Thurston County Superior Court - Hearing - Brinkmeyer v. WSLCB
(July 23, 2021)

Friday July 23, 2021 11:00 AM - 12:00 PM Observed
Thurston County - Logo

Engagement Options

Webinar

Meeting ID: 937 6680 7450
Passcode: 987560

Phone

Number: +1.253.215.8782
Meeting ID: 937 6680 7450
Passcode: 987560

Observations

Following arguments from attorneys, a superior court judge ruled an Idaho businessman did not have standing to challenge the statute and rules creating residency requirements for cannabis licensees.

Here are some observations from the Friday July 23rd Thurston County Superior Court hearing on the Todd Brinkmeyer v. Washington State Liquor and Cannabis Board (WSLCB) lawsuit.

My top 3 takeaways:

  • The hearing on competing motions for summary judgment was conducted telephonically with Thurston County Superior Court Judge Mary Sue Wilson presiding.
    • Wilson started the hearing by asking Murphy to confirm he was counsel for Brinkmeyer and Orf-Rodriguez would represent WSLCB (audio - 1m, Hearing Minutes). 
      • Cannabis Observer Founder Gregory Foster requested approval to record the proceeding, securing the consent of the Court (audio - 1m).
    • Wilson asked the counsel to cite case precedent “that you find most helpful and most difficult for your position,” adding that she was particularly interested in issues of “justiciability and the issue of the application of state constitution’s privileges and immunities clause to non-Washington residents.” Murphy spoke first, arguing on Brinkmeyer’s behalf (audio - 15m).
      • Murphy said the “state has not cited a single case that has upheld a residency requirement in commerce as constitutional” whereas there was an “abundance of case law” cited in the plaintiff’s filings that showed “unanimously stricken residency requirements in commerce as unconstitutional.” He asked Wilson to continue an “unbroken chain of cases” by granting his client’s motion to “strike the residency requirement.”
      • Speaking to Wilson’s first issue, justiciability, or “whether Mr. Brinkmeyer has standing to bring his claims,” Murphy said there was “a two part test.”
        • First, Murphy addressed whether Brinkmeyer was “regulated by the residency requirements, and if he is harmed by them.” The residency requirement applied to Brinkmeyer and Atkison as “prospective and existing equity holders in the cannabis industry” Murphy attested. Not being a cannabis licensee “injured” Brinkmeyer in an “immediate” way and “in the future” as his “long-time friend, Mr. Atkison” intended to make Brinkmeyer a shareholder of “No. 259 Inc. and therefore a member of Insangu LLC” as well as “eventually...transfer another interest to Mr. Brinkmeyer as part of his estate planning.” The only thing stopping the arrangement was the residency requirement, Murphy said, as the submitted case law showed a party “doesn’t need to go over the precipice and have liability to have a justiciable claim.”
        • As to the applicability of the Washington State Constitution to non-residents, Murphy asserted the most frequently cited case was State v. Osman, in which a non-U.S. resident brought “a challenge under the Washington Constitution for violating the privileges or immunities clause." Murphy added that Brinkmeyer “does business in Washington,” including financing cannabis retail stores as well as giving “advice,” and “he wants to do more business in Washington, that’s the whole purpose of this case.” If the court didn’t apply the state constitution to non-residents then Murphy argued there would be “no protection, whatsoever, for the cannabis industry.” He said the residency requirement “granted a privilege” that his client was denied in the form of cannabis license ownership which amounted to the state picking “favorites” in the cannabis sector.
      • Murphy told the court that in Tennessee Wine and Spirits Retailers Association v. Thomas, the U.S. Supreme Court ruled “as a matter of law, that residency requirements are not necessary to maintain oversight over licensed, in-state, businesses.” He argued this applied to cannabis just as it had to alcohol. Murphy cited the “Toigo [case], which struck down Missouri’s residency requirement in cannabis,” remarking that the court there had found the state’s grounds for doing “background checks, and [preventing] diversion just don’t hold up because the state has the ability to obtain background criminal check information through other means.”
      • The state’s argument, Murphy interpreted, was that the “constitutional protection that it is seeking to evade providing to non-residents seeking to do business in Washington may come from the federal constitution.” That differed from the defendant’s arguments when the case had been in federal court, he stated, where the state’s counsel argued “six times that no constitutional protections exist at all for the cannabis industry.” Murphy argued that WSLCB officials were seeking “no limits at all, essentially becoming a kingpin over the cannabis industry” and that the state constitution needed to “set a limit” on WSLCB authority in this area. He cited the 1949 case of E.R. Ralph v. The City of Wenatchee, saying “that drawing distinctions based on residency is not a valid exercise of police power and it warrants striking those laws.”
