Top Cat Enterprises v. Wa State Liquor & Cannibis Board

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
TOP CAT ENTERPRISES, LLC, a, ) No. 79224-5-I
Washington Corporation, )
Appellant,
DIVISION ONE
v.
CITY OF ARLINGTON, a Washington ) PUBLISHED OPINION
municipal corporation; and )
WASHINGTON STATE LIQUOR AND )
CANNABIS BOARD, a state agency, )
Respondents. ) FILED: January 6, 2020
MANN, A.C.J. —Top Cat appeals the Washington State Liquor and Cannabis
Board’s (WSLCB) decision to license 172nd Street Cannabis in the City of Arlington.
Top Cat contends that WSLCB incorrectly interpreted the meaning of ‘property line” in
WAC 314-55-050(10), and improperly determined the distance between 172nd Street
Cannabis and Weston High School, by measuring from the leased lot lines, rather than
the fee simple boundary lines. Top Cat argues that the improper measurement resulted
in 172nd Street Cannabis being located less than 1000 feet from a school.
We agree with the WSLCB that the appropriate measure was between the
leased lot lines. We affirm.
No. 79224-5-1/2
In 2012, Washington voters approved Initiative 502 (1-502) LAWS OF 2013, ch. 3
(codified in part of chapter 69.50 ROW). 1-502 established a regulatory system for the
production, processing, and distribution, of limited amounts of marijuana for recreational
use by adults. WSLCB used a lottery system to award 334 retail licenses. Licenses
granted under the lottery system were jurisdiction specific. A license applicant was
required to stay within the jurisdiction in which they applied, even if that jurisdiction
issued a ban or moratorium on retail licenses.
In 2015, the Cannabis Patient Protection Act (CPPA) merged the preexisting
medical marijuana program with the recreational marijuana retail stores established
under 1-502. LAwS OF 2015, ch. 70 (codified in part of chapter 69.50 ROW). The CPPA
also directed WSLCB to reopen the application period for retail stores and issue
additional licenses addressing the needs of the medical market. LAWS OF 2015, ch. 70.
WSLCB increased the number of retail licenses by 222. Rather than implement a
lottery system similar to 1-502, the CPPA prioritized new marijuana applications as
Priority 1, Priority 2, or Priority 3, which distinguished between applicants’ degree of
experience and qualifications in the marijuana industry. Former ROW 69.50.331 (2015);
former WAC 314-55-020 (2015). Because of the large number of applicants, only
Priority 1 applicants were able to move forward with the licensing process. In addition
to Priority I applicants, the CPPA allowed licensees from 1-502’s lottery that were
barred from opening retail stores because of local bans to transfer their license to
jurisdictions without local bans on marijuana sales.
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No. 79224-5-1/3
Because only a limited number of new licenses were available, applicants
needed to finish the WSLCB licensing process before other applicants to ensure that
they obtained one of the open spots in a particular jurisdiction. ROW 69.50.331
requires both 1-502 licensees and Priority I CPPA applicants to meet statutory
requirements before WSLCB grants a retail license. One of these requirements
prohibits WSLCB from licensing a retail business within 1 000 feet of “the perimeter of
the grounds of” a school. ROW 69.50.331 (8)(a).
Top Oat was originally selected in the 1-502 lottery for a retail location in the City
of Marysville. Top Cat completed the licensee process and received a license for a
retail business in Marysville on November 12, 2014. During the licensing process,
Marysville enacted a ban on marijuana retailers, which prevented Top Cat from opening
its store.
On January 29, 2016, Top Cat applied to move its retail license from Marysville
to Arlington. At the time, there was only one available retail license available in
Arlington.
Previously, 172nd Street Cannabis applied for a marijuana retail license in
Arlington under the CPPA’s priority system and received a Priority 1 designation on
December 8, 2015. WSLCB assigned 172nd Street Cannabis’s application to WSLCB
Senior Marijuana Licensing Specialist Sean Houlihan. 172nd Street Cannabis sought a
license for a leased property at 5200 172nd St. N.E., F-101 in Arlington. The proposed
location is leased lot 500B on the Arlington Municipal Airport property (Airport property).
