Greensun Group Llc v. City Of Bellevue , 436 P.3d 397 ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
GREENSUN GROUP, LLC, No. 77635-5-1
Appellant, DIVISION ONE
V. PUBLISHED OPINION
CITY OF BELLEVUE,
Respondent. FILED: March 4, 2019
CHUN, J. — Greensun Group LLC (Greensun)1 brought a claim against the
City of Bellevue (the City) for tortious interference with business expectancy. We
address whether the trial court properly dismissed the claim on summary
judgment. In doing so, we discuss each element of the tort. And we discuss the
affirmative defense of privilege.
Upon passage of Initiative 502 (1-502) in 2012, the City issued a regulation
prohibiting marijuana retail shops from being located within 1,000 feet of each
other (the 1,000 Foot Separation). In 2014, the City denied Greensun a license
to operate such a shop after determining the business planned to locate too
close to another shop deemed "first-in-time."
Greensun then filed this action against the City, claiming violations of the
due process and privileges and immunities clauses of the Washington State
1 For clarity, this opinion refers to appellant as "Greensun" although the business also
used its trade names in the events leading up to this case.
No. 77635-5-1/2
Constitution. The trial court dismissed the case on summary judgment.
Greensun appealed. Because the City adopted its first-in-time rule without
engaging in formal rule-making, this court invalidated it.
On remand, Greensun amended its complaint to claim tortious
interference with business expectancy. On cross-motions for summary
judgment, the trial court dismissed Greensun's claim and declared the City had
remedied the rule-making issue identified in the first appeal.
Because genuine issues of fact exist as to the tortious interference claim,
we affirm in part and reverse in part the trial court's order denying Greensun's
motion for partial summary judgment and granting the City's summary judgment
motion. We remand the case for trial.
BACKGROUND
A. Facts
On November 6, 2012, Washington passed 1-502. 1..xtvs of 2013, ch. 3§
41. 1-502, in part, legalized the possession of limited amounts of marijuana and
directed the Washington State Liquor Control Board (the LCB)to develop and
implement rules to regulate and tax recreational marijuana retailers by
December 31, 2013.
Greensun's managing members, Seth Simpson and David Ahl, leased a
retail space at 10600 Main Street, Bellevue, Washington on November 29, 2012.
They planned to open a retail marijuana shop there. As such, Greensun made
several upgrades to the building. It intended to operate a medical marijuana
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No. 77635-5-1/3
business at the space until the LOB implemented the regulations for recreational
marijuana. Greensun applied to the City for a building permit on January 8,
2013.
The City opposed Greensun's attempt to open a medical marijuana
operation, claiming the proposed use violated Bellevue's Land Use Code (LUC).
The City obtained injunctive relief prohibiting the opening of a medical marijuana
facility at the location. Greensun then abandoned its plan to open a medical
marijuana store. However, because it still planned to use the space for
recreational marijuana, it extended its lease through June 30, 2016.
The LOB then opened the application process for retail marijuana
licenses. Greensun applied. By March 1, 2014, the LCB had screened
Greensun's application and listed it as one of 19 qualified applicants for licenses
in Bellevue.
On March 17, 2014, the City adopted Ordinance 6156, which extended
Ordinance 6133 B-12 for an additional six months and implemented a new
restriction—the 1,000 Foot Separation. Under the restriction, no marijuana
retailer could be located within 1,000 feet of any other marijuana retailer.
On April 2, 2014, the LOB announced it would process license
applications "with geographic distribution and population density in mind." To this
end, the LOB allocated a predetermined number of initial licenses for recreational
marijuana stores to each jurisdiction. If the number of applicants in a jurisdiction
2 Ordinance 6133 B-1 constituted the first ordinance to include interim zoning controls to
regulate recreational marijuana. It did not contain a 1,000 foot separation requirement between
retailers.
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exceeded its number of licenses, the LCB would use a lottery system to
determine which applicants it would license. The LCB stated it expected to issue
the initial retail licenses in "batches" during the first week of July 2014.
The LCB initially allocated four such licenses for Bellevue. Because 19
qualified applicants sought to open shops in Bellevue, the LCB held a lottery on
May 2, 2014. Greensun ranked fifth. Two other applicants, Par 4 Investments
LLC (Par 4)3 and High Society, ranked in the top four.
On May 7, 2014, the City e-mailed High Society about the 1,000 Foot
Separation. It explained that "[a] retailer will 'lock down' their location upon
submittal of a complete building permit application. This means that once we
determine a building permit application complete for review that [sic] we will apply
the 1,000 foot separation from that property."
On May 16, 2014, Par 4 applied for its building permit.
Greensun met with the City on May 19, 2014. At the meeting, it told the
City the LCB would likely disqualify High Society's application because the
business listed the wrong address. It asked how the 1,000 Foot Separation
would be applied if Greensun became one of the four lottery winners. The City
advised Greensun it would give priority to the applicant who first submitted a
complete building permit application. Greensun mentioned it had submitted a
complete application for 10600 Main Street in 2013. The City responded that the
LCB had to have designated an applicant as a lottery winner to establish priority.
clarity, this opinion refers to this retailer as "Par 4" although the company also used
3 For
trade names in the events leading up to this case.
