Judge James C. Chalfant, Case 22STCP01425 2023-02-23 Tentative Ruling

Respondent City of Los Angeles (“City”) and Petitioner Marc Epstein (“Fabian”) separately move for judgment on the pleadings for the First Amended Petition (“FAP”).

The court has read and considered the moving papers for both motions,[1] and Epstein’s reply, and renders the following tentative decision.

Petitioner Epstein commenced this proceeding on April 18, 2022 against Respondents City, Holly L. Wolcott (“Wolcott”), the City’s Department of Cannabis Regulation (“DCR”), Michelle Garakian in her capacity as its Acting Executive Director (“Garakian”), the City’s Office of Finance (“Finance”), and Diana Mangioglu in her capacity as its Director (“Mangioglu”). The operative pleading is the FAP, filed April 20, 2022, alleging (1) traditional or administrative mandamus and (2) declaratory relief. The verified FAP alleges in pertinent part as follows.

At the time of filing, another case Hollywood Holistic Healers, Inc., et al. v. Rick Waters, et al. (“Hollywood”) (2014), SC123554 is pending. FAP, ¶6. That case concerns (1) the ownership of a company whose names include Hollywood Holistic, Inc., Unified Patient Alliance MBC (“UPA”) and Hollywood Holistic Healers, Inc. (“HHH”); and (2) the lawful registrant under Business Tax Registration Certificate No. 2173088-0001-5 with an L050 classification (“BTRC 3088”). FAP, ¶7.

On February 26, 2018, during the pendency of Hollywood, Epstein submitted a Cannabis Business Application for HHH to DCR. FAP, ¶9.

On February 28, 2018, Maria Colvin (“Maria”) submitted a Cannabis Business Application for HH to DCR that listed Maria as 10% owner, David Shin (“Shin”) as 28.5% owner, Janie Kon (“Kon”) as 10% owner, and Dakota Segura (“Segura”) as 33% owner. FAP, ¶8, Ex. A. Maria submitted another application on March 4, 2018 to the same effect. FAP, ¶10, Ex. B.

The Phase 1 trial in Hollywood addressed HHH’s ownership and who is the proper registrant under BTRC 3088. FAP, ¶12. William Colvin (“William”), Maria, and Waters presented evidence that Maria and Waters are the only owners and that HHH is the lawful registrant under BTRC 3088. FAP, ¶13. Maria testified that Segura never owned any part of HHH. FAP, ¶14. Epstein presented evidence that he owns 51% of HHH and controls BTRC 3088, with Waters as minority shareholder. FAP, ¶15. This evidence included a November 12, 2011 contract between Epstein and Waters and his payment of taxes between 2012 and 2016 for two marijuana businesses that he operated under BTRC 3088 at 1543 Sawtelle Boulevard, Los Angeles, California 90025 (“Sawtelle”) until the end of 2013 and at 8416 Lankershim Boulevard, Los Angeles, California 91352 (“Lankershim”) thereafter. FAP, ¶15.

On August 10, 2020, the court in Hollywood issued a statement of decision finding that the November 12, 2011 contract between Epstein and Waters had a lawful object, Maria and Waters owned HHH, Maria could not use her ownership of HHH to Epstein’s detriment in her pursuit of BTRC 3088, Epstein and Waters operated Sawtelle and Lankershim under a different company that Waters had incorporated in 2013, and that BTRC 3088 is void because William and Waters defrauded the City through false representations and omissions in a Notice of Intention to Register filed by Waters in February 2011. FAP, ¶¶ 16-17.

The parties provided the Hollywood statement of decision to DCR. FAP, ¶18. On January 26, 2021, the DCR issued Findings of Ineligibility against the applications for cannabis business licenses of Epstein and Maria. FAP, ¶¶ 19-20, Exs. D-E. Both appealed DCR’s decisions. FAP, ¶¶ 21-22.

Maria did not appear at her appeal hearing on September 1, 2021. FAP, ¶24. Segura appeared and testified that contrary to Maria’s testimony in the trial in Hollywood, Segura owned HHH since 2016. FAP, ¶24, Ex. F.

On December 20, 2021, the hearing officer for Maria’s appeal issued a decision rejecting DCR’s findings for Maria’s application. FAP, ¶27, Ex. G. The hearing officer called the Hollywood statement of decision non-binding and non-appealable, and the trial court even said that the City and Finance remained free to determine what to do with the continued renewal of BTRC 3088. FAP, ¶27, Ex. G. the hearing officer concluded that the findings were an abuse of due process and a violation of the right to possess property. FAP, ¶27, Ex. G. Los Angeles Municipal Code (“LAMC”) section 21.12 provides that the Director of Finance cannot suspend a registration certificate until it provides ten days’ notice of a hearing where the defendant has an opportunity to show cause why a registration certificate or certificates should not be suspended. FAP, ¶27, Ex. G.

Epstein’s appeal was heard on September 29 and October 21, 2021. FAP, ¶26. On December 21, 2021, Epstein apprised DCR that Maria had testified in Hollywood that Segura never owned an interest in HHH. FAP, ¶25.

On January 21, 2022, the hearing officer for Epstein’s appeal issued a decision upholding DCR’s findings. FAP, ¶28, Ex. H. The hearing officer noted that the findings relied on the Hollywood statement of decision and claimed that Epstein did not dispute its findings with respect to Proposition (“Prop”) M eligibility. FAP, ¶28, Ex. H. The hearing officer rejected the argument that the statement of decision was not final and could be withdrawn stating that, in his 39 years of civil practice experience, that was not likely. FAP, ¶28, Ex. H. Pending such withdrawal, the hearing officer found that the Hollywood statement of decision was sufficient to warrant denial of Prop M priority processing. FAP, ¶28, Ex. H.

The trial court in Hollywood has not entered a final judgment. FAP, ¶29. Epstein and Maria are in identical situations, yet the DCR treated them differently on whether the Hollywood statement of decision is a final adjudication. FAP, ¶30.

