Pharmacy_Walgreens_suit_SF_City_County_brief_9_25_08.DOC

1 DENNIS J HERRERA, State Bar #139669 City Attorney WAYNE SNODGRASS, State Bar #148137 VINCE CHHABRIA, State Bar #208557 Deputy City Attorneys City Hall, Room 234 Dr Carlton B Goodlett Place San Francisco, California 94102 Telephone: (415) 554-4674 Facsimile: (415) 554-4699 E-Mail: vince.chhabria@sfgov.org Attorneys for Defendants CITY AND COUNTY OF SAN FRANCISCO, ET AL SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 COUNTY OF SAN FRANCISCO 11 UNLIMITED JURISDICTION 12 13 WALGREEN CO., an Illinois corporation, 14 15 16 17 18 19 20 Plaintiff, vs THE CITY AND COUNTY OF SAN FRANCISCO; THE BOARD OF SUPERVISORS FOR THE CITY AND COUNTY OF SAN FRANCISCO; and GAVIN NEWSOM, in his capacity as Mayor of the City and County of San Francisco, Case No 479-553 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO APPLICATION FOR A PRELIMINARY INJUNCTION Hearing Date: Time: Place: September 30, 2008 9:30 a.m Dept 301 Date Action Filed: Trial Date: September 8, 2008 Not Set Defendants 21 22 23 24 25 26 27 28 29 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c TABLE OF CONTENTS 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 i OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c TABLE OF AUTHORITIES 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 ii OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c INTRODUCTION This lawsuit represents Walgreen Company's hail-mary attempt to continue selling cigarettes to its pharmacy customers in San Francisco, despite the efforts of the American Pharmacists Association, the California Pharmacists Association, and the California Medical Association to stop it from doing so Harkening back to the Lochner Era, Walgreens is asking the Court to place the company's financial interests ahead of the health of San Francisco's citizens As set forth below, there is no legal basis for granting such a request The company first argues that the City's ban on tobacco sales by stores with pharmacies violates its equal protection rights, because the ban excludes big box stores and grocery stores that 10 also have pharmacies in them However, under rational basis review, the Court must defer to the 11 reasonable policy judgment of the experts Dr Mitchell Katz, San Francisco's leading expert on 12 public health, set forth to the Board of Supervisors in great detail the rationale for distinguishing 13 between drug stores and more general stores Among other things, he explained that stores like 14 Walgreens – which bills itself as "the pharmacy America trusts" – are understood by the public to be 15 health-promoting businesses The sale of tobacco by health-promoting businesses like Walgreens 16 sends an implicit message that smoking is acceptable, almost as much as if a doctor's office or a 17 hospital were to sell tobacco And Dr Katz explained that cigarette addiction by adolescents has 18 declined over the years in large part due to governmental efforts, like this one, to undercut the 19 message that smoking is acceptable 20 Dr Katz also explained that the public does not similarly think of big box stores and grocery 21 stores as health-promoting businesses To be sure, the sale of cigarettes by these stores may also 22 send an implicit message that smoking is acceptable, but the City's policymakers could rationally 23 conclude that this message is stronger and more dangerous at drug stores like Walgreens Under the 24 rational basis test, policymakers are free to tackle problems one step at a time, focusing first on 25 areas where the need for regulation is greatest 26 27 28 29 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c Walgreens also assumes, without analysis, that if there is no rational distinction between drug stores and more general stores, the Court must strike down the tobacco sales ban entirely Perhaps this argument should not be surprising given the economic goals of this lawsuit, but it is completely wrong The ordinance bans tobacco sales by retail stores with pharmacies, and it then excludes big box stores and grocery stores from that prohibition And the ordinance has a severability clause The exemption is clearly severable from the remainder of the ordinance Accordingly, if the exemption were struck down on equal protection grounds, that would leave in place a ban on the sale of tobacco by all retail stores with pharmacies Finally, Walgreens contends that the Board lacked authority under Proposition I to enact the 10 ban because the Controller's Office did not prepare an economic impact report on the legislation 11 This argument ignores three key points: (1) the Controller's Office thoroughly reviewed the 12 legislation and determined it would have no material impact on jobs, revenues or pricing, thereby 13 obviating the need to prepare a report on those impacts; (2) even if the Controller's Office had 14 violated its ministerial duty to prepare an economic impact report, Proposition I was not intended to, 15 and does not purport to, preclude the Board from enacting measures before a report is prepared; and 16 (3) even if the voters who enacted Proposition I, which is an initiative ordinance and not an 17 amendment to the City Charter, had sought to shackle the Board whenever an unelected official fails 18 or refuses to prepare