January 2012 - Arizona Medical Marijuana Law

Obama Refuses to Answer Question about Legalizing Marijuana that Won the White House & Google’s Youtube Ask the President Contest

The White House and Google teamed up and asked viewers to ask video questions on Youtube. The promoters mislead the public by announcing that President Obama would personally answer the questions that got the most votes from the Youtube viewers. The following video question submitted by a retired Deputy Sheriff had the most video votes and the second most votes of all video and text questions:

“Mr. President, my name is Stephen Downing, and I’m a retired deputy chief of police from the Los Angeles Police Department. From my 20 years of experience I have come to see our country’s drug policies as a failure and a complete waste of criminal justice resources. According to the Gallup Poll, the number of Americans who support legalizing and regulating marijuana now outnumbers those who support continuing prohibition. What do you say to this growing voter constituency that wants more changes to drug policy than you have delivered in your first term?”

Despite getting the most votes of any video question, Obama refused to answer the question, again for the second year in a row. Here’s the winner of the 2011 video question contest and Obama’s non-answer answer.

By On the Net|2012-01-31T08:09:17-07:00January 31st, 2012|Stories & Articles, Video|Comments Off

Barack Obama Just another Drug Warrior

Reason.com: “It is not hard to see how critics of the war on drugs got the impression that Barack Obama was sympathetic to their cause. Throughout his public life as an author, law professor, and politician, Obama has said and done things that suggested he was not a run-of-the-mill drug warrior. In his 1995 memoir Dreams From My Father, the future president talked candidly about his own youthful drug use. . . . As a candidate for the U.S. Senate in 2004, Obama called the war on drugs ‘an utter failure’ and advocated marijuana decriminalization. As a U.S. senator, he cosponsored legislation aimed at reducing the federal government’s draconian crack cocaine sentences. . . . Obama stood apart from hard-line prohibitionists even when he began running for president. In 2007 and 2008, he bemoaned America’s high incarceration rate, warned that the racially disproportionate impact of drug prohibition undermines legal equality, advocated a ‘public health’ approach to drugs emphasizing treatment and training instead of prison, repeatedly indicated that he would take a more tolerant position regarding medical marijuana than George W. Bush, and criticized the Bush administration for twisting science to support policy.”

This excellent article is a history of Barack Obama’s statements on marijuana, the drug war and the Department of Justice’s recent actions to shut down dispensaries. All proponents of medical marijuana should read the article so they are informed about the President’s double speak and 180 degree turn against the legalization of medical marijuana.

By On the Net|2012-05-12T14:40:03-07:00January 31st, 2012|Federal Dispensary Attacks, Stories & Articles|Comments Off

Despite Prescriptions, Medical Marijuana Remains Barred from ASU Dorms

State Press: “When the Arizona Medical Marijuana Act was passed in November 2010 to allow medical marijuana in Arizona, the rules for medication possession were straightforward. Proposition 203 prohibits smoking marijuana in certain places, but the line blurs inside a campus dorm room. One 18-year-old ASU student was approached in her dorm at Hassayampa Phase I by ASU Police on Jan. 22, just hours after smoking medicinal marijuana. . . . ‘Marijuana is not allowed on campus so whether or not you got a card, it’s still a policy violation . . . . So you receive discipline through the dean”.”

By On the Net|2019-06-14T08:25:44-07:00January 31st, 2012|Stories & Articles|Comments Off

LAPD Shuts Down Last Pot store in Chatsworth; 3 Arrested

Los Angeles Times: “Police said Monday night that officers have shut down a final medical marijuana dispensary in an area where dozens of pot shops once thrived. Narcotics officers from the Devonshire Division served a search warrant at Herbal Medicine Care . . . . In late 2008, more than 60 medical marijuana stores were in the Devonshire Division, according to the LAPD. “

Read also “Police Shut Down Last Chatsworth Pot Shop,” which contains this incredible statement:

“One of the men arrested claimed he made more than $500,000 per year, tax-free, because he declared the business a non-profit”

This story called “Police Shut Down Last Remaining Pot Shop In Chatsworth” contains a chilling warning from a local police official:

“Deputy Chief Jorge Villegas said, “We’re not done yet. There are approximately 200 other locations within the San Fernando Valley that we’re also going to be targeting.”

By On the Net|2015-04-06T18:53:10-07:00January 31st, 2012|California News, Marijuana Crimes, Stories & Articles|Comments Off

Obama’s War on Medical Marijuana

Counter Punch: “In the past few months, the Obama Administration has defrauded medical cannabis advocates by launching a full scale, ‘shock and awe’ attack against dispensaries in California. The legal actions constitute a complete reversal of the position Attorney General Holder had stated he would follow. The operation has been shameful and disgraceful, warranting censure, but it is not the focus of this article. . . . Sadly, the reality now is that the process of medical regulation by state agencies is threatened by increased federal law enforcement. . . . California dispensaries were raided last month, Colorado ones this week. . . . Why should we embrace a system, where we know in advance, some people are going to use a ruse to get their medicine? It has contributed to the very consequences we are dealing with today.”

By On the Net|2012-08-25T08:06:22-07:00January 30th, 2012|Colorado News, Federal Dispensary Attacks, Stories & Articles|Comments Off

Prospective Dispensary’s Single Most Important Task Before April 30, 2012

Nonprofit entities that want to obtain a dispensary registration certificate (aka license) to sell medical marijuana in Arizona have a lot of tasks to accomplish before they can open for business. At this time, however, the single most important task for all would-be dispensaries is to locate a properly zoned place within the desired CHAA to operate the dispensary and tie it up with a lease or an option to lease.

Arizona’s medical marijuana law and the Arizona Department of Health Services rules provide that the application for a dispensary registration certificate must show the location where the dispensary will operate. In addition, Arizona Department of Health Services Rule R9-17-304 states:

To apply for a dispensary registration certificate, an entity shall submit to the Department the following

6.Documentation from the local jurisdiction where the dispensary’s proposed physical address is located that:

a. There are no local zoning restrictions for the dispensary’s location, or

b. The dispensary’s location is in compliance with any local zoning restrictions;

7. Documentation of:

a. Ownership of the physical address of the proposed dispensary, or

b. Permission from the owner of the physical address of the proposed dispensary for the entity applying for a dispensary registration certificate to operate a dispensary at the physical address;

Translation: The dispensary applicant must obtain and submit with the application for a dispensary registration certificate a written statement from the applicable zoning authority that the proposed dispensary premises is “groovy” and a written statement from the landlord that the applicant can operate a dispensary at the location designated in the application (or proof the applicant owns the land).

