On January 1, 2016, the Medical Cannabis Regulation and Safety Act (MCRSA), a California state law, went into effect. But what is MCRSA exactly?
MCRSA consists of three separate bills: AB 243, AB 266, and SB 643 that Governor Jerry Brown signed in 2015. Together these bills direct state agencies to license and regulate commercial medical cannabis cultivation, manufacturing, distribution, transportation, sales, and testing. It puts California into compliance with the Federal guidelines set forth in the Cole Memo (the specifics of what the federal government will place their attention on in the state marijuana markets), which specifies how the industry can function without intervention by the Federal government.
MCRSA is the roadmap to the future of the California medical and eventual recreational marijuana industries. However, it requires operators to obtain a local permit to then qualify for a state license, a system that does not exist in many cities currently.
INTRODUCTION TO PREVIOUS STATE LAW
Hundreds of medical cannabis dispensaries, coops, collectives, and delivery services are currently doing business in California. Although many are operating in legal accordance with state and local law, the sale of medical cannabis remains strictly illegal under federal law, and the DEA has conducted scores of raids against medical cannabis businesses.
Under state law, the California Compassionate Use Act of 1996 (Prop. 215) patients and their “primary caregivers” are protected from criminal prosecution under state law for personal possession and cultivation of marijuana, but NOT for distribution or sale to others. State law was expanded in 2004 by a new law, Senate Bill 420 (Health & Safety Code 11362.7-8). Among other things, SB 420 authorized patient “cooperatives” or “collectives” to grow, distribute and/or sell medical marijuana on a non-profit basis to their members. It also allows duly designated primary caregivers who consistentlyattend to patients’ needs to charge for their labor and services in providing marijuana.
On September 30, 2010, Gov. Schwarzenegger signed bill AB 2650 (Buchanan), which prohibits medical marijuana collectives from operating within 600 feet of a school as of Jan 1, 2011. It covers all activities by dispensaries or other providers that have a storefront location or mobile outlet and are required to have a business license. The bill grandfathers dispensaries that are currently allowed to operate there under existing local regulations.
Although President Obama said during his campaign that he wouldn’t be using federal resources to circumvent state medical marijuana laws, the Department of Justice launched a new offensive against California medical marijuana providers in the fall of 2011, and it has continued to expand since then. Especially targeted have been dispensaries that are 1,000 feet from schools or parks, with landlords receiving threatening letters. Read more.
The Pack decision, which held that cities may not regulate dispensaries since they are federally illegal, left local officials wondering what to do about current and pending ordinances. The California Supreme Court agreed to rule on Pack and three other dispensary-related cases, putting them on hold for at least a year. The Pack decision has since been invalidated by the California Supreme Court, which declined to give it a hearing without ruling on the merits of the case. Although Pack is no longer legal precedent, the question of federal preemption is not clearly settled, and could be resurrected in future court cases.
Meanwhile, in People v Colvin, the Second District Court of Appeals ruled that not every member of a collective or cooperative has to participate in cultivation, affirming the legality of storefront collectives. And in Lake Forest v Evergreen Caregivers Collective, the Third District Appellate Court ruled that cities cannot use nuisance abatement ordinances to impose a blanket ban on collectives – provided that the collective cultivate on-site. The California Supreme Court will hear Evergreen and City of Riverside v Inland Empire Patient’s Health and Wellness Center, with decisions expected in 2013.
ATTORNEY GENERAL’S GUIDELINES
On Aug. 25, 2008, the California Attorney General’s office issued guidelines for medical marijuana enforcement explaining its interpretation of SB420 and Prop 215. Read the guidelines. Although not strictly binding as law, they provide a good indication of how the AG’s office will with state enforcement. The guidelines are for the most part consistent with the California NORML legal committee’s interpretation of state law, with certain exceptions noted below (see Cal NORML analysis of AG’s guidelines ).
The guidelines note that storefront “dispensaries” are not explicitly recognized in state law, but that a “properly organized collective or cooperative” may legally dispense medical marijuana through a storefront provided it complies with certain conditions. The guidelines do not envision dispensaries operating as patient “caregivers,” nor as for-profit businesses (there are many ways in which businesses can be organized as “non-profits”; for details consult a business attorney).
