Filed 10/21/20 Cereceres v. City of Baldwin Park CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

OSCAR ALAN CERECERES et al.,

Plaintiffs and Appellants,

v.

CITY OF BALDWIN PARK,

Defendant and Respondent;

RUKLI, INC.,

Real Party in Interest and Respondent.

B296921

(Los Angeles County

Super. Ct. No. BC697871)

APPEAL from a judgment of the Superior Court of Los Angeles County, Mitchell L. Beckloff, Judge. Affirmed.

Pierce Law Firm and Bradley D. Pierce for Plaintiffs and Appellants.

Jimmy L. Gutierrez; Pollak, Vida & Barer, Daniel P. Barer, and Anna L. Birenbaum for Defendant and Respondent.

No appearance for Real Party in Interest and Respondent.

____________________________________________________

INTRODUCTION

In 2016, California voters approved Proposition 64, which led to the Legislature’s enactment of the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA or the Act). The Act was codified into law at sections 26000 through 26250 of the Business and Professions Code, “to establish a comprehensive system to control and regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both” medical and recreational cannabis. (Bus. & Prof. Code, § 26000, subd. (b).) Among other things, the Act restrains anti-competitive behavior by “person[s]” and “licensee[s].” (§§ 26051, subd. (b), 26052, subd. (a).)

In 2018, respondent City of Baldwin Park (the City) adopted a development agreement with real party in interest Rukli, Inc., (Rukli) that contained provisions granting Rukli an exclusive license to transport cannabis in the City, and promising that the City would require all other cannabis licensees in the City to use Rukli for transportation (e.g., for moving the cannabis they grew from their facility in the City to elsewhere) (the Exclusivity Provisions). The trial court denied appellants’ petition for a writ of mandate ordering the City to disapprove the Exclusivity Provisions, and appellants appealed.

On appeal, appellants argue the court erred because: (a) the City may not use its zoning powers to adopt an agreement whose purpose is to grant Rukli a monopoly; (b) the Exclusivity Provisions conflict with the Act and are therefore void; (c) the Exclusivity Provisions are unauthorized by the law governing development agreements and are therefore void; and (d) the Exclusivity Provisions constitute impermissible spot zoning. We affirm.

STATEMENT OF RELEVANT FACTS

A. The City Grants Rukli an Exclusive Distribution License; Appellants Sue
B.
On August 16, 2017, the City adopted Ordinance No. 1400, permitting cannabis operations in the City by adding Chapter 127 of Title XI to the City’s Municipal Code. The staff report prepared regarding this ordinance notes: “The ordinance contains many safeguards to assure that the City and its citizens are protected and that any marijuana licensees conduct their businesses safely.”

In September 2017, Rukli (which had incorporated one month earlier) applied for a permit to transport cannabis. Its application included various statements touting the experience of its personnel, and its commitment to safety, including:

–the experience of Rukli’s CEO “working in a federally and municipally contracted taxicab operation that includes transporting EOB transportation eligible beneficiaries” and the fact that Rukli’s staff “have been in the transportation business for 23 years, serving Los Angeles, Riverside, and San Bernardino counties,” and “one company run by Rukli’s staff was grown into one of the largest and most reliable taxi cab service companies in California, winning franchise agreements . . . in Coachella Valley, the Pomona Valley Transportation Authority, and the cities of Diamond Bar and Walnut, California, serving nearly 500 thousand California citizens and visitors”;

–Rukli’s ability to “offer[] the city of Baldwin Park a turn-key method of documenting, tracking and analyzing marijuana courier demands and customer service/customer satisfaction”;

–Rukli’s intent to “establish a state-of-the-art, modern communications center and staff it with personnel who are already adept at verifying requests for pick-up and delivery, and locating and tracking company vehicles” meaning “Rukli won’t be learning how to implement its technologies on the City of Baldwin Park’s dime, but will instead be well-practiced and an expert from day one of the announcement of the award and permit to operate a transportation/distribution license”;

–Rukli’s commitment to “operat[e] strictly within the confines of California law, and this commitment includes working as closely as possible with local law enforcement to ensure that certified patients are the only recipients of the medical marijuana products that we will distribute. To this end, we will schedule regular meetings with local law enforcement officials to discuss issues of mutual concern, offer them tours of the facility as well as the general property, and we will provide education in addition to training for law enforcement personnel regarding medical marijuana and its legal use.” Rukli also agreed to “sponsor local police officer’s organizations including but not limited to the local chapter of the Fraternal Order of Police with each member of our management team seeking to become an Associate Member.”

