City of Vallejo v. NCORP4, Inc.

The City of Vallejo (Vallejo or city) appeals from the denial of its request for a

preliminary injunction to enjoin the operation of a medical marijuana dispensary within

the city. The trial court concluded that the city’s ordinance conferring limited immunity

for the operation of such a dispensary conditioned on the prior payment of a business tax

imposes an unconstitutional ex post facto condition and therefore may not be enforced.

We disagree and therefore shall reverse the order.

Background

Vallejo’s zoning code does not recognize medical marijuana dispensaries as a

permitted land use within city limits. (Vallejo Mun. Code, §§ 16.06.010-16.06.630.) An

unpermitted use is declared to be “a public nuisance.” (Id., § 16.100.040.) Vallejo

recently adopted Ordinance No. 1715 granting limited immunity to those medical

marijuana dispensaries that meet various requirements, including the past payment of

local business taxes. (Id., §§ 7.100.010, 7.100.080(A)(3).)

Defendant NCORP4, Inc. (NCORP4), doing business as Nature’s Love Collective,

is a nonprofit corporation operating a medical marijuana dispensary in Vallejo.

Defendants Marc Hewitt and Gerome Tango manage the business. Vallejo denied

NCORP4’s application for limited immunity for failure to pay taxes, among other

reasons, but the dispensary continues to operate. The city brought this action to enjoin the

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dispensary as a public nuisance. The trial court denied the city’s request for a preliminary

injunction, concluding that the ordinance improperly conditions immunity upon past

payment of business taxes.

Marijuana Laws

Federal law prohibits the use, possession, manufacture and sale of marijuana. (City

of Riverside v. Inland Empire Patients Health & Wellness Center, Inc. (2013) 56 Cal.4th

729, 738-739 (City of Riverside); see generally 21 U.S.C. § 801 et seq.) A number of

states, including California, have less restrictive marijuana laws. In 1996, the voters of

California adopted an initiative measure permitting medicinal use and, in 2004, the

Legislature enacted a statute to enhance access to medicinal marijuana. (City of Riverside,

supra, at p. 739.) In 2016, the voters approved Proposition 64 legalizing marijuana for

recreational use by adults, subject to various conditions. (See, e.g., Health & Saf. Code,

§§ 11358-11359.)

While permitting the use of marijuana, California law “does not thereby mandate

that local governments authorize, allow, or accommodate the existence of” marijuana

dispensaries. (City of Riverside, supra, 56 Cal.4th at p. 759.) “ ‘Land use regulation in

California historically has been a function of local government.’ ” (Id. at p. 742.) “A

county or city may make and enforce within its limits all local, police, sanitary, and other

ordinances and regulations not in conflict with general laws.” (Cal. Const., art. XI, § 7.)

State law permitting medicinal marijuana use and distribution does not preempt “the

authority of California cities and counties, under their traditional land use and police

powers, to allow, restrict, limit, or entirely exclude facilities that distribute medical

marijuana, and to enforce such policies by nuisance actions.” (City of Riverside, supra, at

p. 762.) The same principle applies to recreational marijuana use, as Proposition 64

expressly provides that state regulations do not “limit the authority of a local jurisdiction

to adopt and enforce local ordinances to regulate” marijuana dispensaries “or to

completely prohibit” their “establishment or operation.” (Bus. & Prof. Code, § 26200,

subd. (a)(1).)

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Vallejo’s Ordinances

Vallejo has several ordinances affecting the operation of medical marijuana

dispensaries. The starting point is its zoning ordinance, which predates state medical

marijuana laws. Vallejo’s zoning ordinance provides an extensive list of permitted land

uses and prohibits all other uses. (Vallejo Mun. Code, §§ 16.06.010-16.06.630.) An

unpermitted use is declared to be “a public nuisance.” (Id., § 16.100.040.) Vallejo has

never recognized medical marijuana dispensaries as a permitted land use. A marijuana

dispensary is not a designated land use and, therefore, is an unpermitted nuisance. (Id.,

§§ 16.06.010-16.06.630, 16.100.040; see City of Corona v. Naulls (2008) 166

Cal.App.4th 418, 433 [enjoining operation of a medical marijuana dispensary upon

finding that “where a particular use of land is not expressly enumerated in a city’s

municipal code as constituting a permissible use, it follows that such use is

impermissible”].)1

In 2011, Vallejo city officials studied the impact of medical marijuana

establishments and possible regulatory responses. On May 24, 2011, city officials

presented a report on the matter to the mayor and city council.

