Marijuana Marketers Face Resistance From Google, Media Companies

Huffington Post:  “In spite of what you may think, legal pot doesn’t just sell itself, marijuana’s marketers are finding. . . . The marketers said they’re finding much of the media industry remains hostile to pot businesses. Online search giant Google wants nothing to do with them, as do many newspaper publishers. Billboard operators are reluctant to offer them space. Even some pro-marijuana activists said they worry that an out-and-proud embrace of marijuana advertising could spark a reactionary backlash.

By |2013-09-04T07:37:14-07:00September 4th, 2013|Legal Issues, Miscellaneous, Stories & Articles|Comments Off on Marijuana Marketers Face Resistance From Google, Media Companies

Arizona Medical Marijuana Law Does Not Allow Possession of Resin Extracted from Cannibis in Food Products

On August 30, 2013, Will Humble, Director of the Arizona Department of Health Services, wrote a detailed article that concludes with the following statement:

“registered identification card holders and dispensaries may be exposed to criminal prosecution under the Criminal Code for possessing a narcotic drug if the card holder or dispensary possesses resin extracted from any part of a plant of the genus Cannabis or an edible containing resin extracted from any part of a plant of the genus Cannabis.’

Read also “Marijuana regulations might not cover all food products.”  The full text of the article is below.

“Are Marijuana and Cannabis the same thing when it comes to Arizona Law?  The short answer is no- and the distinction may be  an important one for Qualified Patients.

The Arizona Medical Marijuana Act provides registry identification card holders and dispensaries a number of legal protections for their medical use of Marijuana pursuant to the Act.  Interestingly, the Arizona Medical Marijuana Act definition of “Marijuana” in A.R.S. § 36-2801(8) differs from the Arizona Criminal Code’s (“Criminal Code”) definition of “Marijuana” in A.R.S. § 13-3401(19). In addition, the Arizona Medical Marijuana Act makes a distinction between “Marijuana” and “Usable Marijuana.” A.R.S. § 36-2801(8) and (15).

The definition of “Marijuana” in the Arizona Medical Marijuana Act is “… all parts of any plant of the genus cannabis whether growing or not, and the seeds of such plant.”  The definition of “Usable Marijuana” is  “…  the dried flowers of the marijuana plant, and any mixture or preparation thereof, but does not include the seeds, stalks and roots of the plant and does not include the weight of any non-marijuana ingredients combined with marijuana and prepared for consumption as food or drink.”  The “allowable amount of marijuana” for a qualifying patient and a designated caregiver includes “two-and-one half ounces of usable marijuana.”  A.R.S. § 36-2801(1).

The definition of “Marijuana” in the Criminal Code is “… all parts of any plant of the genus cannabis, from which the resin has not been extracted, whether growing or not, and the seeds of such plant.”   “Cannabis” (a narcotic drug under the Criminal Code) is defined as: “… the following substances under whatever names they may be designated: (a) The resin extracted from any part of a plant of the genus cannabis, and every compound, manufacture, salt, derivative, mixture or preparation of such plant, its seeds or its resin.  Cannabis does not include oil or cake made from the seeds of such plant, any fiber, compound, manufacture, salt, derivative, mixture or preparation of the mature stalks of such plant except the resin extracted from the stalks or any fiber, oil or cake or the sterilized seed of such plant which is incapable of germination; and (b) Every compound, manufacture, salt, derivative, mixture or preparation of such resin or tetrahydrocannabinol.A.R.S. § 13-3401(4) and (20)(w).

An issue the Department has been wrestling with for some time is how the definition of “Marijuana” and “Usable Marijuana” in the Arizona Medical Marijuana Act and the definition of “Cannabis” and “Marijuana” in the Criminal Code fit together.  This confusion, which appears to be shared by dispensaries and registered identification card holders alike, is not easy to clear up and has resulted in the Department receiving numerous questions regarding the interplay between the protections in A.R.S. § 36-2811 and the Criminal Code.  While we can’t provide legal advice as to whether a certain conduct is punishable under the Criminal Code (only an individual’s or entity’s legal counsel can do this), “Cannabis” is defined as the “resin extracted from any part of a plant of the genus cannabis” and “Cannabis” is listed as a narcotic drug according to the Criminal Code in A.R.S. § 13-3401(4) and (20)(w).

In other words, registered identification card holders and dispensaries may be exposed to criminal prosecution under the Criminal Code for possessing a narcotic drug if the card holder or dispensary possesses resin extracted from any part of a plant of the genus Cannabis or an edible containing resin extracted from any part of a plant of the genus Cannabis.  If you’re concerned that your conduct may expose you to criminal prosecution, you may wish to consult an attorney.  We’ll be providing some specific guidance for dispensaries licensed by the ADHS next week.

Big Practical Problem:  How would a card carrying patient or a dispensary employee know if a food or beverage product contained resin extracted from a cannabis plant?

By |2017-02-11T20:47:07-07:00August 31st, 2013|Legal Issues, Marijuana Crimes, Stories & Articles, Will Humble Speaks|Comments Off on Arizona Medical Marijuana Law Does Not Allow Possession of Resin Extracted from Cannibis in Food Products

How to Avoid a Marijuana DUI in Zero-Tolerance Arizona

Phoenix New Times:  “For the millions of people who now use marijuana legally under their states’ laws, driving in Arizona is technically a crime.  Motorists with pot metabolites in their bloodstreams who want to avoid a marijuana DUI — which comes with nasty fines and a one-year suspension of driving privileges, instead of the regular 90 days for booze DUIs — may want to consult our quick primer below.”

By |2013-08-29T08:06:27-07:00May 2nd, 2013|Legal Issues, Marijuana Crimes, Stories & Articles|Comments Off on How to Avoid a Marijuana DUI in Zero-Tolerance Arizona

Singh Dispensary Solutions dba weGrow Phoenix Sues “Illegal Hydroponics Cartel”

Courthouse News Service:  “Singh Dispensary Solutions dba weGrow Phoenix . . . . [filed a lawsuit in which it claims] ‘Defendants Sunlight Systems, Hydrofarm, BWGS, and R & M Supply Inc., seized upon their substantial market power and the fewness of firms in Arizona to exclusively control the wholesale hydroponics supply market in the state of Arizona, all to the detriment of plaintiff and Arizona consumers’.”

See also “Arizona weGrow Franchise Accuses Rivals of Forming ‘Cartel’ to Sink Phoenix Store.”

By |2017-10-07T09:55:59-07:00November 3rd, 2012|AZ Marijuana Law Lawsuits, Legal Issues, Stories & Articles|Comments Off on Singh Dispensary Solutions dba weGrow Phoenix Sues “Illegal Hydroponics Cartel”

Arizona Attorney General & Maricopa County Attorney Want Judge to Rule Arizona Medical Marijuana Facilities are Prevented by Federal Law

East Valley Tribune:  “Prosecutors urged a judge Friday to declare medical marijuana dispensaries and growing facilities as preempted by federal law.  Maricopa County Attorney Bill Montgomery said there’s no question but that marijuana remains illegal under federal law. And he told Judge Michael Gordon that law classifies marijuana as a Schedule 1 drug for which there is no legitimate medical use. Click here to find out more!What that means, Montgomery argued, is the state is powerless to do anything that ultimately results in the state issuing a license to someone to sell marijuana. If nothing else, he said the requirements of the 2010 voter-approved law for public officials to act put them in the position where they could be prosecuted under federal law for aiding someone else in obtaining the drug.”

