WSLCB - Board Caucus
(October 13, 2020)

• Accepting of Policy and Rules Coordinator Casey Schaufler’s argument that pending litigation in the Brinkmeyer v. WSLCB case should preclude the Board from action, members voted to deny a petition to voluntarily undertake rulemaking to revise residency requirements (audio - 6m).
• The Board was similarly accepting of Schaufler’s argument that the WSLCB should respect local authority by maintaining its own rules which require local authorities to inspect cannabis extraction equipment (audio - 5m).

Here are some observations from the Tuesday October 13th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• The Board denied a petition for rulemaking regarding residency requirements due to corresponding, ongoing litigation.
  • Policy and Rules Coordinator Casey Schaufler presented the petition submitted by Harmony Farms Director of Compliance Lukas Hunter on August 18th. The petition proposed changes to WAC 314-55-020(10) “that would in effect limit residency requirements only to applicants for marijuana licensure who are sole proprietors” (audio - 6m).
    • The Board voted to deny a related petition calling for rulemaking on the definition of ‘residency’ in March 2019.
  • Schaufler summarized his interpretation of the petition:
    • “The residency requirement seems only applicable to sole proprietors, not to any other business structure” as “it appears the residency requirement was expanded on without consideration for the language in statute.”
    • “The section in WAC 314-55-020 references” RCW 69.50.331(1)(c) “that does not exist.”
    • Schaufler said Hunter requested “either an expansion of the scope of the current rulemaking project for WAC 314-55-020...or to open a new project to address out-of-state ownership issues within the same section.”
    • Schaufler relayed Hunter’s conclusion: “This change would align rule with statute and further help prepare Washington cannabis to be competitive with the future of interstate commerce, and in the meantime help all cannabis companies who need additional capital to continue to grow their company.”
  • Schaufler began by saying the residency requirements were under “pending litigation with a licensee, though not this petitioner, that concerns issues related to those in the petition for rulemaking. It is not appropriate for the Board to respond with further analysis of these issues raised in the petition while it is involved in that litigation.”
    • On June 8th, the mentioned litigation was brought by Todd Brinkmeyer, an Idaho businessman and cannabis business financier, who sued WSLCB for the right to accept ownership of four retail licenses awarded to Scott Atkison.
    • On July 7th, the Washington State Office of the Attorney General (WA OAG) filed a Notice of Removal to Federal Court asking that the case be moved from Thurston County Superior Court to the U.S. District Court for the Western District of Washington in Tacoma.
    • The federal case was assigned to Judge Benjamin H. Settle, who ordered the parties to show cause. The Court received responses from attorneys representing Brinkmeyer and WSLCB on September 14th.
      • Cannabis Observer procured all records in the federal case docket and made them publicly available via CourtListener. The documents included arguments which would likely resurface as the litigation was continued.
    • On October 5th, Settle ruled that “the Court sua sponte invokes Pullman abstention on Brinkmeyer's federal claims and severs Brinkmeyer's state law claims. The Clerk shall remand the matter to Thurston County Superior Court for resolution of Brinkmeyer's state law claims, terminate the pending motion, and administratively close this matter pending final resolution of the state law claims. The parties shall file a motion to lift the stay once state court matter is resolved or move to dismiss this case if the dispute is otherwise resolved.”
    • Designated as Thurston County Superior Court case number 20-2-01568-34, an October 9th hearing on Assignment for Trial Setting under Judge John C. Skinder was cancelled at the Court’s request.
  • Regarding the erroneous “statutory reference in rule,” Schaufler said the RCW had been modified in 2017 by SB 5131 “striking certain subsections of existing statute related to the competitive application process, and renumbering...the remainder of the subsections. As a result, the prior RCW 69.50.331(1)(c) was renumbered to RCW 69.50.331(1)(b) and there were no changes to the language.” He agreed that the reference was “technically incorrect.”
  • Schaufler said currently open rulemaking on the relevant section of WAC to implement SB 6206 (Location Compliance Certificates) “was intentionally narrow in scope to implement only the requirements” of the law. He added that “while the Board has the discretion to expand the scope of rulemaking if it so chooses, it has already been established that it is inappropriate to do so at this time given the current status of pending litigation.”
  • Schaufler recommended and the Board voted to deny the petition without further inquiry.
• A second petition on extraction inspections questioned whether they could be performed by certified inspectors in addition to local authorities.
