Court Opinion

ID: 4229889
Source: CourtListenerOpinion
Date Created: 2017-12-18 22:34:37.244489+00
Date Added: 2024-06-11T14:16:13.647355
License: Public Domain

FILED
                                                           COURT OF APPEALS DIV I
                                                            STATE OF WASHINGTON

                                                           2017DEC 18 Ail 8: 49

           IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
                               DIVISION ONE

LIBBY HAINES-MARCHEL and ROCK                       No. 75669-9-1
ISLAND CHRONICS, LLC, Dba
CHRONICS,

                         Appellants,

                 V.                                 PUBLISHED OPINION

WASHINGTON STATE LIQUOR &
CANNABIS BOARD, an Agency of the
State of Washington,

                          Respondent.               FILED: December 18, 2017

       SCHINDLER, J. — In 2012, Washington voters approved Initiative Measure 502.

LAWS OF 2013, ch. 3, codified as part of chapter 69.50 RCW. Initiative 502 legalizes the

possession and sale of marijuana and creates a system for the distribution and sale of

recreational marijuana. Under RCW 69.50.325(3)(a), a retail marijuana license shall be

issued only in the name of the applicant. No retail marijuana license shall be issued to

a limited liability corporation unless all members are qualified to obtain a license. RCW

69.50.331(1)(b)(iii). The true party of interest of a limited liability company is "[a]lt

members and their spouses." Under RCW 69.50.331(1)(a), the Washington State

       1 WAC 314-55-035(1).
No. 75669-9-1/2

Liquor and Cannabis Board (WSLCB)considers prior criminal conduct of the applicant.2

Criminal history of eight or more points is grounds for denial of a retail marijuana license

application.3 The WSLCB denied the application of Rock Island Chronics LLC

(Chronics LLC)for a retail marijuana license based on the criminal history of the spouse

of the sole member of the limited liability company, Libby Haines-Marchel. Chronics

LLC and Haines-Marchel appeal the WSLCB decision to deny the application for a retail

marijuana license. We affirm.

Application for a Retail Marijuana License

       The material facts are not in dispute. In 2013, Rock Island Chronics LLC

(Chronics LLC)submitted an application to the Washington State Liquor and Cannabis

Board (WSLCB)for a retail marijuana license in Douglas County. The application

identifies Libby Haines-Marchel as the sole member and manager of Chronics LLC with

a "100%" ownership interest. The application identifies Brock Marchel as her spouse.

       The WSLCB determines the maximum number of retail marijuana locations for

each county. WAC 314-55-081(1). If the number of applications exceeds the allotted

number, the WSLCB conducts a lottery. Former WAC 314-55-081(1)(2013).

        RCW 69.50.331(1) states the WSLCB shall conduct an evaluation of the

application. The WSLCB may consider the criminal history of the applicant and has the

discretion to grant or deny the application for a marijuana license. RCW

69.50.331(1)(a). If the application "is disqualified for any reason," the WSLCB will issue

a notice of intent to deny and "the next application on the lottery list will take its place."

        2 We note the legislature amended chapter 69.50 RCW and chapter 314-55 WAC after 2013.
Unless otherwise noted, because the language pertinent to our analysis has not changed, we cite the
current statutes and regulations throughout the opinion.
        3 WAC 314-55-040(1).

                                                  2
No. 75669-9-1/3

        On May 1, 2014, the WSLCB notified Chronics LLC that following the lottery for

Douglas County, its application was "selected number 1."4 The letter states, in pertinent

part:

        Your application was selected number 1.

        We will begin processing applications for the allotted number of stores in
        the coming weeks. If an application is disqualified for any reason or
        withdrawn by the applicant, the next application on the lottery list will take
        its place. If an application appears to not qualify, a statement of Intent to
        Deny will be issued with the right to appeal that decision. Once all
        licenses have been issued in a jurisdiction the remaining applications will
        be administratively closed.

        Applicants selected in the lottery to move forward in the licensing process
        are not guaranteed to receive a license. The application must undergo
        our rigorous investigation process and pass a final inspection prior to
        issuance.[6]

        Under RCW 69.50.331(1)(b)(iii), "[n]o license of any kind may be issued to" a

corporation "unless all of the members thereof are qualified to obtain a license." WAC

314-55-035 identifies "What persons or entities have to qualify for a marijuana license."6

WAC 314-55-035(1) defines the true parties of interest for a limited liability company as

141 members and their spouses" and lap managers and their spouses." Because the

"marijuana license must be issued in the name(s) of the true party(ies) of interest,"

Chronics LLC had to submit a "Personal/Criminal-History Form" for each member and

spouse of the limited liability company. WAC 314-55-020(6)(a), -035(1).

        On December 2, 2014, WSLCB License Investigator Tim Lynch met with Haines-

Marche!. For the first time, Haines-Marchel "disclosed that her spouse, Brock Marchel,

        4 Boldface omitted.
        5 Boldface in original.
        6 Boldface omitted.

                                               3
No. 75669-9-1/4

is currently incarcerated." Haines-Marchel told Lynch that she "was hoping the power of

attorney she holds will allow her to complete the documents for him."

       WAC 314-55-040 addresses consideration of criminal history for a retail

marijuana license. WAC 314-55-040(1) uses a "point system" to determine if criminal

history prevents issuance of a retail marijuana license. Under WAC 314-55-040(1), a

felony conviction is 12 points. Felony convictions remain in effect for 10 years. WAC

314-55-040(1). The WSLCB will not issue a retail marijuana license if an applicant has

"accumulated eight or more points." WAC 314-55-040(1).

       Lynch asked Haines-Marchel to provide "more information on the incarceration

(the circumstances behind the incarceration and when Brock may be released)." On

December 11, Lynch sent an e-mail to Haines-Marchel "regarding the requirement for

her husband to complete his own documents"—the Personal/Criminal History Form. In

response, Haines-Marchel stated her spouse is incarcerated "for a homicide" and "is

             1 2 year" sentence.7 On December 15, Haines-Marchel sent an e-mail to
serving a 44 /

Lynch and attached a copy of a "Spousal Renunciation of Rights Affidavit" dated July 3,

2014. The December 15 e-mail states, in pertinent part:

      My husband is currently incarcerated for a homicide charge and is serving
      a 44-1/2 year sentence with an ERD (earliest possible release date) of
      2038. The board knows of my situation however I want to make you of
      [sic] aware that my husband has relinquished all community rights to
      property pursuant to RCW 26.16.050 which states "a spouse m[a]y give
      grant sell or convey directly to the other his or her community right title
      interest and all or any portion of their community real property[.]" [M]y
      husband has no community property interest in this business and is not a
      true party of interest. I have attached my husband's Spousal
      Renunciation of Rights Affidavit.

The Spousal Renunciation of Rights Affidavit states Brock "will relinquish, irrevocably

       7 The   record does not indicate when the felony conviction occurred.

                                                    4
No. 75669-9-1/5

deny and renounce any and `all' ownership interest and management decisions in Rock

Island Chronics."

       On December 15, Lynch forwarded his report to the WSLCB Marijuana Licensing

and Regulation Division (Licensing Division). The comment portion of the report states:

      The applicant is currently married to Brock Marchel who according to the
      applicant is serving time in prison for a homicide conviction. The
      conviction is a felony that holds a 44% year term. Although the spouse
      would like to give all rights to the business over to his wife[WAC]314-55-
      035 requires that all true parties of interest have to qualify for a licenses
      [sic].

