March 17 (Westlaw Journals) - National grocery store chain Safeway Inc. has filed a federal lawsuit claiming that San Francisco's ban on the sale of tobacco products in pharmacies and stores that contain pharmacies is unconstitutional.

Safeway says the prohibition should be lifted because it discriminates against retailers that have in-store pharmacies.

In August 2008 San Francisco passed a law that prohibited the sale of tobacco at pharmacies but exempted grocery stores like Safeway and “big box” retailers such as Wal-Mart and Costco that happen to contain pharmacies.

San Francisco is the first U.S. city to initiate such a ban.  It says the ordinance is necessary because pharmacies are in the business of meeting health care needs and should not promote habits that are harmful to consumers' health.

In September 2010 San Francisco repealed the exception for grocery stores and "big box" retailers.

Safeway is challenging the amended version of the ban in the U.S. District Court for the Northern District of California, saying it violates equal-protection laws and would cause the chain financial harm. 

The complaint notes that two other lawsuits have been filed against the city regarding the tobacco ban but maintains that they involve different issues.

Safeway operates 15 stores in San Francisco, all but five of which contain a pharmacy.  Its permits to sell tobacco products in its stores with pharmacies were revoked after the ordinance was amended, according to the lawsuit.

Safeway defines the issue of the case as "whether the city may lawfully expand the definition of 'pharmacy' to include as a 'pharmacy' the whole other area of the building which operates as traditional retail grocery store, and then ban sales of tobacco products in the retail grocery store on the ground that it is a 'pharmacy.'"

The company says it "isolates" its in-store pharmacies from the rest of the grocery store using walls, front counters and locked doors and does not sell tobacco products at its pharmacies.  In fact cigarettes must be purchased at customer service booths in its San Francisco stores, the suit says.

"The ordinance as amended differentiates arbitrarily and capriciously between similarly situated retailers solely on the ground that some have, and some do not have, somewhere on their premises, a lawful pharmacy," the complaint says.

Safeway claims that its competitors that do not have pharmacies have an edge in the marketplace because they can still sell tobacco products, even though they also sell health-related products like nonprescription drugs, vitamins and cold and flu items.  This conflicts with the rationale behind the ordinance, the suit says.

Safeway seeks an order allowing it to sell tobacco products in the grocery store areas of its stores, as well as an injunction banning enforcement of the ordinance as to Safeway, costs and attorney fees.

Plaintiff attorneys: Thomas J. Klitgaard, William F. Murphy, John N. Dahlberg and Barbara L. Harris Chang, Dillingham & Murphy, San Francisco.

Safeway v. City & Council of San Francisco, No. 3:11-cv-00761-MEJ, complaint filed (N.D. Cal. Feb. 18, 2011).