Filed 8/18/17




                                 CERTIFIED FOR PUBLICATION
                      APPELLATE DIVISION OF THE SUPERIOR COURT
                     STATE OF CALIFORNIA, COUNTY OF LOS ANGELES


THE PEOPLE,                                        )   BR 053046
                                                   )
        Plaintiff and Appellant,                   )   East Los Angeles Trial Court
                                                   )
                v.                                 )   No. 4CA14996
                                                   )
TOLUCA LAKE COLLECTIVE, INC. et al.,               )
                                                   )
        Defendants and Respondents.                )   OPINION
                                                   )

        APPEAL from a judgment of the Superior Court of Los Angeles County, Melissa
Widdifield, Judge. Reversed.
        Michael N. Feuer, City Attorney, City of Los Angeles, Asha Greenberg, Assistant City
Attorney, Meredith A. McKittrick, Deputy City Attorney, and John Prosser, Deputy City
Attorney, for Plaintiff and Appellant.
        Eric D. Shevin and Stephen J. Fisch of the Shevin Law Group for Defendants and
Respondents.
                             *           *             *




                                               1
                                            INTRODUCTION
       A misdemeanor complaint was filed on June 20, 2014, charging defendants Toluca Lake
Collective, Inc. (TLC), Frank Jay Sheftel (Sheftel), Hatteras Holdings, LLC, and Peter Welkin
with operating an unlawful medical marijuana business (MMB) in violation of Los Angeles
Municipal Code (LAMC) section 45.19.6.2, subdivision A,1 on August 26, 27, and 28, 2013,
and the illegal use of land (§ 12.21, subd. A) based on the operation of the MMB.
       Following an evidentiary hearing on the applicability of the limited immunity provided
in section 45.19.6.3, the court found defendants substantially complied with the requirements
for the affirmative defense, including subdivision B’s registration requirement contained
therein. Based on its finding that the immunity applied “as a matter of law” to bar prosecution,
and pursuant to Penal Code section 1385, the court dismissed all charges against defendants.
       The People appeal from the order of dismissal, contending that substantial compliance
was applied in error to the immunity requirement of section 45.19.6.3, subdivision B, and that
the court abused its discretion under Penal Code section 1385. We reverse.
                                             BACKGROUND
Motion in Limine
       On May 19, 2015, defendants filed a motion in limine, seeking to allow evidence and
argument at trial that defendants qualified for immunity from prosecution pursuant to
section 45.19.6.3. Defendants asserted that TLC was open and operating prior to the passage of
Interim Control Ordinance No. 179027 (ICO)2 on September 13, 2007, and that, after the
passage of the ICO, Sheftel went to the city offices in the Van Nuys Government Center, on
October 15, 2007, to register TLC as an MMB. He met with a city employee who was
unfamiliar with the ICO registration process but who nevertheless assured Sheftel that he was
“in compliance.” The employee printed and date-stamped “a screen shot” for Sheftel
       1
           All further statutory references are to the LAMC unless otherwise indicated.

       2
        On August 1, 2007, the City Council passed the ICO which imposed a moratorium on new
MMB’s and required existing MMB’s to cease operations. (ICO, § 2.) The ICO also contained an
exception for MMB’s that were established before the effective date of the ICO, if they had registered
with the City Clerk by November 13, 2007.
                                                  2
(exhibit A), as proof that Sheftel had registered TLC on that date. On August 25, 2008, the
City issued an order to comply (exhibit C), requiring defendants to discontinue their operation
of their MMB. Consequently, Sheftel met with city staff and filed a hardship application on
September 8, 2008. After this meeting, TLC was placed on a list of “Now Open Pre-ICO
collectives” (exhibit E). In May of 2010, defendants learned that the City had changed its
position regarding TLC’s ICO registration.
The People’s Response
       On August 25, 2015, the People filed their response, arguing that defendants could not
demonstrate they were entitled to limited immunity under section 45.19.6.3 because they failed
to satisfy subdivision B’s ICO registration requirement. The People argued that the City Clerk
had no record of an ICO registration packet for defendants; any filing in the city offices in
Van Nuys was inadequate, as it was not the Office of the City Clerk; and the submission of a
registration package in September of 2008 was untimely.
Evidence Code Section 402 Hearing
       The court conducted an Evidence Code section 402 hearing on December 1, 2015,
regarding defendants’ compliance with the ICO registration requirement. The defense called
Jose Zaragoza, a former tax compliance officer for the City, who worked in the Office of
Finance at the Van Nuys branch in 2007. Zaragoza testified that at the time of his employment
with the City he had no authority to act on behalf of the Office of the City Clerk, and there was
no office for the City Clerk in Van Nuys. He further testified that he was unfamiliar with the
ICO; had no recollection of Sheftel or receiving any documents from him; had no knowledge of
receiving any filings for MMB’s, other than business tax registration certificate applications;
and did not recall ever forwarding any documentation to the City Clerk’s Office.
       Zaragoza identified exhibit A as “a print screen” of a computer system that had been
used to enter business tax applications. He confirmed that the printout contained his signature
and a date file stamp. He stated he did not know what prompted the printout and that the stamp
did not indicate receipt of any documents. When the prosecutor showed Zaragoza an exemplar