      [WAC]314-55-040 — what criminal history might prevent a marijuana
      license applicant from receiving or keeping a marijuana license.

      "Felony conviction["] - 12 points. Because the applicant did not complete
      a criminal history form it is unclear what other conviction or charges he
      may have.

Denial of Retail Marijuana License

       On January 12, 2015, the Licensing Division sent Chronics LLC a "Statement of

Intent to Deny Marijuana License." The "Summary of Relevant Facts" states, in

pertinent part:

       2.2   [Haines-Marchel]'s spouse, Brock Marchel, is currently
             incarcerated, serving a 44.5 year term for a homicide conviction.
             Although the spouse would like to give all rights to the business
             over to his wife, they remain married in the state of Washington.
             WAC 314-55-035 requires that all true parties of interest must
             qualify for a license.

The "Relevant Authority and Conclusions" cite RCW 69.50.331(1) and WAC 314-55-035

and -040(1) as "grounds for denial."

       3.1    The conduct outlined in paragraph 2.2 constitutes grounds for
              denial of the marijuana license application under the provisions of
              RCW 69.50.331(1)for the purpose of reviewing any application for
              a license and for considering the denial, suspension, revocation or

                                            5
No. 75669-9-1/6

                 renewal or denial thereof, of any license, the state liquor control
                 board may consider any prior criminal conduct of the applicant.
       3.2       The conduct outlined in paragraph 2.2 also constitutes grounds for
                 denial under the provisions of WAC 314-55-035 and WAC 314-55-
                 040(1).
       3.3       Paragraphs 3.1 through 3.2 above each establish a separate and
                 independently sufficient basis for denial.

Administrative Appeal

        Chronics LLC filed an administrative appeal of the Intent to Deny Marijuana

License application and a motion for summary judgment. Chronics LLC argued that

because Brock Marchel disclaimed any interest in the limited liability company, Haines-

Marchel was the only true party of interest under WAC 314-55-035. Chronics LLC

asserted the Spousal Renunciation of Rights Affidavit "changed community property to

separate property solely in [Haines-Marchel]." Chronics LLC also argued denial of the

license application infringed on the constitutional right of Haines-Marchel to work and

earn a living and violated state law on "[m]arital status discrimination in employment."

       The Licensing Division filed a cross motion for summary judgment. The

Licensing Division asserted that under WAC 314-55-035 and -040, Brock Marche!

"remains a true party of interest" and does not "qualify because of his criminal history."

The Licensing Division argued the true party of interest for a limited liability company is

not based on "a community property interest in the business."

        The administrative law judge(AU)affirmed the decision of the Licensing Division

to deny the application for a retail marijuana license.8 The "Initial Order on Summary

Judgment Motion" sets forth the undisputed facts:

        4.6.             Chronics applied for a marijuana retailer license during the
               application window.

        8 The  All ruled it did not have authority to address Haines-Marchel's argument that denial of the
application violated her constitutional liberty interest to work and be free of marital discrimination.

                                                    6
No. 75669-9-1/7

      4.7.            [The Licensing Division] required each applicant to submit a
             Personal/Criminal History [Form].

      4.8.            Chronics is a limited liability company.

      4.9.              [The Licensing Division] required each member of a limited
             liability company and the spouse of each member to submit a
             Personal/Criminal History [Form].

      4.10.           Chronics's only member is Libby Haines-Marchel.

      4.11.           Ms. Haines-Marchel is married to Brock Marche!.

      4.12.         During the initial interview, Ms. Haines-Marchel disclosed
          that Mr. Marchel is incarcerated. [The Licensing Division] sought
          more information from her. Ms. Haines-Marchel subsequently advised
          [the Licensing Division] that Mr. Marchel is serving a 44.5-year term
          for a homicide conviction and will be released no earlier than 2038.

      4.13.        On or about June 15, 2014, Mr. Marchel signed a Spousal
          Renunciation of Rights Affidavit, whereby he irrevocably relinquished
          any ownership or management interest in and any rights to profits
          from Chronics, and renounced any community property interest in
          Chronics that might otherwise be attributed to him.

      4.14.         Mr. Marchel did not submit a Personal/Criminal History
         [Form] nor did he provide a copy of his fingerprints. Therefore,[the
          Licensing Division] was unable to determine whether he had any
          criminal history in addition to his homicide conviction. [The Licensing
          Division] assigned to Mr. Marche! 12 criminal history points for the
          homicide conviction.

      4.15.         As a result of the 12 criminal history points assigned to Mr.
          Marchel and consequently attributed to Chronics,[the Licensing
          Division] denied Chronics's application for a marijuana retailer license.

      The conclusions of law state, in pertinent part:

      5.12.         [The Licensing Division] may investigate and consider
          criminal history when determining whether to grant an applicant a
          license. RCW 69.50.331(1); WAC 314-55-020[(6)].

      5.13.         "A marijuana license must be issued in the name(s) of the
          true party(ies) of interest." WAC 314-55-035.

                                             7
No. 75669-9-1/8

      5.14.          For the purposes of Title 314 WAC, when the "true party of
          interest" is a limited liability company, the "persons to be qualified" are
          "all members and their spouses". WAC 314-55-035(1). In other
          words, the criminal history of both member and spouse are attributed
          to the limited liability company. Here, Ms. Haines-Marchel is the only
          member of Chronics, a limited liability company. Mr. Marchel is her
          spouse. Therefore, he must qualify, or put another way, if his criminal
          history disqualifies him, it disqualifies Chronics.

      5.15.          Chronics argued that [the Licensing Division] is interfering
          with community property law. But the regulation specifically limits its
          definition of "true party of interest" to Title 314 WAC. Title 314 WAC
          addresses [the Licensing Division]'s regulation of tobacco, liquor, and
          marijuana. It does not address property rights, much less the
          regulation, definition, or application of property rights. Thus, WAC
          314-55-035(1) does not clash with community property law.

      5.16.          Chronics argued that Mr. Marchel disclaimed any and all
          property rights, interest, and control as to Chronics. However, the
          definition of "true party of interest", or perhaps more correctly "persons
          to be qualified" is based upon the relationship of the individual to
          either the limited liability company or a member of the limited liability
          company. It has nothing to do with property rights, interest, or control.
          Further, "true party of interest" is specifically distinguishable from
          "financiers"(WAC 314-55-035(3)) and "persons who exercise control
          of business"(WAC 314-55-035(4)). Accordingly, that Mr. Marchel
          disclaimed any and all property rights, interest, and control as to
          Chronics is not relevant.

      5.17.         Therefore, for the purposes of Title 314[WAC]and for the
          purposes of Chronics qualifying for licensure, Mr. Marchel is a "true
          party of interest" and a "person to be qualified" and his criminal history
          must not disqualify him from licensure.

      5.18.          Mr. Marchel's failure to meet the criminal history standards
          outline[d] in WAC 314-55-040 constitutes a basis for [the Licensing
          Division] to deny Chronics's marijuana license application. WAC 314-
          55-050(4).

      5.19.        More specifically, a criminal history accumulating eight or
          more points as described in WAC 314-55-040(1) is grounds for
          denying a marijuana license application. WAC 314-55-040(1),(3).

      5.20.         Here, Mr. Marchel is serving time for a felony conviction. A
          current felony conviction is assigned 12 criminal history point[s]. WAC
          314-55-040(1). So, Mr. Marchel's criminal history points are 12.

