Charmed, LLC v. D.C. Dep't of Health
| Decision Date | 24 November 2021 |
| Docket Number | No. 20-CV-124,20-CV-124 |
| Citation | 263 A.3d 1028 |
| Parties | CHARMED, LLC, Appellant, v. DISTRICT OF COLUMBIA DEPARTMENT OF HEALTH, Appellee. |
| Court | D.C. Court of Appeals |
Abram J. Pafford and Brandi G. Howard, Washington, were on the brief for appellant.
Karl A. Racine, Attorney General for the District of Columbia, and Loren L. AliKhan, Solicitor General, Caroline S. Van Zile, Principal Deputy Solicitor General, Carl J. Schifferle, Deputy Solicitor General, and Richard S. Love, Senior Assistant Attorney General Office of the Solicitor General were on the brief for appellee.
Before Easterly and Deahl, Associate Judges, and Nebeker, Senior Judge.
Charmed, LLC ("Charmed") appeals the trial court's order affirming the District of Columbia Department of Health's ("DOH") decision to revoke its eligibility status and deny its application to operate a medical marijuana dispensary in Ward Seven of the District of Columbia. Appellant asserts that the trial court erred in affirming DOH's decision because DOH violated its due process rights and the agency's decision was unsupported by substantial evidence and based on an erroneous interpretation of law. Specifically, appellant argues that: DOH violated its due process when it interviewed Andy Hai Ting, Charmed's alleged owner without counsel present or a formal record and thereafter relied on the interview in its findings; Charmed was not given a meaningful opportunity to be heard because DOH did not set a clear deadline for when it was required to respond to DOH's allegations before the agency issued a final agency decision; DOH's finding that Charmed violated 22-C D.C.M.R. § 5404.2 (2017)1 by making false statements was unsupported by substantial evidence; and DOH's finding that Charmed engaged in deception to try and avoid compliance with 22-C D.C.M.R. § 5401.8 (2011) is based on a legally erroneous interpretation of what that regulation prohibits. We affirm.
On February 24, 2017, DOH issued a public notice announcing that it was accepting Letters of Intent to apply for a medical marijuana dispensary registration in Ward 7 and Ward 8, and that such letters would be accepted from March 6, 2017, to April 7, 2017. On July 2, 2018, DOH informed Charmed by letter that Charmed was being granted the only "deemed eligible" status among the applicants. This letter stated that "being ‘deemed eligible’ does not guarantee that an applicant will receive a registration." In response, on August 6, 2018, the runner-up applicant, D.C. Holistic, filed a petition for review in the Superior Court to challenge DOH's final agency action denying D.C. Holistic's application.2 Charmed intervened in that lawsuit, and on November 2, 2018, counsel for D.C. Holistic sent a letter ("D.C. Holistic Letter") to DOH claiming that Charmed's application violated 22-C D.C.M.R. § 5401.8 (2011) because Charmed shared ownership with another medical marijuana dispensary in the District of Columbia called National Holistic Healing Center ("NHHC"). Title 22-C D.C.M.R. § 5401.8 (2011) prohibits an applicant of a medical marijuana dispensary from applying for more than one dispensary registration.
On November 6, 2018, DOH's medical marijuana program manager, Arian Gibson, requested that Mr. Hai Ting come to DOH to answer questions related to Charmed's applicant status. Following this questioning, DOH sought and obtained an order, consented to by the parties, to stay the litigation in the related case involving D.C. Holistic until February 8, 2019, pending an investigation by DOH as to the merits of the allegations included in the D.C. Holistic Letter. On November 13, 2018, DOH informed Charmed by letter that "unless Charmed can disprove the allegations, regardless of the outcome of the pending litigation between D.C. Holistic and [DOH], [DOH] will not be able to issue a dispensary registration to Charmed." After receiving no opposition from Charmed, DOH concluded its investigation on January 9, 2019, finding that Charmed violated the applicable regulations by making false statements in its application. In a letter to Charmed dated January 9, 2019, ("January Letter"), DOH detailed its findings and withdrew Charmed's "deemed eligible" status. Among its findings, DOH found that:
Reviewing these findings in totality, DOH found "good cause" to deny Charmed's application pursuant to 22-C D.C.M.R. §§ 6000.2 (2011) and 5404.2 (2017). Specifically, DOH concluded that "it is not reasonable or plausible that Chanda Macias and Michael Bobo gave or loaned one million dollars to a competitor without a written agreement or verbal understanding that provided for Ms. Macias or Mr. Bobo to share in the profits of the dispensary, or at a minimum to receive repayment of the loan." DOH further concluded that Mr. Hai Ting and Mr. Carter acted as "strawmen" allowing Ms. Macias and Mr. Bobo to conceal their ownership interests in the dispensary and to circumvent the prohibition set forth in to 22-C D.C.M.R. § 5401.8 (2011). Based on its findings, DOH reasoned that Mr. Hai Ting and Mr. Carter falsely attested that they were the true and actual owners of the business, and that their applications were complete and accurate.
On February 7, 2019, Charmed filed a petition for review of an agency decision in Superior Court pursuant to Agency Rule 1. On January 2, 2020, after the parties were given the opportunity to fully brief the case,3 the trial court affirmed DOH's determination.
The trial court first rejected Charmed's two procedural challenges. Charmed asserted that its due process rights were violated when DOH interviewed Mr. Hai Ting without counsel or a formal record and thereafter relied on the interview in some of its findings.
Charmed also claimed that it was denied a meaningful opportunity to respond prior to DOH's January 9, 2019 decision. In rejecting that claim, the court found that on at least three occasions Charmed had received notice of DOH's investigation of the claims set forth in D.C. Holistic's letter—"(1) when Mr. Hai Ting was interviewed on November 6, 2018, (2) when Charmed consented to a stay of D.C. Holistic's pending action so that the allegations could be investigated, and (3) when DOH addressed the allegations in a letter to Charmed on November 13, 2018." Further, the court found that Charmed had an opportunity to respond to the allegations both on November 6 when Mr. Hai Ting was interviewed and subsequent to DOH's November 13, 2018 letter, "which specifically stated that ‘unless Charmed can disprove the allegations, regardless of the outcome of the pending litigation between D.C. Holistic and [DOH], [DOH] will not be able to issue a dispensary registration to Charmed.’ " The trial court also found "that the fifty-seven days between November 13, 2018[,] and the issuance of the final agency decision on January 9, 2019, was reasonable in light of the circumstances and the prior notice provided to Charmed."
The court also rejected Charmed's two substantive challenges: that there was insufficient support "for DOH's conclusion that Charmed's owners made false statements"; and that DOH unreasonably interpreted its own regulations. The trial court determined that substantial evidence supported DOH's January 9, 2019, conclusion that "Ms. Macias and Mr. Bobo retained an ownership interest in Charmed," and that Charmed had "failed to completely and accurately disclose this interest in its application." In addition, the court found that Charmed's argument that there was no evidence that false statements were intentionally made was irrelevant because 22-C D.C.M.R. § 5404.2 (2017) "explicitly states that the denial of an application may be made regardless of whether the applicant had knowledge of or consented to the false statements."
Charmed also asserted that 22-C D.C.M.R. § 5401.8 (2011), the regulation prohibiting applicants from applying for more than one dispensary registration, was inapplicable and thus could not provide support for DOH's decision. Charmed argued the regulation was inapplicable because a business applicant is defined as "a person who has made an application to register a cultivation center, dispensary, or medical marijuana certification provider permit and who has an application pending before [DOH]" and NHHC did not have a pending...
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