TRAIN WRECK OR A JASON BOURNE RESCUE?? WHAT’S GOING TO HAPPEN NEXT IN CALIFORNIA CANNABIS?

 

The plot thickens!  The last time we checked in with our cast of characters across the state – the BCC, the Legislature, the cities and counties, the coming-into-compliance cannabis business sector, and the black market – it looked like a scene from “It’s a Mad, Mad, Mad, Mad World”

https://www.youtube.com/watch?v=Sla845GW9YM

As the audience awaited breathlessly for the impending January 1, 2018 deadline to hit like a tsunami with an understaffed and unprepared agency, a moment we knew would be like a “shot heard ‘round the world” with utter consequence, the BCC pivoted, and rolled out from under  the train with seconds to spare. “Aha” could be heard from their magical regulatory workshop, “ We have a solution.” The beleaguered but spunky Can-Do girl, Lori AJax and her team announced their Ocean’s 11 workaround to their delayed (understandably so to some extent) bureaucratic roll-out.  It was the Holy Grail, that Sword in the Stone - THE TEMPORARY STATE LICENSE (ta-da!). Sure, It wasn't the perfect start to the race, but rubber-stamping locally approved businesses - that took some courage and flexibility, hallmarks of a great hero.

The Bureau was off and running and high-flying, and buying some time, at least for a few months!  A valiant shift. And, it was the right thing to do. Kudos for that one. Let’s see whether they can wiggle out of the next calamity!  

https://www.youtube.com/watch?v=db5rRtOExbA

[BTW, We’ll see more of the Bureau in an upcoming scene entitled,” The Jolly Green Giant Meets Weedzilla”.]

 

Meanwhile, the stars of our movie, (“C’mon guys, we’re rooting for you! )– the Coming-into-Compliance sector - were and are draining their bank accounts and making Las Vegas style marriages with capital investors (with predictable consequences to THOSE marriages).  That’s all led to a spin-off series, “Canna Guy Get a Break?” and its sequel, “The Incredible, Shrinking Down-payment”, inspired by Wimpy’s famous “I will gladly give you a dollar tomorrow for a hamburger today”.

[https://www.youtube.com/watch?v=WlB2b9wOuik]

Our Black Marketeers meanwhile watch the action, hidden from view, from the hilltops, reading the future and dreading it, like how we imagine many Native Americans must have felt seeing Europeans as their ships arrived on the shores of the continent.  Some have quit in disgust, but others have taken up the challenge to see how long and how far they can take their beloved black market. But they have a new enemy now, their former brothers and sisters, the Coming Into Compliance sector. This is going to get bloody as the BCC - having won over a handful of converts - will try to make further inroads into these Black Marketeers.  The BCC’s weapons look nasty including a secret hotline to turn in non-compliant businesses! Meanwhile, will the converts be seen as traitors to a cause or trailblazers to a better future? Time will tell and more light will be shed in the sequel to this installment, “Back To The Future - the Weed Wars”.

BUT WAIT! WHO IS THIS?  Who do we see coming over the hill like the cavalry?   THE POLITICIANS!!! YES! We are saved!!!!! But wait, that assumes that our Legislature bases its decisions on rationally and scientifically-based, agreed-upon policies with facilitated and productive dialogue among all stakeholders leading to the best agreed upon decision!!!!  We wish them Godspeed and hope that they start to hire professional facilitators, listen to objective policy professionals, and look at the experiences of other states.

But even if they don’t want to legislate scientifically and with common sense, that’s okay.  It’s okay if they don’t want to make a strong effort to fix the massive mistakes made in the enabling legislation (AUMA and its combined regulatory scheme, MAUCRSA).  That’s because our Black Marketeers, watching from the hillside, are banking on the Legislature not being up to the job of fixing the mess! They are already supplying most of the State’s consumers with cannabis and are more than ready to take back the less than 1% of the market they’ve lost with partial legalization!  And from the way cannabis enforcement has looked from the past 4 decades, no one is expecting a miracle or any quick, effective way to eliminate the Black Market.

CAN WE POSSIBLY POLICY, POLICY, POLICY!  (TORA! TORA! TORA!)

Take taxes.   The recent proposal by Assemblyman Lackey - eliminate the cultivator tax temporarily and reduce the (retail) excise tax from 15% to 11% - won’t bring back the consumers to the licensed dispensaries/retailers (slightly less than 400 retailers in total compared to over 40,000 retail outlets to purchase liquor in CA).  Even at 11%, consumers are still paying over 18% in taxes (that’s combined with the sales tax). That, along with the thriving Black Market - with a remarkable flexibility and ability to undercut the compliant market, and the right to home grow, makes writing this ending to screenplay fairly easy.

It will take decades to calm this marketplace under the current tax and compliance policies and requirements.  That’s not a difficult prediction.

And finally, we get to the real villains - the cities and counties - and ultimately, the last standing voices of Prohibition.   No legal retail marketplace with the demand curve that cannabis has can survive in a state of 39 million people with only 400 retail outlets.  Sorry guys. Those Black Marketeers will be swarming all over your cities and counties, putting many of the very few compliant businesses out of business.   Better help fix the Statewide legislation!