                                                 3
of a “Medical Marijuana Dispensary Business Information Form” (Business Information
Form), he stated that he had never seen such a form before.
       The hearing was continued to December 11, 2015. On that date, the defense called
Sharon Dickinson, who worked for the City Clerk’s Office. She testified that the City Clerk’s
Office was the “receiving agent for the city and custodian of records” for documents required
under the ICO. She further testified that in September 2008 she met with Sheftel regarding
TLC’s registration under the ICO. Sheftel told Dickinson that he had filed the required
documents with the Office of Finance in Van Nuys. When Dickinson called that office, she
was told there was no record of such a filing.
       Defense counsel showed Dickinson exhibit B, which was a list of ICO-registered
MMB’s, dated September 9, 2008, and directed her attention to the last entry listing TLC as a
registered MMB. Next to the entry, the following notes were made: “9/9/08. Added to list.
Application was originally submitted on 10/15/07, but was inadvertently misdirected by City
staff. New location pending hardship application. 11436 Hatteras Street.” Dickinson
explained that the notes were added by Daisy Mo from “code enforcement” in reliance on
Sheftel’s “word” and based on his presentation of exhibit A. Dickinson was later instructed by
“Clerk Management” to remove TLC from the list of registered MMB’s, and on June 23, 2010,
Sheftel was notified of the change.
       Sheftel testified that in 2007 he was the operator of TLC and that currently he was a
member. In 2007, he learned of the requirement to register under the ICO through the “media.”
On October 15, 2007, he went to Van Nuys City Hall, assuming that it was also the City
Clerk’s Office, and filed “a packet of papers for the ICO” with Zaragoza at the Office of
Finance. Zaragoza was confused by the papers Sheftel presented; went to speak to his
supervisor; upon his return, accepted Sheftel’s documents; and, in return, gave Sheftel
exhibit A. Sheftel kept a copy of the paperwork he submitted to Zaragoza, but not a copy of the
Business Information Form. Sometime in 2008, he received an order to comply from the City
and subsequently met with Dickinson and Mo. Dickinson and Mo contacted Van Nuys,
accepted Sheftel’s paperwork, and gave him a hardship application. On June 23, 2010, Sheftel
                                                 4
received a letter from the City stating that TLC was being removed from the ICO registration
list.
February 11, 2016, Hearing
        The court heard argument on February 11, 2016. Defense counsel maintained
defendants actually and substantially complied with the ICO registration requirement because
Sheftel had submitted all the necessary documents to city personnel, and the City ultimately
made the “determination” to place TLC on the list of registered MMB’s.
        The prosecutor countered that the ICO specifically required documentation to be filed in
the “Office of the City Clerk,” and there was no evidence that anything was filed with the City
Clerk in 2007. The prosecutor stated it was “the People’s position that substantial compliance
does not apply to limited immunity.”
        The court granted defendants’ motion in limine. The court concluded the goal of the
ICO was only to allow the operation of MMB’s that were “good businesses” and were in
existence as of 2007. It further found that such a purpose was “not thwarted” by applying
substantial compliance to the ICO’s registration requirement because TLC was open and
operating as of 2007 and had all the documents required for registration.3
August 4, 2016, Hearing
        On August 4, 2016, the trial court addressed whether the substantial compliance issue
presented a question of law to be decided by the court or a question of fact for the jury.
        The prosecutor asserted that the court had simply been asked to make preliminary
findings of fact, and not to make a finding “as a matter of law” that defendant satisfied
subdivision B. Nevertheless, the court stated that it was unnecessary to send the case to the


