Opinion
G044515 Super. Ct. No. 30-2010-00352106
11-23-2011
CITY OF DANA POINT, Plaintiff and Respondent, v. HOLISTIC HEALTH et al., Defendants and Appellants.
Alison Minet Adams for Defendants and Appellants. Rutan & Tucker, A. Patrick Muñoz and Jennifer Farrell for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
OPINION
Appeal from an order of the Superior Court of Orange County, David R. Chaffee, Judge. Motion to dismiss appeal granted. Stay dissolved.
Alison Minet Adams for Defendants and Appellants.
Rutan & Tucker, A. Patrick Muñoz and Jennifer Farrell for Plaintiff and Respondent.
***
Holistic Health and Garrison Williams (collectively, Holistic Health) challenge a pretrial order of the trial court shutting down Holistic Health's medical marijuana dispensary on grounds that the dispensary engaged in prohibited sales of marijuana because it, or the persons or members from whom the dispensary obtained its marijuana, profited on the exchange of marijuana among dispensary members. The parties ask us to determine whether Holistic Health's sales activities were lawful, including whether "profit" is determined at the point of exchange in dispensary transactions. We need not decide these issues, however, because Holistic Health's challenge in this appeal to the trial court's initial, temporary closure order has been mooted by subsequent developments. While a preliminary injunction is an appealable order (Code Civ. Proc., § 904.1), the appeal "does not deprive the trial court of jurisdiction to proceed to try the case on the merits" (MaJor v. Miraverde Homeowners Assn. (1992) 7 Cal.App.4th 618, 623 (MaJor)). That is precisely what occurred here.
The City of Dana Point (City) initiated this action by filing a nuisance complaint to shut down Holistic Health's dispensary. Over the course of the litigation, the City obtained two orders closing the dispensary. First, the City obtained a preliminary injunction on grounds the dispensary's activities violated City zoning ordinances said to ban medical marijuana dispensaries by not expressly permitting them. The dispensary appealed the preliminary injunction, which we stayed pending appeal (G044242). In the meantime, the parties conducted discovery and, based on that discovery, the City obtained in the matter now before us in this appeal (G044515) a second order closing the dispensary on grounds the dispensary or those members or persons who provided the dispensary with marijuana profited on marijuana transactions at the dispensary. Holistic Health appealed the trial court's closure order, and we issued a stay pending this second appeal. We specified in a separate order, however, that the second appeal did not stay the proceedings in the trial court. As the litigation proceeded below, the City eventually moved for summary judgment. The trial court granted the City's summary judgment motion and entered a permanent injunction against Holistic Health's medical marijuana activities, mooting the question of the validity of the interim injunction that is the subject of this appeal.
Disputing the mootness of this appeal, Holistic Health contends a decision on the merits is necessary to establish the trial court violated due process by prejudging that Holistic Health's marijuana activities were unlawful. Holistic Health also characterizes the initial injunction as an unwarranted discovery sanction punishing Holistic Health because Garrison and its records custodian asserted the Fifth Amendment and other privileges. But these contentions concerning the trial court's temporary, interim injunction are moot, given the permanent injunction the trial court has now entered. (People v. Rath Packing Co. (1978) 85 Cal.App.3d 308, 314 ["permanent injunction . . . render[s] the appeal from the granting of the preliminary injunction moot"].) Holistic Health's claims are simply not redressable: a decision in their favor on the interim injunction would be an idle act, given the permanent injunction now replacing it. Whether the City was entitled to that injunction and summary judgment on grounds Holistic Health failed to present facts invoking the affirmative defense afforded by California law, or whether the City obtained summary judgment on other grounds, are matters outside the present record and pertinent only to an appeal from that judgment. Accordingly, the City of Dana Point's motion to dismiss this appeal is granted. The appeal is dismissed as moot.
I
FACTUAL, PROCEDURAL, AND LEGAL BACKGROUND
In March 2010, the City filed its nuisance complaint against Holistic Health, asserting three causes of action under state and city nuisance law and a cause of action for unfair business practices based on Holistic Health's allegedly illegal marijuana sales activity.
