Perry v. City of Waterville

Background

In 2023, Minnesota legalized recreational cannabis and established a licensing framework administered by the Office of Cannabis Management ('OCM'). Under that framework, local governments may not outright prohibit cannabis businesses but may impose reasonable time, place, and manner restrictions. OCM regulations separately prohibit cannabis businesses from operating in a 'dwelling,' defined as a physical structure where people live.

Plaintiff Travis Paul Perry, proceeding without an attorney (pro se), sought to open a cultivation-only cannabis microbusiness from his attached or detached home garage in Waterville, Minnesota, a property located in the city's R-2 residential zoning district. Perry formed a single-member LLC for the purpose and received preliminary license approval from OCM. In January 2025, Perry wrote the City Council asking it to amend city zoning ordinances to permit home-based cannabis businesses. The City referred his request to the Zoning Commission, which ultimately declined to amend the code. City Attorney Jason Moran then emailed City Administrator Teresa Hill recommending the city 'get ahead of dangerous occupations' and consider prohibiting cannabis home occupations, referencing 'a person of interest in town that may try to do something clever.' On April 1, 2025, the City introduced an ordinance — enacted May 6, 2025 — prohibiting home occupations that involve the manufacture, growing, sale, or similar handling of cannabis products (the 'Challenged Ordinance').

Perry never applied for a conditional use permit ('CUP'), which the city code requires for higher-intensity Level 2 home occupations, before filing this lawsuit. He filed his original complaint on August 21, 2025, and an amended complaint on December 12, 2025, asserting four claims: (1) procedural due process under the Fourteenth Amendment; (2) equal protection under the Fourteenth Amendment; (3) First Amendment retaliation; and (4) violation of the Minnesota Government Data Practices Act ('MGDPA') regarding public records requests. Defendants moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) (lack of subject-matter jurisdiction) and 12(b)(6) (failure to state a claim).

Standing (Jurisdiction)

Defendants raised two standing challenges.

Traceability Defendants argued Perry's injury was not traceable to the city because OCM's own regulations already forbade cannabis businesses in 'dwellings,' which they argued encompassed Perry's garage. The court found the term 'dwelling' ambiguous as applied to a garage — some courts treat a garage as part of a dwelling; others do not — and declined to resolve the ambiguity because neither party briefed it. Perry therefore plausibly alleged his injury was traceable to the Challenged Ordinance rather than the OCM regulations alone.

LLC vs. Individual Injury Defendants argued Perry's injuries belonged to his LLC, making any suit a derivative action subject to procedural requirements Perry had not followed. The court rejected this, finding Perry alleged at least one direct personal injury: interference with his rights as the owner of the property on which the business would operate. Wrongful interference with property rights is a recognized form of constitutional injury, and this injury was distinct from any economic harm to the LLC. Perry therefore had standing to sue directly.

Merits Analysis

Procedural Due Process (Dismissed) The Eighth Circuit requires that a plaintiff asserting a procedural due process deprivation (here brought as a claim under 42 U.S.C. § 1983, the federal civil rights statute allowing suits against state and local officials) must first exhaust available state administrative remedies. Perry never filed a formal CUP application with the city's Zoning Administrator on the required official form with the required fee. The court rejected Perry's argument that his January 2025 letter to the City Council constituted a CUP application: the letter was treated as a legislative amendment request, it was not submitted on the proper form to the proper official, and in any event the Zoning Commission cannot deny a CUP — only the City Council can. The court also rejected Perry's futility argument, finding that the legal standard for futility requires showing the authority lacks institutional competence or legal authority to grant relief, not merely that approval was unlikely. The procedural due process claim was dismissed.

Equal Protection (Dismissed) The court proceeded to the merits of the equal protection claim without requiring exhaustion. Applying rational-basis review — the most deferential standard, applicable here because no fundamental right or suspect classification was involved — the court found the Challenged Ordinance easily survived. Both the Zoning Commission and City Council had identified concerns including traffic, security risks, odors, noise, and neighborhood character as reasons to prohibit home-based cannabis businesses. The court also noted that OCM's own regulations require intrusive security measures (loud alarms, 24-hour video surveillance, exterior lighting) at cannabis businesses, which the city could reasonably conclude would undermine residential neighborhood character.

Under rational-basis review, the burden falls on the party challenging the law to negate every conceivable rational basis, not on the government to prove one. Perry's argument that the CUP process could have addressed concerns on a case-by-case basis did not negate the city's general concerns, and a law may be imperfect or overinclusive and still pass rational-basis review. The court also addressed a potential 'class-of-one' equal protection theory (discrimination against a specific individual rather than a class) but found it failed for the same reason: there was a rational basis for the different treatment of home-based cannabis businesses versus other home occupations. The equal protection claim was dismissed.

First Amendment Retaliation (Dismissed) To state a First Amendment retaliation claim, a plaintiff must allege: (1) protected activity; (2) adverse action serious enough to chill a person of ordinary firmness from continuing that activity; and (3) a causal link between the protected activity and the adverse action.

The court accepted that petitioning the government for legislative change and making public records requests are protected First Amendment activities, satisfying the first element. However, the claim failed on the second and third elements. On the second element (chilling effect), the court found that the city's failure to enact Perry's preferred legislation does not constitute sufficiently serious adverse action — accepting such a theory would allow nearly any unsuccessful legislative advocate to sue for retaliation. The court also noted that Perry continued to speak out and challenge the city after the ordinance was enacted, undermining any claim that a person of ordinary firmness would have been chilled.

On the third element (causation), the court found that temporal proximity alone was insufficient and that Moran's email — the primary evidence of retaliatory intent — did not plausibly connect the ordinance to Perry's protected speech. The email referenced concern that Perry would 'do something clever,' which the court read as referencing Perry's desire to operate a cannabis business, not his petitioning or records requests. Because operating a cannabis business is not First Amendment-protected activity, the email did not plausibly show Perry was singled out for his protected expression. The retaliation claim was dismissed.

MGDPA State-Law Claim (Dismissed Without Prejudice) Perry's claim that the city and Hill improperly withheld public records under the MGDPA is a state-law claim. Federal courts have discretionary authority under 28 U.S.C. § 1367(c)(3) to decline supplemental jurisdiction over state-law claims when all federal claims have been dismissed. The court exercised that discretion and dismissed the MGDPA claim without prejudice, so that Perry may pursue it in Minnesota state court.

Disposition

Defendants' Motion to Dismiss (ECF No. 50) was granted. The amended complaint was dismissed without prejudice in its entirety.