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New Mexico Top Organics-Ultra Health, Inc. v. Kennedy

United States District Court, D. New Mexico

January 16, 2019

NEW MEXICO TOP ORGANICS-ULTRA HEALTH, INC., Plaintiff,
v.
LARRY KENNEDY, DAN MOURNING, and RAINA BINGHAM, in their official capacities, Defendants.

          FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

         On May 31, 2017, Plaintiff New Mexico Top Organics - Ultra Health, Inc. (Ultra Health) filed suit against three New Mexico State Fair officials, Defendants Larry Kennedy, Dan Mourning, and Raina Bingham (collectively, Defendants), seeking damages, injunctive relief, and a declaratory judgment for alleged violation of its First Amendment right to free speech.[1]Specifically, Ultra Health alleged that Defendants impermissibly sought to restrict its constitutionally protected speech and engaged in viewpoint discrimination against Ultra Health by placing unreasonable restrictions on Ultra Health's exhibitor application for the 2017 New Mexico State Fair in violation of the First and Fourteenth Amendments to the United States Constitution.

         On January 3, 2018, Ultra Health filed a motion for summary judgment (Doc. 30), asking the Court to enter judgment in its favor as to all claims. On February 9, 2018, Defendants filed a cross-motion for summary judgment (Doc. 34) asking the Court to find in favor of Defendants and to dismiss Ultra Health's complaint. On October 10, 2018, the Court granted partial summary judgment in favor of Defendants on Ultra Health's claim for monetary damages, dismissing that claim as barred by the Eleventh Amendment. See Partial Summary Judgment (Doc. 43). On August 6, 2018 through August 7, 2018 the Court held a bench trial. Each party submitted Proposed Findings of Fact and Conclusions of Law.[2] Ultra Health also filed a trial brief, an option that Defendants declined.[3] After carefully reviewing the trial transcript and exhibits, the parties' briefing, proposed findings of fact and conclusions of law, and the relevant case law, the Court finds that Defendants' restrictions as applied to Ultra Health were unreasonable and violated Ultra Health's First Amendment right to free speech. Accordingly, the Court will enter judgment in favor of Ultra Health and will grant injunctive relief as detailed herein.

         FINDINGS OF FACT

         1. Plaintiff New Mexico Top Organics-Ultra Health, Inc. is a New Mexico non-profit corporation licensed by the State of New Mexico Department of Health (NMDOH) to produce, distribute and dispense medical cannabis and cannabis-derived products to patients enrolled in the NMDOH Medical Cannabis Program under the Lynn and Erin Compassionate Use Act, NMSA 1978, §§ 26-2B-1 to -7 (the Act).

         2. Leigh Jenke is the Director of Quality and Compliance as well as chairperson of the board for Ultra Health. (Tr. 5:14-18).

         3. Duke Rodriguez is the founder and CEO of Ultra Health, LLC, Ultra Health's management company. (Tr. 5:24-6:4; 66:24-25).

         4. “The purpose of the Lynn and Erin Compassionate Use Act is to allow the beneficial use of medical cannabis in a regulated system for alleviating symptoms caused by debilitating medical conditions and their medical treatments” in the state of New Mexico. NMSA 1978, § 26-2B-2.

         5. Under the Act and implementing regulations, “[n]o officer, employee, or approved contractor of a licensed producer, approved manufacturer, approved courier, or approved laboratory, nor any qualified patient licensed as a producer or enrolled primary caregiver, shall be subject to arrest, prosecution, or penalty in any manner for the production, possession, distribution, or dispensation of cannabis in accordance with [state regulations] and the act.” N.M.A.C. 7.34.3.25(A) (“Exemption from State Criminal and Civil Penalties for the Medical Use of Cannabis”). However, “[p]articipation in the medical cannabis licensing program by a licensed producer…does not relieve the producer…from criminal prosecution or civil penalties for activities not authorized” by regulation and the Act. N.M.A.C. 7.34.4.22(A).

         6. “Production of medical cannabis and distribution of medical cannabis [by a licensed non-profit producer] to qualified patients or primary caregivers shall take place at locations…described in the non-profit producer's production and distribution plan approved by the department[.]” N.M.A.C. 7.34.4.33(B).

         7. Cannabis is classified under Schedule I of the Controlled Substances Act (CSA), and therefore its possession and use are criminalized under federal law. See 21 U.S.C. § 812(c).

