Brinkmeyer v. Wash. State Liquor & Cannabis Bd.
| Decision Date | 07 February 2023 |
| Docket Number | C20-5661 BHS |
| Parties | TODD BRINKMEYER, Petitioner, v. WASHINGTON STATE LIQUOR AND CANNABIS BOARD, Respondents. |
| Court | U.S. District Court — Western District of Washington |
ORDER GRANTING DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT
This matter comes before the Court on Petitioner Todd Brinkmeyer and Respondent Washington State Liquor and Cannabis Board's (“LCB”) cross Motions for Summary Judgment, Dkts. 34 (Petitioner), 39 (Respondent). Brinkmeyer seeks a declaratory judgment that Washington's residency requirements for obtaining a commercial cannabis[1]license are facially unconstitutional. LCB argues that Brinkmeyer lacks standing and that his claims fail on the merits primarily because cannabis remains federally illegal. The Court has considered the briefing filed in support of and in opposition to the motions and the remainder of the file and grants LCB's motion for the reasons stated below.
The citizens of Washington State enacted Initiative Measure 502 in 2012, legalizing the possession and sale of cannabis in the state for those twenty-one years of age and older. Dkt. 34 at 7. Washington and Colorado were the first states to pass such initiatives. Nineteen more states, two territories, and Washington, D.C., have since legalized recreational cannabis;[2] sixteen other states and two additional territories have comprehensive medicinal cannabis programs;[3]and ten states have cannabidiol (“CBD”) or low THC programs.[4] Cannabis remains fully illegal in only three states and one territory.[5]Nevertheless, cannabis continues to be federally illegal under the Controlled Substances Act (“CSA”). See 21 U.S.C. § 812, Schedule I.
Despite marijuana's federal status, the federal government has maintained a policy of non-enforcement in states that have legalized marijuana for nearly a decade. In August 2013, Deputy Attorney General James M. Cole issued a memorandum to all United States Attorneys (the “Cole Memo”) encouraging them to exercise prosecutorial discretion in enforcing federal marijuana laws in states where it had been legalized. Attorney General Jeff Sessions rescinded the Cole Memo in 2018. Nevertheless, in each fiscal year since fiscal year 2015, Congress has prohibited the Department of Justice (“DOJ”) from using its appropriated funds to take legal action against states that have implemented laws legalizing medicinal marijuana. See Consolidated Appropriations Act of 2022, Pub. L. No. 117-103, 136 Stat. 49, § 530 (2022) (“Rohrabacher-Farr Amendment”). That spending rider has also been interpreted to prohibit the DOJ from prosecuting individuals or organizations that produce, distribute, or possess marijuana in compliance with their state's medical marijuana laws.
Washington, like other states that have legalized cannabis, has a comprehensive regulatory scheme that governs the market. Washington's cannabis market is regulated by LCB. Before an individual or organization can operate a legal cannabis business, they must obtain a license from LCB. Under Washington law, No license of any kind may be issued to:
(i) A person under the age of twenty-one years;
(ii) A person doing business as a sole proprietor who has not lawfully resided in the state for at least six months prior to applying to receive a license;
(iii) A partnership, employee cooperative, association, nonprofit corporation, or corporation unless formed under the laws of this state, and unless all of the members thereof are qualified to obtain a license as provided in this section; or (iv) A person whose place of business is conducted by a manager or agent, unless the manager or agent possesses the same qualifications required of the licensee.
RCW 69.50.331(1)(b) (emphasis added). This “residency requirement” applies to all cannabis license applicants, not just sole proprietors, including all “true parties of interest.” See WAC 314-55-020(11), 314-55-035.
Petitioner Todd Brinkmeyer is an Idaho resident who wishes to invest in and own cannabis retail stores in Washington. Dkt. 34 at 6. His friend, Scott Atkison, owns cannabis retail stores in the state. Id. Brinkmeyer has provided debt financing for Atkison's stores, but he is unable to directly invest in or hold ownership interest in the stores because of Washington's residency requirements. Id. Atkison would also like Brinkmeyer to invest in and own part of his business. Id.; see also Dkt. 35, ¶ 5. Atkison is a Stage IV cancer survivor and claims he would like to make arrangements for his business in case his health declines. Dkt. 34 at 6; Dkt. 35, ¶ 5. He claims, that “if the State is enjoined from enforcing the Residency Requirements . . . and if the LCB approves Todd's application related to the transaction, [he would] immediately transfer a portion of [his] interest in the [business] to Todd.” Dkt. 35, ¶ 6. Atkison asserts that “[t]he only thing stopping Todd and [him] from moving forward with the transactions . . . is that the LCB has confirmed it will rely on the Residency Requirements to deny Todd's application to hold equity in the [business.]” Id.