In addition to the statements above, the application contained a lengthy discussion regarding the safety measures Rukli intended to implement. Among other measures, Rukli discussed the type of fencing and lighting it would use, how it would control visitor access to its facilities, and times, methods, and procedures it would employ for cannabis delivery.

On December 18, 2017, the City granted Rukli the exclusive right to operate a cannabis transportation business in the City. The next day, Rukli’s CEO and its primary operations consultant each donated $4,400 to “Monica Garcia for Senate 2018.” Monica Garcia was a City councilmember who had voted to grant Rukli its license.

On March 15, 2018, appellants filed a petition for writ of mandate against the City, challenging the approval of this agreement on procedural and substantive grounds. Aside from injunctive and declaratory relief, appellants requested a writ of mandate ordering the City to set aside its approval of the sections in the agreement providing for the exclusive distribution right.

C. The City Grants Rukli an Exclusive Distribution License Again; Appellants Amend Their Petition
D.
After appellants filed suit, the City proceeded to approve another agreement with Rukli, this time following the procedures required for approving development agreements. Thereafter, in July 2018, the City enacted Ordinance 1412, again approving a development agreement with Rukli (the Rukli Agreement). The Rukli Agreement again named Rukli the “exclusive distributor and transporter for the cultivation/manufacturing permit holders within the City of Baldwin Park” and provided that the “City shall condition the cultivation/manufacturing permits [with other licensees] on [Rukli] being the exclusive distributor.” The agreement also recognized that the “City prohibits the sale of cannabis within the City of Baldwin Park so the cannabis must be transported to and sold in cities where it is legal to do so.”

At the meeting approving the Rukli Agreement, Councilmember Garcia stated, “You know, one of the reasons why I supported having one distributor is because I believe that it is safer. There is more accountability with one company versus having multiple companies and we don’t know what’s been distributed and what time and what vehicle, so on and so forth, so that in it itself, uh, would suggest that there’s you know, greater public safety, um, but that’s just my position.”

On October 26, 2018, appellants filed a first amended petition for writ of mandate against the City, challenging the Rukli Agreement. Appellants conceded that “the City appears to have corrected procedural defects in the approval process” for the Rukli Agreement but contended that the agreement was “still defective in that it improperly grants Rukli a monopoly controlling all cannabis distribution in the City.” Appellants again requested injunctive and declaratory relief, and “a writ of mandate ordering Respondent, its Council, and its agencies and commissions to set aside approval of Sections 2.13 and 2.14 [the Exclusivity Provisions] of the Exclusive Agreement” and “a writ of mandate or order pursuant to Code of Civil Procedure section 1085 overturning Respondent’s approval of the Exclusive Agreement unless and until sections 2.13 and 2.14 are revised to remove the exclusivity.”

Appellants also filed a memorandum of points and authorities in support of their petition. Among other things, appellants argued that “[m]onopolies and anticompetitive practices and contracts are expressly prohibited” and alleged the Exclusivity Provisions violated both section 26051, subdivision (b) (Section 26051(b)) and section 26052 of the Act. The City filed an Answer, along with an opposition to the memorandum of points and authorities, and appellants filed a reply.

E. The Court Denies the Petition
F.
The court heard the petition in January 2019 and took it under submission after oral argument. Two weeks later, it issued a 12-page order denying the petition. We summarize below the portions relevant to this appeal.

1. Standing
2.
The court found appellants lacked standing to challenge the Rukli agreement under section 26051, but had standing to challenge it under section 26052. Specifically, the court found that appellants lacked standing under Section 26051(b) because it provided that “[t]he Attorney General shall have the sole authority to enforce the provisions of this subdivision.” However, the court found appellants’ “reliance on Section 26052 does not raise a standing issue. Under subsection (c), [appellants] appear to have standing to bring an action under this statute.”

