Eastern Arizona Courier: “Arizona is doing everything possible to avert problems with the controversial new law. The Arizona Department of Health Services completed public hearings for its draft rules for selling and dispensing medical marijuana. The city of Safford has given a first reading of its policy regulating where medical marijuana dispensaries and cultivation centers may operate.”
Arizona Republic: “The Glendale City Council on Tuesday unanimously passed regulations for medical marijuana facilities that operate in the city. . . . Glendale’s restrictions, which will take effect in 30 days, will put dispensaries in general office and certain commercial zones and cultivation and manufacturing facilities in light and heavy industrial zones.”
Today the State Bar of Arizona’s Committee on the Rules of Professional Conduct issued Ethics Rule 11-01 in which it said the following:
A lawyer may ethically counsel or assist a client in legal matters expressly permissible under the Arizona Medical Marijuana Act (“Act”), despite the fact that such conduct potentially may violate applicable federal law. Lawyers may do so only if: (1) at the time the advice or assistance is provided, no court decisions have held that the provisions of the Act relating to the client’s proposed course of conduct are preempted, void or otherwise invalid; (2) the lawyer reasonably concludes that the client’s activities or proposed activities comply fully with state law requirements; and (3) the lawyer advises the client regarding possible federal law implications of the proposed conduct if the lawyer is qualified to do so, or recommends that the client seek other legal counsel regarding those issues and appropriately limits the scope of the representation.
NOTE: This opinion is limited to the specific facts discussed herein. Because the opinion is based on the Act as currently in effect, subsequent legislative or court action regarding the Act could affect the conclusions expressed herein.
FACTS
In the 2010 general election, Arizona voters approved Proposition 203, titled “Arizona Medical Marijuana Act” (“Act”), which legalized medical marijuana for use by people with certain “chronic or debilitating” diseases. The proposition amended Title 36 of the Arizona Revised Statutes by adding §§ 36-2801 through -2819 and also amended A.R.S. § 43-1201. Arizona became the 16th jurisdiction (15 states and the District of Columbia) to adopt a medical-marijuana law.
Despite the adoption of Arizona’s Act, 21 U.S.C. § 841(a)(1) of the federal Controlled Substances Act (“CSA”) continues to make the manufacture, distribution or possession with intent to distribute marijuana illegal.
In an October 19, 2009, memorandum (“DOJ Memorandum”), the U.S. Department of Justice advised that it would be a better use of federal resources to not prosecute under federal law patients and their caregivers who are in “clear and unambiguous compliance” with state medical-marijuana laws. The DOJ Memorandum indicates that federal prosecutors still will look at cases involving patients and caregivers, however, if they involve factors such as unlawful possession or use of a firearm, sales to minors, evidence of money-laundering activity, ties to other criminal enterprises, violence, or amounts of marijuana inconsistent with purported compliance with state or local law.
Although characterizing patients and their caregivers as low priorities, the DOJ Memorandum does not characterize commercial enterprises the same way. In fact, the DOJ Memorandum says that the “prosecution of commercial enterprises that unlawfully market and sell marijuana for profit continues to be an enforcement priority” of the DOJ. [1]
The DOJ Memorandum explains that the DOJ’s position is based on “resource allocation and federal priorities” and
does not “legalize” marijuana or provide a legal defense to a violation of federal law, nor is it intended to create any privileges, benefits, or rights, substantive or procedural, enforceable by any individual, party or witness in any administrative, civil, or criminal matter. Nor does clear and unambiguous compliance with state law or the absence of one or all of the above factors create a legal defense to a violation of the Controlled Substances Act. Rather, this memorandum is intended solely as a guide to the exercise of investigative and prosecutorial discretion. (more…)
This fact sheet prepared by the City of Tucson gives a good summary of Tucson’s medical marijuana dispensary and cultivation site zoning requirements.
As I said on February 8, 2011, a “Prospective Dispensary’s Single Most Important Task Before April 30, 2012 is to find a site to operate the dispensary and enter into a lease with the landlord that ties up the site. The must read article linked to below describes the difficulty would-be-dispensary owners are having finding a site in Tucson. No site, no application, no dispensary!
