All Natural Herbs, Llc, V. State Liquor And Cannabis Board ( 2021 )

Filed
Washington State
Court of Appeals
Division Two
June 8, 2021
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
ALL NATURAL HERBS, LLC, No. 54083-5-II
Appellant,
v.
WASHINGTON STATE LIQUOR AND UNPUBLISHED OPINION
CANNABIS BOARD,
Respondent.
WORSWICK, J. — All Natural Herbs, LLC, (ANH) appeals a superior court order denying
ANH’s petition for review under the Administrative Procedures Act (APA).1 ANH applied for a
recreational cannabis license but was assigned a low-priority designation by the State Liquor and
Cannabis Board’s Licensing and Regulation Division (the agency) and has yet to receive a
license. ANH first petitioned for review of the agency’s determination in 2016, and disputes a
final order of the Liquor and Cannabis Board (the Board). ANH’s overarching argument is that
the agency missed its 90-day statutory deadline to notify ANH that it had commenced
adjudicative proceedings after ANH requested review under RCW 34.05.413 and RCW
34.05.419.2
1
Chapter 34.05 RCW.
2
RCW 34.05.413 establishes when an agency shall commence an adjudicative proceeding and
what constitutes commencing that proceeding. RCW 34.05.419 mandates timelines for the
agency on application for adjudication.
No. 54083-5-II
ANH’s 22 assignments of error fall into five categories: (1) the agency failed to commence
an adjudicative proceeding within 90 days, and thus, by operation of default, ANH is entitled to a
recreational cannabis license; (2) the Board violated ANH’s due process rights; (3) RCW
34.05.419 and the agency’s licensing rule were unconstitutional as applied; (4) the Board’s March
2017 final order was an unconstitutional prior restraint under the First Amendment; and (5) the
agency unconstitutionally discriminated on the basis of race. We hold that the agency timely
commenced an adjudicative proceeding and that ANH fails to show that the Board or agency
violated ANH’s constitutional rights. Accordingly, we affirm.
FACTS
I. MARIJUANA LICENSING SCHEME IN 2015
In 2015, Washington merged its existing medical marijuana market with the new retail
marijuana industry. Laws of 2015, ch. 70 (codified in part of chapter 69.50 RCW). Due to the
limited number of licenses available, the Legislature implemented former RCW 69.50.331(1)(a)
in 2015, which required the Board to assign Priority 1, 2, or 3 status to applicants for the new
licenses. Former RCW 69.50.331(1)(a) (2015); see also former WAC 314-55-081 (2015); WSR
15-19-165. The Board then created rules implementing the priority determination system to
specify the criteria for applicants. Former WAC 314-55-020 (2015). Applicants were to be
processed for licensure in order of priority and by date of application submission. Former WAC
314-55-020(3) (2015). Priority 1 applicants were more likely to receive a license because the
agency processed these applications first. See Top Cat Enters., LLC v. City of Arlington, 11 Wn.
App. 2d 754, 756, 455 P.3d 225 (2020).
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No. 54083-5-II
The Board accepted license applications under this scheme between October 12, 2015
and March 31, 2016, and received more than 2500 applications for 222 available licenses. The
agency collected applicants’ documentation and assigned a priority determination. It was under
this scheme that ANH sought a retail marijuana license. To achieve a Priority 1 designation, an
applicant was required to, among other things, operate or be employed by a collective garden
before January 1, 2013. Former RCW 69.50.331(a)(i).
II. ALL NATURAL HERBS’ APPLICATION
Il Yi, the owner of ANH, had experience in the cannabis industry going back to 2011 that
was relevant to being able to apply for a license under the 2015 scheme.3 Yi was employed by a
cannabis organization doing business as The Healing Center of Tacoma. Yi received a W-2 tax
form for 2011 showing him as an employee of The Healing Center of Tacoma.
The Healing Center of Tacoma was a collective cannabis garden. Under the medical
marijuana scheme, collective gardens existed “for the purpose of producing, processing,
transporting, and delivering cannabis for medical use.” Former RCW 69.51A.085(1) (2011).
However, the statute governing collective gardens imposed certain conditions, including:
“No useable cannabis from the collective garden is delivered to anyone other than one of the
qualifying patients participating in the collective garden.” Former RCW 69.51A.085(1)(e)
(2011).
Although Yi was employed by The Healing Center of Tacoma, the business repeatedly
reported to the Secretary of State that it was not doing business between 2011 and 2013. Despite
the Department of Revenue reporting that The Healing Center was up to date on its excise taxes,
3
Yi is Korean-American.
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No. 54083-5-II
the record also shows that The Healing Center filed no wage information with the State
Employment Security Department and paid no taxes before April 2016. The owner of The
Healing Center also admitted that he had not paid the company’s taxes. Moreover, the
Department of Labor and Industries had no account for covered employees on file for The
Healing Center of Tacoma.
In 2012, Yi started his own medical cannabis business, Natural 7, LLC. Yi later formed a
second LLC, ANH.
On March 27, 2016, four days before the end of the application period, ANH filed an
application for a retail marijuana license, which Yi completed by filing a Priority Verification
Form and providing other documentation on April 7. Despite personally operating as Natural 7
previously, Yi listed The Healing Center of Tacoma as the predecessor entity on ANH’s license
application. On April 21, the agency notified ANH it had been assigned Priority 3 status.
On April 27, ANH sent a letter requesting the agency change its status to Priority 1, or in
alternative, provide an explanation for its Priority determination. The letter contained a typo
conflating Priority 1 and Priority 3 that confused agency staff. As a result, the agency records
staff asked for clarification.
On May 4, ANH responded by email and requested documents explaining the Priority
determination. A timeline and synopsis of the emails exchanged between ANH and the agency
follows:
12:43 pm – ANH sent an email to clear up the confusion about its letter. The email stated
that ANH was seeking information explaining why it was not assigned Priority 1.
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No. 54083-5-II
The email stated, “This information will be used for an appeal.” Clerk’s Papers
(CP) at 406-07.
4:05 pm – A Deputy Director of Licensing and Regulation from the agency responded,
“We will consider it a public records request and a request for appeal, but we need
the license number.” CP at 406.
6:46 pm – ANH replied: “The letter was not necessarily intended to be an appeal, as it
was hoped the [Board] would explain its reasoning or change our priority status to
Priority 1.” Later in the same email, ANH stated, “However, that all said, since it
appears the [Board] is not changing our status from Priority 3 to Priority 1, nor
providing any written explanation as to why . . . then this email/letter does
constitute a notice of appeal.” CP at 405.
On May 24, 2016, the agency sent ANH a “Statement of Intent for Priority
Determination” that explained the agency’s reasoning for assigning Priority 3. The Statement
assigned ANH a case number, M-26,119. In this same mailing, the agency also included a
standard “Request for Hearing” form that informed ANH of its procedural rights and had a box
that the recipient could check to request a hearing. On June 15, the agency received this form
from ANH with the box requesting a hearing checked.
On June 17, the agency responded in a letter stating: “This letter is being sent to you to
acknowledge the receipt of a request for a hearing. The matter is being forwarded to the Office
of the Attorney General.” CP at 388. Following this letter, the parties exchanged emails on
July 12, and discussed whether a hearing had been scheduled. When ANH asked the agency if a
hearing date had been scheduled, the agency responded:
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No. 54083-5-II
No . . . there is no hearing scheduled in this case. Cases are typically evaluated and
scheduled as soon as possible within the competing priorities, and I know of no
reason for inordinate delay in this case. As soon as OAH [Office of Administrative
Hearings] assigns a date, I’m sure you’ll be contacted.
