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HSH, Inc. v. The City of El Cajon

United States District Court, S.D. California

September 4, 2014

HSH, INC., a California Corporation; HS RAZUKI, INC., a California Corporation; 3201 NATIONAL, INC., a California Corporation; and HAPPY INVESTMENTS, LP, a California Limited Partnership, Plaintiff,
v.
THE CITY OF EL CAJON, a California municipality, Defendant

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[Copyrighted Material Omitted]

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For HSH, Inc., a California Corporation, HS Razuki, Inc., a California Corporation, 3201 National, Inc., a California Corporation, Plaintiffs: Christine Gilbert, LEAD ATTORNEY, Law Offices of Joseph Samo, San Diego, CA; Joseph Z Samo, LEAD ATTORNEY, Law Offices of Joseph Samo, El Cajon, CA.

For Happy Investments, LP, Plaintiff: Christine Gilbert, LEAD ATTORNEY, Law Offices of Joseph Samo; Mei-Ying M. Imanaka, Craig McKenzie Nicholas, Nicholas & Tomasevic, LLP, San Diego, CA.

For El Cajon, City of, a California municipality, Defendant: Carrie L Mitchell, LEAD ATTORNEY, McDougal Love Eckis Boehmer & Foley, La Mesa, CA.

Page 999

ORDER

WILLIAM Q. HAYES, United States District Judge.

The matter before the Court is the Motion to Dismiss filed by Defendant City of El Cajon. (ECF No. 12).

I. Background

On December 4, 2014, Plaintiffs HSH, Inc., HS Razuki, Inc., and 3201 National, Inc. initiated this action by filing a Complaint in this Court. (ECF No. 1). On February 13, 2014, Plaintiffs, adding Happy Investments, LP as a plaintiff, filed the First Amended Complaint (" FAC" ) pursuant to Federal Rule of Civil Procedure 15(a)(1). (ECF No. 7). On March 13, 2014, Defendant filed the Motion to Dismiss First Amended Complaint Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (" Motion to Dismiss" ), accompanied by a Request for Judicial Notice. (ECF No. 12). On March 31, 2014, Plaintiffs filed an opposition. (ECF No. 13). On April 7, 2014, Defendant filed a reply. (ECF No. 14).

II. Allegations of the FAC

The FAC challenges the validity of the City of El Cajon's (" the City" ) Ordinance 4994, codified as Chapter 17.210 of Title 17 of the City's municipal code (the " Ordinance" ). " The Ordinance purports to 'protect the general health, safety, and welfare of the residents of the city of El Cajon and to prevent nuisance activities where alcoholic beverage sales occur.'" (ECF No. 7 at 2) (citing El Cajon Municipal Code (" ECMC" ) § 17.210.020). However, the Ordinance " picks favorites" by " heralding

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the interests of big business and big-box retailers over those of the smaller neighborhood businesses truly affected." Id. The Ordinance applies to establishments that conduct retail sales of alcoholic beverages for consumption off the premises where sold (" off-sale alcoholic beverage retailers" ). However, the Ordinance expressly exempts " big-box retailers (who typically sell even more alcohol than the small neighborhood retailers affected by this Ordinance)." Id.

" The Ordinance presently requires that all new, modified, or redeveloped off-sale alcoholic beverage retailers obtain a conditional use permit prior to engaging in any alcoholic beverage sales activity unless the establishment consists of 'a general retail store, a grocery store, or a retail pharmacy, which has (1) at least 10,000 square feet or gross floor space, and (2) a maximum of 10 percent of the gross floor area devoted to the sales and display of alcoholic beverages.'" Id. at 6-7 (citing ECMC § 17.210.080(B)). Under the Ordinance, new, modified, or redeveloped off-sale alcoholic beverage retailers' (" new, modified, or redeveloped retailers" ) sales activities must be " be designed, constructed, and operated to conform to countless operational standards" including restrictions on alcohol sales, alcohol displays, and signage. Id. at 7. The " operational standards," applicable to new, modified, or redeveloped retailers, prohibit, among other things, the exterior advertising of alcohol, tobacco, and paraphernalia. " Conditional use permits may be suspended, modified, or revoked by the Planning Commission for violation of the Ordinance." Id. at 7.

