Report. Pursuant to Elections Code Compassionate Use Dispensary Regulation and Taxation

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1 Report Pursuant to Elections Code 9212 Compassionate Use Dispensary Regulation and Taxation Ordinance Initiative Leslie Devaney, Del Mar City Attorney Robert Mahlowitz, Del Mar Deputy City Attorney July 18, 2012

2 Summary Overview I. Significant issues calling into question the viability of the Initiative A. Improper or Illegal Matters for Initiative Process 1. City sales tax at variance from California s sales tax law prohibited. The Initiative proposes a unique City tax on medical marijuana higher than the uniform sales tax rate imposed by California law; would require Board of Equalization ( BOE ) to cease collecting all sales taxes in Del Mar. Impacts: (1) BOE ceases collecting all sales taxes in the City; (2) Local Del Mar sales taxes constitute $1.5 million annually, 13 percent of the general fund; (3) Del Mar forced to retain its own sales tax force to collect local sales taxes instead of BOE; and (4) All 1800 Del Mar businesses paying sales taxes must adopt a dual sales tax accounting system to accommodate Del Mar and State tax collection system. (See Sections I & III) 2. Dispensaries that distribute marijuana are illegal under California and federal law. Distribution of marijuana is not authorized by California medical marijuana laws and violates the federal Controlled Substances Act. (Section IV.B) 3. A City may not require its employees violate the law. The Initiative mandates City employees issue permits authorizing distribution of marijuana, aiding and abetting violation of California and federal criminal laws. The U.S. Attorney has concluded that City employees are not immune from criminal prosecution. (Section V) 4. A City may not amend State criminal law. The Initiative purports to alter the ability of law enforcement to arrest and prosecute individuals for violation of California criminal law. (Section VI) -- i -- Summary

3 B. Misrepresentations Misrepresentations of the purport or effect of the Initiative make it an improper subject for a vote of the people. 1. Failure to disclose significant, adverse impacts of changes to sales tax laws on the City budget and all Del Mar businesses. The Initiative does not disclose that the proposed 2.5 percent tax on medical marijuana will force the Board of Equalization to cease collecting all sales taxes in the City, require the City to implement its own sales tax force to collect $1.5 million annually (13 percent of the City s general fund) and require all 1800 Del Mar businesses to adopt a dual sales tax accounting system to accommodate Del Mar s unique tax collection system. (Section III) 2. False representation by Initiative Proponent Andrew Warner that he lives in the City of Del Mar. Initiative Proponent Warner listed his address as Del Mar, California, but that address is located in the City of San Diego. Given the Initiative s undisclosed significant impact to all Del Mar business, the City s entire sales tax collection system and the City s budget, the fact that the Proponent is not a City resident may constitute a material misrepresentation to the people of Del Mar. (Section IV) 3. The Initiative Falsely States that courts have determined Medical Marijuana dispensaries are legal under State law. Contrary to the Initiative s assertion, the California Supreme Court has held that dispensary operations where marijuana is distributed are illegal under California law. Voters may have been mislead by this misrepresentation into support of the initiative. (Section III.B) 4. The Initiative Falsely States the courts have concluded that federal law does not preempt California s medical marijuana laws. This specific question is presented by three court of appeal decisions currently pending before the California Supreme Court. Voters may have been mislead by this misrepresentation into support of the initiative. (Section III. C) II. Proposed Area of Operation Initiative seeks to authorize the following number of dispensaries in the following zones: Central Commercial, 3; North Commercial, 2; and Beach Commercial, 1 for a total of six. (See Section IX and Exhibit K) -- ii -- Summary

4 III. Significant Impacts of Concern A people s Initiative is not required to be certified as legal or proper before appearing on a ballot. An Initiative, if enacted, cannot be amended without a subsequent vote of the people. Understanding the impacts of the proposed Dispensary and Taxation Initiative is important. A. Dispensary operations will increase public safety costs, but the Initiative does not allow the City to charge dispensary operators fees to offset needed additional public safety expenditures. (Section VII) B. No enforcement tools are included to ensure dispensary operations comply with the proposed ordinance or State medical marijuana requirements or to verify the safety of marijuana provided to qualified patients. (Section VIII) 1. No notice of dispensary use is required to be provided to a property s owner. (Section VIII.C.1) 2. No right is provided to inspect dispensaries for compliance with local or California law. (Section VIII.C.2) 3. No record-keeping of patients served, marijuana cultivated or obtained is required. (Section VIII.C.3) 4. No testing of marijuana is required, patrons are not assured of the efficacy or safety of what they obtain at a dispensary. (Section VIII.C.4) 5. No audits of dispensary activities is authorized or required. (Section VIII.C.5) C. Dispensary permits do not expire, cannot be revoked and are possibly owned by a permit-holder forever. (Section VIII.A) D. No right to appeal a permit determination exists. (Section VIII.B) E. Serious Felons and other convicted criminals are expressly authorized to obtain permits to operate marijuana dispensaries. (Section VIII.D) F. The Initiative does not specify that a Del Mar dispensary must serve only persons with a significant medical condition. (Section VIII.E) G. Parking for dispensary customers is not addressed. (Section IX.C) -- iii -- Summary

5 H. Dispensaries must obtain a City business license, which cannot issue to a business that operates in violation of State or federal law. (Section XI) I. Federal grant money to the City is jeopardized if the City is required to issue permits authorizing violation of federal law. (Section X) -- iv -- Summary

6 Table of Contents I. Introduction...1 A. Purpose of the Report... 1 B. Nature of an initiative: only a vote of the people can change the law... 2 II. The Dispensary and Taxation Initiative...2 III. IV. A. Andrew Warner of the City of San Diego is the sole proponent... 2 B. Identical initiatives pending in San Diego-area cities... 2 C. The Initiative s two purposes, sales tax and dispensary operations, are illegal, improper and were misrepresented to the public... 3 The Initiative s improper and illegal sales tax provision will prevent the Board of Equalization from collecting any sales taxes in Del Mar, a $1.4 million annualimpact...4 The Initiative mislead Del Mar s registered voters in four significant ways, making it improper to put the Initiative to a vote...6 A. Understanding Federal and California marijuana laws shows the Initiative misrepresentedfacts Federal marijuana law California s Compassionate Use Act and Medical Marijuana ProgramAct... 8 B. Misrepresentation: contrary to the Initiative s assertion, California law does not allow dispensary operations Distribution of marijuana is illegal under California and federal law... 9 C. The Initiative falsely states conflicts between the federal CSA and California s CUA and MMPA are resolved V. A City may not require its employees violate California and Federal law by issuing permits for sales or distribution of marijuana...14 VI. The Initiative improperly purports to amend California law to preclude arrest in Del Mar for violation of California s criminal marijuana laws...18 VII. Dispensary operations are targets of crime and will increase public safety costs. 19 VIII. This Initiative omits any enforcement provisions to ensure compliance with local and State medical marijuana laws or to protect qualified patients...20 A. Dispensary permits never expire, no revocation procedures exist and permits may be owned in perpetuity by an applicant B. No right to appeal permit decisions is provided, a due process concernno restrictions exist on sales or licensing of dispensary permits a Table of Contents

7 C. No enforcement provisions exist to ensure compliance with State medical marijuana laws Notice to landlords should be required Inspection rights are needed for local law enforcement Record keeping should be mandatory for all marijuana-related events Testing of marijuana should be mandated to protect member safety Annual audits of all required records should be required D. The Initiative allows individuals convicted of a serious felony to operate adispensary E. The Initiative does not specify that a Del Mar dispensary must serve only persons with a significant medical condition IX. Land Use Impacts...25 A. Possible locations for dispensary operations according to the Dispensary and Taxation Initiative B. Quantifying demand: Del Mar would be the only city in San Diego County authorizing dispensary sales C. Parking, a significant problem in Del Mar, is not addressed by the Initiative X. The Initiative places federal grants to Del Mar at risk...27 XI. A dispensary must obtain a business license which will not issue under the City s business license regulations...28 ExhibitList...29 b Table of Contents