Actions Prospective Dispensaries Must Take Yesterday

Here are the actions every would be dispensary must take as soon as possible:

1. Hire a zoning attorney who can tell you which locations in your desired CHAA are properly zoned and meet the requirements of the ADHS rules. This step is very important because it is a total waste of time to search for a location and get it leased and find out the location is not properly zoned or too close to a school. The zoning attorney will also apply for the Rule R9-17-304.D.6 zoning comfort letter from the applicable zoning authority.

2. Visit only properly zoned sites that are not too close to a prohibited structure and identify where you want to operate the dispensary.

3. Sign a lease or an option to lease for your desired location (or enter into a contract to purchase it). Make sure the lease has language in it that requires the landlord to give you a written Rule R9-17-304.D.7 comfort letter not later than April 1, 2012.

Cities are severely limiting the areas where a dispensary can be located. When you add the complexity of understanding the applicable zoning ordinance with the further limiting CHAAs, the result is a very difficult problem simply to determine where dispensaries can be located within a CHAA. In many CHAAs, the number of usable sites is limited, which is causing a modern day equivalent to the Oklahoma land rush of the 1800s.

If you cannot find a location and legally tie it up with a lease or a lease option, it’s game over. If your dispensary has not yet found and tied up a site, you should immediately contact an experienced zoning lawyer to explain the zoning rules for your desired area and show you how the CHAAs interact with the zoning. You want the zoning attorney to give you a map that shows exactly where within a city and a CHAA the zoning is right for a dispensary. Use that map to find a site. Enter into a lease or an option to lease with the landlord. Have your zoning lawyer assist in completing the necessary city paperwork to get your site approved by the city.

Nothing else matters as much now as finding a site that is properly zoned and getting it under lease or an option to lease.

I recommend Maricopa County zoning attorney Michael Curley. Call him at 602-903-3077. You need a zoning lawyer to explain where you can lease your site and what locations are available in your desired CHAA.

See “Must My Dispensary Obtain a Conditional Use Permit from the City before it can File an Application for an Arizona Medical Marijuana Dispensary License?,” “How Does My Dispensary Tie Up Land for its Retail & Cultivation Sites?” and “CHAA on This!“

By Richard Keyt|2012-01-27T07:41:42-07:00January 27th, 2012|Dispensary Leases, Legal Issues, Real Estate Issues|Comments Off

Arizona Department of Health Services Plans to Accept Medical Marijuana Dispensary Applications Early April 2012

On January 25, 2012, Director Will Humble of the Arizona Department of Health Services wrote the following on his blog:

Right now, it looks like a qualified “yes”. As you know from earlier blog posts a the judge has ruled in a state case that had challenged our dispensary applicant selection criteria. We’ve been reviewing our options- and decided yesterday not to appeal the case- which puts us back on track to licensing dispensaries under the Arizona Medical Marijuana Act.

Our teams are busy dotting the i’s and crossing the t’s right now on an express rule package that would remove the dispensary selection criteria that was struck down last week (AZ residency, child support, previous bankruptcies etc.) and to set new dates to accept dispensary applications. Our goal is to accept applications this April. We’d then have 45 days to review and award dispensary licenses- so we could potentially have awarded up to 125 dispensary licenses by mid-June. If someone is pretty much ready to go at that point, we could see medical marijuana dispensaries operating in July or August.

It’s been awhile since we talked about dispensaries and the certificate process. The place to start your refresher course is by reading our 53 Frequently Asked Questions summary sheet and our dispensary webpage. In the meantime, there are several things that won’t change and are still outlined in rule. Folks will need to have a business plan, security information, staff information, medical director and a plan to distribute information to patients, plus a letter from the locality saying the address is in compliance with local zoning rules. So while we’re busy tying up loose ends with the rules and the FAQs, I imagine prospective dispensary owners will be busy too.

One of the key provisions we settled on was to use zones to spread the dispensaries throughout the state. There were a few reasons for this – one to keep them from clustering in urban areas, another was to make sure that qualifying patients in the more rural areas of the state had access to a dispensary. Since we started issuing cards to qualifying patients and designated caregivers, we’ve been mapping where they live by zone. That information is available in a monthly report on our website.

By On the Net|2012-01-26T20:55:43-07:00January 26th, 2012|Dept Health Services, Stories & Articles, Will Humble Speaks|Comments Off

Phoenix Marijuana-cultivation Center Soon to Open is 1st in Nation

Arizona Republic: “Inside a freshly-painted office building in north Phoenix, Lynette Shockley unpacked pieces of a black canvas tent to assemble so she can grow medical pot for patients and herself. Around her, dozens of other registered caregivers erected their own grow tents and hauled in boxes of high-pressure sodium lights and duct systems to prepare for the opening of the 5,000-square-foot medical-marijuana cultivation center, soon to be a headquarters of sorts for 45 caregivers and 500 green leafy plants. The center, near Seventh Avenue and Loop 101 is the first of its kind in the nation, its operators said, and provides a central location for caregivers to grow cannibus for patients with maladies ranging from cancer to chronic pain. Compassion First Caregivers Circle Inc. set up the center.”

By On the Net|2012-02-02T07:14:35-07:00January 26th, 2012|Cannabis Clubs, Stories & Articles|Comments Off

ADHS Director Will Humble Says Arizona Medical Marijuana Dispensary Applications to be Awarded Mid-June

Phoenix New Times: “The first state-authorized medical marijuana dispensaries will likely open in Arizona this summer, said Will Humble, director of the state Department of Health Services. Humble . . . said his agency would be awarding the first licenses by mid-June. ‘If someone was really ready to go — they had their business plan and everything ready — we could see some dispensaries in, say, mid-July, maybe early August,’ he said. . . . A new rule package . . . can be done ‘really quickly,’ with dispensary applications accepted in April, he predicts. A lottery for the best applicants in each designated area will likely be held in June, following a 45-day review period, Humble says.”

