Peridot Tree, Inc. v. City of Sacramento

CourtDistrict Court, E.D. California
DecidedNovember 21, 2024
Docket2:22-cv-00289
StatusUnknown

This text of Peridot Tree, Inc. v. City of Sacramento (Peridot Tree, Inc. v. City of Sacramento) is published on Counsel Stack Legal Research, covering District Court, E.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Peridot Tree, Inc. v. City of Sacramento, (E.D. Cal. 2024).

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 Peridot Tree, Inc. and Kenneth Gay, No. 2:22-cv-00289-KJM-SCR 12 Plaintiffs, ORDER 13 v. City of Sacramento and Davina Smith, 1S Defendants. 16 17 The federal government’s policy on marijuana use and distribution was once clear and 18 | “comprehensive.” Gonzales v. Raich, 545 U.S. 1, 10 (2005). Today, however, as one Justice put 19 | ita few years ago, the federal policy has become “a half-in, half-out regime that simultaneously 20 | tolerates and forbids local use of maryuana.” Standing Akimbo, LLC v. United States, 141 S. Ct. 21 | 2236-37 (2021) (Statement of Thomas, J., respecting the denial of certiorari). This inherently 22 | “contradictory” policy sometimes “conceals traps for the unwary.” Jd. 23 In this case, for example, a prospective marijuana dispensary and its majority shareholder 24 | allege the City of Sacramento, California has discriminated against them in violation of the 25 | “dormant” aspect of the Constitution’s Commerce Clause. Ordinarily, the Commerce Clause 26 | implicitly preserves free and open national markets from state and local protectionism. See Tenn. 27 | Wine & Spirits Retailers Ass’n v. Thomas, 588 U.S. 504, 514 (2019). As explained in this order, 28 | however, the plaintiffs cannot assert a constitutional right to participate in a national marijuana

1 market because Congress attempted to eliminate that market by passing the federal Controlled 2 Substances Act. Even if the result is counter-intuitive, in that it effectively permits cities and 3 states to favor local businesses operating in a market Congress has attempted to eliminate, this 4 court cannot ignore federal law, and it cannot second-guess the Attorney General’s or a local 5 prosecutor’s decisions about how to allocate their limited resources. The court thus grants the 6 city’s motion to dismiss, and denies the plaintiffs’ motion for a preliminary injunction. 7 I. BACKGROUND 8 In 2016, California voters passed a ballot initiative known as Proposition 64, which 9 changed state laws that had made it a crime to use marijuana recreationally. See generally 10 Control, Regulate and Tax Adult Marijuana Act, 2016 Cal. Legis. Serv. A-92 (West). Many local 11 governments within California, including Sacramento, then began passing regulations and 12 ordinances about where and how marijuana could be produced, sold and used. The Sacramento 13 City Council adopted what it called the “CORE” Program, for “Cannabis Opportunity 14 Reinvestment and Equity.” See Sacramento City Council Res. No. 2020-0338 (Oct. 13, 2020) & 15 No. 2018-0323 (Aug. 9, 2018). The purpose of the CORE program is reducing “barriers of entry 16 and participation” in the cannabis industry to those who “have been negatively impacted by the 17 disproportionate law enforcement of cannabis related crimes.” Res. No. 2018-0323 at 19. Under 18 this program, a person cannot obtain a permit to operate a cannabis dispensary in Sacramento 19 unless that person is a “current or former resident,” among other requirements. See id. at 23; Res. 20 No. 2020-338. 21 Peridot Tree, Inc., is a California company. First Am. Compl. ¶ 1, ECF No. 12. Kenneth 22 Gay is its majority shareholder. Id. ¶ 2. They applied for a dispensary license and asked to 23 participate in the process, but the City rejected their application because Gay has never lived in 24 Sacramento. See id. ¶¶ 17–22. According to his complaint, he otherwise meets the requirements 25 of the CORE program. Id. ¶¶ 18–19. Peridot and Gay filed this lawsuit after the City rejected 26 their permit application. See id. ¶¶ 22. They claim the City’s program is unconstitutional 27 because it discriminates against out-of-state applicants, and they seek declaratory judgment to the 28 same effect. Id. ¶¶ 23–31. In addition to a declaration, their complaint requests damages, an 1 injunction, costs, fees, and whatever other relief the court deems appropriate. Id. at 10 (prayer for 2 relief). 3 The City moved to dismiss the complaint for failure to state a claim; Peridot and Gay then 4 sought a preliminary injunction barring the City from issuing licenses under its CORE program. 5 Both motions are fully briefed.1 The court also directed the parties to submit supplemental briefs 6 about whether the court should abstain from adjudicating their dispute, which the parties filed.2 7 After a hearing, the court determined it had jurisdiction over the dispute but declined to exercise 8 that jurisdiction and stayed the case. See Prev. Order, ECF No. 36. Peridot and Gay appealed, 9 and the Ninth Circuit held this court could not abstain. See Peridot Tree, Inc. v. City of 10 Sacramento, 94 F.4th 916, 935–36 (2024). But the circuit took care to make clear it was not 11 weighing in on the merits of the parties’ underlying dispute and the dormant Commerce Clause. 12 See id. at 936 & n.10. On remand, this court permitted the parties to file supplemental briefs, 13 which they have now done, and the court held a further hearing. See Mins., ECF No. 50; Pls.’ 14 Suppl. Br. on Remand, ECF No. 55; Defs.’ Suppl. Br. on Remand, ECF No. 52. Jeffrey Jenson 15 appeared for Gay and Peridot, and Andrea Velasquez appeared for the defense. 16 II. DISCUSSION 17 The parties’ most fundamental dispute after remand is whether the Constitution prohibits 18 state and local governments from giving local marijuana businesses and entrepreneurs advantages 19 over non-local competitors. There is no obvious answer. Neither the Ninth Circuit nor the 20 Supreme Court has weighed in, and the question has divided other federal courts. Many of these 21 courts have written thorough and thoughtful decisions, which the parties have summarized well in 22 their post-remand briefs. The court here summarizes the most persuasive arguments for each 23 side.