8 Report Pursuant to Elections Code 9212 Compassionate Use Dispensary Regulation and Taxation Ordinance Initiative July 18, 2012 I. Introduction This report has been prepared in response to the June 18, 2012 request made pursuant to Elections Code 9212 by the Del Mar City Council directing the City Attorney and City Staff to assemble a report concerning an initiative entitled Compassionate Use Dispensary Regulation and Taxation ORDINANCE 1 which the City Clerk has certified as having received signatures from more than 10 percent but less than 15 percent of the City s registered voters. A. Purpose of the Report This report analyzes the potential legal, practical and policy impacts of the Dispensary and Taxation Initiative upon the City, its residents and its businesses. The report does not address the many issues that often arise concerning the topic of marijuana and use of marijuana for medical purposes such as its medical efficacy, recreational usage or whether or not it should remain classified as an illegal drug. Instead, the report addresses the Dispensary and Taxation Initiative from a legal and policy perspective under existing law. Given the short time-frame imposed by the Elections Code for preparation of this report, in many instances, this report identifies questions the Initiative presents but is unable to provide answers to those questions. Additionally, the conclusions of this report are preliminary in nature and are not intended to bind the City to any policy or fixed interpretation of the Initiative given that only the City Council is authorized to set policy for the City of Del Mar. The Initiative states two main purposes: (1) changing the City s sales tax regulations and (2) requiring City employees to issue permits for the sale and/or distribution of marijuana pursuant to California s medical marijuana laws. Given these two purposes, the City Attorney s Office sought input and received input when preparing this report from among the following sources: The United States Attorney for the Southern District of California; The California Board of Equalization; The City of Del Mar s Planning Director; the City of Del Mar s Finance Staff; the City of Del Mar s sales tax consultants; Judi Strang, Executive Director, San Dieguito Alliance for Drug Free Youth; Cynara Velazquez, Citizens for Patient Rights; Melvin Chang; Jon Sullivan; Jessica C. McElfresh, Esq., on behalf of the Patient Care Association of California; Diego di Maria; case law; statutory law; regulatory law; media reports; deposition testimony; public safety reports; social science studies and reports; and the text of the Initiative. Initiative [Exhibit A.] 1

9 B. Nature of an initiative: only a vote of the people can change the law The Dispensary and Taxation Ordinance, either if adopted by the City Council or if enacted by a vote of the people, is legally different than an ordinance proposed by and adopted by the City Council. An ordinance presented by petition, such as the Dispensary and Taxation Ordinance, cannot be amended at any time after it becomes law except by another vote of the people. Elections Code 9217 ( No ordinance that is either proposed by initiative petition and adopted by the vote of the legislative body of the city without submission to the voters, or adopted by the voters, shall be repealed or amended except by a vote of the people, unless provision is otherwise made in the original ordinance. ) The proposed Dispensary and Taxation Ordinance does not allow the Del Mar City Council to amend, correct or clarify any provision of the proposed law that may develop in the future. If enacted, all substantive changes would require vote of the people of Del Mar. Additionally, voters may believe that if an initiative appears on the ballot, the initiative must be legal for the people to enact. The fact is that the legality of any initiative drafted by the public and placed on the ballot is only resolved if someone files a lawsuit challenging it. In many cases this only occurs after a law is approved by the voters. Thus, there is no guarantee that any people s initiative is legally valid merely because it appears on an election ballot. For all of these reasons, understanding the Initiative before it is enacted takes on a heightened importance. II. The Dispensary and Taxation Initiative A. Andrew Warner of the City of San Diego is the sole proponent On March 26, 2012, Mr. Andrew Warner as the sole proponent filed with the City a Notice of Intent to Circulate Petition of the Compassionate Use Dispensary Regulation and Taxation ORDINANCE. 2 Proponent Warner s Notice of Intent to Circulate states that he lives in the City of Del Mar. Proponent Warner s address, however, is not within the City s boundaries and, instead, is located in the City of San Diego. The Notice of Intent to Circulate, falsely represented the proponent is a resident of the City of Del Mar. B. Identical initiatives pending in San Diego-area cities Although Proponent Warner does not appear to be the proponent of them, identical initiatives are pending for qualification for a possible vote in the cities of Encinitas, Solona Beach, La Mesa and Lemon Grove. Another medical marijuana-related initiative has qualified for the November 2012 ballot in the City of Imperial Beach, although that initiative is not identical to Del Mar s Dispensary and Taxation Initiative. For example, unlike Proponent Warner s Initiative, the Imperial Beach Initiative does not appear to be intended to alter the sales tax collections for all businesses throughout Imperial Beach. 2 Notice of Intent and proposed Ordinance. [Exhibit A.] 2

10 No city in the County of San Diego currently authorizes medical marijuana cooperative, collective or dispensary operations that distribute marijuana. The County of San Diego has adopted a regulatory program pursuant to which it is believed a single dispensary has qualified to operate. All other collectives, cooperatives or dispensaries operating within San Diego County or the cities of San Diego County are currently operating in violation of local law, federal law and, as explained below, most likely in violation of State law. C. The Initiative s two purposes, sales tax and dispensary operations are illegal, improper and were misrepresented to the public Proponent Warner s Initiative would have two areas of impact: (1) Severing sales tax collection for all businesses operating in Del Mar from the statewide system of uniform sales tax collections provided by the California Board of Equalization and requiring a special system of sales tax reporting and collection uniquely applicable to every business operating in the City of Del Mar in order to allow a 2.5 percent sales tax on medical marijuana transactions; and (2) Requiring City employees to issue permits authorizing the violation of federal drug laws as well as California s drug laws in the form of permits to sell and/or distribute medical marijuana in the City. The two purposes of Proponent Warner s Initiative propose significant impacts. The proposed sales tax changes, as discussed below, would impose a major change in the way the City receives $1.5 million in annual local sales tax revenues, thirteen percent of the City s general fund, a major change in the way all Del Mar businesses account for and pay sales taxes, and would impose significant additional costs upon both the City government and all businesses operating in the City. Varying from what is allowed by State sales tax law is not allowed, so the Initiative is improper in this regard. Additionally, Initiative Proponent Warner s failure to disclose these impacts was a significant omission and misrepresentation to the voters, calling the entire Initiative s viability into question. Concerning dispensaries, something that requires clarification from the outset: Despite the abundance of illegally-operating storefront dispensaries in the San Diegoregion, California s medical marijuana laws do not allow for distribution of medical marijuana through cooperative, collective or dispensary operations. As explained below, the Initiative is not the proper subject for a public vote because the Initiative proposes to authorize illegal activity in the form of distribution. Additionally, the Dispensary and Taxation Ordinance would illegally require City employees to issue permits authorizing sales or distribution of marijuana. Issuing permits to sell or distribute marijuana could expose City personnel to criminal liability for violation of the federal Controlled Substances Act and California criminal law. As an 3

11 employer, the City cannot mandate its employees violate the law, something the Initiative does. Also illegal, the Initiative proposes to restrict the right of law enforcement to arrest and prosecute individuals for criminal violations of California law in the City of Del Mar. This is beyond the power of a City. Finally, although they do not present legal infirmities, as legislation, Proponent Warner s Initiative fails to address some of the most basic requirements of municipal ordinances. For example, dispensary permits would never expire and cannot be revoked. They appear to be lifetime grants to permit holders. Unlike other jurisdictions that regulate dispensaries, Proponent Warner s Initiative requires no record-keeping, no reporting, no testing of marijuana to be ingested by qualified patients, no right of inspection to any governmental entity. Felons are authorized to control and direct dispensary operations. No requirement exists that property owners be informed and consent to dispensary usage of their property a significant concern given the federal government s recent lawsuits to seize land where dispensaries are operated. Proponent Warner s Initiative presents significant enforcement problems as well as threats to the public interest. III. The Initiative s improper and illegal sales tax provision will prevent the Board of Equalization from collecting any sales taxes in Del Mar, a $1.4 million annual impact As stated, the most drastic impact of Proponent Warner s Initiative stems from the taxation component of the ordinance. Proponent Warner s Initiative would impose a sales tax upon medical marijuana at a rate greater than the tax imposed on all other sales in the City. 3 Sales of medical marijuana in Del Mar would be taxed at a rate of 2.5 percent when taxes of all other goods are allowed at a maximum local rate of one percent pursuant to State law. 4 If a city charges a different rate than allowed by State law, the Board of Equalization ( BOE ) is required by State law to cease collecting all sales taxes in that city. If the BOE stops collecting sales taxes in Del Mar, the impacts will be significant:.the BOE has collected and distributed to Del Mar between $1.4 and $1.6 million in sales taxes each of the past three years. 5 3 The Board of Equalization has already ruled that transactions involving the exchange of marijuana, medical or otherwise, triggers an obligation to pay sales taxes. 4 Initiative, ADDITIONAL SALES TAX IMPOSED TO BENEFIT THE GENERAL FUND OF THE CITY OF DEL MAR, Parts 1-3. [Exhibit A.] 5 June 29, 2012 Letter, Stephen Stark, MuniServices, Del Mar s sales tax consulting firm. [Exhibit B.] All of the bullet points on this and the following page are supported by this letter. 4