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No. 77635-5-1/5
On May 21, 2014, the City made the determination that Par 4's building
permit application was complete.
On May 27, 2014, a reporter from The Seattle Times asked the City about
how it would enforce the 1,000 Foot Separation. The City responded that it "will
consider the first retail applicant who submits a complete building permit as the
'first in,' against which the other applicants will be compared for conformance
with the requirement."
Around the end of May 2014, Greensun applied to the City for a business
license to operate a retail marijuana shop at 10600 Main Street. On June 3,
2014, the City sent a letter to Greensun stating that it "can only approve a
business license application for the four selected retailers." The City denied the
application.
The City received Par 4's marijuana license application from the LCB on
June 4, 2014. The City approved Par 4's proposed location at 10697 Main
Street, but stated it "reserves all rights accorded under law to enforce violations
of city ordinances and codes as exist now or as hereafter amended."
On June 5, 2014, the LCB notified Greensun that it became one of the
four lottery winners because of High Society's disqualification. The LCB told the
City about Greensun's new status on June 9, 2015.
In an email to High Society on June 11, 2014, the City stated that Par 4
had "locked down" their location for purposes of the 1,000 Foot Separation.
4 The "four selected retailers" refers to the four winners of the LCB lottery.
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No. 77635-5-1/6
The City then determined it would not use the timing of building permit
applications for the first-in-time test. The City deemed the method inequitable
because the "[v]esting of a building permit had no connection to the Washington
State Liquor Control Board's program." Instead, the City decided to tie the first-
in-time determinations to when the LCB issued its licenses. The City did so
without engaging in formal rule-making.
On June 24, 2014, the City informed applicants that "[On the event two or
more retail marijuana applicants seek licensing from the LCB and are located
within 1000 feet of another potential retail applicant, the City shall consider the
entity that is licensed first by the LCB to be the 'first-in-time' applicant." The City
detailed the application process, explaining that if the LCB approves an
application, the applicant will receive a payment request for a $1,000 license fee.
The City said, once the LCB receives the fee, it will send a conditional approval
letter that acts as a 30-day marijuana license until the applicant receives a
business license with the marijuana endorsement from the Washington State
Department of Revenue Business Licensing Service. The City indicated the
issuance date for the 30-day license would determine which applicant had priority
for the purposes of the 1,000 Foot Separation.
The City approved Greensun's marijuana license application on June 25,
2014. The application listed 10600 Main Street as Greensun's address. As with
Par 4, the approval notice provided that the City "reserves all rights accorded
under law to enforce violations of city ordinances and codes as exist now or as
hereafter amended."
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No. 77635-5-1/7
On July 1, 2014, Greensun tendered payment of its license fee to the
LCB.
On July 2, 2014, High Society obtained a temporary restraining order
(TRO)against the LCB. The TRO prohibited the LCB from licensing retail
marijuana applicants except for the four original lottery winners. The LCB then
told Greensun it could not accept its license fee payment.
The same day, an LCB employee emailed the City a copy of High
Society's complaint. The City responded, "[I]it sounds like if [the LCB] issue[s] a
license for a Bellevue retail store on Monday, it likely would be to Par 4
Investments (based on the status of Novelty Tree, Happy Highway, and High
Society)? Can you please confirm?" The LCB indicated that the City had
assumed correctly.
Par 4 paid the license fee to the LCB on July 3, 2014.
The LCB issued the first batch of marijuana retailer licenses on July 7,
2014. Par 4 received its conditional approval letter from the LCB via email at
9:17 a.m. that day. The letter sent to Par 4 was misdated July 3, 2014. Upon
receiving the letter from the LCB, Par 4's attorney e-mailed it to the City. The
City replied, "Consistent with my letter to your client dated June 24, 2014,[Par 4]
is first in time for purposes of application of the 1,000 foot separation requirement
between retail marijuana outlets." At 1:08 p.m. that same day, the LCB issued
Par 4 a corrected letter with the date changed to July 7, 2014.
The initial batch of licensed applicants omitted Greensun. However, later
in the day on July 7, a court lifted High Society's TRO. The LCB emailed
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No. 77635-5-1/8
Greensun its conditional approval letter at 3:04 p.m. on July 7. The LCB then
issued an updated list of the retail marijuana licenses to include Greensun. After
the LCB added Greensun to the list, counsel for Par 4 emailed the City asking if
this affected its first-in-time status. The City responded it did not.
At 4:19 p.m. on July 7, Greensun received an email with a letter from the
City attached. The letter provided that the City had deemed Par 4 first-in-time.
Accordingly, the City told Greensun it may not open a marijuana retail store at
10600 Main Street. Greensun claimed the City incorrectly deemed Par 4 to be
first-in-time because the LCB issued the conditional license dated July 3, 2014 in
error.