an economic impact report, the initiative, so construed, would be an invalid 19 attempt to infringe upon the Board's power to enact legislation in accordance with the procedures 20 set forth in the Charter The remedy for a failure of the Controller's Office to prepare an economic 21 impact report would be a writ of mandate ordering it to so, not an after-the-fact invalidation of 22 legislation duly enacted by the Board pursuant to its authority under the Charter 23 24 25 26 27 28 29 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c BACKGROUND Over the years, government – at the federal, state and local levels – has made progress in reducing the number of adolescents who take up smoking.1 This stems in no small part from governmental efforts to undercut the message that smoking is acceptable For example, government has banned television advertisements for cigarettes.2 It has funded anti-smoking campaigns.3 It has sued the tobacco industry for committing fraud upon its customers, and has insisted that the companies promote anti-smoking programs as part of the remedy.4 Government officials have even sought to educate Hollywood about the harmful effects of portraying smoking in a positive light Of course, efforts to prevent adolescents and others from becoming addicts have been far 10 from an unqualified success Tobacco remains the leading cause of preventable death in the United 11 States – an estimated 440,000 Americans die each year from diseases caused by smoking.6 12 Approximately 90 percent of smokers begin smoking before the age of 21, and it is estimated that at 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Centers for Disease Control and Prevention, Morbidity and Mortality Weekly Reports (MMWRs) Cigarette Use Among High School Students—United States, 1991–2007, June 27, 2008, Vol 57, No 25, available at http://www.cdc.gov/tobacco/data_statistics/mmwrs/2008/mm5725a3_highlights.htm (visited Sept 15, 2008) Pub.L No 91-222, § 6, 84 Stat 87 (1970) See, e.g., Larry D Hatfield, Teen smoking in steep decline, study shows Drugs and alcohol figures also down; education credited with turnaround, San Francisco Chronicle, December 19, 2001, at A1, available at http://www.sfgate.com/cgi-bin/article.cgi? f=/c/a/2001/12/19/MN108919.DTL&hw=government+funded+anti+smoking+campaign&sn=003& sc=797 (visited Sept 16, 2008) "Master Settlement Agreement" (1998) National Association of Attorneys General, pg 43, available at http://www.naag.org/backpages/naag/tobacco/msa/msapdf/1109185724_1032468605_cigmsa.pdf (visited Sept 16, 2008) Centers for Disease Control and Prevention Tobacco Use, Access, and Exposure To Tobacco in Media Among Middle and High School Students—United States, 2004 Morbidity and Mortality Weekly Report [serial online] 2005: 4(12);297–301 [cited 2006 Dec 5], available at http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5412a1.htm (visited Sept 15, 2008) American Lung Association, Adolescent Smoking Statistics, November 2003, available at http://www.lungusa.org/site/pp.asp?c=dvLUK9O0E&b=39868 (visited Sept 16, 2008) OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c least 4.5 million U.S adolescents are cigarette smokers.7 These adolescents are not just casual smokers; they are already addicted to nicotine Of adolescents who have smoked at least 100 cigarettes in their lifetime, most of them report that they would like to quit, but are not able to so.8 Tobacco addiction is still a major public health crisis, and governments continue to struggle to find ways to prevent people from becoming addicted San Francisco's new ordinance banning the sale of tobacco in drug stores is yet another governmental effort to prevent young people from becoming addicted to cigarettes It is based on the opinions of groups like the American Pharmacists Association, the California Pharmacists Association, and the California Medical Association that drug stores should not be selling tobacco, 10 because when health-promoting businesses sell tobacco, it sends an implicit message that smoking 11 is acceptable See, e.g., Plaintiff's Request for Judicial Notice ("PRJN"), Exh A at p (Ordinance 12 No 194-08, Finding No 9).9 As Dr Mitchell Katz, San Francisco's Director of Public Health, 13 explained to the Board of Supervisors' Committee on City Operations and Neighborhood Services: The fact is, that selling tobacco at pharmacies influences social acceptability of smoking When we think pharmacy, we think health And so when we see tobacco being sold, that's a mixed message That mixed message may not matter to the person who has made a decision to smoke That person is addicted to nicotine But what about the teenager? What about the child? For the person who sees the pharmacy as part of their health team, what does it mean to see that the pharmacy sells tobacco? We know for a fact that if you decrease the social acceptability of smoking it results in lower rates of smoking That's why we have lower rates of smoking now among teenagers than we had 10 years ago 'Cause we have done an effective job of saying that, no, smoking unlike ads you saw once on TV and still now on billboards, is not cool It's not sexy It's going to be something that could kill you So social acceptability is vitally important 14 15 16 17 18 19 20 21 Declaration of Rebecca Justice