      • Moreover, Murphy argued the cannabis residency requirements also failed the “rational basis test” as the defendants “admitted in their answer that the primary purpose for the residency requirements was economic protectionism.” This was "not a valid exercise of police power" in the Ralph case, Murphy indicated, and the Tennessee Wine ruling determined “residency is not necessary to maintain oversight - and it is not relevant to the character of a cannabis business owner.” He commented that no reason had been offered by the state for “why its admitted economic protectionism should not lead the court to strike the residency requirements under the rational basis test.”
      • Murphy added that opposing counsel had “asserted that normal constitutional protections that would apply to other businesses do not apply to the cannabis industry because of federal illegality.” Citing the original initiative’s purpose of no longer “treating marijuana like a crime,” he said this was a contradiction to “what the state is asserting, and that illegality did not stop three federal courts from striking residency requirements, on their merits, in cannabis.” A ruling counter to the trend from a federal court in Oklahoma, Murphy asserted, was because that court “declined to reach the merits of the challenge” and instead made a “procedural decision.”
      • Murphy pointed out remarks in a June 26th petition denial from Supreme Court Justice Clarence Thomas, who observed that “A prohibition on intrastate use or cultivation of marijuana may no longer be necessary or proper to support the federal government’s piecemeal approach,” as federal law and policy on cannabis “is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana.” Murphy offered this as evidence of “shaky ground” in cannabis policy along with limits on federal prosecution of medical use of cannabis and federal inaction against states establishing adult-use cannabis systems. Since “the state disregarded federal illegality when it created this market” while “it profits handsomely from it,” officials shouldn’t deny those seeking licenses “constitutional rights.”
      • Arguing that the “cases that the state cites...reflect that there is an obligation to operate within the licensed system,” Murphy said Brinkmeyer only needed the residency requirement to change and then WSLCB staff could “evaluate his application to join an industry as an equity holder without applying discrimination.” He commented that although the defendants had not acknowledged his cited case law, the cases demonstrated that “even when a state elects to open up a market...and regulate it, those regulations still have to be constitutional.” Murphy concluded that although WSLCB staff had “latitude” in the way “it does regulate its market,” there were “outer bounds of that” set by the constitution. He summarized that under the privileges and immunities clause, “residency requirements do not serve a legitimate government purpose, they promote favoritism here” in businesses composed “exclusively of long-time residents.”
      • Murphy’s final point was that “the regulation conflicts with the state statute,” which listed the “individuals and entities that are subject to the residency requirement” which didn’t include Limited Liability Companies (LLCs) “or shareholders.” The entities were included in another statute in the same chapter, he said, “showing that the legislature knows how to use LLCs and membership when it wants to in the proper way.” He voiced skepticism about the “ancient” precedents cited by defense counsel which “misuse a legal term that wouldn’t exist for 50 to 100 years.” Murphy concluded that WSLCB rules “regulated what the statute cannot” and would also need to be struck down.
    • Orf-Rodriguez provided the WSLCB response, stating that there was agreement between both parties that “there are no genuine issues of material fact,” and asked Wilson to render a “summary judgment” favorable to the defense (audio - 7m). 
      • Regarding justiciability, Orf-Rodriguez said that Brinkmeyer lacked standing under the "declaratory judgment act." He said the elements of that determination involved whether there was a “possible dormant, hypothetical, or speculative type of dispute” and having endured “substantial and personal” injury “to the litigant.” Orf-Rodriguez assessed the main argument offered by the plaintiff’s counsel was “that Mr. Atkison was planning his estate and, as part of an estate transfer, Mr. Brinkmeyer would receive shares of an equity interest.” As the defense had seen “no estate document” nor evidence offered that Mr. Atkison’s passing “was coming soon” (albeit while acknowledging that Atkison was a cancer survivor), Orf-Rodriguez asserted it was unclear “this injury was going to occur.”
      • Orf-Rodriguez brought up the “reply declarations” which referenced an “immediate transfer that was going to occur” subsequent to initial claims of an “estate transfer.” He found this to be “a contradictory declaration to manufacture standing in this case.” Orf-Rodriguez indicated there was case law covering answers in deposition where “if you give an answer under penalty of perjury in a deposition and then later on...you have a declaration that asserts something different or contradictory, that’s not going to create an issue of fact.” He added that this had included “interrogatories” that contradict a “sworn declaration” given later, and cited the cases of:
