Zoning Laws vs. Washington’s I-502

Tedd Wetherbee has Washington State approval, issued under the provisions of Initiative 502, to open a marijuana business, and he leased a storefront in the town of Fife to do so. Earlier this summer, however, the Fife City Council adopted zoning regulations that went beyond the usual restrictions on location, signage and hours of operation, to ban all marijuana businesses in town.

If this story sounds familiar to you, it should. In June Shaun Preder faced similar obstacles in the town of Wenatchee. Two counties and 28 cities in Washington have adopted similar bans and others have imposed moratoriums on marijuana businesses.

Wetherbee sued the city of Fife, and on Friday, August 29, 2014, the Pierce County Superior Court ruled for the town, holding that I-502 does not preempt local zoning rules. If this case sets the precedent for the state, then local bans may continue to challenge the regulatory system.

This is shaping up as an interesting legal puzzle. Washington, like other states that have legalized marijuana in some form, has long recognized the potential for a federal challenge based on the Controlled Substances Act. As it turns out though, the more serious threat to the law may be bubbling up from below in the form of local regulation.

Much of the thinking about this conflict has focused on the concept of preemption, basically a pecking-order analysis of whose rules trump whose. A more compelling way to understand why local regulation should not be allowed to eviscerate I-502 looks at the interests of those intended to benefit under the law.

 

Intended Beneficiaries of I-502

In broad terms, those intended beneficiaries include the public and the business owner. Individuals are protected from the threat of arrest and provided with a product that meets state quality and safety standards. To the extent that a legitimate market drives out the black market, the public is also protected from a wide range of noxious activity associated with illegal sales. The law is also intended to generate new state and local taxes to fund education, health care, research and substance abuse prevention. The business owner is protected in these ways and, because business licenses are limited, a license holder also has a competitive advantage.

 

State and Local Regulation Interact

Perhaps the best way to understand how this interaction should work is to look at the analogy of minimum wage laws. Minimum wage laws are intended to protect the interests of workers. The federal Fair Labor Standards Act sets a baseline, currently $7.25 per hour. States and localities may be more generous in protecting the interests of intended beneficiaries, but never less.

California, for example, has a minimum wage of $9 per hour and San Francisco’s is $10.74. California does not have the option of redefining what the public interest is or who the intended beneficiaries of the law are, choosing instead to mandate a maximum wage of $5 per hour to protect small businesses, for example.

By the same logic, Fife might plausibly provide greater protection from the threat of arrest, higher quality standards, stronger law enforcement against black-market sales or increased competitive advantages for legal local marijuana businesses. It cannot provide less, redefine public interest or decide to protect a different set of beneficiaries, particularly through administrative action not subject to voter approval.

 

Is State Approval a Property Right?

If so, is it not protected under the due process clauses of the federal and Washington State Constitutions? A business license is certainly a valuable commodity, and it is probably not difficult to measure that value in dollars. If a locality prevents the license holder from using the license, that diminishes its value.

If a locality found it necessary in the public interest to build a road where a homeowner’s house sits, it might, but it would have to pay the homeowner for the diminished value of the property.  Will Fife and other towns and counties end up owing damages to marijuana license holders for the diminished value of the license? It is an interesting thought.

It also may be no more than that. Washington State Representative Christopher Hurst has announced that state lawmakers would move to amend I-502 to prohibit local bans in the event of a Fife victory. That amendment would likely only have a prospective effect, however, so existing litigation might continue. Having the legislature introduce some clarity into the situation is probably a better way to make law, than proceeding through the court system, in any event.

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