12 .Local sales taxes collected by the BOE represents approximately 13 percent of the City s annual general fund..to collect its local sales taxes in place of the BOE, Del Mar would be required to hire or retain its own taxing personnel at a significant cost to the City..The cost of doing business in Del Mar would increase businesses currently pay sales taxes in Del Mar and they would all be required to implement a Del Mar-specific accounting system to segregate Del Mar s one percent local sales tax for City collection and maintain a separate system to account for any sales occurring outside of the City. California law mandates that cities collect a tax of no more than one percent on the sales of goods. Rev. & Tax. Code 7202, If a city varies its sales taxes in any way from what is allowed under State law, the Board of Equalization must cease collecting all sales taxes within that city. Id., Proponent Warner s Dispensary and Taxation Initiative varies from State sales tax laws in two ways: (1) it taxes medical marijuana sales at a rate higher than one percent; and (2) it treats sales of medical marijuana differently than sales of any other good. In State Board of Equalization, 78 Ops. Cal. Atty. Gen. 26 (1995)(Opinion No ), the City of Ontario adopted a sales tax in excess of one percent on car rentals. The California Attorney General determined that this violated the one percent limit on local sales taxes allowed by State law. Therefore, the Attorney General directed the Board of Equalization to cease collecting sales taxes for the City of Ontario. Id. ( Since we have concluded that Ontario's PVRT is a type of use tax for purposes of the statute, the Board has the statutory duty to give Ontario written notice of termination of its contract to administer the city's sales and use tax ordinances. ) The Board of Equalization s office of legal counsel has confirmed that if Proponent Warner s Initiative is enacted in Del Mar, it is probable that the Attorney General would apply the same analysis as was applied in the Ontario case. 6 The Board of Equalization would be required to cease collecting all sales taxes in the City of Del Mar. As explained above, the impact would be great. During the past three years, the Board of Equalization has collected and distributed to Del Mar between $1.4 and $1.6 million, representing approximately 13 percent of the City s annual general fund. More than 1800 Del Mar businesses would have to implement dual sales tax account and reporting systems. And the City would be required to retain its own sale tax collection force in place of the BOE. As an additional matter, the City Attorney s Office, in discussions with the Board of Equalization s office of general counsel, has learned that other cities in California have 6 July 10, and attachments of Mr. Cary Huxall, Esq., California Board of Equalization, office of legal counsel. [Exhibit C.] 5

13 imposed excise taxes on sales of medical marijuana which the Board of Equalization does not feel constitute sales taxes, thus, do not violate California s uniform sales tax laws. However, Proponent Warner s Initiative is drafted to prevent the City of Del Mar from adopting an excise tax that would be acceptable to the Board of Equalization. The Dispensary and Taxation Initiative states, All fees to implement this Ordinance by the City of Del Mar shall be for cost recovery only. 7 Finally, the enacting language of the State s sales tax laws purports to pre-empt local regulation inconsistent with State laws. To the extent the Dispensary and Taxation Initiative is inconsistent with State sales tax laws, the Initiative is beyond the power of a City to enact or which is legally invalid. See, debottari v. City Council of the City of Norco, 171 Cal.App.3d 1204, (1985). The Initiative is not a proper subject for a public vote. IV. The Initiative mislead Del Mar s registered voters in four significant ways, making it improper to put the Initiative to a vote It is improper for a ballot initiative to occur or take effect if premised upon misrepresentations. See Elections Code 1800 (intentionally false representations concerning the contents, purport or effect of an initiative petition a misdemeanor); San Francisco Forty-Niners v. Nishioka, 75 Cal.App.4th 637, (1999)( Numerous decisions have supported the invalidation of initiative measures for Elections Code violations resulting in voter confusion or misinformation. ) The Dispensary and Taxation Initiative contains at least the four following misrepresentations that would have impacted the willingness of registered voters to support the petition: 1. Failure to disclose the Initiative s multi-million dollar changes upon collection of the City s sales taxes and the additional costs for all Del Mar businesses. See above. 2. Proponent Warner represented that he is a Del Mar resident when the address he provided is within the City of San Diego. 8 Given the Initiative s major impact on the City finances and upon all Del Mar businesses, the fact that it is proposed by a non-resident would have impacted the willingness of City voters to support the petition. See above. 3. The Initiative falsely states that dispensary operations have been determined to be legal under California law. In fact, the opposite is true. Not only is this a misrepresentation likely to have impacted the willingness of City voters to support the Initiative, the Initiative is not a proper subject for a public vote because it proposes an illegality. See below. FEE CHARGED BY THE CITY OF DEL MAR SHALL BE FOR COST RECOVERY ONLY. [Exhibit A.] [Exhibit A.]

14 4. The Initiative falsely states that the law is settled that California s medical marijuana laws are not pre-empted in any way by the federal Controlled Substances Act which criminalizes the possession, use, distribution or sale of marijuana for any purpose. The true state of the law, if known to City voters, would have impacted their willingness to support the petition. A. Understanding Federal and California marijuana laws shows the Initiative misrepresented facts To understand the misrepresentations made by Initiative Proponent Warner to Del Mar s voters, it is necessary to understand how federal law addresses marijuana and how California law addresses marijuana and medical marijuana. An overview of both is presented next. 1. Federal marijuana law Under the federal Controlled Substances Act ( CSA ), 21 U.S.C. 801 et seq., marijuana is categorized as a Schedule I substance. Regardless of what any state law says on the subject, Congress expressly found that the drug has no acceptable medical uses. Gonzales v. Raich, 545 U.S. 1, 27 (2005); see also, 21 U.S.C. 812(c), Schedule I(c)(10). The federal CSA prohibits the possession of Schedule I substances, except for in the use of government-approved research projects. See, United States v. Oakland Cannabis Buyers' Co-op., 532 U.S. 483, 490 (2001). In 1970, Congress passed the Comprehensive Drug Abuse Prevention and Control Act of 1970, also known as the Controlled Substances Act. Enacted in 1970 with the main objectives of combating drug abuse and controlling the legitimate and illegitimate traffic in controlled substances, the CSA creates a comprehensive, closed regulatory regime criminalizing the unauthorized manufacture, distribution, dispensing, and possession of substances classified in any of the Act's five schedules. Gonzales v. Oregon, 546 U.S. 243, 250 (2006). The CSA places substances in one of five classifications or schedules, see 21 U.S.C. 812, based on their potential for abuse or dependence, their accepted medical use, and their accepted safety for use under medical supervision, Gonzales, 546 U.S. at 250. Substances listed in Schedule I are the most restricted in terms of access and use, while those in Schedule V are the least restricted. Id. In enacting the CSA, Congress was particularly concerned with the need to prevent the diversion of drugs from legitimate to illicit channels. Gonzales v. Raich, 545 U.S. 1, 2-13 (2005) ( Raich I. ) Marijuana is classified as a Schedule I substance under the Act, and therefore, is subject to the most restrictions. See 21 U.S.C. 812(c). Although substances on Schedules II through V may be dispensed and prescribed for medical use, [S]chedule I drugs cannot be dispensed under a prescription. United States v. Oakland Cannabis Buyers' Co-op., 532 U.S. 483, 492 n. 5, (2001) ( Oakland Cannabis. ) By placing marijuana on Schedule I, the federal government determined, as recognized by the US 7

15 Supreme Court, that marijuana has no currently accepted medical use at all. Id. (emphasis added.) In another US Supreme Court opinion involving California s Compassionate Use Act, the Court reaffirmed this finding where it found that a patient's reliance on a physician's recommendation, even if sanctioned under California s Compassionate Use Act, does not alter Congress' finding that marijuana has no medical value. Raich I, 545 U.S. at 27. The CSA designates marijuana as contraband for any purpose; in fact, by characterizing marijuana as a Schedule I drug, Congress expressly found that the drug has no acceptable medical uses. Id. (emphasis in original). As such, under federal law, it is illegal to manufacture, distribute, or possess marijuana. 21 U.S.C. 841, 844. Further, it is illegal under the CSA to open, use, lease or maintain any place for the purpose of manufacturing, distributing, or using any controlled substance. Id. 856(a)(1); also, Marin Alliance For Medical Marijuana v. Holder, F.Supp.2 nd, 2011 WL , 1 (N.D.Cal ) 2. California s Compassionate Use Act and Medical Marijuana Program Act Like the federal CSA, California law criminalizes the manufacture, distribution or possession of marijuana. See, People v. Kelly, 47 Cal.4th 1008, 1013 (2010). This has remained true even after the people enacted the Compassionate Use Act ( CUA ) and the legislature adopted the Medical Marijuana Program Act ( MMPA. ) California s medical marijuana laws do not decriminalize manufacture, distribution or possession of marijuana. Instead, the State s medical marijuana laws provide a defense after arrest to criminal prosecution for individuals who use marijuana for medical purposes in compliance with the CUA or MMPA. Medical marijuana users remain subject to arrest for use and possession of marijuana under California law. Reviewing California s medical marijuana laws, as recently as 2010, the California Supreme Court explained, So long as the authorities have probable cause to believe that possession or cultivation has occurred, law enforcement officers may arrest a person for either crime regardless of the arrestee 's having a physician's recommendation or approval. People v. Kelly, 47 Cal.4th 1008, 1013 (2010)(citing, People v. Mower, 28 Cal.4th 457, (2010)(emphasis added.) California s medical marijuana laws exist to allow qualified patients to defend against otherwise state criminal charges, charges which may still be filed (though conviction might not result) even against a marijuana user following California s medical marijuana laws. See, Kelly, 47 Cal.4 th at As noted above, however, California s medical marijuana laws provide no defense to violation of any aspect of the federal CSA. In 1996, California voters approved Proposition 215, codified as the Compassionate Use Act of 1996 at section of California s Health and Safety Code. Section (d) provides: Section 11357, relating to the possession of marijuana, and [s]ection 11358, relating to the cultivation of marijuana, shall not apply to 8