Arizona Republic: “Arizona officials will not appeal last week’s judicial ruling that the state must allow medical-marijuana dispensaries and cannot restrict who operates them based on where they live or their financial history. Judge Richard Gama’s decision broadened the pool of potential dispensary owners and cleared the way for the state’s medical-pot industry. The only remaining question was whether state officials would challenge the ruling. . . . Also, people with 20 percent or more interest in a dispensary must be listed as the applicant, principal or board member.”

Yuma Sun: “The state’s first medical marijuana dispensaries could be up, running and selling the drug by mid-July. State Health Director Will Humble announced Tuesday he will not appeal a court ruling invalidating some of the rules he had crafted limiting who can own and operate the shops, including a requirement to be a resident for at least three years. Those rules also gave favorable treatment to applicants who had never declared bankruptcy. . . . These include having $150,000 in start-up capital and that the applicant have at least a 20 percent financial interest in the dispensary ‘so you don’t have straw applicants’.”

The comments that the person who has the $150,000 of start up capital must own at least 20 percent of the dispensary is new. Sounds like the Arizona Department of Health Services is going to issue a 5th version of the rules that will be substantially different from the 4th and “final” version of the rules issued last spring. Stay tuned.

By On the Net|2015-04-06T18:53:10-07:00January 25th, 2012|Stories & Articles|Comments Off

All Applications for an Arizona Medical Marijuana Dispensary Must Include a Zoning is Good Letter from the Zoning Authority

by Mike Wakefield, Architect

If you will be submitting an application to operate a medical marijuana dispensary, infusion, or cultivation center in the state of Arizona, then you will need to include a zoning approval letter (aka comfort letter) from the local city, town, or county for each location in your application to the AZ DHS.

The purpose of this zoning approval letter is to confirm that the location of the facility from which you plan to operate is within an area designated as legal per local zoning ordinance code and is not encroaching within a certain distance of specific areas including schools, churches, residences, and other local pending medical marijuana dispensary, infusion, or cultivation centers.

In order to acquire a zoning approval letter, you must submit a zoning application package – which includes:

1. Completed Application Form (forms are available online for each city, town, county);

2. Plot Map Showing The Location of the Building, Suite, or Portion thereof where the facility is located;

3. Legal Description of the Building, Suite, or Portion thereof where the facility is located;

4. Accurate Distance Table that identifies the approximate distances of schools, churches, residences, and other local pending medical marijuana dispensary, infusion, or cultivation centers from your proposed location.

If you should have any questions regarding this process, contact Mike Wakefield at 623-533-3281 or visit his website.

By On the Net|2015-04-06T18:50:22-07:00January 25th, 2012|Stories & Articles, Zoning|Comments Off

Pot-based Prescription Drug Looks for FDA OK

Associated Press: “A British company, GW Pharma, is in advanced clinical trials for the world’s first pharmaceutical developed from raw marijuana instead of synthetic equivalents – a mouth spray it hopes to market in the U.S. as a treatment for cancer pain. And it hopes to see FDA approval by the end of 2013. Sativex contains marijuana’s two best known components—delta 9-THC and cannabidiol—and already has been approved in Canada, New Zealand and eight European countries for a different usage, relieving muscle spasms associated with multiple sclerosis.”

By On the Net|2015-04-06T18:53:10-07:00January 23rd, 2012|Stories & Articles|Comments Off

Cops & DEA Raid Two Dispensaries Raided in Costa Mesa

Hightimes: “Even the local cops and DEA agents seemed to question (at least jokingly) why they were raiding Otherside Farms, an upscale medical marijuana dispensary in Costa Mesa, California on Tuesday. . . . In all, authorities seized 200 plants, an undisclosed amount of cash and Otherside’s bank records. And while the joint local and federal operation raided another dispensary called American Collective, they also ignored roughly a dozen others still doing business in Costa Mesa.

By On the Net|2017-02-12T07:38:04-07:00January 22nd, 2012|California News, Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles|Comments Off

DHS Issues Arizona Medical Marijuana Dispensary Update

Today Will Humble, Director of the Arizona Department of Health Services, said on his blog:

“With the recent ruling in Maricopa Superior Court, ADHS is analyzing the best way to responsibly begin accepting applications for medical marijuana dispensaries. Last week, the Governor instructed ADHS to proceed with the dispensary portion of the AMMA. One of the stumbling blocks was the pending Compassion First vs. Arizona case, which challenged some of ADHS’ rules for prospective dispensary owners. Now that the judge has ruled, ADHS is working to determine the next steps to begin accepting dispensary applications.”

The starter’s pistol was fired and the race to find a location for your dispensary is on. The three most important tasks all prospective Arizona medical marijuana dispensaries must do yesterday are:

Form your nonprofit entity that will be the signer on the lease for the premises in which the dispensary will sell medical marijuana to patients and where it will grow medical marijuana.
Find a location for your dispensary that is properly zoned to allow the medical marijuana dispensary use and arrange to have the nonprofit entity sign a lease with the landlord.
Apply for a comfort letter from the applicable zoning authority.

Before the Governor killed Arizona medical marijuana dispensaries last year it was the wild wild west as far as finding suitable sites and getting them tied up. Given the threats the U.S. attorneys have been making to landlords (cancel leases to medical marijuana dispensaries or you will forfeit your land) I predict there will be fewer landlords who are willing to lease to a dispensary so the demand for the fewer properly zoned sites will be much greater than last year.

By On the Net|2012-01-19T22:07:17-07:00January 19th, 2012|Stories & Articles, Will Humble Speaks|Comments Off

Pot Dispensary Applications May Be Accepted By Summer

AZ Journal: “Governor Jan Brewer has asked the Arizona Department of Health Services (ADHS) to begin processing medical marijuana dispensary applications. ‘We’re working on those rules right now. The process is complicated by the fact that a lawsuit called Compassion v. Arizona is challenging the scope and constitutionality of our medical marijuana rules,’ said [Director of Arizona Health Services Will] Humble. ‘If that lawsuit is withdrawn or settled quickly, we could begin accepting dispensary applications this summer’.”

The judge ruled on January 16, 2012, that Compassion First, LLC, won its lawsuit against Arizona, but the Governor who is now 0 for 2 in medical marijuana litigation has 30 days to appeal the ruling.