        3
         The court stated, “It seems to me, given the totality of the circumstances here with what the
goal of the I.C.O., the goal of Proposition D, . . . which is the moratorium for the I.C.O., . . . to only
have in existence those businesses that were in existence as of 2007 has been met and that the goals of
Proposition D have also ultimately been met in that its goal was to make sure you had good businesses
operating for lack of a better word to prevent all the secondary, tertiary effects of the pot shops. [¶] And
given this, the Court finds that the defense has provided sufficient evidence . . . of substantial
compliance with the I.C.O. [¶] Now, the question remains . . . whether I need to make the ultimate
decision--legal decision on substantial compliance or whether it’s a jury issue. . . .”
                                                       5
jury because the issue of compliance with the ICO did not turn on the credibility of witnesses.
       The court stated that, although TLC “technically” failed to comply, “in that [the] packet
of documents was not filed . . . downtown,” but rather “at the Van Nuys Office of Finance,” it
nevertheless had done what was “necessary under Proposition D” and the ICO, including
obtaining “the B.T.R.C, the seller’s permit, insurance, and the lease agreement,” “all [which]
demonstrate a business . . . has been operating . . . aboveboard and . . . within the law since
2007.” The court determined that the substantial compliance doctrine could be applied to the
requirement to register with the City Clerk and found “as a matter of law” that defendants
“substantially complied with both the I.C.O. and Proposition D.”
       In dismissing the case, the court stated, “alternatively, the Court cannot in the interest of
justice justify sending this case to a jury. [¶] . . . Primarily, my ruling is based on substantial
compliance as a matter of law . . . but, alternatively, that it is in the interest of justice to dismiss
this case, given the totality of the circumstances in this case.”
                                            DISCUSSION
Standard of Review
       We review the trial court’s dismissal of the charges based on the finding that defendants
substantially complied with the limited immunity provisions of section 45.19.6.3 for an abuse
of discretion. (See People v. Smith (2016) 245 Cal.App.4th 869, 873.) The dismissal of
charges in the interests of justice pursuant to Penal Code section 1385 is also reviewed for an
abuse of discretion. (Ibid.) “‘“‘“[T]he scope of discretion always resides in the particular law
being applied, i.e., in the ‘legal principles governing the subject of [the] action . . . .’ Action
that transgresses the confines of the applicable principles of law is outside the scope of
discretion and we call such action an ‘abuse’ of discretion.”’ [Citation.] To the extent the trial
court’s ruling is based on assertedly improper criteria or incorrect legal assumptions, we review
those questions de novo.” [Citations.]’ [Citation.]” (Property Reserve, Inc. v. Superior Court
(2016) 6 Cal.App.5th 1007, 1018.)
Substantial Compliance—Immunity Provision


                                                   6
       Section 45.19.6.2 prohibits owning, establishing, operating, using, or permitting the
establishment or operation of an MMB. Section 45.19.6.34 provides for a limited immunity that
may be asserted as an affirmative defense.
       In this appeal, we are asked to consider whether the doctrine of substantial compliance
applies to the statutory requirements of section 45.19.6.3 (limited immunity provision). The
precise issue is whether filing documents for registration under the ICO at a location other than
“the Office of the City Clerk” constitutes substantial compliance with section 45.19.6.3,
subdivision B’s registration requirement. When the decisive facts are undisputed, we are
confronted with a question of law and are not bound by the findings of the trial court. (Plaza
Home Mortgage, Inc. v. North American Title Co., Inc. (2010) 184 Cal.App.4th 130, 135.)
        “Limited immunity from prosecution . . . is unavailable . . . where the MMB violates
any of the 15 restrictions set forth in LAMC section 45.19.6.3.” (People v. Trinity Holistic
Caregivers, Inc. (2015) 239 Cal.App.4th Supp. 9, 16 (Trinity).) “A defendant is barred from
asserting immunity if any listed restrictions apply, including if the MMB was not in operation
since 2007 as evidenced by a specified business tax registration or tax exemption certificate; the
MMB did not register with the City Clerk in 2007 in accord with an interim control ordinance;
the MMB failed to obtain a specified business tax registration in 2011 or 2012, and renew the
registration; and if marijuana in the MMB is visible from the exterior of the business.
[Citation.]” (People v. CHR Herbal Remedies (2017) 12 Cal.App.5th Supp. 26, __ (CHR
Herbal Remedies).)