                                            8
No. 75669-9-1/9

          Moreover, this conviction is not subject to the exceptions expressed in
          WAC 314-55-040(3). Further, Mr. Marchel has never submitted a
          criminal history [form] or submitted to [a Licensing Division]
          investigation of the criminal history. He may have additional criminal
          history points for conduct of which [the Licensing Division] is unaware.
          [The Licensing Division] will not normally issue a license to an
          applicant with eight or more criminal history points. WAC 314-55-
          040(1).

      5:21.         Here, by virtue of Mr. Marchel's criminal history points,
          Chronics exceeds the regulatory threshold for a negative criminal
          history and its application should,be denied.

      Chronics LLC filed a petition for review with the WSLCB. The petition asserts the

Licensing Division exceeded its statutory authority by denying the application of

Chronics LLC and violated the procedural due process rights of Haines-Marchel.

      The WSLCB affirmed the All decision and entered a "Final Order" adopting the

Initial Order on Summary Judgment. The Final Order states, in pertinent part:

      The Licensing Division of the Liquor and Cannabis Board issued a
      Statement of Intent to Deny Marijuana License dated January 12, 2015,
      asserting that the Applicant's spouse, Brock Marchel, is currently
      incarcerated, serving a 44.5 year term for a homicide conviction. Although
      the Applicant's spouse has offered to disavow any interest in the business
      or proceeds from it, the Applicant and her spouse remain married in the
      state of Washington. WAC 314-55-035 requires that all true parties of
      interest must qualify for a license. Mr. Marchel's criminal history makes
      him ineligible for a marijuana license. In addition, he has not completed
      the personal/criminal history portion of the application, thus the Board has
      been unable to determine whether he may have additional disqualifying
      criminal history.

            . . .[T]he Administrative Law Judge's Initial Order on Summary
      Judgment Motion: Denying Applicant's Motion for Summary Judgment
      and Granting Agency's Cross Motion for Summary Judgment is
      AFFIRMED and adopted as the Final Order of the Board.

                                            9
No. 75669-9-1/10

Superior Court Appeal

      Chronics LLC and Haines-Marchel filed a petition for review in superior court

under the Washington Administrative Procedure Act(WAPA), chapter 34.05 RCW,

citing RCW 34.05.570(3) and (2)(c).

      RCW 34.05.570(3) provides, in pertinent part:

      Review of agency orders in adjudicative proceedings. The court shall
      grant relief from an agency order in an adjudicative proceeding only if it
      determines that:
             (a) The order, or the statute or rule on which the order is based, is
      in violation of constitutional provisions on its face or as applied;
             (b) The order is outside the statutory authority or jurisdiction of the
      agency conferred by any provision of law;

             (d) The agency has erroneously interpreted or applied the law; [or]

             (i) The order is arbitrary or capricious.

      RCW 34.05.570(2)(c) states, in pertinent part:

      In a proceeding involving review of a rule, the court shall declare the rule
      invalid only if it finds that: The rule violates constitutional provisions; the
      rule exceeds the statutory authority of the agency;[or] the rule was
      adopted without compliance with statutory rule-making procedures.

      The petition alleged that under RCW 34.05.570(3), denial of the retail marijuana

license unconstitutionally infringed on Haines-Marchel's fundamental right to marry and

to pursue a "profession or occupation" and deprived her of a property interest without

due process. The petition alleged that under RCW 34.05.570(2)(c), the WSLCB

adoption of WAC 314-55-035 and -040 exceeded its statutory authority.

      The superior court affirmed the WSLCB Final Order. The court concluded WAC

314-55-035 and -040 were "a narrowly tailored means to further the State's compelling

interest" in closely regulating the sale of marijuana and "screening out criminal

                                             10
No. 75669-9-1/11

involvement in the marijuana industry."9 The court concluded the question of whether a

license to sell marijuana is a property right subject to due process is "moot because

Petitioner was never granted a retail marijuana license."

      The court ruled the WSLCB had the statutory authority to adopt WAC 314-55-035

and -040.

      WAC 314-55-035 requires that when a marijuana license is issued to a
      limited liability company, members'spouses be included as true parties of
      interest.
             ... Under WAC 314-55-035, Ms. Haines-Marchel and Mr. Marchel
      were both true parties of interest in Petitioner's retail marijuana license
      application and both were required to qualify to hold such a license.
             . . . WAC 314-55-035 and -040 act to screen out the involvement of
      criminals in the marijuana industry.
             . . . Under WAC 314-55-040, Mr. Marchel's criminal history
      excluded him from qualifying to hold a retail marijuana license.

              ... WAC 314-55-035 and -040 are within the scope and intent of
      Initiative Measure 502, which gave the Board broad authority to take
      marijuana out of the hands of criminals and bring marijuana under a tightly
      regulated, state-licensed system, and RCW 69.50.342, which empowers
      the Board to adopt rules it deems necessary and advisable to accomplish
      the purposes of and are not inconsistent with the spirit of Chapter 3, Laws
      of 2013.

Standard of Review

       Chronics LLC and Haines-Marchel appeal the superior court order. WAPA

governs review of the final administrative decision and the validity of an agency rule.

Tapper v. Emp't Sec. Dep't, 122 Wash. 2d 397, 402, 858 P.2d 494(1993); Ass'n of Wash.

       9 The  court found, in pertinent part:
       The State of Washington has a compelling interest in closely regulating the sale of
       marijuana in order to (1) keep the marijuana industry out of the hands of criminals,(2)
       prevent revenue from the marijuana industry from being used to support criminal
       enterprises,(3) stop marijuana businesses from being used as a cover for illegal
       activities,(4) prevent the use of a qualified spouse as a "straw person" to disguise an
       unqualified spouse's true interest in the marijuana business, and (5)comply with the
       expectations and interests of the United States Department of Justice in ensuring public
       safety.

                                                  11
No. 75669-9-1/12

Spirits & Wine Distribs. v. Wash. Liquor Control Bd., 182 Wash. 2d 342, 350, 340 P.3d 849

(2015).

       When reviewing a final administrative decision, this court "sits in the same

position as the superior court, applying the standards of the WAPA directly to the record

before the agency." Tapper, 122 Wash. 2d at 402; Brown v. Dep't of Commerce, 184
Wash. 2d 509, 544, 359 P.3d 771 (2015). This court sits in the same position as the

superior court and we do not give deference to the superior court's rulings. Verizon

Nw., Inc. v. Emp't Sec. Dep't, 164 Wash. 2d 909, 915, 194 P.3d 255(2008). We review

constitutional issues de novo and are not bound by the trial court's conclusions of law.

Spirits & Wine, 182 Wash. 2d at 350; Utter v. Dep't of Soc. & Health Servs., 140 Wash. App.
293, 300, 165 P.3d 399(2007). Under RCW 34.05.570(3), we determine only whether

the administrative order is unconstitutional, outside the agency's statutory authority, the

agency has erroneously applied the law, or the decision is arbitrary and capricious.

Ames v. Dep't of Health, Med. Quality Assur. Comm'n, 166 Wash. 2d 255, 260, 208 P.3d
549 (2009).

       Under RCW 34.05.570(2)(c), an agency rule may be invalidated only if it is

unconstitutional, exceeds the agency's statutory rule-making authority, or is arbitrary

and capricious. If the administrative decision is on summary judgment, we overlay the

WAPA standard of review with the summary judgment standard. Verizon, 164 Wash. 2d at

916. "Summary judgment is appropriate only where the undisputed facts entitle the

moving party to judgment as a matter of law." Verizon, 164 Wash. 2d at 916. The moving

party bears the burden of demonstrating the invalidity of the denial. RCW

34.05.570(1)(a).