See “Judge doesn’t rule following two-hour marijuana hearing” which says “Lawyers for Arizona and the state’s most populous county argued in court Friday that federal drug laws pre-empt Arizona’s voter-approved medical marijuana law.” See also “Arizona Medical-Marijuana Law Debated in Court; Judge Criticizes Wording of 2010 Law” which says the judge in the case said “‘Ultimate irony is that Arizona could have decriminalized pot and said it’s not going to be prosecuted under state law’.”

By |2015-04-06T18:55:45-07:00October 21st, 2012|AZ Marijuana Law Lawsuits, Legal Issues, Stories & Articles|Comments Off on Arizona Attorney General & Maricopa County Attorney Want Judge to Rule Arizona Medical Marijuana Facilities are Prevented by Federal Law

Medical Pot Faces a Key Test in Arizona Court

Arizona Republic:  “The top lawyers for the state and county, strong opponents of Arizona’s medical-marijuana laws, will argue in court today that federal drug laws pre-empt the voter-approved law.  Attorneys arguing on behalf of White Mountain Health Center of Sun City, meanwhile, charge that state law does not require anyone to violate federal laws by issuing permits for medical-marijuana activities since the state has decriminalized those acts. In their lawsuit, they also allege that Maricopa County illegally rejected the center’s registration certificate, which is among the state requirements to become a medical-marijuana dispensary applicant.  At stake is the future of medical marijuana in Arizona.”

By |2012-10-19T07:57:14-07:00October 19th, 2012|AZ Marijuana Law Lawsuits, Legal Issues, Stories & Articles|Comments Off on Medical Pot Faces a Key Test in Arizona Court

Oakland’s Medical Marijuana Lawsuit on Behalf of Harborside May have Statewide Implications

The Daily Californian:  “The city of Oakland has filed a lawsuit against U.S. authorities [U.S. Attorney General Eric Holder and U.S. Attorney for the Northern District of California] Melinda Haag that claims the federal government has overstepped its jurisdiction in the attempted closure of a local medical marijuana dispensary [Harborside Health Center, the largest medical marijuana dispensary in California].  The suit, filed on Oct. 10 in the U.S. District Court for the Northern District of California, could affect all dispensaries in California — including the three medical cannabis dispensaries in Berkeley — after a federal crackdown on cannabis dispensaries began last fall. The crackdown negates a promise by the Obama administration not to raid dispensaries in compliance with state law and guidelines.”

By |2012-10-18T06:09:51-07:00October 18th, 2012|California News, Federal Dispensary Attacks, Legal Issues, Stories & Articles|Comments Off on Oakland’s Medical Marijuana Lawsuit on Behalf of Harborside May have Statewide Implications

Civil & Criminal Issues with Commercial Leases in the Medical Marijuana Industry

Arizona real estate attorney William A. Kozub wrote an article called “Civil & Criminal Issues with Commercial Leases in the Medical Marijuana Industry” published on the Arizona School of Real Estate & Business website.  It’s recommended reading for landlords, real estate brokers, realtors and others who are involved with or considering becoming involved with a lease of Arizona land to a medical marijuana dispensary or a medical marijuana grow facility.  Here are some statements made in the article:

“all owners, agents and property managers who have sought to reap the benefits of the medical marijuana industry must also be aware of the significant civil and criminal risks inherent in this industry, risks that arise from the fact that federal law does not recognize the medical use of marijuana. . . . While a criminal prosecution of the landlord may not occur, the landlord’s building may find that it is a named defendant in a forfeiture proceeding.  Federal law clearly provides for the seizure of ‘all real property, including any right, title, and interest (including any leasehold interest) in the whole of any lot or tract of land and any appurtenances or improvements, which is used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this subchapter punishable by more than one year’s imprisonment’.”

By |2015-04-06T18:55:45-07:00October 6th, 2012|Dispensary Leases, Legal Issues, Stories & Articles|Comments Off on Civil & Criminal Issues with Commercial Leases in the Medical Marijuana Industry

Medical Marijuana Lawsuit Reviewing Scientific Evidence Reaches Federal Court for First Time in Nearly 20 Years

The following is the text of a press release by Americans for Safe Access on October 5, 2012.

For the first time in nearly 20 years, a United States Court of Appeals is set to hear oral arguments in a lawsuit challenging the federal government’s classification of marijuana as a dangerous drug with no medicinal value: Americans for Safe Access v. Drug Enforcement Administration. This historic case will force a federal court to finally review the scientific evidence regarding the therapeutic efficacy of marijuana.

During a press briefing Thursday, plaintiffs in the case, along with leading medical researchers and clinicians, spoke about the necessity of the federal government recognizing current scientific data supporting marijuana rescheduling. Marijuana is currently classified in the same category as heroin despite calls from scientists, medical professionals, and policy makers to reschedule marijuana for medical use.

The U.S. Court of Appeals for the D.C. Circuit will hear opening arguments on the case the morning of October 16, 2012. “Medical marijuana patients are finally getting their day in court,” said Joe Elford, Chief Counsel with Americans for Safe Access (ASA), who will be arguing the case before the D.C. Circuit. “What’s at stake in this case is nothing less than our country’s scientific integrity and the imminent needs of millions of patients.”

On the call, Dr. Donald Abrams, Director of Clinical Programs at San Francisco General Hospital, described the effectiveness of medical marijuana in the treatment regimens of cancer and HIV/AIDS patients. “In my practice every day as a cancer specialist I see patients who have loss of appetite, nausea and vomiting from their chemotherapy, pain on and off of opiates, anxiety, depression, and insomnia,” conditions which Dr. Abrams said can be alleviated by medical marijuana.

Dr. Igor Grant, Executive Vice-Chair, Department of Psychiatry, University of California-San Diego School of Medicine, and director of the Center for Medicinal Cannabis Research, stated that multiple California state-supported studies have resulted in “very good evidence” that medical marijuana “is effective in treating muscle spasticity,” which is often experienced by patients with Multiple sclerosis and other painful disorders. He added that it is critical to separate out patients’ legitimate medical needs from other issues surrounding marijuana’s distribution and usage. Dr. Grant recently published a study in Open Neurology Journal concluding that marijuana’s current classification is “untenable.”

Plaintiff Michael Krawitz, a Gulf War veteran and medical marijuana patient, conveyed his struggle in managing his combat-related pain without relinquishing federally-mandated VA benefits under marijuana’s current classification. Without access to medical marijuana, he stated he is in danger of destabilizing his overall health condition, a situation Krawitz has faced multiple times due to federal policy.

“The time has come to address medical marijuana as a public health issue and for the federal government to prioritize science over politics,” Sherer said.

Listen to the audiotape of a teleconference briefing with researchers, legal counsel and lawsuit plaintiff.

By |2012-10-06T06:35:07-07:00October 6th, 2012|Legal Issues, Stories & Articles|Comments Off on Medical Marijuana Lawsuit Reviewing Scientific Evidence Reaches Federal Court for First Time in Nearly 20 Years

ACLU asks Arizona Judge to Stop Attorney General from Stopping Marijuana Dispensaries

East Valley Tribune:  “The American Civil Liberties Union is asking a judge to rebuff efforts by Attorney General Tom Horne to block state licensing of medical marijuana dispensaries.  In legal papers filed Thursday, attorneys for the group want Maricopa County Superior Court Judge Michael Gordon to rule [in the White Mountain Health Center lawsuit] that Arizona is constitutionally entitled to determine what it does and does not want to make a crime. Click here to find out more! They acknowledged the federal Controlled Substances Act makes possession, sale and transportation of marijuana a felony. But they told Gordon that none of that criminalizes the activities of state and local employees in processing the paperwork for everything from licenses to zoning permits, the reason Horne and Maricopa County Attorney Bill Montgomery contend that part — if not all — of the state law is void.”