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The report noted that

marijuana dispensaries were not permitted under the city’s zoning ordinance but were,

nonetheless, “proliferat[ing].” The report proposed a combined regulatory and taxation

approach. Noting a lack of financial resources to enforce land use restrictions, a local

marijuana tax was recommended as an initial step. “A business license tax would have

the sole purpose to raise revenue for municipal purposes and would not be intended to

regulate, sanction, condone or authorize any activity connected with the possession and



1 NCORP4 made no effort to distinguish City of Corona v. Naulls, supra, 166

Cal.App.4th 418 in its briefing on appeal. At oral argument, NCORP4’s counsel

suggested the case is inapplicable, apparently based on the assertion that Vallejo allowed

marijuana dispensaries to operate in the past so that the city should be equitably estopped

from prosecuting dispensaries as unpermitted nuisances. No claim of equitable estoppel

was raised in the briefing on appeal and, in any event, the record fails to support such a

claim. (County of Sonoma v. Rex (1991) 231 Cal.App.3d 1289, 1295.)

2 We grant Vallejo’s April 3, 2017 unopposed request for judicial notice of this report.

(Evid. Code, § 452, subds. (c), (h).)

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distribution of marijuana, unless otherwise authorized by both state and federal law.” The

city council decided to seek voter approval of an ordinance taxing marijuana businesses.

In November 2011, the voters approved Measure C, entitled “Vallejo Marijuana

Business License Tax Measure.”3

The measure enacted an ordinance taxing gross receipts

from the cultivation and sale of marijuana within the city. The “City Attorney’s Impartial

Analysis of Measure C” advised the voters that the proposed measure would tax

marijuana businesses but “does not legalize or otherwise permit marijuana businesses in

Vallejo.” The argument in favor of Measure C, written by several city councilmembers,

said “Nearly twenty marijuana businesses are operating in the City of Vallejo, and are not

being taxed or regulated. . . . [¶] The passage of this business license tax is the first

necessary step in taxing and regulating these businesses. The city is currently working on

separate ordinances to control and limit the number of marijuana businesses.”

Measure C expressly states that it “is enacted solely to raise revenue for municipal

purposes and is not intended for regulation.” (Vallejo Mun. Code, § 5:05:010.) Nothing

in the measure “shall be deemed to repeal, amend, be in lieu of, replace or in any way

affect any requirements for any license or permit required by . . . any other ordinance of

the city” (id., § 5.05.200) nor does “payment of a business license tax” entitle “any

person to carry on any marijuana business unless the person has complied with all of the

requirements” of Vallejo’s municipal code and “all other applicable laws” (id.,

§ 5.05.220). Measure C provides that it “may be repealed or amended by the city council

without a vote of the people” but “voter approval is required for any amendment

provision that would increase the rate of any tax” beyond 10 percent. (Id., § 5.05.640.)

Measure C imposes financial penalties for delinquency. (Vallejo Mun. Code,

§ 5.05.290.) It makes any amount owed a debt to the city subject to civil enforcement

(id., § 5.05.540), declares any violation of its requirements a misdemeanor (id.,

§ 5.05.600), and makes the remedies and penalties it imposes cumulative (id.,

§ 5.05.630). The business tax was implemented in March 2012. (Id., § 5.05.250(C).)



3

The record contains portions of the Solano County November 8, 2011 sample ballot and

voter information pamphlet, of which the trial court took judicial notice. (Evid. Code,

§ 451, subd. (c).) We take judicial notice of the entire document.

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The business tax was suspended in February 2015. The city council found there

had been a “proliferation of medical marijuana dispensaries” and that “accepting taxes

from those engaged in an activity that is not lawful under the city’s land use regulations

tends to confuse the public as to the city’s policy and undermines enforcement of the

city’s land use controls.” The city undertook to draft an ordinance limiting the number of

dispensaries before reinstating the tax.

