COURT ORDER (Re: Defendant s Motion to Dismiss Complaint Pursuant to C.R.C.P. 12(b)(5)

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DISTRICT COURT, CITY & COUNTY OF DENVER, COLORADO

1437 Bannock Street Denver, Colorado 80202

▲ COURT USE ONLY ▲ Plaintiff(s): Transitional Medication, LLC

v.

Defendant(s): City and County of Denver; City of Denver Department of Excise and Licenses, in their official capacity; Penny May, in her official capacity as Director

Case Number: 2011CV370 Division: 424

COURT ORDER

(Re: Defendant’s Motion to Dismiss Complaint Pursuant to C.R.C.P. 12(b)(5)

THIS MATTER is before the Court pursuant to Defendants’ Motion to Dismiss Complaint. The Court has reviewed the Motion, Response, case file and applicable statutory and case law. In consideration thereof, the Court makes the following findings and orders:

STANDARD OR REVIEW

Motions to dismiss pursuant to C.R.C.P. 12(b)(5) are looked upon with disfavor and should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts that would entitle him to relief. Verrier v. Colo. Dept. of Corr., 77 P.3d 875 (Colo. App. 2003). In ruling on a motion to dismiss for failure to state a claim pursuant to C.R.C.P. 12(b)(5), the trial court must accept the facts of the complaint as true and determine whether, under any theory of law, plaintiff is entitled to relief. The complaint is sufficient if relief could be granted under such circumstances. W.O. Brisben Co., Inc. v. Krystkowiak, 66 P.3d 133 (Colo. App. 2002).

FACTS

On January 11, 2010 the Denver City Council passed Ordinance 39 (the “Ordinance”) which regulates marijuana dispensaries in Denver. The ordinance requires that marijuana dispensaries obtain a medical marijuana dispensary license (“dispensary license”). A dispensary license shall not be issued for locations that are within 1000 feet of any other medical marijuana dispensary. This restriction does not apply to any applicant who applied for a license prior to March 1, 2010 for any location where the same applicant had commenced operation of a dispensary on or before December 15, 2009. Whether or not the dispensary was doing business on or before December 15, 2009 was to be determined by whether the applicant submitted an application for a retail sales tax license (“Tax License”) for the dispensary which was date stamped as received by December 15, 2009 and bearing an effective date of December 15, 2009 or earlier.

On June 18, 2010 Plaintiff applied for a dispensary license to operate a dispensary at 999 North Vallejo St., Denver. On September 7, 2010 the dispensary license was denied because

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there was already another dispensary operating within 1000 feet of Plaintiff. The other dispensary, A Cut Off the Top, applied for a dispensary license on June 16, 2010. In response to being denied a dispensary license, Plaintiff requested a hearing to determine if good cause existed to deny the dispensary license. That hearing was held on November 22, 2010. The Hearing Officer issued a recommended decision denying the dispensary license to Plaintiff. On November 30, 2010 the Director accepted the recommend decision. Written objections were filed by the Plaintiff. On December 15, 2010 the Director issued her final decision denying the Plaintiff a dispensary license.

In its complaint, Plaintiff brings seven claims for relief: (1) Denver Municipal Code Ordinance 39 is Unconstitutionally Retroactive Legislation, (2) Denial of Plaintiff’s Application Serves as an Unconstitutional Taking of a Vested Property Right, (3) Ordinance 39’s Retrospective Application Violates Colorado Constitution, Article II, Section 11, (4) Ordinance 39’s Retrospective Application Violates Colorado Constitution, Article II, Section 11 by Impairing Plaintiff’s Contract Rights, (5) Denver Municipal Code Ordinance 39’s Distance Restrictions are Arbitrary and Capricious and Violate Article II, Section 25 of the Colorado Constitution by Depriving Plaintiff of Due Process, (6) Denver Municipal Code Ordinance 39 Distance Restrictions are Arbitrary and Capricious and Violate Article II, Section 25 of the Colorado Constitution by Depriving Plaintiff of Equal Protection, and (7) Injunctive Relief Pursuant to C.R.C.P. Rule 65.

ANALYSIS

Defendant moves to dismiss arguing that Plaintiff failed to state a claim upon which relief may be granted. Additionally, Defendants challenge Plaintiff’s request for a preliminary injunction.

Retrospectivity and Vested Rights

The Colorado Constitution provides that “[n]o . . . law . . . retrospective in its operation . . . shall be passed by the general assembly.” Ficarra v. Dept. of Reg. Agencies, Div. of Ins., 849 P.2d 6, 15 (Colo. 1993). An act is deemed to violate this provision when it “takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past.” Id. (quoting P-W Invs., Inc. v. City of Westminster, 655 P.2d 1365, 1371 (Colo. 1982)).