Lazarus in Support of Plaintiff's Application for Preliminary 22 Injunction ("Lazarus Decl."), Exh at pp 1-2 23 24 25 26 27 28 29 Id Id See also Defendants' Request for Judicial Notice ("DRJN"), Exh A (Legislative Digest citing numerous trade and journal articles for the proposition that tobacco sales by pharmacies sends an implicit message that smoking is acceptable) OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c To underscore his point that the sale of tobacco by drugstores sends an implicit message that smoking is acceptable because of the trust the public places in these health-promoting stores, Dr Katz showed the Committee a photograph of his local Walgreens pharmacy at the corner of California and Spruce Streets See Declaration of Dr Mitchell Katz in Opposition to Application for Preliminary Injunction, Exh B at p The picture shows a large "Rx" towards the top of the building, a sign that says "Walgreens Pharmacy" towards the middle of the building, and another "Rx" sign next to that And, just above the door where customers enter the store, there is a sign that says, "Walgreens: The Pharmacy America Trusts." Id Dr Katz used this picture not just to underscore his point that the sale of tobacco by drug 10 stores sends an implicit message that smoking is acceptable; he also used it to respond to questions 11 about the legislation's exclusion of big box stores and grocery stores: 12 13 14 15 16 So that's why, when people say, "hey, these stores are just like any retail store," to me it's not convincing, because I don't want my children to see the word "pharmacy," to meet my great pharmacist, and then to see tobacco Any more than I'd want a doctor's office to be selling tobacco, or a hospital to be selling tobacco Lazarus Decl., Exh at p Dr Katz provided another reason why drug stores like Walgreens are different from typical 17 retail stores: they are more likely to draw former smokers with illnesses – people who are more 18 tempted by, and vulnerable to, the harmful effects of tobacco and who should not be exposed to it: 19 20 21 22 Pharmacies don't draw the, the cross-section of people They draw [more] people who have chronic diseases So people with asthma, people with chronic obstructive pulmonary disease, cardiovascular disease So they're going to get their medicine, but they also can see right where they're paying, there are, you know, tobacco being sold So people whose diseases are made worse by tobacco are now actually being brought into a store that sells it At 12-step alcohol meetings you don't have an alcohol place where you can buy And that's for a specific reason 23 24 Lazarus Decl., Exh at p 25 26 27 28 29 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c Dr Katz made a similar presentation to the full Board In explaining the exclusion for big box stores and grocery stores, he captured the principle that when it comes to economic and social welfare legislation, policymakers are free to address policy problems one step at a time: As health director, of course, I'm not in favor of anybody smoking or anybody selling tobacco What I was trying to in our work in fashioning the legislation was focusing on that group where I thought the case was the strongest We all go to supermarkets We all go to warehouse stores They get a cross section of people We teach our children that supermarkets, wholesale stores, they're places you go to buy everything When it comes to pharmacies, I feel that our children, our teenagers get a different message My son, even at six, knows that the Walgreens we go to is where we go to pick up [my daughter] Roxy's asthma medicine He knows that it's a pharmacy What we're trying to say is these places market themselves as health-promoting businesses They're not Walgreens General Store They're not Rite Aid They're Walgreens Pharmacy They're Rite Aid Pharmacy The pharmacy America trusts And so it sends a very different message Certainly in the future if we have success and I believe we would, just like San Francisco was the leader [in the ban on smoking in restaurants] that you will want to take on a broadening of this legislation at some future date What we focus on [is] that group we thought was most compelling 10 11 12 13 Lazarus Decl., Exh at p (emphasis added) LEGAL STANDARD 14 15 16 The City agrees with Walgreens' presentation of the legal standard for granting a preliminary injunction One should not issue here because Walgreens has not shown a likelihood of success 17 18 I DISCUSSION THE ORDINANCE DOES NOT VIOLATE EQUAL PROTECTION .A The Ordinance Enjoys A Strong Presumption Of Validity 19 20 21 22 23 24 25 26 27 28 29 The rational basis test is highly deferential to the judgments of policymakers, including judgments about whether similarly-situated groups may be treated differently The test "manifests restraint by the judiciary in relation to the discretionary act of a co-equal branch of government; in so doing it invests legislation involving such differentiated treatment with a presumption of constitutionality and 'requires merely that distinctions drawn by a challenged statute bear some rational relationship to a conceivable legitimate state purpose.'" Hernandez v City of Hanford, 41 Cal.4th 279, 298-99 (2007) (quoting Warden v State Bar, 21 Cal.4th 628, 640-41 (1999)) OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c "[T]he burden of demonstrating the invalidity of a classification under this standard rests squarely upon the party who assails it." Warden, 21 Cal.4th at 641 The legislation "must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification Where there are plausible reasons for the classification, our inquiry is at an end." Warden, 21 Cal.4th at 644 (quoting FCC v Beach Communications, Inc., 508 U.S 307, 313 (1993)) (emphasis in original) It bears noting that to satisfy rational basis review, policymakers are not required to tackle an entire problem at one time "[U]nder the rational relationship test, the state may recognize that different categories or classes of persons within a larger classification may pose varying degrees of 10 risk of harm, and properly may limit a regulation to those classes of persons as to whom the need 11 for regulation is thought to be more crucial or imperative." Warden, 21 Cal.4th at 644 (emphasis 12 added) "Evils in the same field may be of different dimensions and proportions, requiring different 13 remedies Or so the legislature may think Or the reform may take one step at a time, addressing 14 itself to the phase of the problem which seems most acute to the legislative mind." Williamson v 15 Lee Optical of Oklahoma, Inc., 348 U.S 483, 489 (1955) (internal citations omitted) 16 B The Exclusion Of Grocery Stores And Big Box Stores From The Tobacco Sales Ban Is Rational 17 18 19 20 21 22 23 24 25 26 27 28 29 Walgreens contends that San Francisco's ban on tobacco sales by stores with pharmacies violates equal protection because it irrationally excludes big box stores and grocery stores However, as set forth at pp 4-6 above, the Board could rationally have concluded that the sale of tobacco by health-promoting businesses sends an implicit message that smoking is acceptable The Board further could have concluded that the sale of cigarettes by drug stores like Walgreens – the "pharmacy America trusts" – sends that implicit message of acceptability more strongly than the sale of cigarettes by big box stores or grocery stores, even if those stores too have pharmacies in them Finally, the Board could rationally have concluded that a ban on sales in drug stores like Walgreens and Rite Aid was more important than a ban on sales in big box and grocery stores, given OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c that the former type of store draws a larger proportion of sick people – people who may once have been addicted to cigarettes and whose illnesses would be worsened by a relapse Not only could the Board rationally have drawn these conclusions; it heard compelling testimony in support of them by the City's leading expert on, and promoter of, public health.10 Walgreens disputes the notion that the sale of a product by a health-promoting business could send an implicit message that the product is acceptable Despite the fact that this argument is endorsed by the American Pharmacists Association, the California Pharmacists Association, and the California Medical Association, Walgreens derides it as "absurd" in light of "all of the public campaigns and pronouncements" against cigarettes Plaintiff's Application for Preliminary 10 Injunction ("Application") at Walgreens' argument is a non-sequitur Explicit messages of 11 unacceptability not preclude the existence of implicit messages of acceptability Competing 12 messages can exist in the world Would Walgreens contend that if the Mayor's Office or the San 13 Francisco Department of Public Health sold cigarettes, this would not imply that smoking enjoys a 14 level of acceptability, simply because of some anti-smoking campaign by the State of California or 15 the American Lung Association?11 16 Walgreens next argues that even if it is rational to conclude that the sale of tobacco by 17 health-promoting businesses sends an implicit message that smoking is acceptable, San Francisco 18 may not, consistent with equal protection, distinguish between drug stores that sell cigarettes and 19 more general stores that sell cigarettes Walgreens focuses on the fact that drug stores – like big box 20 stores and grocery stores with pharmacies – sell products other than pharmaceuticals And it spends 21 22 23 24 25 26 27 28 29 10 Of course, under rational basis review, the legislative record could have been completely bare, and the Board was not required to "actually articulate at any time the purpose or rationale supporting its classification." Nordlinger v Hahn, 505 U.S 1, 15 (1992) 11 In any event, nowhere does Walgreens contend that a ban on the sale of tobacco by stores with pharmacies in itself violates equal protection Nor could it make this contention, because such a policy does not draw distinctions between classes of similarly-situated individuals See, e.g., People v Hofsheier, 37 Cal.4th 1185, 1200 (2006) (making clear that if the groups receiving differential treatment are not similarly situated for purposes of the ordinance, no level of equal protection scrutiny is applied – not even rational basis) OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c a great deal of time emphasizing that cigarettes are located in a different part of its stores from pharmaceuticals – again like grocery stores and big box stores These