                                             12
No. 75669-9-1/13

Regulation of Marijuana

       In 1923, the legislature enacted a criminal statute making possession and sale of

narcotics unlawful. LAWS OF 1923, ch. 47,§ 3; State v. Bradshaw, 152 Wash. 2d 528, 532,

98 P.3d 1190(2004). The statute defined "narcotic drugs" as opiates, cocaine, and

marijuana. LAWS OF 1923, ch. 47,§ 2.

       In 1970, Congress passed the "Comprehensive Drug Abuse Prevention and

Control Act of 1970,"1° known as the Controlled Substances Act(CSA), 21 U.S.C. §§

801-904. "The main objectives of the CSA were to conquer drug abuse and to control

the legitimate and illegitimate traffic in controlled substances." Gonzales v. Raich, 545
U.S. 1, 12, 125 S. Ct. 2195, 162 L. Ed. 2d 1(2005). The CSA classifies marijuana as a

"Schedule I" controlled substance. 21 U.S.C. §§ 802(6), 812(c)(Schedule 1)(c)(10).

Under the CSA, it is "unlawful for any person knowingly or intentionally. .. to

manufacture, distribute, or dispense, or possess with intent to manufacture, distribute,

or dispense, a controlled substance." 21 U.S.C. § 841(a)(1); see also Gonzales, 545
U.S. at 14; United States v. Oakland Cannabis Buyers' Co-op, 532 U.S. 483, 489-90,

121 S. Ct. 1711, 149 L. Ed. 2d 722(2001). The sale of marijuana is a felony under

federal law. 21 U.S.C. §§ 841(a)(1)(i), (b)(1)(A)(vii), (b)(1)(B)(vii), (b)(1)(D); 18 U.S.C.

§§ 3559(a)(3)-(5).

       In 1971, Washington adopted the Uniform Controlled Substances Act, chapter

69.50 RCW. LAWS OF 1971, 1st Ex. Sess., ch. 308. The Uniform Controlled

Substances Act paralleled the CSA. Seeley v. State, 132 Wash. 2d 776, 790-91, 940 P.2d

604(1997). Under the Uniform Controlled Substances Act, it was a crime to

"manufacture, deliver, or possess with intent to manufacture or deliver" marijuana.
       10 Pub. L. No. 91-513, 84 Stat. 1236 (1970).

                                                  13
No. 75669-9-1/14

Former RCW 69.50.401(a)(1)(i), .204(d)(10)(1971); Cannabis Action Coal. v. City of

Kent, 183 Wash. 2d 219, 222, 351 P.3d 151 (2015).

       In 1998, Washington voters approved Initiative Measure 692 legalizing the

medical use of marijuana. LAWS OF 1999, ch. 2.

Initiative 502

       In November 2012, Washington voters approved Initiative Measure 502. LAWS

OF 2013, ch. 3, codified as part of chapter 69.50 RCW. Initiative 502 legalizes the

possession of small quantities of marijuana for individuals over 21 years oldl I and

authorizes regulation and a "system for the licensed distribution of recreational

marijuana." Cannabis Action Coal., 183 Wash. 2d at 222-23; No on 1-502 v. Wash.

NORML, 193 Wash. App. 368, 370, 372 P.3d 160(2016). A stated purpose of Initiative

502 is to take "marijuana out of the hands of illegal drug organizations and bring[]it

under a tightly regulated, state-licensed system similar to that for controlling hard

alcohol." LAWS OF 2013, ch. 3,§ 1. The Laws of 2013, chapter 3, section 1 state:

       The people intend to stop treating adult marijuana use as a crime and try a
       new approach that:
              (1) Allows law enforcement resources to be focused on violent and
       property crimes;
              (2) Generates new state and local tax revenue for education,
       health care, research, and substance abuse prevention; and
              (3) Takes marijuana out of the hands of illegal drug organizations
       and brings it under a tightly regulated, state-licensed system similar to that
       for controlling hard alcohol.
               This measure authorizes the state liquor control board to regulate
       and tax marijuana for persons twenty-one years of age and older, and add
       a new threshold for driving under the influence of marijuana.

       Consistent with Initiative 502, RCW 69.50.360 states, in pertinent part:

       The following acts, when performed by a validly licensed marijuana retailer
       or employee of a validly licensed retail outlet in compliance with rules

       11 RCW 69.50.4013(3)(a).

                                             14
No. 75669-9-1/15

       adopted by the state liquor and cannabis board to implement and enforce
       chapter 3, Laws of 2013, do not constitute criminal or civil offenses under
       Washington state law:
              (1) Purchase and receipt of marijuana concentrates, useable
       marijuana, or marijuana-infused products that have been properly
       packaged and labeled from a marijuana processor validly licensed under
       this chapter;

              (3) Delivery, distribution, and sale, on the premises of the retail
       outlet, of any combination of the following amounts of marijuana
       concentrates, useable marijuana, or marijuana-infused product to any
       person twenty-one years of age or older:
              (a) One ounce of useable marijuana;
              (b) Sixteen ounces of marijuana-infused product in solid form;[or]
              (c) Seventy-two ounces of marijuana-infused product in liquid form.

       Initiative 502 is codified as part of chapter 69.50 RCW. RCW 69.50.325(3)(a)

states, "Every marijuana retailer's license shall be issued in the name of the applicant."

RCW 69.50.331(1)(b)(iii) states,"No license of any kind may be issued to. ..[a]

partnership, employee cooperative, association, nonprofit corporation, or corporation

... unless all of the members thereof are qualified to obtain a license as provided in this

section." RCW 69.50.325(3)(a) states, in pertinent part:

       There shall be a marijuana retailer's license to sell marijuana
       concentrates, useable marijuana, and marijuana-infused products at retail
       in retail outlets, regulated by the state liquor and cannabis board and
       subject to annual renewal. The possession, delivery, distribution, and sale
       of marijuana concentrates, useable marijuana, and marijuana-infused
       products in accordance with the provisions of this chapter and the rules
       adopted to implement and enforce it, by a validly licensed marijuana
       retailer, shall not be a criminal or civil offense under Washington state law.
       Every marijuana retailer's license shall be issued in the name of the
       applicant, shall specify the location of the retail outlet the licensee intends
       to operate, which must be within the state of Washington, and the holder
       thereof shall not allow any other person to use the license.

     • RCW 69.50.331(1)(a) expressly states that "[s]ubject to the provisions of this

section, the state liquor and cannabis board may, in its discretion, grant or deny the . . .

license applied for." RCW 69.50.331(1)(a) states the WSLCB "may consider any prior

                                             15
No. 75669-9-1/16

criminal conduct of the applicant" in determining whether to deny an application for a

license. RCW 69.50.331(1)(a) states, in pertinent part:

      For the purpose of reviewing any application for a license and for
      considering the denial, suspension, revocation, or renewal or denial
      thereof, of any license, the state liquor and cannabis board may consider
      any prior criminal conduct of the applicant including an administrative
      violation history record with the state liquor and cannabis board and a
      criminal history record information check. The state liquor and cannabis
      board may submit the criminal history record information check to the
      Washington state patrol and to the identification division of the federal
      bureau of investigation in order that these agencies may search their
      records for prior arrests and convictions of the individual or individuals
      who filled out the forms.

