City of Boulder Moratorium/Federal Threat

At last night’s Boulder City Council meeting, the Boulder City Attorney requested a six month moratorium for medical marijuana businesses. On the surface, this sounded like a good idea – keep new businesses from coming in for six months. However, the reality was that the proposed moratorium was intended to prevent existing businesses from bringing on investment, transfer the business to a new owner, expand the existing business or transfer to a new location. With the very real threat of Federal prosecution looming over the industry, the moratorium would prevent medical marijuana businesses from being able to move out of harm’s way.

In response, I drafted a letter to the City Council and, in particular, Councilperson K.C. Becker. I proposed that the moratorium not include existing businesses. Councilperson Becker took the letter and crafted a new ordinance that excluded existing businesses. After several hours of wrangling and heartfelt testimony from myself and several medical marijuana business owners, employees and patients, the City Council adopted the Becker Ordinance, City of Boulder Ordinance Number 7834. The ordinance permits existing businesses to proceed as usual.

In the waning moment of the public hearing, the moratorium was amended, as follows:

1. The moratorium for new businesses was extended until 11/9/12;
2. Existing businesses will be able to move forward with expansion, investment, sale and relocation after 3/8/12; and
3. New fees we added for change of business entity ($2,000), addition of financiers ($2,000), modification of premises ($3,000) and change of business manager ($150).

Finally, approximately 21 medical marijuana centers were identified as being in harm’s way of Federal prosecution. Those centers located within 1000 ft. of licensed day cares, schools (including the University of Colorado) and public housing units are a risk. Accordingly, I suggest that if you, or anyone you know, is within this danger zone the business should immediately obtain a new location before Federal prosecution visits the City of Boulder. I know this is a tough situation, but the prospect of federal prison should be incentive enough.

Update on Colorado Medical Marijuana, final meeting with Dan Hartman

Dear Friends,

As you know, Mr. Dan Hartman was removed from his position as Director of the Medical Marijuana Enforcement Division due primarily to the efforts of our Attorney General, John Suthers. On the last day as Director, I met with Mr. Hartman to answer many of the questions posed by our clients and colleagues:

1. Q: If a MMB that was locally banned (i.e., Fort Collins, Longmont, etc.) withdraws its application and then moves to a favorable jurisdiction, when can they begin operation?

A: The local authority must approve the business, then MMED will move forward with state approval. The MMB will receive preference in the processing of the application.

2. Q: Can a MMC sell to a primary caregiver?

A: Only if the primary caregiver’s patient is homebound and the appropriate home delivery request has been approved by MMED.

3. Q: Can a MMC sell to a patient who has valid paperwork on file with the MMC?

A: No. A valid MMJ registry card must be presented every time, including patients that have assigned the MMC as their primary center.

4. Q: Can MMCs trade an equal amount of MMJ with another MMC without implicating the 70/30 rule?

A: No. There are no “trades” permitted. Payment from one MMC to the other MMC is required and there must be paperwork evidencing the transaction.

5. Q: Can a MMC sell kief hash and/or bubble hash wholesale to other MMCs without implicating 70/30?

A: The answer was not clear. Mr. Hartman acknowledged that hash does not count against allowable inventory and is treated like other infused products. However, he stated that it counts against 70/30. At this point, Mr. Hartman advised that hash is a problematic issue and will be addressed in future rule making. Stay tuned.

6. Q: Does a homebound patient have to assign the MMC as their primary center in order to receive a home delivery?

A: No. See #2 above. The sale is to the patients primary caregiver, who will deliver the medicine pursuant to authorization by MMED. This means that any homebound patient must assign a primary caregiver.

7. Q: Does hash count against allowable inventory?

A: No. See #5 above.

8. Q: Does the sale of trim count against 70/30?

A: This is complicated. If the trim is provided to a MIP and the MIP uses the trim to create an infused product, which product is then provided back the MMC only and not sold to any other MMCs, then it does not count against 70/30. However, if the trim is used by the MIP and the MIP sells the infused products to any MMC other than the MMC that provided to trim, it counts against the selling MMC’s 70/30.