Epstein seeks a writ of mandate compelling DCR, Finance, and City to (1) withdraw the Epstein appeal decision, (2) process Epstein’s cannabis business application under the Prop M Priority Processing program, (3) issue a cannabis business license to Epstein, and (4) permit Epstein to use the BTRC 3088 to operate Lankershim and pay all taxes due and owing on Lankershim’s revenues. FAP Prayer, ¶1.

Epstein also seeks a declaratory judgment that (1) the appeal findings on his appeal violate due process and are void ab initio, (2) the appeal findings prejudicially and erroneously rely on the trial court statement of decision in Hollywood, (3) DCR must process Epstein’s cannabis business application under the Prop M Priority Processing program, and (4) DCR and Finance must issue a cannabis business license and a BTRC to Epstein, respectively. FAP Prayer, ¶2.

On May 25, 2022, Epstein served Respondents City, Wolcott, DCR, Garakian, Finance, and Mangioglu with the FAP and Summons.

On July 14, 2022, the parties stipulated that every named Respondent except the City be dismissed without prejudice. The court entered the order the same day.

A motion for judgment under CCP section 1094 may be made where the petition for a writ of mandate (1) presents no triable issue of fact or (2) is based solely on the administrative record. The CCP section 1094 motion for judgment is a mechanism to obtain a streamlined review on a particular undisputed issue based on undisputed facts or the administrative record. Dunn v. County of Santa Barbara, (2006) 135 Cal.App.4^th 1281, 1293. See also 2 CEB California Administrative Mandamus §13.23 (3d ed. 2007). When a question of fact is raised by the respondent’s answer, the petitioner has the right to countervail it with proof. CCP §1091; Lassen v. City of Alameda, (“Lassen”) (1957) 150 Cal.App.2d 44, 47. If the facts are undisputed or only a question of law is raised, the court may hear the matter upon the papers filed and argument. Lassen, supra, 150 Cal.App.2d at 47.

The petitioner also may waive the right to present evidence, and the matter still may be heard under CCP section 1094. Ibid. If a question of fact is raised by the answer, a CCP section 1094 motion is not appropriate and the matter must be heard at trial. See id. at 48. In denying a CCP section 1094 motion, the court may decide that the facts are disputed and hence the motion is procedurally defective, or it may decide that the undisputed facts/record show the moving party cannot prevail on that issue.

CCP section 1094.5 is the administrative mandamus provision which structures the procedure for judicial review of adjudicatory decisions rendered by administrative agencies. Topanga Ass’n for a Scenic Community v. County of Los Angeles, (“Topanga”) (1974) 11 Cal.3d 506, 514-15.

The inquiry in such a case shall extend to the questions whether the respondent has proceeded without, or in excess of, jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. CCP §1094.5(b). Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence. CCP §1094.5(b).

CCP section 1094.5 does not on its face specify which cases are subject to independent review, leaving that issue to the courts. Fukuda v. City of Angels, (1999) 20 Cal.4th 805, 811. In cases reviewing decisions which affect a vested, fundamental right the trial court exercises independent judgment on the evidence. Bixby v. Pierno, (1971) 4 Cal.3d 130, 143. See CCP §1094.5(c). Where the agency initially decides whether to grant a license to engage in a trade or business, its decision will be upheld unless it lacks substantial evidence to support it. Donely v. Davi, (2009) 180 Cal.App.4^th 455-56.

“Substantial evidence” is relevant evidence that a reasonable mind might accept as adequate to support a conclusion (California Youth Authority v. State Personnel Board, (“California Youth Authority”) (2002) 104 Cal.App.4th 575, 585) or evidence of ponderable legal significance, which is reasonable in nature, credible and of solid value. Mohilef v. Janovici, (1996) 51 Cal.App.4th 267, 305, n.28. The petitioner has the burden of demonstrating that the agency’s findings are not supported by substantial evidence in light of the whole record. Young v. Gannon, (2002) 97 Cal.App.4th 209, 225. The trial court considers all evidence in the administrative record, including evidence that detracts from evidence supporting the agency’s decision. California Youth Authority, supra, 104 Cal.App.4th at 585.

In 2007, the City adopted Interim Control Ordinance 179027 (“ICO”) which required all marijuana collectives to register with the City in 60 days. In 2010, the City adopted the Medical Marijuana Ordinance (“MMO”) which limited the number and operation of marijuana collectives in the City. On January 25, 2011, the City Council passed Ordinance No. 181530, a temporary urgency ordinance to amend the MMO in response to a Los Angeles Superior Court’s preliminary injunction against enforcement of the MMO and pending the City’s appeal of that injunction.

In 2013, the temporary ordinance was replaced by Prop D (Ordinance No. 182580) (“Prop D”). Prop D explained that the City discontinued implementation of the MMO after the Los Angeles Superior Court decision of October 14, 2011. After a series of other judicial decisions, the City chose in August 2012 to prohibit almost all medical marijuana businesses via Ordinance No. 182190 to stop the continued proliferation of unregulated and unauthorized businesses. The City repealed the general ban on October 9, 2012. To address the continued proliferation of unauthorized medical marijuana businesses, Prop. D replaced the entirety of LAMC Chapter IV, Article 5.1 by granting limited immunity from enforcement of the prohibition on medical marijuana businesses for those businesses that have abided by the City’s regulations and do not violate the restrictions in Prop D.

In 2017, the City passed Prop M, which provided limited immunity and priority registration/processing for retail cannabis activity for existing medical marijuana dispensaries (“EMMD”). In order to participate in the City’s Phase 1 cannabis licensing -- otherwise known as “Prop M Priority Processing” -- an applicant must receive a determination of eligibility from Department. RJN Ex. A, pp. 27-28 (LAMC §104.07). An applicant is eligible if it can establish that it previously operated an EMMD.