      The legislature authorizes the WSLCB to adopt regulations and a system to

implement Initiative 502 and legalize issuance of a retail marijuana license. RCW

69.50.342(1). RCW 69.50.342(1) gives the WSLCB broad authority to adopt rules that

are "not inconsistent with the spirit of chapter 3, Laws of 2013 as are deemed necessary

or advisable."

Adoption of Chapter 314-55 WAG

       The WSLCB adopted rules in November 2013. WAG 314-55-005(Wash. St.

Reg. 13-21-104, filed Oct. 21, 2013, effective Nov. 21, 2013). Chapter 314-55 WAG

governs the requirements for a retail marijuana license. WAG 314-55-010(1) defines a

"marijuana license applicant" as "any person or business entity who is considered by the

WSLCB as a true party of interest in a marijuana license, as outlined in WAG 314-55-

035." A "marijuana licensee" is "any person or entity that holds a marijuana license, or

any person or entity who is a true party of interest in a marijuana license, as outlined in

WAC 314-55-035." WAG 314-55-010(15).

                                             16
No. 75669-9-1/17

       If the applicant meets the minimum requirements for a retail marijuana license,

the Licensing Division conducts a comprehensive investigation to verify "the true

party(ies) of interest," including criminal history based on submission of a

Personal/Criminal History Form. WAC 314-55-020(5)-(7). WAC 314-55-020 states, in

pertinent part:

              WAC 314-55-020 Marijuana license qualifications and
       application process. Each marijuana license application is unique and
       investigated individually. The WSLCB may inquire and request
       documents regarding all matters in connection with the marijuana license
       application. ...

              (5) The WSLCB will verify that the proposed business meets the
       minimum requirements for the type of marijuana license requested.
              (6) The WSLCB will conduct an investigation of the applicants'
       criminal history and administrative violation history, per WAC 314-55-040
       and 314-55-045.021
              (a) The criminal history background check will consist of
       completion of a personal/criminal history form provided by the WSLCB
       and submission of fingerprints to a vendor approved by the WSLCB.. . .
               ....
              (7) The WSLCB will conduct a financial investigation in order to
       verify the source of funds used for the acquisition and startup of the
       business, the applicants' right to the real and personal property, and to
       verify the true party(ies) of interest.[13]

        WAC 314-55-035 identifies "What persons or entities have to qualify for a

marijuana license."14 WAC 314-55-035 states,"A marijuana license must be issued in

the name(s) of the true party(ies) of interest." WAC 314-55-035(1) defines "true party of

        12 WAC 314-55-045 identifies "What marijuana law or rule violation history might prevent an
applicant from receiving a marijuana license." (Boldface omitted.)
        13 Boldface in original.

        14 Boldface omitted.

                                                   17
No. 75669-9-1/18

interest" and the persons who must qualify. WAC 314-55-035(1) states:

      True parties of interest - For purposes of this title, "true party of interest"
      means:

              True party of interest                   Persons to be qualified
        Sole proprietorship                       Sole proprietor and spouse.
        General partnership                       All partners and spouses.
        Limited partnership, limited liability    • All general partners and their
        partnership, or limited liability            spouses.
        limited partnership                       • All limited partners and their
                                                    spouses.
        Limited liability company                 • All members and their
                                                    spouses.
                                                  • All managers and their
                                                    spouses.
        Privately held corporation                • All corporate officers (or
                                                    persons with equivalent title)
                                                    and their spouses.
                                                  • All stockholders and their
                                                     spouses.
        Publicly held corporation                 All corporate officers (or persons
                                                  with equivalent title) and their
                                                  spouses.

                                                  All stockholders and their
                                                  spouses.
        Multilevel ownership structures           All persons and entities that make
                                                  up the ownership structure (and
                                                  their spouses).
        Any entity or person (inclusive of        Any entity or person who is in
        financiers) that are expecting a          receipt of, or has the right to
        percentage of the profits in              receive, a percentage of the
        exchange for a monetary loan or           gross or net profit from the
        expertise. Financial institutions         licensed business during any full
        are not considered true parties of        or partial calendar or fiscal year.
        interest.                                     Any entity or person who
                                                      exercises control over the
                                                      licensed business in exchange for
                                                      money or expertise.
                                                      For the purposes of this chapter:
                                                        • "Gross profit" includes the
                                                          entire gross receipts from all

                                                 18
No. 75669-9-1/19

                                                     sales and services made in,
                                                     upon, or from the licensed
                                                     business.
                                                  • "Net profit" means gross
                                                     sales minus cost of goods
                                                     sold.
            Nonprofit corporations             All individuals and spouses, and
                                               entities having membership rights
                                               in accordance with the provisions
                                               of the articles of incorporation or
                                               the bylaws.[151

       WAC 314-55-040 addresses "What criminal history might prevent a marijuana

license applicant from receiving or keeping a marijuana license."16 WAG 314-55-040(1)

states, in pertinent part:

       The WSLCB will not normally issue a marijuana license or renew a license
       to an applicant who has accumulated eight or more points as indicated
       below:

                                        Time period during
                                        which points will be           Points
                Description                  assigned                assigned
        Felony conviction             Ten years                    12 points
        Gross misdemeanor             Three years                  5 points
        conviction
        Misdemeanor conviction      Three Years                    4 points
        Currently under federal or  n/a                            8 points
        state supervision for a
        felony conviction
        Nondisclosure of any of the n/a                            4 points
        above                                                      each.[171

Constitutional Riaht to Marry and Contract

       Chronics LLC and Haines-Marchel contend WAG 314-55-035 violates her

constitutional right to marry and the decision to deny the retail marijuana license violates

her right to contract.

       15 Boldface in original.
       16 Boldface omitted.
       17 Boldface in original.

                                             19
No. 75669-9-1/20

       We review constitutional issues de novo as a matter of law. Spirits & Wine, 182
Wash. 2d at 350. We presume an agency's regulations are constitutional. Campbell v.

Tacoma Pub. Sch. Dist. No. 10, 192 Wash. App. 874, 883, 370 P.3d 33(2016); Wash.

Hosp. Ass'n v. Dep't of Health, 183 Wash. 2d 590, 595, 353 P.3d 1285(2015).

       Where, as here, the legislature specifically delegates rule-making power to an

agency, the regulations are presumed valid. Anderson, Leech & Morse, Inc. v. Wash.

Liquor Control Bd., 89 Wash. 2d 688, 695, 575 P.2d 221 (1978); St. Francis Extended

Health Care v. Dep't of Soc. & Health Servs., 115 Wash. 2d 690, 702, 801 P.2d 212

(1990). A party may assert either a facial or an as-applied challenge to a regulation.

       To prevail on a facial challenge, the party must show "no set of circumstances"

where the regulation "as currently written... can be constitutionally applied." City of

Redmond v. Moore, 151 Wn.2d 664,669, 91 P.3d 875 (2004). To prevail on an as-

applied challenge, the party must prove an otherwise valid regulation is unconstitutional

as applied to that individual. Moore, 151 Wash. 2d at 668-69.

       Chronics LLC and Haines-Marchel do not assert a facial challenge to WAC 314-

55-035. Haines-Marchel contends that as applied, WAC 314-55-035 violates her

constitutional right to marry. In an as-applied challenge, the party alleges the regulation

is unconstitutional "in the specific context of the party's actions or intended actions."