By |2015-04-06T18:55:45-07:00September 28th, 2012|AZ Marijuana Law Lawsuits, Legal Issues, Stories & Articles|Comments Off on ACLU asks Arizona Judge to Stop Attorney General from Stopping Marijuana Dispensaries

Nevada Supreme Court to Rule on Medical Marijuana Law

Las Vegas Sun:  “A ruling that Nevada’s medical marijuana law is unconstitutional has put the issue before the state Supreme Court and has lawmakers again pushing to clarify how patients can legally obtain the drug.  After several medical marijuana dispensaries set up shop around Las Vegas in recent years, a task force from the Metro Police Department and the District Attorney’s Office began working with federal authorities on a series of high-profile raids. . . . Most of the medical marijuana dispensaries in Las Vegas have been shut down, he said. They were acting as for-profit entities and required a donation to belong”

The two Nevada cases involve the Jolly Green Meds dispensary and the Sin City Co-op dispensary.

By |2012-08-31T07:21:14-07:00August 31st, 2012|Legal Issues, Stories & Articles|Comments Off on Nevada Supreme Court to Rule on Medical Marijuana Law

Prosecutors Challenge Med Pot Law

AZ Daily Sun:  “The state’s top prosecutor asked a judge Thursday to void a key provision in Arizona’s 2-year-old medical marijuana law.  In legal papers filed in Maricopa County Superior Court, Attorney General Tom Horne argued that voters are legally powerless to authorize anyone to sell marijuana as long as it remains illegal under federal law.  The real goal is to get a ruling declaring the state and federal laws in conflict. Horne said that will then allow him to direct the state Department of Health Services to halt the current process of licensing up to 126 dispensaries to sell the drugs even before the first one has opened its doors.”

By |2012-08-25T07:08:46-07:00August 25th, 2012|AZ Marijuana Law Lawsuits, Legal Issues, Stories & Articles|Comments Off on Prosecutors Challenge Med Pot Law

Arizona Attorney General & Maricopa County Attorney Sue to Stop Arizona’s Medical Marijuana Industry

The following is the text of a press release issued by Arizona Attorney General Tom Horne on August 23, 2012:

Maricopa County Attorney Bill Montgomery and Arizona Attorney General Tom Horne are each filing separate motions for summary judgment in Superior Court today seeking to resolve conflicting issues raised by the Arizona Medical Marijuana Act (AMMA). Today’s filings are the latest response to a lawsuit filed by White Mountain Health Center against Maricopa County and the Arizona Department of Health Services (DHS) and ask the Court to determine whether the AMMA is preempted by federal law prohibiting the possession, distribution and cultivation of marijuana.

“It is the County’s position that the AMMA is in direct violation of the federal Controlled Substances Act and therefore cannot be implemented without exposing County employees to the risk of federal prosecution,” Montgomery said. “The AMMA also runs afoul of the Supremacy Clause enshrined in the U.S. Constitution by our Founding Fathers, which preempts state law that conflicts with federal law,” he added.

Attorney General Tom Horne stated: “I was recently asked by 13 out of the 15 County Attorneys in Arizona to issue an Opinion on whether the AMMA is pre-empted by federal law. The two most recent cases, from California and Oregon, clearly hold that states may not authorize what federal law prohibits. These rulings stem from Article Six of the U.S. Constitution, which, in case of conflict gives supremacy to federal law. Therefore, state authorization for growing or selling marijuana is prohibited under federal law and we are therefore asking the court to dismiss the Plaintiff’s complaint.”

On June 20, 2012 White Mountain Health Center sued Maricopa County and DHS after the County, on the advice of the County Attorney, declined to issue the necessary zoning permits that would allow the Center to operate a non-profit medical marijuana dispensary and cultivation site in Sun City. The case is being heard by Judge Michael D. Gordon.

Related stories: “AG files court papers to ultimately halt licensing of Arizona medical marijuana dispensaries” and “Tom Horne and Bill Montgomery Make Their Move to Nix Arizona’s Medical Marijuana Law.”

By |2015-04-06T18:54:43-07:00August 24th, 2012|AZ Marijuana Law Lawsuits, Legal Issues, Stories & Articles|Comments Off on Arizona Attorney General & Maricopa County Attorney Sue to Stop Arizona’s Medical Marijuana Industry

Arizona Attorney General’s Radio Interview on Arizona’s Medical Marijuana Act

Bill Buckmaster interviewed Arizona Attorney General Tom  Horne on August 21, 2012, about his legal opinion that the Arizona Medical Marijuana Act is partially preempted by federal law.  The AG said his office will intervene in a Maricopa County Superior Court case and seek a court ruling that confirms his nonbinding legal opinion.

By |2015-04-06T18:55:44-07:00August 22nd, 2012|AZ Marijuana Law Lawsuits, Legal Issues, Stories & Articles|Comments Off on Arizona Attorney General’s Radio Interview on Arizona’s Medical Marijuana Act

Debate: Should Owners of Arizona Medical Marijuana Dispensaries be Prosecuted?

ABC15.com:  “Each Sunday, ABC15.com debuts an Arizona issue – along with two opposing sides on the topic. . . . This week we’re tackling the debate on whether or not winners of the Arizona Department of Health Services Medical Marijuana Lottery should be prosecuted.  Sunny Singh, Chief Operations Officer & Owner of weGrow Phoenix, says winners should not be prosecuted because it would continue to delay a potentially lucrative program that’s already been stalled.  Bill Montgomery, Maricopa County Attorney, says while his office has never advocated prosecuting winners, dispensary operators could face prosecution for several reasons.”

By |2017-02-12T07:39:20-07:00August 21st, 2012|Legal Issues, Marijuana Crimes, Stories & Articles|Comments Off on Debate: Should Owners of Arizona Medical Marijuana Dispensaries be Prosecuted?

Colorado Court Ruling Agrees with Attorney General Horne & Says Medical Marijuana Trumped by Federal Law

Denver Post:  “A state court ruling in a legal dispute between a medical-marijuana grower and a dispensary has laid bare an argument that could be the undoing of Colorado’s medical-marijuana system.  Grower Quincy Haeberle sued Blue Sky Care Connection and its manager, Laura Lowden, after saying he delivered $40,000 worth of marijuana to the business and wasn’t paid. . . . But, in an order issued this month, Arapahoe County District Court Judge Charles Pratt found in favor of the dispensary. Because all marijuana sales are illegal under federal law, Pratt reasoned that the contract between grower and dispensary was void — in line with longstanding legal precedent that contracts concerning illegal activities are invalid.”

The judge made the following statement in his order:

“(A)ny state authorization to engage in the manufacture, distribution or possession of marijuana creates an obstacle to full execution of federal law. Therefore, Colorado’s marijuana laws are preempted by federal marijuana law.”

Read “Arizona Attorney General’s Opinion Kinda Corrects Arizona Governor & Concludes Arizona’s Medical Marijuana Act is Partially Preempted by Federal Law” which contains the following quote from a legal opinion issued by Arizona Attorney General Tom Horne”

Because of federal prohibitions, those AMMA provisions and related rules that authorize any cultivating, selling, and dispensing of marijuana are preempted.”

By |2012-08-25T08:05:07-07:00August 19th, 2012|Colorado News, Legal Issues, Stories & Articles|Comments Off on Colorado Court Ruling Agrees with Attorney General Horne & Says Medical Marijuana Trumped by Federal Law

Arizona Republic Rips Maricopa County Attorney’s Because of His Threats to Prosecute Medical Marijuana Patients & Dispensary Owners in Maricopa County

Arizona Republic:  “Maricopa County Attorney Bill Montgomery, like county attorneys across Arizona, is no fan of the state’s medical-marijuana program. . . . But that doesn’t excuse the saber rattling he engaged in last week.”

