Update: Court of Appeal Issued a Ruling Upholding Substantial Penalties and Fines Under the Eighth Amendment and California Constitution
By Scott Kalter and Matthew Silver, Attorneys at law
The Case: PEOPLE OF THE STATE OF CALIFORNIA V. DANIEL BRAUM, ET AL.
The Court of Appeal has issued a new and informative ruling that will impact cases that seek to challenge the use of daily fines and civil penalties issued by cities to enforce local regulations, including illegal cannabis.
In People of the State of California v. Daniel Braum, the Court of Appeal held that use of daily fines and penalties in this case was not excessive because Defendant Michael Braum (“Braum”) had it within his control to stop the accumulation of penalties. The fines and penalties continued to accrue due to Braum’s flagrant disobedience of the City’s ordinances and court orders. Therefore, the Court of Appeal held the fines were not excessive under the Eighth Amendment or California State Constitution.
I. Factual and Procedural Background
Defendant Braum was the original defendant in this case and the controversy concerned two commercial properties leased by Braum in his capacity as trustee for the Braum Family Living Trust (the “Trust”) in the City of Los Angeles. He filed this appeal in his individual capacity and as trustee of the Trust. However, Michael Braum died while the appeal was pending and his sons Daniel Braum and David Hekmat were substituted in his place (collectively, “Defendants”).
On June 22, 2007, Braum leased a commercial property owned by the Trust to the Emerald Dispensary for the purpose of operating a medical marijuana dispensary. On January 7, 2009, Braum leased a second commercial property owned by the Trust to the Ventura Dispensary for the same purpose.
On May 4, 2010, the City of Los Angeles sent Braum a letter advising him that the Emerald Dispensary did not register with the City Clerk. At this time, all medical marijuana dispensaries in Los Angeles were required to be registered with the City Clerk per the Los Angeles Municipal Code (“LAMC”). A second letter was sent on March 7, 2011, with a similar advisement and demand to cease operations.
A third cease and desist letter was sent to Braum on May 11, 2011, regarding the Ventura Dispensary. The City of Los Angeles again informed Braum that the LAMC requires medical marijuana businesses to register with the City Clerk. If they are not registered, they must cease operations.
Emerald Dispensary and Ventura Dispensary continued to operate even though Braum was fully aware that it violated the law. The City of Los Angeles, on behalf of the People of the State of California (the “City”), filed two civil complaints against Braum as an individual and as trustee citing causes of action for zoning violations, and maintaining a nuisance, specifically, using a building for unlawful narcotics activity in violation of Health and Safety Code section 11570, et seq. The City sought to assess the maximum statutory penalties allowed under the LAMC against Braum in the amount of $2,500 per day and it sought additional civil penalties pursuant to Health and Safety Code section 11570, et seq.
On November 14, 2012, the City brought and won a motion that ordered Braum to force Emerald Dispensary to stop operations and take down any advertising regarding medical marijuana. Braum did not comply with this order. In 2018, the Court entered judgment in favor of the City. The Court granted the City’s requested relief and imposed daily penalties of $2,500 per day for 897 days, a penalty for each day Emerald Dispensary operated in violation of the LAMC, totaling $2,242,500. The Court imposed daily penalties of $2,500 per day for 1,470 days, a penalty for each day Ventura Dispensary operated in violation of the LAMC, totaling $3,675,000. Lastly, the Court imposed a $25,000 civil penalty against Braum in both actions, pursuant to Health and Safety Code section 11570, et seq.
II. California Court of Appeal Holds That Substantial Penalties and Fine Amount Are Not Excessive, Especially When Defendant Flagrantly Violates the Law
The Court of Appeal held that penalties, even daily penalties amounting to substantial amounts, are appropriate and do not violate the Eighth Amendment to the U.S. Constitution or the California State Constitution. Further, when a defendant flagrantly disobeys the law, hefty penalties such as daily statutory penalties and maximum statutory penalties are appropriate and not excessive. The Court held that Braum was liable because he knew about the illegality of the dispensaries and his responses to the notices rose to the level of negligent disregard. The Court affirmed the following points of law, supporting its decision:
- When analyzing whether a penalty is excessive under the Eighth Amendment’s excessive fines clause, the Court looks to four factors as set forth in U.S. v. Bajakjian: (1) the defendant’s culpability; (2) the relationship between the harm and the penalty; (3) the penalties imposed in similar statutes; and (4) the defendant’s ability to pay. (U.S. v. Bajakjian (2008) 524 U.S. 321, 337-338.)
- A defendant’s culpability has to do with their actions. If evidence is presented that shows a defendant’s actions are in flagrant disregard of the law, then the defendant is deemed culpable. In deciding the remedies to award the City, the Court noted that it was “quite obvious that there was a bet [by Braum] that the political current, [and] the policy climate would change in the future. And if we just ride this thing out and defy it long enough we’ll end up, as that expression says, ‘better to ask for forgiveness than permission.’” According to the Court, these facts supported a finding of Braum’s culpability.
- Securing obedience to code requirements through penalties is a legitimate exercise of a city’s police powers under the California Constitution. (City and County of San Francisco v. Sainez (2000) 77 Cal.App.4th 1302, 1315.)
- A “trustee thus cannot be held personally liable under Probate Code section 18001 for any obligation arising from his ownership or control of trust property, nor can he be held personally liable under Probate Code section 18002…unless the party seeking to impose such personal liability on the trustee demonstrates that the trustee intentionally or negligently acted or failed to act in a manner that establishes personal fault.” (Haskett v. Villas at Desert Falls (2001) 90 Cal.App.4th 864, 877 – 878.)
The Court of Appeal deemed the hefty civil penalties appropriate because Braum intentionally failed to comply with the City’s notices regarding the illegal marijuana dispensaries. Further, even though the Trust owned the property, Braum’s intentional failure to act and negligent disregard of the City’s notices made him personally liable. Therefore, applying this holding to future cases, the Court holds that whether a fine is excessive often has to do with the nature of the conduct of the defendant. If a defendant is put on notice and refuses to comply, this may factor into the trial court’s determination of whether the amount complies with the Eighth Amendment and California Constitution.