CP at 420. On August 31, the Attorney General’s office (AGO) forwarded case number
M-26,119 to the OAH for assignment to an administrative law judge (ALJ).
On September 9, the OAH sent ANH a Notice of Prehearing Conference, which notified
ANH that an ALJ would conduct a prehearing conference on October 25. On October 24, ANH
moved for summary judgment arguing that the agency had failed to commence adjudicative
proceedings within 90 days of ANH’s request and therefore lacked jurisdiction over its
application. At the October 25 prehearing conference, the parties agreed that the sole issue
before the ALJ would be whether the Board or OAH had jurisdiction over the proceedings, given
ANH’s timeliness claim.
On December 22, the ALJ held a hearing on the summary judgment issue. On January 4,
2017, the ALJ granted ANH’s motion for summary judgment, reversed the agency’s Statement
of Intent for Priority Determination, and remanded the issue to the agency for further review.
The ALJ ruled that the agency “lack[ed] subject matter jurisdiction” because it “failed to timely
request commencement of an adjudicatory proceeding” under RCWs 34.05.413 and 34.05.419.
CP at 41. The ALJ further ruled that neither the May 24, June 17, nor July 12, 2016,
communications constituted the commencement of an adjudicative proceeding as required by
statute. On January 24, the agency sought Board review.
On March 21, 2017, the Board issued its final order. The Board found that the June 17,
2016 letter marked the commencement of the adjudicative hearing because it began preparation
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No. 54083-5-II
for a hearing. As for the communication between ANH and the agency before June 17, the
Board explained:
The prior communications about the priority determination were informal.
Licensing properly did not consider those communications as a request for hearing
by the licensee that begins the hearing process. Those communications did provide
notice to Licensing that the applicant wanted an appeal, resulting in the preparation
of the Statement of Intent for Priority Determination. The Statement of Intent was
mailed on May 24, 2016 along with the Request for Hearing form and the cover
letter that advised the applicant of the timelines for requesting a hearing.
CP at 468 (Conclusion of Law 4.4) (emphasis in original).
The Board explained that the agency’s June 17 letter therefore commenced adjudicative
proceedings under the APA. “Applicant requested an adjudicative proceeding when it filed the
Request for Hearing with the Board on June 15, 2016. Licensing’s June 17, 2016 letter notified
the applicant that the Request for Hearing had been received and commenced the hearing
process.” CP at 468. The Board reasoned that the letter commenced the adjudicative proceeding
under RCW 34.05.413(5) because it notified ANH of an “other stage of an adjudicative
proceeding” as specified in the statute. RCW 34.05.413(5);4 CP at 468-69.
The Board also determined that the agency did not lack subject matter jurisdiction and
reversed the ALJ’s summary judgment ruling. The Board ruled that ANH could not have
requested an appeal until it received the agency’s May 24 Statement of Intent for Priority
4
RCW 34.05.413(5) provides: “An adjudicative proceeding commences when the agency or a
presiding officer notifies a party that a prehearing conference, hearing, or other stage of an
adjudicative proceeding will be conducted.”
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No. 54083-5-II
Determination. The Board reasoned that the agency’s May 24 Statement of Intent letter served
as a “charging document” that provided ANH the “ability to request a hearing.”5 CP at 468, 470.
Because the ALJ had decided the case on procedural grounds (summary judgment), the
Board remanded to the Licensing Division “for consideration of the documents provided by the
Applicant, as potentially supplemented during the hearing process, for a new priority
determination and notice of hearing rights, if appropriate.” CP at 472-73. The Board also gave
ANH the “opportunity to again request a hearing if so desired.” CP at 473.
On April 27, 2017, after remand, the agency sent ANH a new Priority Determination and
blank Request for Hearing form. The agency also assigned ANH a new case number (M-26,505)
and again determined that ANH was Priority 3. ANH again requested a hearing.
An ALJ held hearings in October 2017 and February 2018. At the October hearing, the
owner of a separate collective garden site, The Healing Center of Olympia, testified that he had
purchased and received several pounds of cannabis each month from The Healing Center of
Tacoma. At the February hearing, the owner of the Healing Center of Tacoma confirmed that it
had delivered cannabis to other collective gardens.
Yi also testified at the February hearing. He explained that four other entities near
ANH’s location were licensed immediately after ANH’s initial Priority 3 determination.
Yi testified that he knew the owners of these shops and that they were all Caucasian. When Yi
was being cross-examined by the agency, the following exchange occurred:
5
The Board based this conclusion on Hutmacher v. Bd. of Nursing, 81 Wn. App. 768, 915 P.2d
1178 (1996).
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No. 54083-5-II
Q: So you remember Ms. McShane’s testimony?[6] It was a long time ago. And she
testified that race played no role in the [agency’s] decision, so what evidence do
you have that race did play a role?
A: I’m not claiming that race played a role.
Administrative Record (AR) at 657.
In a May 31, 2018 initial order, the ALJ affirmed the Priority 3 determination for case
M-26,505.7 The ALJ analyzed whether the agency had correctly determined ANH’s priority
designation under the controlling laws, former RCW 69.51A.330 and former WAC 314-55-020.
To achieve a Priority 1 designation under those laws, an applicant was required to, among other
things, operate or be employed by a collective garden before January 1, 2013. Former RCW
69.50.331(a)(i). The ALJ concluded that the agency correctly determined that Yi’s former
employer, the Healing Center of Tacoma, did not qualify as a collective garden as defined in
former RCW 69.51A.085. Thus, the ALJ concluded that the agency properly determined ANH’s
priority.
ANH petitioned for review by the Board, and the Board issued a final order on July 24,
2018. The Board affirmed the ALJ’s initial order, adopted the ALJ’s findings of fact and
conclusions of law, and upheld ANH’s Priority 3 designation.
On August 23, 2018, ANH filed a petition for Judicial Review and Declaratory Judgment
in superior court. The superior court denied ANH’s petition for review on November 1, 2019.
ANH appeals all of the orders issued in this case.
6
Jeanne McShane was the Deputy Director of Licensing at the agency at the time of ANH’s
application.
7
The ALJ also determined it did not have jurisdiction over ANH’s challenge of the 90-day rule
or ANH’s due process claims.
9
No. 54083-5-II
ANALYSIS
ANH has appealed five orders: (1) the ALJ’s January 4, 2017 initial order granting ANH
summary judgment and remanding the matter to the agency, (2) the Board’s March 21, 2017
final order reversing the ALJ’s initial order granting summary judgment and remanding to the
agency, (3) the ALJ’s March 31, 2019 initial order affirming the agency’s Priority 3
determination, (4) the Board’s July 24, 2018 final order affirming the ALJ’s initial order and the
Priority 3 designation, and (5) the superior court’s November 1, 2019 order denying ANH’s
petition for review.
ANH argues that the agency missed its 90-day statutory deadline to notify ANH that it
had commenced an administrative proceeding to review its Priority 3 determination. ANH
assigns error to all but one of the Board’s conclusions of law from its March 21, 2017 final order
remanding the matter to the agency. ANH also assigns error to all findings of fact and
conclusions of law from the Board’s May 31, 2018 initial order and July 24, 2018 final order,
arguing that those orders are void. ANH also argues that its rights were violated under the due
process and equal protection clauses of the Fourteenth Amendment and that the Board’s March
21, 2017 final order was an unconstitutional prior restraint under the First Amendment. As a
remedy, ANH requests that we void all of the Board’s orders, issue ANH a Priority 1
determination, and issue it a retail cannabis license at a qualified location of its choosing.