Dispensaries are expected to file for a seller’s permit and pay sales taxes to the Board of Equalization. This is consistent with state law, which requires sales taxes for all medicinal herbs and drugs except those sold by a licensed pharmacist upon a doctor’s “prescription ” (legally, doctors cannot “prescribe” marijuana, but only “recommend” or “approve” it). The BOE publishes tax guidelines and a link for obtaining sales permits.
Some cities and counties also require a business license and/or zoning permits for dispensaries.
Coops and collectives must serve only verified legal patients, and distribute only to their own members.
Beyond this, the guidelines specify that cooperatives and collectives should use only marijuana legally grown or obtained by their own members, with no purchases from outside their membership. This requirement is questionable, since there is nothing in state or federal law banning the purchase of marijuana, medical or otherwise, from any source (the law bans possession, not purchase, and possession is protected under Prop. 215). However, this problem can be avoided by including all growers and suppliers as members.
The guidelines also state that dispensaries should document their activities, and specifically “track and record” the source of their marijuana. This too is outside the requirements of Prop 215 and SB 420. While good record-keeping is always advisable as a business practice, keeping records on growers and vendors poses obvious problems given the threat of federal prosecution. Until federal law is reformed to protect medical marijuana suppliers, coops and collectives need to be careful about protecting their confidentiality.
Despite the federal illegality of dispensaries, many cities and counties have enacted ordinances aimed at licensing or regulating them. Many others have banned them altogether. Some cities, such as Los Angeles, have enacted moratoriums banning new dispensaries while allowing existing ones to operate. Others, such as Oakland, have put a cap on the number of licensed dispensaries. Strict zoning regulations are in effect in many localities, preventing siting near schools or too close to other dispensaries. Other regulations that have been adopted include banning on-site consumption and limiting the quantity of marijuana that can be sold or kept on hand. In some cases, regulations have been deliberately devised to be so strict as to preclude dispensaries from operating.
A new state law, AB 2650, (Buchanan) prohibits medical marijuana collectives from operating within 600 feet of a school as of Jan 1, 2011. It covers all activities by dispensaries or other providers that have a storefront location or mobile outlet and are required to have a business license. The bill grandfathers dispensaries that are currently allowed to operate there under existing local regulations.
It is important that cooperatives and collectives consult local regulations before trying to set up operation. ASA has a list of Local California Dispensary Regulations; (however this list may not be up to date, check with local authorities.)
Anyone interested in opening a medical cannabis facility should be wary about alarming local authorities. Many towns have moved to ban dispensaries after receiving inquiries from prospective operators. However, anyone planning to open a storefront dispensary should seek a business license and comply with local zoning regulations. It is especially important that dispensaries be appropriately sited so as not to disturb neighbors. Neighborhood complaints are the number one cause of police raids.
COLLECTIVES AND COOPERATIVES
State law explicitly allows distribution of medical marijuana through non-profit “collectives” or “cooperatives.” This is the way storefront dispensaries should be organized. While some dispensaries are currently organized otherwise, as sole proprietorships, partnerships, or for-profit businesses, such arrangements are not advisable, since they are not permitted under SB 420 or the Attorney General’s guidelines.
Cooperatives” are explicitly defined in California law. Cooperatives must file articles of incorporation with the state and be organized in accordance with provisions spelled out in the state Corporations or Food and Agriculture code. Prospective cooperatives should be set up in consultation with a business attorney.
“Collectives” are not defined in statutory law. According to the Attorney General’s guidelines :
“A collective should be an organization that merely facilitates the collaborative efforts of patient and caregiver members – including the allocation of costs and revenues. As such, a collective is not a statutory entity, but as a practical matter it might have to organize as some form of business to carry out its activities. The collective should not purchase marijuana from, or sell to, non-members; instead, it should only provide a means for facilitating or coordinating transactions between members.”
One might infer that “collective” refers to any organization of multiple patients. Unfortunately, the guidelines provide no explanation as to how these should operate. Presumably, the basic model is a group of patients and caregivers who plant a garden together and share the crop among themselves. The cultivation collective model does not necessarily envision walk-in clients, nor retail sales of medicine to members. Collectives may be supported by participation in work, donations or membership fees. Under one model, patients pay a set gardening fee for a certain part of the crop, and receive the harvest at no further charge.<
A notable example of a patients’ collective is the Wo/Men’s Alliance for Medical Marijuanain Santa Cruz. WAMM has 200 seriously ill members who cultivate a collective garden and attend to each others’ health and personal needs.