“[A]n existing medical marijuana dispensary that is in compliance with all restrictions of Proposition D, notwithstanding those restrictions are or would have been repealed, including, but not limited to, either possessing a 2017 L050 BTRC and current with all City-owed business taxes, or received a BTRC in 2007, registered with the City Clerk by November 13, 2007 (in accordance with the requirements under Interim Control Ordinance 179027), received a L050 BTRC in 2015 or 2016 and submits payment for all City-owed business taxes before the License application is deemed complete. For purposes of this subsection only, an EMMD that has entered into a payment plan with the City's Office of Finance pursuant to LAMC Section 21.18 to pay all outstanding City-owed business taxes is deemed current on all City-owed business taxes and is deemed to have submitted payment for all City-owed business taxes.” RJN Ex. A, pp. 3 (LAMC §104.01(a)(22)) (emphasis added).

A “BTRC” is a Business Tax Registration Certificate issued by Finance that is required for all businesses in order to remit taxes to the City. LAMC §§ 21.03(a)-(b), 21.06(a); RJN Ex. A, p. 2 (LAMC §104.01(a)(5)). A BTRC is issued by Finance to the person or entity listed on the face of the certificate. LAMC §21.00(d) (“person” defined), 21.08(a); RJN Ex. A, p. 2 (LAMC §104.01(a)(5)). It is generally not transferrable. LAMC §21.11. A BTRC is not a business license or a permit in and of itself. LAMC §§ 21.08(b), 21.50(a).

Prop M Priority Processing can only be granted for the one location identified in the EMMD’s original or amended BTRC. RJN Ex. A, pp. 27-28 (LAMC §104.07(a)). Once an applicant is deemed eligible, its EMMD is entitled to receive temporary approval from the Department that authorizes the EMMD to maintain the limited immunity from prosecution afforded by Prop D and engage for a limited period of time in commercial cannabis activity as would be permitted under the privileges of a non-temporary license of the same type. Id., pp. 5, 28 (LAMC §§ 104.01(48) (defining Temporary Approval), 104.07(c), (e) (grant of Temporary Approval)).

The Department’s determination whether an EMMD application is eligible for Prop M Priority Processing shall be made without a hearing and shall be final unless an administrative hearing is timely requested. RJN Ex. A, p. 28 (LAMC §104.07(c)).

The procedure for appeal is set forth in LAMC section 104.10. City RJN Ex. A, pp. 30-31. The appeal must be filed with the Department within 15 days of the date of the mailing of the written decision by Department and set forth the specific basis upon which the appellant claims there was an error or abuse of discretion by the lower-level decision maker. City RJN Ex. A, p. 30 (LAMC §104.10(a)(1)). Within 30 business days after the conclusion of a hearing, the hearing officer shall issue written findings of fact and decide whether to uphold, reject or modify the challenged decision being appealed. The hearing officer’s assistant shall serve the findings on the appellant by mail to the appellant's agent for service of process.

On February 26, 2018, Epstein submitted two Prop M Cannabis Business Applications, LA-M10-18-0000149-APP and LA-A10-18-0000154-APP, on behalf of UPA. AR 6159-62. The applications listed UPA’s BTRC as BTRC Number 0000999999-7766-9 and Lankershim as its business address. AR 6159, 6161.[4]

On February 28, 2018, Maria submitted a Prop M Cannabis Business Application on behalf of HHH. AR 7966-7967. The application listed HHH’s BTRC as BTRC 3088 and its address as 21825 Nordhoff St., Chatsworth, CA 91311 (“Chatsworth”). AR 7966.

On September 18, 2018, DCR emailed Epstein to notify him that it had applications from both UPA and Hollywood using the same BTRC. AR 5945. DCR could only grant Priority Processing to one location and one applicant per BTRC, so it could not make a determination on the applications until it knew who owned HHH. AR 5945. DCR asked for information as to HHH’s ownership by September 28, 2018. AR 6164.

On September 27, 2018, Epstein reported to DCR that Hollywood is an ongoing case that concerns the control of BTRC 3088. AR 6168-69.

On August 10, 2020, the trial court in Hollywood issued its statement of decision after the Phase 1 Trial to determine ownership of HHH. AR 5958-80. The trial court found that Maria owns 510,000 shares of HHH and Waters owns 10,000 shares. AR 5958. However, after February 14, 2021 Maria and her husband William are estopped from asserting any rights under or ownership interest in HHH to Epstein or UPA’s detriment. AR 5958-59. BTRC 3088 is void due to a substantial change in HHH’s ultimate ownership, and none of Maria, William, Waters or Epstein can use or control the BTRC. AR 5959. All four are estopped from claiming any right to use or control BTRC 3088, individually or through any other entity. AR 5959.

The statement of decision noted that most of the testimony of Waters, Colvin, and Epstein appeared untruthful and each was willing to spin their testimony or outright lie when he or she believed it would help their cause. AR 5961.

The stock ledger showed that on June 26, 2006, William was issued 10,000 shares as the only stockholder. AR 5962. Although Waters was issued 10,000 shares on June 12, 2008, whether he ever received a stock certificate for those shares was unclear. AR 5962. William received an additional 500,000 shares on December 12, 2013. AR 5962. In 2017, William transferred all 510,000 shares to Maria. AR 5962.

In September 2010, William was on probation for his felony conviction for possession of cocaine and sale or transportation of marijuana. AR 5962. When the City Council passed Ordinance No. 181530 in 2011, William and Waters were concerned that the City would not allow a convicted felon to run a Medical Marijuana Business (“MMB”). AR 5963. In corporate minutes signed on February 14, 2011, William purported to transfer all of his shares to Waters. AR 5963. This allowed Waters to show the City that he was the only shareholder on February 17, 2011, but he returned William’s then 50% ownership immediately afterwards. AR 5963.

On November 12, 2011, Waters agreed to make Epstein a 51% owner of HHH. AR 5963. They signed a contract to that effect, but HHH never adopted formal corporate minutes or other evidence to document the transfer of stock. AR 5964.