Brinkmeyer has never applied for a cannabis license, but LCB has approved him as a debt financier three times, which Brinkmeyer asserts involves “the same vetting and approval process that [LCB] performs on licensees.” Dkt. 34 at 10. Debt financiers, however, are not subject to the State's residency requirements. Id. Brinkmeyer's counsel inquired with LCB whether it would approve Brinkmeyer as an owner of Atkison's stores and LCB made clear that Brinkmeyer could not inherit Atkison's businesses until he complied with the residency requirements. Dkt. 37 at 5.
Brinkmeyer sued LCB in Thurston County Superior Court in June 2020 seeking a declaratory judgment that Washington's residency requirements violate the dormant Commerce Clause, Article IV's Privileges and Immunities Clause, the Fourteenth Amendment's Privileges or Immunities Clause, the Fourteenth Amendment's Due Process Clause, and the Fourteenth Amendment's Equal Protection Clause of the United States Constitution. Dkt. 1-2, ¶¶ 30-57. He also sought a declaratory judgment that Washington's residency requirements violate the Privileges or Immunities Clause of the Washington State Constitution and that the regulations exceed statutory authority in violation of RCW 34.05.570(2)(c). Id. ¶¶ 58-65. He further sought a permanent injunction, preventing LCB from enforcing Washington's residency requirements along with fees and costs. Id. at 10. LCB removed the case to this Court in July 2020. Dkt. 1.
Brinkmeyer moved for a preliminary injunction. Dkt. 6. Rather than ruling on the motion, this Court ordered the parties to show cause why the Court has jurisdiction over Brinkmeyer's claims. Dkt. 17. The Court “question[ed] its authority to declare [the] state law unconstitutional,” which it reasoned would allow Brinkmeyer “to participate in violations of the CSA.” Id. at 2. The parties agreed that the Court has subject matter jurisdiction and that granting relief in this case would not require the Court to order a violation of the CSA. Dkts. 18, 19.
Satisfied that it had jurisdiction, the Court invoked Pullman abstention, reasoning that the case touched on a sensitive area of public policy, that federal constitutional questions could be avoided with a definitive ruling on the state issues, and that state laws on the issue were unclear. Dkt. 20. It therefore severed Brinkmeyer's state law claims, remanded those claims case to Thurston County Superior Court, and administratively closed the case pending resolution of the state law claims. Id.
Thurston County Superior Court concluded that Brinkmeyer is not a Washington citizen and therefore Article I, Section 12, of the Washington Constitution the Privileges and Immunities Clause did not apply to him. Dkt. 24-6 at 3. It dismissed Brinkmeyer's state law claims with prejudice and Brinkmeyer did not appeal. Dkt. 23 at 1.
This Court reinstated the case and the parties filed cross-motions for summary judgment. Dkts. 34, 39. The parties agree that there are no disputed issues of material fact and that therefore the case should be decided on summary judgment.
Brinkmeyer argues, generally, that the state's residency requirements are unconstitutional because they discriminate, without justification, against out-of-state citizens. Dkt. 34 at 6-7. LCB argues that Brinkmeyer's claims are not justiciable because he has not suffered an injury-in-fact and his claims are not ripe. Dkt. 39 at 8. It further argues that at least parts of the United States Constitution do not apply to the state's cannabis market because no federally legal market exists and that, even if the Constitution does apply, the state is justified in restricting the market to in-state citizens given the fact that cannabis remains federally illegal. Id. The parties' arguments are discussed in further detail below.
The Court also permitted Amici Craft Cannabis Coalition and Washington CannaBusiness Association to file briefing. Amici urge the Court to adopt and apply a four-part test to determine whether a federal right may be enforced in the context of illegal activity. Dkt. 49 at 11-16. Specifically, they argue that the Court should consider (1) “the extent of the illegality of the activity,” (2) “the purposes of the federal right to be enforced,” (3) “whether the court can award a remedy that does not compel or authorize illegal activity,” and (4) “the public interests at stake.” Id. at 11. According to Amici, these factors support Brinkmeyer's claim that the residency requirements are unconstitutional. Id.
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