For more on Montgomery’s threats read “Maricopa County Attorney Warns Everybody in Maricopa County Not to Grow, Sell or Distribute Marijuana Because He Will Prosecute Violators for Felonies.”

By |2012-08-16T07:05:11-07:00August 16th, 2012|Legal Issues, Stories & Articles|Comments Off on Arizona Republic Rips Maricopa County Attorney’s Because of His Threats to Prosecute Medical Marijuana Patients & Dispensary Owners in Maricopa County

Colorado Court Rules Contract Between Marijuana Grower & Dispensary Not Enforceable

Denver Westword Blogs:  “a just-issued decision in Arapahoe County District Court may be the most sweeping to date in Colorado. The conclusion: The medical marijuana industry here and in other states is illegal. Period. . . . It involves a medical marijuana grower whose name is being withheld at his request and Blue Sky Care Connection, a dispensary in Littleton. The plaintiff maintains that he delivered approximately $40,000 worth of MMJ between June and October of 2010, but he never received compensation.”

In the case of Undisclosed Plaintiff vs. Laura Lowden & Blue Sky Connection, LLC, the Colorado Court said:

“Colorado’s marijuana laws are preempted by federal marijuana law. Similarly, in Emerald, the Oregon Supreme Court held that Oregon marijuana law is without effect because Oregon’s marijuana laws are preempted by federal law. 230 P.3d at 529. . . . Consequently, contracts for the sale of marijuana are void as they are against public policy. Accordingly, the contract here is void and unenforceable.”

For more on this case read “Medical marijuana at state level found illegal in potential blockbuster court ruling.”

This Colorado case and the Arizona case of Michele Rene Hammer v. Today’s Health Care II means that two state courts have reached the same conclusion, i.e., contracts that involve medical marijuana will not be enforced because they are against public policy.  For more on the Arizona case see “What Does the Case Mean to People Considering Becoming Involved in Arizona Medical Marijuana Dispensaries?

Blue Sky Connection Medical Marijuana Case

By |2012-08-25T08:05:15-07:00August 13th, 2012|Colorado News, Legal Issues, Stories & Articles|Comments Off on Colorado Court Rules Contract Between Marijuana Grower & Dispensary Not Enforceable

Arizona Republic’s E J Montini Likes Arizona’s Medical Marijuana Law

Arizona Republic columnist E. J. Montini wrote a column in which he rips Arizona Attorney General Tom Horne and Maricopa County Attorney Bill Montgomery because they are ” two men doing everything they can to keep the state from fully implementing the medical-marijuana law that — for a third time — was approved by voters.”  Montini also said that the two “must think of Ryan Hurley as the boogeyman.”

Ryan Hurley is an Arizona attorney who is the media’s go-to-guy when they need a quote about Arizona’s medical marijuana law because he and his law firm represent a lot of applicants for medical marijuana dispensary licenses.  Montini wrote that Ryan Hurley told Montini that “His (Montgomery’s) press conference amounted to fear and intimidation rather than anything new. The county attorney enforces and prosecutes state law, not federal law. … So this sort of notion that he’s going to be out there arresting people under state law is just silly.”  Montini claims Hurley also said “even in California, where there is a lot of uncertainty, these notions that the sky is going to fall just don’t hold up.”

Even the most ardent supporters of Arizona’s medical marijuana law should acknowledge the prosecutors’ war on medical marijuana dispensaries that has been taking place in the last year.  For more on this war that the prosecutors are winning read:

  • Court rulings bode ill for medicinal pot:  “the U.S. Justice Department said that federal courts in all four California judicial districts have rejected appeals by dispensaries threatened with shutdown.  The most recent rejection came this month, when a federal court in Oakland rejected appeals filed by the Marin Alliance for Medical Marijuana in Fairfax, the Medthrive Cooperative and the Divinity Tree Patients’ Wellness Cooperative in San Francisco, and Medthrive’s landlords. Similar appeals by dispensaries in Sacramento, Butte County and Los Angeles County were rejected earlier this year. . . . All told, approximately 400 dispensaries in California have closed since the four U.S. Attorneys began their coordinated crackdown in September”

Looking at the facts some people would say that the sky has actually fallen on the California medical marijuana industry.  Hopefully Mr. Hurley and other attorneys who represent people involved in the soon-to-be operating Arizona medical marijuana dispensary have had their clients sign a good CYA letter that notifies the clients that their activities could cause them to be prosecuted and convicted of violations of federal criminal laws and that they could be imprisoned.

By |2012-08-12T09:35:05-07:00August 12th, 2012|Legal Issues, Stories & Articles|Comments Off on Arizona Republic’s E J Montini Likes Arizona’s Medical Marijuana Law

Maricopa County Attorney Warns Everybody in Maricopa County Not to Grow, Sell or Distribute Marijuana Because He Will Prosecute Violators for Felonies

The video below should be watched in its entirety by the types of people listed below who personally or in connection with any type of entity grow,  sell  or distribute marijuana (medical or otherwise) in Maricopa County, Arizona:

  • People who have a medical marijuana patient or caregiver card.
  • Owners of medical marijuana dispensaries and collectives.
  • Employees or independent contractors who provide  services to a medical  marijuana dispensary or collective.
  • Medical  directors of medical marijuana dispensaries.
  • Landlords who allow their real property to be used by a medical marijuana dispensary or collective.
  • Professionals  such as attorneys, accountants and tax preparers who provide services to a medical marijuana dispensary or collective.

In the video Maricopa County Attorney William Montgomery states:

Montgomery:  “Rather than allow people to take additional action an put themselves in jeopardy of prosecution at a later point in time it is more prudent now to let people know that their conduct is not authorized.”

Question:  “A patient growing pot at home is that person at risk of being prosecuted?”

Montgomery:  “Yes.  You cannot grow it.”

Question:  “Are employees of a dispensary at risk?

Montgomery:  “Yes”

Question:  “Are the owners of the business at risk?”

Montgomery:  “Yes”

Question:  “Would you open a dispensary right now?  Would you even work there?”

Montgomery:  “Absolutely not. . . . Part of my statements at this point in time is to literally help, help to protect those people from conducting any more business or taking another step in that direction which would jeopardize whatever resources they put into it as well as their own liberty.”

By |2012-08-09T21:06:52-07:00August 9th, 2012|Legal Issues, Marijuana Crimes, Stories & Articles, Video|Comments Off on Maricopa County Attorney Warns Everybody in Maricopa County Not to Grow, Sell or Distribute Marijuana Because He Will Prosecute Violators for Felonies

Arizona Governor Allows Attorney General Horne to Challenge Arizona’s Medical Marijuana Law

The Bugle: “Gov. Jan Brewer has signed a waiver that will allow Attorney General Tom Horne to try to close down the marijuana dispensaries that her state health department is in the process of licensing.  The move comes in the wake of Horne’s formal legal opinion that the state cannot legally permit anyone to sell marijuana, even only to those who have a doctor’s recommendation to use the drug. Horne said as long as the drug remains illegal under federal law, the state is powerless to authorize anything to the contrary. . . . Horne said he intends to legally intervene in a legal fight between Maricopa County and the owner of a clinic that wants to open a marijuana dispensary in Sun City.”

By |2017-02-12T07:39:20-07:00August 9th, 2012|Legal Issues, Stories & Articles|Comments Off on Arizona Governor Allows Attorney General Horne to Challenge Arizona’s Medical Marijuana Law

Tom Horne: Arizona Medical Marijuana Act Preempted by Federal Law, in Part

Phoenix New Times:  “Arizona should not authorize medical-marijuana dispensaries as voters intended because they would violate federal law, says state Attorney General Tom Horne. . . . Now, the question of whether Arizona gets dispensaries like Colorado is apparently in the hands of state judge who just doesn’t know it yet.”