We hold that the agency began the adjudicative proceeding within 90 days and that the
agency did not violate ANH’s constitutional rights. We also hold that the agency did not
unconstitutionally discriminate on the basis of race. Accordingly, we affirm.
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I. TIMELINESS OF LICENSING DIVISION’S COMMENCEMENT OF ADJUDICATIVE PROCEEDINGS
ANH argues that the agency missed its 90-day statutory deadline to notify ANH that it
had commenced an administrative proceeding. ANH argues that the agency was therefore in
default and prohibited from opposing ANH’s appeal to the Board. The agency argues that it
timely commenced an adjudicative proceeding because it assigned ANH a case number on June
17, 2016, and notified ANH that it had received its request for an adjudicative proceeding. We
agree that the agency timely commenced an adjudicative proceeding, but hold that the agency’s
July 12 communications notified ANH that the agency had commenced the proceeding.
A. Legal Principles
Here, we review the agency’s actions under the APA to determine if it complied with the
statute. We review issues of statutory interpretation de novo. Fortgang v. Woodland Park Zoo,
187 Wn.2d 509, 518, 387 P.3d 690 (2017). When interpreting a statute, we determine legislative
intent from the plain language and ordinary meaning of the statute. City of Spokane v. County of
Spokane, 158 Wn.2d 661, 673, 146 P.3d 893 (2006). Our inquiry ends where a statute is plain
and unambiguous. HomeStreet, Inc. v. Wash. Dep’t of Revenue, 166 Wn.2d 444, 451, 210 P.3d
297 (2009).
When reviewing an agency’s decision under the APA, we review the record before the
Board, and sit in the same position as the superior court. Am. Waterways Operators v. Dep’t of
Ecology, 7 Wn. App. 2d 808, 815-16, 435 P.3d 856 (2019). We “review only the board’s
decision, not the ALJ’s decision or the superior court’s ruling.” Marcum v. Dep’t of Soc. &
Health Servs., 172 Wn. App. 546, 559, 290 P.3d 1045 (2012). We review the Board’s legal
conclusions de novo under the “error of law” standard. Marcum, 172 Wn. App. at 559; RCW
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No. 54083-5-II
34.05.570(3)(d). We examine the record on appeal and will uphold an agency’s factual findings
if they are supported by substantial evidence. Marcum, 172 Wn. App. at 560. We will uphold
the Board’s contested factual findings if supported by substantial evidence. Marcum, 172 Wn.
App. at 560.
The APA applies to the Liquor and Cannabis Board and establishes our review of agency
action. RCW 34.05.030(5); RCW 34.05.010(2); RCW 34.05.510. “Agency action” includes
“licensing, [and] the implementation or enforcement of a statute.” RCW 34.05.010(3).
The APA provides:
“Adjudicative proceeding” means a proceeding before an agency in which an
opportunity for hearing before that agency is required by statute or constitutional
right before or after the entry of an order by the agency. Adjudicative proceedings
also include all cases of licensing . . . in which an application for a license . . . is
denied except as limited by RCW 66.08.150.
RCW 34.05.010(1). An applicant for a license before the Liquor and Cannabis Board may
demand a hearing. RCW 66.08.150(3).
The APA lists when a court may grant relief when reviewing adjudicative proceedings,
explaining that a court
shall grant relief from an agency order in an adjudicative proceeding only if it
determines that: (a) The order, or the statute or rule on which the order is based, is
in violation of constitutional provisions on its face or as applied; (b) The order is
outside the statutory authority or jurisdiction of the agency conferred by any
provision of law; (c) The agency has engaged in unlawful procedure or decision-
making process, or has failed to follow a prescribed procedure; (d) The agency has
erroneously interpreted or applied the law; (e) The order is not supported by
evidence that is substantial when viewed in light of the whole record before the
court, which includes the agency record for judicial review, supplemented by any
additional evidence received by the court under this chapter; . . . [or] (i) The order
is arbitrary or capricious.
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No. 54083-5-II
RCW 34.05.570(3). “The burden of demonstrating the invalidity of agency action is on the party
asserting invalidity.” RCW 34.05.570(1)(a).
The APA mandates agency action on receipt of an application for an adjudicative
proceeding. It provides:
(1) Except in situations governed by subsection (2) . . . of this section, within ninety
days after receipt of the application or of the response to a timely request made by
the agency under subsection (2) of this section, the agency shall do one of the
following:
(a) Approve or deny the application, in whole or in part, on the basis of brief or
emergency adjudicative proceedings, if those proceedings are available under this
chapter for disposition of the matter;
(b) Commence an adjudicative proceeding in accordance with this chapter; or
(c) Dispose of the application in accordance with RCW 34.05.416;
(2) Within thirty days after receipt of the application, the agency shall examine the
application, notify the applicant of any obvious errors or omissions, request any
additional information the agency wishes to obtain and is permitted by law to
require, and notify the applicant of the name, mailing address, and telephone
number of an office that may be contacted regarding the application . . . .
RCW 34.05.419(1), (2).
The APA also mandates when an agency is required to hold an adjudicative proceeding:
(2) When required by law or constitutional right, and upon the timely application
of any person, an agency shall commence an adjudicative proceeding.
(3) An agency may provide forms for and, by rule, may provide procedures for
filing an application for an adjudicative proceeding. An agency may require by rule
that an application be in writing and that it be filed at a specific address, in a
specified manner, and within specified time limits. . . .
...
(5) An adjudicative proceeding commences when the agency or a presiding officer
notifies a party that a prehearing conference, hearing, or other stage of an
adjudicative proceeding will be conducted.
RCW 34.05.413.
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B. Agency’s Timeliness under RCW 34.05.413 and 34.05.419
ANH argues that the Board’s March 21, 2017 final order erroneously interpreted and
applied RCWs 34.05.413 and 34.05.419. ANH argues that its May 4, 2016, email was a request
for an adjudicative proceeding which began the 90-day window for the agency to act under RCW
34.05.419(1). ANH then argues that the agency did not commence an adjudicative proceeding
under RCW 34.05.413(5) until the agency’s September 9 prehearing conference scheduling,
falling outside the 90-day window and thus being untimely.
The agency argues that it was not until June 15, the date the completed agency-provided
Request for Hearing form was received by the agency, that ANH requested an adjudicative
proceeding. The agency then argues that it commenced an adjudicative proceeding under RCW
34.05.413(5) on June 17, when it assigned a Liquor and Cannabis Board case number
(M-26,119) and sent ANH a letter informing it that the agency had received ANH’s Request for
Hearing form. Although we agree with ANH that it requested an adjudicative proceeding on
May 4, we disagree with both parties regarding the date the agency commenced the adjudicative
proceeding.
1. ANH’s Request for an Adjudicative Proceeding was Effective May 4, 2016.
AHN argues that it requested an adjudicative proceeding on May 4. ANH argues that the
Board erred when it found that ANH requested the adjudicative proceeding on June 15. We
agree.
The APA provides timelines for the adjudicative process. “When required by law or
constitutional right, and upon the timely application of any person, an agency shall commence an
adjudicative proceeding.” RCW 34.05.413(2). After a timely application, the agency shall
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No. 54083-5-II
“commence an adjudicative proceeding” within 90 days of receipt of the application.