The City then engaged in the following inquiries: Chad Barnes, an
Assistant City Attorney for the City, contacted Assistant Attorney General Kim
O'Neal, who represented the LCB. He did so "to better understand the timing of
the conditional approval letters issued by the LCB." O'Neal informed the City
"that the LCB currently takes the position that the July 3, 2014 letter received by
[Par 4] was not the actual marijuana retail license." O'Neal clarified that "that the
actual licenses were issued following the July 7, 2014 online notice." When
asked if the LCB could determine which applicant it had licensed first, O'Neal
"indicated that their system was not set up for such a query."
On July 11, 2014, the City sent letters to Par 4 and Greensun asking them
to provide any information that may indicate whom the LCB had licensed first.
Counsel for Par 4 responded on July 14, 2014. Par 4 noted it placed first
in the LCB lottery. It said it paid the license fee on July 3, 2014 and the LCB
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No. 77635-5-1/9
issued its conditional approval letter the same day. Par 4 also asserted it had
received its initial conditional approval letter on the morning of July 7, 2014, and
Greensun did not receive its letter until after the court lifted the TRO later in the
day. Lastly, Par 4 stated it should be licensed because the City confirmed Par
4's status as first-in-time on July 7, 2014.
Greensun's attorney responded on July 21, 2014. Greensun pointed out it
first applied for a building permit 18 months prior and thus had first-in-time status
under the City's original method. It further contended the LCB had issued the
July 3, 2014 letter to Par 4 in error because it had intended to issue all of the
licenses simultaneously. Greensun argued the LCB issued both Par 4's and
Greensun's licenses on July 7, 2014. Additionally, Greensun noted it "passed
[its] final inspection first and [was] invoiced on July 1st prior to [Par 4]."
On July 29, 2014, the City informed Greensun via letter that it had
"determined that [Par 4] was licensed by the LCB before [Greensun].
Consequently,[Par 4] is 'first-in-time' for the purposes of applying the separation
requirements established in Ordinance No. 6156." The letter further explained
the City's decision as follows:
The City's decision is based on the fact that on July 3, 2014, the LCB
sent [Par 4] a letter indicating it was approving [Par 4]'s marijuana
retailer license and directed that the letter be posted as [Par 4]'s
temporary permit. The LCB subsequently sent [Par 4] a revised
temporary operating permit on July 7, 2014 at 1:08 pm.
The City's decision is further supported by the LCB's records that
indicated [Par 4's] license was approved on July 6, 2014.
[Greensun's] license was not approved until July 7, 2014.
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No. 77635-5-1/10
The City will not grant [Greensun] a business license to operate a
retail marijuana outlet at 10600 Main Street based on the separation
requirement in Ordinance 6156.
The next day, July 30, 2014, the City's legal planner and assistant
attorney emailed other city employees and directed them not to approve
Greensun's license.
Par 4 opened its retail marijuana store on October 7, 2014.
B. Procedural History
Greensun filed a complaint against the City on November 3, 2014. The
complaint alleged the City had violated the due process and privileges and
immunities clauses of the Washington State Constitution and sought declaratory
and injunctive relief. In the complaint, Greensun claimed it "would have been
able to open its retail store in less than a week of[the LCB's] issuance of its
license on July 7, if the City of Bellevue had issued its requested business
license."
On May 20, 2015, the trial court granted summary judgment in favor of the
City and dismissed Greensun's suit. The trial court ruled the City did not act in
an arbitrary and capricious manner in denying Greensun a business license.
Greensun appealed to this court.
On August 3, 2015, during the pendency of the first appeal, the Bellevue
City Council engaged in formal rulemaking and passed Ordinance 6253 to
legislatively adopt its first-in-time rule. The ordinance specified as follows:
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No. 77635-5-1/11
If two or more marijuana retail applicants seek licensing from the
state and propose to locate within 1,000 feet of each other, the City
shall consider the entity who is licensed first by the state liquor and
cannabis board to be the "first-in-time" applicant who is entitled to
site the retail use. First-in-time determinations will be based on the
date and time of the state-issued license or conditional license,
whichever is issued first.
On June 13, 2016, this court reversed the trial court's summary judgment
order. City of Bellevue v. Greensun Group, LLC, No. 73646-9-1 (Wash. Ct. App.
June 13, 2016)(unpublished) https://www.courts.wa.pov/opinions/pdf/736469.pdf
(Greensun I). The decision invalidated the first-in-time rule and related decisions
because the City adopted the rule without engaging in rule-making procedures.
Greensun I, No.73646-9-I, slip op.at 15-17. This court remanded "for further
proceedings consistent with" the opinion from the first appeal. Greensun I,
No.73646-9-I, slip op. at 18. Our Supreme Court denied the City's petition for
review.
On February 14, 2017, Greensun moved for leave to amend its complaint.
Greensun sought to "add a claim for monetary damages caused by the City of
Bellevue's tortious interference with its business expectancy." The trial court
granted Greensun's motion. Greensun filed its amended complaint on
February 28, 2017.