By On the Net|2019-06-14T08:25:44-07:00January 19th, 2012|AZ Marijuana Law Lawsuits, Stories & Articles|Comments Off

Judge: Brewer Illegally Delayed Marijuana Law

Yuma Sun: “A state judge has ordered Gov. Jan Brewer to finally fully implement the 2010 voter-approved Medical Marijuana Act, saying she acted illegally in holding it up. Maricopa County Superior Court Judge Richard Gama rejected the governor’s argument that she has the discretion to delay enactment of parts of the law while she sought a ruling from another court about the liability of state workers under federal drug laws. ‘Defendants cite no authority for this proposition, and the court has found none,’ Gama wrote in his ruling made public Wednesday.”

By On the Net|2015-04-06T18:53:10-07:00January 19th, 2012|AZ Marijuana Law Lawsuits, Stories & Articles|1 Comment

Proposed Arizona Law Approves Discipline of Doctors Who Improperly Recommend Medical Marijuana

KTAR.com: “A lawmaker wants to make it clear that state officials can notify licensing boards when medical professionals are suspected of improperly recommending marijuana for patients. Rep. Kimberly Yee, R-Phoenix, said clarifying in law that the Arizona Department of Health Services has such authority would help officials to enforce rules applying to the voter-approved Arizona Medical Marijuana Act. HB 2035 specifies that recommending medical marijuana for other than a debilitating medical condition is unprofessional conduct.”

By On the Net|2017-02-12T07:38:04-07:00January 19th, 2012|AZ Legislation, Stories & Articles|Comments Off

Feds Continue Attack on Medical Marijuana Dispensaries & Their Landlords in CA & CO

The federal crackdown on state legal medical marijuana dispensaries continues in California and Colorado. In the fall of 2011, the two U.S. Attorneys for the State of Washington sent letters to 40 landlords that leased to medical marijuana dispensaries and threatened to take legal action to confiscate their land if they did not cancel their leases with the dispensaries. Would be Arizona dispensary owners and their prospective landlords should read the following stories:

Feds continue crackdown on CA pot dispensaries

Fed pot crackdown hits Colo. shops near schools – “Federal officials on Thursday began a California-style crackdown on medical marijuana dispensaries in Colorado that targets those located near schools . . . . U.S. Attorney John Walsh said 23 dispensaries within 1,000 feet of schools have until Feb. 27 to shut down or face federal penalties, which can include asset seizure or forfeiture of property. The warning letters dated Thursday were being sent to dispensary owners and their landlords.”

Extensive Colo. pot rules don’t prevent crackdown – “U.S. Attorney John Walsh in Denver sent letters this week to 23 dispensaries near schools telling them to shut down or else. The warnings are the strongest message to date that federal law enforcement won’t tolerate commercial marijuana sales in Colorado.”

Fed med marijuana crackdown may come to Colorado – A December 14, 2011, story that appears to have predicted this Colorado crackdown. “Federal authorities are considering a statewide crackdown on medical marijuana businesses in Colorado in the first sign that a coordinated offensive against the industry is expanding from California. A law enforcement official told The Associated Press on Wednesday that such an enforcement action is under consideration for Colorado early next year

By On the Net|2017-02-12T07:38:04-07:00January 18th, 2012|California News, Colorado News, Federal Dispensary Attacks, Stories & Articles|Comments Off

Arizona Superior Court Nixes Some Stupid Department of Health Services Medical Marijuana Dispensary Requirements

Phoenix New Times: “Arizona needs to start up the 2010 Medical Marijuana Act as voters intended, but without several of the rules designed to restrict dispensary applicants, a judge has ordered. Maricopa County Superior Court Judge Richard Gama ruled on the Compassion First, LLC, lawsuit yesterday . . . .Gama nixed the rules that require dispensary applicants to:

* Have been an Arizona resident for three years
* Have filed personal income taxes in Arizona for the previous three years
* Have never before filed for personal or corporate bankruptcy
* Not be delinquent on child support, taxes, parking tickets, student loans or other unpaid debts to the government.

Those rules are ‘onerous and substantively alter the requirements of the Act,’ Gama wrote in his minute entry. ‘DHS cannot bootstrap substantive regulations of who may apply’…”

The following statements are taken from Judge Gamma’s Minute Entry dated January 17, 2012:

“DHS cannot bootstrap substantive regulations of who may apply onto its mandate that it consider such applications in a manner as to protect against diversion and theft. . . . The Court finds that DHS exceeded its statutory authority in promulgating these challenged regulations, and therefore they are invalid. . . .

IT IS ORDERED declaring the following regulations to be ultra vires and invalid:

R9-17-322(A)(2) (requiring applicant to have been an Arizona resident for three years);

R9-17-302(A)(4) (setting criteria that applicant have never filed personal or corporate bankruptcy);

R9-17-302(A)(1) (setting criteria that applicant has submitted Arizona personal income tax returns for previous three years);

R9-17-302(A)(2) (setting criteria that applicant is current on courtordered child support; is not delinquent in paying taxes, interest or penalties to the government; does not have an unpaid judgment to the government; and is not in default on a government issued student loan).

IT IS FURTHER ORDERED directing Defendants to implement the lawful provisions of the AMMA and, if necessary, to promulgate regulations that conform thereto.”

Results of Governor Brewer vs. the People of Arizona & Proposition 203 Lawsuits

People 2 – Brewer 0

Maybe the Gov needs to get a better lawyer.

By On the Net|2017-02-12T07:38:04-07:00January 18th, 2012|AZ Marijuana Law Lawsuits, Stories & Articles|Comments Off

Why Every Arizona Medical Marijuana Dispensary Must Have a Buy Sell Agreement

My name is Richard Keyt. I am an Arizona business lawyer who has practiced law in Arizona since 1980 and who has formed thousands of companies. I have seen far too many situations where owners of a company suffered dearly because they failed to adopt a Buy Sell Agreement. When people join together (other than a husband and wife) to go into business they do not realize that business divorces are more common than husband and wife divorces (50%+). A U.S. Bureau of Labor Statistics study found that 66% of new businesses did not last four years. A special tabulation by the Bureau of the Census produced for the Office of Advocacy of the U.S. Small Business Administration found that 71% of start up businesses failed within ten years.

Companies fail for many reasons, but a common reason for failure is one owner or one group of owners cannot get along with another owner or another group of owners. When this happens I say the owners need a “company divorce.” Unfortunately for most people who need a company divorce there is no easy way to consummate the divorce because the owners never signed a Buy Sell Agreement. Arizona law does not provide for a company divorce other than an involuntary judicial dissolution. When the owners of an Arizona company cannot agree on how to divorce and they do not have a Buy Sell Agreement, they only have two options: (1) continue on indefinitely, or (2) one owner can file a lawsuit in Arizona Superior Court and ask the court to dissolve the company.

