Judge Mitchell L. Beckloff, Case 22STCP01130 2023-02-08 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 22STCP01130, Date: 2023-02-08 Tentative Ruling

Respondent, Michelle Garakian, in her official capacity as Acting Executive Director of the Director of the Department of Cannabis Regulations for the City of Los Angeles, and Real Party in Interest, the City of Los Angeles, (jointly, the City) demurrer to the amended verified petition for peremptory writ of mandate. The City contends the petition is moot. Petitioner, Hollywood Holistic Healers, Inc., opposes the demurrer.

The demurrer is sustained without leave to amend. Petitioner’s claims concerning the City’s reconsideration of its priority processing application arose after it filed the petition. Petitioner’s claims are properly the subject of a new proceeding.

The City’s request for judicial notice (RJN) of Exhibits 1 through 3 in its RJN filed October 7, 2022 is granted. The City’s RJN of Exhibits 1 through 3 in its RJN filed February 1, 2023 is granted. Both RJNs are unopposed.

Prior to May 2013, Petitioner operated a medical marijuana dispensary. In May 2013, the City’s voters adopted Proposition D which allowed then existing medical marijuana dispensaries (EMMDs) to operate with limited immunity from law enforcement. (Pet., ¶ 13.)

On March 6, 2017, the City’s voters adopted Proposition M to regulate the City’s cannabis industry. (Pet., ¶ 14.) Proposition M’s licensing scheme provided EMMDs under Proposition D with priority processing of their licensing applications. (Pet., ¶ 14.) That is, EMMDS “qualified for Proposition M Priority Processing.” (Pet., ¶ 14.)

To obtain priority processing under Proposition M, an EMMD applicant must have received and maintained a business tax registration certificate (BTRC) by 2007, registered with the City Clerk by November 13, 2007, received a L050 BTRC in 2015 or 2016, and have submitted all business taxes it owed to the City before the City deemed the application complete. (Pet., ¶ 17.) (See Los Angeles Municipal Code [LAMC], section 104.01, subd. (a)(22).)

Petitioner submitted a timely application for priority processing with the City on February 28, 2018. (Pet., ¶ 20.)

The City subsequently learned Petitioner’s ownership was in dispute and litigation amongst its shareholders was ongoing. (Pet., ¶ 21.) The litigation had been initiated in 2014, well prior to Petitioner submitting its licensing application to the City. (Pet., ¶ 21.) Given the litigation and its practice, the City suspended consideration of Petitioner’s application; the City would not consider the license until the ownership litigation concluded. (Pet., ¶ 26.)

On August 10, 2020, the superior court concluded a first phase of trial concerning Petitioner’s shareholders’ dispute. The court issued a non-appealable statement of decision finding none of the shareholders in the litigation were entitled to use or control BTRC 3088, the registration certificate that had been used for Petitioner’s priority processing application with the City. (Pet., ¶ 27.)

On January 26, 2021, the City’s Office of Finance voided the account associated with BTRC 3088. (Pet., ¶ 28.) Thereafter, the City denied Petitioner’s license application priority processing relying on the court’s statement of decision finding the registration certificate void after February 2011. (Pet., ¶ 29.)

Petitioner appealed the City’s decision. (Pet., ¶¶ 30-31.) The hearing officer found Petitioner met each requirement to obtain priority processing by the City of its license application but could not determine whether Petitioner had been registered with the City Clerk. (Pet., ¶ 3, Ex. 1 6:13-15.) The hearing officer found the City’s act of canceling the registration certificate constituted an “abuse of due process.” (Pet., ¶ 32, Ex. 1.) The hearing officer concluded:

“[The City’s] denial of Proposition M Priority Processing based on the Court’s Statement of Decision retroactively voiding BTRC 3088, and the Office of Finance cancellation of the account is an abuse of due process, and should be rejected.” (Pet., ¶ 32, Ex. 1.)

Petitioner claims the City has failed to comply with the hearing officer’s decision. (Pet., ¶ 34.) Petitioner requests a court order compelling the City to “determine [Petitioner] is eligible for Priority Processing; (b) process [Petitioner’s] application for temporary approval, and

A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (Code Civil Proc. § 430.30, subd. (a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “We assume the truth of the allegations in the complaint, but do not assume the truth of contentions, deductions, or conclusions of law.” (California Logistics, Inc. v. State (2008) 161 Cal.App.4th 242, 247.)

A demurrer may be sustained without leave to amend when there is no reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan, supra, 39 Cal.3d at 318.) Indeed, where the facts are not in dispute and the nature of the plaintiff's claim is clear, but no liability exists under substantive law and no amendment would change the result, the sustaining of a demurrer without leave to amend is proper. (City of Ceres v. City of Modesto (1969) 274 Cal. App. 2d 545, 554.) The burden is on the plaintiff to show how the complaint might be amended so as to cure the defect. (Association of Community Organizations for Reform Now v. Department of Industrial Relations (1995) 41 Cal.App.4th 298, 302.)

Petitioner acknowledges mootness is “an appropriate ground to demurrer and dismiss a

The court may, upon a motion, or at any time in its discretion, strike “any irrelevant, false, or improper matter inserted in any pleading.” (Code Civ. Proc., § 436, subd. (a).) The court may also strike “all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Code Civ. Proc., § 436, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or from any matter of which the court is required to or may take judicial notice. (Code Civ. Proc., § 437, subds. (a), (b).)