In particular, the City's first cause of action rested on Health and Safety Code section 11570 et seq., which provides for the abatement of "so-called 'drug house[s]'" (Lew v. Superior Court (1993) 20 Cal.App.4th 866, 871). The Legislature enacted section 11570 in 1972 as a key component of the Drug Abatement Act (DAA) to address, with a "special[]" focus, "premises where controlled substances are manufactured, kept and sold." (People ex rel. Gwinn v. Kothari (2000) 83 Cal.App.4th 759, 762, 765.) To that end, section 11570 defines as a public nuisance "[e]very building or place used for the purpose of unlawfully selling, serving, storing, keeping, manufacturing, or giving away any controlled substance . . . ." (Italics added.) Nothing in section 11570 or the Drug Abatement Act provides for criminal sanctions. Rather, the primary enforcement remedy is injunctive relief obtained in nuisance abatement proceedings against "the owner, lessee, or agent of the building . . . ." (§ 11571; see Lew, at p. 872). Additional remedies include the sale of chattels used in maintaining the nuisance, a one-year closure of the building for any use, damages in lieu of closure, and a civil penalty up to $25,000. (§ 11581; Lew, at p. 872.)
All further undesignated statutory references are to the Health and Safety Code.
In People ex rel. Lungren v. Peron (1997) 59 Cal.App.4th 1383 (Peron), the court held that the Compassionate Use Act of 1996 (CUA, codified at § 11362.5), adopted by the voters to allow medical marijuana uses under certain conditions, did not prevent the Attorney General from obtaining an injunction under section 11570 against an Oakland medical marijuana dispensary known as the Cannabis Buyers' Club. (Peron, at p. 1390.) The court observed that the CUA addressed only the cultivation and possession of marijuana, and did not authorize medical marijuana patients or their primary caregivers to engage in sales of the drug. Specifically, the court noted that the new enactment mandated only that "'[s]ection 11357, relating to the possession of marijuana, and [s]ection 11358, relating to the cultivation of marijuana, shall not apply to a patient, or to a patient's primary caregiver, who possesses or cultivates marijuana for the personal medical purposes of the patient upon the written or oral recommendation or approval of a physician.'" (Peron, at p. 1389.) The court concluded the CUA thus provides a "'partial defense'" in the medical marijuana context, applying "to charges of possession [and cultivation], but not to charges of selling marijuana or possessing marijuana for sale." (Ibid.; see also People v. Trippet (1997) 56 Cal.App.4th 1532, 1547 [same; also observing the CUA's literal terms left primary caregivers vulnerable for transporting marijuana down a hallway to their patients].)
Within a few years, in 2003, the Legislature enacted the Medical Marijuana Program Act (MMPA), which includes provisions pertaining to the sale and transportation of marijuana and to section 11570 and similar state law provisions barring the use of land in the marijuana trade. For example, section 11362.775 provides that "[q]ualified patients, persons with valid identification cards, and the designated primary caregivers of qualified patients and persons with identification cards, who associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes, shall not solely on the basis of that fact be subject to state criminal sanctions under Section 11357 [possession of marijuana], 11358 [cultivation of marijuana], 11359 [possession for sale], 11360 [transportation], 11366 [maintaining a place for the sale, giving away or use of marijuana], 11366.5 [making available premises for the manufacture, storage or distribution of controlled substances], or 11570 [abatement of nuisance created by premises used for manufacture, storage or distribution of controlled substance]." (Italics added.)
Section 11362.765 similarly immunizes specified individual, rather than collective or group, activities including the "administration" of medical marijuana to a qualified patient, instructing qualified patients and their primary caregivers in "the skills necessary to cultivate or administer marijuana for medical purposes," and transporting or delivering a qualified patient's medical marijuana. (§ 11362.765, subd. (a)(1)-(3); see id., subd. (a) ["Subject to the requirements of this article, the individuals specified in subdivision (b) shall not be subject, on that sole basis, to criminal liability under Section 11357, 11358, 11359, 11360, 11366, 11366.5, or 11570"].)