        • “Baldwin v. Silver, 165 Wn. App. 463
        • “Hansen Industries v. Katushcow, 168 Wn. App. 278”
        • Department of Labor and Industries...versus Keiser Aluminum 111 Wn. App. 771
        • He concluded that the claims of both estate and immediate transfers meant the court should not consider that argument from the plaintiffs as “an issue of fact for standing.”
      • Considering the privileges and immunities clause, Orf-Rodriguez cited the “Grant County case” which stated that “the term ‘privileges and immunities’ pertain alone to those fundamental rights which belong to the citizens of the state, by reasons of such citizenship.” As an Idaho resident, he asserted that Brinkmeyer couldn’t exercise the privileges and immunities clause. Orf-Rodriguez pointed to Ralph v. The City of Wenatchee, where a license fee “only applied, though, to non-Wenatcheeans, but everyone in Wenatchee didn’t have to subject to this license.” He argued the privilgeges and immunities clause intended to address discrimination between different groups of Washington citizens, “not an Idaho resident.”
      • American citizenship and Washington citizenship were different, stated Orf-Rodriguez, along with the “common sense principle that there’s a set of rights under the U.S. Constitution that you can assert and then the state can confer...state rights.” He cited Colgate v. Harvey as a case describing the “bundle of rights” afforded by each document. Atkison wasn’t a party to the lawsuit, Orf-Rodriguez indicated, “none of those marijuana businesses are parties to lawsuit,” and although Brinkmeyer had previously helped finance them, “none of those businesses are before the court.” The court needed to “take the caption for what it is and all we have is Mr. Brinkmeyer.”
    • Wilson asked Orf-Rodriguez about the “Osman case that Mr. Murphy cited on the question of application of the privileges and immunities clause to an Idaho resident.” Orf-Rodriguez replied that as Osman was not a U.S. citizen “and it's not clear whether he’s a state resident or not, we don’t really have enough facts in that case to....show the question either way.” He believed it mostly demonstrated that a non-U.S. citizen could “be subject to the criminal...laws of Washington and of course that’s true because if you commit a crime here now we have jurisdiction...If Mr. Brinkmeyer came over here and committed a crime...he would have a way to assert his rights then” (audio - 1m).
    • Orf-Rodriguez continued, telling the court that Brinkmeyer did not have a “fundamental right to run a marijuana business” because case law involving liquor had established that individuals do not have rights to that license. Citing a “Spirits and Wine Distributors case,” he read from the Washington Supreme Court opinion: “the ability to sell and distribute spirits does not implicate a privilege under Article 1, Section 12.” Orf-Rodriguez found it sensible for the court to determine “you don’t have a fundamental right to sell or distribute marijuana” and that such a determination would invalidate a privileges and immunities claim by Brinkmeyer (audio - 6m).
      • He argued that federal cases striking down residency requirements mentioned by Murphy were federal “district courts in different states” and had been based on “dormant commerce clause challenges” that shouldn’t be relevant when addressing the Washington state privileges and immunities clause.
      • Orf-Rodriguez reviewed “other cases that talk about liquor and say that you still have to abide by constitutional provisions.” He claimed they were “all old, out-of-state cases” and a litigant still needed to “win on the merits.” Orf-Rodriguez didn’t “think these courts were saying that you can’t assert the rights at all,” but that it “depends on the nature of the constitutional provision.”
      • He asserted that “regardless of RCW 69.[50.]331,” the broader issue Murphy was raising was “whether administrative rules adopted pursuant to a legislative grant...of authority happen and are presumed to be correct.” Orf-Rodriguez contended that if rules were “reasonably consistent with the statute”---noting RCW 69.50.342 empowered WSLCB officials to “supply rules that are consistent with I-502,” which he called “tightly regulated”---they should be held as valid. Citing 150 Wn.2d 881, Campbell v. State (Department of Social and Health Services), he suggested that the residency restriction in rule was a “reasonably consistent rule with that grant of authority.”
      • Orf-Rodriguez’s final point was that lawmakers increased the residency requirement from three to six months in 2015, which he regarded as a tacit “endorsement of this interpretation by the board.” He remained concerned that Brinkmeyer sought “to overturn the will of Washingtonians to have this law,” which he called “an essential part of the industry.”
    • Murphy was granted the opportunity to offer a rebuttal of Orf-Rodriguez’s arguments (audio - 3m).
      • Referring to “Exhibit A to the Masse declaration,” he said that WSLCB had attested to denying “any application that Brinkmeyer submits, so the injury is present.”