Arizona Daily Star: “Now that Arizona voters have decided to allow the use of medical-marijuana, just where will those who qualify be able to buy it? With strict regulations set by Tucson and other local municipalities layered on top of state rules, that question has become a nagging one for potential dispensary operators. . . . An initial challenge – before talking to a potential landlord – is finding a bit of real estate. . . . So far, the city has received three official requests from operators looking to open up pot dispensaries, he said. All three were sent back to the applicants because they had problems that would have kept them from getting approved,”
Modern Times Magazine: “Now That Absolute Prohibition of Marijuana Has Ended, The Battle For Legal Profits Has Begun. . . . Nearly four months after the passage of the initiative that legalized medical marijuana dispensaries, three issues have dominated the debate: licensing requirements and eligibility, out-of-state participants, and the requirement that a licensed medical professional must be involved in the operation.”
Arizona Republic: “the [Peoria] council voted unanimously to allow dispensaries in areas zoned for commercial use. That is similar to zoning for pharmacies, medical offices and bars. Cultivation sites would be restricted to industrial areas.”
Eastern Arizona Courier: “To stay abreast of regulating where medical marijuana dispensaries and cultivation centers may locally operate, the city of Safford gave a first reading of its policy at its meeting Feb. 14. City Manager David Kincaid urged the council to begin action to implement the city’s regulations to avoid giving the opportunity for people to open such businesses for lack of city regulation.”
The East Valley Tribune is conducting an online poll on if people are for or against medical marijuana and the total legalization of marijuana. As of February 23, 2011, 53% voted for total legalization, 24% for medical marijuana and 23% opposed to the use of marijuana for any purpose. Take the poll.
ABC 15: “The ABC15 Investigators have discovered some patients currently seeking medical marijuana evaluations are getting the wrong information about our state’s new law. . . . ‘Rather than spend time trying to get a (qualified patient) card, which is really a waste of time right now, (patients) ought to spend time looking at the rules,’ [Arizona Department of Health Services Director Will] Humble said.”
TriValleyCentral.com: “Nearly six weeks into a four-month window to come up with regulations for the local placement and operation of medical marijuana dispensaries, Pinal County officials presented the Board of Supervisors Wednesday with further details on how and where dispensaries may show up in Pinal.”
Phoenix New Times: “The first time I made brownies, I was living with my mom and nana. My mother had moved in to take care of nana, who had breast cancer, then bone cancer. . . . She didn’t know about the process of making “canna butter,” or oil, or about any other medicinal use for marijuana, so she did what she thought would work best, smashing some cheap marijuana to a powder with a mortar and pestle and putting it in capsules.”
Arizona Republic: “Three doctors have submitted plans for Scottsdale’s first medical-marijuana dispensary, which could be one of nine in the Northeast Valley. The Virtue Center, at 7301 E. Evans Road in the Scottsdale Airpark, is seeking a use permit from the city. . . . The principals have agreed to donate all profits to qualified charities, according to their use-permit application.”
In the Use Permit Application submitted to Scottsdale by the Applicant, the Rose Law Group, pc, repeatedly and incorrectly refers to the nonprofit entity as OF&C Corporation, when its actual legal name is O.F. & C., Inc. Oops! Question for zoning lawyers: If the law firm is the applicant, doesn’t that mean it is the party applying for the permit and the party that will receive the permit if it is issued rather than O.F. & C., Inc.?
The Use Permit Application contains this interesting statement:
“All directors have . . . agreed to donate all profits in excess of usual and customary business expenses to qualified charities in Arizona, including the proposed State fund to assist those in need of medicinal marijuana products who are unable to pay.”
Arizona Republic: “Today is the last day for the public to respond to the state health department’s proposed medical-marijuana rules. About 150 people gave input at the Arizona Department of Health Services’ public forums this week, and the agency had received more than 1,000 comments as of Thursday afternoon. People can submit online comments until 5 p.m. today. The department will release the final version in about five weeks.”
Background
Voters in State of Arizona passed proposition 203, enacting legislation defined as Arizona’s Medical Marijuana Act. The Medical Marijuana Act authorizes the establishment of nonprofit medical marijuana dispensaries (“dispensaries”). These dispensaries are to be licensed, tightly regulated, and inspected and are intended to provide medical marijuana to qualified patients, with their doctor’s approval, or their designated caregivers.