Section 11002 defines "[a]dminister[ing]" as "the direct application of a controlled substance, whether by injection, inhalation, ingestion, or any other means, to the body of a patient for his immediate needs . . . ."
Here, in filing its complaint for abatement in its first cause of action under section 11570, the City recognized the CUA and MMPA may "under certain limited circumstances" authorize seriously ill patients and primary caregivers to possess, cultivate, and distribute medical marijuana to other patients and primary caregivers. The City, however, alleged Holistic Health failed to comply with a litany of CUA and MMPA requirements and accompanying guidelines published by the Attorney General. (See § 11362.81, subd. (d) ["the Attorney General shall develop and adopt appropriate guidelines to ensure the security and nondiversion of marijuana grown for medical use"]; see generally "Guidelines for the Security and Non-Diversion of Marijuana Grown for Medical Use" (A.G. Guidelines, or Guidelines) <http://ag.ca.gov/cms_attachments/press/pdfs n1601_ medical marijuana guidelines. pdf> (as of Nov. 16, 2011).
In particular, the City alleged "the marijuana cultivation, distribution, possession, and sales taking place at the Property" were "unlawful under California law," and therefore constituted a per se property nuisance subject to abatement under section 11570. The City alleged Holistic Health's marijuana activities violated California law because "the Dispensary is (a) neither a collective nor a cooperative (A.G. Guidelines, p. 8); (b) not operating as a non-profit entity (Health & Saf. Code § 11362.765(a); A.G. Guidelines, p. 9); (c) not comprised solely of patients and primary caregiver members (A.G. Guidelines, p. 10); (d) not purchasing marijuana from, or selling to, those members (A.G. Guidelines, p. 10); and (e) and not complying with various other requirements relating to membership applications (A.G. Guidelines, p. 9), record keeping (A.G. Guidelines, p. 9-10), business licenses, sales tax and sellers permits (A.G. Guidelines, p. 9), and various other corporations code provisions (A.G. Guidelines, p. 8; . . .)."
In its second cause of action, the City alleged Holistic Health's marijuana activities constituted a nuisance not just under the Drug Abatement Act (§ 11570), but also under general state nuisance law, citing Civil Code section 3479. That section provides in pertinent part that "[a]nything which is injurious to health, including, but not limited to, the illegal sale of controlled substances . . . is a nuisance." (Civ. Code, § 3479, italics added.) The Civil Code provides that any public body or officer may abate a public nuisance (Civ. Code, §§ 3480, 3494), the lapse of time cannot legalize a public nuisance (Civ. Code, § 3490), and that remedies include a criminal indictment or information, a civil action, or abatement proceedings (Civ. Code, § 3491).
The City's third cause of action asserted Holistic Health's marijuana activities constituted a nuisance under its zoning laws. Specifically, because the dispensary was located in a zoning district in which only enumerated uses were permitted, and the expressly enumerated uses did not include "Medical Marijuana Dispensaries," Holistic Health's operation violated City law that designated as a nuisance the breach of any municipal or zoning code. The City's fourth cause of action alleged Holistic Health's illegal marijuana sales constituted an unfair business practice under Business and Professions Code section 17200.
Throughout the lengthy ensuing litigation, Holistic Health did not admit or deny it dispensed medical marijuana at the property. Instead, Holistic Health maintained its conduct was neither unfair nor illegal because it fell within the protections of the CUA and MMPA, and therefore did not constitute illegal narcotics violations subject to nuisance abatement under state law. Specifically, Holistic Health relied on the MMPA's express provision in sections 11362.765 and 11362.775 that nuisance abatement is not available under section 11570 against medical marijuana activities specified to be lawful. Holistic Health also argued that more general state nuisance law (Civ. Code, §§ 3479, 3480) similarly did not apply because it provides, "Nothing which is done or maintained under the express authority of a statute can be deemed a nuisance" (Civ. Code, § 3482).