Two examples of patients’ providers officially structured as cooperative corporations under California law were the Oakland Cannabis Buyers’ Cooperative and Los Angeles Cannabis Research Center. Both might have been legal under SB 420, but they were shut down by the federal government.
The legality of collectives and cooperatives under state law was upheld by the Third District Court of Appeals in the 2005 Urziceanu decision. The Court ruled that while Prop. 215 did not authorize distribution by anyone except primary caregivers, SB 420 allowed for distribution among patients and caregivers through collectives and cooperatives.
A ”primary caregiver” is narrowly defined under Prop. 215 to be “the individual designated [by a legal patient] who has consistently assumed responsibility for the housing, health, or safety of that person.” The law does not explicitly allow patients to have multiple caregivers. In contrast, a caregiver may serve more than one patient.
The State Supreme Court has ruled that defendants are not entitled to a caregiver defense if all they do is grow or supply medical marijuana to patients. In the case People v. Mentch (2008), the court ruled: “a defendant whose caregiving consisted principally of supplying marijuana and instructing on its use, and who otherwise only sporadically took some patients to medical appointments, cannot qualify as a primary caregiver.” The court went on to specify: “a defendant asserting primary caregiver status must prove at a minimum that he or she (1) consistently provided caregiving, (2) independent of any assistance in taking medical marijuana, (3) at or before the time he or she assumed responsibility for assisting with medical marijuana.”
A provision in SB 420 forbids caregivers from having more than one patient outside their own “city or county.” The constitutionality of this provision is questionable because it appears to restrict Prop. 215; also, the limitation to a single “city or county” is ambiguous. So far, no appellate court has ruled on the legality of this restriction; while it is included in the Attorney General’s guidelines, it has been disregarded in some lower court rulings. Until this legal issue is settled, prospective caregivers are advised to be cautious about trying to serve many clients outside of their “city orcounty.”
In general, the courts have held that cannabis clubs cannot serve as legal “primary caregivers” for large numbers of patients. Some persons have claimed caregiver status while growing for multiple numbers of patients on the theory that they are providing for their patients’ health or safety. This defense has been successful in court for caregivers growing for small numbers of patients. However, it was rejected by a state court of appeals in the Peron decision, where the court held that Peron’s San Francisco Cannabis Buyers’ Club could not reasonably claim to function as a “primary caregiver” for its 8000 clients.
In general, dispensaries who cater to walk-in clients should not hope to rely on the caregiver provision. Caregiver growers should limit themselves to a select membership list of patients whom they personally know and who do not have other caregivers. Within these constraints, SB 420 allows caregivers to be compensated for the costs of their services, but it does NOT authorize sale of the marijuana itself for profit.
Although state law has no explicit provision for delivery services, they can be justified on the grounds that many patients lack transportation and cannot grow for themselves. The best way to organize a delivery service is as a non-profit cooperative or collective. The management should be in the hands of the membership, not a single individual. (See definitions of collective and cooperative above.)
COLLECTIVE CULTIVATION & POSSESSION GUIDELINES
Prop 215 allows individual patients and their caregivers to possess & cultivate as much as required for the patient’s own medical use. Because this criterion is vague and open to differing interpretations, it is difficult for patients and police to judge beforehand whether a particular garden is legal. All too frequently, police take a stingy interpretation of the law and bust patients or caregivers for gardens they deem excessive, thus leaving the matter to be settled in court at the defendant’s expense.
In order to reduce uncertainty and avoid unnecessary arrests, SB 420 established “limits” or guidelines as to how much marijuana patients and their caregivers could grow and possess. The state default SB 420 guidelines are 6 mature plants or 12 immature plants per patient, and 8 ounces of dried marijuana bud or equivalent. Individual counties and cities are allowed to set higher but not lower limits ( list of local SB 420 guidelines). Individual patients may exceed the guidelines if they have a doctor’s note saying they need more; in practice, however, police routinely ignore this exception.