The parties filed cross-motions for summary judgment. Greensun sought
partial summary judgment on the issue of liability with respect to its claim for
,
tortious interference. The City asked the court to dismiss GreenSun's Suit and to
grant declaratory relief confirming it remedied the rule-Making issue. On
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No. 77635-5-1/12
November 2, 2017, the court denied Greensun's motion, granted the City's
motion, and dismissed Greensun's claims5 with prejudice.
Greensun appeals.
ANALYSIS
Greensun claims the trial court erred by entering summary judgment for
the City and denying its motion for partial summary judgment. Greensun asserts
that, as a matter of law, it establishes liability for its tortious interference with
business expectancy claim. The City counters that Greensun fails to raise a
material issue of fact as to any of the claim's elements.
Appellate courts review de novo a trial court's grant of summary judgment.
Woods View II, LLC v. Kitsap County, 188 Wash. App. 1, 18, 352 P.3d 807 (2015).
We will affirm a summary judgment order only "if there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law."
Woods View 11, LLC, 188 Wash. App. at 18. Reviewing courts conduct the same
inquiry as the trial court and view all facts and their reasonable inferences in the
light most favorable to the nonmoving party. Pac. Nw. Shooting Park Ass'n v.
City of Sequim, 158 Wash. 2d 342, 350, 144 P.3d 276 (2006).
A plaintiff must prove five elements6 to establish a prima face case of
tortious interference with a business expectancy. Pac. Nw. Shooting Park Ass'n,
5 Though the summary judgment motions and order focused on Greensun's tortious
interference claim, the City also asked the court to dismiss any remaining constitutional claims
and Greensun's request for declaratory relief if the court chose to revisit those claims after the
first appeal. Greensun's current appeal concerns only its claim for tortious interference.
6 More recently, our Supreme Court listed three elements for a prima face case of tortious
interference. See Elcon Const., Inc. v. E. Wash. Univ., 174 Wash. 2d 157, 168, 273 P.3d 965(2012)
("A claim of intentional interference requires (1) the existence of a valid contractual relationship of
which the defendant has knowledge,(2) intentional interference with an improper motive or by
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No. 77635-5-1/13
158 Wash. 2d at 351. Specifically, a plaintiff must show "(1) the existence of a.. .
[valid] business expectancy;(2) that [the defendant] had knowledge of that
[expectancy];(3) an intentional interference inducing or causing . . . termination
of the.. . expectancy;(4) that [the defendant] interfered for an improper purpose
or used improper means; and (5) resultant damage." Pac. Nw. Shooting Park
Ass'n, 158 Wash. 2d at 351. If a plaintiff establishes all five elements, the defendant
may demonstrate a privilege protecting its actions. Commodore v. Univ. Mech.
Contractors, Inc., 120 Wash. 2d 120, 137, 839 P.2d 314 (1992). We address each
element in turn.
A. Existence of a Business Expectancy
Greensun claims it "had a valid business expectancy in operating a retail
marijuana store." The City asserts Greensun fails to prove this element because
(1) the company did not identify a third party with which it would have had a
business relationship had it opened its store; and (2) it did not have a right to
open its store in violation of the City's LUC. We conclude Greensun raises a
genuine issue of material fact as to this element.
To establish a valid business expectancy, courts require something less
than an enforceable contract. Scymanski v. Dufault, 80 Wash. 2d 77, 83, 491 P.2d
1050 (1971). Instead, a "valid business expectancy includes any prospective
contractual or business relationship that would be of pecuniary value." Newton
Ins. Agency & Brokerage, Inc. v. Caledonian Ins. Group, Inc., 114 Wash. App. 151,
improper means that causes breach or termination of the contractual relationship, and (3)
resultant damage."). Because the tests contain essentially the same elements, we apply the five-
element test, as do the parties.
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No. 77635-5-1/14
158, 52 P.3d 30 (2002). Courts allow tortious interference claims "where a
defendant's acts destroy a plaintiff's opportunity to obtain prospective
customers." Caruso v. Local Union No. 690, 33 Wash. App. 201, 207,653 P.2d
638 (1982), rev'd on other grounds, 100 Wash. 2d 343, 670 P.2d 240 (1983).
Washington courts require a plaintiff to show only that its "future business
opportunities are a reasonable expectation and not merely wishful thinking." Life
Desiqns Ranch, Inc. v. Sommer, 191 Wash. App. 320, 337, 364 P.3d 129(2015)
(internal quotations and citations omitted); Woods View II, LLC, 188 Wash. App. at
30 (determining the plaintiff had an expectancy in a business development
project that ultimately failed).
Greensun established that after Washington passed 1-502, it leased a
retail space in Bellevue in order to open a recreational marijuana store.
Greensun made improvements to the store to prepare it for such use.
Furthermore, the LCB issued Greensun a marijuana retailer license. The
company made arrangements to acquire inventory and had staff available to
begin operations. Greensun's plan to open a marijuana retail shop was not
merely wishful thinking. It demonstrated a material issue as to its valid business
expectancy.
