Marijuana Sales Tax

The Missouri Constitution was amended by voters in 2022 to permit legalized recreational use and possession of marijuana.  The Amendment provided for “the commercial production and distribution of marijuana under a system that licenses, regulates, and taxes the businesses involved while protecting public health.” All retail marijuana businesses are required to collect a 6 percent state tax on the retail sale of non-medical marijuana and “the governing body of any local government is authorized to impose, by ordinance or order, an additional sales tax in an amount not to exceed three percent on all tangible personal property retail sales of adult use marijuana sold in such political subdivision.”

The City of Florissant is an incorporated city in St. Louis County. The City of Florissant voted to impose a 3 percent sales tax on retail sales of marijuana and the St. Louis County’s voters also passed a 3 percent sales tax on retail sales of marijuana sold in St. Louis County.

Robust is a dispensary operating in Florissant and it collected the 3 percent sales tax imposed by the City of Florissant but decided it would not collect the county’s 3 percent sales tax as it believed that was not permitted or required by the Missouri constitution. Robust did collect and remitted the three percent sales tax imposed by Florissant.

The Department of Revenue informed Robust it was required to remit the three percent St. Louis County sales tax in addition to the three percent sales tax imposed by Florissant. Robust filed a declaratory judgment suit against St. Louis County and the Director of Revenue. The circuit court entered a judgement in favor of St Louis County and the Director of Revenue.  Robust appealed the decision to the Eastern District.

On appeal the Eastern District focused on whether Article XIV authorizes a county to impose an additional sales tax when the dispensary is located within the boundaries of an incorporated village, town, or city, or is the county limited to only imposing a retail sales tax at a dispensary located in an unincorporated area of that county.  The Eastern District reviewed the language of Article XIV, § 2.6(5) of the Missouri Constitution which provides that “the governing body of any local government is authorized to impose, by ordinance or order, an additional sales tax in an amount not to exceed three percent on all tangible personal property retail sales of adult use marijuana sold in such political subdivision.” 

The court then examined the definition and meaning of “local government.” The definition of “local government” turns on whether an area is incorporated or unincorporated. Article XIV, § 2.2(12) states, “‘Local government’ means, in the case of an incorporated area, a village, town, or city and, in the case of an unincorporated area, a county.” The plain, unambiguous text of this constitutional provision means, that in an incorporated area like Florissant, the village, town, or city is the “local government,” not the county.

The Eastern District determined that the plain language of Article XIV is unambiguous. The Eastern District found in favor of Robust that only one local government is authorized to impose an additional three percent sales tax. Robust v. St. Louis County, (ED112642, 11/122024)

Public Duty Doctrine

This case raises three issues that every attorney representing a local government should consider during and before litigation.  1) When you are involved in litigation you must raise every single one of your defenses early, often, and carefully preserve them for appeal. You also need to make sure you clearly distinguish between the different defenses that can become indistinguishable. 2) When you are looking at the issues in your litigation you should make yourself fully aware of any other ongoing cases or recent cases with similar issues.  Sometimes the purpose of an opinion is to help educate lawyers on an issue so that the court can avoid reviewing the same errors. The court in this matter devoted time to discussing issues in a way to help educate lawyers on legal defenses that should be raised and preserved and the differences in those defenses.  This is a good case to review. 3) You need to have a litigation outline of every possible defense that you will automatically raise in each case and you should have a database of legal briefs on each issue to submit to the court which can be quickly recycled for future cases.   

Facts: KC Pet Project is a tax-exempt nonprofit corporation that operated a Kansas City’s animal shelter. Pet Project entered into a contract with the City of Kansas City under which Pet Project would perform all of the animal control services in the City. Pet Project was charged with enforcing all applicable animal control laws under Chapter 14 of the City’s Code of Ordinances.  Pursuant to the contract, the Pet Project took title to all of Kansas City’s animal control vehicles and equipment.

In February 2021, Owner moved into the Rock Ridge Ranch Apartments in Kansas City with her pit-bull dog. The Pet Project received multiple complaints from a neighbor who was concerned about the dog’s aggressive behavior.  An Animal Safety Officer interviewed the neighbor about the dog’s behavior and the neighbor stated that the dog had aggressively charged two individuals at the apartment complex after breaking free of the dog’s leash, and that the neighbor had seen the dog outside off-leash on two other occasions. The neighbor subsequently submitted a written formal complaint that characterized the dog as “a vicious animal,” and stated that “it is only a matter of time till the dog bites someone, or another dog.”

