Court Of Appeal Clarifies Limits Of Legal Protection Provided To Medical Marijuana Collectives, Cooperatives And Dispensaries Under The CUA And The MMPA

April 27, 2012 | Bulletin No. 998422.1

The Court of Appeal recently issued an opinion that clarifies the operational parameters of medical marijuana collectives, cooperatives, and dispensaries, confirms that cities may pursue civil injunction relief under Health and Safety Code section 11570 and Civil Code section 3479, and confirms that cities may pursue remedies under the Unfair Competition Law to enjoin unlawfully operating medical marijuana dispensaries.  (The People v. Joseph, 2012 WL 1004770, Cal.App. 2 Dist., March 26, 2012).

Facts

Organica is a storefront business establishment that is located partly in the City of Los Angeles and partly in Culver City.  Organica is owned by Jeffrey K. Joseph, who is also the chief executive officer of Organica, Inc.  Over a two-year period, undercover law enforcement officers purchased marijuana from Organica in 13 separate transactions.  Menus displayed at Organica listed the varieties and prices of marijuana available for sale.  An officer observed Joseph assisting a customer with a purchase.  Three separate searches of Organica’s premises performed pursuant to warrants yielded large quantities of marijuana, products that contained marijuana, large amounts of cash, and psilocybin.  For example, the United States Drug Enforcement Administration (“DEA”), assisted by the Culver City Police Department, executed a search that uncovered 48 kilograms of marijuana, hashish, hash oil, numerous beverages and edible products that contained marijuana, and $16,379 in cash.  Customer records recovered by the DEA document 1,772 Organica “patients,” but only 601 of those patients gave addresses that are in the vicinity of Organica.    

The city attorney of the City of Los Angeles and the city attorney of Culver City filed an action on behalf of the People of the State of California against Joseph for violations of the Narcotics Abatement Law, the Public Nuisance Law, and the Unfair Competition Law.  The trial court found that Joseph and Organica had no defense under either the Compassion Use Act (“CUA”) or the Medical Marijuana Program Act (“MMPA”).  The People sought a permanent injunction to prohibit Joseph from unlawfully selling, manufacturing, or giving away controlled substances, including marijuana, anywhere in Culver City or Los Angeles.  The trial court granted a permanent injunction and entered judgment against Joseph for civil penalties, attorney fees, investigative costs, and court fees.

Decision

The City asserted Joseph violated the Narcotics Abatement Law, and specifically Health and Safety Code section 11570, which provides that every building where controlled substances are sold, stored, served, kept, manufactured or given away “is a nuisance which shall be enjoined, abated, and prevented, and for which damages may be recovered, whether it is a public or private nuisance.”  Joseph was selling and storing marijuana, which is a controlled substance, at Organica’s premises.  Joseph claims that the marijuana sales activity is protected under the CUA and the MMPA.  The court rejects this argument and clarifies the limits of the legal protections provided under the CUA and the MMPA.  The court explains that Health and Safety Code section 11362.775 “protects group activity ‘to cultivate marijuana for medical purposes,’” but “does not cover dispensing or selling marijuana.” 

The court also clarifies and confirms that any “reasonable compensation” under Health and Safety Code section 11362.765 to be paid for services by a qualified patient or other person authorized to use marijuana “may only be given to a ‘primary caregiver.’”  Joseph, however, does not meet the statutory definition of a primary caregiver because there is no evidence the patrons of Organica designated him as their primary caregiver or that he assumed responsibility for the patrons’ “housing, health, or safety.”  Also, Organica was not a licensed health care or residential care facility, clinic, or hospice.   

Recently, the Fourth District Court of Appeal held that, in order for a medical marijuana dispensary to be lawful under the MMPA, the operators must cultivate the marijuana on-site.  City of Lake Forest v. Evergreen Holistic Collective (2012) 203 Cal.App.4th 1413.  The Lake Forest case concluded dispensaries that cultivate at one site and transport the medical marijuana to another site for distribution are unlawful and prohibited under the MMPA.  In this case, the court builds on this principle of law by further clarifying the manner in which such dispensaries may lawfully operate in the collective cultivation of medical marijuana and the payment for services associated with such cultivation.

The court also found defendant’s operations constituted a public nuisance.  A nuisance is defined by the Public Nuisance Law, Civil Code section 3479, in part as “[a]nything which is injurious to health, including, but not limited to, the illegal sale of controlled substances.”  This case confirms that cities may continue to utilize Health and Safety Code section 11570 and Civil Code section 3479 in tandem to prosecute civil cases to abate unlawful medical marijuana dispensaries as nuisances per se.  The court clarifies that medical marijuana dispensaries operating in violation of section 11570 by unlawfully selling, serving, storing, keeping, manufacturing, or giving away marijuana “constitute nuisances per se under Civil Code section 3479” and may by enjoined by civil action. 

Finally, the court concluded that a violation of the Narcotics Abatement Act and Public Nuisance Law may properly support a violation of the Unfair Competition Law contained at Business and Professions Code, sections 17200, et seq.  Business and Professions Code section 17200 prohibits business practices that are unlawful, unfair, or fraudulent.  Civil actions may be brought under section 17200 in the name of the People of the State of California by certain city attorneys and prosecutors.  The ability of cities to pursue remedies under the Unfair Competition Law, including its attendant civil penalties (Bus. & Prof. Code §§ 17206, 17206.1, 17207), provides a valuable tool to ensure that any operators of medical marijuana dispensaries do so within the confines of the law.

Questions

If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

Jonathan P. Hobbs or Jeffrey L. Massey | 916.321.4500