By |2012-08-07T07:35:58-07:00August 7th, 2012|Legal Issues, Stories & Articles|Comments Off on Tom Horne: Arizona Medical Marijuana Act Preempted by Federal Law, in Part

Arizona Attorney General’s Opinion Kinda Corrects Arizona Governor & Concludes Arizona’s Medical Marijuana Act is Partially Preempted by Federal Law

Last week Arizona Governor Jan Brewer’s response to a letter from 13 Arizona County Attorneys that the Arizona Medical Marijuana Act was preempted by federal law was to say you legal types don’t know what you are talking about and “I am duty-bound to implement the AMMA.”  Now her lawyer says oops-e-dazey, not so fast.  In a press release issued today Arizona Attorney General Tom Horne said:

Arizona Attorney General Tom Horne issued the following statement in connection with an Opinion being issued today regarding the Arizona Medical Marijuana Act (AMMA) stating the law is pre-empted in part:

“I have received formal requests from State Representative John Kavanagh and Yavapai County Attorney Sheila Polk, as to whether the Arizona medical marijuana initiative is preempted by federal law. This past Friday, August 3rd, I received the same request from 13 of Arizona’s 15 county attorneys, including county attorneys of both political parties. The request from the 13 county attorneys stated: ‘your immediate action is requested in light of the pending licensing of dispensaries beginning on August 7th.’

The 13 county attorneys have clearly communicated their view that the AMMA is preempted by federal law.

I have taken seriously the request of the 13 county attorneys that immediate action is needed, and the Opinion is attached. The Opinion was prepared by professional attorneys entirely on the basis of legal precedent, without regard to policy considerations as to medical marijuana as an issue, and without regard to my views. This is a purely legal analysis, as is the duty of this office.

Two recent cases, one from California, and one from Oregon, hold that the state cannot ‘authorize’ actions that are forbidden under federal law. A state can, however, decriminalize marijuana under its own laws. These cases compel the Opinion being issued today.

The AMMA ‘authorizes’ dispensaries, and the growing of marijuana. Under the California and Oregon court decisions, those provisions would be preempted by federal law. However, the provisions of the AMMA that relate to patient and caregiver identification cards would not be preempted because they merely identify those individuals who are exempt from prosecution under state law for the possession or use of marijuana for medical purposes. The use of the cards for that purpose would not be preempted.

This is an Attorney General’s opinion, not a court order, and a court may or may not agree with this opinion. We expect that there will be a motion for accelerated resolution of this issue in a pending court case.

Accordingly, I have advised the Department of Health Services that the law does not prevent them from proceeding with the planned lottery on Tuesday, August 7, and the issuance of registration certificates. The receipt of a registration certificate does not give a certificate holder permission to open or operate a dispensary. Certificate holders must subsequently apply for approval to operate after having completed a number of additional requirements. Dispensary certificate holders are advised that it would be prudent to delay additional work and expenditures pending resolution of the preemption issue by a court, which I expect will be resolved in an accelerated manner.

Emphasis added.

Note to Prospective Arizona Medical Marijuana Dispensary Owners:  Read the last sentence of the above press release twice because it appears to me that the Arizona Attorney General is giving prospective Arizona medical marijuana dispensary owners legal advice.  Mr. Horne won’t stop the Arizona Department of Health Services from issuing dispensary registration certificates and moving forward with its rules that implement the parts of the AMMA that are preempted by federal  law, but he seems to suggest that a future court case will have more to say on the subject of the life or death of Arizona medical marijuana dispensaries.

Read the Attorney General’s August 6, 2012, Opinion, which states:

Is the Arizona Medical Marijuana Act (“the AMMA”) preempted by the federal Controlled Substances Act (“the CSA”)? . . . Yes, in part. . . . Because of federal prohibitions, those AMMA provisions and related rules that authorize any cultivating, selling, and dispensing of marijuana are preempted.

Emphasis added.

The following is the text of Will Humble’s blog post of today.  Mr. Humble is the Director of the Arizona Department of Health Services.

The AZ Attorney General issued an Opinion and a media release this afternoon about the Arizona Medical Marijuana Act.  The Opinion states, in part, that the voter approved Act is pre-empted by Federal Law – specifically the part that allows the cultivation, selling or distribution of marijuana.  It references 2 recent court cases that states cannot ‘authorize’ actions that are forbidden under federal law.

Today’s Opinion is just that, an Attorney General Opinion…  not a court order, and a court (or courts) may or may not agree.  Attorney General Horne has said in his media release today that he expects that there will be a motion for accelerated resolution of this issue in a pending court case.

The AGs Office also advised us this afternoon that today’s Opinion doesn’t prevent us from proceeding with tomorrow’s planned lottery on Tuesday, August 7, and the issuance of Registration Certificates- so we’ll be proceeding tomorrow as planned at 9 a.m.  I’m not sure how or whether today’s Opinion will impact the issuance of subsequent Operating Licenses for the folks that are allocated a Registration Certificate tomorrow morning.

 So, at least for now, we’ll take it one day at a time.

Player Update

For those who are keeping score at home, here’s the latest stats in the game of Arizona’s wack-a-mole medical marijuana dispensary industry:

  • Arizona Governor Jan Brewer:  Opposes the AMMA, but will  allow it to be implemented because “though the Department of Justice has prosecuted a select number of large medical-marijuana operations in California and other states, the federal government’s position remains unclear with regard to the AMMA and participation in this law by Arizona State employees.”
  • Arizona Attorney General Tom  Horne:  “AMMA provisions and related rules that authorize any cultivating, selling, and dispensing of marijuana are preempted,” but go for it prospective dispensary owners and Arizona Department of Health Services.
  • Will Humble, Director of the Arizona Department of Health Services:  “The AGs Office also advised us this afternoon that today’s Opinion doesn’t prevent us from proceeding with tomorrow’s planned lottery on Tuesday, August 7, and the issuance of Registration Certificates- so we’ll be proceeding”
  • Gila County Attorney Daisy Flores:  “Arizona voters determined that dispensaries should be permitted if in compliance with our Arizona law, as county attorney, I must respect the will of the people.”
  • Arizona Attorney Ryan Hurley:  “even in California, where there is a lot of uncertainty, these notions that the sky is going to fall just don’t hold up.”
  • Arizona Republic columnist E. J. Montini:  “federal authorities, who have expressed no interest in prosecuting medical-marijuana cases”
  • 13 Arizona County Attorneys:  The AMMA is preempted by federal law.
  • Former U.S. Attorney for the District of Arizona Ann Birmingham Sheel:  “compliance with the AMMA and Arizona regulations will not provide a safe harbor or immunity from federal prosecution for anyone involved in the cultivation and distribution of marijuana. . . . state employees who conduct activities authorized by the AMMA are not immune from liability under the CSA.”
  • Former U.S. Attorney for Arizona Dennis Burke:  “The United States Attorney’s Office for the District of Arizona (“the USAO”) will continue to vigorously prosecute individuals and organizations that participate in unlawful manufacturing, distribution and marketing activity involving marijuana, even if such activities are permitted under state law. . . . The public should understand, however, that even clear and unambiguous compliance with AMMA does not render possession or distribution of marijuana lawful under federal statute.”
  • U.S. Department of Justice:  “The federal government will ‘vigorously enforce’ federal laws against those who ‘operate and facilitate large marijuana production facilities and marijuana production facilities involved in the cultivation, sale and distribution of marijuana, even if purportedly for medical purposes’.”

Half Time Score

AMMA Dispensaries Good Team: 5.5
(1 each for Gov. Brewer, Will Humble, Daisy Flores, Ryan Hurley & EJ Montini + .5 for AG Horne)
vs.
AMMA Dispensaries Bad Team:  115.5
(.5 for AG Horne + 13 county attorneys + 2 former U.S. attorneys + 100 because the DOJ is the DOJ).

