420Lawyer.com - California Business and Corporate Representatin for Prop 215 Collectives, Dispensaries, Patients and Growers
  BUSINESS LAW SECTION

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State Medical 
Marijuana Laws

California State Laws

Proposition 215 
Senate Bill 420
  Cal Norml's Co-Op Suggestions
  May, 2006 ABA Article

 

 

CA NORML SUGGESTIONS

Despite the fact that scores of medical cannabis dispensaries, clubs, and delivery services are currently in business in California, the sale of medical cannabis is strictly illegal under federal law. Under state law, sale is generally illegal. However, non-profit "distribution" may be allowed in certain cases for patient cultivation co-ops and small-scale caregiver gardeners.

Under federal law, sale, cultivation and possession of marijuana remain strictly illegal.  The DEA has raided dozens of medical marijuana growers, clubs and caregivers  in California since the enactment of Prop. 215.  For the most part, the targets have been either high-profile activists who have attracted publicity, or commercial-scale growers whom local law enforcement have decided to turn over for federal prosecution.

Under state law,  the California Compassionate Use Act of 1996 (Prop. 215) exempts patients and their primary caregivers from criminal prosecution for personal possession and cultivation of marijuana, but NOT for distribution or sale to others. 

State law was  expanded in 2004 by a new law, SB 420 (Health & Safety Code 11362.7-8), which  (1) authorizes caregivers who provide marijuana to patients to be compensated for the costs of their services, though not on a for-profit basis; and (2)  allows patients to form cultivation "collectives" or "cooperatives."  On careful examination, however, neither of these provisions provides a green light for sales of cannabis. Those dispensaries that are selling marijuana over the counter accordingly do so at the tolerance of local authorities. Note that there have been instances where hostile local law enforcement agencies have busted medical cannabis dispensaries and charged their personnel with illegal distribution or sales.

For a list of patients' groups and dispensaries, see www.canorml.org/prop/cbclist.html

CAREGIVERS:

A  "primary caregiver" is narrowly defined under Prop. 215 to be "the individual designated [by a legal patient] who has consistently assumed responsibility for the housing, health, or safety of that person."  The law does not explicitly allow for multiple caregivers. While caregivers may serve more than one patient, a new provision in SB 420 has made it illegal for them to have more than one patient outside their own "city or county."    While the constitutionality of this provision is debatable (not only does it seem to override Prop. 215, but the restriction to a single "city or county" is ambiguous)  prospective caregivers should beware of trying to serve large geographical areas. 

 In general, the courts have held that cannabis clubs cannot serve as legal "primary caregivers" for large numbers of patients.   Some persons have claimed caregiver status while growing for multiple numbers of patients on the theory that they are providing for their patients' health or safety.  This defense has been successful in court for caregivers growing for small numbers of patients.  However, it was explicitly rejected by a state court of appeals in the Peron decision, where the court held that Peron's San Francisco Cannabis Buyers' Club could not reasonably claim to function as a "primary caregiver" for its 8000 clients.

In general, medical cannabis providers who cater to walk-in clients should not hope to rely on the caregiver provision.   Caregiver growers should limit themselves to a select membership list of local clients  whom they personally know and who do not have other caregivers.  Within these constraints, SB 420 allows caregivers to be compensated for the costs of their services, but does NOT specifically authorize distribution or cultivation for profit.

COLLECTIVE GARDENS

SB 420 encourages access to medical marijuana through "collective, cooperative cultivation projects. " Unfortunately, it  provides no guidelines or explanation as to how these should operate.    Presumably, the basic model is a group of patients and caregivers who plant a garden together and share the crop among themselves.   The cultivation cooperative model does not necessarily envision walk-in clients, nor retail sales of medicine to members.  Co-ops may be supported by participation in work, donations or  membership fees.  Under one model, co-op patients pay a set gardening fee for a certain part of the crop, and receive the harvest at no further charge. Unlike caregivers, collective gardens aren't limited to patients from the same "city or county."

A notable example of a patients' collective is the Wo/Men's Alliance for Medical Marijuana in Santa Cruz  www.wamm.org.  WAMM has over 200 seriously  ill members  who cultivate a collective garden and attend to each others' health and personal needs.   In 2004, WAMM won a federal injunction protecting their right to cultivate under the Raich decision (see below).  This did not stop the DEA from busting another collective garden , Eddy's Medicinal Gardens, whose operator was engaged in large-scale cultivation (30,000 plants) for some 2,000 ≠ 3,000 patients. The WAMM injunction was voided in 2005 by the Supreme Court's Raich decision.