After interviewing the neighbor, the Officer spoke with Owner’s daughter. The Daughter stated the complaints were false and that the Neighbor was a racist who had been bothering her and her mother.

The Officer closed the investigation without taking any additional action after conducting those interviews. A month after the investigation was closed, a resident (Roark), was attacked by the pit-bull dog. The pit-bull dog bit Roark on the chest, right arm, and left hand.  The bites caused deep puncture wounds and the bite to the left hand severed a finger.  Pet Project subsequently seized the dog and transported it to the Pet Project’s temporary holding facilities. The dog was later returned to the custody of the Owner and then the dog bit another person.  After the second incident the pit bull dog was euthanized as required by Kansas City ordinances.

Roark sought damages after the attack, against the Owner, apartment complex owner, property manager, and Pet Project.  The claim against the owner was dismissed without prejudice because the Owner could not be located.  The trial court on a summary judgment motion determined the property owner and property manager could not be held liable for injuries caused by a domesticated animal owned by a tenant.  This chain of events left only Pet Project as a defendant in the case.

Pet Project faced a claim that it was negligent and breached its duty “to exercise due care to protect persons, including but not limited to Kansas City residents, such as plaintiff, from harm by defendant [Owner]’s dog.” Roark alleged that the Pet Project was liable on a negligence per se theory, based on Owner’s violation of multiple Kansas City animal control ordinances.  Pet Project moved for summary judgment. Pet Project argued that it was entitled to sovereign immunity as a “quasigovernmental agency” which had “contractually undertake[n] . . . governmental functions for the City of Kansas City.” The Pet Project also argued that it was entitled to judgment because it did not own, possess, or exercise control over Owner’s dog at the time it attacked Roark, and therefore could not be held liable for injuries caused by the dog. Finally, the Pet Project argued that Roark could not assert a negligence per se claim against it under Kansas City’s animal control ordinances, because those ordinances were “not designed for [the Pet Project], but rather for the owners, possessors and harborers of dogs, and other animals, to abide by.”

The circuit court granted the Pet Project’s motion for summary judgment as to Roark’s claim for negligence per se. 

The trial court also provided that the City would have been entitled to sovereign immunity from Roark’s negligence claim, but in this matter the City’s sovereign immunity should not extend to a private contractor like the Pet Project, because the Pet Project “retain[ed] significant discretion” concerning the manner in which it performed animal control services. Since Pet Project did not have sovereign immunity, the court decided that genuine issues of material fact prevented the grant of summary judgment on Roark’s negligence claim.

Following a jury award of $200,000 in compensatory damages the Pet Project appealed the matter.

On appeal Pet Project argued that it was entitled to judgment as a matter of law because the public duty doctrine and privity doctrine protect public entities from the type of negligence claim being asserted by the defendant in this matter.  

The Western District began its analysis by discussing the public duty doctrine and the privity doctrine. The Missouri Supreme Court previously described the public duty doctrine in Southers v. City of Farmington, 263 S.W.3d 603 (Mo. 2008):

The public duty doctrine states that a public employee is not civilly liable for the breach of a duty owed to the general public, rather than a particular individual. This public duty rule is based on the absence of a duty to the particular individual, as contrasted to the duty owed to the general public. The public duty doctrine does not insulate a public employee from all liability, as he could still be found liable for breach of ministerial duties in which an injured party had a special, direct, and distinctive interest. This exception exists when injury to a particular, identifiable individual is reasonably foreseeable as a result of a public employee’s breach of duty. . . . Further, the protections of the public duty doctrine are not intended to be limitless, and, just as the doctrine of official immunity will not apply to conduct that is willfully wrong or done with malice or corruption, the public duty doctrine will not apply where defendant public employees act in bad faith or with malice.

The Western District then provided a brief analysis of the privity doctrine. As explained by the Western District under the privity doctrine a plaintiff may not assert a negligence claim against a defendant based on a duty of care derived from the defendant’s contractual obligations to a third party. As the Supreme Court had previously explained, “the rule of privity . . . generally provides a party to a contract owes no duty to a plaintiff who was not a party to the contract where there was no privity or direct transaction between them.” State ex rel. Tyler Technologies, Inc. v. Chamberlain, 679 S.W.3d 474, 478 (Mo. 2023).

In this case, the Pet Project did not argue that it was entitled to judgment based on the public duty doctrine, or based on a lack of contractual privity, either in its directed verdict motion at the close of the evidence, or in its post-judgment JNOV motion. There was no record of Pet Project raising these issues. The Pet Project’s failure to raise these issues in the circuit court denied the court the opportunity to address them in the first instance; it also denied Roark the opportunity to fully develop the facts which might be relevant to the potential applicability of the public duty or privity doctrines in this case.