similarities exist to an extent, even if Walgreens gives short shrift to the fact that prescription drug sales represent a much higher percentage of total sales at chain drug stores than at general stores DRJN, Exh A (Finding No 21) But regardless of the similarities, as the testimony of Dr Katz established, there are also differences between drug stores and more general stores – differences that the legislators could rationally find significant Walgreens' argument that the City only has two choices – ban sales in all stores with pharmacies or none at all – also ignores the principle that "different categories or classes of persons 10 within a larger classification may pose varying degrees of risk of harm " Warden, 21 Cal.4th at 11 644, and "a legislature need not run the risk of losing an entire remedial scheme simply because it 12 failed, through inadvertence or otherwise, to cover every evil that might conceivably have been 13 attacked." McDonald v Board of Election Comm'rs of Chicago, 394 U.S 802, 809 (1969) See 14 also Subsection A, supra As Dr Katz conceded to the Board, the sale of tobacco by big box stores 15 and grocery stores with pharmacies may too send some level of implicit message that smoking is 16 acceptable, even though people not think of these stores in the same way as drug stores But it is 17 rational to conclude that the harm caused by the sale of tobacco at drug stores like Walgreens is 18 greater and more immediate, given the societal perception that such stores are health-promoting 19 businesses The City may ultimately determine that all stores with pharmacies should be barred 20 from selling tobacco, but for now San Francisco's policymakers "properly may limit [the] regulation 21 to those classes of [businesses] as to whom the need for regulation is thought to be more crucial or 22 imperative." Warden, 21 Cal.4th at 644 23 C Walgreens' Apparent Assertion That The Ordinance Violates Equal Protection Because It Is "Anticompetitive" Has No Support In Law 24 25 26 27 28 29 Walgreens appears to suggest that the ordinance violates equal protection because it has "anti-competitive" effects See, e.g., Application at Although the factual accuracy of this OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c assertion is questionable,12 it is irrelevant Just last year the California Supreme Court reiterated the obvious: laws often have anti-competitive effects, yet such effects not give rise to a constitutional claim Hernandez, 41 Cal.4th at 298 In Hernandez, the Court upheld a local zoning ordinance that was designed to protect the viability of a downtown commercial district by banning furniture sales in another commercial district, even while recognizing that the ordinance had a clear and direct impact on competition between businesses in the two districts Id Even more pertinent to this case, although the ordinance at issue in Hernandez banned the sale of furniture in this particular commercial district, it exempted big box stores from the ban Id The Court recognized that although it was rational for the city to impose a ban in this district to 10 protect the dowtown district's economic viability, it was also rational to exclude big box stores from 11 the ban, to enable the city to attract and retain big box stores within that area Id at 302 Even 12 aside from the rationale set forth by Dr Katz for the distinction between drug stores and more 13 general stores, which has nothing to with economics, Hernandez shows that the Board could also 14 rationally have excluded big box stores and grocery stores for economic reasons See, e.g., C.W 15 Nevius, Supermarkets become endangered species in S.F., San Francisco Chronicle (Sept 18, 2008) 16 at p B1 Certainly Walgreens' speculation that the ordinance might have anticompetitive effects is 17 no basis for striking it down 18 D The Case Law Cited By Walgreens Does Not Support Its Equal Protection Claim 19 20 21 22 23 Walgreens lists a number of cases, including several from the 1930's, in which California courts struck down economic or social welfare legislation But Walgreens provides no analysis of how these cases support its contention that the City's distinction between drug stores and more general stores is not rationally related to the purpose of undercutting the implicit message that 24 25 26 27 28 29 12 As the Board found, an overwhelming percentage of California consumers surveyed (96.8%) stated they would continue to patronize their drug store as often or more often if it stopped selling tobacco products DRJN Exh A (Finding No 12) 10 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c smoking is acceptable Nor does Walgreens explain how these cases show that the City may not first regulate the stores that present this problem most squarely For example, in Justesen's Food Stores, Inc v City of Tulare, 12 Cal.2d 324, 330 (1938), the Court struck down an ordinance that distinguished between stores selling food to customers for consumption on the premises, and stores selling food for customers to bring home The Court could conceive of no rational reason for distinguishing between the two for purposes of food safety, so it held the ordinance violated equal protection Id Here, as discussed above, there are several conceivable reasons for distinguishing between drug stores