RCW 34.05.419(1)(b). “The agency shall allow at least twenty days to apply for an adjudicative
proceeding from the time notice is given of the opportunity to file such an application.”
RCW 34.05.413(3).
ANH received notification from the agency that it had been assigned Priority 3 on April
21, 2016. On April 27, ANH sent the agency a letter requesting an explanation for the agency’s
decision. On May 4, ANH and the agency exchanged emails regarding whether or not ANH’s
April 27 letter constituted an appeal or a public records request. There was a scrivener’s error in
ANH’s April 27 letter, which ANH corrected in an email on May 4.
In the May 4 email, ANH explained to the agency that it was asking for supporting
documentation on the agency’s decision not to grant ANH Priority 1. It stated, “This
information will be used for an appeal.” A Deputy Director of Licensing and Regulation from
the agency responded, “We will consider it a public records request and a request for an appeal,
but we need the license number.”
In response, ANH explained, “The [April 27] letter was not necessarily intended to be an
appeal, as it was hoped the LCB would explain its reasoning or change our priority status to
Priority 1.” But ANH then stated, “[S]ince it appears the LCB is not changing our status from
Priority 3 to Priority 1, nor providing any written explanation as to why . . . then this email/letter
does constitute a notice of appeal.”
ANH’s May 4 email was within 20 days of the agency’s April 21 notice that ANH was
assigned Priority 3, and was therefore within the 20-day minimum the agency must grant a party
to apply for an adjudicative proceeding under RCW 34.05.413(3). Thus, the unambiguous
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No. 54083-5-II
language of ANH’s May 4 email stating that the “email/letter does constitute a notice of appeal”
was a timely application for an adjudicative proceeding under the clear language of RCW
34.05.413(2). Accordingly, May 4 started the 90-day window for the agency to act under RCW
34.05.419(1).
The agency argues that ANH did not request an adjudicative proceeding until June 15,
2016, when it returned the Request for Hearing form. We disagree.
The APA provides:
An agency may provide forms for and, by rule, may provide procedures for filing
an application for an adjudicative proceeding. An agency may require by rule that
an application be in writing and that it be filed at a specific address, in a specified
manner, and within specified time limits.
RCW 34.05.413(3).
The agency argues that under RCW 34.05.413(3) it has the authority to “provide forms”
to be used in filing an “application for an adjudicative proceeding,” and that ANH therefore did
not request an adjudicative proceeding until it returned the Request for Hearing form. But the
agency ignores the rest of RCW 34.05.413(3).
We review issues of statutory interpretation de novo. Fortgang, 187 Wn.2d at 518. We
determine legislative intent from the plain language and ordinary meaning of the statute. City of
Spokane, 158 Wn.2d at 673.
Although the agency “may provide forms for” filing an adjudicative proceeding, it also
“by rule, may provide procedures for filing an application” and “may require by rule that an
application be in writing and that it be filed . . . in a specified manner.” RCW 34.05.413(3)
(emphasis added). Because “by rule” precedes the permission the statute grants to the agency,
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the plain language and ordinary meaning of the statute requires the agency to use rulemaking if it
wishes to mandate that applicants use a particular procedure to file an application.
The agency has promulgated no rules providing for application procedures or specifying
that appeals must be in writing or filed in a specified manner. Thus, although the agency
provided a form to ANH on May 24, ANH was not required to use that form to initiate its request
for an adjudicative proceeding.
The agency attempts to circumvent the APA’s rulemaking requirement by leaning on the
statutory language that it “may provide” a form for requesting an adjudicative proceeding. It
echoes the Board’s conclusion of law 4.4 from March 21, 2017, and calls the May 4
correspondence with ANH “informal.” The agency argues that using the form could eliminate
uncertainty about the date a hearing request was initiated. And indeed it may. But if the agency
seeks to provide uniform “procedures for filing an application for an adjudicative proceeding,”
the statute clearly requires it engage in rulemaking to do so. To hold otherwise would allow
agencies to avoid rulemaking to mandate the procedures as required by RCW 34.05.413(3) by
simply drafting a form.
Although the agency may provide a form as an aid to applicants, it cannot require its use
as the “specified manner” to apply without promulgating a rule. Accordingly, ANH’s May 4
email, and not the June 15 Request for Hearing form constituted ANH’s request for an
adjudicative proceeding.
2. The Agency Timely Commenced Adjudicative Proceeding on July 12, 2016.
ANH argues that the Board erroneously ruled that the agency’s May 24 Statement of
Intent letter served as a “charging document,” such that ANH could not request a hearing before
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No. 54083-5-II
its issuance, and that ANH did not request a hearing until it submitted the agency-provided form;
that the Board erred when it ruled that the agency commenced the adjudicative proceeding with
its June 17, 2016, letter; and that the September 9, 2016, Notice of Prehearing Conference
commenced adjudicative proceedings. The agency argues that the Board properly ruled that it
commenced adjudicative proceedings on June 17.
We agree with ANH that the Board erred when it ruled that the June 17 letter commenced
adjudicative proceedings and that it erred in ruling the May 24 Statement of Intent provided
ANH the ability to request a hearing. However, we disagree with both ANH and the agency
regarding the date adjudicative proceedings commenced and hold that the agency commenced
adjudicative proceedings on July 12.
a. May 24, 2016 Statement of Intent
ANH argues that the Board erred when it ruled the agency’s May 24 Statement of Intent,
which included the blank Request for Hearing form, served as a “charging document” and that
ANH’s request for adjudication could follow only therefrom. We agree.
As explained above, under RCW 34.05.413(3), although an agency “may provide forms”
for an applicant to request an adjudication, an agency may mandate that applicant use such a
form only if the agency has promulgated a rule requiring such procedure. Thus, the Board erred
when it determined that ANH did not request an adjudicative hearing until it returned the
agency-provided Request for Hearing form on June 17.
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No. 54083-5-II
i. Statement of Charges under Hutmacher v. State Board of Nursing
The agency argues that the Board correctly relied on Hutmacher v. State Board of
Nursing, 81 Wn. App. 768, 915 P.2d 1178 (1996), when it determined the May 24 Statement of
intent served as a “charging document.” We disagree.
In Hutmacher, the Board of Nursing moved to remove a nurse’s license after she illegally
obtained drugs. 81 Wn. App. at 770. The Board issued a “Statement of Charges” against the
nurse. Hutmacher, 81 Wn. App. at 770. Hutmacher filed a response within 20 days, but did not
contest the charges. Hutmacher, 81 Wn. App. at 770. The Board did not commence a hearing
until more than a year after it issued the Statement of Charges. Hutmacher, 81 Wn. App. at 770.
Hutmacher appealed, arguing that the Board lost jurisdiction over her case by failing to take
action within 90 days of her answer to the Statement of Charges. Hutmacher, 81 Wn. App. at
771. Division I of this court held that the Board’s Statement of Charges commenced the
adjudicative proceeding. Hutmacher, 81 Wn. App. at 772.
This case is distinguishable. The agency’s May 24 letter was not a Statement of Charges,
but an explanation of why ANH was assigned as Priority 3 to receive a cannabis license. ANH
had filed a challenge to the Priority determination under RCW 34.05.413. In Hutmacher, it was
the agency who filed a disciplinary action against the nurse. This is not a disciplinary action
requiring a statement of charges; the action here was initiated by the applicant. Accordingly,
Hutmacher is inapplicable.
ii. 30-Day Deadline under RCW 34.05.419(2)
ANH also appears to argue that the agency failed to satisfy the APA’s 30-day
requirement imposed under RCW 34.05.419(2). We disagree.