From BTRC 3088’s issuance in 2006 to November 2011, it was used exclusively by HHH at the Sawtelle location. AR 5964. William started a second MMB at 1607 El Centro Avenue (“El Centro”) and obtained BTRC 2257. AR 5964. Once an appellate decision in February 2012 reversed William’s criminal conviction, William and Waters began to conspire against each other. AR 5964. While William ordered the Sawtelle MMB shut down, Waters tried to get it out of HHH’s umbrella by incorporating UPA at the same address. AR 5964-65.

Waters then requested a new BTRC 2698 for Sawtelle and an updated BTRC 3088 that identified UPA instead of Hollywood as the corporate entity. AR 5965. When Epstein and Waters moved the MMB from Sawtelle to Lankershim, they continued to use BTRC 3088 and requested that the City update BTRC 2698’s business location to Lankershim. AR 5966. Notwithstanding their battle to control the name on record with the City, William kept using BTRC 2257 for El Centro and Waters and Epstein used BTRC 3088 for Lankershim. AR 5966.

On October 8, 2015, the City charged William and HHH with illegal operation of the El Centro MMB. AR 5967. On July 21, 2016, William entered a plea agreement with three-year probation in which he could not operate or work for an MMB and BTRC 2257 was cancelled. AR 5967. Although William asked Finance cancel BTRC 2257 three days later, in remarkable duplicity he asked it to reissue BTRC 3088 with William’s home address as the MMB location. AR 5967-68. After the City attorney brought new charges and William lost the appeal of his conviction, he transferred his HHH shares to Maria. AR 5968.

In November 2016, Waters discovered William’s fraudulent transfer of BTRC 3088 and asked the City to accept his right to use BTRC 3088 for the Lankershim MMB. AR 5968. Finance decided to prohibit any further change to BTRC 3088 pending a court decision on HHH’s ownership. AR 5968. It also canceled BTRC 2257. AR 5968.

Meanwhile, Waters and Epstein’s relationship deteriorated. AR 5968. Waters sued Epstein in September 2015 and they settled the case in December 2015. AR 5968. In December 2017 they again became estranged, with Epstein appointing himself as UPA’s CEO in the latest Statement of Information. AR 5969.

The statement of decision found that Epstein’s claim in the case had varied over time. AR 5969-5971. His latest claim was that Waters sold him a 51% interest in the Sawtelle MMB and not HHH. AR 5971. This claim was not credible. AR 5971. It was only after William had his first felony conviction overturned that Epstein and Waters conspired to create an entity with a similar name so they could use HHH’s BTRC 3088 but escape its history and tax liability. AR 5971.

Epstein alternatively argued that William disclaimed any interest in HHH to persuade the City of Waters’ sole ownership. AR 5971-72. William and Maria should be estopped from claiming that ownership now. AR 5972. The court agreed that Epstein relied on Waters’ representation that William had divested his interest in HHH. AR 5974. William and Maria were therefore estopped from claiming HHH ownership to the detriment of Epstein. AR 5974.

As a result, Waters indisputably owns 10,000 shares of HHH, and the partial settlement resolved any claims between Waters and Epstein as to this ownership. AR 5977. Maria owns 510,000 shares by transfer from her husband William, but they both are estopped from exercising that ownership in a way that is detrimental to Epstein. AR 5978.

The trial court decided the ownership of BTRC 3088. LAMC section 21.11 prevents BTRC 3088 from being transferred unless the underlying business is transferred, such that the real or ultimate ownership of the business after the transfer is substantially similar to the real or ultimate ownership before the transfer. AR 5978. Under LAMC section 21.11, any substantial change in HHH’s ultimate ownership voids BTRC 3088. AR 5979. The parties offered expert testimony that said otherwise, but it was all without foundation and inconsistent with LAMC section 21.11. AR 5979-80.

The statement of decision concluded that William’s transfer of all his interest in HHH voided BTRC 3088. AR 5980. No evidence suggests that the equitable theories and defenses raised by Epstein as to ownership of HHH supersedes LAMC section 21.11. AR 5980. That William and Waters lied to the City to get the BTRC also would support an equitable declaration that neither should control BTRC 3088. AR 5980.

Epstein requested that the court order Finance to issue BTRC 3088 to the company operating the Lankershim MMB. AR 5980. The trial court does not have jurisdiction over Finance or the City, neither of whom were parties, so they are free to what to do about the continued renewal of BTRC 3088. AR 5980. The court’s statement of decision concludes “IT IS SO ORDERED” followed by Judge Ford’s signature. AR 5980.

In reliance on the Hollywood statement of decision, Finance cancelled BTRC 3088. AR 5982. Finance’s record for BTRC lists the Chatsworth address. AR 5982.

On January 26, 2021, DCR issued Written Findings of Ineligibility for Prop M Priority Processing in response to Epstein’s application for UPA. AR 5955-56. DCR explained that it had received the Hollywood statement of decision finding BTRC 3088 void. AR 5956. Finance then cancelled BTRC 3088. AR 5956. Under LAMC section 104.01(a)(21), eligibility for Prop M Priority Processing requires either (1) a 2017 L050 BTRC or (2) a BTRC in 2007, registration with the City Clerk by November 13, 2007 per the ICO’s requirements, and a L050 BTRC in 2015 or 2016 and payment of all business taxes. AR 5956. Epstein relied on the 2011 BTRC 3088 in UPA’s application, so the fact that the court declared it void renders UPA ineligible. AR 5956. DCR ordered HHH to cease all retail commercial cannabis activity. AR 5956.

On February 9, 2021, Epstein appealed DCR’s rejection of UPA’s application. AR 14539. Hearing Officer David Shapiro (“Shapiro”) heard the appeal on April 14, September 29, and October 20, 2021. AR 14539.

DCR’s Appeal Recommendation Report for Epstein’s appeal reiterated that DCR chose not to make a determination on the Prop M application until the ownership claims were resolved. AR 5943. Under LAMC section 104.01(a)(21), eligibility for Prop M Priority Processing requires either (1) a 2017 L050 BTRC or (2) a BTRC in 2007, registration with the City Clerk by November 13, 2007 per the requirements under Interim Control Ordinance 179027, and a L050 BTRC in 2015 or 2016. AR 5943. UPA based its applications on BTRC 3088. AR 5945.