       4
          “Notwithstanding the activities prohibited by this Article, and notwithstanding that [MMB]
is not and shall not become a permitted use in the City for so long as this Article remains in effect,
[an MMB] shall not be subject to the remedies set forth in Los Angeles Municipal Code Sections 11.00
or 12.27.1 solely on the basis of: (1) an activity prohibited by Section 45.19.6.2; and (2) the fact that
[MMB] is not a permitted use in the City, provided however that, as authorized by California Health
and Safety Code Section 11362.83, this limited immunity is available and may be asserted as an
affirmative defense only so long as subsections A. through D. and G. through O. of this
Section 45.19.6.3 remain in effect in their entirety, only by [an MMB] at the one location identified in
its original or any amended business tax registration certificate issued by the City, and only if that
[MMB] does not violate any of the following medical marijuana business restrictions: [enumerating 15
restrictions].”
                                                      7
       As relevant to this appeal, LAMC section 45.19.6.3, subdivision B, provides, “Every
[MMB] is prohibited that did not register with the City Clerk by November 13, 2007 in
accordance with all requirements of the City’s [ICO].” (Italics added.)
       The ICO states, in pertinent part, “The prohibitions [against the establishment and
operation of MMB’s] specified in Section 2 of this ordinance shall not apply to any Medical
Marijuana Dispensary established before the effective date of this ordinance and operated in
accordance with State law, if the owner or operator of the Medical Marijuana Dispensary
complies with the following requirements: [¶] A. File the form, designated by the Office of the
City Clerk, and the following documentation with the Office of the City Clerk within 60 days
of the adoption of the Interim Control Ordinance: City of Los Angeles Tax Registration
Certificate, State Board of Equalization seller’s permit, property lease, business insurance,
and dispensary membership forms and, if needed, Los Angeles County Health Department
permit. . . . [¶] B. This exception only applies to a facility that otherwise meets all requirements
of the LAMC and is open for business on the effective date of this ordinance.” (ICO, § 3,
italics added.)5
       In Trinity, we considered a different aspect of the ICO registration requirement. There,
we concluded that the limited immunity defense was unavailable for a defendant who had failed
to strictly comply with section 45.19.6.3, subdivision B’s ICO registration requirement because
the documents submitted by the defendant failed to show the MMB was open and operating
legally as of September 14, 2007. (Trinity, supra, 239 Cal.App.4th at p. Supp. 19.) In People
v. Onesra Enterprises, Inc. (2016) 7 Cal.App.5th Supp. 7, 16 (Onesra), we held substantial
compliance did not apply to section 45.19.6.3, subdivision E’s requirement to obtain and renew
business tax registration. Most recently, in CHR Herbal Remedies, supra, we held that
applying substantial compliance to section 45.19.6.3, subdivision O, “would disserve the
purposes underlying the distance requirements [contained therein].” (Id. at p. Supp. __.) We
       5
         Section 4 of the ICO provides for a hardship exemption: “The City Council, acting in its
legislative capacity and by resolution, may grant an exemption from the provisions of this ordinance in
cases of hardship duly established to the satisfaction of the City Council. An application for a hardship
exemption shall be obtained from and filed with the City Clerk.”
                                                     8
concluded, “The clear terms of [section 45.19.6.3] indicate strict compliance with the immunity
provisions was required. [Citations.]” (Id. at p. Supp. __.) In line with the aforementioned
decisions, we hold that the doctrine of substantial compliance does not apply to subdivision
45.19.6.3, subdivision B’s requirement to register with the City Clerk.
       “‘“Substantial compliance . . . means actual compliance in respect to the substance
essential to every reasonable objective of the statute.” [Citation.] Where there is compliance as
to all matters of substance[,] technical deviations are not to be given the stature of
noncompliance. [Citation.] Substance prevails over form. When the plaintiff embarks [on a
course of substantial compliance], every reasonable objective of [the statute at issue] has been
satisfied.’ [Citation.] . . . [Citation.] Furthermore, the doctrine of substantial compliance does
not apply at all when a statute’s requirements are mandatory, instead of merely directory.
[Citations.] A mandatory statute ‘is one that is essential to the promotion of the overall
statutory design and thus does not permit substantial compliance. [Citation.]’ [Citation.]”
(Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1332-1333, italics omitted.)
       The critical inquiry, here, is whether the policies underlying the requirement to “register
with the City Clerk” were served in this case. (See Trinity, supra, 239 Cal.App.4th Supp. at
p. 19.) We conclude they were not. The LAMC specifically mandated, inter alia, ICO
registration “with the City Clerk” in order to qualify for immunity. The ICO, which is
incorporated by reference, is even more explicit, designating “the Office of the City Clerk” as
the location for filing the necessary documentation. Requiring that the registration process be
done with the City Clerk—the City’s receiving agent and custodian of records—ensures that the
documents are received by the City so that the City can determine which MMB’s were open
and operating in compliance with the law as of September 14, 2007. (See ICO, §§ 2, 3.)
       Were MMB’s allowed, by substantial compliance, to file documents at any city office,
the underlying purposes of section 45.19.6.3, subdivision B, would not be promoted.
Permitting an MMB to file at a satellite city office would place an untoward burden on the City,
and would increase the risk that the documents would not be received by the City. Indeed, in
the case sub judice, there is no evidence that ICO registration paperwork was ever received by
                                                 9
the City Clerk’s Office, and the City sent Sheftel the order to comply based on this perceived
failure of registration.6 Sheftel’s filing of his ICO paperwork (assuming they were filed) at the
Van Nuys Finance Office cannot be viewed as a “technical imperfection[] of form.” As we
stated in Trinity, “Nothing in the ICO suggests that the filing requirement was pointless or
optional.” (Trinity, supra, 239 Cal.App.4th at Supp. 19.)
       In the broader context of the City’s ban on MMB’s and given the stringent standards for
immunity (Onesra, supra, 7 Cal.App.5th at p. Supp. 16), we conclude the requirement to
register with the City Clerk is mandatory rather than simply directory and that strict compliance
is essential to the promotion of the overall statutory design. (See Troyk v. Farmers Group, Inc.,
supra, 171 Cal.App.4th at p. 1333; Trinity, supra, 239 Cal.App.4th at p. Supp. 19 [“the
documents required by the City [for registration under the ICO] were critical to substantiating
that all MMB’s registered with the City were in fact open and operational as of the September
14, 2007 deadline”].) Accordingly, the doctrine of substantial compliance does not apply to
section 45.19.6.3, subdivision B’s requirement that an MMB register with the City Clerk.
       Defendants contend the court’s dismissal based on “substantial compliance” was
harmless error because they submitted substantial evidence of compliance with
section 45.19.6.3, subdivision B, at the Evidence Code section 402 hearing. Defendants,
however, seem to ignore that the court originally ruled that evidence in support of the immunity
defense could be admitted at trial, but there was no such trial.
       The purpose of a hearing under Evidence Code section 402, which governs the
procedure for determining foundational and other preliminary facts, is simply to decide
preliminary questions of fact upon which the admissibility of evidence depends. (See People v.
Superior Court (Blakely) (1997) 60 Cal.App.4th 202, 208-209 & fn. 6.) At the August 4, 2016,
hearing, the prosecutor attempted to remind the court that it had only been asked to make

