Metropolitan News-Enterprise


Monday, August 8, 2016


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C.A. Tosses Order That City Refund Marijuana Penalties

City Cannot Be Forced to Return Funds Seized by Federal Government, Panel Says




A city that levied penalties against a medical marijuana facility in excess of the amounts its ordinance allowed was not required to refund amounts that were seized from the city by the federal government, the Fourth District Court of Appeal ruled Friday.

“The federal government, in an in rem proceeding, had seized and declared forfeited a cashier’s check representing the money deposited with the City [of Beaumont], and it is undisputed that Oak Tree [Alternative Care] never contested the federal asset seizure proceeding,” Justice Richard Fybel of Div. Three explained in an unpublished opinion. “Thus, when the seized deposits were declared forfeited, title to them passed to the federal government.  Simply put, the City had nothing it could refund to Oak Tree.”

The panel agreed with Oak Tree that the city violated its own ordinance by collecting $664,000 in penalties, which were limited to $100,000 by the legislation. But it overturned Riverside Superior Court Judge John Vineyard’s order that the city refund $564,000 to the dispensary, and also held that the city was the prevailing party in the mandamus action.

The case was sent back to the trial court to determine the amount the city should be awarded in attorney fees.

City Ordinance

The dispute goes back to 2009, when Oak Tree incorporated as a California nonprofit mutual benefit corporation and leased premises in Beaumont, commencing operations in August of that year, three months after the city’s council enacted an ordinance banning medical marijuana dispensaries from operating in the city.

 City officials promptly cited Oak Tree for operating a dispensary in violation of the ordinance and operating a business without a license. Additional citations were issued daily between August 2009 and November 2010, with fines beginning at $100 per day and then increased to $500 per day in late August and $1,000 per day in September 2009.

The dispensary filed administrative objections and began depositing the penalties. In March 2011, a hearing officer concluded he lacked authority to hear constitutional objections and ruled that Oak Tree was operating in violation of the ordinance, upholding the penalties. Oak Tree ceased operating in June 2011 when it was raided by a task force of sheriff’s deputies and local police officers from around the county.

Four months after the raid, a federal district judge issued a warrant commanding the Department of Homeland Security to seize the $664,000 in penalties paid by Oak Tree. In May 2012, the department declared the cashier’s check used by Oak Tree to pay the penalties—which had been seized three months earlier—forfeited.

Oak Tree, which had petitioned in state court for a writ of mandate a year earlier, did not contest the federal summary forfeiture proceeding.

Refund Ordered

In the state case, Vineyard ruled that the maximum the city could collect was $100,000, and that Oak Tree was entitled to a refund of the balance. He also denied the city’s motion for attorney fees, which were sought under statutes allowing recovery of fees in administrative cases when provided for by local ordinance.

Fybel, however, said the trial judge had no jurisdiction to order the city to return money it did not have, and lacked title to. Once the forfeiture was declared, and because Oak Tree did not contest the forfeiture, title passed to the federal government, the justice said.

He rejected Oak Tree’s argument that the state court had jurisdiction over the money because it was in the city’s exclusive possession up until it was seized.

‘Ownership Interest’

The dispensary “very much claimed an ownership interest in the deposited penalties and sought their return,” the jurist noted.

He continued:

“Oak Tree does not deny that the deposited penalties constituted a res that could be seized; indeed, Oak Tree argues the penalties were a res that was subject to superior court in rem jurisdiction.  The cashier’s check, though apparently written with the City as the payor, represented $664,000 Oak Tree had deposited as fines.  Oak Tree does not dispute the $664,000 derived from activity or transactions rendering the money subject to forfeiture….The federal authorities treated the deposited penalties as a res subject to seizure.  Oak Tree, by failing to file a claim and defaulting in the federal forfeiture proceeding, conceded that to be the case and abandoned any claim of ownership to the deposited penalties represented by the cashier’s check.”

As for the attorney fee issue, Fybel said the city, being entitled to a net monetary recovery under the panel ruling, was necessarily the prevailing party and thus entitled to recover both ordinary costs and attorney fees.

The case is Oak Tree Alternative Care v. City of Beaumont Office of Administrative Appeals (City of Beaumont), G052266.


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