On January 21, 2022, Hearing Officer Shapiro issued his decision rejecting Epstein’s appeal. AR 14539-55.

DCR’s Assistant Executive Director testified that DCR found UPA ineligible based on three separate findings from the Hollywood statement of decision, all of which had unambiguous wording: (a) UPA cannot use BTRC 3088, (b) Epstein cannot use BTRC 3088, and (c) BTRC 3088 is void and cannot be used by any applicant. AR 14540-541. The Hollywood court also ruled that Epstein is estopped from using BTRC 3088. AR 14541.

DCR’s Assistant Director also testified that it can only grant Prop M Priority Processing to a person or business with one BTRC. AR 14541. UPA cannot use HHH’s BTRC in its application and UPA’s BTRC number 0002698545-0001-4 existed only between July 2013 and March 2016. AR 14541. UPA was not incorporated until 2013 and so could not have registered under the 2007 ICO or received a 2006 BTRC. AR 14541.

DCR’s Assistant Director further testified that UPA has violated Prop D, Prop M’s predecessor, and that Epstein now operates an unlicensed cannabis business. AR 14541. Either of these grounds would justify denial of the appeal. AR 14541.

Epstein testified that he has operated a lawful cannabis business since November 2011, when he assumed from Waters management of the MMD at Sawtelle. AR 14541. Epstein paid all taxes owed under BTRC 3088. AR 14541. In 2016, after relocation of the business to Lankershim to satisfy Prop D, Finance declined Epstein’s renewal payment because William had purloined the BTRC 3088. AR 14542.

Eligibility for Prop. M Priority Processing requires either (1) a 2017 L050 BTRC or (2) a BTRC in 2007, registration with the City Clerk by November 13, 2007 per the requirements under Interim Control Ordinance 179027, and a L050 BTRC in 2015 or 2016. AR 14542.

The Hollywood court found that the parties engaged in ownership transfer to defraud the City. AR 14542. The DCR states that it tries to rely on court rulings and should not reject its findings. AR 14542. The hearing officer also should not substitute his judgment for that of a bench officer unless that decision is plainly wrong. AR 14542. The hearing officer had reviewed virtually the entire Hollywood court record with the goal of independently assessing it. AR 14542. The testimony conflicts but it is well summarized in the Hollywood court’s summary. AR 14542.

UPA did not dispute any particular findings of the statement of decision, but it argued that the statement of decision is not final and could be withdrawn. AR 14543. DCR responded that the statement of decision has withstood two more trial phases and, if the court does withdraw or amend it, DCR will consider a different decision if it revisits licensing. AR 14543.

Hearing Officer Shapiro rejected the argument that the Hollywood statement of decision is not final and could be withdrawn. AR 14543. In his 39 years of civil practice experience, that was not likely. AR 14543. Pending such withdrawal, he found the statement of decision sufficient to warrant denial of Prop M priority processing. AR 14543. He found all other arguments irrelevant. AR 14543.

Hearing Officer Shapiro concluded that DCR acted correctly and denied Epstein’s and UPA’s appeal. AR 14544.

DCR rejected HHH’s Prop M Cannabis Business Application based on the Hollywood statement of decision. AR 7388. Maria appealed the rejection. AR 7385.

On December 20, 2021, the hearing officer in Maria’s appeal issued her decision. AR 7384-93. The hearing officer acknowledged that the Hollywood statement of decision found BTRC 3088 void for all parties because of a substantial change in the ownership of HHH. AR 7386-7387.

DCR records show that BTRC 3088 was opened in 2006, registered with the City Clerk before November 2007, and possessed a 2016 L050BTRC in 2016, otherwise complying with the requirements of Prop D, and that taxes have been paid under BTRC 3088. AR 7389.

DCR argued that BTRC 3088 never received an L050 BTRC in 2017 because the account was already closed due to pending litigation. AR 7389. DCR then suspended its determination of Prop M priority processing eligibility for HHH until after the end of litigation over the company’s ownership. AR 7389.

The Hollywood statement of decision was a non-binding, non-appealable decision deciding the ownership issue. AR 7389. The decision concluded that BTRC 3088 is void based on LAMC section 21.11. AR 7389-90.

The hearing officer noted that the right to acquire and possess property as an inalienable constitutional right. AR 7390. Courts have held that people may not be deprived of their property interest without due process of law. AR 7390-91. LAMC section 21.12 provides that the Director of Finance cannot suspend a registration certificate until it provides ten days’ notice of a hearing where the defendant has an opportunity to show cause why a registration certificate or certificates should not be suspended. AR 7391. No such hearing or notice occurred. AR 7391.

DCR argues that BTRC 3088 was voided and not suspended, and LAMC section 21.12 does not apply. This argument is not compelling because voiding and suspend are synonyms. AR 7391. Nor did DCR provide HHH with an opportunity to appeal a final judgment because no final judgment was made. AR 7391. Instead, DCR found HHH ineligible for Prop M Priority Processing based on the Hollywood court’s retroactive decision voiding BTRC 3088. AR 7391.

The Hollywood statement of decision specified that it could not order the City or Finance to do anything about BTRC 3088. AR 7393. Both remained free do determine what to do regarding BTRC 3088’s renewal. AR 7393. Yet, DCR relied on the statement of decision to deny HHH Prop M Priority Processing, which violated due process. AR 7393. The hearing officer granted HHH’s appeal and rejected DCR’s denial. AR 7393.

On January 23, 2023, Epstein’s counsel in Hollywood submitted a proposed judgment. RJN Ex. B (Carlsen Decl., ¶4, Ex. B). The proposed judgment included the findings from the trial court’s Phase 1 trial stating that BTRC 3088 is void due to substantial change in the company’s ownership, and that Epstein, Waters, Maria, and William are all estopped from claiming any right to use or control BTRC 3088. RJN Ex. B (Carlsen Decl., ¶4, Ex. B, p. 8).

