Legal Alerts Jun 01, 2020

$6 Million Fine for Trustee Who Knowingly Allowed Illegal Cannabis Dispensaries on Property Owned by Trust

California Appellate Court Says Trustee Can be Held Personally Liable

$6 Million Fine for Trustee Who Knowingly Allowed Illegal Cannabis Dispensaries on Property Owned by Trust

A trustee can be held personally liable for flagrant violations of a city’s zoning code, a California appellate court held last week. When a person acts intentionally or with negligent disregard of an ongoing nuisance, that person can be held personally liable — even though the property is held in trust, the court opinion found.
 
In this case, People v. Braum, the trustee leased two commercial properties in the City of Los Angeles to medical cannabis dispensaries. Over the span of a year, the trustee ignored several cease and desists letters advising him that his two lessees were operating medical cannabis operations without proper city registration. The trustee ignored the letters and the City subsequently filed two civil enforcement complaints against him.
 
The City’s complaint alleged the trustee was using his building without required permits, which was a zoning violation, and was maintaining a nuisance: using a building for unlawful narcotics activity. The trustee knew, the City alleged, that the use of the properties violated the Municipal Code but nevertheless provided substantial assistance to the tenants and aided and abetted violations by renting the property to the dispensaries.
 
The City filed civil actions against the trustee in August 2011 to force compliance with its zoning code and the nuisance abatement law, but the dispensaries continued to operate under the trust’s leases. In November 2012, the City obtained a preliminary injunction against the properties, but the dispensaries continued to operate. Because of the continued disobedience by the trustee, the court found his behavior was “flagrant.”
 
The court found that the City has a valid and strong interest in regulating uses within the City, including medical cannabis uses, and in abating nuisances defined by state law to address the perceived harms addressed by its zoning regulations and the statewide nuisance abatement law. By consistently resisting the City’s enforcement efforts and instead allowing the unpermitted uses and nuisances to continue on his properties, the trustee increased the risk of the harm the City was trying to stop and abate.
 
In addition, while the trustee, as landlord, could have complied in a timely manner with the City’s enforcement efforts,  his own conduct dictated that the amount of penalties necessary to achieve the City’s legitimate enforcement goals would be substantial. The trustee could have prevented and stopped the accumulation of penalties against the trust. Since he did not, he was found to be personally liable for his actions. The trial court imposed a $6 million civil fine, which the Second District Court of Appeal upheld.
 
The trustee argued that the City’s medical cannabis regulations were complex and their meaning so arcane that it was virtually impossible for any landlord to determine and prove whether a given dispensary was operating legally. The vagueness doctrine bars enforcement of a statute that either forbids or requires the doing of an act in terms so vague that persons of common intelligence must necessarily guess its meaning and differ as to its application. The court found that the zoning ordinance was neither vague nor uncertain. The City’s ordinances plainly prohibited the establishment or operation of medical cannabis dispensaries within the City limits. The mere fact that a premises owner within a particular zone is required to search the zoning ordinances to discover the scope of permitted uses cannot alone render the ordinance vague or uncertain.
 
If you have any questions about this decision and how it may impact your agency, please contact the authors of this Legal Alert listed to the right in the firm’s Municipal Law practice group, or your BB&K attorney.
 
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Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein. 

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