Two examples of patients' providers officially structured as "cooperative" corporations under California law were the Oakland Cannabis Buyers' Cooperative and Los Angeles Cannabis Research Center. Both would have been legal under SB 420, but both were shut down by the federal government.

FEDERAL LAW

Under the U.S. Controlled Substances Act (CSA), marijuana is currently classified as a Schedule I drug, meaning that it has no accepted medical use.  The federal government has interpreted the law strictly to mean that all marijuana is illegal regardless of state laws like Prop. 215. The federal law was upheld by the U.S. Supreme Court in the case Raich v Gonzalez (2005), where it ruled that the CSA's ban on posssession and cultivation did not exceed the federal government's constitutional authority under the interstate commerce clause even in the case of private, personal use by patients.  While further constitutional challenges to the CSA are being pursued in federal court, medical marijuana remains completely illegal under current federal law.

The Supreme Court rejected a prior, 2001 challenge to the federal law by upholding an injunction ordering the Oakland Cannabis Buyers Cooperative  and five other cannabis clubs to cease operations.  The court overturned a Ninth Circuit Court of Appeals ruling that the OCBC was  entitled to a "medical necessity" defense for distributing marijuana to its members.  While the court ruled for the government on the procedural grounds that the CSA  did not allow for a necessity defense for distributors, it left open the question whether individual patients might invoke a necessity defense.

FEDERAL FORFEITURE: 

Another federal weapon against medical marijuana is property forfeiture. Federal law allows the government to forfeit real estate from owners or landlords who let it be used for marijuana distribution or cultivation.  The DEA successfully used forfeiture against the Los Angeles Cannabis Resource Center in 2001.  The LACRC's building was actually owned by the city of West Hollywood, which had bought it as a gift for the club.  The government had no trouble taking possession of it by means of forfeiture, effectively closing the LACRC. More recently, the government invoked forfeiture to close the  Capitol Compassionate Care center in Roseville and to force a landlord to evict another dispensary in West Hollywood.  The DEA has threatened to employ forfeiture more widely.  So far, the chosen targets have mostly been facilities that actively sought publicity through the media or advertising.   Dispensary operators are advised to operate discreetly to avoid DEA attention.

LOCAL REGULATION

Despite the shaky legality of dispensaries, many cities and counties have enacted ordinances aimed at zoning, regulating, or limiting them.  Some localities have enacted moratoriums banning new dispensaries altogether, including numerous towns in the Central Valley area and the Peninsula.   Others, including Alameda County, Hayward, Berkeley, Santa Rosa, West Hollywood, and Oakland, have put a limit on the number of dispensaries in their area.   A few cities, including San Francisco, Oakland, West Hollywood, and Santa Rosa have established licensing schemes for dispensaries.    Strict zoning regulations are in effect in many localities.  Other regulations that have been adopted include banning on-site consumption and limiting the quantity of marijuana that can be sold or kept on hand. Local regulations are constantly evolving.  For the latest information, check with  local officials. 

Anyone interested in opening a medical cannabis facility should be wary about consulting with local authorities. Many towns have moved to ban dispensaries after receiving inquiries from prospective operators. However, anyone planning to open a storefront dispensary should seek a business license and comply with local zoning regulations. It is especially important that dispensaries be appropriately sited so as not to disturb neighbors. Neighborhood complaints are the number one cause of police raids. Dispensaries should also be sure that their landlords are comfortable with what they are doing. Landlord complaints are another leading cause of problems.

Dispensaries have been organized in various ways:  as sole proprietorships, partnerships, non-profit cooperatives or corporations.   Because SB 420 does not specifically protect for-profit operations, non-profit organizations are probably safer.   Prospective operators are advised to consult a business attorney.

SALES TAX

The state Board of Equalization has ruled that medical cannabis sales are subject to sales tax, regardless of their legality. (This is consistent with California law, under which medicinal herbs are generally taxable. The only medicines that are not taxable are those provided in licensed pharmacies with a physician's prescription.)

ATTORNEYS

Prospective patient providers are strongly advised to consult an attorney. The following attorneys are familiar with the law on cannabis cooperatives, patients' groups, dispensaries, etc.

 

 

The How To's

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Create a Business Plan
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Find a Location
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3.

Funding
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