Judge Mitchell L. Beckloff, Case Number: 22STCP01130, Date: 2023-07-21 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 22STCP01130, Date: 2023-07-21 Tentative Ruling

Respondent, Michelle Garakian, in her official capacity as Acting Executive 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 second amended verified petition for peremptory writ of mandate (SAP). The City contends the petition is moot. Petitioner, Hollywood Holistic Healers, Inc., did not file an opposition.[1] Three court days prior to this hearing, Petitioner filed its request for judicial notice (RJN) in support of non-opposition and a statement indicating it did not oppose the demurrer but requesting leave to amend the petition.[2] Thus, Petitioner expressly does not oppose the demurrer thereby conceding its merits.

The demurrer is sustained without leave to amend. As noted, Petitioner has expressly not opposed the demurrer.

The motion to strike is granted as to items (1), (2), (3) and (4). (For completeness the court includes its ruling on the motion to strike. Given the City’s meritorious demurrer, the motion to strike is actually moot.) The motion is denied as to the first paragraph of the SAP’s prayer.

The City’s unopposed request for judicial notice (RJN) of Exhibits 1 through 4 is granted.

Prior to May 2013, Petitioner operated a medical marijuana dispensary.[3] 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. (SAP, ¶ 16.)

On March 6, 2017, the City’s voters adopted Proposition M to regulate the City’s cannabis industry. (SAP, ¶ 17.) Proposition M’s licensing scheme provided EMMDs under Proposition D with priority processing of their licensing applications. (SAP, ¶ 17.) That is, EMMDS “qualified for Proposition M Priority Processing.” (SAP, ¶ 17.)

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. (SAP, ¶ 20.) (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. (SAP, ¶ 23.)

The City subsequently learned Petitioner’s ownership was in dispute and litigation amongst its shareholders was ongoing. (SAP, ¶ 28.) The litigation had been initiated in 2014, well prior to “the Prop M licensing procedures.” (SAP, ¶ 24.) 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. (SAP, ¶ 29.)

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. (SAP, ¶ 30.)

Around September 2020, unbeknownst to Petitioner, the City’s Office of Finance voided the account associated with BTRC 3088. (SAP, ¶ 31.) 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 and the cancellation of Petitioner’s account by the Office of Finance. (SAP, ¶ 32.)

Petitioner appealed the City’s decision. (SAP, ¶¶ 33-34.) The hearing officer “specifically found that [Petitioner] met each requirement to obtain priority processing by the City but was unable to determine whether [Petitioner] was registered with the City Clerk.” (SAP, ¶ 3.) The hearing officer found the City’s act of canceling the registration certificate constituted an “abuse of due process.” (SAP, ¶ 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.” (SAP, ¶ 32, Ex. 1.)

Petitioner claims the City has failed to comply with the hearing officer’s decision. (SAP, ¶ 37.)

On May 13, 2022, six months after the hearing officer’s decision, the City advised Petitioner:[4]

“despite the administrative hearing officer’s decision the City refused to re-refused to re-review [Petitioner’s] application for the limited purpose of determining whether [Petitioner] had registered with the City Clerk until [Petitioner] provided a ‘fully executed settlement agreement between the parties to the Litigation or a conformed copy of a final judgment . . . .” (SAP, ¶ 39.)

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.)

The City provides authority the court may sustain a demurrer to a cause of action based on mootness. (Committee for Sound Water & Land Development v. City of Seaside (2022) 79 Cal.App.5th 389, 405.) Moreover, Petitioner has previously acknowledged mootness is “an appropriate ground to demurrer and dismiss a case . . . .” (Opposition to Demurrer to Amended Petition filed January 26, 2023 3:3.) Petitioner has also not opposed the demurrer.

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. Based on the City’s communication to Petitioner, the City alleges it is in the process of reevaluating Petitioner’s application. (Memo 6:9-10.) The City advises, consistent with its communication to Petitioner, it is awaiting additional information to proceed with its re-evaluation. (Memo 6:10.)

“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 5:7-8.) The City explains the appeal decision “only rejects [the City’s] previous determination of ineligibility . . . .” (Memo 9:2-3.) Further, according to the City, that

“rejection is only based on the specific and limited grounds of the Water’s Statement of Decision and Finance’s subsequent cancellation of BTRC 3088. 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 9:3-6.)

The City argues “the Court should find this matter is moot as [the City] complied with the Decision by performing a complete re-review of [Petitioner’s] Phase 1 applications.” (Memo 9:7-8.)

The SAP acknowledges the City’s May 13, 2022 correspondence. (SAP, ¶ 39, Ex. 5.) On that date, the City acknowledge it is “re-reviewing the Proposition M Priority Processing Applications . . .¶ The Prop M Applications are now pending before [the City] . . . .” (SAP, Ex. 5.)

Petitioner alleges the appeal decision requires the City to “re-review the application solely to determine whether [Petitioner] registered with the City Clerk by November 13, 2007, pursuant to LAMC section 104.01(a)[22].” (SAP, ¶ 43.) Petitioner’s interpretation of the appeal decision is not supported by its language. (SAP, Ex. 1.) The appeal decision refers to the City Clerk on three occasions. (SAP, Ex. 1, 4:22, 6:10, 6:13-15.) The appeal decision does not require the City to “re-review the application solely to determine whether [Petitioner] registered with the City Clerk by November 13, 2007, . . . .” (SAP, ¶ 43.)

“Whether Applicant [Petitioner] is ineligible pursuant to Los Angeles Municipal Code (‘LAMC’) Section 104.07 for Proposition M Priority Processing based on the August 10, 2020, Superior Court Statement of Decision that Business Tax Registration Certificate (’BTRC’) No. 0002173088-0001-5 is void as of February 2011, and the Office of Finance cancellation of the account.” (SAP, Ex. 1 2:19-25.)