9. Q: Can employees of a MMJ Vendor (i.e., has a MMED Vendor license) be under 21?

A: Not if the employee will be in a restricted access area for any reason.

10. Q: Will the 7/1/12 moratorium be extended?

A: Not in Mr. Hartman’s opinion. Mr. Hartman stated that MMED will not request it and the legislature “is in no mood to hear anything else about MMJ” at this point.

City of Boulder Medical Marijuana Business Moratorium

The Boulder City Attorney, Mr. Thomas Carr, recently requested and was granted a moratorium regarding medical marijuana businesses in the City of Boulder. The moratorium is expected to be extended for 6 months. I suspect this is a prelude to a request from Mr. Carr that the City Council enact a “cap” on the number of medical marijuana businesses in the City.

This is highly problematic. The moratorium affects existing businesses, not just new businesses. Under the current ordinance, the City requires a new license in the event the business wants to, or needs to, change locations. A new license is also required in order to transfer the business to a new owner. By contrast, the State of Colorado amends the existing license for both scenerios and does not require a new license.

In view of the recent Federal threat of criminal prosecution and civil forfeiture for landlords and medical marijuana businesses located within 1000 feet of a school, this is quite terrifying. For instance, if a medical marijuana business is within 1000 feet of a school (CU?, a day care?), the Feds require the business to move within 45 days. The City of Boulder moratorium makes this impossible.

Finally, the City’s actions demonstrate veiled hostility and fear toward the medical marijuana industry. The moratorium is likely only a first step. It is incumbent on all City of Boulder medical marijuana businesses to band together and oppose any further interference with medical marijuana businesses, which are the most regulated businesses in the history of the State of Colorado. City officials need to be reminded that they are representatives of the citizens of Boulder and personal political agendas have no place in representative government. If they are unwilling to support the industry, they need to be replaced with people who support local and state law regarding medical marijuana. Please attend the 2/7/12, 7:00 p.m., public hearing and let the Council know that further regulation, including the proposed moratorium, will not be tolerated.

Federal crackdown on Colorado Medical Marijuana

As you may know, the Federal Government is now attempting to crack down on Colorado medical marijuana dispensaries and other medical marijuana businesses. Last week, the Feds sent letters to several medical marijuana businesses that were located within 1000 feet of a school. The letters instructed the businesses to close within 45 days or face federal prosecution and civil forfeiture. The Feds are also targeting the landlords.

By way of review, the Feds purported authority over state medical marijuana programs stems from a 2005 U.S. Supreme Court Case, Gonzales v. Raich, 545 U.S. 1, which can be viewed at:

http://www.law.cornell.edu/supct/html/03-1454.ZS.html

A close reading of this case reveals that Colorado medical marijuana business regulations are very different from California. Recall that medical marijuana businesses in Colorado must be owned by two year state residents, there is no reciprocity for out-of-state medical patients and the state requires that the businesses grow their own medicine under strict state supervision. This scheme could possibly carve out an exception to federal authority over Colorado medical marijuana. Now if we only had an attorney general who was interested in supporting Colorado citizens and Colorado laws instead of taking pot shots at Obamacare…. Stay tuned.

Medical Marijuana, the ATF, Firearms, California, etc.

As you all know, the federal government continues to struggle with state legalization of medical marijuana. In June, the U.S. Attorney’s Office issued a 2nd memorandum regarding medical marijuana and the potential prosecution of medical marijuana businesses. However, on the other side of the federal government, the I.R.S. is permitting medical marijuana businesses to file tax returns and receive various deductions in connection with the cultivation and sale of medical marijuana. We are not tax attorneys, so please discuss such issues directly with a qualified and knowledgeable accountant.