On January 25, 2023, the Hollywood trial court issued a minute order directing counsel to meet and confer to submit a revised proposed judgment that incorporates the proposed orders in the statements of decision for each phase of the trial and to file it on or before February 7, 2023. RJN Ex. C.[5]

Petitioner Epstein seeks mandamus directing the City to set aside Hearing Officer Shapiro’s decision upholding the denial of UPA’s eligibility for Prop M Priority Processing. Epstein argues that the issue for the court is whether DCR was entitled to base its decision for UPA’s eligibility on the Hollywood court’s Phase 1 statement of decision (sometimes, “statement of decision”). Mot. at 3.

The right to acquire, possess, and protect property is an inalienable right all people have because they are free and independent. Cal. Const. Art. I, §1. A person may not be deprived of life, liberty, or property without due process of law or denied equal protection of the laws. Cal. Const. Art. I, §7(a).

Epstein notes (Mot. at 3-4) that “[p]rocedural due process, as required by the United States Constitution, protects only those matters that may be construed as liberty or property interests. Mathews v. Eldridge, (1976) 424 U.S. 319, 332; Conejo Wellness Center, Inc. v. City of Agoura Hills, (2013) 214 Cal.App.4th 1534, 1562. Procedural due process under the California Constitution potentially extends to any statutorily conferred benefit, whether or not it can be properly construed as a liberty or property interest. People v. Ramirez, (1979) 25 Cal.3d 260, 263–64. When an individual is deprived of such a benefit, due process analysis under California law focuses not on the precise characterization of the benefit but simply on what process is constitutionally required given the governmental and private interests at issue. Ibid. Procedural due process protection under California law therefore extends further than that under federal law, but it still requires the deprivation of some statutorily conferred benefit before it is implicated. Schultz v. Regents of University of California, (1984) 160 Cal.App.3d 768, 786.

Epstein argues that the Hollywood court’s split of the trial into phases is a device permitted and governed in pertinent part by CCP sections 632 (statement of decision) and 634 (omission or ambiguity in statement of decision).[6] The Phase 1 Statement does not contain binding findings of fact adjudicated with finality; the trial court has the discretion to amend the findings of fact (and conclusions of law) prior to the entry of judgment. See Bay World Trading, Ltd. v. Nebraska Beef, Inc., (2002) 101 Cal.App.4th 135, 141 (“Even after a court has issued a written decision, the court retains the power to change its findings of fact or conclusions of law until judgment is entered.”). Until a judgment is entered, it is not effectual for any purpose. CCP §664. “At any time before it is entered, the court may change its conclusions of law and enter a judgment different from that first announced.” Phillips v. Phillips, (1953) 41 Cal.2d 869, 874–75. Thus, the Hollywood trial court's Phase 1 statement of decision does not contain final findings of fact or conclusions of law. Mot. at 6.

Epstein notes that the Hollywood trial court's statement of decision also is not appealable under CCP section 904.1(a)(1). “The general rule is that a statement or memorandum of decision is not appealable ... The rule’s practical justification is that courts typically embody their final rulings not in statements of decision but in orders or judgments.” Alan v. American Honda Motor Co., Inc., (2007) 40 Cal.4th 894, 901. Mot. at 7-8.

Thus, The Hollywood statement of decision was not a final adjudication. The statement of decision does not contain final findings of fact or conclusions of law and is not appealable. The trial court still can revise the statement of decision and it is non-binding. As a result, the DCR’s reliance on the Phase 1 statement of decision for its findings that Epstein is ineligible for Prop M Priority Processing deprived Epstein of his procedural due process rights. Mot. at 3, 8.

DCR also improperly relied on Finance’s unilateral and ultra vires cancellation of BTRC 3088 in conjunction with the Phase 1 statement of decision, which is another due process violation. The Phase 1 statement of decision expressly stated that “[a]s far as the Court is concerned, the City and Department of Finance remain free to determine what they will do regarding the continued renewal of BTRC 3088.” AR 5980. The court did not require the City, acting through the DCR and/or Finance, to cancel BTRC 3088. Hence, the statement of decision did not absolve the City of its obligation to give Epstein notice and the right to a hearing on the proposed cancellation of BTRC 3088 pursuant to LAMC section 21.12. Mot. at 8.

Epstein concludes that the DCR’s reliance on the Phase 1 statement of decision as the basis for its rejection of Epstein’s Applications deprived him of his procedural due process protections. As a result, DCR did not proceed in the manner required by law. Mot. at 3.

The City argues that Epstein’s mandamus claim is futile or moot. His license application requires him to hold a qualifying BTRC, but the Hollywood trial court is about to enter judgment concluding both that BTRC 3088 is void as of February 2011 and that Epstein is estopped from relying upon it. See RJN, Ex. B (Epstein’s Revised Proposed Judgment filed on January 23, 2023); RJN Ex. C (January 25, 2023 minute order). Accordingly, any writ for a new administrative hearing would inevitably result in the denial of Epstein’s application and, as such, would be a useless and futile act. California law does not permit courts to issue futile or useless writs of mandate. Genser v. McElvy, (1969) 276 Cal.App.2d 709, 712. Opp. at 9-10.

Epstein replies that the City’s argument is premature. DCR’s findings and Hearing Officer Shapiro’s appeal decision are unlawful at this time. Whether DCR would stand on its findings or simply issue new findings that Epstein is ineligible for a license at a new hearing cannot be addressed now. Reply at 5. The court agrees that Epstein’s claim is not moot until judgment is entered in Hollywood. While judgment may be imminent, it has not happened yet.

The City then argues that Epstein and UPA are ineligible for Prop M Priority Processing because there is substantial evidence that they do not control a qualifying BTRC. Hearing Officer Shapiro relied on the Hollywood court’s Phase I statement of decision, which was based on the preponderance of evidence standard (see Evid. Code §110) and is a higher standard of proof than the substantial evidence requirement governing this case. See Wollersheim v. Church of Scientology, (1999) 69 Cal.App.4th 1012, 1014. If the Hollywood court found that Epstein does not control a qualifying BTRC, that same evidence must also satisfy the lower substantial evidence standard. Opp. at 8.