In July 2015, the city council adopted Ordinance No. 1715, which is the ordinance

at issue on this appeal.4

The council determined there were more than 40 medical

marijuana businesses operating in the city despite being a prohibited use under the zoning

ordinance. The council declared: “the city wishes to resume collection of marijuana tax

and also address the continued proliferation of unauthorized medical marijuana

dispensaries in the city by accepting tax from, and granting limited immunity from

enforcement of its prohibition on medical marijuana dispensaries under the Vallejo

Municipal Code to, those medical marijuana dispensaries that meet certain criteria, until

the number of medical marijuana dispensaries is reduced to no more than four . . . .”

The council chose “limited civil immunity” as “a vehicle that will allow those

existing medical marijuana dispensary operators that have obtained tax certificates and

paid their quarterly taxes” to operate. Ordinance No. 1715 provides that a medical

marijuana dispensary is, and remains, an unpermitted land use under the zoning

ordinance (Vallejo Mun. Code, § 7.100.030) but “a limited immunity shall be available

and may be asserted as an affirmative defense to enjoin activity” otherwise prohibited by

the zoning ordinance (id., § 7.100.050).

Ordinance No. 1715 provides that no medical marijuana dispensary may operate

within the city unless specified requirements are met or the city manager determines that

a requirement cannot be met due to circumstances beyond the operator’s control. (Vallejo

Mun. Code, § 7.100.080.) There are numerous requirements. As relevant here, a medical

marijuana dispensary operator must provide proof that the dispensary (1) was issued a tax



4 NCORP4 requests judicial notice of an earlier ordinance that was adopted, suspended,

and replaced by Ordinance No. 1715. The unopposed June 19, 2017 request is granted.

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certificate and operated in the city before April 23, 2013 (when a moratorium on

dispensary business licenses was imposed) (id., § 7.100.080(A)(1)-(3), & 5); and

(2) “paid quarterly taxes from the date of opening until the City ceased accepting tax in

February 2015” (id., § 7.100.060). An existing dispensary that fails to meet these

requirements “shall receive no limited immunity and [shall] be deemed an illegal public

nuisance.” (Id., § 7.100.130.)

Complaint for Public Nuisance and Injunctive Relief

In May 2016, Vallejo sued to enjoin operation of the medical marijuana

dispensary operated by NCORP4. Months earlier, NCORP4’s request for limited

immunity under Ordinance No. 1715 had been denied because the company had not paid

all taxes due from the start of its operation in 2011 through February 2015, among other

reasons.

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The trial court issued ex parte a temporary restraining order and an order to

show cause why a preliminary injunction should not be issued.

In August 2017, following briefing and a hearing, the trial court dissolved the

temporary restraining order and denied Vallejo’s motion for a preliminary injunction. The

court found that Ordinance No. 1715 improperly amended Measure C by increasing the

penalty for nonpayment of taxes: “What the city did, in enacting its 2015 amendment to

the ordinances enacting the initiative, was to apply a new and different type of penalty to

businesses who had failed to pay the marijuana business tax in 2012 and 2013. It amounts

to in essence an ex post facto law, making activity that was legal at the time committed

(or at least subject to very limited penalties) suddenly and retroactively illegal (or subject

to greater and much different penalties).” (Italics omitted.) The court concluded: “to the

extent that the city’s action here is premised fundamentally on this dispensary’s failure to

have timely paid the marijuana business tax in 2012 and 2013, its likelihood of prevailing

on injunctive relief is insufficient to support the issuance of a preliminary injunction.”

Vallejo filed a timely notice of appeal.



5 NCORP4 did not file a writ of mandate challenging the city’s action. (Code Civ. Proc.,

§ 1085.) In the trial court, the city maintained that it’s denial of immunity was a purely

discretionary act not reviewable by writ. We express no opinion on the matter.

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Discussion

“In determining whether to issue a preliminary injunction, the trial court considers:

(1) the likelihood that the moving party will prevail on the merits and (2) the interim

harm to the respective parties if an injunction is granted or denied.” (Sahlolbei v.