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No. 54083-5-II
The APA provides:
(1) Except in situations governed by subsection (2) . . . of this section, within ninety
days after receipt of the application or of the response to a timely request made by
the agency under subsection (2) of this section, the agency shall . . . (b) Commence
an adjudicative proceeding in accordance with this chapter . . . .
(2) Within thirty days after receipt of the application, the agency shall examine the
application, notify the applicant of any obvious errors or omissions, request any
additional information the agency wishes to obtain and is permitted by law to
require, and notify the applicant of the name, mailing address, and telephone
number of an office that may be contacted regarding the application . . . .
RCW 34.05.419(1), (2).
ANH argues that the May 24, 2016 Statement of Intent could not satisfy both the 30-day
requirement of RCW 34.05.419(2) and the 90-day requirement of subsection (1). It argues that
one letter fulfilling both requirements would render RCW 34.04.419(1)’s 90-day requirement
superfluous. But that is not what happened here.
Here, the agency’s May 24 Statement of Intent was an explanation of its Priority 3
determination as requested by ANH. It did not serve as a notification under RCW 34.04.419(2)
because subsection (2) applies only when an agency requires more information from the
applicant to initiate the proceeding. Indeed, subsection (2) applies only where subsection (1)
does not because subsection (1) states it applies “[e]xcept in situations governed by subsection
(2).” Thus the 30-day deadline does not apply here.
b. June 17, 2016 Letter and July 12, 2016 E-mails
ANH argues that the Board erred when it ruled that the agency commenced the
adjudicative proceeding with its June 17, 2016 letter. ANH also appears to argue that the July 12
emails it exchanged with the agency did not commence an adjudicative proceeding under RCW
34.05.413(5). The agency argues that the Board properly ruled that it commenced adjudicative
20
No. 54083-5-II
proceedings on June 17. We hold that the July 12, 2016 emails commenced the adjudicative
proceedings.
Under RCW 34.05.413(5), “[a]n adjudicative proceeding commences when the agency or
a presiding officer notifies a party that a prehearing conference, hearing, or other stage of an
adjudicative proceeding will be conducted.” When interpreting a statute, we determine
legislative intent from the plain language and ordinary meaning of the statute. City of Spokane,
158 Wn.2d at 673. Our inquiry ends where a statute is plain and unambiguous. HomeStreet,
Inc., 166 Wn.2d at 451.
The interpretation of RCW 34.05.413 as it applies to license applicants and agency
timeliness is a matter of first impression before us. Neither ANH nor the agency cite any
relevant cases to support their arguments regarding RCW 34.05.413(5).
The June 17 letter read, in pertinent part, “This letter is being sent to you to acknowledge
receipt of a request for a hearing. The matter is being forwarded to the Office of the Attorney
General.” CP at 388. The letter advised ANH only that the agency received ANH’s request for a
hearing and which office ANH could expect to hear from. It did not mention or notify ANH of
any adjudicative proceeding, nor any conference, prehearing, schedule, or potential schedule.
There was no language in the letter that suggested that any “other stage of an adjudicative
proceeding will be conducted.” RCW 34.05.413(5).
The agency argues that the June 17 letter commenced an adjudicative proceeding because
it assigned a Liquor and Cannabis Board case number and informed ANH that its request was
being forwarded to the AGO. The agency argues that forwarding the matter to the AGO
constituted a “stage of an adjudicative proceeding.” But the agency had already assigned ANH a
21
No. 54083-5-II
case number, as displayed on its May 24 Statement of Intent. Even then, it would have been
possible for the agency to assign a case number and never proceed to schedule a hearing or other
proceeding. Thus, assigning a case number was not an “other stage of an adjudicative
proceeding.”
Likewise, informing ANH that the matter was being forwarded to the AGO signals
nothing to ANH regarding an adjudicative proceeding. The agency explains that referral to the
AGO is an “essential step” in proceeding towards adjudication because the AGO then sends the
case to the Office of Administrative Hearings (OAH), who then assigns an ALJ. But forwarding
the case to the AGO did not signal a step towards an adjudicative proceeding. It provided no
notice to ANH that an adjudicative hearing was forthcoming. Thus, the June 17 letter did not
clearly notify ANH that a stage of an adjudicative proceeding was going to be conducted.
Accordingly, the June 17 letter did not commence an adjudicative proceeding under RCW
34.05.413(5).
However, on July 12, ANH emailed the agency and asked if a hearing date had been
scheduled. The agency responded:
No . . . there is no hearing scheduled in this case. Cases are typically evaluated and
scheduled as soon as possible within the competing priorities, and I know of no
reason for inordinate delay in this case. As soon as OAH assigns a date, I’m sure
you’ll be contacted.
CP at 420.
Although this correspondence does not schedule a stage of an adjudicative proceeding, it
does notify ANH of the next stage in the adjudicative process. Crucially, RCW 34.05.413(5)
states that an adjudicative proceeding commences when an agency notifies a party “that” a stage
of an adjudicative proceeding will be conducted, not “when” it will be conducted. The agency’s
22
No. 54083-5-II
email does so by informing ANH (1) what may be causing any delay in scheduling (2) that
inordinate delay is not expected, (3) that ANH will be contacted when its case is scheduled, and
(4) who will be contacting it (OAH). It notifies ANH what the next stage of the adjudication will
be—in this case, the first stage. Thus, the agency’s email notified ANH that a stage of an
adjudicative proceeding would be conducted. RCW 34.05.413(5). Therefore, we hold that the
July 12 email commenced the adjudicative proceeding for the purposes of RCW 34.05.413(5).
As explained in Part 1 above, ANH’s May 4 email started the 90-day window for the
agency to act under RCW 34.05.419(1). July 12 is within 90 days of May 4. Thus, the agency
timely commenced an adjudicative proceeding under RCW 34.05.419(1)(b).8
C. Cannabis License Requirements under Former RCW 69.51A.085 (2011) and Former
WAC 314-55-020 (2015)
ANH next argues that the Board erred when it adopted the agency’s interpretation of
former RCW 69.51A.085 and former WAC 314-55-020 in its March 2017 final order. ANH
argues that it was denied Priority 1 determination because the Board erroneously held that Yi had
to show commercial and business activity for the Healing Center of Tacoma. We disagree.
We interpret the meaning of a statute de novo, and where a statute is ambiguous, we defer
to the agency’s interpretation of a statute within its expertise. Port of Seattle v. Pollution Control
Hearings Bd., 151 Wn.2d 568, 593, 90 P.3d 659 (2004). When reviewing an agency’s decision
under the APA, we review the Board’s legal conclusions de novo under the “error of law”
8
ANH also appears to argue that the actions of an assistant attorney general may not commence
an adjudicative proceeding because “attorney general” is excluded from the definition of
“agency” in the APA. But just because the AGO is not an agency for the purposes of the APA
does not mean that they cannot do business on behalf of an agency or the OAH.
23
No. 54083-5-II
standard, not the ALJ’s or the superior court’s ruling, and we may substitute our view for that of
the Board. Marcum, 172 Wn. App. at 559; RCW 570(3)(d). We review all facts in the
administrative record de novo and we will uphold the Board’s factual findings if supported by
substantial evidence. City of Seattle, 13 Wn. App. 2d 831, 853, 468 P.3d 637 (2020); Marcum,
172 Wn. App. at 560.
Former RCW 69.51A.085 governed collective cannabis gardens.9 Collective gardens
existed under the medical cannabis statutes. See Former Chapter 69.51A RCW (2011).