The Pet Project’s references to sovereign immunity in its directed verdict and JNOV motions were not sufficient to present the public duty issue to the circuit court. In Southers, the Missouri Supreme Court emphasized the differences between the sovereign immunity protection afforded to governmental entities, and the official immunity and public duty doctrines which protect government employees from liability: Although sovereign immunity is a tort protection for government entities, not their employees, public employees are covered by two different government immunity doctrines: the official immunity and public duty doctrines. The official immunity and public duty doctrines have similar policies behind their protections and, in many cases, both doctrines can be applied to protect the government employee. Because both doctrines are often applicable to a defendant public employee’s conduct, they are often confusingly applied together in cases. Given the distinctions between sovereign immunity and the public duty doctrine, the Pet Project’s references to sovereign immunity in its motions for directed verdict and judgment notwithstanding the verdict did not preserve a separate public duty argument for appellate review. Willie Roark v. KC Pet Project, (WD86960, 12/17/2024)

Collateral Attack On Board Of Adjustment’s Denial Of A Conditional Use Permit Dismissed

Double AA is a Missouri limited liability company which owns a property in St Louis.  Double AA requested a conditional use permit for a convenience store on the property in St. Louis.  The St. Louis Board of Public Service denied the conditional use permit, and that decision was appealed to the Board of Adjustments, which also denied the permit.  Double AA filed a petition in circuit court for a writ of certiorari pursuant to Section 89.110 and sought a declaratory judgement pursuant to Section 527.010.  Double AA alleged the Board of Adjustment engaged in a practice called “aldermanic courtesy,” which is when the board denies a permit “solely on the basis of disapproval by an Alderman whose ward the property in question is located.” 

Double AA sought a declaratory judgment that the practice of aldermanic courtesy violates a variety of state laws, the Missouri constitution, and the United States Constitution.  Double AA later dismissed the declaratory judgment count without prejudice in order to refile it as a separate action.  Double AA then filed a separate petition for declaratory judgment before the circuit court which alleged the practice of aldermanic courtesy which resulted in the denial of the conditional use permit. 

The City moved to dismiss and argued that the exclusive remedy in this matter is a writ of certiorari pursuant to Section 89.110 where the trial court would review the Board of Adjustment’s decision.  The circuit court granted the City’s motion to dismiss the declaratory judgment.  Double AA appealed the trial court’s decision.

The Eastern District discussed the remedies available and when a remedy is not available under Missouri law. “When a declaratory judgment claim improperly invokes § 527.010 because an adequate remedy already exists, that declaratory judgment claim fails to state a cause of action.” “[W]here an agency’s decision is reviewable by writ of certiorari, then resort to the Administrative Procedure and Review Act is not required, and, by its own terms, Section 536.150.1 does not apply.”

In this matter Section 89.110 provides specifically for judicial review of decisions of the Board of Adjustment via a writ of certiorari:

“Section 89.110 provides a means for parties aggrieved by a decision of the Board to file a petition for writ of certiorari ‘setting forth that such decision is illegal, in whole or in part, [and] specifying the grounds of the illegality.’ Claims of illegality include claims that the Board’s decision violates the Constitution.” Duffner, 482 S.W.3d at 820 (quoting Section 89.110) (alteration in original). Double AA thus may not invoke Section 527.010 in pursuit of a declaratory judgment that the Board’s decision is illegal or unconstitutional.

As a result, Double AA’s declaratory judgment action pursuant to Section 527.010 is an impermissible collateral attack on the Board’s decision.

The Tik Tok Ban Before The Supreme Court

The United States Supreme Court will hear arguments on January 10, 2025, to determine whether to grant an injunction preventing the enforcement of the Foreign Adversary Controlled Applications Act on the basis that the law violates the First Amendment.  FACAA would shut down and prohibit the operation of the popular social media company, Tik Tok, in the United States until ByteDance, the company that currently owns Tik Tok, sells its interest in Tik Tok.  Congress enacted the federal law requiring the divesture because there is a belief that Tik Tok is under the control of “foreign adversaries” of the United States and that it poses a substantiated risk to national security if it is continued to be permitted to operate in the United States.

ByteDance is not alone in challenging the mandated divestiture. The most interesting argument the court will hear will be the arguments made by the users who rely on Tik Tok and have created a community built around the sharing of ideas, opinions, news, and artistic expression.  A group of TikTok users have challenged the law on the basis the law “violates the First Amendment because it suppresses the speech of American creators based primarily on an asserted government interest, policing the ideas Americans hear.”  Firebuagh v. Garland, 24-1130.