Plaintiff’s Claims 1, 3 and 4 argue that the Ordinance is retrospective legislation in violation of the Colorado Constitution. Because a law must impair a vested right to impermissibly violate the Colorado Constitution’s proscription of retrospective laws, this analysis must examine whether Plaintiff had a vested right to operate a marijuana dispensary. A vested right “must be something more than a mere expectation based on an anticipated continuance of the existing law. It must have become a title, legal or equitable, to the present or future enjoyment of property or future enjoyment of the demand, or a legal exemption from a demand made by another.” Id. at 16 (quoting People ex rel. Eitel v. Lindheimer, 21 N.E.2d 318, 321 (Ill. 1939).

Plaintiff argues that a permit issued by a local city or county government can constitute a vested right if the permit holder takes steps in reliance on that permit. P-W Invs., Inc. v. City of Westminster, 655 P.2d 165 (Colo. 1982). Plaintiff did apply for and receive several permits including a Tax License, a Use Permit, and several permits for construction. Complaint ¶ 20. However, the earliest application of any of these permits was May 7, 2010. Id. The Ordinance

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was passed on January 11, 2010. Accordingly, on May 7, 2010 the Plaintiff was on notice that a dispensary license was required. Therefore, Plaintiff’s decision to undertake expenses and investments in furtherance of this business was done so at its own peril and assumed at its own risk.

Further, an apt comparison for marijuana distribution law is liquor law because both regulate the sale of a controlled substance. The Colorado Supreme Court has held “[t]here is no vested right in a licensee to continue in the liquor business beyond the expiration of the date of the license under which he operates. Any licensee who invests his time and substance in the liquor business does so with full knowledge that he has no assurance that the desires of the

neighborhood, or the requirements thereof, will remain constant, or that new members of boards possessing power to issue or renew a license will reach the same conclusions as their

predecessors, and he acts at his peril and assumes the risk that his license may not be granted or

renewed.Ficarra, 849 P.2d at 18) (emphasis original). Similarly, dispensary owners who did

not have licenses had no vested right that they would be able to continue selling marijuana without further regulation and no guarantee that if further regulations are added that they would still be eligible to sell marijuana.

In addition, the right to sell marijuana is not protected by the Colorado Constitution. In

2000 the people of Colorado voted to amend the constitution to allow for the medical use of marijuana. Colo. Const. Art. XVIII § 14. The General Assembly then passed laws to enact the provisions. C.R.S. § 18-18-406.3. Nowhere in any of these provisions has the right to dispense marijuana, except by primary care givers, been found. Id.; see also People v. Clendin, 232 P.3d 210 (Colo. App. 2009) (relying on the Bluebook to determine that distribution of marijuana is still illegal). To be retrospective, legislation “impairs vested rights acquired under existing laws.Ficarra, 849 P.2d at 15 (emphasis added). The right to sell marijuana was not an established right under existing laws. Moreover, the existing law at the time Plaintiff sought a Use Permit and building permits was that a dispensary license was required.

Finally, in Bunzel v. City of Golden the Colorado Supreme Court determined whether a new regulation requiring the licensing of billiards and pinball machines interfered with the owner’s constitutional right to acquire, possess and protect property. 372 P.2d 161 (1962). The Court held that this constitutional provision “does not confer upon the citizen a constitutional right to conduct a business which may be inimical to the public morals.” Id. at 164. Like pinball machines, marijuana dispensaries are arguably “inimical to the public morals” and therefore, the right to operate them is not found in the Colorado Constitution.

For the above reasons, Plaintiff did not have a vested property right. Therefore, the Ordinance was not impermissibly retrospective. As such, Plaintiff’s claims 1, 3 and 4 which allege unconstitutional retrospectivity are without merit.

Unconstitutional Taking of a Vested Property Right

Plaintiff argues in Claim 2 that it was deprived of a vested property right by the Ordinance. However, Plaintiff did not have a vested property right to sell marijuana. As explained in the previous section, Colorado does not recognize a constitutional right to sell marijuana. See Colo. Const. Art. XVIII § 14; Clendin, 232 P.3d 210 (relying on the Bluebook to determine that distribution of marijuana is still illegal). Additionally, Bunzel held that the constitutional right to acquire, posses, and protect property does not “confer upon the citizen a constitutional right to conduct a business which may be inimical to the public morals.” 372 P.2d

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at 164. Selling marijuana is arguably inimical to the public morals and therefore not a protected constitutional right.