Providence Healthcare, Inc. (2003) 112 Cal.App.4th 1137, 1145.) “Generally, the

standard of review for denial of a preliminary injunction is whether the trial court

committed an abuse of discretion. However, a party’s likelihood of prevailing on the

merits sometimes can be determined as a matter of law. [Citations.] In that case, de novo

review as to that factor is proper.” (Id. at pp. 1145-1146.) Further, “when reviewing the

interpretation and application of a statute where the ultimate facts are undisputed” an

appellate court exercises its independent judgment in determining whether issuance or

denial of injunctive relief was proper. (In re Loveton (2016) 244 Cal.App.4th 1025,

1043.)

The central issue on appeal concerns the interpretation and application of

Ordinance No. 1715. The ordinance provides that medical marijuana dispensaries are a

public nuisance but grants immunity from prosecution to those dispensaries that have

consistently paid business taxes and meet other requirements. (Vallejo Mun. Code,

§§ 7.100.030, 7.100.050, 7.100.060, 7.100.080(A).) NCORP4 has operated a medical

marijuana dispensary in Vallejo since 2011 but has paid almost no Measure C marijuana

business taxes. It made a single payment in April 2012 but made no other payments from

that date through February 2015, when Vallejo suspended collection of the tax. In its

application for immunity, NCORP4 offered to pay delinquent taxes and penalties. Vallejo

denied NCORP4’s application and seeks to enjoin its operations.

Vallejo contends that it may lawfully preclude operation of a medical marijuana

dispensary that has a history of unpaid taxes. The city argues that Ordinance No. 1715

does not, as the trial court held, impermissibly amend Measure C’s tax provisions to

increase the penalty for nonpayment of taxes but simply “limits the many aspirants to sell

medical marijuana in the city to a manageable number by preferring those who have

demonstrated a willingness and ability to comply with local law by paying the Measure C

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tax when the city enforced it . . . and to continue paying taxes as a condition of

immunized operation.”

We agree. As noted earlier, land use regulation is a function of local government.

(City of Riverside, supra, 56 Cal.4th at p. 742.) State law permitting medicinal marijuana

use and distribution does not preempt “the authority of California cities and counties,

under their traditional land use and police powers, to allow, restrict, limit, or entirely

exclude facilities that distribute medical marijuana, and to enforce such polices by

nuisance actions.” (Id. at p. 762.)

Local governments may rationally limit medical marijuana dispensaries to those

already in operation and compliant with prior law as past compliance shows a willingness

to follow the law, which suggests future lawful behavior. (420 Caregivers, LLC v. City of

Los Angeles (2012) 219 Cal.App.4th 1316, 1335-1338.) In 420 Caregivers, the appellate

court upheld a Los Angeles ordinance restricting dispensaries to those that had been in

operation for several years and had registered under a prior ordinance. (Id. at pp. 1326-

1328.) The court characterized the ordinance as “essentially a ‘grandfather provision’

with the added gloss of a prior registration requirement.” (Id. at p. 1335.) The court

rejected an equal protection challenge, noting that “[i]n areas of social or economic

policy not involving suspect classifications or fundamental rights, a statute must be

upheld so long as there is any reasonably conceivable set of facts that provides a ‘rational

basis’ for the classification.” (Id. at pp. 1333-1334.) The court observed that “[s]o-called

‘grandfather provisions’ have routinely withstood equal protection challenges, both at the

federal and state levels” (id. at p. 1335) and found no constitutional infirmity in the added

requirement of prior registration. Those dispensaries’ willingness to register under the

prior law “provided the City with a rational basis to conclude that they would continue to

act in a law-abiding manner going forward.” (Id. at p. 1338.)

NCORP4 fails to address 420 Caregivers, LLC v. City of Los Angeles, supra, 219

Cal.App.4th 1316 in its briefing and we see no basis for distinguishing it.6 A dispensary’s



6 At oral argument, NCORP4 attempted to distinguish 420 Caregivers, LLC v. City of Los

Angeles, supra, 219 Cal.App.4th 1316 based on the fact that the Los Angeles ordinance,

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timely payment of business taxes provides Vallejo with a rational basis to conclude that

the dispensary will continue to act in a law-abiding manner. NCORP4, which did not pay

its business taxes, was reasonably denied immunity to continue operations.