By |2015-04-06T18:55:44-07:00August 6th, 2012|Legal Issues, Stories & Articles, Will Humble Speaks|Comments Off on Arizona Attorney General’s Opinion Kinda Corrects Arizona Governor & Concludes Arizona’s Medical Marijuana Act is Partially Preempted by Federal Law

13 Arizona County Attorneys Ask Governor Brewer to Stop Medical Marijuana Dispensaries

Arizona Republic:  “Thirteen Arizona county attorneys are urging Gov. Jan Brewer to halt the state’s medical-marijuana program, saying state employees will be facilitating federal crimes when they issue licenses to pot dispensaries.  The lawyers signed onto a three-page July 24 letter authored by Yavapai County Attorney Sheila Polk, who requests that the governor prevent the state’s issuance of licenses for medical-marijuana dispensaries because the state program is pre-empted by the federal Controlled Substances Act. . . . Polk wrote that she has been told Arizona’s newly appointed U.S. Attorney John Leonardo ‘fully intends to prevent any dispensaries from operating in Arizona by seizing each and every one as it opens and commits violations’ of the federal act.”

Read Yavapai County Attorney Polk’s letter to Brewer and Governor Brewer’s response in which she makes this incredible statement:

“though the Department of Justice has prosecuted a select number of large medical-marijuana operations in California and other states, the federal government’s position remains unclear with regard to the AMMA and participation in this law by Arizona State employees.”
Apparently Governor Brewer forgot she got a February 16, 2012, letter from then U.S. Attorney for Arizona Ann Birmingham Sheel that contained the following warning statements:
compliance with the AMMA and Arizona regulations will not provide a safe harbor or immunity from federal prosecution for anyone involved in the cultivation and distribution of marijuana. . . . state employees who conduct activities authorized by the AMMA are not immune from liability under the CSA.”

Governor Brewer appears to be unaware of the reality and scope of federal dispensary attacks.  On July 20, 2012, SF Gate wrote an article entitled “Court rulings bode ill for medicinal pot” that states “approximately 400 dispensaries in California have closed since the four U.S. Attorneys began their coordinated crackdown in September.”  Four hundred shut downs is more than a “select number.”  That number is more than four times the number of dispensary licenses the Arizona Department of Health Services will award.  The 400 California dispensary closures includes dispensaries of all sizes, not just large ones.

Why did Governor Brewer respond to the 13 county attorneys without apparent input from Arizona Attorney General Thomas Horne?  Where does Arizona’s top attorney stand with respect to the issues raised by the 13 county attorneys in their letter?
By |2012-07-31T02:02:58-07:00July 31st, 2012|Legal Issues, Stories & Articles|Comments Off on 13 Arizona County Attorneys Ask Governor Brewer to Stop Medical Marijuana Dispensaries

Warning to Arizona Medical Marijuana Dispensaries that Plan to Make their Dispensary Not-for-Profit by Siphoning Funds to Affiliated Entities

Since Arizona voters approved Proposition 203 in November of 2010 I have talked to many people who were interested in obtaining a license to grow marijuana and sell it in an Arizona medical marijuana dispensary.  In general these people fall into two categories: (1) people whose primary goal is to provide medicine to patients, and (2) people who want to make a lot of money.  When I mention to the people in category 2 that all Arizona medical marijuana dispensaries must be operated on a not-for-profit basis they usually say I know, but I’m going to form one or more companies to provide services to the dispensary to move money from the dispensary to the for profit companies.

In theory this seems like a reasonable plan that could work, but I suspect that in practice most category 2 people will be “over paying” for services rendered by a for profit company to the category 2 person’s not-for-profit dispensary.  Let’s consider two scenarios and compare the results.

Scenario 1:  AZ Medical Marijuana Dispensary, LLC (“AMMD”), has a license to operate an Arizona medical marijuana dispensary.  It is owned equally by Homer Simpson and Ned Flanders.  The total cost for salaries, bonuses, employee benefits, payroll taxes and expenses for all of AMMD’s personnel for the first year of its business is $X, which amount can be deducted from AMMD’s gross income for the purposes of determining if AMMD is a not-for-profit dispensary as required by Arizona’s medical marijuana laws.  Whether any portion of this amount is deductible from AMMD’s federal income tax return depends on Internal Revenue Code Section 280E.

Scenario 2:  Same facts as Scenario 1 except Homer and Ned form Suck Off the Profits, LLC (“SOTP”), an employee leasing company that employs and leases to AMMD all personnel needed by AMMD to operate AMMD’s dispensary business.  SOTH bills AMMD $X times 3.  In computing its not-for-profit bottom line for Arizona medical marijuana dispensary requirements AMMD now can reduce its gross income by the cost of its leased personnel = $3X instead of $X.

In both scenarios AMMD must submit audited financial statements to the Arizona Department of Health Services.  These financial statements will disclose in the case of Scenario 1 that AMMD paid $3X to SOTP.  I suspect that ADHS will inquire into the ownership of SOTP and when it finds that Homer and Ned own both companies ADHS may claim that AMMD was not operated on a not-for-profit basis.  How will Homer and Ned explain why AMMD paid 3 times the actual cost of the employees to SOTP?  Homer and Ned may think ADHS is stupid, but if so, that would be a big mistake that could lead to the loss of AMMD’s license to operate an Arizona medical marijuana dispensary.

However, AMMD’s loss of its license to operate an Arizona medical marijuana dispensary might be the least of its worries.  Don’t you think that the federal law enforcement agencies will get copies of the audited financial statements of every Arizona medical marijuana dispensary and do their own investigations as to whether Arizona medical marijuana dispensaries are operated on a not-for-profit basis?  Evidence that a dispensary is a money making machine is a good way to entice the feds to bust your medical marijuana dispensary.

Read the post called “Feds Indict 6 California Medical Marijuana Dispensary Owners & Sue to Take Landlord’s Land” about a California dispensary called G3 Holistic that was very good at making money.  The story linked to in the preceding sentence said:

“In a civil forfeiture complaint, the government claimed that a forensic investigation by the IRS identified 19 bank accounts linked with G3 Holistic Inc. or individuals connected with it. The accounts had received $3.3 million in deposits during an eight-month period in 2011, with withdrawals nearly equaling that amount. The IRS concluded it was to make G3 appear to be a nonprofit organization.”

The Los Angeles Times has a detailed story about California medical marijuana dispensaries making big bucks called “Some Southern California ‘Nonprofit’ Pot Shops Make Big Money.”  This story says:

“Tax may be the biggest cudgel the feds have against medical pot. Increasingly, the IRS is applying an obscure provision of the tax code, 280E, which prohibits drug traffickers from claiming routine business deductions, for costs like wages and rent, when federal agents are trying to get back-taxes from them. Already dispensaries were in a quandary: Pay the IRS and literally document your federal crime to the federal government, or don’t report it and risk going down for tax evasion. Now they face 280E, and potentially crippling tax bills.”

If you are a category 2 person you should read about the G3 Holistic case, note in your mind that your dispensary will be giving ADHS a road map of how your dispensary spends its money (the audited financial statements) and then answer the question San Francisco Detective Harry Callahan asks a crook in the movie “Dirty Harry” after Callahan points his gun at the crook who must decide whether to go for his gun or give up.  Dirty Harry says:

I know what you’re thinking. Did he fire six shots or only five? Well, to tell you the truth, in all this excitement, I’ve kinda lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you’ve got to ask yourself one question: ‘Do I feel lucky?’ Well, do ya punk?”