3. The Act
4.
While finding “no disagreement [that the Exclusivity P]rovisions prevent any person or entity from competing with Rukli as to cannabis distribution in the City” and that “[a]ny cannabis cultivator or manufacturer in the City must use Rukli to transport and distribute their cannabis products,” the court found the Exclusivity Provisions did not violate the Act because the “language of the statutes make[s] clear the legislature intended to regulate only private behavior. Neither Section [26051 nor 26052], on its face, imposes any limitations on a municipality’s authority to determine only one cannabis distributorship license shall be issued within the City.” In that regard, the court noted sections 26051 and 26052 prohibited “any person” or “a licensee” from performing certain acts, that “licensee” is defined as a “person holding a license,” and that “person,” in turn, is defined as an “individual, firm, partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, and the plural as well as the singular.” But “[t]he Sections do not instruct, command or limit a municipality’s authority.”

5. The City’s Zoning Powers
6.
The court found that the case of Hernandez v. City of Hanford (2007) 41 Cal.4th 279 (Hanford) “teaches zoning regulation can be used to regulate economic competition ([as] a ‘direct and intended effect’) so long as the ordinance’s primary purpose is to further a valid public purpose,” and that appellants failed to “meet their burden of demonstrating the City adopted the Exclusive Agreement for other than a valid public purpose.” While the court took judicial notice of an “official reporting document showing two donations made from certain Rukli executives to Councilwoman Monica Garcia who voted to approve the ordinance approving the Exclusive Agreement,” the court noted the donations were “not a significant amount” and that others had donated similar amounts. The court declared it was “not persuaded that these two donations, alone, justify finding that the ordinance was passed in a sort of quid pro quo arrangement or otherwise indicative of any wrongdoing on the part of Councilwoman Garcia.”

The court additionally found that due to appellants’ “failure to meet [their] burden of proof on this issue [of showing the primary purpose of the Exclusivity Provisions was not for a valid public purpose], the City was not required to make any showing as to the primary purpose of the ordinance.” Nevertheless, the court noted “there is evidence in the record the City was concerned about and considered public safety – a valid public purpose – with cannabis distribution in the City.” The court pointed to the Staff Report on the Rukli Agreement discussing Rukli’s plans for safety, and councilmember Garcia’s statement that one reason she supported an exclusive agreement was safety. The court also noted Rukli’s permit application discussed security and safety, and recognized that “the law imposes additional requirements on [cannabis] distributors.” Acknowledging that the “evidence about the principal and ultimate object of the City with the Exclusive Agreement is minimal,” the court nevertheless concluded the evidence supported the finding that “the City’s primary purpose was ‘not to further or disadvantage a private business but instead was to serve the city’s legitimate public interest’ of prom[o]ting public safety with respect to the cannabis industry in the City. Accordingly, the court found that to the extent appellants “presented some evidence to support their theory, . . . there is adequate evidence to support the City’s rationale for issuing a single distributor license to the exclusion of other potential distributors.”

7. Development Agreements
8.
The court found that the development agreement statutes appellants cited “merely set forth the general purpose and requirements of the development agreement. These statutes contain no limiting language that would prohibit the City from entering into an exclusive distribution development agreement.”

9. Spot Zoning
10.
The court found appellants’ legal authority regarding spot zoning distinguishable; the cited case involved a local jurisdiction granting an exception to a use restriction in a certain zone, whereas in the present situation, “[r]ather than treating different property differently within the same zoning area, the City only permitted one corporation to conduct distributions within the existing zone.”

The court entered judgment in March 2019. Appellants timely appealed.

DISCUSSION

“In reviewing a trial court’s judgment on a petition for writ of ordinary mandate, we apply the substantial evidence test to the trial court’s factual findings. However, we exercise our independent judgment on legal issues, such as the interpretation of statutory . . . provisions.” (Kreeft v. City of Oakland (1998) 68 Cal.App.4th 46, 53.)