There is no merit to NCORP4’s argument that Vallejo’s regulatory ordinance

impermissibly amended Measure C’s tax provisions. Initially, “[t]he ex post facto clauses

of both the state and federal Constitutions apply only to criminal statutes punishing

conduct committed prior to their enactment.” (Melton v. City of San Pablo (1967) 252

Cal.App.2d 794, 804.) The constitutional prohibition on ex post facto laws is inapplicable

to local ordinances regulating the operation of medical marijuana dispensaries. (Santa

Barbara Patients’ Collective Health Coop. v. City of Santa Barbara (C.D. Cal. 2012) 911

F.Supp.2d 884, 896-897.)

Moreover, Ordinance No. 1715 did not amend Measure C’s tax provisions by

retrospectively increasing the measure’s penalty provisions. The civil penalty for

nonpayment of taxes remains what it has always been, a financial penalty calculated as a

percentage of unpaid taxes. (Vallejo Mun. Code, § 5.05.290.) Ordinance No. 1715 is a

separate ordinance that uses past compliance with Measure C as one of several standards

for granting dispensaries immunity from prosecution as a public nuisance. (Vallejo Mun.

Code, § 7.100.080(A)(3).) Regulatory systems commonly consider compliance with other

laws when authorizing business operations. (E.g., Bus. & Prof. Code, §§ 6060 [to practice

law, attorneys must “[b]e of good moral character”]; 26057, subd. (b)(1) [state license to

operate marijuana business may be denied for failure to comply with regulations].)

In arguing there was an “unlawful amendment of Measure C,” NCORP4 contends

that the tax measure permits a delinquent taxpayer to cure its default with payment of

back taxes, penalties and interest. NCORP4 argues that Ordinance No. 1715 “revokes”



unlike the Vallejo ordinance, allowed dispensaries to cure past tax defaults and remain

entitled to operate. But that aspect of the Los Angles ordinance was not at issue in the

case. At issue was the ordinance’s provision limiting dispensaries to those that had

registered under a prior ordinance, and the failure to have previously registered could not

be cured. The ordinance was upheld, thus supporting the conclusion that a city may

rationally limit dispensaries to those compliant with prior law.

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this curative provision by denying “immunity to an applicant who is otherwise ready,

willing and able to meet his past-due tax obligations.” The argument misconstrues

Measure C. The failure to pay taxes under Measure C has never been capable of cure by

the simple expediency of tendering late payment. A person violating Measure C is “guilty

of a misdemeanor” (Vallejo Mun. Code, § 5.05.600) and may be prosecuted even if late

payment is made (id., § 5.05.590). In any event, Ordinance No. 1715 does not preclude

late payment of taxes but limits immunity to those medical marijuana dispensaries that

“paid quarterly taxes from the date of opening until the city ceased accepting tax in

February 2015.” (Id., § 7.100.080(A)(3).) NCORP4 did not pay taxes “from the date of

opening” but only proffered payment years later when applying for immunity. (Ibid.)

NCORP4 notes that other cities allow medical marijuana dispensaries to continue

operations if they pay past tax obligations. Vallejo does not dispute the point but counters

that it is not “alone in using past compliance with local tax laws to limit the number of

dispensaries.”7

These are choices properly consigned to local authorities, which are

“endowed with wide-ranging discretion” in formulating land use policy. (DeVita v.

County of Napa (1995) 9 Cal.4th 763, 781-782.)





7 We grant Vallejo’s July 10, 2017 unopposed request for judicial notice of other city

ordinances.

The order denying the city’s motion for a preliminary injunction is reversed. The

matter is remanded to the trial court with directions to issue a preliminary injunction and to conduct further proceedings consistent with the views expressed in this opinion. The city shall recover costs on appeal upon timely application in the trial court. (Cal. Rules of Court, rule 8.278.)