In this appeal we consider a challenge to an ordinance enacted by the City and County of San Francisco (the City) banning the sale of tobacco products in certain retail establishments that contain a pharmacy. The ordinance is premised on the notion that a retail store conveys tacit approval of tobacco use when it sells prescription drugs as well as tobacco products. Appellant Walgreen Co. (Walgreens) contends the ordinance violates the equal protection clauses of the federal and state Constitutions, arguing there is no rational basis for prohibiting its stores with pharmacies from selling tobacco products while allowing such sales at “general grocery” stores and “big box” stores that contain pharmacies. Walgreens also claims the ordinance must be invalidated because the City’s Office of Economic Analysis (OEA) abused its discretion by failing to prepare a report on the economic impact of the legislation, a purported violation of voter-enacted Proposition I.
We conclude the OEA’s failure to prepare an economic impact report does not permit an interested party such as Walgreens to invalidate a duly enacted ordinance. The cause of action premised on failure to comply with Proposition I therefore fails as a matter of law. However, we agree with Walgreens that its complaint adequately states a cause of action alleging an equal protection violation. The issue is a close one only because the deferential rational basis test guides our equal protection analysis. Nevertheless, even under that deferential standard, the challenged distinction among stores containing licensed pharmacies is not fairly related to the object of the prohibition on sales of tobacco products. There is no rational basis to believe the supposed implied message conveyed by selling tobacco products at a Walgreens that has a licensed pharmacy in the back of the store is different in any meaningful way from the implied message conveyed by selling such products at a supermarket or big box store that contains a licensed pharmacy. Accordingly, we reverse in part the judgment of the trial court sustaining the City’s demurrer without leave to amend.
Factual and Procedural Background
The legislation challenged in this appeal, City Ordinance No. 194-08 (hereafter the ordinance), amended the San Francisco Health Code to provide that “No person shall sell tobacco products[
1
] in a pharmacy, except as provided in [San Francisco Health Code] Section 1009.93.” (S.F. Health Code, § 1009.92.) The term “pharmacy” is defined in the ordinance to refer to
In addition to traditional independent pharmacies, which sell little more than prescription drugs, over-the-counter medications, and personal care items, the term “pharmacy” encompasses chain stores, supermarkets, and big box stores that sell a variety of products such as food, beverages, paper goods, and miscellaneous items in addition to prescription drugs. However, although a “general grocery store” 3 or a “big box store” 4 that contains a licensed pharmacy qualifies as a “pharmacy” under the ordinance, the ordinance specifically excludes these establishments from the prohibition on sales of tobacco products. (S.F. Health Code, § 1009.93.) As a result, the ordinance prohibits a Walgreens that contains a licensed pharmacy from selling tobacco products but imposes no such limitation on a Safeway supermarket or a Costco big box store that contains a licensed pharmacy.
The legislative findings associated with the ordinance cite the adverse health effects associated with tobacco use. The principal finding upon which the ordinance is premised states: “Through the sale of tobacco products, pharmacies convey tacit approval of the purchase and use of tobacco products. This approval sends a mixed message to consumers who generally patronize pharmacies for health care services . . . .” (S.F. Ord. No. 194-08.)
As reflected in the legislative findings, various medical and pharmaceutical organizations advocate prohibiting sales of tobacco products in pharmacies. Among the organizations supporting such a prohibition are California’s Tobacco Education and Research Oversight Committee, the American Pharmacists Association, the California Pharmacists Association, and the California Medical Association. As far back as 1970 the American Pharmaceutical Association declared that “mass display of cigarettes in pharmacies is in direct contradiction to the role of a pharmacy as a public health facility.”
As support for distinguishing between chain drugstores, 5 on the one hand, and general grocery stores and big box stores on the other hand, the ordinance contains a finding that prescription drug sales comprise a much larger part of the business of chain drugstores, as follows: “Prescription drug sales for chain drugstores represent a significantly higher percentage of total sales than for grocery stores and big box stores that contain pharmacies. According to the 2007 Rite Aid[] Annual Report, prescription drug sales represented 63.7% of total sales in fiscal 2007. Walgreen’s 2007 Annual Report documented prescription sales as approximately 65% of net sales that year. Pharmacy sales at Safeway have been estimated at 7.5% of annual volume. Costco’s prescription sales generated 1.5% of total revenue in 2002.”