       6
          At the February 11, 2016, hearing, the prosecutor pointed out, “If Mr. Sheftel had gone to the
City Clerk’s office at City Hall where he was supposed to go, they would have known exactly what he
was there for. They wouldn’t have had to go and talk to a supervisor and try to figure out what he was
doing. [¶] . . . They had all sorts of forms and ways of doing things. They knew. They were set up for
this. [¶] . . . [¶] Mr. Zaragoza testified that . . . he’s never seen a registration form in his life.”
                                                          10
preliminary findings of fact, not to decide the case as a matter of law. Once the court decided
the doctrine of substantial compliance applied to section 45.19.6.3, subdivision B’s ICO
registration requirement and that there was sufficient evidence to support the immunity defense,
defendant still had the burden of proving the elements to the jury.7 (See People v. West
Caregivers, Inc. (2015) 242 Cal.App.4th Supp. 24, 37.)
Interest of Justice
        As a direct result of its finding that section 45.19.6.3 immunity barred prosecution, the
court stated that it was “not in the interest of justice to use any more City resources or State
resources on this matter.” (Italics added.)
        Section 1385, provides in relevant part, “The judge . . . may, either on his or her own
motion or upon the application of the prosecuting attorney, and in furtherance of justice, order
an action to be dismissed.”
        Appellate review of whether the trial court abused its discretion under Penal Code
section 1385 “‘“requires consideration both of the constitutional rights of the defendant, and the
interests of society represented by the People, in determining whether there should be a
dismissal. [Citations.]” [Citations.] At the very least, the reason for dismissal must be “that