The involuntary judicial dissolution is always an expensive nightmare for all concerned. Each side has to burn money (i.e. attorneys’ fees) while waiting for the court to decide how to divide the pie and kill the company. Judicial dissolution should be the last resort because it ultimately ends with the termination of the company unless the parties tire of burning money and agree to a settlement.

The Buy Sell Agreement is the Exit Strategy

Without exception I always recommend that when people go into business together the first thing they should do after forming their new company is adopt a Buy Sell Agreement because it contains the owners’ exit strategy. A good Buy Sell Agreement provides for how the owners will deal with and buy out the interests of one or more owners when they cannot agree or on the happening of a triggering event such as death or termination of employment. The purpose of the Buy Sell Agreement is to make a company divorce less expensive and painful for all owners.

For more about the importance of the Buy Sell Agreement see my article called “A Multi-Member LLC’s Most Important Document.”

Why Every Arizona Medical Marijuana Dispensary Must Have a Buy Sell Agreement

The Buy Sell Agreement is a must have document for every Arizona medical marijuana dispensary company because if ANY PRINCIPAL OFFICER OR BOARD MEMBER OF THE COMPANY CEASES TO MEET ANY ONE OF THE REQUIREMENTS CONTAINED IN THE ARIZONA DEPARTMENT OF HEALTH SERVICES’ RULES THE COMPANY WILL BE PREVENTED FROM APPLYING FOR A DISPENSARY LICENSE OR IF IT HAS A LICENSE THE ADHS WILL REVOKE THE COMPANY’S DISPENSARY LICENSE. Consider this example:

Example 1: World Wide Widgets, LLC, an Arizona nonprofit LLC, has three members, Homer Simpson, Ned Flanders and Chief Wiggins. They invest a ton of money, time and effort to obtain a license to operate an Arizona medical marijuana dispensary. Two years after the LLC opened its doors for business, Ned Flanders is convicted of an excluded felony. The Arizona Department of Health Services will revoke the company’s dispensary license.

The Arizona Department of Health Services medical marijuana dispensary rules contain grounds to revoke or deny an original and a renewal dispensary license if any principal officer or board member of the company violates any of the prohibitions contained in the rules. Here are the conditions that principal officer or board members must satisfy at all times:

R-17-322.A.2: “The Department shall deny an application for a dispensary registration certificate or a renewal if: . . . A principal officer or board member . . .

b. Has been convicted of an excluded felony offense.

c. Has served as a principal officer or board member for a dispensary that:

i. Had the dispensary registration certificate revoked, or

ii. Did not obtain an approval to operate the dispensary within the first year after the dispensary registration certificate was issued.

e. Is a physician currently providing written certifications for medical marijuana for qualifying patients;

f. Is a law enforcement officer; or

g. Is an employee or contractor of the Department”

R-17-322.B states: “The Department may deny an application for a dispensary registration certificate if a principal officer or board member of the dispensary provides false or misleading information to the Department.”

R-17-322.C.2 states: “The Department shall revoke a dispensary’s registration certificate if . . . . A principal officer or board member has been convicted of an excluded felony offense.”

If any principal officer or board member is convicted of an excluded felony the conviction will prevent the company from obtaining OR RENEWING a dispensary license. If the company has a dispensary license, ADHS will revoke its license.

The term “excluded felony” is defined in Arizona Revised Statutes Section 36-2801.7 , which states:

“Excluded felony offense” means:

(a) A violent crime as defined in section 13-901.03, subsection B, that was classified as a felony in the jurisdiction where the person was convicted.

(b) A violation of a state or federal controlled substance law that was classified as a felony in the jurisdiction where the person was convicted but does not include:

(i) An offense for which the sentence, including any term of probation, incarceration or supervised release, was completed ten or more years earlier.

(ii) An offense involving conduct that would be immune from arrest, prosecution or penalty under section 36-2811 except that the conduct occurred before the effective date of this chapter or was prosecuted by an authority other than the state of Arizona.

How a Good Buy Sell Agreement Can Solve the Ineligible Owner Problem

My Buy Sell Agreement for a company that intends to acquire and operate an Arizona medical marijuana dispensary solves the owner ineligibility problem because it provides that if an owner ever ceases to meet all the ADHS eligibility requirements, then at that moment in time the company purchases the ownership interest of that owner for an amount calculated by the method selected by the owners and set forth in the Buy Sell Agreement. The end result is that an ineligible owner is never a problem that would prevent the company from obtaining or renewing its dispensary license. My Buy Sell Agreement also provides that if any eligibility requirement ceases to be an ADHS requirement to renew the dispensary license, that requirement will no longer trigger a buy out.

Example 2: Same facts as in Example 1 except all the members of World Wide Widgets, LLC, signed my Buy Sell Agreement. Effective simultaneously with Ned’s conviction of an excluded felony his membership interest in the company was purchased by the company and Ned ceased to be a member. The Buy Sell Agreement contains a valuation method that determines the purchase price and it provides for the terms of the payment of the purchase price according to what the members agreed to. For example the value of the company might be determined by an appraisal method with the purchase price to be paid with a 20% down payment within thirty days of the date of Ned’s felony conviction and equal payments of principal and interest at four percent over 5 years.

Because I believe this is such an important issue, every one of the nonprofit LLCs that I form must have my Buy Sell Agreement.

If you need a Buy Sell Agreement for a prospective Arizona medical marijuana dispensary, call me, Richard Keyt, at 602-906-4953, ext. 1.

By On the Net|2017-10-07T09:54:54-07:00January 16th, 2012|Legal Issues|1 Comment

Flagstaff Pot Store Open for Business

AZDailySun: “It looks like any doctor’s office. There are no Bob Marley posters or blacklights on the walls, and the latest issues of Hightimes aren’t strewn across the coffee table. But if you have a medical marijuana prescription, this might be the only place in Flagstaff for you to obtain the substance legally. The Grassroots Wellness Center, which opened its doors last month, is owned by longtime Flagstaff artist David Grandon, who says his goal is to help sick people feel better. The center offers a variety of health services and classes devoted to marijuana cultivation, cooking and legal issues.”