During public hearings on the ordinance, one of its main proponents, Dr. Mitchell Katz, the City’s director of public health, addressed why the legislation was directed at only certain stores containing licensed pharmacies. Dr. Katz explained: “Well, you know, shouldn’t you include all stores [containing licensed pharmacies]. If you’re going to do this, you know, let’s be fair, look at all stores. But I ask you, in your own experience, if we stop people going into a Walgreens, going into a Rite-Aid, going into one of these independent pharmacies and said, What kind of store are you going into? [T]hey would say, Pharmacy. If you stop someone going into a supermarket, and [say], What kind of store are you going into? [E]ven a supermarket that has a drugstore, they’d say, I’m going into a supermarket. And that’s the social perceptibility difference. . . . You can see as a total of sales that
When asked during a Board of Supervisors meeting why the legislation did not cover all stores containing a pharmacy, Dr. Katz responded as follows: “What I was trying to do in our work in fashioning the legislation was focusing on the group where I thought the case was 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 to go to buy everything. When it comes [to] pharmacies, I feel that our children, our teenagers get a different message. . . . 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 [‘P]harmacy America [T]rusts’ 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 and then broaden[ed] the legislation . . . around second hand smoke. . . . [W]e focus on that group we thought was most compelling.”
On September 8, 2008, Walgreens filed a complaint seeking to invalidate the ordinance. Walgreens also moved for a preliminary injunction to prevent the ordinance from taking effect. The trial court denied the application for a preliminary injunction on September 30, 2008. The ordinance took effect the following day. Walgreens thereafter filed a first amended complaint (hereafter the complaint).
The complaint contains three causes of action. The first and second causes of action allege violations of the equal protection clauses of the United States and California Constitutions, respectively. Walgreens alleges the ordinance “prohibits some retail establishments with [licensed] pharmacies from selling tobacco products, but arbitrarily exempts from this prohibition other retail establishments with [licensed] pharmacies, namely, general grocery stores and big box stores,” in violation of constitutional equal protection guarantees. The third cause of action alleges a violation of Proposition I, which the voters approved in November 2004. Proposition I directed the City to create the OEA, which is obligated to provide an economic impact report to the Board of Supervisors with respect to any proposed legislation that might have a material impact on the City. (S.F. Admin. Code, § 10.32.) Walgreens contends the failure of the OEA to prepare an economic impact report regarding the ordinance renders the ordinance invalid.
The trial court sustained the City’s demurrer without leave to amend. Walgreens timely appealed following entry of judgment in the City’s favor.
Discussion
I. Standard of Review
“On review of an order sustaining a demurrer without leave to amend, our standard of review is de novo, ‘i.e., we exercise our independent judgment about whether the complaint states a cause of action as a matter of law.’ [Citation.]”
(Santa Teresa Citizen Action Group v. State Energy Resources Conservation & Development Com.
(2003)
II. Equal Protection
Walgreens contends the challenged ordinance violates the equal protection clauses of the federal and state Constitutions, asserting that the disparate treatment of different types of stores containing pharmacies is not rationally related to a legitimate legislative end. For the reasons that follow, we agree that Walgreens’s complaint adequately states an equal protection violation.
The Fourteenth Amendment to the United States Constitution provides that “No State shall . . . deny to any person within its jurisdiction the equal protection of the laws.” The California Constitution likewise prohibits the denial of equal protection.
7
(Cal. Const., art. I, § 7, subd. (a).) “ ‘ “The concept of the equal protection of the laws compels recognition of the proposition that persons similarly situated with respect to the legitimate purpose of the law receive like treatment.” ’ [Citation.]”
(In re Eric J.
(1979)
“ ‘The first prerequisite to a meritorious claim under the equal protection clause is a showing that the state has adopted a classification that affects two or more
similarly situated
groups in an unequal manner.’ [Citations.] This initial inquiry is not whether persons are similarly situated for all purposes, but ‘whether they are similarly situated for purposes of the law challenged.’ [Citation.]”
(Cooley v. Superior Court
(2002)
The City concedes that, for purposes of the challenged ordinance, all retail establishments containing licensed pharmacies are similarly situated. This concession is not dispositive of Walgreens’s equal protection challenge but merely constitutes an acknowledgement that Walgreens has met its threshold burden to show that the different types of stores containing licensed pharma
“In resolving equal protection issues, the United States Supreme Court has used three levels of analysis. Distinctions in statutes that involve suspect classifications or touch upon fundamental interests are subject to strict scrutiny, and can be sustained only if they are necessary to achieve a compelling state interest. Classifications based on gender are subject to an intermediate level of review. But most legislation is tested only to determine if the challenged classification bears a rational relationship to a legitimate state purpose. [Citations.]”