Arizona’s Medical Marijuana Act is governed under Title 36, Public Health and Safety, Chapter 28.1 – Arizona Medical Marijuana Act. Arizona’s Department of Health Services (“DHS”) has enacted “draft” rules governing the program which are contained in Title 9, Health Services, Chapter 17, Department of Health Services – Medical Marijuana Program.
Draft rules issued by DHS contain regulatory requirements over the financial accounting operations of all dispensaries. The draft rules require financial accounting submissions to DHS to be in accordance with Generally Accepted Accounting Principles (GAAP), specifically defined in R17-101 – Definitions. DHS rule R9-17-315 requires an inventory control system and monthly internal audit(s) of the dispensary’s inventory in accordance with GAAP. The draft rules also require annual financial statement audit conducted by an independent Certified Public Accountant. The requirements are contained in R9-17-307(3) and (4).
Our goal is to provide general guidance to entities that are anticipating submission of an application and receipt of an Arizona medical marijuana dispensary license. Due to the anticipated changes in the draft rules as a result of the public meetings and comment occurring during February, 2011, the likelihood of additional or amended final rules should be anticipated.
Small Business Accounting System
Many new small business owners and entrepreneurs consider accounting and bookkeeping, a necessary evil; forced upon them by various federal, state and local governments. In this case, an Arizona Medical Marijuana dispensary’s perpetual existence will be closely related to how well the accounting system provides Arizona’s Department of Health Services the financial accounting information they require.
Accounting is an essential component of business, and evil or not, it is a critical business function that cannot be avoided. Remember, noncompliance with statute and regulation will eventually collapse an entity, with an entity’s officers possibly being subjected to civil fine(s), penalties and forfeitures. The accounting system is how a business tracks assets, liabilities, equity, revenues and expenses as a mechanism to evaluate if the company is financially successful. A well designed accounting system is:
Organized set of computerized and manual accounting methods, procedures, and controls established to gather, record, classify, analyze, summarize, interpret, and present accurate and timely financial data for management decisions.
It is an information system that should be embraced by small business owners and entrepreneurs as a means of providing a “snapshot of the business”, through the production and analysis of periodic and timely prepared financial statements. It’s also one of the most important management decision making tools used in any business.
Accounting System – Practical Considerations (more…)
Phoenix New Times posted comments by people reacting to Ray Stern’s two part stories about the Arizona Department of Health Services public hearing on its January 31, 2011, second draft of the rules held at the ASU law school on February 15, 2011. Read Ray’s stories “Medical Marijuana Policy Hearing in Tempe Draws Large Crowd,” “Speakers at Medical Marijuana Hearing Criticize Strong Regulations” and “Live-Blogging Continues at Prop 203 Hearing in Temp.”
Phoenix New Times: “A state lawmaker wants to scratch out the anti-discrimination clause in Arizona’s medical marijuana law and give immunity to employers who fire qualified patients. The callous bill [HB 2541] by State Representative Kimberly Yee, R-Phoenix, also seeks to ban people from using medical weed “in a condominium or planned community common area that is open to use by the public.”
Here’s a portion of HB 2541:
“No cause of action is or may be established for any person against an employer who has established a policy and initiated a testing program in accordance with this article for any of the following:
ACTIONS BASED ON THE EMPLOYER’S GOOD FAITH BELIEF THAT AN EMPLOYEE USED OR POSSESSED ANY DRUG WHILE ON THE EMPLOYER’S PREMISES OR DURING THE HOURS OF EMPLOYMENT
ACTIONS BASED ON THE EMPLOYER’S GOOD FAITH BELIEF THAT AN EMPLOYEE HAD AN IMPAIRMENT WHILE WORKING WHILE ON THE EMPLOYER’S PREMISES OR DURING HOURS OF EMPLOYMENT”
HB 2541 is sponsored only by Representative Kimberly Yee , Republican; [email protected]; phone: 602-926-3024; fax: 602-417-3110.
Phoenix New Times: “Most Arizona residents prefer larger cultivation facilities for medical pot and residency requirements for dispensary owners, says a poll commissioned by the folks who brought you Prop 203. Joe Yuhas of the Arizona Medical Marijuana Association spoke of the poll results today at the medical marijuana rules hearing in Tempe, and gave us a handout afterward. Yuhas is a partner of the Riester PR firm, and he and Andrew Myers have been the most visible supporters of the state’s new medical marijuana law.”