Supreme Court Reviews Case That Threatens Rural Broadband Aid

Politico and Arstechica wrote articles about a case that will come before the Supreme Court of the United States.  The central issue in the articles is that rural areas rely on a funding mechanism to lower the cost of broadband in rural areas and support the infrastructure that provides broadband.  Without this funding source rural areas could be significantly impacted and a recent decision from the 5^th Circuit Court of Appeals threatens this funding mechanism. 

The case the Supreme court will review is Consumer Research v. FCC.  The Supreme will consider the constitutionality of the FCC’s Universal Service Fund (USF) which was authorized by congress by the Telecommunications Act of 1996.  The USF raises funds which are later distributed to people, entities, and projects to expand and advance telecommunication services in the nation.  The FCC relies on a private entity, the Universal Service Administration Company (USAC) to administer the USF.  The USAC comprised of industry experts 1) collects self-reported income from telecommunication carriers, compiles data to formulate contribution rates, 3) proposes quarterly budget to the FCC.

Consumer Research challenged the constitutionality on the grounds that 1) the Hobbs Act is not a jurisdictional bar to their constitutional claims; 2) Section 254 violates the nondelegation doctrine because Congress failed to supply the FCC with an intelligible principle; and 3) the FCC’s relationship with USAC violates the private nondelegation doctrine because the FCC does not adequately subordinate USAC in its administration of the USF.

An example of this funding mechanism which consumers frequently observe is the “universal service tax” which appears on our cell phone bills.     

When the 5^th Circuit first heard the issue it found in favor of the FCC but in a rehearing the 5^th Circuit found the scheme violated Article I, Section 1 of the Constitution.  Article From: Arstechnica;  Article From: Politico; Consumer Research v. FCC, (5^th Circuit Fed 22-60008, 3/24/2023)

Use Of Force Retaliation First Amendment

Officer Boyd was patrolling a park in Ferguson, Missouri, due to there being an ongoing issue with car break-ins.  Officer Boyd observed an idling vehicle that was parked with its headlights on with excessively tinted windows and no front license plate.  Officer Boyd then contacted the driver, Fred Watson, due to his observation of the ordinance violations. Mr. Watson was not receptive to Officer Boyd’s contact, he was verbally critical of the contact with Officer Boyd, argumentative, and declined Officer Boyd’s request for Mr. Watson’s social security number.  In response to the police contact Mr. Watson requested the name and badge number of Officer Boyd who refused to provide this information and advised it would be on the ticket that would be issued.  Upon being told he was going to receive a citation Mr. Watson reached for his phone which resulted in Officer Boyd yelling at Mr. Watson not to reach around and grab items in the car.  Officer Boyd then requested backup and allegedly pulled his gun, pointed his gun at Mr. Watson, and told Mr. Watson that “I can shoot you right here and nobody would give a shit.”  Mr. Watson was told to exit the vehicle but refused to exit until another backup officer arrived on scene.  Mr. Watson was charged with violating 7 different city ordinances.  All of the charges were dismissed by the City. 

Mr. Watson filed suit in federal court alleging that Officer Boyd violated Mr. Watson’s Fourth, Fourteenth Amendment, First Amendment, and violated his Fourth and Fourteenth Amendment right to be free from malicious prosecution.  After the matter bounced between the trial court and the appellate court Watson was left with one claim that was remanded to the trial court.

The appellate court determined at this stage there did exist sufficient information to withstand a summary judgment finding that Officer Boyd’s used retaliatory force by pointing his gun at Mr. Watson as a result of Watson requesting Officer Boyd’s name and badge number. 

To succeed on a First Amendment retaliation claim Mr. Watson must demonstrate: (1) he engaged in protected First Amendment activity; (2) Officer Boyd took an adverse action that would chill a person of ordinary firmness from continuing in that protected activity; and (3) the use of force was motivated by the exercise of the protected activity.  Officer Boyd was not entitled to qualified immunity because (1) Mr. Watson’s request for Officer Boyd’s badge number was protected speech, (2) Officer Boyd pointing his gun was an adverse action that would chill protected activity, and (3) a reasonable factfinder could conclude that there exists a but-for causal connection between Watson’s request for Officer Boyd’s name and badge number and Officer Boyd’s pointing of his firearm at Watson. Under the facts Mr. Watson presented sufficient evidence on this claim to withstand summary judgment. Watson v. City of Ferguson, (8^th Circuit 22-3233, 10/21/24)