(Hofsheier, supra,
Rational basis review “ ‘is the basic and conventional standard for reviewing economic and social welfare legislation in which there is a “discrimination” or differentiation of treatment between classes or individuals. It 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.” [Citation.]’ ”
(Warden v. State Bar
(1999)
“[T]hose attacking the rationality of the legislative classification have the burden ‘to negative every conceivable basis which might support it,’ [citation].”
(FCC v. Beach Communications, Inc., supra,
“[Although it is irrelevant whether the perceived reason for the challenged distinction actually motivated the Legislature, equal protection ‘does require that a purpose may conceivably or “may reasonably have been the purpose and policy” of the relevant governmental decisionmaker’ [citation] and that ‘the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational.’ [Citation.]”
(Hofsheier, supra,
B. Asserted Rational Grounds for Exempting General Grocery Stores and Big Box Stores from Ban on Sales of Tobacco Products
We now turn to the question of whether there is a rational basis for exempting general grocery stores and big box stores that contain licensed pharmacies from the ban on sales of tobacco products applicable to all other retail establishments containing licensed pharmacies. We do not question the premise that the presence of a licensed pharmacy within any retail establishment provides a rational justification for prohibiting that store from selling tobacco products, but that is not the question before us. What must be decided here is whether the legitimate objectives of discouraging smoking and avoiding the suggestion that a health care purveyor approves of cigarette smoking provides a rational justification for prohibiting retail establishments such as Walgreens—which contains a licensed pharmacy in the rear of the
The City defends the distinction drawn in the ordinance by asserting that the Board of Supervisors “rationally could have concluded that the sale of cigarettes by drug stores like Walgreens sends the wrong message about cigarettes more strongly than does the sale of cigarettes by big box stores or grocery stores, even if those stores too have pharmacies in them.” (Italics added.) What the City seems to mean is that customers, particularly “impressionable young people,” are more likely to perceive a tacit message that smoking is not harmful when tobacco products are sold in a store the public associates with the sale of health-related products, and a “drugstore” such as Walgreens carries such an association more so than does a supermarket such as Safeway.
The City’s premise contradicts the allegation in Walgreens’s complaint that “the implied message, if any, conveyed by the sale of tobacco products at a Walgreens [is not] different from the implied message, if any, conveyed by the sale of tobacco products at the exempted stores with [licensed] pharmacies.” We must accept Walgreens’s allegation as true in this appeal from an order sustaining a demurrer. (See
Zelig v. County of Los Angeles, supra,
The increasingly blurred distinction between Walgreens and general grocery stores is much like the growing similarities over time between hotels and motels, which the appellate court addressed in
Gawzner Corp.
v.
Minier
(1975) 46 Cal.App.3d
777
[
Walgreens attacks not only the exemption for general grocery stores and big box stores but also claims the very premise of the legislation is questionable. According to Walgreens, “It is simply not credible that ‘pharmacies convey tacit approval of the purchase and use of tobacco products’ . . . given the decades of anti-smoking media campaigns and warnings that would counteract any such implied message.” The premise underlying the prohibition on sales of tobacco products in pharmacies may not be universally accepted. Nonetheless, the government unquestionably has a legitimate interest in discouraging tobacco use. Here, the City made a determination that prohibiting sales of tobacco products in pharmacies furthers that legitimate interest, a determination supported by numerous professional medical and pharmaceutical organizations. While that assessment may be subject to debate—and indeed was debated by members of the Board of Supervisors—it does not violate any constitutional principle.
Although it is generally not the court’s role to examine the legitimacy of the legislative purpose underlying legislation,
10
we must necessarily consider a law’s purpose more carefully when it provides the justification for treating similarly situated persons differently. In other words, a law based upon a questionable premise may violate no constitutional proscription if applied uniformly to all similarly situated persons. But a law that discriminates among similarly situated persons based upon that same questionable or speculative premise may well lack a rational basis to support the unequal treatment. In this case, the City has relied upon a premise that is itself subject to debate to support narrow distinctions the generic premise simply does not support. With the image of a small, traditional independent pharmacy in mind—one that primarily sells pharmaceutical prescriptions, over-the-counter
The analysis in
Hays v. Wood
(1979)
Like the distinction among professionals in Hays v. Wood, the distinction among pharmacies here rests upon the supposed strength of a perception. That perception may justify the prohibition against sales of tobacco products by pharmacies in general, but it does not justify treating stores such as Walgreens differently from general grocery stores and big box stores. The City’s claim that the implied message, or perception, is somehow stronger at a Walgreens than it is as a general grocery store or big box store is purely speculative.