        7
            At the February 11, 2016, hearing, the prosecutor stated, “taking Ms. Dickenson’s [sic]
testimony, taking the documentary evidence that [defense counsel] has provided, I can say it appears
probable that in September of 2008, Mr. Sheftel had all the documents he was required to have in . . .
2007 before the registration date . . . deadline. But I cannot say that he had them in 2007 before the
registration deadline. I’m unable to say that.” The court also remarked, “I think if . . . I grant [defense
counsel’s] motion [in limine] . . . that’s a[n] evidentiary issue for trial.”
           Later at the same hearing, the trial court attempted to clarify what it was being asked to do. The
court asked, “[S]o can you both agree that I have to legally conclude there’s been substantial
compliance? Or—I thought you were saying that it was a factual issue for the jury.” Defense counsel
responded, “I think this Court has to make a determination on the law whether substantial compliance
applies so that it can go to the jury or Your Honor, as Court trial, sum trier of fact. But I think we can’t
just make that argument unless this Court rules as a matter of law.”
           Thus, while the central issue litigated at the February 11, 2016, and August 4, 2016, hearings
was whether defendants failed to comply with the ICO registration requirement, the People in no way
conceded the other 14 requirements of the immunity defense had been satisfied. At the August 4
hearing, the prosecutor pointed out, “I don’t believe the Court has before it sufficient evidence with
regard to all the other requirements of limited immunity . . . to find that it is in the interest of justice to
dismiss this case because there are 14 other requirements out there, and we’ve addressed one. [¶] . . . [¶]
. . . It’s the defendant’s job to prove [the immunity requirements], and there are 14 others.”
                                                         11
which would motivate a reasonable judge.” [Citations.]’ [Citation.] ‘Courts have recognized
that society, represented by the People, has a legitimate interest in “the fair prosecution of
crimes properly alleged.” [Citation.] “‘[A] dismissal which arbitrarily cuts those rights without
a showing of detriment to the defendant is an abuse of discretion.’ [Citations.]”’” (People v.
S.M. (2017) 9 Cal.App.5th 210, 218.) “‘[A] court abuses its discretion if it dismisses a case . . .
solely “to accommodate judicial convenience or because of court congestion.” [Citation.]’”
(Ibid.)
          Given the trial court’s error in finding as a matter of law that defendants were immune
from prosecution, the concomitant conclusion that dismissal was in the interest of justice was
an abuse of discretion. (See Property Reserve, Inc. v. Superior Court, supra, 6 Cal.App.5th at
p. 1018.)
                                            DISPOSITION
          The order of dismissal is reversed.

                                                          _________________________
                                                           Richardson, J.
          We concur:


          _________________________                       _________________________
          P. McKay, P. J.                                  Ricciardulli, J.




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