As to the City's zoning provisions, Holistic Health argued its activities fell under specifically permitted uses in the City's zoning code, including "Clinical Office Uses," "Medical Office Uses," "Membership Organizations," "Personal Service Uses," "Retail Sales Uses," and "Cultural Uses." According to the City, Holistic Health misidentified the uses permitted in the dispensary's particular zoning district. Even assuming the dispensary might qualify under the general wording of some enumerated uses, the City maintained the dispensary's actual, primary "use of property for the sale of marijuana is not permitted." (Original bolded italics.) Answering the City's narrow view of permitted uses, Holistic Health argued, "There is a category for medical offices but the code is silent [as] to x-ray facilities, phlebotomists, veterinary clinics, surgery centers or dentists. Should they be 'per se' nuisances too?"
The City also relied on its zoning provision prohibiting the use of property in any manner violating other laws or regulations, including federal law. But Holistic Health asserted that state law endorsing specified medical marijuana activities under the CUA and MMPA preempted local reliance on federal law.
Amidst these volleys between the parties, discovery proceeded. Holistic Health designated Williams as its "person most knowledgeable" on the topics the City sought to conduct discovery, including the dispensary's business and financial operations and its compliance with the CUA, MMPA, and A.G. Guidelines. The City therefore deposed Williams, but with little success because he refused to answer virtually any questions related to Holistic Health's medical marijuana activities. He variously asserted a substantive due process medical patient information privilege under article I, section 7 of the California Constitution and patient privacy protections under rules adopted pursuant to the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) (see generally 45 C.F.R. § 164.500 et seq. [privacy of individually identifiable health information]). Williams also asserted the privileges on matters not involving any particular dispensary patient's confidentiality, but rather the dispensary's business structure and manner of operating. Alternatively, he asserted the Fifth Amendment.
Williams refused to answer the following questions: (a) whether Holistic Health carried, provided, or sold marijuana products; (b) whether Holistic Health received monetary compensation in exchange for marijuana; (c) whether Holistic Health acquires all of its marijuana from its members; (d) whether Holistic Health has any means to track the source of its marijuana; (e) whether Holistic Health ensured marijuana is not distributed to nonmembers; (f) the cash value of the marijuana Holistic Health sold; (g) the price it pays for marijuana; (h) the cost to grow the marijuana it sells; (i) how Holistic Health sets the sale price for the marijuana it sells; (j) the efforts made, if any, to determine that members or other suppliers are not profiting when they provide marijuana to Holistic Health.
In one exchange, however, Williams addressed the costs that "vendors" incurred in "creat[ing]" the "products" they furnished to Holistic Health. Williams explained he had "[d]one some research on what it costs for different stuff, of course, but, you know, it boils down to if a product is X amount of dollars, and you feel that you can justify that money and this expense, then you justify it. . . . I mean that's — that's business 101." When asked if the vendors made a profit, Williams answered, "I would think that some of the vendors do, yes," and added, "Sure, I would hope they would," but also hedged, "I would think that they are making a living. I don't know if you call that a profit or not." Williams seemed to suggest that Holistic Health, like its vendors, made a profit on the products it bought and sold, noting the basic business calculation remained the same: "If somebody wants X amount of dollars for something and you feel you can sell it for Y amount of dollars, is it worthwhile to purchase it."
In Peron, the court noted the elusive character of the terms "non-profit" and "overhead," which potentially could tempt dispensary operators to engage in gamesmanship by "chang[ing] in their discretion their own salaries, bonuses, or remuneration, [then] claim these as expense deductions against gross sales receipts, and report no profits." (Peron, supra, 59 Cal.App.4th at p. 1391-1392.) "By such means, literal conformity could be made with the court's expressed intent [in the injunction order under review] respondents make no profit in the operation of their enterprise." (Id. at p. 1392.) Ferreting out such "subterfuge" via a trial or otherwise was unnecessary there, however, because the Legislature had not yet passed the MMPA and the CUA did not authorize marijuana sales at all, even if not for profit. (Id. at p. 1393; see § 11360 [criminalizing both sales and "giv[ing] away" marijuana].)