By On the Net|2012-01-16T08:18:10-07:00January 16th, 2012|Cannabis Clubs, Stories & Articles|Comments Off

Many US Communities are Blocking Medical Marijuana

Associated Press: “More and more states are saying yes to medical marijuana. But local governments are increasingly using their laws to just say no, not in our backyard. In California, with the nation’s most permissive medical marijuana laws, 185 cities and counties have banned pot dispensaries entirely. In New Jersey, perhaps the most restrictive of the 17 states that have legalized marijuana for sick people, some groups planning to sell cannabis are struggling to find local governments willing to let them in.”

By On the Net|2015-04-06T18:53:10-07:00January 15th, 2012|Stories & Articles|Comments Off

Arizona Medical Marijuana Dispensaries May Be Delayed by Compassion First, LLC vs. Arizona Lawsuit

Phoenix Business Journal: “Dispensary lawsuit presents hurdle for Arizona medical marijuana law. Arizona’s medical marijuana industry received a reprieve when Gov. Jan Brewer announced on Friday she would not continue to challenge the voter-approved medical marijuana law, but another lawsuit has put a kink in the process. A lawsuit filed in July by Compassion First LLC, a dispensary company, against the state and government officials in Arizona Superior Court is the next hurdle. Gerald Gaines, founder of Compassion First said he will not drop the lawsuit.”

The lawsuit is Compassion First, LLC vs. Arizona filed in Arizona Superior Court.

For more on Arizona Governor Jan Brewer’s decision to drop her lawsuit against the U.S. read “Arizona’s Brewer to Abandon Marijuana Lawsuit, Allow Dispensaries to Open,” “Gov. Brewer won’t refile lawsuit against US over implementation of Ariz. medical marijuana law,” “Brewer lifts hold on medical pot dispensaries process,” “AZ plans to begin issuing licenses for pot dispensaries.”

By On the Net|2017-02-12T07:38:03-07:00January 14th, 2012|AZ Marijuana Law Lawsuits, Stories & Articles|Comments Off

Eleven Critical Tasks Every Prospective Arizona Medical Marijuana Dispensary Must Accomplish to Be Able to Submit an Application to DHS for a Medical Marijuana Dispensary License

Updated on January 14, 2012, from my task list first published on April 24, 2011.

I am reposting and updating this article in light of the fact that Arizona Governor Jan Brewer ordered the Arizona Department of Health Services to implement medical marijuana dispensaries in Arizona. Check back because I will update this task list when ADHS issues the new time lines and changes to its regulations.

Here is my list of critical tasks that each prospective Arizona medical marijuana dispensary must accomplish before it can file an application for a dispensary registration certificate beginning [new date to come from ADHS]. If any one of the following is not satisfied on or before [new date to come from ADHS], the last day to file the application for a dispensary registration certificate, the application will be rejected.

1. Find a Properly Zoned Site Where the Dispensary Will Operate. Find a site where the nonprofit entity could operate its dispensary. You must show the “physical address of the proposed dispensary” on the application. R9-17-304.D.1.b. The site must be properly zoned. See “Prospective Dispensary’s Single Most Important Task Before April 30, 2012,” “How Does My Dispensary Tie Up Land for its Retail & Cultivation Sites?” and “CHAA on This!“

2. Landlord Comfort Letter. R9-17-304.D.7 requires that the dispensary applicant get written “Permission from the owner of the physical address of the proposed dispensary for the entity applying for a dispensary registration certificate to operate a dispensary at the physical address.”

3. Zoning Comfort Letter. Obtain a comfort letter from the appropriate zoning authority that says the the proposed location of the dispensary is “groovy.” Rule R9-17-304.D.6 states that the comfort letter must be “from the local jurisdiction where the dispensary’s proposed physical address is located” and it must say that “There are no local zoning restrictions for the dispensary’s location, or . . . The dispensary’s location is in compliance with any local zoning restrictions.” See “Must My Dispensary Obtain a Conditional Use Permit from the City before it can File an Application for an Arizona Medical Marijuana Dispensary License?,” the DHS FAQ DI12 & DI13 about certificates of occupancy and special use permits,

4. Medical Director. Enter into a contract with a medical director who has obtained a license from Arizona Department of Health Services to act as the medical director. The application must include the medical director’s DHS license number. R9-17-304.D.1.e. This means the medical director must apply for his or her DHS license asap. See “Clauses to Include in a Contract between a Medical Director & a Dispensary.”

5. Policies & Procedures. Prepare the following written policies and procedures per R9-17-304.D.4 that comply with the requirements in the DHS rules for:

a. Inventory control (task 5),
b. Qualifying patient record-keeping (task 6),
c. Security (task 7), and
d. Patient education and support (task eight)

You should be working on these documents now so they will be ready when you submit the application.

9. By-laws. Prepare the dispensary’s by-laws containing provisions for the disposition of revenues and receipts. R9-17-304.D.8 See “What the Final DHS Rules Require to Be In Dispensary Bylaws,” “Bylaws for Arizona Medical Marijuana Dispensaries,” “Bylaws – We Don’t Need No Stinking Bylaws or Do We?”

10. Business Plan. Prepare a business plan demonstrating the on-going viability of the dispensary on a not-for-profit basis. R9-17-304.D.9. See “What Must be In an Arizona Medical Marijuana Dispensary Applicant’s Business Plan.”

11. Bank Comfort Letter. Last minute rules R9-17-302A.5 and R9-17-304.D.1.f.ii. require that every application for an Arizona medical marijuana dispensary license contain a financial institution comfort letter that:

(1) Is from an in-state financial institution or an out-of-state financial institution;

(2) Is dated within 30 days before the date the dispensary registration certificate application was submitted; and

(3) Demonstrates that the entity applying for the dispensary registration certificate or a principal officer of the entity has at least $150,000 under the control of the entity or principal officer to begin operating the dispensary and has had control of the $150,000 for at least 30 days before the date the dispensary registration certificate application was submitted“

By Richard Keyt|2012-05-13T16:18:49-07:00January 14th, 2012|Legal Issues, Stories & Articles|Comments Off

Checklist for Opening an Arizona Medical Marijuana Dispensary

Updated on January 13, 2012, from my checklist first published on January 16, 2011.

Here’s my checklist for the legal issues that every prospective Arizona medical marijuana dispensary business must complete, sooner rather than later than the yet to be announced date when the Arizona Department of Health Services will stop accepting applications for dispensary registration certificates. Check back in the future because I will update the checklist as I find more legal issues to add to the list.