16 a patient, or to a patient's primary caregiver, who possesses or cultivates marijuana for the personal medical purposes of the patient upon the written or oral recommendation or approval of a physician. The CUA states that its purpose is to ensure that seriously ill Californians have the right to obtain and use marijuana for medical purposes where that medical use is deemed appropriate and has been recommended by a physician who has determined that the person's health would benefit from the use of marijuana in the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief. Health and Safety Code (b)(1)(A.) The CUA was also enacted, to ensure that patients and their primary caregivers who obtain and use marijuana for medical purposes upon the recommendation of a physician are not subject to criminal prosecution or sanction. Id., (b)(1)(B.) Another purpose was to encourage the federal and state governments to implement a plan to provide for the safe and affordable distribution of marijuana to all patients in medical need of marijuana. Id (b)(1)(C.) Later, the State Legislature enacted the MMPA, effective January 1, The Legislature stated that its intent in enacting the MMPA was to (1) Clarify the scope of the application of the [CUA] and facilitate the prompt identification of qualified patients and their designated primary caregivers in order to avoid unnecessary arrest and prosecution of these individuals and provide needed guidance to law enforcement officers. (2) Promote uniform and consistent application of the act among the counties within the state. (3) Enhance the access of patients and caregivers to medical marijuana through collective, cooperative cultivation projects. Stats. 2003, ch. 875, 1, subd. (b)(1 )-(3). B. Misrepresentation: contrary to the Initiative s assertion, California law does not allow dispensary operations Distribution of marijuana is illegal under California and federal law Proponent Warner s Dispensary and Taxation Initiative contains a misleading assertion that the law is settled regarding the legality of the dispensaries proposed. Not only is this claim untrue, and misleading to voters who signed in support of the Initiative, but the Initiative s purpose of allowing dispensaries to distribute medical marijuana is beyond the power of a city to enact. The Initiative states, California courts upheld the legality of compassionate use dispensaries under state law, including in People v. Hochanedel, 176 Cal.App.4 th 997 [(2009)], and People v. Urziceanu, 132 Cal.App.4 th 747 [(2005)]. The Initiative misleads the voters by asserting that Del Mar, or any local government, may enact a law allowing businesses to distribute medical marijuana and creating a permitting program for these businesses. Given the many medical marijuana 9

17 dispensaries that have operated and continue to operate illegally throughout California, many may have lost sight of the fact that the California Supreme Court has already found that no distribution of medical marijuana may occur between individuals other than from a primary caregiver to a medical marijuana patient with whom that caregiver has a preexisting, ongoing and significant relationship. The California Supreme Court resolved this issue in People v. Mentch, 45 Cal.4th 274 (2008) (group medical marijuana activity limited to collectively learning to cultivate marijuana without fear of prosecution for aiding and abetting violation of criminal laws.) A recent appellate court decision, issued July 3, 2012, again recognized this holding. 420 Caregivers, LLC v. City of Los Angeles, Second Appellate District, Division Eight, Case No. B at p. 35. (California law creates no right to cultivate or distribute medical marijuana through collectives or dispensaries. ) Contrary to the Initiative s assertions, California law does not allow for operation of cooperatives, collectives or dispensaries that distribute marijuana. Additionally, Laura Duffy, United States Attorney for the Southern District of California, reviewed the Initiative and sent a letter addressing the legality of the proposed dispensary operations. 9 In it, U.S. Attorney Duffy reminds Del Mar that federal law prohibits dispensary operations, stating,... enterprises engaged in the cultivation, manufacture, and sale of marijuana directly violate federal law. Neither Hochanedel nor Urziceanu, cited by the Dispensary and Taxation Initiative, find that dispensary operations are legal. In fact, neither case addressed a local ordinance or regulation such as that proposed by Proponent Warner. Hochanedel concerned whether the enactments of the MMPA, created by the legislature, were acceptable as modifications of the CUA, which was adopted by vote of the people. The legislature is allowed to enact laws that serve to carry out a voterapproved law such as the CUA, but the legislature is not allowed to enact laws that amend a voter-approved initiative much as would be the case in Del Mar if Proponent Warner s Initiative is enacted. Hochanedel found the MMPA did not violate this principal of California law and was not an amendment of the CUA. 176 Cal.App.4th at The Court then rejected a criminal defendant s attempt to assert the MMPA as a defense to a criminal prosecution of California law that continues to criminalize sales of marijuana. At no point did the Hochanedel Court uphold the operation of any form of dispensary. In Urziceanu, the Court found that the CUA, before it was supplemented by the MMPA, did not allow for any group activity related to medical marijuana beyond a primary caregiver who provides medical marijuana to the person he or she cares for. 132 Cal.App.4 th at 769. ( [T]he Compassionate Use Act does not allow for collective cultivation and distribution of marijuana by someone who is a qualified patient for the benefit of other qualified patients or primary caregivers. ) However, because the trial 9 July 17, 2012 letter of U.S. Attorney Laura Duffy [Exhibit E.] 10

18 court in that case did not consider how the MMPA applied, the appellate court in Urziceanu returned the case to the trial court for a determination of whether application of the MMPA provided a defense for operation of a dispensary. 132 Cal.App.4 th at 784 ( The question then becomes whether this Medical Marijuana Program Act applies to defendant's conduct, which predates the law. We conclude it does. ) and 786 ( Thus, we must remand the case for a new trial on this issue. ) Although Urziceanu did not address dispensary operations under the MMPA, the California Supreme Court did in the 2008 decision of People v. Mentch, mentioned above. Consistent with Urziceanu, the Mentch Court found that distribution of medical marijuana from one qualified patient to others is not allowed by the CUA. The Mentch Court found the MMPA does not allow for distribution of medical marijuana by a qualified patient to other qualified patients. Instead, the Court found that the MMPA allows groups to collectively assist in, teaching how to cultivate, medical marijuana. Id. at 291 (emphasis added.) The Court explained, This immunity is significant; in its absence, those who assist patients or primary caregivers in learning how to cultivate marijuana might themselves be open to prosecution for cultivation. The recently-decided case of 420 Caregivers, LLC v. City of Los Angele s, Second Appellate District, Division Eight, Case No. B at p. 35, succinctly summed up the state of the law concerning the scope of allowed group medical marijuana activities, reiterating that California s medical marijuana laws do not allow distribution of medical marijuana through cooperatives or collectives: The MMPA does not differ in kind from the CUA. As stated earlier, although it further implements and expands upon the CUA, it is still only a statute that provides limited criminal immunities to specific groups of people under a narrow set of circumstances. (See People v. Mentch, supra, 45 Cal.4th at p. 290; Kruse, supra, 177 Cal.App.4th at p ) Nowhere does the language of its operative terms command or even affirmatively allow the existence of collectives or dispensaries. Its operative terms do not affirmatively create any right, constitutional or otherwise, to cultivate or distribute medical marijuana through collectives or dispensaries. Contrary to the assertions of law contained in the Initiative, California courts have not upheld the operation of dispensaries. Instead, the CUA and MMPA allow qualified patients to cultivate and use medical marijuana; allow a primary care giver to cultivate medical marijuana and distribute it to the qualified patient for whom he/she has an established and involved care giving relationship; and to collectively associate in groups to learn to cultivate medical marijuana. Proponent Warner s Dispensary and Taxation Initiative misleads voters by asserting otherwise and presents a subject which is beyond the authority of a city to enact as law. 11