The City's arguments to the contrary do not persuade us. The City cites
Pac. Nw. Shooting Park Ass'n to argue a claim of tortious interference with a
business expectancy requires the plaintiff to show a relationship with identifiable
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No. 77635-5-1/15
third parties.7 But this argument appears to conflate the claim at issue with the
closely related tort of interference with a contractual relationship. The Pac. Nw.
Shooting Park Ass'n case concerned whether the plaintiff had a valid contractual
relationship, rather than a valid business expectancy. Pac. Nw. Shooting Park
Ass'n, 158 Wash. 2d at 352-53. As Greensun alleges interference with a valid
business expectancy, the case is inapposite here.
The City also argues Greensun did not have a valid business expectancy
because opening its store would have violated the LUC. But this argument
dodges the underlying question of whether the City engaged in actionable
conduct, which led to the first-in-time determinations at issue; and these
determinations led to the City's denial of a license to Greensun based on the
LUC.8
Furthermore, the City does not cite legal authority to support its claim that
a plaintiff must demonstrate an enforceable legal right to meet the first element.
And case law runs contrary to such a claim. See, e.g., Scvmanski, 80 Wash. 2d 77
7 The City also cites two Division III cases, Hudson v. City of Wenatchee, 94 Wash. App.
990, 974 P.2d 342(1999) and Evergreen Monevsource Mortg. Co v. Shannon, 167 Wash. App.
242, 274 P.3d 375 (2012), to support this proposition. We do not read Hudson to go so far as to
require a plaintiff to prove it would have had a relationship with a specific prospective customer
but for the defendant's interference. To be sure, such a requirement would conflict with well-
established case law, which allows tortious interference claims for interference with prospective
contractual or business relationships. See Scvmanski, 80 Wash. 2d at 83; Life Designs Ranch, Inc.,
191 Wash. App. 320 at 337; Caruso, 33 Wash. App. at 207. Likewise, Evergreen does not apply. In
that case, the plaintiff claimed the defendants improperly diverted its customers. 167 Wash. App. at
259. The court found the plaintiff did not have an expectancy because it could not demonstrate
the defendant took any customers from it. 167 Wash. App. at 259.
8 Also, the parties dispute whether Greensun's store would have violated the LUC's 1,000
Foot Separation requirement. While neither party disputes that the store locations were within
1,000 feet of one another, they dispute when a violation of the 1,000 Foot Separation requirement
would occur: (1) when the City licensed two applicants with proposed locations within 1,000 feet
of each other; or(2) when two marijuana shops actually opened within 1,000 feet.
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No. 77635-5-1/16
at 82-83 (allowing a tort action for wrongful interference where the contract
interfered with was not enforceable because it violated the statute of frauds).
In light of the foregoing, Greensun has presented sufficient evidence to
raise a genuine issue as to whether it had a reasonable expectation of opening a
recreational marijuana business at 10600 Main Street.
B. Knowledge of the Expectancy
The parties next dispute whether the City had knowledge of Greensun's
business expectancy. We determine Greensun raises a genuine issue of
material fact as to this element.
The second element of a tortious interference claim requires the
defendant to have known of the plaintiff's business expectancy. Pac. Nw.
Shootinq Park Ass'n, 158 Wash. 2d at 351. This element requires only that the
defendant knew of facts giving rise to the presence of the business expectancy.
Calbom v. Knudtzon, 65 Wash. 2d 157, 165, 396 P.2d 148 (1964). The facts need
merely show the defendant had "awareness of'some kind of business
arrangement." Woods View II, LLC, 188 Wash. App. at 30-31 (citing Topline
Equip., Inc. v. Stan Witty Land, Inc., 31 Wash. App. 86, 93, 639 P.2d 825 (1982))
(finding the second element satisfied where the county knew of the plaintiffs
business plans despite the later failing of those plans).
The City knew Greensun hoped to open a recreational marijuana shop in
Bellevue. Greensun applied to the City for a building permit. The City knew the
LCB lottery selected Greensun as one of the four lottery winners and it approved
the intended location in the company's business license application. Greensun
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No. 77635-5-1/17
spoke with the City about the 1,000 Foot Separation on several occasions and
the City asked it to submit evidence regarding which applicant was first-in-time.
The City asserts Greensun did not allege sufficient facts "as a matter of
law to establish that the City knew its actions would terminate any identifiable
relationship Greensun may have had." This, however, misstates the test. A
defendant needs only to be aware of facts that suggest an expectancy existed,
and "[i]t is not necessary that the [defendant] understand the legal significance of
such facts." Calbom, 65 Wash. 2d at 165. That the City knew of Greensun's plans
to open a store suffices to raise a genuine issue of material fact as to whether the
City knew of Greensun's expectancy.
C. Intentional Interference Inducing or Causing a Breach or Termination of
the Expectancy
Greensun asserts it meets the third element because the City intentionally
denied its business license. The City responds by contending the "good faith
effort to enforce its LUC does not constitute intentional and improper
interference." But the analysis of intentional interference does not consider good
faith. We decide that Greensun raises a genuine issue of material fact as to the
element of intentional interference.