The Airport property is approximately 1,200 acres in size and is partitioned into
over 100 distinct parcels that are available to lease. Arlington School District No. 16
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No. 79224-5-1/4
leases lot 301 for Weston High School. Weston High School’s lease is recorded with
the Snohomish County Auditor and includes a legal description of the property. A
cyclone fence fully encloses lot 301 for security. Weston High School’s lot 301 is on the
north side of 172nd St. NE. 172nd Street Cannabis’s lot 500B is located on the south
side of 172nd St. SE.
The following Airport Property Boundary and Lease Lot map depicts the Airport
property boundaries, leased lots within the Airport property (including Weston High
School), and the location of 172nd Street Cannabis.1
City of 4 cling! on
Afrport Property Boundary
and Lease Lots
Legend
Airport Lots
Airport Property
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1 (Labels added). This image is rotated so that north is to the right. 172nd Street NE runs east-
west between Weston High School and 172nd Street cannabis, but is not visible in the above image.
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No. 79224-5-1/5
Specialist Houlihan measured the distance between 172nd Street Cannabis’s lot
500B and Weston High School’s lot 301 and concluded that the lots are over 1,600 feet
apart from one another and thus consistent with the 1000-feet separation requirement.
Prior to the final inspection of Top Cat’s application, WSLCB issued the only
retail license in Arlington to 172nd Street Cannabis. WSLCB closed licensing in
Arlington and offered Top Cat the opportunity to remain in Marysville or relocate to
another jurisdiction with retail licenses still available.
Top Cat requested an administrative hearing and the case was assigned to an
Administrative Law Judge (AU) at the Office of Administrative Hearings. Top Cat
objected to the approval of 172nd Street Cannabis’s license on the basis that the retail
location was less than 1000 feet from the Airport property where Weston High School is
located. Specifically, Top Cat contended that Weston High School is located within the
larger Airport property located north of 172nd Street NE and identified as Snohomish
County Parcel No. 31052100400102. And because the Airport property is immediately
diagonal from the proposed retail store for 172nd Street Cannabis and separated by
only 120 feet, 172nd Street Cannabis’s location did not meet the 1000 foot separation
requirement. WSLCB responded that the lease lots are distinct parcels and that those
boundaries are depicted on the Airport Property Boundary and Lease Lot map.
Therefore, WSLCB contended that specialist Houlihan correctly measured the distance
between lot 50DB and lot 301.
The AU’s initial order affirmed the approval of 172nd Street Cannabis’s license.
The AU concluded that “property line” in WAC 314-55-050(1 0) is not ambiguous and
that its usual and ordinary meaning is “those lines which separate one’s lot from
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No. 79224-5-1/6
adjoining lots or the street.” Thus, the AU explained that the lease lot lines for the
Airport property were property lines within the meaning of WAC 314-55-050(10). Top
Cat filed a petition for review of the initial order to WSLCB. On July 25, 2017, WSLCB
issued a final order affirming the initial order and adopting the AU’s findings of fact and
conclusions of law.
On August 22, 2017, Top Cat petitioned for review by the Snohomish County
Superior Court. On November 1, 2018, the superior court affirmed WSLCB’s final order.
Top Cat appeals.
Top Cat contends that the WSLCB erred in concluding that the term “property
line” within WAC 3 14-55-050(10) includes not only formal, recorded, boundary lines, but
also lease lines and lot lines.
The Washington Administrative Procedure Act (APA) governs our review of
WSLCB’s final order. RCW 34.05.570; Tapper v. Emp’t Sec. Dep’t, 122 Wash. 2d 397,
402, 858 P.2d 494 (1993). This court sits in the same position as the superior court,
applying the standards of the APA directly to the record before the agency. Tapper, 122
Wash. 2d at 402. “The burden of demonstrating the invalidity of agency action is on the
party asserting invalidity.” RCW 34.05.570(1)(a). We will not overturn an agency’s
legal determination unless the agency engaged in an unlawful procedure or decision
making process, failed to follow a prescribed procedure, or erroneously interpreted or
applied the law. RCW 34.05.570(3). Top Cat challenges whether the WSLCB’s final
order contained an erroneous interpretation or application of the law.