Moore, 151 Wash. 2d at 668-69; City of Seattle v. Evans, 184 Wash. 2d 856, 862, 366 P.3d
906 (2015).

       The right to marry is a fundamental substantive due process right under the

Fourteenth Amendment to the United States Constitution. Oberaefell v. Hodges,

U.S.     , 135 S. Ct. 2584, 2597-98, 192 L. Ed. 2d 609 (2015); Zablocki v. Redhail, 434

                                             20
No. 75669-9-1/21

U.S. 374, 383, 98 S. Ct. 673, 54 L. Ed. 2d 618(1978); Loving v. Virginia, 388 U.S. 1, 12,

87 S. Ct. 1817, 18 L. Ed. 2d 1010(1967); City of Bremerton v. Widell, 146 Wash. 2d 561,

575-76, 51 P.3d 733(2002). But not "every state regulation which relates in any way to

the incidents of or prerequisites for marriage must be subjected to rigorous scrutiny."

Zablocki, 434 U.S. at 386; Parsons v. County of Del Norte, 728 F.2d 1234, 1237(9th

Cir. 1984).

       We apply a two-part test to determine whether state action unconstitutionally

infringes on the right of marriage. Widell, 146 Wash. 2d at 579. First, "'a court must ask

whether the policy or action is a direct or substantial interference with the right of

marriage.'" WideII, 146 Wn.2d at 579(quoting Montgomery v. Carr, 101 F.3d 1117,

1124 (6th Cir. 1996)). " Il]f the policy or action is a direct and substantial interference

with the right of marriage,' "strict scrutiny applies. Widell, 146 Wash. 2d at 579(quoting

Carr, 101 F.3d at 1124). Otherwise, we apply a"'rational basis scrutiny.'" Widell, 146
Wash. 2d at 579 (quoting Carr, 101 F.3d at 1124); Parsons, 728 F.2d at 1237.

"[R]easonable regulations that do not significantly interfere with decisions to enter into

the marital relationship may legitimately be imposed." Zablocki, 434 U.S. at 386; see

Califano v. Jobst, 434 U.S. 47, 54, 98 S. Ct. 95, 54 L. Ed. 2d 228 (1977).

       Chronics LLC and Haines-Marchel assert denial of the application for a retail

marijuana license directly interferes with the right to marry. Chronics LLC and Haines-

Marchel assert the decision was "solely based on her marriage to Brock." The record

does not support this argument. The record establishes the WSLCB denied the

application of Chronics LLC because Brock is a true party of interest who did not qualify

for a retail marijuana license.

                                             21
No. 75669-9-1/22

       A retail marijuana license must be issued in the name of the applicant. Under

WAG 314-55-035(1), if the applicant is a limited liability company, all true parties of

interest must qualify. The true parties of interest for a limited liability company are all

members and the spouses of each member. WAG 314-55-035(1). Because WAG 314-

55-035 does not interfere with the right of Haines-Marchel to marry or remain married to

the person of her choosing, it does not place a "direct and substantial" burden on the

right of marriage, and the rational basis test applies. WideII, 146 Wash. 2d at 579-80.

       Under the rational basis test, WAC 314-55-035 need only be "rationally related to

a legitimate state interest." Amunrud v. Bd. of Appeals, 158 Wash. 2d 208, 222, 143 P.3d
571 (2006).

       In determining whether a rational relationship exists, a court may assume
       the existence of any necessary state of facts which it can reasonably
       conceive in determining whether a rational relationship exists between the
       challenged law and a legitimate state interest.

Amunrud, 158 Wash. 2d at 222; Heller v. Doe, 509 U.S. 312, 320, 113 S. Ct. 2637, 125 L.

Ed. 2d 257(1993).

       There is no dispute that the WSLCB has a legitimate interest in conducting a

comprehensive investigation to verify the true parties of interest and determine whether

criminal history disqualifies the applicant. See RCW 69.50.331(1)(b). Because WAG

314-55-035 is rationally related to the legitimate interest of the State to legalize and

strictly control issuance of a retail marijuana license, Chronics LLC and Haines-Marchel

cannot show that as applied, WAG 314-55-035 is unconstitutional.

       Levinson v. Horse Racing Commission, 48 Wash. App. 822, 740 P.2d 898 (1987),

is distinguishable. In Levinson, the Washington Horse Racing Commission suspended

a "racehorse ownership license" after learning the owner's spouse had a 12-year-old

                                              22
No. 75669-9-1/23

narcotics conviction. Levinson, 48 Wash. App. at 823-24. Under former WAC 260-12-160

(1980), an individual convicted of selling narcotics was barred from horse racing.

Former WAC 260-40-160(3)(1961) stated, "[N]o entry [of a horse in a horse race] shall

be accepted from husband or wife, while either is disqualified." The court concluded

former WAC 260-12-160 unconstitutionally infringed on Levinson's right to marry

because the regulation was "very sweeping" and applied to individuals "who many years

after their conviction still cannot attend racing events, and cannot get ownership

licenses." Levinson, 48 Wash. App. at 826. But here, unlike in Levinson, WAC 314-55-

040 does not categorically disqualify a true party of interest based on criminal history.

WAC 314-55-040(3) states:

       The WSLCB may not issue a marijuana license to anyone who has
       accumulated eight or more points as referenced above. This is a
       discretionary threshold and it is further recommended that the following
       exceptions to this standard be applied:
               Exception to criminal history point assignment.
               (a) Prior to initial license application, two federal or state
       misdemeanor convictions for the possession only of marijuana within the
       previous three years may not be applicable to the criminal history points
       accumulated. All criminal history must be reported on the
       personal/criminal history form.
               (i) Regardless of applicability, failure to disclose full criminal history
       will result in point accumulation;
               (ii) State misdemeanor possession convictions accrued after
       December 6, 2013, exceeding the allowable amounts of marijuana, usable
       marijuana, and marijuana-infused products described in chapter 69.50
       RCW shall count toward criminal history point accumulation.
               (b) Prior to initial license application, any single state or federal
       conviction for the growing, possession, or sale of marijuana will be
       considered for mitigation on an individual basis. Mitigation will be
       considered based on the quantity of product involved and other
       circumstances surrounding the conviction (18]

       The cases Haines-Marchel cites to argue denial of the application under WAC

314-55-035 violates the Washington Law Against Discrimination, chapter 49.60 RCW,

       18   Boldface in original.

                                              23
No. 75669-9-1/24

are inapposite. Magula v. Benton Franklin Title Co., Inc., 131 Wash. 2d 171, 930 P.2d 307

(1997), and Kastanis v. Educational Employees Credit Union, 122 Wash. 2d 483, 859 P.2d
26, 865 P.2d 507(1993), address claims filed under RCW 49.60.180 against former

employers for employment discrimination based on marital status. See RCW 49.60.180

(it is "unfair practice for any employer" to refuse to hire, to discharge, or to discriminate

against any person based on a number of protected categories, including "marital

status"). WAC 314-55-035 does not'discriminate based on an individual's legal marital

status.

       Chronics LLC and Haines-Marchel also claim denial of the application violated

the constitutional right of Haines-Marchel to contract by disregarding the Spousal

Renunciation of Rights Affidavit executed by Brock in determining whether Brock

qualified under WAC 314-55-035.