A party intentionally interferes with a business expectancy if it "desires to
bring it about or if he knows that the interference is certain or substantially certain
to occur as a result of his action." Newton Ins. Agency & Brokerage, Inc., 114
Wash. App. at 158.
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No. 77635-5-1/18
On July 7, 2014, the City notified Greensun that Par 4 had first-in-time
status and that Greensun could not open its retail marijuana store at 10600 Main
Street. In a letter dated July 29, 2014, the City told Greensun,"The City will not
grant[Greensun] a business license to operate a retail marijuana outlet at 10600
Main Street based on the separation requirement in Ordinance 6156." After the
City determined it would not grant Greensun a license, the City's legal planner
and assistant attorney emailed other City employees, telling them not to approve
Greensun's license.
The City does not dispute that its actions interfered with Greensun's ability
to open a retail marijuana store. Rather, the City argues it did not intentionally
interfere because it acted in good faith. Whether the City acted in good faith,
however, does not matter under this element,9 which concerns only whether the
defendant had the intent to do the interfering act. Accordingly, viewing the facts
in a light most favorable to the Greensun, a genuine issue exists as to the third
element.
D. Interfered with Improper Means
Greensun claims the City acted with improper means by acting in an
arbitrary and capricious manner. The City denies this. In Greensun I, we
"decline[d] to address the more troubling claim by Greensun that the
questionable first in time decision here constitutes arbitrary and capricious action
by the City." No.73646-9-I, slip op. at 17, n.13. We reach the question here.
We conclude Greensun has presented sufficient evidence of arbitrary and
9 However, as discussed below, good faith conduct can support an affirmative defense.
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No. 77635-5-1/19
capricious conduct to raise a genuine issue of material fact as to improper
means.1°
A claim for tortious interference can be established by demonstrating the
defendant acted with improper motive, improper means, or both. Pleas v. City of
Seattle, 112 Wash. 2d 794, 804-05, 774 P.2d 1158 (1989). Here, Greensun alleges
only improper means.
Tortious interference through improper means "arises from. . . the
defendant's ... use of wrongful means that in fact cause injury to plaintiff's
contractual or business relationships." Pleas, 112 Wash. 2d at 803-04. To show
improper means, the plaintiff must demonstrate the defendant had a duty not to
interfere. Pleas, 112 Wash. 2d at 804. To establish such a duty, the plaintiff may
point to a statute, regulation, recognized common law, or established standard of
trade or profession. Libera v. City of Port Angeles, 178 Wash. App. 669, 676-77,
316 P.3d 1064(2013)(citing Pleas, 112 Wash. 2d at 804).
When determining whether a party acted with improper means, courts
analyze the method by which the defendant interfered with the expectancy.
Wash. Trucking Ass'n v. Emp't Sec. Dep't, 192 Wash. App. 621, 651, 369 P.3d 170
(2016), rey'd on other grounds, 188 Wash. 2d 198, 393 P.3d 761 (2017). Courts
can consider a city's arbitrary and capricious actions as evidence of improper
means. Pleas, 112 Wash. 2d at 805. "A court need not find that a defendant acted
10 In light of this conclusion, we do not reach the question whether the City's failure to
engage in formal rule-making constituted improper means.
19
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with ill will, spite, defamation, fraud, force, or coercion in order to find improper
purpose or means." Libera, 178 Wash. App. at 677.
The City does not dispute that arbitrary and capricious conduct can serve
as evidence of improper means. Instead, it argues it did not act in such a
manner. Such conduct is defined as follows:
Arbitrary and capricious refers to willful and unreasoning action,
taken without regard to or consideration of the facts and
circumstances surrounding the action. Where there is room for two
opinions, an action taken after due consideration is not arbitrary and
capricious even though a reviewing court may believe it to be
erroneous.
Singh v. Covington Water Dist., 190 Wash. App. 416, 424, 359 P.3d 947(2015)
(internal quotations and citations omitted).
In March 2014, the City decided to implement the 1,000 Foot Separation
by creating a first-in-time rule. Throughout May, the City told applicants it would
make the first-in-time determination based on which applicant first applied for a
building permit. When Greensun informed the City it had submitted a complete
application, a City employee stated the applicant first had to be designated as a
lottery winner by the LCB. As early as June 11, 2014, the City stated Par 4 was
first-in-time.
Roughly two weeks before the LCB issued the licenses, the City changed
course and defined the first-in-time applicant as the one who first received a
license from the LCB. The City decided on this method even though the LCB
stated in April that it expected to issue licenses in batches. The City adhered to
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No. 77635-5-1/21
this method despite the inability of the LCB system to determine which applicant
it had licensed first. As this court noted in Greensun 1:
The City's failure to notice the LCB's public announcement
that "initial retail licenses will issued [sic] in batches (10-20) in most
populous areas"(included Par 4 and Greensun)triggered a series of
ad hoc City decisions intended to implement its unworkable first in
time rule. As Drews later described it, "we did not issue a written
policy about [the "lock down" rule]. We didn't publish it. We had to
make decisions on the fly and—Well,that's probably not a good way
to say it." The City's assistant attorney acknowledged licenses were
issued in batches and the LCB's system was not set up to "determine
which entity was actually first in time." Even the ultimate first in time
winner, Par 4, complained to the City about its "illogical first in time
rule":
The City's pursuit and reliance on the State's actual
license 'issuance order' is illogical and a waste of time
for all parties involved where those records likely do
not exist.
