Top Cat Enters., LLC v. City of Arlington

• Decision Date: 06 January 2020
• Docket Number: No. 79224-5-I,79224-5-I
• Citation: 455 P.3d 225
• Parties: TOP CAT ENTERPRISES, LLC, a, Washington Corporation, Appellant, v. CITY OF ARLINGTON, a Washington municipal corporation; and Washington State Liquor and Cannabis Board, a state agency, Respondents.
• Court: Washington Court of Appeals

455 P.3d 225

TOP CAT ENTERPRISES, LLC, a, Washington Corporation, Appellant,

v.CITY OF ARLINGTON, a Washington municipal corporation; and Washington State Liquor and Cannabis Board, a state agency, Respondents.

No. 79224-5-I

Court of Appeals of Washington, Division 1.

FILED: January 6, 2020

Roger M. Townsend, Cynthia J. Heidelberg, Breskin, Johnson & Townsend PLLC, 1000 2nd Ave. Ste. 3670, Seattle, WA, 98104-1053, for Appellant.

Joshua Daniel Orf-Rodriguez, Attorney at Law, Po Box 40100, Olympia, WA, 98504-0100, for Respondents.

PUBLISHED OPINION

Mann, A.C.J.

¶1 Top Cat appeals the Washington State Liquor and Cannabis Board’s (WSLCB) decision to license 172nd Street Cannabis in the City of Arlington. Top Cat contends that WSLCB incorrectly interpreted the meaning of "property line" in WAC 314-55-050(10), and improperly determined the distance between 172nd Street Cannabis and Weston High School, by measuring from the leased lot lines, rather than the fee simple boundary lines. Top Cat argues that the improper measurement resulted in 172nd Street Cannabis being located less than 1000 feet from a school.

¶2 We agree with the WSLCB that the appropriate measure was between the leased lot lines. We affirm.

I.

¶3 In 2012, Washington voters approved Initiative 502 (I-502) LAWS OF 2013, ch. 3 (codified in part of chapter 69.50 RCW). I-502 established a regulatory system for the production, processing, and distribution, of limited amounts of marijuana for recreational use by adults. WSLCB used a lottery system to award 334 retail licenses. Licenses granted under the lottery system were jurisdiction specific. A license applicant was required to stay within the jurisdiction in which they applied, even if that jurisdiction issued a ban or moratorium on retail licenses.

¶4 In 2015, the Cannabis Patient Protection Act (CPPA) merged the preexisting medical marijuana program with the recreational marijuana retail stores established under I-502. LAWS OF 2015, ch. 70 (codified in part of chapter 69.50 RCW). The CPPA also directed WSLCB to reopen the application period for retail stores and issue additional licenses addressing the needs of the medical market. LAWS OF 2015, ch. 70. WSLCB increased the number of retail licenses by 222. Rather than implement a lottery system similar to I-502, the CPPA prioritized new marijuana applications as Priority 1, Priority 2, or Priority 3, which distinguished between applicants’ degree of experience and qualifications in the marijuana industry. Former RCW 69.50.331 (2015); former WAC 314-55-020 (2015). Because of the large number of applicants, only Priority 1 applicants were able to move forward with the licensing process. In addition to Priority 1 applicants, the CPPA allowed licensees from l-502’s lottery that were barred from opening retail stores because of local bans to transfer their license to jurisdictions without local bans on marijuana sales.

¶5 Because only a limited number of new licenses were available, applicants needed to finish the WSLCB licensing process before other applicants to ensure that they obtained one of the open spots in a particular jurisdiction. RCW 69.50.331 requires both I-502 licensees and Priority 1 CPPA applicants to meet statutory requirements before WSLCB grants a retail license. One of these requirements prohibits WSLCB from licensing a retail business within 1000 feet of "the perimeter of the grounds of" a school. RCW 69.50.331 (8)(a).

¶6 Top Cat was originally selected in the I-502 lottery for a retail location in the City of Marysville. Top Cat completed the licensee process and received a license for a retail business in Marysville on November 12, 2014. During the licensing process, Marysville enacted a ban on marijuana retailers, which prevented Top Cat from opening its store.

¶7 On January 29, 2016, Top Cat applied to move its retail license from Marysville to Arlington. At the time, there was only one available retail license available in Arlington.

¶8 Previously, 172nd Street Cannabis applied for a marijuana retail license in Arlington under the CPPA’s priority system and received a Priority 1 designation on December 8, 2015. WSLCB assigned 172nd Street Cannabis’s application to WSLCB Senior Marijuana Licensing Specialist Sean Houlihan. 172nd Street Cannabis sought a license for a leased property at 5200 172nd St. N.E., F-101 in Arlington. The proposed location is leased lot 500B on the Arlington Municipal Airport property (Airport property).

