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Colorado Health Consultants v. City and County of Denver

Court of Appeals of Colorado, Sixth Division

September 6, 2018

Colorado Health Consultants, d/b/a Starbuds, Plaintiff-Appellant,
City and County of Denver, through its Department of Excise and Licenses; and Ashley Kilroy, in her official capacity as Director of Denver Department of Excise and Licenses, Defendants-Appellees.

          City and County of Denver District Court No. 16CV32618 Honorable Ross B.H. Buchanan, Judge

          The Law Office of Emilio De Simone, LLC, Emilio G. De Simone, Denver, Colorado; Law Office of Trevor McFee, Trevor M. McFee, Denver, Colorado, for Plaintiff-Appellant

          Kristin M. Bronson, City Attorney, Reginald D. Nubine, Rebekah B. Watada, Assistant City Attorneys, Denver, Colorado, for Defendants-Appellees


          FREYRE JUDGE

         ¶ 1 Sometimes a retail marijuana business wishes to grow the marijuana it sells. To do so legally in Denver, such a business must be located in a zone that permits both cultivation and retail sales, and it must obtain a zoning permit from Denver's Zoning Authority. Additionally, such a business must obtain a retail marijuana cultivation (RMC) license from the Director of the Denver Department of Excise and Licenses (Department), which is subject to an annual renewal process.

         ¶ 2 This case involves the interplay between a zoning permit and a RMC license. Plaintiff, Colorado Health Consultants, d/b/a Starbuds (Starbuds), appeals from the district court's judgment affirming the Department's decision to deny Starbuds' 2016 RMC license renewal application. For the reasons described below, we affirm.

         I. Background

         ¶ 3 Starbuds is a retail marijuana business located in an I-MX-3 zone - a special context zone for industrial mixed use. In March 2013, the zoning authority issued Starbuds a zoning permit for retail sales. The application included attached floor plans identifying retail space on the first floor and a "veg" and "bloom" space on the second floor. Starbuds separately applied with the Department for a RMC license. The Department issued the RMC license in March 2014.

         ¶ 4 The following year, Starbuds sought renewal of the RMC license and, after an uncontested hearing required by Denver Revised Municipal Code (D.R.M.C.) section 6-214(a)(3), the Department renewed Starbuds' RMC license.

         ¶ 5 Starbuds again sought renewal on February 17, 2016. Because changes to the D.R.M.C. no longer mandated a hearing, but allowed one in the Department's discretion, the Department immediately renewed the RMC license. However, several days later, the Department discovered that an interested party had requested a hearing on Starbuds' license renewal. The Department then notified Starbuds that based on this request, it needed to schedule a public hearing. Starbuds agreed to the hearing, which occurred on April 25, 2016. However, during the hearing, Starbuds changed course. It argued that it sought renewal under D.R.M.C. section 6-214(a)(1) and that this provision did not authorize the Department to conduct a hearing.

          ¶ 6 At the hearing, six witnesses opposed the renewal. Starbuds' managing member and owner testified in support of the renewal. The hearing officer also accepted petitions containing signatures of neighborhood residents, both in opposition to and in support of the renewal.

         ¶ 7 In a detailed written recommendation, the hearing officer applied D.R.M.C. section 6-214(a)(3) and recommended that the Department deny Starbuds' request to renew the RMC license. She first found that plant husbandry was not a permitted use in an I-MX-3 zone and that the Department had issued the original license in error.[1] She then rejected Starbuds' assertion that plant husbandry was a permitted "accessory use" under section 6-214(a)(1) and, instead, found that the RMC license was subject to the requirements of section 6-214(a)(2) and (3). After weighing the evidence, the hearing officer found that the opposition had established, by a preponderance of the evidence, that Starbuds failed to satisfy four of the five requirements for renewal under section 6-214(a)(3). Consequently, she recommended that the Department deny Starbuds' RMC license renewal application. After considering Starbuds' formal objections to the hearing officer's recommendation, the Department adopted the hearing officer's findings and denied Starbuds' renewal application.

         ¶ 8 Starbuds filed a C.R.C.P. 106(a)(4) complaint in the Denver District Court alleging that the Department did not have the authority to hold a public hearing on its renewal application because plant husbandry was a permitted accessory use in an I-MX-3 zone. Starbuds also alleged that the Department was equitably estopped from denying its renewal application and that the Department's denial was an unconstitutional taking. The district court affirmed the Department's order, found that equitable estoppel did not apply, and concluded that the denial was not an unconstitutional taking.

         II. The Department Properly Denied Starbuds' RMC License Renewal Application

         ¶ 9 Starbuds first contends that the Department abused its discretion and legally erred in concluding that plant husbandry is not a permitted accessory use in an I-MX-3 zone and that its zoning permit did not authorize plant husbandry. Specifically, Starbuds argues that its license is governed by D.R.M.C. section 6-214(a)(1), which does not permit a public hearing, rather than section 6-214(a)(2) and (3), under which the Department denied its application. Because Starbuds concedes that it did not meet the requirements of section 6-214(a)(2) and (3), we need not analyze those provisions further. Instead, we conclude that the Department's findings and conclusions under those provisions also support denial under section 6-214(a)(1). We therefore affirm the Department's order and the district court's judgment, albeit on a slightly different basis.

         A. Standard of Review

         ¶ 10 C.R.C.P. 106(a)(4) provides as follows:

Where any governmental body or officer or any lower judicial body exercising judicial or quasi-judicial functions has exceeded its jurisdiction or abused its discretion, and there is no plain, speedy and adequate remedy otherwise provided by law:
(I) Review shall be limited to a determination of whether the body or officer has exceeded its jurisdiction or abused its discretion, based on the evidence in the record before the defendant body or officer.