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The City obtained a temporary restraining order on the basis of this testimony. (See A.G. Guidelines, p. 9 ["collectives" and "cooperatives" authorized by the MMPA must operate as nonprofits]; § 11362.765, subd. (a) ["nothing in this section shall authorize . . . any individual or group to cultivate or distribute marijuana for profit"].) Upon Holistic Health's writ application, we stayed the trial court's order pending Holistic Health's appeal, to consider whether Williams's testimony constituted a sufficient admission to support closure of Holistic Health's business and whether "profits" in the collective or cooperative medical marijuana context are properly determined at the point of exchange. Rather, ascertaining "profit" may be affected by California law concerning agricultural and consumer cooperatives, which the A.G. Guidelines suggest also govern dispensaries. (A.G. Guidelines, p. 8.) As we recently noted in Traudt v. City of Dana Point (2011) 199 Cal.App.4th 886, California cooperative law expressly authorizes the later return to constituent members of any excess income over expenses without impacting the cooperative's nonprofit character, and also authorizes substantial "dividends" that do not destroy the co-op's nonprofit nature because they are "'deemed to be in the nature of interest . . . .'" (Id. at p. 895.)
Holistic Health perfected its appeal from the trial court's preliminary order enjoining marijuana sales at the dispensary, and it is that order that is now before us. We expressly advised the parties in a subsequent order that the appeal did "'not deprive the trial court of jurisdiction to proceed to try the case on the merits.'" (Quoting MaJor, supra, 7 Cal.App.4th at p. 623, italics added; see also 6 Witkin, Cal. Procedure (5th ed. 2008) Provisional Remedies, § 402, p. 344 ["where the provisional remedy [of a preliminary injunction] is granted, and the defendant appeals, the action may be tried and decided while the appeal is pending"].)
Subsequently, the City moved for summary judgment, and Holistic Health opposed the motion. We take judicial notice of the trial court's minute order and final order granting the City's summary judgment motion, attached as exhibits to the City's motion to dismiss in this court. (Evid. Code, § 452, subd. (d).) The exhibits do not include the parties' summary judgment motions, separate statements of fact, or any other documents pertaining to the motion. Holistic Health, however, does not dispute the trial court granted summary judgment in the City's favor and has entered a permanent injunction against the dispensary's marijuana activities. We now turn to the effect this development has on the pendency of this appeal.
II
DISCUSSION
"It is well settled that an injunction pendente lite remains in force only until rendition of the final judgment in the case. . . . 'An injunction by order is a provisional remedy, and temporary in its character. It assumes a pending litigation in which all questions are to be settled by a judgment and operates only until the judgment is rendered . . . ." (Peoples Ditch Co. v. Foothill Irr. Dist. (1930) 103 Cal.App. 321, 325.) At that time, the preliminary injunction "will then be merged in the permanent injunction or will terminate on denial of a permanent injunction. In either case, the appeal from the order granting the preliminary injunction is rendered moot and may be dismissed. [Citations.]" (6 Witkin, Cal. Procedure, supra, Provisional Remedies, § 402, p. 344.)
In limited circumstances, a reviewing court may exercise its discretion to retain and decide an issue that is technically moot. "We do so when the issue is of substantial and continuing public interest. [Citation.] Such a resolution is particularly appropriate when the issue is 'presented in the context of a controversy so short-lived as to evade normal appellate review' [citations], or when it is likely to affect the future rights of the parties [citation]." (Chantiles v. Lake Forest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914, 921.)