No.73646-9-I, slip op. at 15, n. 11 (internal citations omitted).
Moreover, although the LCB first issued Par 4 a license dated July 3,
2014, it told the City the license was not the actual marijuana retail license. The
LCB confirmed it issued all of the licenses on July 7, 2014. Notwithstanding this
information from the LCB, the City justified its determination that Par 4 was first-
in-time "based on the fact that on July 3, 2014, the LCB sent[Par 4] a letter
indicated it was approving [Par 4]'s marijuana retailer license." The City went on
to say its "decision is further supported by the LCB's records that indicated [Par
4]'s license was approved on July 6, 2014." Both of these dates were incorrect
as the LCB told the City it did not issue any licenses before July 7, 2014.
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No. 77635-5-1/22
Viewing the evidence in the light most favorable to Greensun, there
remains a genuine issue of material fact as to whether the City acted with
improper means through arbitrary and capricious conduct.
E. Resultant Damage
The parties dispute whether the City's actions caused Greensun
damages. The City argues Greensun cannot demonstrate it suffered damages
and cannot prove the City proximately caused any such damages. We disagree.
A party must prove a claim of damages with reasonable certainty. Mut. of
Enumclaw Ins. Co. v. Gregg Roofing, Inc., 178 Wash. App. 702, 315 P.3d 1143
(2013). Thus, the party must produce evidence sufficient to support its claim.
Mut. of Enumclaw Ins. Co., 178 Wash. App. at 715-16. "Evidence of damage is
sufficient if it affords a reasonable basis for estimating loss and does not subject
the trier of fact to mere speculation or conjecture." Mut. of Enumclaw Ins. Co.,
178 Wash. App. at 716.
Though Greensun asks to have a trial to determine the exact amount of its
damages, it has produced sufficient evidence that it suffered damages when it
could not open a recreational marijuana store. Greensun alleged it would have
opened its store but for the City's refusal to issue it a business license. It
submitted evidence that it would have been able to open its store within a week
of receiving its license, and therefore lost profits from that time forward. To
support this claim, Greensun points to the net profits of $2,577,614 in 2015, and
$3,760,535 in 2016, generated by its licensed retail store in Des Moines.
Simpson contends the Des Moines store is very similar to the store Greensun
22
No. 77635-5-1/23
would have opened in Bellevue. Both spaces, he contends, are around 3,000
square feet, located on a major arterial, and have convenient customer parking.
In another declaration, Simpson points to the LCB's published gross sales
reported by each of its licensees. According to the LCB website, Par 4 reported
$300,000 in gross sales for its first month of operation. Viewed in the light most
favorable to Greensun, this evidence raises a material issue of fact as to whether
the company suffered damages as a result of the City's conduct.
F. Privilege
Once a plaintiff establishes all five elements of a tortious interference
claim, the burden shifts to the defendant to demonstrate the interference was
justified or the actions were privileged. Pleas, 112 Wash. 2d at 805. The City
contends it established its actions were privileged as a matter of law. We
disagree. We conclude the evidence presented raises material issues of fact.
1. Good Faith
The City first claims its actions were privileged because it based its
conduct on a good faith interpretation of the zoning ordinance. Good faith may
privilege an interferor's actions and thereby serve as an affirmative defense to a
tortious interference claim. Moore v. Commercial Aircraft Interiors, LLC, 168 Wn.
App. 502, 511-12, 278 P.3d 197(2012)(describing good faith as an affirmative
defense); see also, Singer Credit Corp. v. Mercer Island Masonry Inc., 13 Wn.
App. 877, 884, 538 P.2d 544, 549(1975)(describing good faith as a privilege).
"It [is] well established that '[o]ne who in good faith asserts a legally protected
interest of his own which he believes may be impaired by the performance of a
23
No. 77635-5-1/24
proposed transaction is not guilty of tortious interference." Brown v. Safeway
Stores, Inc., 94 Wash. 2d 359, 375, 617 P.2d 704 (1980)(quoting Singer Credit
Corp., 13 Wash. App. at 884). The burden of proving privilege rests with the
defendant. Pleas, 112 Wash. 2d at 800.
That the interferor is reasonably mistaken about the law does not defeat
the privilege. See Leingang v. Pierce County Med. Bureau, Inc., 131 Wash. 2d 133,
930 P.2d 288 (1997); see also, Restatement(Second) of Torts § 773(1979). An
interferor may assert the good faith privilege based on an honest but incorrect
belief. See Restatement(Second) of Torts § 773 (1979).