¶9 The Airport property is approximately 1,200 acres in size and is partitioned into over 100 distinct parcels that are available to lease. Arlington School District No. 16 leases lot 301 for Weston High School. Weston High School’s lease is recorded with the Snohomish County Auditor and includes a legal description of the property. A cyclone fence fully encloses lot 301 for security. Weston High School’s lot 301 is on the north side of 172nd St. NE. 172nd Street Cannabis’s lot 500B is located on the south side of 172nd St. SE.

¶10 The following Airport Property Boundary and Lease Lot map depicts the Airport property boundaries, leased lots within the Airport property (including Weston High School), and the location of 172nd Street Cannabis.¹

¶11 Specialist Houlihan measured the distance between 172nd Street Cannabis’s lot 500B and Weston High School’s lot 301 and concluded that the lots are over 1,600 feet apart from one another and thus consistent with the 1000-feet separation requirement.

¶12 Prior to the final inspection of Top Cat’s application, WSLCB issued the only retail license in Arlington to 172nd Street Cannabis. WSLCB closed licensing in Arlington and offered Top Cat the opportunity to remain in Marysville or relocate to another jurisdiction with retail licenses still available.

¶13 Top Cat requested an administrative hearing and the case was assigned to an Administrative Law Judge (ALJ) at the Office of Administrative Hearings. Top Cat objected to the approval of 172nd Street Cannabis’s license on the basis that the retail location was less than 1000 feet from the Airport property where Weston High School is located. Specifically, Top Cat contended that Weston High School is located within the larger Airport property located north of 172nd Street NE and identified as Snohomish County Parcel No. 31052100400102. And because the Airport property is immediately diagonal from the proposed retail store for 172nd Street Cannabis and separated by only 120 feet, 172nd Street Cannabis’s location did not meet the 1000 foot separation requirement. WSLCB responded that the lease lots are distinct parcels and that those boundaries are depicted on the Airport Property Boundary and Lease Lot map. Therefore, WSLCB contended that specialist Houlihan correctly measured the distance between lot 500B and lot 301.

¶14 The ALJ’s initial order affirmed the approval of 172nd Street Cannabis’s license. The ALJ concluded that "property line" in WAC 314-55-050(10) is not ambiguous and that its usual and ordinary meaning is "those lines which separate one’s lot from adjoining lots or the street." Thus, the ALJ explained that the lease lot lines for the Airport property were property lines within the meaning of WAC 314-55-050(10). Top Cat filed a petition for review of the initial order to WSLCB. On July 25, 2017, WSLCB issued a final order affirming the initial order and adopting the ALJ’s findings of fact and conclusions of law.

¶15 On August 22, 2017, Top Cat petitioned for review by the Snohomish County Superior Court. On November 1, 2018, the superior court affirmed WSLCB’s final order. Top Cat appeals.

II.

¶16 Top Cat contends that the WSLCB erred in concluding that the term "property line" within WAC 314-55-050(10) includes not only formal, recorded, boundary lines, but also lease lines and lot lines.

¶17 The Washington Administrative Procedure Act (APA) governs our review of WSLCB’s final order. RCW 34.05.570 ; Tapper v. Emp’t Sec. Dep’t, 122 Wash.2d 397, 402, 858 P.2d 494 (1993). This court sits in the same position as the superior court, applying the standards of the APA directly to the record before the agency. Tapper, 122 Wash.2d at 402, 858 P.2d 494. "The burden of demonstrating the invalidity of agency action is on the party asserting invalidity." RCW 34.05.570(1)(a). We will not overturn an agency’s legal determination unless the agency engaged in an unlawful procedure or decision-making process, failed to follow a prescribed procedure, or erroneously interpreted or applied the law. RCW 34.05.570(3). Top Cat challenges whether the WSLCB’s final order contained an erroneous interpretation or application of the law.

¶18 We interpret agency regulations as if they were statutes and review WSLCB’s legal determinations de novo. Wash. Cedar & Supply Co., Inc. v. State, Dep’t of Labor of Indus., 137 Wash. App. 592, 598, 154 P.3d 287 (2007). We give substantial weight, however, to an agency’s interpretation of statutes and regulations within its area of expertise. Id. at 598, 154 P.3d 287. "Accordingly, we will uphold an agency’s interpretation of a regulation if it reflects a plausible construction of the statutory language and is not contrary to the legislature’s intent and purpose." Id. at 598, 154 P.3d 287.

¶19 Under I-502, the WSLCB is prohibited from issuing "a license for any premises within one thousand feet of the perimeter of the grounds of any elementary or secondary school." RCW 69.50.331 (8)(a). The legislature also empowered WSLCB to adopt regulations regarding retail outlet locations. RCW 69.50.342(1)(f). In response, WSLCB promulgated WAC 314-55-050(10), which states:

the [WSLCB] shall not issue a new marijuana license if the proposed licensed business is within one thousand feet of the perimeter of the grounds of any of the following entities. The distance shall be measured as the shortest straight line distance from the property line of the proposed building/business location to the property line of the entities

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