Further, the Ordinance is not a regulatory taking of Plaintiff’s property. A regulation will only amount to a taking if it was either a per se taking or specific facts make the regulation a taking. Animas Sand and Gravel, Inc. v. Bd. of Cnty. Comm’rs of Cnty. of La Plata, 38 P.3d 39, 61 (Colo. 2001) (citing Palazzolo v. Rhode Island, 533 U.S. 606 (2001). A per se taking can be proven by showing either that the regulation has no legitimate purpose or that the regulation leaves the land without “reasonable economic value.” Id. The regulation has a legitimate state purpose because it is a legitimate state interest to regulate the sale of a controlled substance. Further, the regulation does not deprive the land of all reasonable economic value. While the Plaintiff cannot sell marijuana at the 999 N. Vallejo Street location, there is no reason to think that the location has been stripped of all reasonable economic value. A prohibition of marijuana sales is one discrete activity that has been excluded.

“If a [property owner] fails to meet its burden of proving a per se taking, it can still prove a taking under a fact-specific inquiry.” Id. at 65. Under a fact-specific inquiry, a mere decrease in property value is not enough,” and “the level of interference must be very high.” Id. Not being allowed to sell marijuana at a location does not amount to a high level of interference with the property because it is a limitation on only one discrete activity.

There is no vested right to sell marijuana. Additionally, the Ordinance did not amount to a regulatory taking because there was not a per se taking nor was there a high enough level of interference to find a taking under a fact specific analysis. Accordingly, Claim 2 fails to state a claim upon which relief may be granted because there was no unconstitutional taking of a vested property right.

Distance Restrictions

Plaintiff alleges in claims 6 and 7 that the distance restrictions are arbitrary and capricious, and therefore, violate Plaintiff’s due process and equal protection rights. The Ordinance prohibited dispensaries within 1000 feet of another dispensary unless the dispensary had filed for a Retail Sales Tax License before December 15, 2009. The Ordinance does classify marijuana dispensary businesses in two ways: those dispensaries that filed before December 15, 2009 and those that did not; and those dispensaries that are within 1000 feet of another dispensary and those that are not. “Where the statutory classification involves neither a fundamental right nor a suspect class, different classes of persons may be treated differently without violation of equal protection when the classification is reasonable, not arbitrary, and bears a rational relationship to legitimate state objectives.” Hurricane v. Kanover, Ltd.,651 P.2d 1218, 1222 (Colo. 1982). None of the classifications that the Ordinance made are suspect classifications or implicate fundamental rights. Therefore, the classifications must only be reasonable and bear a rational relationship to legitimate state objectives. Id. Rational basis review is the least intrusive form of review and uses a presumption of constitutionality. Students for Concealed Carry on Campus, LLC v. Regents of the U. of Colo., ---P.3d---, 2010 WL 1492308 *9 (Colo. App. 2010). The Ordinance states its purpose is to protect the public health, safety and general welfare and promote compliance with other state laws that prohibit trafficking in marijuana for non-medical purposes. It is a legitimate state interest to protect the public health, safety and general welfare. It is also a legitimate interest to seek compliance with state laws. The means chosen by the Ordinance only have to have a rational relationship to the objectives, they do not have to be the best method for achieving such ends. Id. Under this

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deferential standard, regulating the distribution of dispensaries has a rational relationship to the stated objectives because the regulation may make it easier to ensure compliance with state law, limit secondary effects of dispensaries, and prevent trafficking of marijuana. Additionally, it is a reasonable state objective to protect those businesses that had been operating before the new ordinance went into effect. Using retail sales tax licenses with effective dates before December 15, 2009 was a rational way to achieve this objective. Therefore, the Ordinance’s distance restrictions are not arbitrary and capricious.

Injunction

Injunctive relief should be granted sparingly and cautiously. Rathke v. MacFarland, 648 P.2d 648, 653. Additionally, for injunctive relief to be granted, the moving party must establish six prerequisites: (1) that the moving party has a reasonable probability of success; (2) that a danger of real, immediate, and irreparable injury may be prevented by injunctive relief; (3) that there is no plain, speedy, and adequate remedy at law; (4) that the granting of the preliminary injunction will not disservice the public interest; (5) that the balance of equities favors an injunction; and (6) that the injunction will preserve the status quo pending trial on the merits. Id. at 653-54.Because no claims remain, there is not a reasonable probability of success. Therefore, Plaintiff does not meet the first prerequisite and an injunction is not proper.

CONCLUSION

The Plaintiff does not plead sufficient facts and therefore fails to state a claim upon which relief may be granted. Accordingly, Defendants’ Motion to Dismiss the Complaint is

GRANTED.

SO ORDERED this 20th day of March, 2011.

BY THE COURT

Sheila A. Rappaport District Court Judge

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