As to the claim that it acted arbitrarily and capriciously, the City contends it
acted in good faith because it sought to enforce its zoning laws by applying the
1,000 Foot Separation through a neutral method and offered to help Greensun
find another location after it denied its license. It offers the following
interpretation of the 1,000 Foot Separation requirement:
Under the City's zoning ordinances, Greensun and Par 4
became "marijuana" retailers subject to the 1,000 [sic] Separation
rule at the time the LCB issued them licenses. Thus, at the time
Greensun received its marijuana license from the LCB, it was in
violation of the 1,000 Foot Separation because the LCB had already
issued a license [sic] Par 4 for a location within 1,000 feet of the
Greensun's Premises.
However, as discussed above, the City's decision to use the timing of the
LCB licensing for the first-in-time determinations was questionable. The City
originally implemented a system where applicants would "lock down" a location
based on building permit applications. It then abandoned that to instead link the
24
No. 77635-5-1/25
first-in-time determinations to which applicant the LCB licensed first, even though
the LCB stated it would issue the licenses in "batches." After the LCB informed
the City that its system could not determine which applicant had been licensed
first, the City asked the applicants to submit evidence as to who the LCB licensed
first. This prompted even Par 4 to complain about the City's "illogical first in time
rule." In Greensun I, we described the City's actions as "ad hoc" and "troubling."
No.73646-9-I, slip op. at 15, n. 11, and 17, n.13.
Viewing the evidence in the light most favorable to Greensun, there is a
material issue of fact as to whether the City acted in good faith. Likewise, when
the evidence is viewed in the light most favorable to the City, there is a material
issue of fact as to good faith. Accordingly, Greensun was not entitled to
summary judgment as to liability. See C.L. v. Dep't of Soc. & Health Servs., 200
Wash. App. 189, 203-04, 402 P.3d 346 (2017). In tortious interference cases,
"when there is room for different views, the determination of whether the
interference was improper or not is ordinarily left to the [trier of fact]." Quadra
Enters., Inc. v. R. A. Hansen Co., Inc., 35 Wash. App. 523, 527, 667 P.2d 1120
(1983)(internal quotations and citations omitted)(addressing the good faith
privilege in a tortious interference claim).
2. Discretionary Immunity
Second, the City argues its actions were privileged based on discretionary
immunity. When the legislature passed RCW 4.92.090, it abolished sovereign
immunity. Evangelical United Brethren Church of Adna v. State, 67 Wash. 2d 246,
252, 407 P.2d 440 (1965). However, courts still provide a narrow exception that
25
No. 77635-5-1/26
immunizes "high level discretionary acts exercised at a truly executive level."
Chambers-Castanes v. King County, 100 Wash. 2d 275, 281, 669 P.2d 451 (1983);
Avellaneda v. State, 167 Wash. App. 474, 480, 273 P.3d 477(2012). The immunity
does not privilege ministerial or operational government acts. Taggart v. State,
118 Wash. 2d 195, 214, 822 P.2d 243(1992). Moreover, a "State [or City] is
immune only if it can show that the decision was the outcome of a conscious
balancing of risks and advantages." Taggart, 118 Wash. 2d at 215; see also, King
v. City of Seattle, 84 Wash. 2d 239, 246, 525 P.2d 228 (1974), overruled on other
grounds by City of Seattle v. Blume, 134 Wash. 2d 243, 947 P.2d 223(1997)("The
fact that an employee normally engages in 'discretionary activity' is irrelevant if,
in a given case, the employee did not render a considered decision."). Put
another way, the immunity does not protect a city from liability for their arbitrary
and capricious acts. King, 84 Wash. 2d at 247. As discussed above, Greensun
raises an issue of material fact as to whether the City acted in an arbitrary and
capricious manner. Accordingly, the City is not entitled to summary judgment on
discretionary immunity grounds.
CONCLUSION
The trial court properly denied Greensun's summary judgment motion
because issues of fact remain as to the City's liability. The trial court erred in
granting the City's motion for summary judgment because Greensun has
submitted evidence to raise genuine issues of fact as to the elements of a claim
for tortious interference with business expectancy. We affirm in part and reverse
26
No. 77635-5-1/27
in part the order denying Greensun's motion for partial summary judgment and
granting the City's summary judgment motion." We remand the case for trial.
WE CONCUR:
11 Greensun's first assignment of error provides,"The King County Superior Court erred
in granting the City of Bellevue's Cross-Motion for Summary Judgment, granting the City's
request for declaratory relief, and dismissing all Greensun's claims for relief." However,
Greensun does not make any argument regarding the trial court's declaratory relief award in its
briefing. Greensun only states the formal rule-making conducted by the City after Greensun I
does not retroactively cure its tortious interference. A party abandons the assignments of error
that it does not discuss in its brief. Zabka v. Bank of Am. Corp., 131 Wash. App. 167, 174, 127 P.3d
722(2005). Because Greensun does not provide argument challenging the trial court's
declaratory relief award, it abandons the issue on appeal.
27