         Thus, in a C.R.C.P. 106(a)(4) action, "judicial review of a governmental agency exercising its quasi-judicial role . . . is limited to whether the body has exceeded its jurisdiction or abused its discretion." City of Commerce City v. Enclave W., Inc., 185 P.3d 174, 178 (Colo. 2008). We sit in the same position as the district court when reviewing an agency decision under C.R.C.P. 106(a)(4). Marshall v. Civil Serv. Comm'n, 2016 COA 156, ¶ 10; Roalstad v. City of Lafayette, 2015 COA 146, ¶ 13. We review de novo whether the agency abused its discretion. Roalstad, ¶ 13.

         ¶ 11 An agency abuses its discretion if its decision is not reasonably supported by any competent evidence in the record, or if the agency has misconstrued or misapplied applicable law. Freedom Colo. Info., Inc. v. El Paso Cty. Sheriff's Dep't, 196 P.3d 892, 899-900 (Colo. 2008); Roalstad, ¶ 13. An action by an agency is not arbitrary or an abuse of discretion when the reasonableness of the agency's action is open to a fair difference of opinion, or when there is room for more than one opinion. Bennett v. Price, 167 Colo. 168, 172, 446 P.2d 419, 420-21 (1968).

         ¶ 12 Generally, a reviewing court should defer to the agency's construction of a law it is charged with enforcing. City & Cty. of Denver v. Bd. of Adjustment, 55 P.3d 252, 254 (Colo.App. 2002). And we presume that the governing body intended a just and reasonable result. Steamboat Springs Rental & Leasing, Inc. v. City & Cty. of Denver, 15 P.3d 785, 787 (Colo.App. 2000).

         ¶ 13 "In reviewing the agency's construction, we rely on the basic rules of statutory construction, affording the language of the provisions at issue their ordinary and common sense meaning." Enclave W., Inc., 185 P.3d at 178. "Our primary task in interpreting statutes and municipal enactments is to give effect to the intent of the drafters, which we do by looking to the plain language." Waste Mgmt. of Colo., Inc. v. City of Commerce City, 250 P.3d 722, 725 (Colo.App. 2010). If the language of the provision at issue is clear and the intent of the legislative body that enacted it may be discerned with certainty, we may not resort to other rules of statutory interpretation. Id. When construing an ordinance in the C.R.C.P. 106(a)(4) context, "we give effect to every word and, if possible, harmonize potentially conflicting provisions." Enclave W., Inc., 185 P.3d at 178.

         ¶ 14 Our review of the agency's factual, discretionary determinations is more deferential. We must uphold the Department's decision unless there is no competent evidence in the record to support it. Carney v. Civil Serv. Comm'n, 30 P.3d 861, 863 (Colo.App. 2001).[2] "No competent evidence" means that the Department's decision is "so devoid of evidentiary support that it can only be explained as an arbitrary and capricious exercise of authority." Id. (quoting Bd. of Cty. Comm'rs v. O'Dell, 920 P.2d 48, 50 (Colo. 1996)); accord Turney v. Civil Serv. Comm'n, 222 P.3d 343, 347 (Colo.App. 2009). "An action by an administrative [body] is not arbitrary or an abuse of discretion when the reasonableness of the [body's] action is open to a fair difference of opinion, or when there is room for more than one opinion." Khelik v. City & Cty. of Denver, 2016 COA 55, ¶ 13. Because we are not the fact finder, we "cannot weigh the evidence or substitute our own judgment for that of the [administrative body]." Kruse v. Town of Castle Rock, 192 P.3d 591, 601 (Colo.App. 2008).

         B. RMC Licensing

         ¶ 15 It is unlawful to cultivate, manufacture, distribute, or sell retail marijuana, except in compliance with the terms, conditions, limitations, and restrictions set forth in article XVIII, section 16 of the Colorado Constitution and in the Colorado Retail Marijuana Code (CRMC). § 12-43.4-102(2), C.R.S. 2017. The General Assembly has authorized the Executive Director of the Department of Revenue (Director) to regulate and control the licensing of the cultivation, manufacture, distribution, and sale of medical and retail marijuana. §§ 12-43.3-201, 12-43.4-201, C.R.S. 2017. The Director may grant or refuse state licenses for cultivation and may suspend, fine, restrict, or revoke such licenses, whether active, expired, or surrendered, upon a violation of the CRMC or any rule promulgated pursuant to the CRMC. § 12-43.4-202(2)(a), C.R.S. 2017. The Director may also hear and determine, at a public hearing, any contested state license denial and any complaints against a licensee. § 12-43.4-202(2)(c).

         ¶ 16 Additionally, the Colorado Constitution permits local governments to (1) prohibit state licensing of marijuana establishments; (2) regulate the time, place, and manner in which marijuana establishments may operate; and (3) limit the total number of marijuana establishments within its jurisdiction. Colo. Const. art. XVIII, § 16(5)(f); D.R.M.C. § 6-200. The Department is Denver's designated local licensing authority for retail marijuana establishments. D.R.M.C. §§ 6-204, 32-2(a). Its authority includes the licensing of several kinds of local marijuana establishments. D.R.M.C. § 6-200.[3] Indeed, the purpose of D.R.M.C.'s chapter 6, article V, the "Denver Retail Marijuana Code," "is to exercise the authority of the City and County of Denver to allow state-licensed marijuana ...

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