19 C. The Initiative falsely states conflicts between the federal CSA and California s CUA and MMPA are resolved Promoter Warner s Dispensary and Taxation Initiative states, California courts have ruled that federal law does not preempt municipalities from regulating compassionate use dispensaries under California and local law, including Qualified Patients Association v. City of Anaheim, 187 Cal.App.4th 997 [(2010)], County of San Diego v. San Diego NORML, 165 Cal.App.4th 798 [(2008)]. The Initiative s contention that the scope of local authority to regulate dispensaries is settled as a matter of law is entirely wrong and misleading. This area of law is very much still in dispute and is currently pending for review before the California Supreme Court. The Qualified Patients decision identified in the Initiative made a much narrower finding than the Initiative claims. In Qualified Patients, a dispensary operator challenged the City of Anaheim s enforcement of that City s dispensary ban. Anaheim responded to the complaint by filing a motion to dismiss, arguing that the California CUA and MMPA did not allow anyone to use or distribute marijuana for any purpose because these laws were preempted by the federal CSA for all purposes. See, 197 Cal.App.4 th at Relying on California Supreme Court precedent, Qualified Patients made the limited finding that federal law does not preempt all aspects of the CUA and MMPA and reversed the trial court s dismissal of the dispensary s complaint against Anaheim, returning the case to the trial court to begin proceeding toward a trial of the issues. Prior courts had reached similar conclusions. See, e.g., County of San Diego v. San Diego NORML, 165 Cal.App.4th 798, 825 (2008) (Upholding MMPA requirement that counties issue identification cards to qualified patients)( The CSA is entirely silent on the ability of states to provide identification cards to their citizenry, and an entity that issues identification cards does not engage in conduct banned by the CSA. ) Essentially, these cases concluded that California law does not conflict with the federal CSA by providing medical users a defense to criminal prosecution of California s marijuana laws because even medical users remain subject to criminal prosecution for violating federal laws. No case, however, including Qualified Patients addressed the central question presented by Proponent Warner s Dispensary and Taxation Initiative, whether the federal CSA allows city employees to authorize persons or businesses to sell marijuana. Qualified Patients, moreover, could not reach that question because it was not presented to that Court for consideration. Id. at ( We do not decide whether the CUA or the MMPA preempt the city's ordinance because we conclude the issue is not properly before us. ); ( Whether the MMPA bars local governments from using nuisance abatement law and penal legislation to prohibit the use of property for medical marijuana purposes remains to be determined. ); ( As anxious as we, the parties, and amici curiae are to reach this important and interesting question of state preemption, this case in its 12

20 present posture is not the occasion to do so. ) The most Qualified Patients stands for is that the federal CSA does not prevent all local regulation in the field of medical marijuana. Likewise, County of San Diego v. San Diego NORML, identified by the Dispensary and Taxation Initiative, did not resolve whether the federal CSA allows a city employee to issue permits authorizing sales of medical marijuana. Instead, the San Diego NORML case resolved a challenge to the provision of the MMPA that requires counties to issue identification cards to qualified medical marijuana patients. Identification cards are used by qualified patients to present to law enforcement when charged with violating California s marijuana laws as proof that they can defend against prosecution as legitimate medical marijuana users. The San Diego NORML Court found that because state identification cards do not allow for use, distribution or possession of marijuana, the requirement to issue the cards did not allow for conduct banned by the federal CSA. See id., 165 Cal.App.4th 798, ( However, the applications for the card expressly state the card will not insulate the bearer from federal laws, and the card itself does not imply the holder is immune from prosecution for federal offenses; instead, the card merely identifies those persons California has elected to exempt from California's sanctions. ) At no point does San Diego NORML do what the Dispensary and Taxation Initiative states, at no point does the case address whether all local regulation of dispensaries is allowed by federal law. Instead, this question is currently pending before the California Supreme Court in three cases: City of Riverside v. Inland Empire Patient s Health and Wellness Center, Inc., 200 Cal.App.4th 885 (2011), rev. granted and opinion superseded (January 18, 201 2)(Riverside s dispensary ban upheld); City of Lake Forest v. Evergreen Holistic Collective, 203 Cal.App.4th 1413 (2012), rev. granted and opinion superseded (May 16, 2012)(Lake Forest dispensary ban struck down); and Pack v. Superior Court, 199 Cal.App.4th 1070 (2011), rev. granted and opinion superseded (January 18, 201 2)(Long Beach ordinance creating dispensary permitting system struck down as violating federal CSA.) Additionally, on July 2, 2012, in County of Los Angeles v. Alternative Medicinal Cannabis Collective, Court of Appeal, Second District, Division 1, Case No. B233419, the Court found that a local agency may not ban all cooperatives. On July 3, 2012, in 420 Caregivers, LLC v. City of Los Angeles, Second Appellate District, Division Eight, Case No. B230436, the Court upheld the City of Los Angeles cooperative and dispensary regulations. Because these cases involve the same issues already pending before the California Supreme Court, it is expected these cases, too, will be taken for review within six to eight weeks. 13

21 Within the next year, the California Supreme Court will reconcile the entirely contradictory decisions in Riverside and Lake Forest and now Los Angeles County in which two appellate courts have concluded a city may not ban all dispensary operations and another has concluded that a city may ban all dispensary operations. Even more important to the analysis of Proponent Warner s Dispensary and Taxation Initiative, the California Supreme Court will consider the appellate court s decision in the Pack case that the federal CSA prevents a city from enacting an ordinance that calls for permits to issue to businesses that sell marijuana. This is especially true in light of the very recent City of Los Angeles decision which upheld that City s dispensary regulations, where Los Angeles does not create a permitting process. The law concerning regulation of the very limited type of dispensary allowed under California law as explained by the California Supreme Court in the Mentch decision (a collective operation to teach medical marijuana patients how to cultivate their own medical marijuana, as explained above) is entirely in flux. Proponent Warner s Dispensary and Taxation Initiative falsely asserts the exact opposite is the case. In fact, a group of cities has filed a brief in the Pack appeal asking the California Supreme Court to revisit the findings made by the appellate courts in Qualified Patients and San Diego NORML -- that aspects of the California CUA and MMPA are consistent with and allowed by the federal CSA. 10 The Supreme Court of California has been asked to rule upon whether any of California s medical marijuana laws are enforceable. All of the above demonstrates that the question of whether the federal CSA allows a California city to issue permits authorizing businesses to operate even the narrow type of teaching dispensary allowed under the CUA and MMPA is entirely unsettled. The Initiative s contention to the contrary is misleading and untrue. V. A City may not require its employees violate California and Federal law by issuing permits for sales or distribution of marijuana By mandating that City of Del Mar employees issue permits allowing the operators of medical marijuana dispensaries to distribute marijuana, the Dispensary and Taxation Initiative requires that a City employee, as a component of his or her job, violate both California and federal laws against distribution of marijuana. The Initiative, thus, has an illegal and improper purpose. Unsurprisingly, California law forbids an employer from requiring an employee to engage in a criminal act. Labor Code 2856 ( An employee shall substantially comply with all the directions of his employer concerning the service on which he is engaged, except where such obedience is impossible or unlawful.... ); Tameny v. Atlantic 10 June 18, 2012 Amicus Brief for 19 California Cities, the County of Riverside, California Sheriff s Association, California Police Officers Association and California Police Chiefs Association filed in Pack v. Superior Court, California Supreme Court Case No. S [Exhibit D.] 14

22 Richfield Co., 27 Cal.3d 167, (1980) ( To hold that one's continued employment could be made contingent upon his commission of a felonious act at the instance of his employer would be to encourage criminal conduct upon the part of both the employee and employer and serve to contaminate the honest administration of public affairs. ) Although, as explained above, California law does not allow a collective, cooperative or dispensary to distribute marijuana for any purpose, Proponent Warner s Dispensary and Taxation Initiative seeks to authorize such illegal distribution of marijuana. 11 The Initiative would compel a City employee to aid and abet the distribution of marijuana which is a crime under California and federal law. Because it is beyond the power of a City to compel its employees to engage in criminal acts, the Initiative itself is improper. The Ninth Circuit Court of Appeal has held, in a case involving California s medical marijuana laws that, conviction of aiding and abetting requires proof that the defendant associate[d] himself with the venture, that he participate[d] in it as something that he wishe[d] to bring about, that he [sought] by his actions to make it succeed. Conant v. Walters, 309 F.3d 629, 635 (9th Cir ) Other courts have been called upon to address the issue of aiding and abetting liability in the following contexts: (1) when a doctor recommends a patient consider utilizing marijuana for a medical purpose (Conant); (2) when a police officer is called upon to return seized medical marijuana to a qualified patient (City of Garden Grove v. Superior Court, 157 Cal.App.4th 355, 368 (2007); and (3) when a county issues a medical marijuana patient identification card as required by the MMPA (C ounty of San Diego v. San Diego NORML, 165 Cal.App.4th 798, 825 (2008).) In all of these cases, the courts found that the acts did not lead to use of marijuana. Discussions with a doctor do not necessarily lead to use of marijuana. Return of marijuana does not lead to its distribution or even necessarily its use. Identification cards merely indicate a Californian qualifies for a defense to prosecution for violation of California s criminal marijuana laws but does not authorize use or distribution of marijuana. None of these cases, however, involved the conduct that will be mandated if Proponent Warner s Dispensary and Taxation Initiative is enacted: mandating a municipal employee issue a permit authorizing distribution of marijuana. The permit s sole purpose is to authorize marijuana distribution, the permit issuer would know this fact and would issue with the intent that the permit be valid to allow marijuana to be distributed all likely sufficient to demonstrate violation of the federal CSA as well as California s own criminal marijuana laws. 11 See Initiative, ADDITIONAL SALES TAX IMPOSED TO BENEFIT THE GENERAL FUND OF THE CITY OF DEL MAR, Part (1) ( [F]or transactions at compassionate use dispensaries involving medical cannabis, an additional tax of two and one-half percent (2.5%) shall be imposed. )[Exhibit A.] 15

