the new sewer line from curb to building is installed. The roof is old. The customers cannot park on the street because of the no parking signs. The people who go in the store and come out look intoxicated. The license plate is missing on the owner’s car. The street light went out on the curb, cant be fixed. The awning does not meet code. The customers speed a lot when they drive away. The sidewalk had to be taken out and the new one took six months to be put in.
    ====================
    Sounds like the very popular bar.

  5. Bar associations in the states of Washington (and Colorado) are preparing state ethics laws for lawyers –concerning conflict of state and federal law:

    At its August meeting, the KCBA Board of Trustees voted to support the creation of a new RPC to address the conflict between state and federal law. The new rule would create a safe harbor for attorneys and would provide that a lawyer would not be in violation of the RPCs or subject to discipline for engaging in conduct, or for counseling or assisting a client to engage in conduct, that by virtue of a specific provision of Washington law and implementing regulations is either (a) permitted or (b) within an affirmative defense to prosecution under state criminal law, solely because that same conduct, standing alone, may violate federal law.

    (KCBA).

    A lawyer beginning a practice in Wenachee would be denied a city license if the city interpreted his use of recreational or medicinal marijuana as a violation of federal law.

  6. Of course the city of Wenachee has zoning laws and building codes which need to be enforced. And boy is that pot house a mess. Close it down until the new sewer line from curb to building is installed. The roof is old. The customers cannot park on the street because of the no parking signs. The people who go in the store and come out look intoxicated. The license plate is missing on the owner’s car. The street light went out on the curb, cant be fixed. The awning does not meet code. The customers speed a lot when they drive away. The sidewalk had to be taken out and the new one took six months to be put in.

  7. Paul C. Schulte

    Dredd – it is hard not to understand the Federal law in this case …
    ==========================
    So, what is the federal law in this case?

  8. Paul C. Schulte

    Dredd – it is hard not to understand the Federal law in this case. However, they are not trying to execute federal law.
    ==================
    Quite wrong, like your other malformed and misinformed opinions on this case.

    You are the one harping on their resort to their imagination about what the federal law is and therefore denying a city license to SMP based on that interpretation (which is a malformed and misinformed interpretation).

    The city of Wenachee should be executing city law that complies with state law.

    It is a no brainer.

  9. oops … I messed up the link in my previous comment …

    There are some opinions here by commenters who feel that any city in the state of Washington can just up and interpret then enforce federal marijuana laws, disregarding their own state law.

    Wrong.

    Take a look at State v Kurtz, a Washington State Supreme Court decision, involving state statutes concerning marijuana.

    Marijuana this and marijuana that are discussed at length, with no mention whatsoever of federal law as controlling in state marijuana law issues.

    Why is that?

    An ABC News article sums the issue up well:

    “Nine states have legalized the medical use of marijuana. Tens of thousands of people in advanced stages of cancer, AIDS and other diseases smoke legally obtained marijuana, saying that it relieves their suffering.

    The Supreme Court’s ruling does not overturn those state laws, but it leaves medical marijuana users open to prosecution by the federal government.

    (ABC News).

    Even though marijuana is legal for recreational and medical use in Washington State, still the feds can prosecute under federal law (the state cannot prosecute under federal law, nor can the city of Wenachee).

    The City of Wenachee imagines that it can interpret and execute federal law in its licensing scheme.

    It is wrong.

  10. There are some opinions here by commenters who feel that any city in the state of Washington can just up and interpret then enforce federal marijuana laws, disregarding their own state law.

    Wrong.

    Take a look at State v Kurtz, a Washington State Supreme Court decision, involving state statutes concerning marijuana.

    Marijuana this and marijuana that are discussed at length, with no mention whatsoever of federal law as controlling in state marijuana law issues.

    Why is that?

    An ABC News article sums the issue up well:

    “Nine states have legalized the medical use of marijuana. Tens of thousands of people in advanced stages of cancer, AIDS and other diseases smoke legally obtained marijuana, saying that it relieves their suffering.

    The Supreme Court’s ruling does not overturn those state laws, but it leaves medical marijuana users open to prosecution by the federal government.

    (ABC News).

    Even though marijuana is legal for recreational and medical use in Washington State, still the feds can prosecute under federal law (the state cannot prosecute under federal law, nor can the city of Wenachee).

    The City of Wenachee imagines that it can interpret and execute federal law in its licensing scheme.