See “Prospective Dispensary’s Single Most Important Task Before April 30, 2012” and “Ten Critical Tasks Every Every Prospective Arizona Medical Marijuana Dispensary Must Accomplish to Be Able to Submit an Application to DHS for a Medical Marijuana Dispensary License.”

1. Create an Arizona LLC to own and operate the dispensary business and hold the medical marijuana dispensary license.

A. Make sure that all members satisfy all of the requirements for ownership set forth in the DHS rules.

B. Members adopt Bylaws that comply with the DHS rules. R 9-17-304.D.8 states that the Bylaws must contain “provisions for the disposition of revenues and receipts.” See “What the Final DHS Rules Require to Be In Dispensary Bylaws,” “Bylaws for Arizona Medical Marijuana Dispensaries,” “Bylaws – We Don’t Need No Stinking Bylaws or Do We?”

C. Members sign a resolution approving the Bylaws.

D. Members adopt a buy-sell agreement that contains their exit strategy and deals with issues such as having the LLC purchase the interest of a deceased owner to make sure that no person becomes an owner who does not satisfy all of the requirements of the DHS rules. to be an owner.

E. Members sign a resolution approving the buy-sell agreement.

F. Members sign a resolution giving the designated officers managers the power and discretion to sign any and all contracts they deem necessary and appropriate to carry out the purposes of the business.

G. The LLC enters into written Nondisclosure / Confidentiality Agreements with all members.

2. Obtain a federal employer identification number for the LLC.

3. Open a bank account in the name of the LLC. See “Will Some Banks Refuse to Give My Dispensary a Bank Account?” and Banking Issues.

4. Hire a Certified Public Accountant to determine if the LLC should be taxed as a sole proprietorship (if it has one owner or husband and wife owners who own their interest in the LLC as community property), a partnership (if there are two or more members), a C corporation under subchapter C of the Internal Revenue Code of 1986, or an S corporation under subchapter S of the Internal Revenue Code (if the LLC meets the requirements to be an S corporation for federal income tax purposes. (more…)

By Richard Keyt|2017-10-07T09:54:53-07:00January 13th, 2012|Legal Issues, Medical Directors|Comments Off

Arizona Department of Health Services’ First Announcement about the Dispensary Application Process

The following is the text of a January 13, 2012, blog post by Will Humble on his Arizona Department of Health Services website:

Last May (after receiving a threatening letter from the Arizona U.S Attorney’s Office) the Governor suspended the dispensary portion of the Arizona Medical Marijuana Act with a genuine concern that state employees would be federally prosecuted. Last year, we asked the federal court to provide us with guidance regarding the obvious conflicts between the Arizona law and the federal Controlled Substances Act. The federal court’s refusal to address the issue on the merits left many unanswered questions regarding these conflicts. It’s unfortunate that the Federal court and the Arizona U.S Attorney’s Office couldn’t provide clarity for us on this issue. However, after careful consideration, the Governor has asked us to implement the dispensary portion of the AZ Medical Marijuana Act.

Our first step will be to review the rules for accepting dispensary applications. Our rules had originally stated that we’d accept dispensary applications last June. Obviously, that’s no longer possible- so we’ll need to set new application dates using the State’s rulemaking process. We’re working on those rules right now. The process is complicated by the fact that a lawsuit called Compassion v. Arizona is challenging the scope and constitutionality of our medical marijuana rules. If that lawsuit is withdrawn or settled quickly, we could begin accepting dispensary applications this Summer.

By On the Net|2015-04-06T18:53:10-07:00January 13th, 2012|Stories & Articles, Will Humble Speaks|Comments Off

Arizona Governor Reinstates Medical Marijuana Dispensaries

The following is the text of Arizona Governor Jan Brewer’s January 13, 2012, press release announcing she instructed the Arizona Department of Health Services to move forward with implementing Arizona’s medical marijuana dispensaries:

“The State of Arizona will not re-file in federal court a lawsuit that sought clarification that State employees would not be subject to federal criminal prosecution simply for implementing the Arizona Medical Marijuana Act (AMMA). Instead, I have directed the Arizona Department of Health Services to begin accepting and processing dispensary applications, and issuing licenses for those facilities once a pending legal challenge to the Department‟s medical marijuana rules is resolved.

“I also have sent a letter to Ann Birmingham Scheel, Acting U.S. Attorney for Arizona, notifying her of the State‟s action at this time and – once again – seeking assurance and clarification as to the federal government’s position regarding State employee participation in the licensing or regulation of medical marijuana dispensaries.

“It is well-known that I did not support passage of Proposition 203, and I remain concerned about potential abuses of the law. But the State’s legal challenge was based on my legitimate concern that state employees may find themselves at risk of federal prosecution for their role in administering dispensary licenses under this law. Last week, to my great disappointment, the U.S. District Court of Arizona dismissed the State‟s lawsuit on procedural grounds and refused to provide clarity on the likely conflict between Proposition 203 and federal drug law.

“Remember how we got to this point. The State of Arizona was fully implementing the provisions of Proposition 203 last spring. That’s when Arizona was among a host of states that received letters from the U.S. Department of Justice threatening potential legal ramifications for any individual participating in a medical marijuana program, even in states where it had been legally approved. Specifically, the Arizona letter – dated May 2, 2011 – warned that growing, distributing and possessing marijuana in any capacity, other than as part of a federally authorized research program, is a violation of federal law regardless of state laws that purport to permit such activities.”

“Would state employees at the Department of Health Services, charged with administering and licensing marijuana dispensaries face federal prosecution? This was the basis for calling a ‘time out’ in order for the State to seek a straightforward answer from the court. With our request for clarification rebuffed on procedural grounds by the federal court, I believe the best course of action now is to complete the implementation of Proposition 203 in accordance with the law.

“Know this: I won‟t hesitate to halt State involvement in the AMMA if I receive indication that State employees face prosecution due to their duties in administering this law.”

For Prospective Arizona Medical Marijuana Dispensary Owners

Stay tuned. I will be watching the ADHS for the new dispensary application process and deadlines. If you have not yet formed your nonprofit entity to seek a license to operate an Arizona medical marijuana dispensary, I want to form it for you. Call me at 602-906-4953, ext. 1 if you have questions.