1 See generally Mot. Dismiss, ECF No. 13; Mem. Dismiss, ECF No. 13-1; Opp’n Dismiss, ECF No. 15; Reply Dismiss, ECF No. 17; Mot. Prelim. Inj., ECF No. 26; Opp’n Prelim. Inj., ECF No. 28; Reply Prelim. Inj., ECF No. 29. 2 See generally Order (May 17, 2022), ECF No. 19; Pls.’ Suppl. Abstention Br., ECF No. 21; Defs.’ Suppl. Abstention Br., ECF No. 20. 1 The first of these arguments begins with the motivation behind the constitutional rule at 2 the basis of Peridot’s and Gay’s complaint, which rests on the “dormant” Commerce Clause. The 3 Commerce Clause gives Congress “Power . . . To regulate Commerce with foreign Nations, and 4 among the several States, and with the Indian Tribes.” U.S. Const. art. I, § 8, cl. 3. The dormant 5 Commerce Clause is a prohibition the Supreme Court has long inferred from the Commerce 6 Clause and its history. Under that rule, the Constitution implicitly “prohibits state laws that 7 unduly restrict interstate commerce” and “preserves a national market for goods and services.” 8 Tenn. Wine & Spirits, 588 U.S. at 514. 9 “[R]emoving state trade barriers was a principal reason for the adoption of the 10 Constitution.” Id. at 515. States had “notoriously obstructed the interstate shipment of goods.” 11 Id. “[I]n order to succeed, the new Union would have to avoid the tendencies toward economic 12 Balkanization that had plagued relations among the Colonies and later among the States under the 13 Articles of Confederation.” Granholm v. Heald, 544 U.S. 460, 472 (2005) (quoting Hughes v. 14 Oklahoma, 441 U.S. 322, 325–26 (1979)).

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Peridot Tree, Inc. v. City of Sacramento, Counsel Stack Legal Research, https://law.counselstack.com/opinion/peridot-tree-inc-v-city-of-sacramento-caed-2024.