23 United States Attorney for the Sourthern District of California, Laura Duffy, reviewed the Dispensary and Taxation Initiative and responded with a letter to Del Mar s City Attorney. 12 U.S. Attorney Duffy concluded, [E]nterprises engaged in the cultivation, manufacture, and sale of marijuana directly violate federal law. Accordingly, individuals and organizations that participate in the unlawful cultivation and distribution of marijuana could be subject to civil and criminal remedies. State and City employees who conduct activities mandated by the Ordinance are not immune from liability under the CSA. (emphasis added.) Additionally, we are aware that the U.S. Attorney s office for the Southern District of California has initiated asset seizure procedures stemming from dispensary operations. On July 9, 2012, the U.S. Attorney for the Northern District of California filed two complaints to seize property of a landlord in San Jose and a landlord in Oakland where tenants operate medical marijuana dispensaries. 13 The federal government is stepping up enforcement of the CSA and the City s employees will not be immune from prosecution of federal criminal violations as a result of actions they take to authorize dispensaries to operate in Del Mar. The Court in Pack v. Superior Court, identified this same concern when it struck down the City of Long Beach s medical marijuana permitting ordinance. 199 Cal.App.4th 1070 at n. 27 (2011), rev. granted (2012). There, the Court explained, There may also be an issue of whether the ordinance requires certain City officials to violate federal law by aiding and abetting (or facilitating (21 U.S.C. 843(b)) a violation of the federal CSA. For example, the ordinance requires the City's Director of Financial Management to approve and issue a permit if certain facts are demonstrated. (Long Beach Mun. Code, ch. 5.87, ) In this regard, we note that the Ninth Circuit has held that a physician does not aid and abet the use of marijuana in violation of the federal CSA simply by recommending that the patient use marijuana, but the conduct would escalate to aiding and abetting if the physician provided the patient with the means to acquire marijuana with the specific intent that the patient do so. (Conant v. Walters, supra, 309 F.3d at pp ) We also note that the U.S. Attorneys for the Eastern and Western Districts of Washington took the position, in a letter to the Governor of Washington, that state employees who conducted activities mandated by the Washington legislative proposals [which would establish a licensing scheme for marijuana growers and dispensaries] would not be immune from liability under the CSA. (U.S. Attorney Jenny A. Durkan and U.S. Attorney Michael C. Ormsby, letter to Governor Christine Gregoire, April 14, 2011.) Although a California court has concluded that 12 July 17, 2012 letter of U.S. Attorney Laura Duffy [Exhibit E.] 13 Complaints [Exhibit L.] 16

24 law enforcement officials are not violating the federal CSA by returning confiscated medical marijuana pursuant to state law (City of Garden Grove v. Superior Court (2007) 157 Cal.App.4th 355, 368, 68 Cal.Rptr.3d 656), we are not as certain that the federal courts would take such a narrow view. (See, also, County of Butte v. Superior Court (2009) 175 Cal.App.4th 729, 742, 96 Cal.Rptr.3d 421 (dis. opn. of Morrison, J., [stating [f]ostering the cultivation of marijuana in California, regardless of its intended purpose, violates federal law ].) We are not required to reach the issue. Id. The Pack decision, additionally, distinguished between regulation of medical marijuana and an ordinance that establishes and issues permits to operate a dispensary. Regulations might be appropriate, the Court found, because they would not require the City or its employees to authorize any particular conduct. Permitting programs, on the other hand, require an employee to issue an authorization to distribute marijuana a violation of federal law. Id. ( The question presented by this case is whether the City's ordinance, which permits and regulates medical marijuana collectives rather than merely decriminalizing specific acts, is preempted by federal law. In this case of first impression, we conclude that, to the extent it permits collectives, it is. ) Although Pack is not controlling legal authority because it is currently under review by the California Supreme Court, its analysis is consistent with existing case law. 420 Caregivers, LLC v. City of Los Angele s, mentioned above, implicitly mirrored Pack s distinction between blanket operational regulations and ordinances that require permits to issue and which authorize marijuana distribution. The City of Los Angeles case upheld regulations imposed upon cooperatives, never discussing permits or licenses. Under those regulations, no Los Angeles City employee is required to authorize a dispensary to operate. Instead, the City has enacted a comprehensive set of prohibitions which exclude operation of any cooperate, collective or dispensary that does not comply. 14 Likewise, the County of San Diego s Medical Marijuana ordinance imposes regulations and does not issue permits authorizing dispensary operations. Instead, the San Diego County Ordinance directs the Sheriff s Department to issue a Medical Marijuana Collective Facility Operating Compliance Certificate, showing a dispensary is in compliance with all regulations City of Los Angeles Municipal Code, Article 5. 1, Medical Marijuana Collective. [Exhibit F.] 15 San Diego County Code of Regulatory Ordinances ( SDCC Regs ), [Exhibit G.] San Diego County s Medical Marijuana Ordinance, however, allows dispensary conduct that is not legal under California law. The County does not prohibit distribution of medical marijuana between qualified patients who belong to the same dispensary. As explained above, the only group activity allowed at a cooperative, collective or 17

25 Proponent Warner s Dispensary and Taxation Initiative, in contrast to the City of Los Angeles and San Diego County regulations, mandates a City employee issue the kind of permit to distribute marijuana that troubled the Pack Court and which United States Attorneys have warned could subject an employee to criminal liability. Because a city cannot require an employee to engage in a criminal act and the Initiative would compel Del Mar employees to violate the law, Proponent Warner s Dispensary and Taxation Initiative is not a proper subject for a vote of the people as beyond the power of a City to enact. VI. The Initiative improperly purports to amend California law to preclude arrest in Del Mar for violation of California s criminal marijuana laws Proponent Warner s Initiative states: COMPASSIONATE USE DISPENSARIES, QUALIFIED PATIENTS, AND PRIMARY CAREGIVERS THAT COMPLY WITH STATE AND LOCAL LAW SHALL NOT BE SUBJECT TO ARREST OR PROSECUTION Qualified patients, primary caregivers, and dispensary directors, officers, managers, employees, agents, and volunteers who comply with California s medical marijuana laws and the laws of the City of Del Mar including this Ordinance are not in violation of any local or state law. Thus, they shall not be subject to arrest or prosecution if they come into contact with law enforcement. Further, law enforcement shall not seize any dried cannabis or cannabis plants in their possession. This portion of the Initiative reflects a profound misunderstanding of the power of a city to regulate the criminal laws of the State of California and a profound lack of understanding of California s medical marijuana laws. As has been explained, even with the California CUA and MMPA in place, it remains a State criminal offense to use, sell, transport or distribute marijuana for any purpose. See, People v. Kelly, 47 Cal.4th 1008, 1013 (2010.) Every person, even a qualified medical marijuana patient, may be arrested for such activity. Id. An arrested and prosecuted qualified patient would then have a defense to conviction under California law, but arrest and prosecution is still authorized for all persons. As the California Supreme Court has explained, The CUA provides an affirmative defense to prosecution for the crimes of possession and cultivation. (See generally, People v. Mower (2002) 28 Cal.4th 457, 474, 122 Cal.Rptr.2d 326, 49 P.3d 1067 ( Mower ); People v. Wright (2006) 40 Cal.4th 81, 98, 51 Cal.Rptr.3d 80, 146 P.3d 531 (Wright dispensary is instruction concerning cultivation of marijuana for medical purposes. To the extent the County Code purports to allow any other activity, it is likely unenforceable. 18