If you are a category 2 person who is involved with an Arizona medical marijuana dispensary and you plan on siphoning profits from the dispensary, you must ask yourself “Do I feel lucky.”

For those category 2ers who are not familiar with the not-for-profit requirement of Arizona’s medical marijuana law applicable to all Arizona medical marijuana dispensaries I suggest you read the following text taken from my article called “Warning to Everybody Considering Becoming Involved with an Arizona Medical Marijuana Dispensary.”

Arizona Medical Marijuana Dispensaries Must be Operated on a Not-for-Profit Basis

A lot of people believe that owning an Arizona medical marijuana dispensary is a way to get rich despite the fact that all Arizona medical marijuana dispensaries must be operated on a not-for-profit basis.  Unfortunately neither Arizona’s medical marijuana laws nor the ADHS rules explain what that term means.  The only guidance with respect to the meaning of this term is found in Arizona Department of Health Services rule R9-17-304(D).8 that states that the Bylaws of a dispensary must contain “Provisions for the disposition of revenues and receipts to ensure that the dispensary operates on a not-for-profit basis.”  That’s it.  Nobody has a clue what the phrase means.

We do know, however, that all Arizona medical marijuana dispensaries must provide annual audited financial statements to ADHS.  Most businesses do not get audited financial statements, which are very expensive.  The fact every dispensary will be giving ADHS audited financial statements means that ADHS will be able to examine in detail how dispensaries are spending money, i.e., who the dispensaries pay and how much they pay.  I believe that all expenditures of money by a dispensary must be commercially reasonable or the dispensary is opening itself up to a claim that the dispensary is being operated on a for profit basis.

For example, if a member of the board of directors attends one two hour meeting of the board every quarter and provides no other services the board member may be paid for the reasonable value of the services rendered.  What is the value of 8 hours of time spent at a meeting of the board of directors?  Surely payments of $25, $100 or $250 hour may be justified since many professionals, plumbers and Xerox printer technicians charge those hourly rates.  However, if that board member is paid $100,000 for eight hours of time I submit that ADHS will have a problem with that and ADHS could refuse to renew the dispensary’s license.

Money dispensaries pay to employees and insiders will be scrutinized closely.  The dispensary must be able to justify the reasonableness of all payments to employees, insiders and affiliates.  Dispensaries should not agree to pay for any services provided by employees, insiders and affiliates without tangible evidence that the payments are commercially reasonable.  One way to do this is to follow the same rules used by bona fide tax exempt charities.  To learn more about this important topic a good start is to read “Nonprofit Payments to Insiders and Outsiders: Is the Sky the Limit?“  This article contains footnotes that refer to sources of information that can be used to justify payments to insiders of tax exempt charitable organizations.

Dispensary people must also understand that law enforcement and prosecutors will be able to access dispensaries’ audited financial statements given to ADHS for the purpose of determining if any dispensaries are not operating on a not-for-profit basis.  I am sure law enforcement and prosecutors will pay special attention to payments of large amounts of money to “management” companies or service provider companies owned by the owners, officers or board members of a dispensary.  It is a mistake to think you can make a dispensary operate on a not-for-profit basis by siphoning money from the dispensary to affiliated entities.

The bottom line with respect to the not-for-profit requirement is that Arizona medical marijuana dispensaries must actually operate a not-for-profit business so why would anybody want to invest the large amounts of money and time into a business that cannot pay profits that justify that risk?

June 23, 2012 Update:  Will Humble’s June 23, 2012, blog post confirms what I suspected, i.e., ADHS will investigate large payments by a dispensary to third parties.  Read “Will Humble Warns Arizona Medical Marijuana Dispensaries Not to Pretend to be a Not-for-Profit Business.”

By |2015-04-06T18:53:12-07:00June 16th, 2012|Legal Issues, Stories & Articles|Comments Off on Warning to Arizona Medical Marijuana Dispensaries that Plan to Make their Dispensary Not-for-Profit by Siphoning Funds to Affiliated Entities

U.S. Attorney’s February 2012 Letter to Arizona Govenor Jan Brewer

The following is the complete text of a letter dated February 16, 2012, that was sent by Ann Birmingham Sheel, the U.S. Attorney for Arizona, to Arizona Governor Jan Brewer:

“February 16, 2012

The Honorable Janice K. Brewer
Governor of Arizona
1700 W. Washington Street
Phoenix, AZ 85007

Dear Governor Brewer:

I write in response to your letter dated January 13, 2012, seeking guidance from my office and the Department of Justice concerning the potential criminal and civil ramifications for state employees implementing the Arizona Medical Marijuana Act (AMMA). As noted in previous communications from this office, Congress has determined that marijuana is a controlled substance within Schedule I of the Controlled Substances Act (CSA). Enforcement of the federal Controlled Substances Act has been, and continues to be, a priority for the Department of Justice. Thus, compliance with the AMMA and Arizona regulations will not provide a safe harbor or immunity from federal prosecution for anyone involved in the cultivation and distribution of marijuana.

The United States Attorney’s Office for the District of Arizona (“the USAO”) will continue to follow the guidance received from the Department of Justice in October 2009 and June 2011. Under this guidance, seriously ill individuals who use marijuana as part of a medically-recommended treatment regimen, consistent with state laws, or caregivers individuals providing care to seriously ill individuals-will likely not be the focus of the USAO’s limited prosecutorial resources. Nonetheless, neither a person’s status as an individual, or a caregiver, nor compliance with the AMMA, renders possession or distribution of marijuana lawful under the Controlled Substances Act. As such, state employees who conduct activities authorized by the AMMA are not immune from liability under the CSA.

This USAO will continue to vigorously enforce the Controlled Substances Act against individuals and entities that operate and facilitate large marijuana production facilities and marijuana production facilities involved in the cultivation, sale, and distribution of marijuana, even if purportedly for medical purposes. The USAO will evaluate all potential civil and criminal enforcement actions on a case-by-case basis in light of the priorities of the Department of Justice and available prosecutorial resources.

I thank you for providing me with this opportunity to clarify the position of the Department of Justice as it relates to the potential prosecution of state employees operating under
the AMMA.

Sincerely yours,

ANN BIRMINGHAM SCHEEL
Acting United States Attorney
District of Arizona”

The red text in bold was added for emphasis.

By |2012-06-04T06:57:57-07:00June 4th, 2012|Federal Dispensary Attacks, Legal Issues, Marijuana Crimes, Stories & Articles|Comments Off on U.S. Attorney’s February 2012 Letter to Arizona Govenor Jan Brewer

Ninth Circuit Court Rules Medical Marijuana Not Protected by Americans With Disabilities Act

Phoenix New Times:  “Gravely ill and severely disabled?  Real sorry about that, but you should still be thrown in jail for using marijuana, says a ruling by the U.S. Ninth Circuit Court of Appeals.  Yesterday’s ruling came in a California case that pitted disabled people against the wishes of city leaders who don’t like medical-marijuana dispensaries.  Costa Mesa and Lake Forest took steps to close the pot shops a few years ago, angering patients and activists who believe California law — and the federal ADA — prohibits such actions.  Not so, says the Ninth.”

The Orange County Register:  “A decision by the U.S. 9th Circuit Court of Appeal has found that two Orange County cities are not violating the Americans With Disabilities Act by closing down medical marijuana shops and preventing handicapped patients from having access.  A three-judge panel on Monday upheld the denial of a request filed by four severely disabled medical marijuana users against Costa Mesa and Lake Forest. Their suit charged that the two cities were violating the Americans With Disabilities Act by closing down dispensaries that distributed marijuana.”

Read the opinion in the case of James vs. City of Costa Mesa.