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No. 79224-5-1/7
We interpret agency regulations as if they were statutes and review WSLCB’s
legal determinations de novo. Wash. Cedar & SuiDply Co., Inc. v. State, Dep’t of Labor
of Indus., 137 Wash. App. 592, 598, 154 P.3d 287 (2007). We give substantial weight,
however, to an agency’s interpretation of statutes and regulations within its area of
expertise. k1. at 598. “Accordingly, we will uphold an agency’s interpretation of a
regulation if it reflects a plausible construction of the statutory language and is not
contrary to the legislature’s intent and purpose.” kJ. at 598.
Under l-502, the WSLCB is prohibited from issuing “a license for any premises
within one thousand feet of the perimeter of the grounds of any elementary or
secondary school.” RCW 69.50.331 (8)(a). The legislature also empowered WSLCB to
adopt regulations regarding retail outlet locations. RCW 69.50.342(1)(f). In response,
WSLCB promulgated WAC 314-55-050(1 0), which states:
the [WSLCB] shall not issue a new marijuana license if the proposed
licensed business is within one thousand feet of the perimeter of the
grounds of any of the following entities. The distance shall be measured
as the shortest straight line distance from the property line of the proposed
building/business location to the property line of the entities listed below:
(a) Elementary or secondary school;
Top Cat focuses on the second sentence in WAC 314-55-050(10) and contends
that the term “property line” means the legal description from a deed that describes the
boundaries of real property. We disagree.
“If a regulation is unambiguous, intent can be determined from the language
alone, and we will not look beyond the plain meaning of the words of the regulation.”
Mader v. Health Care Auth., 149 Wash. 2d 458, 473, 70 P.3d 931 (2003). The plain
meaning of a regulation may also be “discerned from all that the Legislature has said in
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No. 79224-5-1/8
the statute and related statutes which disclose legislative intent about the provision in
question.” Mader, 149 Wash. 2d at 473 (internal quotations omitted).
WSLCB concluded that property line is not an ambiguous term and that its usual
and ordinary meaning is “those lines which separate one’s lot from adjoining lots or the
street.” We agree.2
WSLCB’s decision was guided by Mall, Inc. v. City of Seattle, 108 Wash. 2d 369,
373, 375, 739 P.2d 668 (1987). In Mail, our Supreme Court held that property line is
commonly understood as “those lines which separate one’s lot from adjoining lots or the
street.” ~ at 375. The issue in ~ was whether the Seattle zoning law allowed a
landowner to count that portion of its land that is encumbered by a street easement in
computing the allowable floor area for a structure. k~. at 374. Under the Seattle
Municipal Code (SMC) the gross floor area of any structure could not exceed ten times
the “lot area.” k~. at 374. The SMC defined lot area as “the total horizontal area within
the lot lines of a lot.” k1. at 374-75. In turn, the SMC defined lot lines as “the property
lines bounding a lot.” k~. at 369. While the term “property line” was not defined by city
code, the Court concluded that property lines are “commonly understood as those lines
which separate one’s lot from adjoining lots or the street.” k1. at 375. Although the fee
simple owner had a reversionary interest in the land underlying the condemned street
easement, the property line ended at the street line and the condemned street
easement was not included in the calculation of the “lot area.” ki. at 375.
2 Top Cat argues that its interpretation of property line is supported by regulatory history including
amendments to WAC 314-55-050(10). But we only resort to the legislative history where the regulation is
ambiguous. Cannon v. Dept of Licensing, 147 Wash. 2d 41, 57, 50 P.3d 627 (2002). Because we agree
with the WSLCB that the term property line is unambiguous we do not consider the legislative history.