A. The Ordinance Does Not Violate the City’s Zoning Powers
B.
A city may regulate economic activity “so long as the primary purpose of the ordinance or action—that is, its principal and ultimate objective—is not the impermissible private anticompetitive goal of protecting or disadvantaging a particular favored or disfavored business or individual, but instead is the advancement of a legitimate public purpose . . . [and] the ordinance reasonably relates to the general welfare of the municipality and constitutes a legitimate exercise of the municipality’s police power.” (Hanford, supra, 41 Cal.4th at 296-297.)

The trial court found that appellants did “not meet their burden of demonstrating the City adopted the Exclusive Agreement for other than a valid public purpose” and that there was “little evidence to support such a claim.” Specifically, while the court took judicial notice of “an official reporting document” showing Rukli executives donated a total of $8,800 to a councilmember who had voted to approve both agreements with Rukli, the court found the amounts donated were similar to other donations and of an insignificant amount; the court did not believe these donations alone were sufficient to find the Exclusivity Provisions were approved “in a sort of quid pro quo arrangement.” The court also found that the City’s evidence was sufficient to counter whatever showing appellants had potentially made.

On appeal, appellants argue the court erred because: (1) the “primary purpose” of the Exclusivity Provisions was “providing a monopoly to Rukli for the distribution of cannabis products in the City”; and (2) the City’s evidence was insufficient to support the court’s conclusion that the purpose of the ordinance was to protect public safety. We address each contention in turn.

1. Appellants’ Evidence Does Not Compel a Finding That the Primary Purpose of the Exclusivity Provisions Was to Advantage Rukli
2.
“[W]hen the trier of fact has . . . concluded the party with the burden of proof did not carry the burden and that party appeals, . . . ‘“the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant’s evidence was (1) ‘uncontradicted and unimpeached’ and (2) ‘of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.’”’” (Patricia A. Murray Dental Corp. v. Dentsply Internat., Inc. (2018) 19 Cal.App.5th 258, 270.) Moreover, “‘“‘“[i]n reviewing the evidence . . . all conflicts must be resolved in favor of the respondent, and all legitimate and reasonable inferences indulged in to uphold the verdict if possible. . . . When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court.”’”’” (Mason v. Lyl Productions (1968) 69 Cal.2d 79, 85.)

Here, the court found appellants had failed to prove that the primary purpose of the Exclusivity Provisions was one other than a valid public purpose. We interpret appellants’ insistence that the primary purpose of the provisions was to provide Rukli a monopoly as an argument that the evidence supporting their contention was uncontradicted and of such a character and weight as to leave no room for the court’s determination that it was insufficient.

It is undisputed that Rukli personnel contributed a total of $8,800 to the state senate campaign for a councilmember who had voted to approve both agreements. However, even were it reasonable to infer that this councilmember voted to grant Rukli a monopoly in exchange for campaign contributions in an amount the court found insignificant, it is also reasonable to infer that Rukli agreed with and appreciated the councilmember’s vote and independently decided to contribute to her state senate campaign thereafter. The trial court’s inference that the contributions were insufficient to demonstrate a quid pro quo arrangement is reasonable, and we are without power to disregard it. Appellants’ evidence is not of such a character and weight as to leave no room for the court’s determination that it was insufficient.

3. The City’s Evidence Sufficiently Supports the Court’s Conclusion
4.
The court found that appellants’ failure to meet their burden of proof obviated the City’s need to demonstrate that the Exclusivity Provisions were approved for a valid public purpose. Nevertheless, the court listed some of the City’s evidence on the issue — the Staff Report on the Rukli Agreement discussing Rukli’s plans for safety; the councilmember’s statement that she felt having one distributor was safer; Rukli’s permit application containing many assurances of security and safety; and the fact that the Act imposes additional requirements on cannabis distributors — and opined that while the “evidence about the principal and ultimate object of the City with the Exclusive Agreement is minimal,” it was “adequate . . . to support the City’s rationale for issuing a single distributor license to the exclusion of other potential distributors.”