The validity of the SB 420 limits was thrown into question by two state appellate court decisions , People v Kelly and People v Phomphakdy (2008), which ruled that they were unconstitutional limitations on Prop. 215. Both decisions are under review by the State Supreme Court. We believe the ultimate resolution of these decisions is likely to be that the SB 420 guidelines are not legally determinative of guilt in court, but that they can still be used by law enforcement as guidelines for when to arrest people. Regardless, in the meantime, growers are well advised to adhere to the guidelines to the extent possible.
The question remains as to how much medical marijuana cooperatives and collectives are allowed to grow or possess. According to the AG’s guidelines, they can scale the SB 420 limits in proportion to the number of their members. For example, under the standard state guideline, a coop with ten members could have ten times the limits, i.e. 60 mature or 120 immature plants and up to 80 ounces of marijuana. However, some counties and cities have established a maximum cap on the size of collective gardens: for example, San Francisco does not allow more than 99 plants in any case.
In general, collectives are advised to exercise caution about growing very large gardens. Even if local guidelines permit it, don’t assume that you can safely grow 600 plants just because you have 100 patients. Beware that cultivation of 100 plants or more is punishable by a federal mandatory minimum sentence of 5 years. Collectives are accordingly well advised to stay at 99 plants or less to reduce the risk of federal prosecution.
Posssession, sale, distribution and transportation of marijuana, medical or otherwise, remain completely illegal under federal law. Under the U.S. Controlled Substances Act (CSA), marijuana is currently classified as a Schedule I drug, meaning that it has no accepted medical use. In 2001 , the Supreme Court upheld a federal injunction ordering the Oakland Cannabis Buyers Cooperative and five other cannabis clubs to cease operations. The court overturned a Ninth Circuit Court of Appeals ruling that the OCBC was entitled to a “medical necessity” defense for distributing marijuana to its members. The court ruled for the government on the grounds that the CSA did not allow for a necessity defense for distributors, but left open the question whether individual patients might invoke a necessity defense.
The Supreme Court turned back a more fundamental challenge to federal law in 2005, when it ruled that the CSA prohibits the private possession and cultivation of marijuana even by individual patients (Gonzalez v Raich). In particular, it reversed a ruling by the Ninth Circuit Court of Appeals which had found that the Congress’ constitutional authority to regulate “interstate commerce” did not extend to patients who grew and possessed their own marijuana at home. Although the Supreme Court in no way invalidated California’s state law on medical marijuana, it affirmed the federal government’s right to treat all marijuana as contraband. In a subsequent case (Raich v Gonzalez, 2007), the 9th Circuit Court of Appeals ruled that patients have no constitutional right to use medical marijuana even when their lives depend on it. In May 2009 the U.S. Supreme Court refused to hear a case from San Diego and San Bernardino counties challening the state ID card program, leaving in place an appeals court ruling upholding the program. That ruling does not overturn Raich.
As a result , medical marijuana remains completely illegal under current federal law. TheDEA has raided scores of medical marijuana growers, clubs and caregivers in California since the enactment of Prop. 215. For the most part, the targets have been either high-profile activists who have attracted publicity, or commercial-scale dispensaries and growers whom local law enforcement has decided to turn over for federal prosecution. Defendants in federal cases are not allowed to invoke state law or medical marijuana as a defense. As a result, every medical marijuana defendant who has gone to trial in federal court has been convicted. Sentences have ranged from one day to 20 years.Summary of federal cases.
Another federal weapon against medical marijuana is property forfeiture. Federal law allows the government to forfeit real estate from owners or landlords who let it be used for marijuana distribution or cultivation. Since 2007, the DEA has sent letters to hundreds of California dispensary landlords warning them that their property is subject to forfeiture. So far, no forfeiture suits have been filed pursuant to these letters. Nonetheless, in Santa Barbara, the Department of Justice successfully forced landlords to evict their tenants by warning them that they would otherwise face certain forfeiture in 45 days (Aug 2008). The DEA successfully invoked forfeiture after raiding the Los Angeles Cannabis Resource Center in 2001. The LACRC’s building was actually owned by the city of West Hollywood, which had bought it as a gift for the club. The government had no trouble forfeiting it from the city, effectively closing the LACRC.