Posted by: Patricia Salkin | June 9, 2013

CA District Court of Appeals Upholds Local Zoning Ordinance Regulating Medical Marijuana Dispensary and Finds Owner Had No Vested Right to Use

This case deals with a city’s attempts to prevent the operation of a medical marijuana dispensary within its limits. In 1996, voters in California approved Proposition 215, otherwise known as the Compassionate Use Act (CUA), which provides immunity for physicians who recommend marijuana to a patient for medical use and immunity for the patient as well. In 2003, the California legislature enacted the MPA in order to help clarify the scope of the CUA and provide uniform applications of the law throughout the different counties in the state. The MPA created the system of issuing “cards” to those deemed to be “qualified patients” and expanded the grants of immunity in the CUA to a third group of persons, those who assist patients and primary caregivers in acquiring the skills necessary to cultivate or administer medical marijuana. Finally, the MPA included a section that enabled municipalities to enact ordinances that regulate the location, operation and establishment of medical marijuana facilities and the ability to apply its own civil and criminal enforcement of its local ordinances described in the subdivision.

The City of Agoura, California  adopted  a zoning ordinance in 1987, which created a Manufacturing District and  provided that uses only expressly authorized by a commercial use table, or those interpreted by the city planning commission to be similar to an authorized use. Medical marijuana dispensaries were not on this list. Empowered by the CUA and the MPA, the appellant in this case, Conejo began operating a medical marijuana dispensary in the Manufacturing District of Agoura in June 2006 as a nonprofit corporation. Seemingly in response to the presence of Conejo, alongside the growth boom of medical marijuana dispensaries in California around this time, the city of Agoura passed an ordinance in 2008 expressly adding medical marijuana dispensaries as an non-permitted use to the city’s municipal code, violations of which could be punishable by six months in jail or a $1,000 fine, or both. In 2009, despite the city not requiring nonprofits to obtain a city business registration permit, Conejo applied for one in Agoura. The application wasn’t acted on until 2011 when it was rejected. Prior to this, in 2010, the City had commenced an investigation against Conejo, which became a code-enforcement investigation, and the Sherriff ended up seizing marijuana, paraphernalia and paperwork from the business. Despite this, Conejo applied for a building permit to expand its use in June 2010, which was denied by the city because the business was a nonconforming use. In October of 2010, the City adopted an ordinance expressly prohibiting any medical marijuana dispensaries from receiving “compensation” for the distribution of medical marijuana. The same ordinance also required nonprofits to register for business permits annually, and force the city manager to reject any applications for medical marijuana businesses. At the end of 2010, Conejo applied for a business registration permit, which was denied.

Conejo filed suit against the City alleging eight causes of action and seeking declaratory and injunctive relief. The City filed a cross-complaint also seeking declaratory and injunctive relief. The trial court granted the City’s motion for summary judgment on most of the claims, while dismissing or ordering dismissal of the others. Conejo appealed asserting, among other things, that the city enacted a zoning ordinance to amend a zoning ordinance not in accordance with State law governing the requirements for amending zoning laws, and the city’s ordinances effectively deprived Conejo from enjoying its vested property right in the continued operation of a dispensary.

Conejo asserted that the ordinance passed in 2008 (08-355) is a zoning ordinance because it bans medical marijuana dispensaries by expressly classifying them as a no permitted use anywhere in the city. The Court agreed with this classification, but when Conejo made the same allegation that the 2010 ordinance (10-379) was a zoning ordinance as well the Court rejected it. The Court held that while 08-355 is a zoning ordinance which regulates land use in the city, 10-379 does not move property from one zone to another and does not impose any regulations not within the California Government Code which governs zoning ordinances. Conejo contended that 10-379 modifies or amends the definition of a medical marijuana dispensary by including nonprofit operations, as opposed to 08-355 which banned only for-profit. The Court rejected this argument stating the ordinance does not redefine medical marijuana dispensaries for zoning purposes and that 08-355, from its inception, banned all dispensaries, whether for-profit or not. The Court explained the effect of 10-379 is “expressly prohibit an already banned dispensary from receiving compensation.” Conejo also argues, to no avail, that 10-379, by declaring dispensaries to be nonpermitted uses and therefore ineligible to obtain business permits becomes a zoning ordinance because it effectively prohibits nonprofit dispensaries. The Court held that requiring business registration does not impose land use regulations and the mere restating of the regulation from 08-355 banning dispensaries does not add any regulation and is a restatement of the fact.

Conejo also argued that ordinance 10-379’s requirement for nonprofits to register for business permits annually had the effect of disrupting their vested property right in the continued operation of a dispensary. Conejo’s chief argument is that since they lawfully operated in 2006, they had acquired the vested right to continue the use. The Court, citing to Hansen Brother Enterprises, Inc. v. Board of Supervisors compared the analysis in determining the existence and interruption of a vested property right with the principles of the “taking clauses” of the United States and California Constitutions.  ”A zoning ordinance or land-use regulation which operates prospectively, and denies the owner the opportunity to exploit an interest in property that the owner believed would be available for future development, or diminishes the value of the property, is not invalid and does not bring about a compensable taking unless all beneficial use of the property is denied. However, if the law effects an unreasonable, oppressive, or unwarranted interference with an existing use, or a planned use for which a substantial investment in development costs has been made, the ordinance may be invalid as applied to that property unless compensation is paid. Zoning ordinances and other land-use regulations customarily exempt existing uses to avoid questions as to the constitutionality of their application to those uses. ‘The rights of users of property as those rights existed at the time of adoption of a zoning ordinance are well recognized and have always been protected.”

While the Court recognized the functional ban on medical marijuana dispensaries caused a diminution of Conejos’s leasehold value, they rejected the argument that ordinance 10-379 deprived them of a vested property right because, based on the undisputed facts in the record, a marijuana dispensary was never a lawful use within the Manufacturing District created by the 1987 law. Since the use was never expressly permitted nor interpreted to be similar to a permitted use, the use of the land within the Manufacturing District for the dispensary was unlawful and therefore no vested property right could arise out of the illegal use.

Conejo Wellness Center, Inc. v. City of Agoura Hills, 154 Cal.Rptr.3d 850 (3/29/2013)

The opinion can be accessed at:

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