By Richard Keyt|2012-03-10T09:01:57-07:00January 13th, 2012|AZ Marijuana Law Lawsuits, Stories & Articles|Comments Off

A Little Guy’s Plea to Our Governor/Savior

Arizona Republic: “Now that Jan Brewer has elevated her professional status from governor to savior, I’m wondering if she could perform a small miracle for a constituent named Mike Neil. . . . Brewer believes herself to be the savior of ALL states, not just Arizona, when it comes to standing up to the federal government? The citizens in her state voted for medical marijuana. Why now would she defer to the feds? Neil told me, ‘I have e-mailed and written our Governor, (Attorney General Tom) Horne, Vice President Biden, and even President Obama but not one of them even wrote back’.”

By On the Net|2012-01-12T06:52:37-07:00January 12th, 2012|Stories & Articles|Comments Off

Study: Light use of Marijuana Doesn’t Harm Lungs

Associated Press: “Smoking a joint once a week or a bit more apparently doesn’t harm the lungs, suggests a 20-year study that bolsters evidence that marijuana doesn’t do the kind of damage that tobacco does.”

By On the Net|2012-01-18T19:27:06-07:00January 11th, 2012|Stories & Articles|Comments Off

Sobol Files Motion to Enjoin Governor From Using State Funds to Impede Arizona Medical Marijuana Act

The following is the text of Alan Sobol’s January 10, 202 press release:

Allan Sobol the aggressive marketer of the Arizona Medical Marijuana Industry, filed a motion in Maricopa County Superior Court today asking Judge Dean Fink, to impose a preliminary and permanent injunction against Arizona Governor, Jan Brewer and Will Humble, Director of the Arizona Health Department . If granted by the Court the Injunction would enjoin the Governor and Humble from expending any public funds to impede, delay or in any way whatsoever, prevent the full implementation of the of the Arizona Medical Marijuana Act.(AMMA).   Sobol says, “It is an outrageous abuse of the public’s trust, and violation of her constitutional obligations for the Governor to abuse public funds to overturn the will of the voters. This malfeasance must be stopped! Public policy and legal precedent, mandates that the Governors actions be brought into check with the will of the voters. This motion seeks to enjoin the Governor from using public funds to impede, or delay the AMMA.

Filed in May, Brewer’s federal complaint was one of three cases she filed to limit the AMMA.   Brewer argued that state officials fear federal prosecution for implementing the law, despite Arizona’s former top federal prosecutor saying publicly the federal government has “no intention of targeting or going after people who are implementing or who are in compliance with state law.” The U.S. Justice Department federal even filed a motion to dismiss the case.   Brewer also filed two additional cases in State Superior Court attempting to limit access to patients.

  The Arizona Voter Protection Act, enshrined in our state constitution, w as specifically meant to preclude the Gov ernor and her administration from stopping a voter initiativ e, passed by a majority of the voters in Arizona, from going int o effect. While the executive branch seeks to disgu ise its efforts as a civil complaint, if the cou rt granted the requested relief, the effect will be the same: Qualified patients would have been denied their rig ht to obtain voted approved medical marijuana.

In last weeks ruling, U.S. District Court Judge Susan R. Bolton said there is no genuine threat of imminent federal prosecution of state officials who carry out the law. While the Judge did grant the Governor thirty days in which to amend her compliant, Judge Bolton, nevertheless stated in her Order that she is “unconvinced” that the State could correct the defects in the case. The Judge did focus on the “ripeness issue”, a point driven home by ACLU attorney Ezekiel Edwards.

According to a spokesperson for the Governor, Brewer is intending to refile her case to Stop the Medical Marijuana Act.

The Arizona Association of Dispensary Professionals, llc (AADP) represented by attorney Thomas Dean, was the first defendant to challenge the Governors complaint. AADP is Arizona’s largest marijuana trade organization representing the interest of over 10,000 members. AADP believes the Governor’s complaint was disingenuous and frivolous and a concerted scheme with other government officials who conspired to thwart the will of the Arizona voters and intentionally delay, impede, and otherwise prevent the AMMA from being implemented. Allan Sobol, President of AADP, has repeatedly stated, “This is not about marijuana use, this is about government abuse. Whether you are pro or con marijuana you need to be alarmed with the Governors underhanded attempts to over ride the will of the Voters”.

As Governor, Brewer is vested with the supreme executive power of Arizona and is responsible for the faithful execution of all laws, including the Arizona Medical Marijuana Act. The mask has now come off the Governors face, Sobol says, any guise that the Governors legal efforts were truly intended to protect state employees few out the door when the Federal Court dismissed her case. The administration seeks to destroy any hope of a viable Medical Marijuana program, which reveals its underlying contempt for the will of the people and the rule of law.

Arizona voters in 2010 passed Proposition 203, which allows seriously ill patients in Arizona to use marijuana as medicine with a doctor’s recommendation. The law allows marijuana to be distributed by tightly regulated clinics to patients with state-issued registry cards and exempts from state prosecution not only seriously ill Arizonans but also their caregivers and a limited number of certified, non-profit medical marijuana dispensaries that will serve qualifying patients.

The state has issued approximately 19,000 medical marijuana cards to qualified patients collecting almost 3 million dollars in fees, but has fraudulently failed to provide a way, consistent with the AMMA, for patients to obtain their voter approved medication .

The entire text of Sobol’s Motion can be found at: Seed2success.com/enjoingovernor.html

Attorney Tom Dean can be reached at: 602-635-4990

For additional information or questions please contact:

Allan Sobol, President
602 504-6050
[email protected]

By On the Net|2012-01-11T07:05:53-07:00January 11th, 2012|AZ Marijuana Law Lawsuits, Stories & Articles|Comments Off

Mendocino County Suspends Pot Permit Program

Associated Press: “Mendocino County’s permit process for medical marijuana cultivation has been suspended pending the outcome of a Southern California court case that challenges the legality of issuing permits for activities that are barred under federal law. “

By On the Net|2017-02-12T07:38:03-07:00January 10th, 2012|California News, Stories & Articles|Comments Off

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Results of Governor Brewer vs. the People of Arizona & Proposition 203 Lawsuits

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The Buy Sell Agreement is the Exit Strategy

Why Every Arizona Medical Marijuana Dispensary Must Have a Buy Sell Agreement

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For Prospective Arizona Medical Marijuana Dispensary Owners

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