The City demurrers to the petition on grounds of mootness. The City contends it is complying with the hearing officer’s appeal decision. The City advises Petitioner’s application is “again pending before [the City] and [the City] [is] in the process of re-evaluating [the application] for Priority Processing.” (Memo 4:15-16.) The City argues the petition “is based on an administrative hearing decision that requires only that [the City] reevaluate” Petitioner’s application for priority processing. (Memo 5:23-24.) The City asserts it is undisputed the City has complied with the appeal decision.

“A case is moot when the decision of the reviewing court ‘can have no practical impact or provide the parties effectual relief.’ “ ( MHC Operating Limited Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 214.) In other words, a case is moot when “. . . an actual controversy did exist but, by the passage of time or a change in circumstances, ceased to exist.” (Parkford Owners for a Better Community v. County of Placer (2020) 54 Cal.App.5th 714, 722.)

The City contends no writ is necessary here because the City is already reevaluating Petitioner’s priority processing application. (Memo 7:13.) The City explains the appeal decision required the City “to reevaluate [Petitioner’s] application[] and issue a new and undetermined eligibility determination.” (Memo 7:19-20.) The City reports, “This is precisely what is happening now—as of May 13, 2022 . . . .” (Memo 7:20.)

“Based on the Decision, the Amended Petition seeks an order from the Court requiring [the City] to ‘(a) determine that [Petitioner] is eligible for Priority Processing, (b) process [Petitioner’s] application for temporary approval, and (c) process and review pursuant to LAMC section 10.46.’ . . . . However, the Decision only rejects the previous denial of [Petitioner’s application] and, even then, the rejection is only based on the specific and limited grounds of the Statement of Decision in the Waters Litigation. This is evident from a plain reading of the Decision, the narrowly drawn scope of its issues presented and the conclusion, and from the accompanying transcript of the administrative hearing.” (Memo 8:12-19.)

Petitioner’s opposition is quite brief; it does not dispute Petitioner’s interpretation of the appeal decision. In fact, Petitioner concedes the appeal decision “commanded the City re-review [Petitioner’s] application on the grounds [Petitioner] was improperly denied its Measure M status on account of having an expired BTRC.” (Opposition 3:26-28.) Petitioner’s response implicitly recognizes the appeal decision does not require the City to grant Petitioner priority processing but merely requires reconsideration of its application for priority processing. Thus, the relief requested in the petition—“determine [Petitioner] is eligible for Priority Processing”—is not consistent with the appeal decision and overstates what the appeal decision requires.

Petitioner also acknowledges the City has undertaken reconsideration of its priority processing application. (See RJN filed October 7, 2022, Ex. 3. [“This letter shall serve as notice that the Department of Cannabis Regulation (‘DCR’) is re-reviewing the Proposition M Priority Processing Application . . . submitted . . . . The Prop M Applications are not pending before

DCR . . . .”]) Petitioner contends, however, the City has imposed an “untraversable barrier for Petitioner to overcome to obtain [its] license to operate a cannabis business.” (Opposition 4:7-8.) The City has advised Petitioner that it would “re-review the application when certain conditions were met.” (Opposition 4:2.) Petitioner contends the City has now imposed conditions on obtaining priority processing (i.e., conditions on granting Petitioner’s application for priority processing) that are “completely arbitrary and lack justification in the law.”[1] (Opposition 4:9.)

Based on circumstances that have developed since Petitioner filed its petition, Petitioner has shifted the focus of its complaint about the City. Petitioner agrees the appeal decision requires the City to reconsider its priority processing application; Petitioner acknowledges the City has undertaken that review. Petitioner quarrels, however, with the manner of the City’s review. Petitioner contends the City’s reconsideration is inconsistent with the law. Thus, Petitioner’s claims would be the subject of a supplemental or new petition; it is based on facts arising after the City began reconsideration of its priority processing application.[2]

The court is persuaded facts have arisen since Petitioner filed the petition making the petition moot. There is no longer a controversy surrounding the requirement that the City undertake reconsideration of Petitioner’s priority processing application. As a result, an actual controversy has ceased to exist mooting the petition. (See Parkford Owners for a Better Community v. County of Placer, supra, 54 Cal.App.5th at 722.)

Accordingly, the court sustains the demurrer without leave to amend on the ground that the first amended petition is moot—the City has complied with the appeal decision by undertaking reconsideration of Petitioner’s priority processing application.

The City seeks an order striking the following allegations and requests for relief: (1) “temporary approval” (Pet., ¶ 24 at 5:25); (2) “temporary approval” (Pet., ¶ 24 at 5:26; (3) “temporary approval” (Pet., ¶ 34 at 7:13); (4) “and not simply re-review the application” (Pet., ¶ 39 at 9:5); and (5) “A writ of mandate issued under the seal of this Court commanding Respondents to:

(a) determine that [Petitioner] is eligible for Priority Processing; (b) process [Petitioner’s] application for temporary approval, and (c) process and review pursuant to LAMC section 104.06.” (Pet., Prayer at 8:17-19.)

Given the court’s decision to sustain the demurrer without leave to amend, the court finds the motion to strike is moot.

Based on the foregoing, the demurrer is sustained without leave to amend and the motion to strike is denied as moot.

[1] Given LAMC section 104.07, subdivision (c)’s permission to allow the City to “request additional information from the EMMD Applicant,” Petitioner’s legal theory is unclear.

[2] Given the petition’s focus on the appeal decision and the facts arising after Petitioner filed its petition, a new petition is more appropriate than a supplemental petition.