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No. 79224-5-1/9
The WSLCB found that the dictionary definition of property line is consistent with
Mall’s interpretation of property line. The Board also relied upon two dictionaries for the
definition of property line as “the boundary line between two pieces of property.”3 We
agree with the WSLCB. Under J~4~[E and the dictionary definitions it relied upon,
“property line” is a term that includes the boundary lines delineating different types of
property interests, including a lease lot line. The key is that the property boundary
separates the property from other lots or properties. Here, the school’s lease is on lot
301—one of numerous lease lots on the larger Airport property. The school property is
distinct and separate from other lots within the Airport property, including lot 500B.
We also agree that the WSLCB’s interpretation of the term property line is
consistent with the stated legislative purpose of ensuring marijuana businesses are
physically located at least 1,000 feet away from the “perimeter of the grounds” of any
elementary or secondary school or other restricted entity. RCW 69.50.331 (8)(a). The
statute does not mention “property line”—only that a marijuana business must be 1,000
feet from “the perimeter of the ground” of a restricted entity. RCW 69.50.331(8)(a). The
interpretation of the term property line therefore must be consistent with the stated
intent of the statute to insure that marijuana businesses are at least 1,000 from the
perimeter of the grounds of a restricted entity.
The first sentence of WAC 314-55-050(10) mirrors the statute and states that the
WSLCB “shall not issue a new marijuana license if the proposed licensed business is
within one thousand feet of the perimeter of the grounds of any” restricted entity. The
~ VOCABULARY.COM, https://www.vocabulary.com/dictionary/property%2OIine (last visited Apr. 12,
2019); WORDWEB ONLINE, https://www.wordwebonIine.com/search.pl?w=~roQerty+line (last visited Apr.
12, 2019).
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No. 79224-5-1/10
second sentence of WAC 314-55-050(10) explains how to measure the distance
between the licensed business and the prohibited entity by measuring the shortest
distance between the two property lines. The regulations also define the “perimeter” as
“a property line that encloses an area.” WAC 314-55-010(28). Read together, the
WSLCB cannot issue a license for a location that is within 1,000 feet of the property line
that encloses an area of the grounds of any restricted entity.
As the WSLCB concluded:
Here, the legislative intent of the 1,000 foot separation is apparent from
the plain language of RCW 69.50.331(8). The purpose of the separation
is to prevent a marijuana business from being located within 1,000 feet of
the perimeter of school grounds, so as to minimize the possibility that
children will gain access to it .What is important, and what is required
. . .
by statute and regulation, is the physical separation of at least 1,000 feet
between the perimeter of the school grounds and the premises of a
marijuana retail business.
We agree.
The WSLCB’s measurement of the distance between the perimeter of Weston
High School’s lot 301 and 172nd Street Cannabis’s lot 500B as over 1,600 feet is
consistent with RCW69.50.331(8)(a) and WAC 314-55-050(10). WSLCB did not err in
determining the location exceeded the 1,000 feet separation requirement.4
~ We note also that Top Cat’s suggested interpretation creates the potential for absurd results.
“We should not construe a regulation in a manner that is strained or leads to absurd results.” Overlake
Hos~. Ass’n V. Dept of Health, 170 Wash. 2d 43, 52, 239 P.3d 1095 (2010). Consider the following
hypothetical: the federal government owns Olympic National Park and leases a legally described parcel
on the western side of Olympic National Park to a Native American Tribe for a whale study school. On
the eastern side of Olympic National Park, within 1000 feet of the Park, a retail cannabis business seeks
a license from WSLCB. The driving distance on State Route 101 between the whale school and the
proposed retail location would be over 100 miles. But under Top Cat’s interpretation of property line, the
measured distanced would be between the proposed cannabis business and the edge of Olympic
National Park, not the lease line for the whale school. This would result in a denial of a license for the
proposed cannabis business even though driving distance between the two entities would be over 100
miles. This cannot be what the legislature or WSLCB meant when it used the terms perimeter or property
line.
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No. 79224-5-Ill 1
We affirm.
141
WE CONCUR:
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