Collective gardens existed “for the purpose of producing, processing, transporting, and
delivering cannabis for medical use.” Former RCW 69.51A.085(1) (2011). However, the statute
limited collective gardens to certain conditions, including: “No useable cannabis from the
collective garden is delivered to anyone other than one of the qualifying patients participating in
the collective garden.” Former RCW 69.51A.085(1)(e) (2011).
Former RCW 69.50.331 governed applications for cannabis licenses and divided
applicants into three priorities. Former RCW 69.50.331 (2015). Priority 1 was given to
applicants who:
(A) Applied to the state liquor and cannabis board for a marijuana retailer license
prior to July 1, 2014; (B) Operated or were employed by a collective garden before
January 1, 2013; (C) Have maintained a state business license and a municipal
business license, as applicable in the relevant jurisdiction; and (D) Have had a
history of paying all applicable state taxes and fees.
9
The parties rely on the 2011 version of the statute, available at
https://leg.wa.gov/CodeReviser/RCWArchive/Documents/2011/Vol11B/2-11BSuppBody.pdf. It
was repealed effective July 1, 2016. Laws of 2015, ch. 70, § 49.
24
No. 54083-5-II
Former RCW 69.50.331(a)(i). In 2015, the agency updated its regulations to align with the
switch from medical to recreational cannabis use under former RCW 69.50.331 (2015). WSR
15-19-165.
Former WAC 314-55-020 added clarity to the agency’s priority determination rankings.
The regulation explained that for a Priority 1 determination, applicants must have, among other
things:
(ii) Owned or were employed by a collective garden before January 1, 2013. To
meet this qualification, the applicant must provide the [Board] a copy of the master
business license from department of revenue business licensing services showing
the applicant owned a collective garden prior to January 1, 2013, or a pay stub or
tax information indicating that the applicant was employed by a collective garden
prior to January 1, 2013;
(iii) Have maintained a state business license and municipal business license, as
applicable in the relevant jurisdiction. To meet this qualification, the applicant
must provide the [Board] a copy of the master business license from department of
revenue business licensing services and copies of municipal business licenses from
January 1, 2013, through the date of application; and
(iv) Have had a history of paying all applicable state taxes and fees. To meet this
qualification, the applicant must provide the [Board] evidence from the department
of revenue that the entity is up to date on all applicable state taxes since January 1,
2013, and that they have paid all applicable fees to the [Board] for all businesses
they are engaged in since January 1, 2013.
Former WAC 314-55-020(3)(a) (emphasis added).
The first step to achieving a Priority 1 determination, then, was for the applicant’s
previous employer or entity to qualify as a collective garden under former RCW 69.51A.085.
Former RCW 69.51A.330(a)(i)(B); Former WAC 314-55-020(3)(a)(ii). This required the
applicant’s previous employer to not deliver usable cannabis “to anyone other than one of the
qualifying patients participating in the collective garden.” Former RCW 69.51A.085(1)(e)
(2011).
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No. 54083-5-II
The Healing Center of Tacoma, Yi’s employer and ANH’s previous entity for application
purposes, delivered cannabis to other collective gardens. Thus, The Healing Center of Tacoma
was not operating under the requirements of, and did not qualify as, a collective garden as
required by former RCW 69.51A.085(1)(e). Accordingly, on this basis alone, ANH would not
have qualified for a Priority 1 determination.
The next step to achieving a Priority 1 determination was for the previous entity to have
maintained state and municipal business licenses before January 1, 2013, through the application
date. Former RCW 69.50.331(a)(i)(C); Former WAC 314-55-020(3)(a)(iii). The Healing Center
of Tacoma did not operate as a business before 2016, and the record is silent as to it ever holding
or maintaining any municipal business license. Thus, under this step, ANH would not have
qualified for a Priority 1 determination.
The previous entity must also provide the agency “evidence from the department of
revenue that the entity is up to date on all applicable state taxes since January 1, 2013.” Former
WAC 314-55-020(3)(a)(iv) (emphasis added). ANH listed The Healing Center as its previous
collective garden entity in its application. But The Healing Center did not pay taxes during the
statutory period prior to ANH’s application. hus, even if Yi and his LLC, Natural 7, paid taxes,
the designated entity, The Healing Center of Tacoma, did not. Accordingly, for any one of these
reasons, ANH was not eligible for a Priority 1 determination under the statutory and regulatory
licensing scheme then in place.
ANH argues that collective gardens need not be commercial in nature, citing Cannabis
Action Coal. v. City of Kent, 183 Wn.2d 219, 230, 351 P.3d 151 (2015). It is true that under
Cannabis Action Coalition and Former RCW 69.51A.085 a collective garden need not be
26
No. 54083-5-II
commercial in nature or operate as a business. 183 Wn.2d at 230. But Cannabis Action
Coalition does not apply here because there no party sought to produce marijuana under the
recreational scheme. 183 Wn.2d at 222. Moreover, ANH’s argument ignores former RCW
69.51A.330, which specifically requires that a prerequisite for a recreational license is for the
predecessor entity to operate as a business.10
In its March 2017 initial order, the ALJ concluded that the agency correctly determined
that the Healing Center of Tacoma did not qualify as a collective garden as defined in former
RCW 69.51A.085. The ALJ therefore concluded that ANH did not qualify for Priority 1. The
Board adopted the ALJ’s findings and conclusions.
The Board’s adoption of the agency’s interpretation of former RCW 69.51A.330 and
former WAC 314-55-020 was not in error. The language of the statute was clear and
unambiguous, and, as applied, provided more than one reason for the agency to not assign ANH
as Priority 1. Accordingly, ANH’s argument that the only reason it was denied Priority 1 was
due to the agency’s erroneous determination that it had to show commercial activity is flawed. 11
D. Substantial Evidence
ANH further argues that the Board’s March 2017 final order was not supported by the
evidence. We disagree.
10
In other words, collective gardens did not have to operate as businesses to deliver medical
cannabis to members, but they did have to operate as a business to transfer to recreational
dispensaries.
11
ANH also cites multiple United States Supreme Court cases to support its argument.
However, these cases all interpret and apply the federal APA and are not applicable to our state
scheme. See SEC v. Chenery Corp., 318 U.S. 80, 87, 63 S. Ct. 454, 459, 87 L. Ed. 626 (1943);
Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29, 50, 103 S. Ct. 2856, 2870, 77 L. Ed. 2d
443 (1983).
27
No. 54083-5-II
We will uphold the Board’s factual findings if supported by substantial evidence.
Marcum, 172 Wn. App. at 560. We review the Board’s legal conclusions de novo under the
“error of law” standard, and we may substitute our view for that of the Board. Marcum, 172 Wn.
App. at 559; RCW 570(3)(d).
Although, as explained in section I.B supra, the Board erred in its conclusions of law
when it ruled that ANH requested the adjudicative proceeding on June 15, 2016, and that the
agency commenced the adjudicative proceeding on June 17, the Board’s findings were supported
by the record. ANH’s completed agency-provided Request for Hearing form was received by
the agency on June 15. The agency responded with a letter acknowledging its receipt of that
form on June 17. These documents were in the record before the Board. Additionally, as
explained above, the record supports a determination that a Priority 1 determination was not
appropriate. Accordingly, ANH’s argument that the Board’s findings of fact were not supported
by the evidence fails. And although the conclusions of law regarding the commencement of the
hearing were erroneous, that error was harmless because the hearing was held within the
statutory guidelines.
