Trans-High Corporation, et al v. State of Colorado, The et al

Filing 67

ORDER granting 59 Motion for Leave to File Third Amended Complaint to Add a Legal Claim Against Defendant Brohl by Magistrate Judge Michael J. Watanabe on 8/18/14.(dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 14-cv-00370-MSK-MJW
TRANS-HIGH CORPORATION, d.b.a. HIGH TIMES MAGAZINE,
WE ARE PUEBLO LLC, d.b.a. PULP,
COLORADO PRESS ASSOCIATION, INC.,
3-D DENVER’S DISCREET DISPENSARY, LLC, d.b.a. 3D CANNABIS CENTER, and
KARMACEUTICALS, LLC,
Plaintiff(s),
v.
BARBARA J. BROHL, in her official capacity as Executive Director of the
Colorado Department of Revenue,
Defendant(s).

ORDER REGARDING
PLAINTIFFS’ MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT TO
ADD A LEGAL CLAIM AGAINST DEFENDANT BROHL (DOCKET NO. 59)

Entered by Magistrate Judge Michael J. Watanabe
This matter is before the court on Plaintiffs’ Motion for Leave to File Third
Amended Complaint to Add a Legal Claim Against Defendant Brohl (docket no. 59).
The court has reviewed the subject motion (docket no. 59), the response (docket no.
65), and the reply (docket no. 66). In addition, the court has taken judicial notice of the
court’s file and has considered applicable Federal Rules of Civil Procedure and case
law. The court now being fully informed makes the following findings of fact,
conclusions of law, and order.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The court finds:

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1.

That I have jurisdiction over the parties to this lawsuit;

2.

That venue is proper in the state and District of Colorado;

3.

That each party has been given a fair and adequate opportunity to
be heard;

4.

That Plaintiffs seek leave of court to file a Third Amended
Complaint to add a Due Process claim against Defendant under the
Fourteenth Amendment to the United States Constitution based on
Defendant’s unilateral, de facto amendment of Colo. Const. art. II, §
10 and Colo. Const. art. XIX, §§ 1 and 2. In support of the subject
motion (docket no. 59), Plaintiffs argue that the Eleventh
Amendment to the United States Constitution does not bar suits
against the State when the State terminates a state-created liberty
interest without due process. The United States Supreme Court
has “repeatedly held that state statutes may create liberty interests
that are entitled to the procedural protections of the Due Process
Clause of the Fourteenth Amendment.” Vitek v. Jones, 445 U.S.
480, 488 (1980);

5.

That Plaintiffs contend that they should be permitted to file a Third
Amended Complaint and add a Due Process claim. Plaintiffs argue
that their Due Process claim alleges that the Colorado Department
of Revenue, Marijuana Enforcement Division’s (MED) rules at issue
unconstitutionally amend the Colorado Constitution through
regulation. Colo Const. art. XVII, § 16 (personal use and regulation

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of marijuana) provides for the legal status of recreational marijuana
stating, inter alia, “that marijuana should be regulated in a manner
similar to alcohol.” Id., § 16(1)(b). Plaintiffs argue the MED cannot
amend Section 16 by regulating speech regarding retail marijuana
establishments in a much more restrictive manner than speech
regarding alcohol. Furthermore, Plaintiffs argue that the Colo.
Const. art. II, § 10 (freedom of speech and press) prohibits any law
“impairing the freedom of speech” and promises that “every person
shall be free to speak, write, or publish whatever he will on any
subject,” and the MED cannot amend Section 10 through regulation
by significantly restricting the ability of retail marijuana
establishments and publications to speak, write, or publish speech
relating to marijuana. See People ex rel. Tooley v. Seven ThirtyFive E. Colfax, Inc., 697 P.2d 348, 356 (Colo. 1985) (“the Colorado
Constitution provides broader protection for freedom of speech than
does the First Amendment to the United States Constitution”).
Accordingly, Plaintiffs argue that the MED has amended the
Colorado Constitution through regulation without due process of
law, in violation of the Fourteenth Amendment to the United States
Constitution;
6.