The ATF:

On 9/21/11, the Bureau of Alcohol, Tobacco and Firearms (ATF) got into the act. The ATF sent an open letter to all federal firearms dealers informing them that they could not sell a firearm to a person known to use medical marijuana. Federal law, 18 U.S.C. Sec. 922(g)(3) prohibits an unlawful user of or addicted to any controlled substance, including marijuana. The ATF states that this includes medical marijuana patients. According to the ATF, this law prohibits a firearms dealer from selling a firearm to any person whom the dealer has “reasonable cause to believe that such person is an unlawful user of or addicted to a controlled substance, i.e., medical marijuana.

Currently, the firearms dealer does not have access to the Colorado medical marijuana patient database, nor does the ATF. There are only two ways that a firearms dealer can learn of a person’s mmj patient status: (1) the patient tells the dealer for whatever reason about his mmj status; or (2) the person checks “yes” to Question 11(e) on ATF Form 4473, which is form used when purchasing a firearm. Question 11(e) asks if the purchaser is an unlawful user or is addicted to a controlled substance. Again, marijuana, medical or otherwise, is federally classified as a controlled substance.

A copy of the 9/21/11 Open Letter to All Federal Firearms Licensees can be viewed at: http://www.atf.gov/press/releases/2011/09/092611-atf-open-letter-to-all-ffls-marijuana-for-medicinal-purposes.pdf

California and federal prosecution:

As many of you know, the federal government continues to threaten MMJ businesses through the US Attorney’s Office. It appears that, for now, the focus is California. You can read more about this at: http://latimesblogs.latimes.com/lanow/2011/10/feds-cracking-down-on-california-medical-marijuana-dispensaries.html.

This also has been the case historically. One of the reasons that California is targeted is the lack of substantive regulation by the state. Also, many people in law enforcement believe that California dispensaries are selling marijuana obtained illegally from growers in Humboldt, Mendocino, Mexico, etc.

With regard to Colorado, I recently met with Medical Marijuana Enforcement Division director, Mr. Dan Hartman, who advises that he is routinely in contact with the DEA here in Colorado. Accordingly, to Mr. Hartman there has been no movement toward targeting MMBs here. Of course, that could change at any time.

In any event, it is never good news that federal law enforcement is targeting MMBs in California or anywhere else. If you are concerned about the potential for federal prosecution, this is not a business you should continue to be associated with. Currently, there is no protection from federal criminal prosecution under current law. While Colorado is tightly regulated, that does not currently provide any defense to federal criminal prosecution. It could be argued that the fact that the Colorado MMBs are owned by residents, grow all their own medicine under state supervision and sell only to Colorado patients may afford an exception to Gonzales v. Raich, 545 U.S. 1 (2005), 352 F.3d 1222, which is the California case decided by the U.S. Supreme Court which confirmed the power of the federal government to prosecute medical marijuana actors based upon the Commerce Clause. See,http://www.law.cornell.edu/supct/html/03-1454.ZS.html. However, this potential exception to Gonzales v. Raich has never been attempted and would have to be litigated in the context of the criminal prosecution of a Colorado medical marijuana patient, caregiver or business. A frightening thought indeed. While I am prepared to assert such arguments and am admitted in the federal court, I hope it never comes to that.

Finally, as those of you who have met with or spoken with me, I have always maintained and advised that federal prosecution is a real and substantial risk for anyone involved in the medical marijuana business. Simply put, no one should take any risk for which they are not prepared to accept the ultimate, potential risk, in this case – federal criminal prosecution. If such federal criminal prosecution is successful, it could mean a lengthy prison sentence, civil forfeiture of property or both.

Federal MMJ policy memo

Good news. The Obama Adminstration has issued a memo stating that federal enforcement of MMJ is not a priority. This memo reiterates the policy statement issued last spring, which created a watershed of new MMJ patients, caregivers and dispensaries in Colorado. However, we should all be wary. Mr. Holder states that the feds will not become involved as long as caregivers and dispensaries are “in compliance with state law.” Accordingly, it is more critical than ever that all caregivers and dispensaries strictly comply with the MMJ Amendment. That means you must be the primary caregiver for any patients receiving MMJ from you. That includes any growers, dispensaries and caregivers. Be careful – we still have a long way to go.