Review here would be inappropriate for several reasons. First, controversy over the temporary injunction will not affect the future rights of the parties. Holistic Health suggests the City might somehow resuscitate the injunction, perhaps if the dispensary were to appeal the judgment and obtain a stay of the permanent injunction. But as noted, the temporary injunction has merged with the permanent injunction and has no independent vitality. Second, review would be more appropriate on the presumably more fully developed factual record in subsequent proceedings leading to the final judgment, including the parties' separate statements of fact at summary judgment. (Cf. Qualified Patients Assn. v. City of Anaheim (2010) 187 Cal.App.4th 734, 756 [noting the difficulty of determining the proper application of state medical marijuana laws in the abstract, with "precious few facts concerning the plaintiffs' planned medical marijuana activities"].)
Indeed, in light of the fact a permanent injunction has issued, superfluous appellate review of the temporary injunction would be particularly inappropriate given the qualified nature of the rights appellants assert, which are in the nature of an affirmative defense. As the Supreme Court explained in People v. Mower (2002) 28 Cal.4th 457, 464 (Mower), the asserted lawfulness of marijuana activities under California medical marijuana law is an affirmative defense on which "the burden of proof . . . may, and should, be allocated to a defendant . . . ." The high court held the "rule of convenience and necessity supports allocating to the defendant the burden of proof as to the underlying facts" supporting a defense under California medical marijuana law. (Id. at p. 478.) As discussed, the CUA and MMPA operate as exceptions to nuisance and criminal prosecutions under otherwise generally applicable state law. "The rule of convenience and necessity declares that, unless it is 'unduly harsh or unfair,' the 'burden of proving an exonerating fact may be imposed on a defendant if its existence is "peculiarly" within his personal knowledge and proof of its nonexistence by the prosecution would be relatively difficult or inconvenient.' [Citations.] The rule often has been invoked when the 'exonerating fact' arises from an exception to a criminal statute." (Mower, at p. 477.) The existence of facts showing a defendant complied with the state medical marijuana law is peculiarly within a defendant's personal knowledge, and proof of their nonexistence by the prosecuting party is difficult, inconvenient, or impossible. (Ibid.)
Here, Holistic Health did nothing to establish its activities fell within the protection of the CUA or MMPA, and thus asserted in name only an affirmative defense afforded by these laws to a nuisance prosecution. It would be inappropriate to review the intricate issues raised here when the record has not been fully developed.
Holistic Health contends the trial court violated due process by issuing the temporary restraining order on an ex parte basis without an opportunity for Holistic Health to present evidence. But Holistic Health filed an opposition to the City's motion and in doing so made no suggestion it intended to present any evidence. Holistic Health sought no extension or continuance to present evidence. Nor does the record suggest Holistic Health moved for reconsideration on grounds of new evidence to oppose the restraining order. Holistic Health's due process claim is therefore baseless because the nature of a preliminary injunction is that it issues or is denied on the strength of the evidence presented at the time of the motion, before a full adjudication on the merits. That Holistic Health chose not to present any evidence in opposition to the City's motion does not implicate due process.
Holistic Health also characterizes the initial injunction as an unwarranted discovery sanction punishing Holistic Health because Garrison and its records custodian asserted the Fifth Amendment and other privileges. This claim similarly fails, however, because a defendant's decision to remain silent, while it is the defendant's choice to make, may not be without consequence. Here, for example, marijuana sales remain generally illegal under California criminal law, subject to an affirmative defense under California medical marijuana law. Thus, when a defendant fails to provide facts establishing a defense to the City's evidence that marijuana transactions occurred at the dispensary — declining not only to discuss potential profit accruing at the point of each marijuana transaction but also whether the transactions entailed solely marijuana obtained from and furnished to the dispensary's members — the trial court reasonably could reach and decide the City's preliminary injunction motion. In sum, the posture of the case, in which the City was seeking the injunction, required the trial court to make a decision; it was not a discovery sanction.
III
DISPOSITION
The appeal is dismissed as moot. Our stay of the temporary restraining order and enforcement of the trial court's order to show cause concerning a preliminary injunction are similarly moot and hereby dissolved. Respondent is entitled to its costs on appeal.
ARONSON, J. WE CONCUR: RYLAARSDAM, ACTING P. J. FYBEL, J.