That Defendant contends that the subject motion (docket no. 59)
should be denied because: (a) Plaintiffs have not met the standard
for obtaining leave to file a Third Amended Complaint; (b) such

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amendment as requested is futile because this court lacks subject
matter jurisdiction over Plaintiffs’ purposed Due Process claim; and
(c) the Eleventh Amendment to the United States Constitution bars
a direct claim against Defendant for violation of the Colorado
Constitution, and even if the Eleventh Amendment does not bar
Plaintiffs requested Due Process claim, this court should abstain
from exercising jurisdiction under the Pullman abstention doctrine.

In support of Defendant’s contentions, Defendant argues that
Plaintiffs seek to invoke the jurisdiction of this court through the
back door (i.e., by alleging Defendant violated the due process
clause of the United States Constitution on the grounds that the
challenged regulations constitute an “amendment” of the Colorado
Constitution without following the proper procedure for amending
that constitution). In essence, Defendant argues that Plaintiffs are
attempting to concoct a procedural due process claim for the
purpose of circumventing the bar of the Eleventh Amendment to
direct challenges under the Colorado Constitution. See Lewis v.
N.M. Dept. Of Health, 261 F.3d 970, 979 (10th Cir. 2001) (state’s
immunity under Eleventh Amendment and Ex parteYoung is a
matter of subject matter jurisdiction).

Defendant further argues that this court should abstain from

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exercising jurisdiction over Plaintiffs’ proposed Due Process Claim
under the Pullman Abstention doctrine. See R. R. Comm’n of Tex.
v. Pullman Co., 312 U.S. 496, 501 (1941).

In Kansas Judicial Review v. Stout, 519 F.3d 1107, 1118-19 (10th
Cir. 2008), the Tenth Circuit held that the Pullman abstention
doctrine is appropriate when:
(1) an uncertain issue of state law underlies the federal
constitutional claim; (2) the state issues are amenable to
interpretation and such an interpretation obviates the need
for or substantially narrows the scope of the constitutional
claim; and (3) an incorrect decision of state law would hinder
important state law policies.
However, the Pullman Abstention doctrine is a narrow exception to
the duty of federal courts to adjudicate cases properly before them
and is used only in exceptional circumstances. Id.; and
7.

Pursuant to Fed. R. Civ. P. 15(a)(2), “[t]he court should freely give
leave [to amend] when justice so requires.” “Refusing leave to
amend is generally only justified upon a showing of undue delay,
undue prejudice to the opposing party, bad faith or dilatory motive,
failure to cure deficiencies by amendments previously allowed, or
futility of amendment.” Bylin v. Billings, 568 F.3d 1224, 1229 (10th
Cir. 2009) (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365

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(10th Cir. 1993)).

As to Defendant Brohl’s futility argument, Judge Ebel has
previously addressed that issue in the case of General Steel
Domestic Sales, LLC v. Steel Wise, LLC, 2008 WL 2520423 (D.
Colo. June 20, 2008). In the General Steel case, Judge Ebel
stated, in pertinent part: “. . . Defendants’ futility argument seems
to place the cart before the horse. Rather than force a Rule
12(b)(6) motion into a Rule 15(a) opposition brief, the defendant
may be better served by waiting to assert Rule 12 motions until the
operative [pleading] is in place.”
ORDER
WHEREFORE, based upon these findings of fact and conclusions of law this
court ORDERS:
1.

That Plaintiffs’ Motion for Leave to File Third Amended Complaint
to Add a Legal Claim Against Defendant Brohl (docket no. 59)
is GRANTED. The Plaintiff’s Third Amended Complaint (docket no.
59-1) is ACCEPTED for filing as of the date of this Order;

2.

That Defendant shall notify this court within 10 days from the date
of this Order whether Defendant will be seeking WITHDRAWAL of
its Motion to Dismiss Second Amended Complaint (docket no. 50)
with leave to re-file a Motion to Dismiss Third Amended Complaint

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(docket no. 59-1) in light of this court’s ruling above; and
3.

That each party shall pay their own attorney fees and costs for this
motion.

Done this 18th day of August 2014.
BY THE COURT

s/Michael J. Watanabe
MICHAEL J. WATANABE
U.S. MAGISTRATE JUDGE