26 ).) The CUA does not grant immunity from arrest for those crimes, however. So long as the authorities have probable cause to believe that possession or cultivation has occurred, law enforcement officers may arrest a person for either crime regardless of the arrestee's having a physician's recommendation or approval. (Mower, supra, 28 Cal.4th 457, , 122 Cal.Rptr.2d 326, 49 P.3d 1067.) People v. Kelly, 47 Cal.4th 1008, 1013 (2010.) Additionally, this provision of the Dispensary and Taxation Initiative purports to amend California s Penal Code regarding whether and when law enforcement may arrest and prosecute individuals, and regarding when and whether evidence of criminal conduct may be collected. As such, it is entirely pre-empted by State law and beyond the power of city to enact, and is an improper subject to present to the public for a vote. VII. Dispensary operations are targets of crime and will increase public safety costs In 2009, the California Police Chief s Association issued a detailed white paper analyzing the public safety impacts of medical marijuana dispensaries. 16 The White Paper focused on the significant incidence of criminal activity attracted to dispensary operations, their employees and their patrons. Dispensaries attract burglaries and robberies that place dispensary workers as well as qualified medical patients at increased risk. Detective Steven Brewer of the San Diego County Sheriff s Department submitted a declaration as part of a City of Del Mar court action last year to close a dispensary operating in the City. He confirmed that in his extensive experience, medical marijuana dispensaries attract crime to their own operations. He explained, Medical marijuana dispensaries create specific risks of increased crime. The businesses are known to possess quantities of cash and customers are known to arrive with cash. Marijuana at a dispensary or obtained by a customer at a dispensary is often a target of criminals because marijuana is a highly-valuable commodity for criminal re-sale. 17 Members of the public have contacted the City pointing to a study that examined public safety impacts of dispensary operations within 95 specific census tracks in Sacramento, California (less than the entire City.) See, Kepple, Nancy and Freisthler, Bridget, Exploring the Ecological Association Between Crime and Medical Marijuana Dispensaries, Journal Of Studies On Alcohol And Drugs, July This study, of very 16 April 22, 2009, California Police Chiefs Association s Task Force on Marijuana Dispensaries, White Paper on Marijuana Dispensaries. [Exhibit H.] 17 July 7, 2011 Declaration of San Diego Sheriff s Department Det. Steven Brewer. [Exhibit I.] 19

27 limited scope, was not able to correlate crime in neighborhoods surrounding dispensary operations and did not attempt to address the conclusions made by law enforcement that dispensaries themselves draw criminal activity linked to efforts to obtain marijuana for resale and to obtain the cash from qualified patients frequenting dispensaries. The study did not set out to analyze whether dispensaries themselves are at a heightened risk for criminal activity. Proponent Warner s Dispensary and Taxation Initiative recognizes that threats to the safety of dispensary workers and patrons are real and the proposed Initiative does include some of the safety requirements suggested by Sergeant Brewer and the Police Chief s White Paper. However, increased threats to public safety remain and the City would likely see increased costs for providing public safety if dispensaries operate in the City. This is problematic because the Proposed Initiative forbids the City from imposing fees upon dispensary operators to offset the increased public safety costs Dispensary operations impose upon the City. VIII. This Initiative omits any enforcement provisions to ensure compliance with local and State medical marijuana laws or to protect qualified patients Although these issues do not create legal impediments to enactment of the Dispensary and Taxation Initiative, the Initiative is in many respects a significantly incomplete and vague work of proposed regulation. Comparing the Initiative with medical marijuana regulations in place in the City of Los Angeles or County of San Diego, for example, demonstrates that Proponent Warner s Initiative provides little to no ability to the City or law enforcement to monitor marijuana activities at permitted dispensaries, mandates no record-keeping and requires no testing of cultivated marijuana to ensure the safety of dispensary members. Given that an initiative adopted after petition of the people cannot be amended without another vote of the people, the proposed ordinance s deficiencies are worth consideration. A. Dispensary permits never expire, no revocation procedures exist and permits may be owned in perpetuity by an applicant The Dispensary and Taxation Ordinance contains provisions calling upon City staff to issue a permit for operation of medical marijuana dispensaries in the City. If issued, the permits never expire, are never called upon to be renewed and are not revocable. These are normal tools a city utilizes to enforce its laws and which do not appear to be available under the Dispensary and Taxation Ordinance. Compare this to the County of San Diego s Medical Marijuana Regulations where a Certificate of Compliance is valid only for the address for which it was issued (SDCC, (f)); may be revoked (SDCC, ) and contains specific enforcement provisions (Id. ) 18 General tools do exist in the City of Del Mar Municipal Code for enforcement of City Ordinances, such as administrative citation provisions at Chapter The City 18 SDCC Regs. [Exhibit G.] 20

28 could also enforce violations of the State s medical marijuana laws and violation of the limited requirements imposed on dispensary operations contained within the Dispensary and Taxation Initiative through criminal enforcement and via civil action for creation of a public nuisance. These are costly and time-consuming means of enforcing local regulations and normally administrative tools are built into local regulations to avoid resort to the courts in most cases. Additionally, it should be noted that because the permits cannot be revoked, it is possible that permit holders would argue they continue to hold their permits to operate even after losing a criminal lawsuit or a nuisance abatement prosecution. B. No right to appeal permit decisions is provided, a due process concern Proponent Warner s Initiative provides no right to appeal a decision of the Planning and Community Development Department. Often the government is required to provide a right to challenge an administrative decision and failure to provide that right can be deemed a denial of due process. If Proponent Warner s Initiative is passed, the procedure to be followed by a permit applicant who is displeased by any act of the Planning and Community Development Department will be unclear and uncertain. C. No restrictions exist on sales or licensing of dispensary permits The Dispensary and Taxation Initiative does not contain any restriction on the number of permits any entity or individual obtains. The Initiative does not address whether the permit is tied to a particular property or whether it is personal property of the permit applicant. The Initiative does not restrict re-sale of the permit or licensing of the permit by the permit holder. Because the permits never expire, there is also a question of whether a permit could issue for use at a particular property once one permit has already issued. This could lead to permits being consolidated in the hands of a few permit holders or other unanticipated circumstances that arise due to the Proponent s failure to consider what happens to a dispensary permit after it issues. D. No enforcement provisions exist to ensure compliance with State medical marijuana laws The Dispensary and Taxation Initiative s requirements for operation of a dispensary in Del Mar are the following: (1) security personnel, lighting and alarm systems; (2) secured marijuana storage; (3) dispensary hours of 8 am to 10 pm, 365 days a year; (4) compliance with existing City sign regulations; (5) interior signs warning about use of marijuana and loitering; (6) prohibition of alcohol; (7) requirement that marijuana, sales of marijuana and growth of marijuana plants not be visible from the street; (8) edible marijuana products must be labeled; (9) compliance with California and local law; (10) prohibition against distribution of marijuana to anyone younger than 18 years of age; (11) prohibition against on-site medical evaluation for use of medical marijuana; (12) prohibition of on-site use of marijuana; (13) background checks and 21

29 prohibition against any dispensary director who has been convicted of a serious felony within the past seven years; and (13) appointment of a community liaison. 19 Unlike regulations such as the recently-upheld City of Los Angeles dispensary regulations and San Diego County s Medical Marijuana regulations, Proponent Warner s Dispensary and Taxation Initiative contains no requirements enabling the City or any other entity to ensure a dispensary complies with the Initiative or the requirements of the California CUA or MMPA. For example, the following requirements are imposed by the City of Los Angeles regulations 20 and San Diego County s regulations, 21 none of which are required by Proponent Warner s Initiative : 1. Notice to landlords should be required Other local dispensary regulatory enactments require a dispensary operator to demonstrate the landlord, if applicable, knows the property will be used for dispensary purposes and consents. This is particularly important because the United States Attorneys in California have initiated enforcement actions of the federal CSA against landlords who rent property to dispensary operations. Absent this requirement in Del Mar, landlords may unwittingly be exposed to seizure of their property by the federal government due to a tenant s dispensary operations. On July 9, 2012, the United Stated District Attorney for the Northern District of California filed lawsuits to seize the property of a landlord in Oakland and a landlord in San Jose where dispensaries operate. 22 The risks to property owners posed by dispensary operations is very real. Likewise, a property owner may be cited for violation of Del Mar s own regulations at the property. For both of these reasons, it is important that a dispensary operator demonstrate that a property owner knows and consents to use of the owner s property for marijuana dispensary purposes. The Initiative does not require dispensary operators to prove they provided notice to property owners. 2. Inspection rights are needed for local law enforcement The City of Los Angeles and San Diego County regulations authorize dispensary inspections to ensure compliance will all local regulations and State law. Because this right is not included in Proponent Warner s Initiative, the City will be required to obtain an inspection warrant from a Court before inspecting to ensure compliance with regulations, a process which requires proof that the warrant should issue. The City will face significant burdens before it is able to inspect any marijuana dispensary operating under Proponent Warner s Initiative. 19 Dispensary and Taxation Initiative, OPERATIONAL REQUIREMENTS. [Exhibit A.] 20 [Exhibit F.] 21 [Exhibit G.] 22 Complaints [Exhibit L.] 22