The City urges that the factual basis for a statutory distinction may not be “subject to courtroom factfinding” and may rest on “rational speculation.”
(FCC v. Beach Communications, Inc., supra,
But why do these revenue percentages indicate that customers receive a different message concerning the safety of tobacco products sold at a store such as Walgreens than the message received by customers of Safeway or Costco? A customer normally would not be aware of the percentage of pharmacy sales at the different types of stores. The City agrees that the percentage of a store’s revenue attributable to pharmacy sales does not
cause
a customer to perceive the various types of stores differently. It claims, however, that the comparison of revenues attributable to pharmacy sales reflects the fact that stores such as Walgreens are
in fact
different from grocery and big box stores. That undoubtedly is true, but it begs the question; why do the different sales percentages indicate that purchasers at the different
It is true, as the City argues, that courts do not force policymakers to tackle an entire problem at one time. “Past decisions . . . establish that, under the rational relationship test, the state may recognize that different categories or classes of persons within a larger classification may pose varying degrees of risk of harm, and properly may limit a regulation to those classes of persons as to whom the need for regulation is thought to be more crucial or imperative.”
(Warden
v.
State Bar, supra,
Other reasons offered by the City to justify the classification among pharmacies are no more persuasive. According to the City, one could rationally conclude that a ban on sales of tobacco products in stores such as Walgreens and Rite-Aid would serve the purpose of limiting the exposure of sick people to cigarettes. The City reasons that customers of Walgreens and Rite-Aid are more likely to be sick than customers of general grocery stores and big box stores. The contention lacks merit. Sick people who go to a
In its trial court briefs and again at oral argument in this court, the City contended the Board of Supervisors could have rationally excluded big box stores and grocery stores from the ordinance for economic reasons. Citing an article from the San Francisco Chronicle, the title of which suggests that supermarkets are an “endangered species” in the City, the City urges it is rational to favor supermarkets over stores such as Walgreens in order to discourage them from leaving the City. This proffered rationale is insufficient to support the differential treatment afforded to grocery stores, big box stores, and all other pharmacies. Among other things, the article on which the City relies postdates the enactment of the ordinance and is not contained in the record on appeal. In any event, the article’s contents are not a proper subject of judicial notice and therefore may not be considered by this court on review of a ruling sustaining a demurrer. (See
Zelig v. County of Los Angeles, supra,
For the reasons set forth above, Walgreens’s complaint adequately states causes of action for a violation of the equal protection provisions of the
Should Walgreens ultimately prevail on its equal protection causes of action, the court will be required to determine whether the appropriate remedy is to preclude enforcement of the entire ordinance or to invalidate only the exceptions contained in San Francisco Health Code section 1009.93. (See
Hofsheier, supra,
37 Cal.4th at pp. 1207-1208;
Coalition Advocating Legal Housing Options v. City of Santa Monica
(2001)
III. Proposition I *
The judgment is reversed insofar as it sustained the demurrers to the first and second causes of action. On remand, the trial court is directed to enter a new order (1) overruling the demurrers to the first and second causes of action alleging equal protection violations, and (2) sustaining without leave to amend the demurrer to the third cause of action alleging a violation of Proposition I. Each party shall bear its own costs on appeal.
Poliak, J., and Jenkins, J., concurred.
Notes
“Tobacco Product” is defined as “any substance containing tobacco leaf[J including but not limited to cigarettes, cigars, pipe . . . tobacco, snuff[,] chewing tobacco, and dipping tobacco.” (S.F. Health Code, § 1009.91, subd. (f).)
“Pharmacy” is defined as “a retail establishment in which the profession of pharmacy by a pharmacist licensed by the State of California in accordance with the Business and Professions Code is practiced and where prescriptions are offered for sale. A pharmacy may also offer other retail goods in addition to prescription pharmaceuticals. For purposes of this Article, ‘pharmacy’ includes retail stores commonly known as drugstores.” (S.F. Health Code, § 1009.91, subd. (e).)