From the City of Peoria: “Medical Marijuana Pre-Application Meeting appointments are now being accepted for February 22, 2011 and after. Application and materials must be submitted in person in order to be assigned a Pre-Application Meeting time. Please call 623-773-7601 for further details. Click here for application. Medical Marijuana text amendment proposed final draft, click here to view.”
Verde Independent: “The Sedona City Council became the first Verde Valley community to approve a local Medical Marijuana Ordinance, Feb. 8. While the state initiative was approved by Arizona voters during the last election, local governments are allowed to regulate where the drug may be sold in their communities.”
Read the Sedona medical marijuana zoning ordinance.
Payson Roundup: “With towns and cities across the state amending zoning codes to restrict marijuana dispensaries to certain areas of town, Star Valley will take its first look at the issue tonight. Although the town council is not expected to make any final decisions, it is expected to discuss possible locations for a dispensary and cultivation facilities.”
Ray Stern of the Phoenix New Times has an excellent two part article in which he reports on what he heard at the Arizona Department of Health Services public hearing held on February 15, 2011, at ASU’s Sandra Day O’Connor School of Law, which has little public parking. Ray has names and actual comments made by speakers. Ray was live blogging from the event, which is what I wanted to do, but could not because the law school’s Great Hall was not so great – there were no outlets to plug my laptop into.
See “Medical Marijuana Policy Hearing in Tempe Draws Large Crowd,” “Speakers at Medical Marijuana Hearing Criticize Strong Regulations” and “Live-Blogging Continues at Prop 203 Hearing in Temp.”
Norml: “Maricopa County Sheriff Joe Arpaio, already infamous for his treatment of immigrants and prisoners, has now set his sights on Arizona’s new medical marijuana patients following the passage of Proposition 203 by voters last November.”
Phoenix New Times: “Dr. Ed Suter, a Mesa-based physician, says a physical exam should not be required before a doctor provides someone with a recommendation for medical marijuana. Andrew Myers, spokesman for the Prop 203 campaign, thinks that hopeful owners of marijuana dispensaries should have to prove they have at least $200,000 in the bank before the state grants them an operating license.”
Read Doctor Suter’s comments to ADHS in Word format. The letter starts with:
“Mr. Humble, Director of the Arizona Department of Heath Services has paid much lip service to his supposed concern for the law, but he is setting a poor example. In nearly 100 instances, his draft regulations on medical marijuana violate the law.”
Yahoo News: “In the 2010 fall elections, Arizona passed a law legalizing medical marijuana in the state. Though the new law passed by a slim margin and some residents weren’t pleased by its passing, many considered it a victory and step in the right direction. Despite the public’s opinion, though, police officers throughout Arizona must study up on the new medical marijuana laws in order to best regulate the substance. Here’s everything you need to know regarding Proposition 203’s medical marijuana law in the state of Arizona.”
Yahoo News: “This northern Arizona city, known for its beautiful scenery and metaphysical qualities, has taken a proactive approach to the coming authorization of medical marijuana use and distribution in the state. On Feb. 8, the Sedona City Council approved a medical marijuana ordinance that will allow medical marijuana dispensaries and the cultivation of marijuana dispensaries within the city limits.”
Phoenix New Times: “Back in December, medical marijuana foes Bill Montgomery and Sheila Polk, county attorneys for Maricopa and Yavapai, respectively, quietly explored whether or not Proposition 203 could be declared unconstitutional.” See the letter from Montgomery and Polk to Arizona Department of Health Services Director Will Humble and his response.
Arizona Republic: “A Glendale City Council majority this week pushed to extend hours for merchants to sell cannabis beyond what staff proposed. However, council wants to limit the size of cultivation facilities for growers. Glendale is trying to enact a zoning ordinance before March 1.”
Blade Tribune: “Preparing for the arrival of legal medical marijuana, the Town Council [of Florence] held public hearings and heard the first readings of three measures to provide local control for where dispensaries may locate and how they may operate at Monday’s regular meeting. The council might not vote until March 21”