The City notes that Hearing Officer Shapiro also relied on his “own assessment of the trial record.” AR 6763. He ruled that the Hollywood trial record provides substantial evidence that Epstein does not control an eligible BTRC and, as a result, is ineligible for Priority Processing. Id. Consequently, the lack of finality for the Phase I statement of decision is meaningless; Hearing Officer Shapiro reviewed the Hollywood record and found substantial evidence that Epstein does not control a qualifying BTRC and is ineligible for Priority Processing. AR 6763. Opp. at 8-9.

Epstein replies that Hearing Officer Shapiro ruled that “the likelihood of withdrawal is slim ...Pending such withdrawal, and on the basis of his own assessment of the trial record, your Hearing Examiner finds the Statement sufficient to warrant denial of Proposition M priority processing.” AR 14543. This ruling was not an application of law to the evidence in Hollywood; it was a legal opinion on the scope of the Hollywood court’s duties and prerogatives for the statement of decision. Reply at 4.

Hearing Officer Shapiro plainly relied on the Hollywood statement of decision, stating that he should not substitute his judgment for that of a bench officer unless that decision is plainly wrong. AR 14542. On the other hand, Hearing Officer Shapiro also stated that he had reviewed virtually the entire Hollywood court record with the goal of independently assessing it. AR 14542. He found that the testimony conflicted but was well summarized in the Hollywood court’s summary. AR 14542. Hearing Officer Shapiro then stated: “Pending such [unlikely] withdrawal, and on the basis of his own assessment of the trial record…[he] finds the Statement [of decision] sufficient to warrant denial of Proposition M processing.” AR 14543 (emphasis added).

The appeal decision indicates that Hearing Officer Shapiro both relied on the Hollywood statement of decision and found Epstein ineligible for Prop M Priority Processing based on his independent review of the underlying Hollywood evidence. This independent review of the Hollywood evidence by Hearing Officer Shapiro obviates Epstein’s argument. There is some ambiguity in Hearing Officer Shapiro’s decision because he does not separately find the underlying evidence to be sufficient; he only finds the statement of decision to be sufficient. Nonetheless, the court concludes from the totality of the decision that Hearing Officer Shapiro independently found the underlying Hollywood evidence to suffice.

Moreover, there is a simpler resolution to Epstein’s argument. His contention about the need for finality in the Hollywood Phase 1 statement of decision is implicitly based on the doctrines of res judicata and collateral estoppel. Res judicata, also known as claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Mycogen Corp. v. Monsanto Co., (2002) 28 Cal.4th 888, 896. Res judicata applies if (1) the decision in the prior proceeding is final and on the merits, (2) the present proceeding is on the same cause of action as the prior proceeding, and (3) the parties in the present proceeding (or parties in privity with them) were parties to the prior proceeding. Id. at 1202.

Under collateral estoppel (issue preclusion), once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude the re-litigation of the issue in a suit on a different cause of action involving a party to the first case. San Remo Hotel, L.P. v. City & County of San Francisco, (2005) 545 U.S. 323, 336. Collateral estoppel prevents re-litigation when the following factors are met: (1) the issue is identical to an issue decided in a prior proceeding; (2) the issue was actually litigated; (3) the issue was necessarily decided; (4) the decision in the prior proceeding is final and on the merits; and (5) the party against whom collateral estoppel is asserted was a party to the prior proceeding. Gabriel v. Wells Fargo Bank, N.A., (2010) 188 Cal.App.4^th 547, 556. Both res judicata and collateral estoppel apply to administrative adjudications. George Arakelian Farms, Inc. v. Agricultural Labor Relations Board, (1989) 49 Cal.3d 1279, 1290.

Res judicata and collateral estoppel only apply to judgments. These doctrines have no bearing on DCR’s decision or Epstein’s appeal for the simple reason that the Hollywood Phase 1 statement of decision is not a judgment. But it is an order. A judgment is a conclusive determination of the matter between the parties and their successors in interest. See CCP §1908(a)(2). An order is “a command or direction authoritatively given”. Black’s Law Dictionary, (4^th ed. 1968) p. 1247. “Every direction of a court or judge, made or entered in writing, and not included in a judgment” is a court order. CCP §1003. So long as a court has personal jurisdiction over the parties, a court order must be obeyed until it is set aside.

The Hollywood statement of decision is designated as an order by the phrase “IT IS SO ORDERED” as well as by the trial court’s signature. AR 5980. As a court order, the Hollywood parties are bound by its direction until such time as it is set aside (or superseded by a judgment). Epstein and UPA are parties in Hollywood and are bound by the trial court’s order. As such, they are bound by the ruling that the BTRC 3088 is void and that Epstein is estopped from claiming any right to use or control it, individually or through any entity. AR 5959. It does not matter that there is no final judgment yet. The statement of a decision is a direct order to Epstein and UPA, and both parties are bound by it.

Of course, Epstein’s administrative appeal is not the same proceeding as the Hollywood case. A party in one lawsuit is not bound by a ruling against him or her in another lawsuit absent res judicata or collateral estoppel, and the same is true for an administrative proceeding. Epstein was free to argue the issues of ownership and control of BTRC 3088 in his administrative appeal.

But that does not mean that the City could not consider the statement of decision as a court order. The Hollywood court recognized that it had no jurisdiction over the City or Finance and could not compel them to renew BTRC 3088. AR 5980. Finance was not obligated by the statement of decision to void BTRC 3088, and DCR was not obligated to deny Epstein and UPA eligibility for Prop M Priority Processing. But they were entitled to consider the Hollywood statement of decision as an existing court order that BTRC 3088 is void and that Epstein and UPA are estopped from claiming any right to use or control BTRC 3088. In other words, the City entities were entitled to rely on the order itself and were not required to independently determine the truth of the facts underlying the order. At least, Epstein points to no authority to the contrary.