E. Arbitrary and Capricious
ANH argues that the Board’s March 2017 final order and the agency’s Priority 3
determination were arbitrary and capricious. We disagree.
We review whether an agency decision was arbitrary and capricious de novo. Wash.
Indep. Tel. Ass’n v. Wash. Utils. & Transp. Comm’n, 149 Wn.2d 17, 24, 65 P.3d 319 (2003). An
agency’s action is arbitrary or capricious if it “‘is willful and unreasoning and taken without
regard to the attending facts or circumstances.’” Wash. Indep. Tel., 149 Wn.2d at 26 (quoting
28
No. 54083-5-II
Rios v. Dep’t of Labor & Indus., 145 Wn.2d 483, 501, 39 P.3d 961 (2002) (internal quotation
marks omitted)). Even if we believe an action to be in error, where there is room for two
opinions, an action taken after due consideration is not arbitrary and capricious. Pac. Coast
Shredding, LLC v. Port of Vancouver, 14 Wn. App. 2d 484, 502, 471 P.3d 934 (2020). “Neither
the existence of contradictory evidence nor the possibility of deriving conflicting conclusions
from the evidence renders an agency decision arbitrary and capricious.” Pac. Coast Shredding,
14 Wn. App. 2d at 502 (quoting PacifiCorp v. Wash. Utils. & Transp. Comm’n, 194 Wn. App.
571, 587, 376 P.3d 389 (2016) (internal quotation marks omitted)).
Neither the agency’s Priority 3 determination nor the Board’s March 2017 final order
were arbitrary or capricious. Both decisions were made after a review of the record and
supported by factual and legal conclusions based on the record before them. ANH does not
show that the agency or Board made any decision in disregard of the facts in the record or
attendant circumstances. ANH merely re-alleges its argument that the Board’s final order was
not supported by the evidence with no further analysis. This argument fails.
II. ALL NATURAL HERBS’ CONSTITUTIONAL CLAIMS
ANH makes a multitude of constitutional arguments. ANH argues that the agency
violated its rights under the First and Fourteenth Amendments to the U.S. Constitution and that
RCW 34.05.419 and former WAC 314-55-020 are unconstitutional as applied. ANH argues that
the agency violated ANH’s due process rights because it did not initiate a timely adjudicative
proceeding. ANH also argues that the Board’s remand of the matter to the agency in its March
2017 final order was an unconstitutional “do over.” ANH then argues that RCW 34.05.419 and
former WAC 314-55-020 are unconstitutional as applied. ANH next argues that the Board’s
29
No. 54083-5-II
final order and remand was an unlawful prior restraint under the First Amendment. Finally,
ANH argues that the agency violated ANH and Yi’s equal protection rights by discriminating
against Yi based on race.12 We determine that neither the agency nor the Board violated the
constitution in assigning ANH as Priority 3 and remanding the adjudicative proceedings to the
agency.
A. Due Process
ANH makes two related due process arguments: that the agency failed to commence
adjudicative proceedings within 90 days, thus violating ANH’s due process rights, and that the
Board’s subsequent remand to the agency was unconstitutional. We disagree.
1. There is No Protected Property Interest in the Issuance of a Marijuana License.
ANH argues that the agency did not follow the procedures in the APA and failed to meet
its 90-day deadline. For the reasons explained in Part I supra, we disagree. The agency timely
commenced an adjudicative proceeding when it notified ANH of a stage of an adjudicative
proceeding under RCW 34.05.419. Moreover, ANH does not have a protected liberty or
property interest in an unissued license.
To establish a due process violation, ANH must show it was deprived of a
constitutionally protected liberty or property right. Haines-Marchel v. Liquor & Cannabis Bd.,
1 Wn. App. 2d 712, 742, 406 P.3d 1199 (2017) (citing Mathews v. Eldridge, 424 U.S. 319, 332,
96 S. Ct. 893, 47 L. Ed. 2d 18 (1976)). Applicants for a marijuana license do not have a property
interest in the issuance of the license. 1 Wn. App. 2d at 743. Thus, in Haines-Marchel,
12
Yi is not a party to this case. Even assuming that ANH could assert rights personal to Yi, its
arguments nonetheless fail.
30
No. 54083-5-II
Division I of this court held that the agency did not violate due process when it denied the
application for a license. 1 Wn. App. 2d at 743.
In the same way, ANH’s due process rights were not violated when it was assigned
Priority 3 because it has no property interest in the issuance of a marijuana license, much less a
Priority 1 designation. Thus, ANH has failed to establish a due process violation.
2. A Remand is not an Unconstitutional Repeat of an Invalid Hearing.
ANH argues that the Board’s March 2017 final order remanding the matter to the agency
to consider any additional documentation and again determine ANH’s priority violated due
process because it was an unlawful de facto dismissal of ANH’s request for adjudicative
proceeding. ANH argues this resulted in an unconstitutional “do over,” a “gross due process
violation,” and “post hoc rationalization.” Br. of Appellant at 41-42. We disagree.
Under the APA, an agency may appoint persons to review initial orders and enter final
orders. RCW 34.05.464(2). On review, “[t]he reviewing officer shall enter a final order
disposing of the proceeding or remand the matter for further proceedings, with instructions to the
presiding officer who entered the initial order. Upon remanding a matter, the reviewing officer
shall order such temporary relief as is authorized and appropriate.” RCW 34.05.464(7).
This is exactly what the Board did. The Board remanded to the Licensing Division of the
agency “for consideration of the documents provided by the Applicant, as potentially
supplemented during the hearing process, for a new priority determination and notice of hearing
rights, if appropriate.” CP at 472-73. This was not a limitless remand where discovery and other
procedures were re-opened. It was not a “post hoc rationalization” of agency action as ANH
contends. Indeed, the Board sent the matter back to the agency for further action because of the
31
No. 54083-5-II
large record and new documents ANH provided. A remand for an agency to reconsider a
licensing determination, and ordering it to review the record as supplemented during hearings
held since the initial proceeding, is not a due process violation. ANH’s claim was not dismissed,
it was merely remanded to the agency for further review.
B. Constitutionality of RCW 34.05.419 and Former WAC 314-55-020 As Applied
ANH argues that RCW 34.05.419, concerning agency action on applications for
adjudication, and former WAC 314-55-020 are unconstitutional as applied in the Board’s March
2017 final order. ANH contends that the statute and regulation violate due process when an
agency does not commence an adjudicative proceeding within 90 days and thus deprived ANH
of a meaningful opportunity to be heard. This argument fails.
We review constitutional challenges de novo. City of Redmond v. Moore, 151 Wn.2d
664, 668, 91 P.3d 875 (2004). As-applied challenges to the constitutionality of a statute arise
when a party alleges that application of a statute in a specific context violates the constitution.
Moore, 151 Wn.2d at 668-69. “Holding a statute unconstitutional as-applied prohibits future
application of the statute in a similar context, but the statute is not totally invalidated.” Moore,
151 Wn.2d at 669.
First, ANH’s argument fails because the agency commenced an adjudicative proceeding
within 90 days. Second, an as-applied challenge under the due process clause of the Fourteenth
Amendment triggers analysis of the agency’s action under the procedural due process test. See
Didlake v. State, 186 Wn. App. 417, 425, 345 P.3d 43 (2015). Thus, ANH must show it has a
protected property interest before we can analyze whether ANH was deprived of a meaningful
opportunity to be heard. Didlake, 186 Wn. App. at 425-26. As explained above, there is no
32
No. 54083-5-II
property interest in the issuance of a marijuana license. Haines-Marchel, 1 Wn. App. 2d at 743.