    It is wrong.

    1. Dredd – it is hard not to understand the Federal law in this case. However, they are not trying to execute federal law.

  11. Roland

    The hinge issue here is whether US law [federal law] in fact trumps state law …
    ==========================
    That depends, because it does and it doesn’t trump depending on the circumstances:

    The decisions of the United States Supreme Court are mandatory authority in all courts, federal and state, when the decisions cover points of federal law.

    Federal courts of appeals decisions are not binding on state courts.

    [Federal] District court decisions are not binding on state courts.

    The decisions of a state supreme court on that state’s laws are mandatory authority for all lower courts in that state. State supreme court decisions will also be binding on federal courts that are interpreting the state’s law

    (Mandatory v Persuasive Law).

  12. Richard

    Dredd, I don’t have all the citations handy. The main case is City of Riverside v. Inland Empire Patients Health and Wellness Center. There have been additional cases relying on Riverside since it was decided a year ago.
    ========================
    Thank you for the two links.

    The cases involve California law, which is not binding on Washington State courts.

    The California cases are distinguishable on the facts and law too.

    The California Supreme court held that the medical marijuana law in California was “modest” –not compelling.

    Further, California has no recreational personal marijuana use law in addition to a medical marijuana law like Washington State does.

    The Washington case under consideration in this post is also distinguishable from those two California cases.

    That is because the relevant Washington statutes specifically mandate that all municipalities in Washington shall not enact any local codes that are at odds with state wide marijuana law.

    The city code in Maral was a code against cultivating marijuana, inside their city limits (“Marijuana cultivation by any person, including primary caregivers and qualified patients, collectives, cooperatives or dispensaries is prohibited in all zone districts within the City of Live Oak”), whereas the city of Wenachee code outlaws the sale of it within their city limits (“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 California cases offer little, if any, application to SMP v City of Wenachee.

  13. The hinge issue here is whether US law in fact trumps state law. Amendment X of the Bill of Rights indicates no. The Supremes say yes: http://en.wikipedia.org/wiki/Angel_Raich, claiming that if you grow on your own property for your own use it’s Interstate Commerce, a flimsy ruling at best which needs to be overturned. IMHO if it doesn’t cross state lines, it isn’t Interstate Commerce and the Feds have no jurisdiction. But insanity reigns.

  14. Richard, thanks. Riverside, Orange and San Diego Counties were some of the jurisdictions dragged kicking and screaming into the 21st century. I know you can read and anyone w/ that ability knows I NEVER asserted there were laws that had local or state laws trump Federal laws. I did assert the conservatives who write those stupid laws are voted out of office. Indeed, I asserted to rafflaw that I learned in 8th grade that Federal law trumps state laws. Some folks here are stalkers who are only intent on stalking and harassing, not reading. You just took time out of your life you’ll never get back. That’s why I don’t respond to a growing list of trolls. It is empowering.

  15. The frustrating thing about the way this blog platform structures comments is that we can’t follow a thread. For example, Dredd gave us an excellent lesson on jurisdiction removal (which I think I understand now) wayyyy up the line. I wanted to ask is there any scenario under which this ends up in a federal court? But I sure as hell couldn’t take all the hours it might take to wade through all of the comments between there and here to find out if that has been asked…sorry. I’m sure there are a lot of worthy comments, but not may have the time to read everything.

    On a slightly different note: I’d love to see even more legal discussion here, such as that lesson Dredd outlined. My only request is that the lawyers present put some of it into terms the layperson can understand. I may have a degree, but it’s not in law! Thanks, all.

    This is going to be an interesting case to follow.

  16. Dredd, I don’t have all the citations handy. The main case is City of Riverside v. Inland Empire Patients Health and Wellness Center. There have been additional cases relying on Riverside since it was decided a year ago.

  17. Richard

    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.
    ========================
    Do you know how to cite to cases?

    If so do so.

    Only a few here believe everything they read.

    You address them in that fashion, so allow me the honor of reading the cases that support your assertion.

  18. Paul C. Schulte

    Dredd – you picked the wrong list. You completely missed the point. You are trying to “poison the well.”
    ====================
    Wrong metaphor.

    Nice try though.

    Your arguments and presentations evince the tail trying to wag the dog syndrome.

    Hence, your philosophy of law is “let the tail wag the dog.”

    1. Dredd – poison the well is a logical fallacy not a metaphor.

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