Court of Appeal: Baldwin Park Properly Granted Monopoly in Transporting Cannabis Within Its Border

Friday, October 23, 2020

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Court of Appeal: Baldwin Park Properly Granted Monopoly in Transporting Cannabis Within Its Border

Manella Says Action Not Invalidated by Executives of Company Receiving the License Giving $8,800 to Political Campaign of Council Member Voting in Its Favor

By a MetNews Staff Writer

The Court of Appeal for this district has affirmed a judgment denying a writ of mandate to persons challenging the City of Baldwin Park’s grant of an exclusive license to a company to transport cannabis within the city.

Presiding Justice Nora M. Manella wrote the opinion which affirms a decision by Los Angeles Superior Court Judge Mitchell L. Beckloff. Filed Wednesday, it was not certified for publication.

Beckloff determined that the creation of a monopoly for Rukli, Inc. served a valid municipal interest, and was not tainted by contributions in 2017 by Rukli of $8,800 to the state Senate campaign of Monica Garcia, a member of the City Council who had voted to grant the company its license.

The city does not permit sales of cannabis within its borders. Any Baldwin Park cultivator of cannabis or manufacturer of products made from it must use Rukli for transportation of its product to other cities.

Garcia’s Explanation

A Jan. 22, 2018 article in the San Gabriel Valley Tribune quoted Garcia as saying, in an email, that “innuendos and allegations” over her vote were “politically motivated,” insisting:

“The decisions I make on the City Council are based on what I believe to be in the best interest of my community—not anything else.”

Sharone Bershatski, the president and CEO of Rukli, was quoted as explaining:

“In the latter part of December, we were contacted by the Garcia for Senate campaign and we were very pleased to support her candidacy with a contribution.”

The City Council’s vote was taken on Dec. 18, 2017. The following day, Bershatski and Rukli’s operations consultant each made a $4,400 campaign donation.

Garcia explained at the meeting at which the agreement with Rukli was approved:

“You know, one of the reasons why I supported having one distributor is because I believe that it is safer. There is more accountability with one company versus having multiple companies and we don’t know what’s been distributed and what time and what vehicle, so on and so forth, so that in it itself, uh, would suggest that there’s you know, greater public safety, um, but that’s just my position.”

Manella's Opinion

Manella wrote:

“Here, the court found appellants had failed to prove that the primary purpose of the Exclusivity Provisions was one other than a valid public purpose. We interpret appellants’ insistence that the primary purpose of the provisions was to provide Rukli a monopoly as an argument that the evidence supporting their contention was uncontradicted and of such a character and weight as to leave no room for the court's determination that it was insufficient.”

She went on to say that “even were it reasonable to infer” that Garcia voted to grant Rukli a monopoly as a quid pro quo for the campaign donations, “it is also reasonable to infer that Rukli agreed with and appreciated the councilmember’s vote and independently decided to contribute to her state senate campaign” in the aftermath of the vote.

“The trial court's inference that the contributions were insufficient to demonstrate a quid pro quo arrangement is reasonable, and we are without power to disregard it,” Manella said. “Appellants’ evidence is not of such a character and weight as to leave no room for the court’s determination that it was insufficient.”

Statutes Cited

The plaintiffs contended that the city’s action contravenes two provisions of the Business & Professions Code which are part of the Medicinal and Adult Use Cannabis Regulation and Safety Act, which went into effect Jan. 1, 2018.

Sec. 26051(b) provides:

“It shall be unlawful for any person to monopolize, attempt to monopolize, or combine or conspire with any person or persons to monopolize, any part of the trade or commerce related to cannabis. The Attorney General shall have the sole authority to enforce the provisions of this subdivision.”

Section 26052 says that a “licensee” shall not perform certain acts in violation of the state’s antitrust statute, the Cartwright Act, including making “any contract in restraint of trade” or forming “a trust or other prohibited organization in restraint of trade.”

Definition of ‘Person’

Manella pointed out that §26051(b) applies to a “person” and §26052 to a “licensee,” defined by §26001(z) as “any person holding a license.” Sec. 26001(an), she noted, defines a “person” as “any individual, firm, partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, and the plural as well as the singular.”

The jurist remarked that “[n]otably, this list omits the term ‘local jurisdiction,’ ” which, she wrote, is specified by §26001(ac) to mean “a city, county, or city and county.”

She reasoned:

“We therefore assume the Legislature intentionally omitted ‘local jurisdiction’ both from the list of entities defined as a ‘person,’ and from those restrained from anti-competitive behavior. In short, by its terms, the Act did not prohibit the City from approving the Exclusivity Provisions.”