and more general stores Walgreens also makes much of the quote from Justesens that "if the ordinance is 10 discriminatory, irrespective of the purpose for which it is passed, it must be declared invalid If it 11 applies to all persons conducting a business which comes reasonably within the same classification, 12 it will be upheld, but if it excepts any particular business which comes within the same reasonable 13 classification, it must be held discriminatory." Id at 329 (internal quotations omitted) This 14 overbroad dicta from 1938 is clearly wrong, as evidenced most recently by the Supreme Court's 15 ruling in Hernandez upholding discrimination between big box stores that sold furniture and other 16 retail stores that sold furniture 41 Cal.4th at 302 The actual rule is that if economic or social 17 welfare legislation discriminates between persons or groups who are similarly situated, the 18 discrimination is permissible so long as it "bears a rational relationship to a legitimate state 19 purpose." Hofsheier, 37 Cal.4th at 1200 20 The other cases on Walgreens' list are equally unhelpful – the courts in those cases simply 21 found no rational basis for the legislative classification at issue, whereas here there is indeed a 22 rational basis for the classification For example, in College Area Renters & Landlord Ass'n v City 23 of San Diego, 43 Cal.App.4th 677, 686 (1996), the court may have concluded there was no rational 24 basis for distinguishing between owner-occupied and tenant-occupied homes for purposes of 25 overcrowding laws, but that provides no support for the contention that the distinction here between 26 27 28 29 11 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c drug stores and more general stores is irrational And in Deese v City of Lodi, 21 Cal.App.2d 631, 637 (1937), the court understandably held that there is no rational basis for concluding that a tobacco store, with its "nicotine and smoke-laden atmosphere," is safer or more healthy than a grocery store But that conclusion does not speak to the case at hand (other than to confirm that some members of the judiciary were aware that tobacco is unhealthy as far back as 1937) E Even If The Classification Violated Equal Protection, Walgreens Would Not Be Entitled To An Injunction Preventing Enforcement Of The Ordinance 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Walgreens has challenged the validity of the City's decision to exclude big box stores and grocery stores from the ban It does not contend – and could not contend – that a ban on tobacco sales by all stores with pharmacies would violate equal protection Stores with pharmacies are not similarly situated to stores without pharmacies for purposes of this ordinance, which means a classification between them does not trigger any level of equal protection scrutiny Hofsheier, 37 Cal.4th at 1200 See also note 11, supra Thus, the only question here is whether the exclusion violates equal protection As discussed above, it does not But even if it did, the ordinance's severability section would protect the remainder of the legislation That section states in pertinent part: "If any of the provisions of this Article is held invalid, the remainder of this Article shall not be affected thereby and shall continue in full force and effect To this end, the provisions of this Article are severable." PRJN Exh A at p As the courts have made clear, "the general presumption of constitutionality, fortified by the express statement of a severability clause, normally calls for sustaining any valid portion of a statute unconstitutional in part." Santa Barbara School Dist v Superior Court, 13 Cal.3d 315, 330 (1975) Indeed, an invalid portion of an ordinance must be severed if it is "grammatically, functionally, and volitionally separable" from the rest of the measure Hotel Employees & Restaurant Employees Int'l Union v Davis, 21 Cal.4th 585, 613 (1999) Clearly the exemption is grammatically severable The central provision of the ordinance – codified at Section 1009.92 of the San Francisco Health Code – states, "[n]o person shall sell 12 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c tobacco products in a pharmacy, except as provided in Sec 1009.93." PRJN Exh A at p (Ordinance No 194-08) In turn, Section 1009.93 provides that big box stores and grocery stores may sell tobacco even if they have pharmacies Id Upon a ruling that the exclusion is unconstitutional, the phrase "except as provided in Sec 1009.93" would simply become inoperative, as would Section 1009.93 itself But the language of Section 1009.92 stating "[n]o person shall tobacco products in a pharmacy " would retain independent meaning and force.13 It is equally clear that the exemption is functionally severable from the ordinance As a practical matter, a ban on tobacco sales by stores with pharmacies may exist regardless of whether big box stores and grocery stores are included within the ban 10 Finally, there can be no question, in light of the legislative history, that the exclusion is 11 volitionally severable An invalid provision is volitionally severable where it "was not of critical 12 importance to the measure's enactment." Hotel Employees, 21 Cal.4th at p 613 (emphasis added) 13 As Walgreens notes in its papers, far from being of critical importance, the