By |2012-05-23T07:19:36-07:00May 23rd, 2012|California News, Legal Issues, Stories & Articles|Comments Off on Ninth Circuit Court Rules Medical Marijuana Not Protected by Americans With Disabilities Act

Arizona Medical-pot Ruling may Reverberate

Arizona Republic:  “Two Arizonans lent a medical-marijuana company in Colorado $500,000, but the company didn’t pay them back.  So, what did they do? They sued, of course.  But instead of forcing the company to pay back the loan, a Maricopa County Superior Court judge told the two Valley business partners they were out of luck as far as he was concerned.”

This story mentions KEYTLaw attorney Richard Keyt, the creator of this website, and says “Keyt wrote that the ruling could mean ‘that people who enter into contracts that relate in any way to Arizona medical marijuana will have to hope the other side to the contract satisfies his/her/its obligations because it may not be possible to sue for breach of contract and get a judgment against the party who defaults’.”  Keyt broke this story with his May 7, 2012, article called “Maricopa County Superior Court Ruling May be Last Nail in the Coffin of the Unborn Arizona Medical Marijuana Dispensary Industry.”

By |2012-05-10T07:09:06-07:00May 10th, 2012|AZ Marijuana Law Lawsuits, Legal Issues, Stories & Articles|Comments Off on Arizona Medical-pot Ruling may Reverberate

Denver Lawyer Loses Liability Insurance over Medical-marijuana Clients

Denver Post:  “In what appears to be a first-of-its-kind event nationwide, a Denver lawyer has lost her liability insurance because part of her practice involves representing medical-marijuana businesses.  Ann Toney’s insurance company told her last month that it will not renew her malpractice coverage. In its terse notice, the Hanover Insurance Group explained that Toney’s practice “does not meet current underwriting guidelines because of the following risk factors: Area of practice involving medical marijuana.”

By |2012-05-10T06:53:38-07:00May 10th, 2012|Legal Issues, Stories & Articles|Comments Off on Denver Lawyer Loses Liability Insurance over Medical-marijuana Clients

Maricopa County Superior Court Ruling May be Last Nail in the Coffin of the Unborn Arizona Medical Marijuana Dispensary Industry

On April 17, 2012, Maricopa County, Arizona, Superior Court Judge Michael R. McVey signed a Judgment of Dismissal that could be the death blow to Arizona’s fledgling medical marijuana dispensary industry.  The case is Michele Rene Hammer v. Today’s Health Care II, a Colorado corporation (“THC”).  Although the judge’s decision has not yet been appealed and may not be appealed, the legal significance of the case cannot be ignored by anybody who is considering becoming involved in a prospective or actual  Arizona medical marijuana dispensary or anybody who is a party to or may become a party to a contract that involves the growing, transporting, storing, infusing, processing, selling or dealing in any way with marijuana in Arizona.

Hammer v. Today’s Health Care II involves a very common situation.  Michele Hammer and Mark Haile each loaned $250,000 to Today’s Health Care II, a Colorado corporation.  Each lender and borrower signed a loan agreement that stated:

“Borrower shall use the loan proceeds for a retail medical marijuana sales and grow center.”

THC defaulted on both loans.  Although the loan proceeds were to be used only in Colorado, a state where medical marijuana is legal, each lender sued in Maricopa County Superior Court to collect the amounts owed under the promissory notes signed by THC.  The two cases (Hammer v. THC and Mark W. Haile v. Todays Health Care II) were consolidated.  The plaintiffs and defendant filed motions for summary judgment.  On April 17, 2012, the judge signed the Judgment of Dismissal in which he ruled that THC is not obligated to repay all or any part of either loan.  Judge McVey stated:

“The explicitly stated purpose of these loan agreements was to finance the sale and distribution of marijuana. This was in clear violation of the laws of the United States. As such, this contract is void and unenforceable. This Court recognizes the harsh result of this ruling.  Although Plaintiffs did not plead any equitable right to recovery such as unjust enrichment, or restitution, this Court considered whether such relief may be available to these Plaintiffs.  Equitable relief is not available when recovery at law is forbidden because the contract is void as against public policy.”

Result:  The borrower can keep the $500,000 and it has no legal obligation to repay the loans.  The borrower does not get to keep all of the money, however, because it will be required to report $500,000 as taxable income on its 2012 federal income tax return.  Forgiveness of a debt causes “discharge of indebtedness income” that must be reported to the IRS and taxed at the taxpayer’s marginal tax rate.

There is an equitable concept in the law called unjust enrichment.  There are many cases where a court has ruled that even though the plaintiff could not prove a legal basis on which the plaintiff should be paid damages, a court of equity looking at all of the facts gave the plaintiff a judgment for money because the actions of the plaintiff caused the defendant to be unjustly enriched and it would not be fair for the defendant to keep the economic benefit bestowed on the defendant.  Judge McVey wrote that he considered ruling in favor of the lenders on the basis of unjust enrichment, but that remedy is also denied when the contract involved is void as against public policy.

Judge McVey based his decision on the fact the purpose of the loan was for a purpose that is illegal under federal law.  He did not examine whether the loans should be enforced because they were legal under state law.  After all, collection of a loan arises from legal obligations and rights created under state law, not federal criminal law.  It seems logical and lawful to me that the judge could have ruled in favor of the plaintiffs had he considered the legality of the loans under state law.

This case does not have the legal precedent of a written opinion from the Arizona Court of Appeals or the Arizona Supreme Court.  Nevertheless Hammer v. Today’s Health Care II stands for a very important principle that everybody who is contemplating becoming involved with the Arizona medical marijuana industry cannot ignore, i.e.:

Unless and until an Arizona appellate court rules that contracts involving Arizona medical marijuana are enforceable under Arizona law (as opposed to unenforceable under federal law), any contract that has a purpose related to Arizona medical marijuana may be unenforceable and not worth the paper it is written on!

What Does the Case Mean to People Considering Becoming Involved in Arizona Medical Marijuana Dispensaries?

Until an Arizona appellate court reverses the result in this case it means that people who enter into contracts that relate in any way to Arizona medical marijuana will have to hope the other side to the contract satisfies his/her/its obligations because it may not be possible to sue for breach of contract and get a judgment against the party who defaults.  This case should cause the following people to think twice or three times before getting involved:

  • Landlords who lease to dispensaries.  The lease may not be enforced.  If a dispensary tenant defaults on the rent would a court evict the tenant or give the landlord a money judgment for damages for breach of the lease?
  • Investors in dispensaries.  Would the investment be treated the same as a loan with no legal way to force the dispensary to repay the investment or profits?
  • Lenders who loan to dispensaries.  This is the same facts as Hammer v. Today’s Health Care II.  Why would any person or entity make a loan to a dispensary when there is a good chance a court would refuse to enforce the loan?
  • Medical directors of dispensaries.  What if the dispensary doesn’t pay for the doctor’s services?
  • High paid employees or independent contractors.  Are you willing to work and have the dispensary refuse to pay and dare you to sue?

The above list is not complete.  If you are contemplating entering into any type of contract (oral or written) with a prospective or actual Arizona medical marijuana dispensary you are taking a risk that an Arizona court may rule that the contract is unenforceable.

You might think that the ultimate winner as a result of Hammer v. Today’s  Health Care II is the Arizona medical marijuana dispensary.  Perhaps, but I submit that dispensaries are actually the ultimate losers because this case stands for the proposition that it will be very difficult if not impossible for Arizona medical marijuana dispensaries to operate because prudent people and businesses will not want to contract with dispensaries until an Arizona appellate court rules that the contracts are enforceable under Arizona law.

Update:  Richard Keyt and Judge McVey’s ruling are discussed in the following stories:

  • Fox News Chicago story called “Contracts with medical marijuana companies unenforceable, Arizona court rules.”