In considering the Hollywood order, DCR could conclude that Epstein had been ordered not to claim any right to use or control BTRC 3088 and that he was ineligible without the ability to make that claim.[7]

“A person may not be deprived of life, liberty, or property without due process of law or denied equal protection of the laws ... A citizen or class of citizens may not be granted privileges or immunities not granted on the same terms to all citizens.” Cal. Const. Art. I, §7(a), (b). “Equal protection under the law means that parties similarly situated with respect to a law must be treated alike under the law.” Las Lomas Land Co., LLC v. City of Los Angeles, (2009) 177 Cal.App.4th 837, 857.

Epstein argues that he, UPA, Maria, and HHH are similarly situated when it comes to the DCR’s licensing and review process and yet he and UPA were not afforded the same treatment as Maria and HHH. Mot. at 4-5. In reply (Reply at 3), Epstein adds that DCR issued findings against HHH based on the Phase 1 statement of decision and HHH appealed those findings. The hearing officer’s decision for HHH’s appeal found that the Hollywood statement of decision was an insufficient basis for the findings against HHH given that it was non-binding and non-appealable. AR 7389. The superior court records available through the court’s internet portal indicates that DCR did not seek review of this decision. Epstein concludes that he was not afforded the same due process rights as HHH and therefore did not receive equal protection under the law.

The City argues that Epstein cannot meet his burden of showing that the Hearing Officer’s decision lacks substantial evidence by pointing to a different administrative hearing, with its own unique facts and parties, that came to a different conclusion. Hearing Officer Shapiro’s decision is supported by substantial evidence even if he could have made a different decision. Opp. at 8-9.

Epstein responds that the City is missing his point. While he asserts that the HHH appeal hearing officer correctly declined to rely on the Hollywood statement of decision, his primary argument is that the HHH appeal decision and Hearing Officer Shapiro’s decision applied two different standards in violation of equal protection. Reply at 5. The City’s argument that the HHH appeal deals with a different set of facts and a different individual who is not a party to Hollywood is incorrect. HHH is the plaintiff in Hollywood and was the party appealing DCR’s findings. AR 7384-95. Reply at 3.

The answer to Epstein’s equal protection argument is threefold. First, Hearing Officer Shapiro independently reviewed the Hollywood record and found the underlying evidence sufficient. The hearing officer in the HHH appeal did not perform this review. This is sufficient reason to distinguish the two cases and deny an equal protection claim.

Second, the hearing officer in the HHH appeal was focused on the Hollywood statement of decision’s conclusion that BTRC 3088 is void, which she found to be the equivalent of a suspension. AR 7391. Yet, LAMC section 21.12[8] provides that the Director of Finance cannot suspend a registration certificate without a hearing and there was no hearing. AR 7391. The HHH hearing officer did not address the fact that the Hollywood statement of decision was a court order estopping Maria from asserting any right or ownership in HHH, and from claiming any right to use or control BTRC 3088. AR 5958-59. Maria is a party to Hollywood and is subject to the order in the same manner as Epstein. DCR was entitled to rely on the order to deny Maria’s application for HHH. Even if the hearing officer was correct that Finance could not find BTRC 3088 to be void without a hearing, she did not consider this point.

Epstein’s motion for judgment is denied and the City’s motion for judgment is granted. Epstein is not entitled to mandamus relief and the FAP’s declaratory relief claim is subsumed within the mandamus claim. The City’s counsel is ordered to prepare a proposed judgment, serve it on Petitioner’s counsel for approval as to form, wait ten days after service for any objections, meet and confer if there are objections, and then submit the proposed judgment along with a declaration stating the existence/non-existence of any unresolved objections. An OSC re: judgment is set for April 6, 2023 at 9:30 a.m.

[1] Per the court’s trial setting order, the City’s moving papers are considered its opposition to Epstein’s motion, Epstein’s reply is considered his opposition to t he City’s moving papers, and the City shall not have a reply to Epstein’s opposition.

[2] The City moves for the court to judicially notice (1) LAMC Chapter X, Article 4 (RJN Ex. A); (2) Declaration of Miles Carlsen (“Carlsen”) In Support of a Revised Proposed Judgment in Hollywood dated January 23, 2023 (RJN Ex. B); and (3) a minute order for Non-Appearance Case Review Re: Proposed Judgment in Hollywood dated January 25, 2023 (RJN Ex. C). The first request is granted under Evid. Code section 452(b), and the other requests are granted under Evid. Code section 452(d).

[3] The parties oddly have presented evidence from the Administrative Record in the order they have cited the pages rather than numerical order, making finding these pages quite difficult. Their counsel is admonished to present record evidence in numerical bates-stamp page order in the future.

[4] Both parties state that Epstein’s application used BTRC 3088, and DCR said so as well. AR 5945. But that is not what the applications say.

[5] The court judicially notices that on February 8, 2023 the status conference re: judgment was continued to February 23, 2023. Evid. Code §452(d).

[6] The trial court’s authority to bifurcate a trial into phases actually lies in CCP section 1048(b) (court may order separate trial of any cause or issue) and CCP section 598 (court may order trial of any issue before others for efficient handling of case).

[7] Epstein adds that the Finance document attached to DCR’s findings as Exhibit B, entitled “City of Los Angeles Office of Finance - LATAX General Taxpayer Information”, does not refer to Epstein or Lankershim. AR 5982. Instead, it refers to a street address associated with Maria and Dakota Segura: “21825 NORDHOFF STREET CHATSWORTH, CA 91311-5712”. Id. Mot. at 8. Any inconsistency in Finance’s cancellation is immaterial to DCR’s reliance on the Hollywood statement of decision as an order.

[8] Whenever any person fails to comply with any provision of the LAMC article for business taxes or any rule or regulation adopted pursuant thereto, the Director of Finance, upon hearing, after giving such person ten days’ notice in writing specifying the time and place of hearing and requiring him to show cause why his registration certificate or certificates should not be suspended, may suspend any one or more of the registration certificates held by such person. LAMC §21.12(a).