So, will there be a train wreck, or will the Government figure out how to avoid being the roadrunner (BEEP BEEP!!)   STAY TUNED! https://www.youtube.com/watch?v=Jd_41tM6H2Y



 

A Johny-Come-Lately Who Witnessed the Legend

I first met Dennis Peron at Tony Serra’s office, sometime in 1996 or 1997.  I was working on section 1983 (civil rights) litigation at the time, some cases with Randy Daar, one of Tony’s partners, and had developed a side area, helping local, small businesses with incorporations, and other mundane business matters.  That business work wasn’t a passion but it paid the bills in the beginning when I was building a civil rights practice with a brand new baby at home and a wife who was taking care of her.

Randy recommended I go to a celebration of the passage of the Compassionate Use Act in Santa Cruz the weekend after the successful vote.  I decided to go and was happy to meet some of the luminaries of the medical cannabis movement like Jeff Jones and Valeria Corral.  It was an education for me as I started to learn what these folks had been doing for years.  It was all new to me.

I remember around the same time I had a meeting with Randy at his office on Pier 5 and Dennis was there with Tony discussing some legal matter.  I can’t remember which legal issue he was dealing with but we were introduced and Dennis learned I was doing some business law.   He started asking me business-related questions and assumed, correctly, that a civil rights lawyer like me was going to help him for free.  Dennis liked lawyers around him who worked for free.   I honestly thought it was all pretty funny and amusing, (Dennis was definitely very funny!), because, at that time, I was not a cannabis lawyer and was not involved in the cannabis legalization fight at all.  I thought you smoked pot to get high.  I had no idea there was something called medical use.   

I think Dennis was asking me about insurance and employee issues and I gave him the best advice I could, taking into account that what he was doing was definitely over the line.  A club selling cannabis to its members in San Francisco based on a law that gave cannabis patients a defense to criminal charges?   It wasn’t an issue in my wheelhouse but I was happy to shed whatever little light I could for him.

But, it became clear to me soon after the 1996 vote that this issue was not only NOT going to go away, but there was going to be an explosion.  The activists, led by Dennis and others, were simply not going to stop advocating and distributing cannabis to patients.  When the State Legislature opened the door for patients to work together to grow and distribute cannabis n 2003, that’s when the show really opened up.

The simple truth is that Dennis and his allies were passionate, made a lasting impression on me, and were inspiring.  I started to look more closely at the myriad legal and political issues medical cannabis raised and I started to do more and more to assist patients around the state.   I guess, looking back, I was one of Dennis’s recruits.  Thanks Dennis. It’s been a great fight and we’ll all carry it on until we finally win.  Don’t worry!

The New Medical Cannabis Law

MAUCRSA is now the law in California, regulating commercial cannabis operations while enshrining the new criminal laws passed by the voters in November, 2016 (Prop. 64).  Many people are confused about what the new law entails and how they can position themselves to obtain a license once the State starts issuing them.  

Please contact my office for more information about the new law and how it will impact those seeking to obtain a license, whether they currently operate a cannabis cooperative in California or not.

Cooperatives and The Future of State Licensing in 2018

The language of SB 420, also known as the Medical Marijuana Program Act,  passed by the California Legislature in 2003, continues to vex and confuse patients and cause roadblocks for the development of an organized and well-regulated industry throughout the State.  Law enforcement and cities and counties, have taken advantage of the ambiguous language to either ban or unduly restrict patients cooperatives, or, in some cases, even arrest the patients running the dispensing operation.  And, while this law will lapse once licensing takes effect, likely by late 2018 or early 2019, patients in the state of California must still belong to a legally formed and legally operating cooperative until then.  Make sure you have some corporate entity in place that is not allowed to make a profit.  I have used a cooperative corporation for my clients, governed by California Corporations Code section 12200 to 12704, since January, 2004. I believe that since the California Attorney General also recommends this form in his August, 2008 Guidelines, licensing authorities will reward those who followed those Guidelines as closely as possible, including setting up the cooperative corporation. 

 Problems with Local Cities and Counties

Despite the fact that State law allows and authorizes patient cooperatives, most of the State's cities and counties have used their local zoning laws and their business license laws to block cooperatives.   That concept is enshrined in the MAUCRSA.  Our firm has litigated against the City of Stockton, the City of Mountain View, the City of Los Angeles, the City of Vallejo, the City of Richmond, Sonoma County, and Humboldt County, to name only some of the most recognizable governmental entities, and in only one case did a judge agree that patients should not be subjected to restrictive ordinances.  Once licensing starts in 2018, we expect that it will be difficult, it not impossible, to challenge the formal bans that many cities and counties have already enacted.

Thus, those interested in getting a state license will need to ensure they have local approval first before applying to the state in 2018.  Plan to have a budget for local lobbying of the city council or board of supervisors in the jurisdiction where you plan to operate.  Also, make sure you are not planning to operate in a city or county that has enacted a ban, unless you plan to start a political campaign to overturn that ban or to elect friendlier lawmakers who will overturn it.  Either of those options is time-consuming and costly.