The appeal decision concluded the statement of decision as well as the cancellation of Petitioner’s account by the Office of Finance could not serve as the grounds for denying Petitioner Proposition M priority processing:

Petitioner initiated these proceedings on March 28, 2022. The City did not advise Petitioner it was re-reviewing Petitioner’s application until May 13, 2022.

Petitioner contends the City has violated Petitioner’s “rights” by requesting a “ ‘fully executed settlement agreement between the parties to the Litigation or a conformed copy of a final judgment in the Litigation in which all possibility of direct attack by way of appeal, motion for a new trial, or motion to vacate the judgment has been exhausted.’ ” (SAP, ¶ 44.) Petitioner does not acknowledge, however, LAMC section 104.07, subdivision (c) expressly provides the City “may request additional information from the EMMD applicant” when determining whether “an EMMD applicant is eligible for Proposition M Priority Processing . . . .” (LAMC, § 104.07, subd. (c).)

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 second amended petition is moot—the City has complied with the appeal decision by undertaking reconsideration of Petitioner’s priority processing application. As part of that process, LAMC section 104.07, subdivision (c) expressly permits the City to “request additional information from the EMMD Applicant” when considering a Proposition M Priority Processing application.

The City seeks an order striking the following allegations and requests for relief: (1) “temporary approval” (SAP, ¶ 27 at 6:21-22); (2) “despite the administrative hearing . . . registered with the City Clerk” (SAP, ¶ 39 at 8:19-21); (3) “re-review the application solely to determine . . . with the City Clerk by November 13, 2027” (SAP, ¶ 43 at 9:13-14); and (4) “under the conditions proposed by the Hearing Officer” (SAP, ¶ 44 at 9:13-14). The City also moves to strike the first paragraph of the SAP’s prayer for relief.

As to the motion to strike items (1) through (4) set forth above, the motion is granted.

As to item (1), Petitioner’s allegations in paragraph 23 specifically identifies the application as one for “Priority Processing” and the appeal decision indicates the City denied Petitioner’s application for “Proposition M Priority Processing.” Misidentification of the application is irrelevant or false. Therefore, striking the label “temporary approval” is proper.

As to items (2) and (3), the allegation is false. The appeal decision did not so limit the City’s consideration of Petitioner’s application.

Similarly, as to item (4), the appeal decision did not impose any conditions on the City’s reconsideration of Petitioner’s application.

The court denies the motion to strike as to the first paragraph of the SAP’s prayer. The court does not find the prayer contains false, irrelevant or improper matter at this stage of the proceedings.

Based on the foregoing, the demurrer is sustained without leave to amend and the motion to strike is granted as to items (1), (2), (3) and (4).

[1] Petitioner’s counsel did not respond to the City’s meet and confer efforts. (Wada Decl., ¶ 4.)

[2] Petitioner requests the court take judicial notice of the judgment entered on May 20, 2023 in Hollywood Holistic Healers, Inc. v. Waters, et al., Los Angeles Superior Court case number SC123554 (consolidated with case numbers BC594427 and SC128176). The judgment is attached to the request. Petitioner does not explain the relevance of the document in the context of the City’s demurrer or these proceedings. Petitioner’s non-opposition to the demurrer notes “there has been a material change in fact . . . . ¶ Plaintiff therefore provides its non-opposition for the purpose of requesting the opportunity to amend the complaint to account for the material fact.” In response, the City filed an objection asserting the request is “both untimely and premature.” (Respondent Garakian and Real Party in Interest City of Los Angeles’ Objection to Petitioner’s Request to Amend Complaint 2:6.) The City contends Petitioner’s non-opposition and request to amend is actually an untimely opposition to the demurrer. (The court notes Petitioner makes no showing of how the SAP might be amended to state a cause of action.) To the extent the request and the non-opposition is, in fact, a late filed opposition, the court declines to consider it. (Cal. Rules of Court, Rule 3.1300, subd. (d).) Petitioner provides no explanation for its untimely response to the demurrer. The court also cannot find a reasonable likelihood Petitioner can amend given facts that have arisen after March 28, 2022, the date Petitioner initiated these proceedings. In any event, it is clear Petitioner does not oppose the demurrer.

[3] This fact can be inferred from the Petition generally.

[4] The email communication is attached to the SAP at Exhibit 5. The communication is from “DCR Licensing” to Petitioner. It states:

“Dear Applicant:

This letter shall serve as notice that the Department of Cannabis Regulation (‘DCR’) is re-reviewing the Proposition M Priority Processing Applications . . . that were submitted by Petitioner . . . under Los Angeles Municipal Code (‘LAMC’) section 104.07. This re-review complies with the administrative appeal decision, dated December 20, 2020, that rejects DCR’s previous determination of ineligibility based on the Statement of Decision in Hollywood Holistic Healers, Inc. [] v. Rick Waters, . . . . ¶ The Prop M Applications are now pending before DCR and, pursuant to LAMC section 104.07(c), DCR requests additional information from the Applicant before the Prop M Applications can be further processed and/or determined eligible. DCR requests documentation of a final resolution of the Litigation. . . . ¶ Until the requested additional information is received, DCR cannot make any eligibility determination or otherwise process the Prop M Application. . . .”

[5] LAMC section 104.14, subdivision (f)(5) allows a hearing officer on appeal to “uphold or reject, in whole or in part, [the City’s] action.” The appeal decision rejected the City’s denial of Petitioner’s application. Thus, the hearing officer rejected “in whole” the City’s action.