Accordingly, ANH’s as-applied challenge fails.
C. Prior Restraint in an Administrative Remand
ANH next argues that the Board’s March 2017 final order was an unconstitutional prior
restraint under the First Amendment. We disagree.
Our Supreme Court has adopted the United States Supreme Court’s definition of prior
restraint as
administrative and judicial orders forbidding certain communications when issued
in advance of the time that such communications are to occur. . . . Temporary
restraining orders and permanent injunctions—i.e., court orders that actually forbid
speech activities—are classic examples of prior restraints.
In re Marriage of Suggs, 152 Wn.2d 74, 81, 93 P.3d 161 (2004) (quoting Alexander v. United
States, 509 U.S. 544, 550, 113 S. Ct. 2766, 125 L. Ed. 2d. 441 (1993)).
ANH cites no case for the proposition that an order remanding an administrative
proceeding is a prior restraint. Where a party does not cite to authority, we assume there is none.
Kirby v. State Dep’t of Emp’t Sec., 185 Wn. App. 706, 728, 342 P3.d 1151 (2014).
Furthermore, for an administrative order may rise to the level of a prior restraint, it must
forbid speech activities. Suggs, 152 Wn.2d at 81. There is nothing in the Board’s March 2017
final order that restricts ANH’s speech. Indeed, the Board explained that ANH had “opportunity
to again request a hearing if so desired.” CP at 473. Thus, ANH does not show any prior
restraint and we conclude there was no First Amendment violation.13
13
ANH states that it was “barred by court order from petitioning the government for a
grievance.” Br. of Appellant at 45. ANH repeatedly cites to the Administrative record at “1390-
1354.” But a review of our record on appeal at 1354 through 1390 reveals no such court order.
33
No. 54083-5-II
D. Equal Protection
ANH argues that the agency violated ANH and Yi’s equal protection rights because it
assigned ANH Priority 3 based on race discrimination aimed at Yi. We disagree.14
A classification assigned by the government will be upheld “‘unless it rests on grounds
wholly irrelevant to the achievement of legitimate state objectives.’” State v. Coria, 120 Wn.2d
156, 171, 839 P.2d 890 (1992) (quoting Omega Nat’l Ins. Co. v. Marquardt, 115 Wn.2d 416,
431, 799 P.2d 235 (1990)). The burden is on the party alleging discrimination to challenge the
classification. Davis v. Dep’t of Licensing, 137 Wn.2d 957, 972, 977 P.2d 554 (1999). Our level
of scrutiny depends on the nature of the classification or rights involved. State v. Johnson, 194
Wn. App. 304, 307, 374 P.3d 1206 (2016). “Strict scrutiny applies if the classification is based
on a suspect class, such as race, nationality, or alienage, or if it affects a fundamental right.”
Johnson, 194 Wn. App. at 307. We apply intermediate scrutiny where important or
“semisuspect” classifications are involved. Johnson, 194 Wn. App. at 307. Absent these, a law
or government action receives rational basis review. Johnson, 194 Wn. App. at 308.
In analyzing an equal protection claim, we first determine whether there is any evidence
of race-based decision-making or discriminatory intent. Johnson, 194 Wn. App. at 308. Where
a party does not demonstrate discriminatory intent, we need not even engage in rational basis
review because the government action does not rise to the level of violating equal protection.
Johnson, 194 Wn. App. at 309.
14
Yi was not a party to the administrative action, and ANH does not explain how it can assert
Yi’s personal equal protection rights.
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No. 54083-5-II
ANH must show discriminatory intent or race-based decision-making to assert an equal
protection claim. ANH shows no reasoned explanation or analysis but merely states in
conclusory fashion that because Yi is Korean-American, and because entities with Caucasian
owners received licenses before ANH, that there must have been race-based decision making.
But ANH points to no facts in the record that support its contention that the agency engaged in
race-based decision-making. Indeed, when asked about testimony that showed race did not play
a role in the agency’s decision, Yi responded, “I’m not claiming that race played a role.”
AR at 657.
There are any number of reasons why the agency may have granted licenses to other
entities before ANH, but those licensing decisions are not in the record. Only the agency’s
determination for Yi and ANH is in the record. The record shows no discriminatory intent or
race-based decision-making and ANH points to none. Thus, ANH cannot establish the first step
in its equal protection claim, and we need not engage in rational basis review because the
government action does not rise to the level of violating equal protection.
III. VOIDNESS OF BOARD’S 2018 FINAL ORDER
ANH argues that the ALJ’s May 31, 2018 initial order and the Board’s July 24, 2018
final order are void because of the agency’s due process violations. We disagree and hold that
they are not, and affirm the Board’s July 24, 2018 final order.
ANH cites to no authority explaining how an adjudicative order following a lawful
remand is void, so we assume there is none. Kirby, 185 Wn. App. at 728. As explained in Part I,
supra, the agency timely commenced an adjudicative proceeding. The Board reviewed the
agency’s decision and lawfully remanded the matter to the agency for review as permitted under
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No. 54083-5-II
RCW 34.05.464. The agency then reviewed the record and again assigned a Priority 3
determination. On review, an ALJ affirmed the Priority 3 determination in its May 2018 initial
order. The Board affirmed the Priority 3 determination in its July 2018 final order. Because the
Board’s July 2018 final order is not void and is not otherwise contested, we find no error in its
determinations.
ATTORNEY FEES
ANH argues that it should be awarded attorney fees and costs on appeal. We disagree.
[A] court shall award a qualified party that prevails in a judicial review of
an agency action fees and other expenses, including reasonable attorneys’ fees,
unless the court finds that the agency action was substantially justified or that
circumstances make an award unjust. A qualified party shall be considered to have
prevailed if the qualified party obtained relief on a significant issue that achieves
some benefit that the qualified party sought.
RCW 4.84.350(1).
ANH does not prevail on a significant issue. Although we substitute our view for that of
the Board on several issues ANH raised, ANH does not prevail on overturning its Priority
determination or gaining licensure. Thus, we do not award fees.
CONCLUSION
We hold that the agency timely commenced an adjudicative proceeding under RCW
34.05.413 and 34.05.419. We also hold that the agency and Board properly interpreted former
RCW 69.51A.085 and former WAC 314-55-020, and that the Board’s orders were supported by
the record and the agency’s determination was not arbitrary and capricious.
None of ANH’s constitutional challenges succeed. ANH’s due process claims fail
because it has no property interest in the issuance of a marijuana license. We hold that the
Board’s lawful remand was constitutional. We also hold that ANH’s prior restraint claim fails
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No. 54083-5-II
because there was no restraint. Likewise, we hold that ANH’s equal protection claim fails
because it cannot show discriminatory intent or race-based decision-making.
The agency’s second Priority determination from April 2017 was valid and the Board’s
order affirming that decision is not void. Accordingly, we affirm the Board’s July 2018 final
order. Finally, because ANH does not prevail on a significant issue, we do not award fees.
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,
it is so ordered.
Worswick, J.
We concur:
Lee, C.J.
Veljacic, J.
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