Appellants argue the court erred in this finding because: (a) the Exclusivity Provisions do not further the purpose of a development agreement (which is to freeze zoning regulations applicable to a specific property prior to development); and (b) the City already adopted mandatory safety regulations when it added Chapter 127 to its municipal code, so public safety could not have been the reason for approving the Exclusivity Provisions. We disagree.

Our Supreme Court has held that the anticompetitive effects of an ordinance regulating economic activity do not invalidate it “so long as the primary purpose of the ordinance or action . . . is not the impermissible private anticompetitive goal of protecting or disadvantaging a particular favored or disfavored business or individual, but instead is the advancement of a legitimate public purpose . . . .” (Hanford, supra, 41 Cal.4th at 296-297.) Appellants neither cite authority nor advance any cogent argument as to why the legitimate public purpose discussed in Hanford must be related to the type of agreement in question. That the Exclusivity Provisions may not advance the traditional purpose of development agreements does not preclude them from furthering a legitimate public purpose.

Similarly, there is no reason to presume that because the City had already enacted the mandatory safety regulations contained in Chapter 127 of its municipal code, the City necessarily had no other public safety concerns. Indeed, one councilmember voiced such a concern, opining that there was “more accountability with one company versus having multiple companies” and “greater public safety” with a single transportation company. Substantial evidence supports the court’s finding that the City approved the Exclusivity Provisions for a legitimate public purpose.

C. The Exclusivity Provisions Do Not Conflict with the Act
D.
The trial court rejected appellants’ contention that the Exclusivity Provisions conflicted with sections 26051 and 26052, noting both that these sections prohibited only actions by “persons” and “licensees” — not “cities” — and that the Act contained other prohibitions on municipal action, demonstrating the Legislature was perfectly capable of restraining cities when it intended to. The court also found appellants lacked standing to challenge the Exclusivity Provisions under Section 26051(b).

On appeal, appellants argue the trial court erred in finding the Exclusivity Provisions did not conflict with the Act because the Exclusivity Provisions are “inimical to the intent of the MAUCSRA’s express intent [sic] to reduce barriers to entry into the legal, regulated cannabis market and directly conflict[] with the prohibition against monopolies and anti-competitive conduct in Section 26051(b).” We disagree.

1. The Act Does Not Prohibit Anti Competitive Conduct by Cities
2.
Sections 26051 and 26052 of the Act restrict the behavior of “any person” or “a licensee.” A “licensee” is defined as “any person holding a license.” (§ 26001, subd. (z).) A “person” includes “any individual, firm, partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, and the plural as well as the singular.” (§ 26001, subd. (an).) Notably, this list omits the term “local jurisdiction,” which is defined as “a city, county, or city and county.” (§ 26001, subd. (ac).)

“‘Courts should generally “assume that the Legislature knew what it was saying and meant what it said.” [Citation.] . . . And this is particularly true where the Legislature has omitted a provision which it has employed in other circumstances where the asserted effect is intended.’” (CPF Agency Corp. v. Sevel’s 24 Hour Towing Service (2005) 132 Cal.App.4th 1034, 1049 (Sevel’s).) Additionally, “‘[i]f a statute enumerates the persons or things to be affected by its provisions, there is an implied exclusion of others . . . . It is an elementary rule of construction that the expression of one excludes the other. And it is equally well settled that the court is without power to supply an omission.’” (Ibid.) We therefore assume the Legislature intentionally omitted “local jurisdiction” both from the list of entities defined as a “person,” and from those restrained from anti-competitive behavior. In short, by its terms, the Act did not prohibit the City from approving the Exclusivity Provisions.

3. The Exclusivity Provisions Are Not Inimical to the Act’s Intent
4.
Appellants additionally argue that the Exclusivity Provisions are void because they are inimical to the Act’s intent. “To ascertain legislative intent, we apply settled rules of statutory construction. We begin with the words of the statute, since ordinarily they provide the most reliable indication of legislative intent.” (Sevel’s, supra, 132 Cal.App.4th at 1048.) Additionally, as discussed above, courts should consider the Legislature’s omission of terms in certain sections, especially if those terms are employed elsewhere in the statute. (Id. at 1049.)