  • Schaufler also brought forward a petition for rulemaking from attorney Ryan Agnew submitted on August 24th. The petition and proposed rule text sought to amend WAC 314-55-104(8) to allow for “the inspection and approval of professional closed-loop systems, other equipment used, the extraction operations, and facilities by a National Fire Protection Association Certified Fire Inspector (CFI), holding at least a CFI-II credential.” Schaufler conveyed that “this would be an alternative to the current requirement for the inspection and approval...by a local fire code official” (audio - 5m). 
  • Schaufler relayed the petitioner's argument and requested change:
    • “There are times where local fire officials are not willing or able to provide the inspection(s) necessary to grant approval of extraction operations.”
    • “A qualified third-party would be allowed to perform inspections and issue the approval required.”
  • Schaufler relayed Agnew’s concern that “in at least one instance, local government has adopted a ban on cannabis while allowing the continued use of certain production and processing facilities as a pre-existing, non-conforming use.” The pre-existing businesses were told by local officials “that due to the ban on cannabis, fire officials will not come and inspect equipment” including equipment existing prior to the ban. The petition would allow “for a certified third-party to inspect a facility in lieu of the local government official.”
    • In the October 12th Week Ahead, Cannabis Observer noted our “understanding that processors in Chelan County who were in operation prior to a county-level ban instituted there have been contending with local fire code officials who refuse to perform inspections because of the ban.”
  • Schaulfer leaned on the 2014 WA OAG advisory opinion that I-502 did not “prevent local jurisdictions from enforcing local rules and ordinances.” Schaufler asserted, "A decision that circumvents local authority rules could impact the cost associated with enforcing local ordinances and result in a political response or legal action, as well as damaging the WSLCB’s relationship with local government officials and community members.”
    • The WSLCB’s relationship with local governments had been fraught over many issues, perhaps most prominently regarding issuance of State cannabis licenses for premises in contravention of local zoning ordinances. In February 2017, the Kittitas County Chief Civil Deputy Prosecuting Attorney requested WSLCB issue a Declaratory Order “on the issue of whether the Board must comply with local zoning requirements and only issue a marijuana license when the application/location is congruent with local zoning.” The Board declined to accept that responsibility and the resulting litigation was appealed all the way to the State Supreme Court where it was finally disposed in the Board’s favor in September 2019.
  • Schaufler found that WAC 314-55-104(8) didn’t “explicitly prohibit third-party inspection but does require approval of the local fire code official.” He argued that the agency lacked authority “to circumvent local jurisdiction approval authority” which seems to have been assigned to local jurisdictions by the WSLCB.
  • Schaufler suggested jurisdictions which refused to allow their fire code officials to perform inspections could be asked to revise their ordinances to authorize third-party inspections instead. Schufler added that the agency was comfortable with third-party inspections, “so long as the inspection, and results thereof, meet required fire, safety, and building requirements, and receive approval from the local fire code official.”
  • Schaufler said staff recommended denial of the petition. Board Member Ollie Garrett thanked him for “the time that we kept scheduling calls to discuss both the petitions and doing some due diligence before reaching the decisions that we reach.” The Board then voted to deny the petition. Board Chair Jane Rushford acknowledged the “thoroughness and the extra effort” of Schaufler.
• Board Member Ollie Garrett shared more of her perspective on the agency’s engagements with communities of color.
  • The WSLCB hosted a trio of three-hour virtual engagements reaching out to black, indigenous, and people of color (BIPOC) communities on September 29th, October 5th, and October 12th. Garrett, Director Rick Garza, and others in WSLCB leadership participated in the events.
  • Garrett was asked about the meetings by Rushford, and Garrett suggested “if you don’t listen to all three, I would start with” the October 12th event. She conveyed there had been "a lot of deep, painful emotions that came out in that meeting yesterday." Garrett called the event generally “informative” and that she’d heard a lot about “perception and what happened to” prior applicants and licensees, saying she was “surprised that yesterday I heard even more and new things that I hadn’t heard before” (audio - 4m) 
    • The first two engagements were hosted using WebEx and elicited complaints about accessibility. The agency then announced a switch to Zoom on October 8th. Garrett found the alternative platform used in the final engagement “really did make a difference" by enabling participants to see one another throughout the session.
  • For the final engagement, Garrett noted participants who had spoken at prior sessions were made to wait until the end to give “all new voices” the opportunity to be heard. Rushford said it was “important to hear more of them.”
    • See the complete video, audio, slidedeck, and chat log from the October 12th BIPOC engagement.