exemption caused some 14 members of the Board to express concerns about the ordinance In response, Dr Katz assured 15 Board members that he did not oppose extending the ban to big box stores and grocery stores with 16 pharmacies, and that this could very well be something the Board accomplishes in the future See 17 pp 5-6, supra With that, the ordinance passed 18 Accordingly, even if the Court concluded that the classification drawn by the ordinance is 19 likely to violate equal protection, it should deny Walgreens' motion to enjoin enforcement of the 20 ordinance in its entirety The only appropriate remedy would be an order enjoining the City from 21 exempting big box stores and general grocery stores from the tobacco sales ban 22 II 23 24 25 26 27 28 29 THE ORDINANCE WAS NOT ADOPTED IN VIOLATION OF PROPOSITION I Walgreens also contends the ordinance was "enacted in violation of" San Francisco Administrative Code section 10.32 That local ordinance, which was added by Proposition I in 13 The ordinance defines "pharmacy" as a "retail establishment" in which "the profession of pharmacy is practiced and where prescriptions are offered for sale." PRJN Exh A at p 13 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c 2004, directs the Office of Economic Analysis ("OEA") in the San Francisco Controller's Office to determine which legislation introduced before the Board "might have a material economic impact on the City," and to provide the Board with a report on any such legislation S.F Admin Code §10.32 (PRJN Exh G) Walgreens contends the OEA abused its discretion by concluding that the ordinance was unlikely to have such an impact, thereby rendering the ordinance invalid Application at 12-13 As set forth below, the OEA did not abuse its discretion, and even if it did, this would not invalidate the ordinance A The OEA Reasonably Determined That The Ordinance Would Have No Material Economic Impact On The City 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 "Where a statute leaves room for discretion, a challenger must show the official acted arbitrarily, beyond the bounds of reason or in derogation of the applicable legal standards." Excelsior College v Bd of Registered Nursing, 136 Cal.App.4th 1218, 1239 (2006) Walgreens asserts that the OEA acted arbitrarily by limiting its consideration to the ordinance's potential impact on the pricing of cigarettes, while "entirely ignor[ing] overall lost tax and fee revenues to the City, business attraction and retention, and job creation " Application at 13 But in fact, the OEA firmly concluded that the ordinance would have no material impact on the City's economy – not only in terms of pricing, but in terms of jobs and tax revenues as well First, the OEA determined that because drug stores have such a small share of the overall cigarette market in San Francisco, the inability of those stores to continue selling cigarettes would not have a material impact on cigarette pricing Declaration of Ted Egan in Opposition to Application for a Preliminary Injunction ("Egan Decl.") at ¶ Similarly, given the small market share of businesses covered by the ordinance, the OEA concluded that the ordinance would not materially affect the amount of cigarette sales; it would only affect where people would purchase cigarettes Id Once the OEA made these determinations, it was easy to conclude that the ordinance would have no net effect on jobs Jobs lost by businesses covered by the ordinance, if any at all, would be gained by businesses who continued selling cigarettes Id It was equally easy for the OEA to conclude that 14 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c the City would experience no significant net gain or loss of sales tax revenue; if anything, the City would simply end up collecting fewer revenues from some sources and more revenues from others Id at Walgreens notes that the documents provided by the OEA in response to its Public Records Act request deal only with pricing, but for someone with the qualifications of Ted Egan, see id at ¶ 2, no documentation was required to come to the obvious conclusions reached by the OEA about job creation and revenues, once it had been determined that the ordinance would have no material effect on pricing or sales Id at ¶ There was no abuse of discretion in the OEA's determination that the ordinance was unlikely to have a material economic impact.14 B In Any Event, The Failure Of The OEA To Prepare A Report Can Never Be Grounds For Invalidating An Ordinance Enacted By The Board Of Supervisors 10 11 12 13 14 15 16 17 18 19 20 21 Even if the OEA had abused its discretion, that would not strip the Board of its power to adopt the ordinance The requirement that the OEA prepare economic impact reports for selected legislation is directed at the OEA, not the Board It does not bar the Board from considering legislation absent an economic impact report Indeed, Proposition I's plain text shows that the voters recognized that it was up to the Board to set its own legislative calendar Section of Proposition I, as it appeared in the voter handbook, states that the voters "urge the Board to adopt all necessary rules and procedures for [the measure's] full implementation [including] a Rule of Order providing that the Board shall not consider or hold hearings on