We find it significant that while the Act does not include cities in the entities subject to sections 26051 and 26052, other sections of the Act do restrict municipal action. (See § 26080, subd. (b) [“A local jurisdiction shall not prevent transportation of cannabis or cannabis products on public roads by a licensee transporting cannabis or cannabis products in compliance with this division”]; § 26090, subd. (e) [“A local jurisdiction shall not prevent delivery of cannabis or cannabis products on public roads by a licensee acting in compliance with this division and local law as adopted under Section 26200”].) It thus appears the Legislature knew how to restrict municipal action when it intended to. (Cf. Widdows v. Koch (1968) 263 Cal.App.2d 228, 235 [even if complained-of acts would violate the Cartwright Act if undertaken by private persons, “[t]here is nothing in the language of the Cartwright Act which suggests that its purpose is to restrain a municipality or its agents from engaging in activities ordered by the city’s governing body”]; ibid. [Cartwright Act “only applicable to ‘persons’ and defines ‘persons’ to include corporations, firms, partnerships and associations”]; People ex rel. Freitas v. City and County of San Francisco (1979) 92 Cal.App.3d 913, 920-921 [cities are not “persons” able to be sued under Cartwright Act].) We therefore conclude the Legislature intended the Act to prohibit anti-competitive behavior by individuals and corporations, but not by municipalities.

Citing Int’l Bhd. of Elec. Workers v. City of Gridley (1983) 34 Cal.3d 191 (Gridley), appellants argue the Exclusivity Provisions contradict the Act’s express intent to “[r]educ[e] barriers to entry into the legal, regulated [cannabis] market.” We find Gridley distinguishable. The question in Gridley was whether a city ordinance revoking the recognition of a union was permissible under the Meyers-Milias-Brown Act (MMB Act or MMBA). (Id. at 194-195.) The MMB Act was enacted to promote communication between public employees and the public agencies employing them, and also to recognize the right of public employees to be represented by unions in dealing with the agency employer. The MMB Act permitted public agencies to “adopt reasonable rules and regulations . . . for the administration of employer-employee relations under this chapter,” including provisions for “[r]ecognition of employee organizations.” (Gov. Code, § 3507, subd. (a)(3).)

The municipality in Gridley had enacted an ordinance permitting the revocation of the recognition of a union as the authorized negotiating representative for public employees if that union encouraged a strike. (Gridley, supra, 34 Cal.3d at 195.) The Supreme Court held this ordinance impermissible under the MMBA, finding that “[t]he scope of local government rulemaking power under Government Code section 3507 is limited by the policies and purposes of the MMBA. ‘Although the Legislature did not intend to preempt all aspects of labor relations in the public sector, we cannot attribute to it an intention to permit local entities to adopt regulations which would frustrate the declared policies and purposes of the MMB Act . . . . [The] power reserved to local agencies to adopt rules and regulations was intended to permit supplementary local regulations which are “consistent with, and effectuate the declared purposes of, the statute as a whole.” [Citation.]’ [Citation.] In view of the fact that the city’s policy of revoking union recognition as a sanction for strike activities interferes with both the policies and purposes of the act, we conclude that it is impermissible.” (Id. at 202, italics added.)

In the instant case, appellants point to no “declared policies and purposes” that indicate the Legislature intended to restrict municipalities from behaving in an anti competitive manner. Instead, they cite a specific Legislative finding that the Act furthered “the purposes and intent of the Control, Regulate and Tax Adult Use of Marijuana Act” by “[r]educing barriers to entry into the legal, regulated [cannabis] market.” (Stats. 2017, ch. 27, § 182, subd. (i).) However, in these same findings, the Legislature also found that the Act furthered these purposes by “[t]aking adult-use cannabis production and sales out of the hands of the illegal market and bringing them under a regulatory structure that . . . protects public safety, public health, and the environment” and “[a]llowing local governments to . . . enact additional local requirements for adult-use cannabis businesses . . . .” (Stats. 2017, ch. 27, § 182, subds. (a) and (c), italics added.) Taken together, these findings merely reinforce that while the Legislature intended the Act to restrain individuals and companies from acting in an anti-competitive manner, it expressed no similar intent to restrict cities.