“General Grocery Store” is defined to have “the same meaning as set forth in [San Francisco] Planning Code Section 790.102(a) or any successor provisions.” (S.F. Health Code, § 1009.91, subd. (c).) Section 790.102, subdivision (a)(1) of the San Francisco Planning Code, in turn, defines “general grocery store” as “[a]n individual retail food establishment that: [¶] (A) Offers a diverse variety of unrelated, non-complementary food and non-food commodities, such as beverages, dairy, dry goods, fresh produce and other perishable items, frozen foods, household products, and paper goods; [¶] (B) May provide beer, wine, and/or liquor sales for consumption off the premises . . . ; (C) Prepares minor amounts or no food on-site for immediate consumption; and [¶] (D) Markets the majority of its merchandise at retail prices.”
“Big Box Store” is defined as “a single retail establishment occupying an area in excess of 100,000 gross square feet.” (S.F. Health Code, § 1009.91, subd. (a).)
Neither the ordinance nor the legislative findings define the terms “drugstore” or “chain drugstore.” Nevertheless, based on the text of the legislative findings, the City classifies chain stores such as Walgreens and Rite Aid as “chain drugstores,” whereas Safeway and Costco are not considered “chain drugstores,” even though they are chains and may contain a licensed pharmacy.
The complaint neglects to mention independent pharmacies covered by the ordinance. Dr. Katz testified that there were 16 independent pharmacies in the City at the time the ordinance was enacted. Only four of those independent pharmacies were still selling tobacco products at the time the ordinance was enacted. In its briefing to this court, Walgreens states that it purchased the six Rite-Aid pharmacies located in the City following enactment of the ordinance, leaving it with 58 stores covered by the ordinance. Walgreens asserts it has “58 of the approximately 63 pharmacy establishments covered by the Ordinance.” Walgreens’s estimate of the total number of pharmacies covered by the ordinance is derived by adding Walgreens’s 58 stores to the one operated by Longs Drugs and the four independent pharmacies that were selling tobacco products at the time the ordinance was enacted. Walgreens’s tally omits the 12 independent pharmacies that had voluntarily chosen not to sell tobacco products even before the ordinance was enacted. Regardless of how one calculates the number of pharmacies subject to the ban on sales of tobacco products, the fact remains that, following its purchase of Rite-Aid drugstores in the City, Walgreens operates over three-quarters of the pharmacies covered by the ordinance (58 out of approximately 75), including all but one of the chain drugstores prohibited from selling tobacco products.
In addressing Walgreens’s constitutional claims, we consider decisions of the United States Supreme Court and other federal courts as persuasive authority because the equal protection provision of the California Constitution is “ ‘substantially the equivalent of the equal protection clause of the Fourteenth Amendment to the United States Constitution.’ ”
(Manduley v. Superior Court
(2002)
See footnote 3, ante.
The City offers no explanation of the product mix that would be necessary for a store to be considered a “retail food establishment,” a troubling ambiguity as hybrid forms of retail stores offering food items continue to appear in the marketplace. At oral argument, counsel for Walgreens explained it would not be in a position to claim it is a “general grocery store” and that it would have been futile to pursue such a status, asserting the City takes the view a “retail food establishment” primarily sells food items. Counsel for the City did not dispute this assessment.
The day is past when the courts “strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident, or out of harmony with a particular school of thought. [Citations.]”
(Williamson v. Lee Optical Co.
(1955)
By Walgreens’s estimates, pharmacy sales comprise slightly over half of the sales revenue at its City stores. According to the recitals in the City’s ordinance, pharmacy sales at Safeway are estimated to be “7.5% of annual volume” and prescription sales generated “1.5% of total revenue in 2002” at Costco.
The complaint alleges that two Walgreens stores in the City do not contain a licensed pharmacy.
Our disposition should not be interpreted to suggest we have reached our decision solely because we must accept as true the allegations in Walgreens’s complaint. We agree with Walgreens that the relevant facts appear to be largely beyond dispute. To the extent disputed facts have been brought to our attention, such as the litigants’ competing estimates of proportionate revenue attributable to prescription drug sales at Walgreens and other pharmacies, the differences are legally irrelevant, particularly in light of the principle that a legislative choice is not subject to judicial factfinding.
(FCC
v.
Beach Communications, Inc., supra,
As a consequence of our decision, the parties do not start with a clean slate upon remand. The principles of law necessary to this court’s decision become law of the case and must be adhered to both in the court below and upon any subsequent appeal.
(Gunn v. Mariners Church, Inc.
(2008)
See footnote, ante, page 424.