      • He denied any inconsistency in his client’s declarations, as none promised a single business transaction. There could be multiple transactions as part of Atkison’s estate planning and “an immediate transaction that is contemplated.” 
      • “Regarding the privileges and immunities clause,” Murphy said the analysis he’d cited was not premised on citizenship, but asked whether “the law grant[ed] a privilege or immunity to a group.” This law did, injuring Brinkmeyer, who sought “to do more business in the state.” Moreover, his existing investment in the cannabis sector “should get him protection by the Washington constitution,” he reasoned.
      • Mentioning the fee in the Tennessee Wine and Spirits Retailers Association v. Thomas case, Murphy stated it hadn’t stopped “anyone from participating in the economy” and ultimately “supports Brinkmeyer’s challenge.” As for the applicability of the dormant commerce clause, he argued that was a process based on “how a regulator interacts with its market” and believed it did support a privileges or immunities claim. He asked the court to “follow the Supreme Court precedent from the state, the United States, and district courts around the country in finding that these residency requirements are not necessary, but are discriminatory.”
  • Wilson rendered her summary judgment, a finding favorable to WSLCB based solely on an interpretation that Brinkmeyer lacked standing to bring the suit (audio - 7m).
    • Wilson outlined her order granting summary judgment, based on the defense’s proposal, saying both attorneys offered “well argued” points in the written documents and testimony to the court. She articulated that the first issue for the court was whether there were any “genuine issues of material fact that preclude the court from ruling as a matter of law.” As the facts of the case were “mostly” agreed upon, Wilson stated that she saw nothing “that would preclude a ruling as a matter of law.”
    • Wilson went over the particular grounds of the suit from Brinkmeyer and his claim of a violation of the state constitution’s privileges and immunities clause due to not being able to take ownership of, nor equity in, retail cannabis licenses even though he was not a Washington resident. Of the four arguments submitted by Murphy, she found “there is not an argument regarding the second and fourth prong[s]” specifically, “that between the parties there are genuine and opposing interests and a judicial determination would be final and conclusive.” The points she found relevant were whether the case concerned “an actual present or existing dispute rather than a possible, hypothetical, or speculative” one and that the involved interests were “direct and substantial.”
    • For justiciability, Wilson said “the court finds...that the fact that the residency requirement is right now preventing Mr. Brinkmeyer from receiving equity compensation based upon his non-status as a Washington resident...is enough to satisfy the justiciability test in the two issues that are raised.” The case presented a “justiciable controversy,” she affirmed.
    • The other relevant argument to Wilson was “whether Mr. Brinkmeyer may advance a state privilege and immunities clause argument.” She said the court interpreted three prior cases, Martinez-Cuevas v. DeRuyter Brothers Dairy, Inc., State v. A.P. Vance, and E.R. Ralph v. The City of Wenatchee, as “indications and holdings that our appellate courts indicate that the state constitution privileges and immunities clause applies to Washington citizens.” Because Brinkmeyer was not a citizen of the state, she announced, “the court does not proceed to the rest of the grounds” and her analysis would not address the other points raised by his suit.
    • Wilson was mindful of Murphy’s argument that his client should be “entitled to the protection” given the precedent of State v. Osman, but she observed that it was a criminal case “distinguishable” from Brinkmeyer’s situation.
    • “Issues related to the federal dormant commerce clause,” could be advanced in a federal trial, Wilson reported, as that court had “retained jurisdiction” over that clause even as Brinkmeyer’s suit was returned to state court.
    • After reviewing the proposed order from the defense, Wilson chose to use it “to capture my decision” while “striking letter A, letter C, and letter D” under the proposal’s second point on whether the residency requirement is unconstitutional. She found only letter B, establishing that Brinkmeyer wasn’t a resident, to be a relevant point. Wilson also struck the proposal’s third point on whether WSLCB staff had exceeded their authority in crafting the residency rule since her ruling related to “what was captured as 2B” which became the second point of her order.
    • Granted an opportunity for clarifying questions, Murphy asked Wilson about the “statutory interpretation argument” to which she replied that her “threshold ruling...precludes the need to address any subsequent rulings” (audio - <1m). Orf-Rodriguez requested a copy of Wilson’s order (audio - 1m).
    • Washington court rules of appellate procedure permit Brinkmeyer’s attorneys to file either a “discretionary review” within 15 days, or a “notice of appeal” that can be filed “30 days after the entry of the decision of the trial court.” At publication time, Cannabis Observer had not identified any appeal documentation.

Information Set