E. The Exclusivity Provisions Do Not Violate the Development Agreement Laws
F.
The Rukli Agreement is a development agreement. Appellants argue that the statutes authorizing cities to enter development agreements — Government Code sections 65864 through 65869.5 — do not permit the Exclusivity Provisions, and therefore the City was without authority to approve them. Specifically, they focus on the portion of Government Code section 65865.2 mandating the specific terms to be included in development agreements — “[a] development agreement shall specify the duration of the agreement, the permitted uses of the property, the density or intensity of use, the maximum height and size of proposed buildings, and provisions for reservation or dedication of land for public purposes” — and argue the Exclusivity Provisions are unauthorized because they have “no relationship” to these terms. We find appellants’ argument unavailing for two reasons.

First, a mandate that a development agreement contain certain terms neither equates to nor implies a prohibition of other terms. Appellants cite no authority to the contrary, and the language of the statute does not support such a construction.

Second, Government Code section 65865.2 also states that “[t]he development agreement may include conditions, terms, restrictions, and requirements for subsequent discretionary actions, provided that such conditions, terms, restrictions, and requirements for subsequent discretionary actions shall not prevent development of the land for the uses and to the density or intensity of development set forth in the agreement.” (Gov. Code, § 65865.2.) Though we have found no authority on point, we see no reason why the Exclusivity Provisions would not fall under the “conditions, terms, restrictions, and requirements” also permitted in a development agreement. “The [development agreement] statute is best served through a liberal construction which encompasses agreements that substantially comply with its specific terms and conditions and achieve its essential objectives.” (Santa Margarita Area Residents Together v. San Luis Obispo County Bd. of Supervisors (2000) 84 Cal.App.4th 221, 228.) Appellants have failed to demonstrate that the statutes governing development agreements would preclude the Exclusivity Provisions.

G. The Exclusivity Provisions Do Not Violate the Zoning Uniformity Requirement
H.
Finally, appellants argue the Exclusivity Provisions amount to impermissible “spot zoning.” “‘Spot zoning occurs where a small parcel is restricted and given lesser rights than the surrounding property, as where a lot in the center of a business or commercial district is limited to uses for residential purposes thereby creating an “island” in the middle of a larger area devoted to other uses.’” (Arcadia Development Co. v. City of Morgan Hill (2011) 197 Cal.App.4th 1526, 1536.) But “[e]ven where a small island is created in the midst of less restrictive zoning, the zoning may be upheld where rational reason in the public benefit exists for such a classification.’” (Ibid.; see also Foothill Communities Coalition v. County of Orange (2014) 222 Cal.App.4th 1302, 1314 [“spot zoning may or may not be impermissible, depending on the circumstances. ‘The rezoning ordinance may be justified, however, if a substantial public need exists, and this is so even if the private owner of the tract will also benefit.’ [Citation.] ‘[T]he term “spot zoning” is merely shorthand for a certain arrangement of physical facts. When those facts exist, the zoning may or may not be warranted. . . . [¶] Spot zoning may well be in the public interest; it may even be in accordance with the requirements of a master plan’”].)

The parties disagree over the propriety of applying the concept of “spot zoning” to the granting of an exclusive distribution license. Appellants argue the Exclusivity Provisions are akin to zoning only buildings occupied by Rukli as suitable for cannabis distribution, and thus are the ultimate example of spot zoning; the City counters that granting an exclusive license does not constitute an act of zoning, and therefore cannot be spot zoning; appellants retort that because the City entered into a development agreement with Rukli — which by definition relates to real property and zoning — the City may not object to the application of zoning concepts to the agreement.

We need not resolve this debate. Appellants recognize that spot zoning “may be upheld where rational reason in the public benefit exists for such a classification.” As discussed above, the trial court found that the City granted Rukli an exclusive license to further public safety, and the evidence did not compel a contrary finding. Therefore, even assuming the concept of spot zoning applied to the situation at hand, it would not invalidate the Exclusivity Provisions.

DISPOSITION

The judgment is affirmed. Respondent the City is awarded its costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

MANELLA, P. J.

We concur:

WILLHITE, J.

CURREY, J.