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.