       The Spousal Renunciation of Rights Affidavit states, in pertinent part:

                It is my intention to knowingly and willingly make this agreement
       that I will relinquish, irrevocably deny and renounce any and `all'
       ownership interest and management decisions in Rock Island Chronics.
                It is also my understanding spouces [sic] may agree to change the
       character of their property from community to separate property. This is
       my intention.
                I agree to renounce and convey my rights in claiming to have a
       right to the companies [sic] asset acquisition, profits, bank accounts, sales
       revenue, or the profits she makes in the sale of the business as a whole.
                I also agree to convey and renounce my rights within the color of
       the law that the Washington State Liquor Control Board deems necessary
       in this process.

       We conclude the Spousal Renunciation of Rights Affidavit is not a binding

contract. "[U]nless both parties are bound by mutual promises or considerations,

neither is bound." Lande v. S. Kitsap Sch. Dist. No. 402, 2 Wash. App. 468, 477, 469 P.2d

982(1970); Larkins v. St. Paul & Tacoma Lumber Co., 35 Wash. 2d 711, 722, 214 P.2d
24
No. 75669-9-1/25

700 (1950). Further, "[e]very contract must be supported by a consideration to be

enforceable." King v. Riveland, 125 Wash. 2d 500, 505, 886 P.2d 160(1994); SAK &

Assocs., Inc. v. Ferguson Constr., Inc., 189 Wash. App. 405, 411, 357 P.3d 671 (2015).

"Consideration is a bargained-for exchange of promises" or"'any act, forbearance,

creation, modification or destruction of a legal relationship, or return promise given in

exchange.'" Labriola v. Pollard Grp., Inc., 152 Wash. 2d 828, 833, 100 P.3d 791 (2004)

(quoting King, 125 Wash. 2d at 505). The unilateral intent in the Spousal Renunciation of

Rights Affidavit to "relinquish, irrevocably deny and renounce any and 'all' ownership

interest and management decisions in Rock Island Chronics" is not a mutually binding

agreement supported by consideration.

Due Process Liberty and Property Interest

       Haines-Marchel asserts that as applied, WAC 314-55-035 violates her right to

pursue an occupation. The right to pursue an occupation or profession is a protected

liberty interest. Conn v. Gabbert, 526 U.S. 286, 291-92, 119 S. Ct. 1292, 143 L. Ed. 2d
399 (1999). The "Due Process Clause" of the Fourteenth Amendment"'includes some

generalized due process right to choose one's field of private employment.'" Amunrud,

158 Wn.2d at 220(quoting Conn, 526 U.S. at 291-92); Dittman v. California, 191 F.3d
1020, 1029 (9th Cir. 1999). But that right is"'subject to reasonable government

regulation.'" Amunrud, 158 Wash. 2d at 22019 (quoting Conn, 526 U.S. at 292). We apply

the rational basis test to regulations alleged to burden the right to employment.

Amunrud, 158 Wash. 2d at 222("Because the right to pursue a trade or profession is a

protected right but not a fundamental right, we apply a rational basis test"); Johnson v.

Dep't of Fish & Wildlife, 175 Wash. App. 765, 775, 305 P.3d 1130(2013). We conclude

       19   Emphasis omitted.

                                             25
No. 75669-9-1/26

WAC 314-55-035 and WAC 314-55-040 are rationally related to a legitimate state

interest and do not violate Haines-Marchel's right to purse an occupation.

       Haines-Marchel claims that because the WSLCB selected her application for

processing, she acquired a property right to issuance of a marijuana license, and denial

of the application violated due process.

      To state a claim for deprivation of property without due process of law, a party

must identify a property interest protected by the Due Process Clause. Mathews v.

Eldridge, 424 U.S. 319, 332, 96 S. Ct. 893,47 L. Ed. 2d 18(1976); Banp Nguyen v.

Dep't of Health, Med. Quality Assur. Comm'n, 144 Wash. 2d 516, 522-23, 29 P.3d 689

(2001).

       Haines-Marchel relies on Wedges/Ledges of California, Inc. v. City of Phoenix,

Arizona, 24 F.3d 56 (9th Cir. 1994), to assert Chronics LLC had a property interest in

the issuance of a marijuana license. In Wedges/Ledges, the Phoenix City Code(PCC)

that stated a game license tag "'shall be issued'"to certain coin-operated game

machines made issuance of licenses mandatory and eliminated the city's discretion to

deny licenses. Wedges/Ledges, 24 F.3d at 63(quoting former PCC § 7-28(c)(1)(1986-

1987)). The court concluded the city code created a property interest in issuance of a

license because it was an "`articulable standard' sufficient to give rise to a legitimate

claim of entitlement." Wedpes/Ledpes, 24 F.3d at 63-64 (quoting Parks v. Watson, 715

F.2d 646,657 (9th Cir. 1983)). The court held, "[P]n individual has a reasonable

expectation of entitlement deriving from 'existing rules or understandings that stem from

an independent source such as state law.'" Wedges/Ledges, 24 F.3d at 62(quoting

                                             26
No. 75669-9-1/27

Bd. of Regents of State Coils. v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 33 L. Ed. 2d
548 (1972)).

       Here, unlike in Wedqes/Ledges, Haines-Marchel cannot show Chronics LLC had

"'a legitimate claim of entitlement to'"the issuance of a retail marijuana license. Town

of Castle Rock, Colo. v. Gonzales, 545 U.S. 748, 756, 125 S. Ct. 2796, 162 L. Ed. 2d

658(2005)(quoting Roth, 408 U.S. at 577). The issuance of a marijuana license is not

mandatory. RCW 69.50.331 expressly gives the WSLCB discretion to deny an

application for a marijuana license. RCW 69.50.331(1)(a) states, in pertinent part, that

"[s]ubject to the provisions of this section, the state liquor and cannabis board may, in its

discretion, grant or deny the. . . license applied for." Further, the "issuance of any

license by the board shall not be construed as granting a vested right in any of the

privileges so conferred." WAC 314-12-010; see also Jow Sin Quan v. Wash. Liquor

Control Bd., 69 Wash. 2d 373, 382, 418 P.2d 424(1966)(license to sell intoxicants "does

not become a vested property right upon the issuance thereof"). A license is "a

temporary permit, in the nature of a privilege, to engage in a business that would

otherwise be unlawful." Jow Sin Quan,69 Wn.2d at 382; see also RCW 69.50.325(3).

       Because Chronics LLC and Haines-Marchel do not have a property interest in

the issuance of a marijuana license, the WSLCB did not violate due process by denying

the application for a license.

Statutory Authority to Adopt WAC 314-55-035 and WAC 314-55-040

    - Chronics LLC and Haines-Marchel cite RCW 34.05.570(2)(c) and RCW

34.05.570(3) to argue the WSLCB exceeded its statutory authority in adopting WAC

314-55-035 and WAC 314-55-040 and denying the application.

                                             27
No. 75669-9-1/28

       We review the validity of an agency's rule de novo. Local 2916, IAFF v. Pub.