         8. Cannabis is also categorized as a Schedule I controlled substance under New Mexico law, NMSA 1978, § 30-31-6(C), and it is otherwise unlawful for a person to possess a Schedule I controlled substance or drug paraphernalia in New Mexico, NMSA 1978, §§ 30-31-23, 30-31-25.1. Under the Act, however, qualified patients and licensed producers are exempt from state prosecution for possession of cannabis or paraphernalia. NMSA 1978, § 26-2B-4.

         9. The State of New Mexico holds an annual fair at the Expo New Mexico Fairgrounds.

         10. Defendant Larry Kennedy is the Chairman of the New Mexico State Fair Commission.

         11. Defendant Dan Mourning is the General Manager of the New Mexico State Fair Expo New Mexico. (Tr. 217:17-19).

         12. Defendant Raina Bingham is the concessions and commercial exhibits manager for the New Mexico State Fair. (Tr. 122:11-12).

         13. The statutory purpose of the New Mexico State Fair is to “advanc[e] the agricultural, horticultural and stock raising, mining, mechanical and industrial pursuits of the state.” NMSA 1978, § 16-6-4.

         14. The State Fair Defendants also articulated a goal of “promot[ing] a safe and family friendly ticketed event while complying with all state and federal laws.” (Pl. Ex. 21; Tr. 136:5-6). This goal is not explicitly stated in statute or regulation. (Tr. 138:13-24). However, in addressing conduct of concessionaires and exhibitors, the 2017 State Fair Vendor Manual affirms that, “[t]he New Mexico State Fair mission is to host a safe and family-friendly entertainment environment for the State of NM.” (Pl. Ex. 2 at 17; Tr. 180:4-15).

         15. The New Mexico State Fair is a separate government instrumentality managed by the State Fair Commission (Commission). See NMSA 1978, §§ 16-6-1, 16-6-4, 16-6-14.

         16. The Commission is responsible for adopting and enforcing rules necessary to manage the State Fair. See NMSA 1978, § 16-6-4(B).

         17. The Commission has the legislative authority to charge entrance fees for admissions, to lease stalls, stands, and restaurant sites, and “do all things which by the commission may be considered proper for the conduct of the state fair not otherwise prohibited by law.” NMSA 1978, § 16-6-4.

         18. The public must pay an entrance fee to gain admission to the State fairgrounds. Prospective vendors and exhibitors must apply to the State Fair to seek approval to have a display booth. Vendors and exhibitors whose applications are approved must pay a fee to the State Fair to set up their booths. (Tr. 253:3-13; Pl. Ex. 1).

         19. All vendors and exhibitors who sign a space agreement contract must comply with the terms in their contract as well as with the terms in the manual that contains policies governing concessions and exhibits at the New Mexico State Fair. See N.M.A.C. 4.3.10.

         20. The 2017 New Mexico State Fair Vendor Manual provided:

The Fair reserves the right to prohibit the sale and display of any product the Fair deems objectionable. It will be the sole decision of the Fair to determine whether an item is offensive or in poor taste. The display, sale, or distribution of weapons (firearms, knives, mace, martial art items, chains, etc.), toy weapons, fireworks, drug-related merchandise or paraphernalia, pornographic materials, offensive wording or graphics of any type, and counterfeit or ‘knock-off' items are prohibited unless authorized under the terms of the Space Agreement executed by the Fair.

(See Doc. 57, Stipulated Fact. No. 4; Pl. Ex. 2).

         21. This prohibited items provision has been included in the Vendor Manual since at least 2007. (Tr. 200:10-14).

         22. The 2017 application form also stated: “Prohibited items include but are not limited to: firearms, knives, swords, mace, martial art items, fireworks, drug related merchandise or paraphernalia, pornographic materials, offensive wording or graphics, counterfeit or ‘knock-off' items.” (See Doc. 57, Stipulated Fact No. 5; Pl. Ex. 1).

         23. Defendant Raina Bingham interprets “drug related merchandise or paraphernalia” to refer to “illegal drugs, ” including cannabis, the possession of which is unlawful under federal law. (Tr. 147:1-6; 185:15-24).[4]

         24. Ms. Bingham is responsible for receiving, reviewing, and ultimately rendering a decision on the applications submitted by prospective vendors and exhibitors. (Tr. 124:25-125:8).