any proposed legislation until it has received the [OEA]'s report on the impact of the legislation, if any." PRJN Exh H (Legal Text of Proposition I) (emphasis added) If Proposition I's drafters and the voters had intended to force the Board to refrain from adopting legislation until the OEA submitted a report, they would not have merely "urged" the Board to 22 23 24 25 26 27 28 29 14 Walgreens uses the OEA's determination that the ordinance was unlikely to have a material effect on tobacco sales to support of its argument that the ban is irrational But as discussed at length in Section I, that misses the point The ordinance was never intended to have a measurable, immediate impact on tobacco sales It was intended to undercut the implicit message that smoking is acceptable – a long-term, multi-front battle that the government has waged, and undoubtedly will continue to wage, in an effort to prevent children and adolescents from becoming addicted to cigarettes in the future 15 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c voluntarily restrain its legislative activities The voters simply did not give the OEA – which is headed by an unelected City official – the ability to stop elected representatives from enacting legislation Furthermore, even if the voters had intended to force the Board to await an OEA report before adopting legislation, they could not have done so through Proposition I, an initiative ordinance Where a city charter grants a power to the municipality, "any limitations upon its exercise are those only which have been specified in the charter." Cawdrey v City of Redondo Beach, 15 Cal.App.4th 1212, 1222 (1993) If the voters wish to impose additional limitations on the Board’s exercise of its Charter- derived legislative authority, they can only so by amending the Charter See City and County of San Francisco v Patterson, 202 Cal.App.3d 95, 102-106 (1988) 10 In Patterson, the court held that where the Charter "specif[ied] the procedures and standards for 11 the sale or exchange and lease of real property by the board," a proposed initiative ordinance 12 prohibiting the City from selling any real property for less than 90% of its fair market value absent 13 voter approval was "patently invalid" and had to be removed from the ballot Id at pp 98, 103 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 [A]n ordinance can no more change or limit the effect of a charter than a statute can modify or supersede a provision of the state Constitution Under the provisions of the San Francisco City Charter, all powers neither delegated to other officials, boards or commissions nor reserved to the people are vested in the board of supervisors §§ 1.101, 2.101 Thus, any restrictions on the power of the board must be explicitly provided by the charter or accomplished by charter amendment [Id at pp 102-103 (internal citation omitted and italics added).] The same rule applies here The Charter specifies the procedures the Board must follow to exercise its legislative power.15 If Proposition I purported to add a new procedure, it would be "an indirect attempt to accomplish what can only be done directly by amendment of the [C]harter." Id at 105 City and County of San Francisco v Cooper, 13 Cal.3d 898 (1975), Robertson v Health Net of Cal., Inc., 132 Cal.App.4th 1419 (2005), and Walker v County of Los Angeles, 55 Cal.2d 626 (1961), are entirely unhelpful to Walgreens None suggests that an ordinance can restrict the legislative power that a local legislative body enjoys under its charter In fact, Walker, by holding 15 See, e.g., San Francisco Charter, §2.105 (ordinances "shall be referred to and reported upon by an appropriate committee of the Board," "shall require the affirmative vote of a majority of the members of the Board," and "shall require two readings at separate meetings of the Board … which shall be held at least five days apart") 16 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c that a city charter can restrict local legislative power, simply underscores our point: a local ordinance, such as Administrative Code section 10.32, cannot so In sum, if Walgreens believed the OEA abused its discretion by not preparing an economic analysis of the ordinance, it should have sought a writ to compel the OEA to comply with its ministerial duty to so once it became aware that the Board was considering the legislation 16 To be sure, Walgreens would have lost that writ action, because the OEA soundly exercised its discretion not to prepare a report But that is the remedy available for the alleged abuse of discretion; not an after-the-fact invalidation of the legislation duly enacted by the Board in accordance with the Charter CONCLUSION 10 11 Because Walgreens has shown no likelihood of success on the merits, the Court should deny 12 the application for a preliminary injunction 13 Dated: October 18, 2022 DENNIS J HERRERA City Attorney 14 15 By: 16 VINCE CHHABRIA 17 Attorneys for Defendants CITY AND COUNTY OF SAN FRANCISCO, ET AL 18 19 20 21 22 23 24 25 26 27 28 29 16 Walgreens was aware early on that the Board was considering the legislation, as evidenced by its Public Records Act request 17 OPPOSITION BRIEF, CASE NO 479-553 / storage1/vhost/convert.123doc.vn/data _temp/document/nmc1666072844127619916660728448916/nmc1666072844.do c