Established off-sale alcoholic beverage retailers (" established retailers" ) have " deemed-approved" status under the Ordinance. Id. Established retailers may continue to lawfully operate by satisfying a training requirement, paying an annual permit fee, and complying with various performance standards. Id. at 8. " Deemed approved status may be suspended, modified, or revoked by the Planning Commission for violation of the Ordinance." Id. at 9.

Plaintiff HSH owns Fair Valley Liquor and Main Street Market #2, which both have deemed approved status under the Ordinance. However, they are unable to send their employees to the trainings required by the Ordinance. Main Street Market #2 will become a modified establishment when it applies for a license to sell distilled spirits in addition to wine. Main Street Market #2 will therefore be subject to " burdensome restrictions" and suffer " economic diminution on the value and potential resale value." Id. at 4. Main Street Market #2 will also be operating in " violation of various operational standards contained in section 17.210.100 of the Ordinance" upon receipt of its new license. Id.

Plaintiff HS Razuki owns Main Street Liquor. Main Street Liquor recently received a conditional use permit under the Ordinance as a modified or redeveloped retailer. Main Street Liquor suffers and will continue to suffer economic diminution of value from the " burdensome restrictions on alcoholic beverage sales." Id. " Also, as Main Street Liquor will operate in the same manner in which it has been operating, it will be in violation of various operational standards contained in section 17.210.100 of the Ordinance." Id.

Plaintiff 3201 National owns Main Street Liquor #3. Main Street Liquor #3 has deemed approved status, but it cannot send its employees to the required trainings. Id. at 5. Main Street Liquor #3 presently suffers economic diminution due to burdensome restrictions it would face, should " the business want to modify or redevelop its store." Id.

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Plaintiff Happy Investments owns 3 Brothers Liquor. 3 Brothers Liquor has deemed approved status, but it cannot send its employees to the required trainings. Id. 3 Brothers Liquor presently suffers economic diminution due to the prospective burdensome restrictions it would face, should " the business want to modify or redevelop its store." Id.

Plaintiffs challenge the statute on the following grounds: (1) violation of the Equal Protection Clause (brought by HSH and HS Razuki only), (2) void for vagueness under the Due Process Clause, (3) violation of the Due Process Clause, (4) preemption by California Business & Professions Code § 23790, (5) preemption by Article XX of the California Constitution, (6) violation Article XIII C, § 2(b) of the California Constitution, as amended by Proposition 26, and (7) violation Article XIII C, § 2(d) of the California Constitution. For each claim, Plaintiffs request: (1) a declaratory judgment that the Ordinance is " unlawful, void and unenforceable," (2) a permanent injunction, temporary injunction, or temporary restraining order prohibiting enforcement, and (3) attorney's fees and costs. Id. at 16-18.

III. Article III Standing

Defendant contends that Plaintiffs lack standing because they have failed to allege an injury in fact. Defendant contends that the alleged injuries stemming from violating the Ordinance are hypothetical because Plaintiffs have not alleged that they plan to violate the ordinance. Defendant further contends that simply not wanting to comply with regulations is not harm to a legally protected interest because Plaintiffs do not have a right " to operate their business as they see fit." (ECF No. 14 at 3). Finally, Defendant contends that the complained of injury is not particularized because it is an injury common to " all alcoholic beverage sales establishments in the City." Id. at 4.

Plaintiffs assert that they have adequately alleged actual economic diminution on the value of their businesses as a result of the Ordinance. Plaintiffs also assert that they have adequately alleged imminent future harm in their inability to comply with the Ordinance's requirement of employee trainings, and Main Street Market #2 and ...


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