         25. Generally, when Ms. Bingham has concerns about and rejects an application, the applicant is not offered a contract and, unless the applicant asks to speak to a supervisor about the rejection decision, the process stops with Ms. Bingham. (Tr. 125:9-19).

         26. Ms. Bingham ultimately bases her decisions regarding whether a proposed booth is or is not family friendly on her own sensibility, but she uses the prohibited merchandise provision in the vendor manual as a guideline for making this determination. (Tr. 139:3-21).

         27. In August 2016 Ms. Jenke applied on behalf of Ultra Health for exhibit space at the New Mexico State Fair. (Tr. 7:13-19). Ultra Health saw the 2016 State Fair “as an opportunity to educate…[w]e wanted to educate people on, you know, what are qualifying conditions here in the State of New Mexico, how you can apply for a card. You know, we like to facilitate, I guess-we like to facilitate proper use within a regulated system, and so reaching out to people in that kind of venue is…a really, really good opportunity.” (Tr. 9:3-9). Ultra Health wanted people to see “how we make the medicine here, how it's grown, how it's cultivated, so patients and people that are interested in it can see where their medicine comes from. It was considered a little bit of kind of a science fair presentation for the public. We wanted to show how the manufacturing worked, where the plants were grown, how they are grown, what the facilities look like.” (Tr. 9:10-18). Ultra Health deemed the State Fair “a perfect venue” because medical cannabis is “an agricultural industry” within the state. Also, on the “manufacturing side, ” Ultra Health wanted to show the lab, how things are cultivated, and the different products that are made. (Tr. 9:19-10:9)

         28. The second page of the Ultra Health's 2016 State Fair application listed items that Ultra Health intended to bring as “printed materials, ” “posters, ” “plants, ” “microscope, ” “post cards, ” “pens, ” “post-it notes, ” and “stress balls.” (Pl. Ex. 3).

         29. Ultra Health submitted a proposed booth set up design to the 2016 State Fair in a separate email after submitting its application. The proposed design indicated that Ultra Health would exhibit a “cannabis clone, ” “microscope, ” “educational materials on the medicinal and economic benefits of cannabis, ” a “rosin press lavender demonstration area, ” and a “secure area where people can view cannabis plants.” (Pl. Ex. 3). A cannabis clone is a portion of the cannabis plant that is cut from the mother plant and used to start a successive cannabis plant. (Tr. 17:7-9).

         30. Ms. Bingham did not recall reviewing the Ultra Health booth design prior to the 2016 State Fair. (Tr. 190:20-191:4; Tr. 192:1-7).

         31. When booth space became available a few days before the start of the 2016 State Fair due to a cancellation Ms. Bingham contacted Ultra Health. “Understanding their desire to be part of the State Fair and also that they were poised and ready to jump in at last minute's notice, which many vendors at that point aren't prepared, but knowing that they had made it very clear that they were still interested in wanting to do that, they seemed like a good fit for that space.” (Tr. 7:21-25; 191:5-25). The parties signed a space agreement contract for the 2016 State Fair. (Pl. Ex. 4).

         32. On September 8, 2016, the first day of the State Fair, Ultra Health displayed a live cannabis plant in its exhibition space. (Tr. 15:22-16:6). State Fair officials learned of the plant and Ms. Bingham called Duke Rodriguez, CEO of Ultra Health, LLC, and “explained to him that [she] did not realize that that was their intention. And [she] explained to him also that had [she] realized this, the application would not have been approved the way that it was submitted. [Ms. Bingham] told him that we couldn't keep - that he could not have that plant in his booth, nor the pipes.”[5] (Tr. 194:5-14).

         33. Ms. Bingham was not aware of any decision by the State Fair to shut down Ultra Health's booth for the rest of the 2016 State Fair but did later become aware that Ultra Health had vacated the booth location. (Tr. 194:15-24). “Because of the misunderstanding, ” Ms. Bingham reimbursed the contract fees to Ultra Health. (Tr. 194:25-195:5).

         34. It was New Mexico State Police officers who had approached the booth and told Ultra Health to pack everything and exit the premises. (Tr. 59:8-14). Ultra Health complied and did not return for the remainder of the 2016 State Fair. (Tr. 22:6-11; 195:21-24).

         35. Ms. Bingham indicated that had Ultra Health removed the cannabis plant and the pipes, it would have been allowed to continue to discuss its ...


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