Emp't Relations Comm'n, 128 Wash. 2d 375, 379, 907 P.2d 1204 (1995). The validity of a

rule is governed by RCW 34.05.570(2)(c). We determine the extent of an administrative

agency's rule making authority de novo as a matter of law. Local 2916, 128 Wash. 2d at

379; Spirits & Wine, 182 Wash. 2d at 350; Wash. Hosp. Ass'n, 183 Wash. 2d at 595. The

authority of an administrative agency is" 'limited to that which is expressly granted by

statute or necessarily implied therein.'" Conway v. Dep't of Soc. & Health Servs., 131
Wash. App. 406, 419, 120 P.3d 130(2005)(quoting McGuire v. State, 58 Wash. App. 195,

198, 791 P.2d 929 (1990)); Anderson, Leech & Morse, 89 Wash. 2d at 694. A rule is

invalid if it conflicts with the intent and purpose of the legislation, exceeds the statutory

authority of the agency, or is arbitrary and capricious. RCW 34.05.570(2)(c). Under

RCW 34.05.570(2)(c), the court "shall declare the rule invalid" if it finds the rule exceeds

the statutory authority of the agency. " 1[R]egulation[s] will not be struck down unless

compelling reasons are presented sufficient to show the scheme is in conflict with the

intent and purpose of the legislation.'" Hi-Starr, Inc. v. Liquor Control Bd., 106 Wash. 2d
455, 459, 722 P.2d 808(1986)2° (quoting Anderson, Leech & Morse, 89 Wash. 2d at 695).

       Where the legislature specifically delegates the power to adopt regulations, those

regulations are presumed to be valid. St. Francis, 115 Wash. 2d at 702. "The burden of

overcoming this presumption rests on the challenger, and judicial review will be limited

to a determination of whether the regulation in question is reasonably consistent with

the statute being implemented." St. Francis, 115 Wash. 2d at 702. Because administrative

agencies are "'creatures of the legislature without inherent or common-law powers,'"

an agency has only those powers that are conferred either expressly or by necessary
       20 (Alterations in original)(internal quotation marks omitted).

                                                    28
No. 75669-9-1/29

implication. Human Rights Comm'n v. Cheney Sch. Dist. No. 30, 97 Wash. 2d 118, 125,

641 P.2d 163(1982)(quoting State v. Munson, 23 Wash. App. 522, 524, 597 P.2d 440

(1979)).

       Statutory interpretation is a question of law we review de novo. W.Telepage,

Inc. v. City of Tacoma Dep't of Fin., 140 Wn.2d 599,607, 998 P.2d 884 (2000). Our

primary goal in interpreting statutes is to ascertain and give effect to legislative intent.

Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wash. 2d 1, 9-10,43 P.3d 4(2002). If

the statute's meaning is plain on its face, we give effect to that plain meaning.

Campbell & Gwinn, 146 Wash. 2d at 9-10.

       Under RCW 34.05.570(3), we review the legal determination of the WSLCB

under the error of law standard. Verizon, 164 Wash. 2d at 915. This standard accords

substantial weight to an agency's interpretation of a statute within its expertise and an

agency's interpretation of rules that the agency promulgated. Verizon, 164 Wash. 2d at

915.

       Haines-Marchel cannot show the adoption of WAC 314-55-035 or WAC 314-55-

040 is in conflict with the intent and purpose of the statute or that the WSLCB acted

outside its statutory authority.

       The adoption of WAC 314-55-035 and -040 is consistent with the purpose and

intent of the statute. Initiative 502 unambiguously states the purpose of the initiative is

to take "marijuana out of the hands of illegal drug organizations and bring[]it under a

tightly regulated, state-licensed system similar to that for controlling hard alcohol." LAWS

OF 2013, ch. 3, § 1. RCW 69.50.325(3)(a) states that the WSLCB shall regulate the

                                              29
No. 75669-9-1/30

marijuana retailer licenses and that "[e]very marijuana retailer's license shall be issued

in the name of the applicant."

       Under RCW 69.50.331(1)(b)(iii), "[n]o license of any kind may be issued to" a

corporation "unless all of the members thereof are qualified to obtain a license as

provided in this section." RCW 69.50.331(1)(a) expressly states that "[s]ubject to the

provisions of this section, the state liquor and cannabis board may, in its discretion,

grant or deny the renewal or license applied for." RCW 69.50.331(1)(a) unambiguously

states the WSLCB "may consider any prior criminal conduct of the applicant" in

determining whether to deny an application for a license. RCW 69.50.331(1)(a) states,

in pertinent part:

       For the purpose of reviewing any application for a license and for
       considering the denial, suspension, revocation, or renewal or denial
       thereof, of any license, the state liquor and cannabis board may consider
       any prior criminal conduct of the applicant including an administrative
       violation history record with the state liquor and cannabis board and a
       criminal history record information check. The state liquor and cannabis
       board may submit the criminal history record information check to the
       Washington state patrol and to the identification division of the federal
       bureau of investigation in order that these agencies may search their
       records for prior arrests and convictions of the individual or individuals
       who filled out the forms.

       RCW 69.50.342(1) and .345(1) expressly give the WSLCB the authority to adopt

rules governing the investigation and approval of an application for a retail marijuana

license. RCW 69.50.342(1) authorizes the WSLCB to adopt regulations "[f]or the

purpose of carrying into effect the provisions of chapter 3, Laws of 2013 according to

their true intent or of supplying any deficiency therein," including regulations governing

application for marijuana licenses. RCW 69.50.342(1) grants the WSLCB broad

authority to adopt rules that are "not inconsistent with the spirit of chapter 3, Laws of

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2013 as are deemed necessary or advisable."21 RCW 69.50.342(1) states, in pertinent

part:

        For the purpose of carrying into effect the provisions of chapter 3, Laws of
        2013 according to their true intent or of supplying any deficiency therein,
        the state liquor and cannabis board may adopt rules not inconsistent with
        the spirit of chapter 3, Laws of 2013 as are deemed necessary or
        advisable. Without limiting the generality of the preceding sentence, the
        state liquor and cannabis board is empowered to adopt rules regarding the
        following:

               (i) Application .. . for licenses issued under this chapter.

RCW 69.50.345(1) states the WSLCB "must adopt rules that establish the procedures

and criteria necessary to implement the. ..[Ilicensing of... marijuana retailers." WAC

314-55-035 and -040 are consistent with the purpose of carrying out the intent of

Initiative 502. We hold the WSLCB did not exceed its authority in adopting WAC 314-

55-035 and WAC 314-55-040.

        We also note that the regulations are nearly identical to the regulations governing

the issuance of licenses to sell hard alcohol. Like WAC 314-55-035, WAC 314-07-035

provides that "a liquor license must be issued in the name(s) of the true party(ies) of

interest." Like WAC 314-55-035(1), where the applicant for a liquor license is a limited

liability company, WAC 314-07-035(1) defines the true parties of interest to be qualified

as "[apt members.. . with more than 10% interest in the LLC and spouses" and 141

managers... and their spouses."22 Likewise, the "point system" used to determine

         21 See also RCW 69.50.345(1)(WSLCB "must adopt rules that establish the procedures and
criteria necessary to implement the ...[I]icensing of. . . marijuana retailers.")
          22 The regulatory scheme governing the issuance of gambling licenses, chapter 230-03 WAC, is
also consistent with WAC 314-55-035. WAC 230-03-065(1) states:
          Applicants' spouses must also meet the qualifications to hold a gambling license when
          married persons who maintain a marital community apply for or hold a license to operate
          gambling activities. This includes, but is not limited to, owners and substantial interest
          holders of commercial gambling establishments.

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whether an individual's criminal history bars them from receiving a marijuana license is

also used to determine if an individual is eligible for a liquor license. Compare WAC

314-55-040(1) with WAC 314-07-040(1).

       Haines-Marchel does not carry her burden to establish that the adoption of WAC

314-55-035 or WAC 314-55-040 is inconsistent with the intent of the statute or that the

WSLCB exceeded its authority in denying the Chronics LLC application.

      We affirm.

WE CONCUR:

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