30 3. Record keeping should be mandatory for all marijuana-related events The City of Los Angeles and San Diego County regulations require every dispensary maintain for inspection records of all dispensary operators, qualified patients served, primary caregiver members, documentation of the circumstance of each distribution of marijuana, receipts and detailed records related to all cultivation of marijuana. Los Angeles regulations, moreover, require records of testing of all marijuana and records of all complaints regarding the dispensary. These records must be made available to law enforcement upon request with special provisions to protect private medical information. Proponent Warner s Initiative requires no record-keeping of any kind. Absent these requirements it will be difficult for the City or any other authority to ensure marijuana is used solely for medical purposes, solely by qualified patients and solely in compliance with California law. 4. Testing of marijuana should be mandated to protect member safety The Los Angeles regulations require a dispensary to test the marijuana qualified patients obtain to determine what it contains. Proponent Warner s Initiative does not require that marijuana provided to qualified patients at a dispensary be tested for any purpose. Qualified patients using marijuana for medical purposes obtained at a Del Mar dispensary will have no assurances as to what they are putting in their bodies. 5. Annual audits of all required records should be required The City of Los Angeles regulations require every dispensary to submit an annual independent audit of all of the subjects for which record-keeping is required. Proponent Warner s Initiative contains no record-keeping requirements and no audit is mandated. Dispensaries in Del Mar that would operate pursuant to this Initiative have no obligation to document their compliance with any regulations or laws. E. The Initiative allows individuals convicted of a serious felony to operate a dispensary Proponent Warner s Dispensary and Taxation Initiative states, Compassionate use dispensaries must obtain a background check through the California Department of Justice, Office of the Attorney General, for all directors, to verify that no director has been convicted in the past seven years of a serious felony, as defined in California Penal Code section , subdivision (c) Dispensary and Taxation Initiative, OPERATIONAL REQUIREMENTS. [Exhibit A.] 23

31 Penal Code (c) defines serious felony to include such crimes as kidnapping, robbery, first degree burglary, assault with a deadly weapon, attempted murder, murder, manslaughter, rape, lewd acts on a child, and providing hard drugs to a minor. Proponent Warner s Dispensary and Taxation Initiative will allow persons convicted of these crimes to operate a dispensary that would cultivate, store and distribute marijuana so long as the conviction occurred more than seven years earlier. Additionally, anyone convicted of any other less-serious felony or crime is not barred in any way from operating a dispensary. Compare this to San Diego County s regulations which prohibit any convicted felon from obtaining a medical marijuana Operating Certificate at any time.24 Given that marijuana distribution, possession and use remains criminal under both California and federal law, and given the significant public safety issues presented by dispensary operations discussed above, it does not appear wise to allow persons convicted of felonies, including serious felonies, to operate dispensaries. Yet, this is what Proponent Warner s Dispensary and Taxation Initiative will allow. F. The Initiative does not specify that a Del Mar dispensary must serve only persons with a significant medical condition The California CUA contains a broad statement of the conditions for which marijuana may provide a medical benefit stating that Californians have the right to obtain and use it for any... illness for which marijuana provides relief. Health & Safety Code, (b)(1)(a). Other jurisdictions, such as the County of San Diego, have adopted regulations that provide a definition for any illness for which marijuana provides relief, to limit dispensary operations to cultivation of medical marijuana by qualified patients with significant medical conditions. Proponent Warner s Initiative imposes no such requirement for Del Mar dispensary operations. As explained above, the United States Supreme Court has concluded that the federal government has determined there is no medical use for marijuana. However, California s Compassionate Use Act is premised upon a finding, enacted by a vote of the People of California, that marijuana does serve a medical purpose. The CUA states that one of its purposes is, To ensure that seriously ill Californians have the right to obtain and use marijuana for medical purposes where that medical use is deemed appropriate and has been recommended by a physician who has determined that the person's health would benefit from the use of marijuana in the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief. 24 SDCC Regs., (l). [Exhibit G.] 24

32 Health & Safety Code, (b)(1)(a). And section (d) of the MMPA states that a patient shall not be convicted for cultivation of marijuana for personal medical purposes of the patient,... upon the written or oral recommendation or approval of a physician. Given the CUA s language authorizing marijuana use for any other illness for which marijuana provides relief, combined with the MMPA s statement that the defenses afforded by the CUA and MMPA apply upon the recommendation or approval of use for medical purposes by a physician, there is little limit placed by State law upon the medical reason for which a doctor might recommend the use of marijuana. In fact, internet searches reveal businesses advertising medical practices dedicated solely to providing recommendations for the use of marijuana for medical purposes. In addition to the medical conditions listed in the CUA, some of these web sites state that marijuana treats depression, anxiety, chronic insomnia, social phobia, flight phobia, chronic back/neck pain, and severe menstrual cramps. San Diego County s medical marijuana ordinance at, Title I, (g), restricts the distribution of marijuana at a dispensary, collective or cooperative to persons, who suffer from one or more of the following serious medical conditions: AIDS; anorexia; arthritis; cachexia; cancer; chronic pain; glaucoma; migraine; seizures; severe nausea; persistent muscle spasms; any other chronic or persistent medical condition that either limits their ability to conduct one or more major life activity as defined by the American Disability Act of 1990 or may cause harm if not alleviated. 25 It would appear this restriction is consistent with the CUA to provide a definition for the CUA s undefined term, other illness for which marijuana provides relief. Proponent Warner s Initiative, however does not require that dispensary operations be limited to patients with the kinds of medical conditions identified by San Diego County. And, as explained below, the Initiative s supporters have never documented the number of Del Mar residents who require medical marijuana for the treatment of a serious medical condition or the subset of that population that has difficulty obtaining marijuana for their medical needs. The scope of the alleged need among the City s residents remains entirely undocumented. IX. Land Use Impacts A. Possible locations for dispensary operations according to the Dispensary and Taxation Initiative The Planning Director has examined the Dispensary and Taxation Initiative and made preliminary conclusions about where the Initiative would authorize medical marijuana dispensary operations to exist. A map illustrating possible zones where they might operate is found at Exhibit K to this Report. 25 [Exhibit G.] 25

33 The Initiative precludes dispensary operations in any residential zone. This would include zones that allow for transient residential uses such as hotel and motel uses. Given that, the sole existing zones within the City where no residential use is authorized are the Central Commercial, Beach Commercial and North Commercial zones. Id. The Initiative requires dispensaries to be spaced at least 1000 feet apart and to locate further than 600 feet from any school or park. It has been determined that the City s accessible beach fronts and other recreation areas all qualify as parks. Further, dispensary uses in the Central Commercial zone would be precluded by Del Mar s Horizontal Zoning requirements from operating in street-frontage portions of building spaces. Moreover, if the currently-debated Village Specific Plan is enacted, dispensary uses will not be allowed within the current Central Commercial Zone because, in the new zone, mixed residential uses will be authorized. The Planning Director s best estimate is that, under today s zoning regulations, if dispensary operations maximized spacing of operations, given the above requirements, the Dispensary and Taxation Initiative seeks to authorize the following number of dispensaries in the following zones: Central Commercial, 3; North Commercial, 2; and Beach Commercial, 1 for a total of six. 26 B. Quantifying demand: Del Mar would be the only city in San Diego County authorizing dispensary sales Were dispensaries to operate in the City of Del Mar, they would be the only authorized dispensaries in any city located in San Diego County. It is believed there is only one dispensary operating in compliance with local regulations within the County of San Diego or within any city located within San Diego County. Neither Proponent Warner nor anyone who has contacted the City in support of his Initiative has ever estimated the number of Del Mar residents who require access to medical marijuana. Nor have they identified how many of those person are currently unable to obtain marijuana for their medical needs. Given that authorized dispensaries in the region are few, however, it should be anticipated that dispensaries operating in Del Mar will receive patronage from throughout the County. Quantification of dispensary use can be estimated by looking to the number of customers who frequent illegally operating dispensaries in California. For example, a dispensary subject to civil lawsuit for illegal operation within the City of Murrieta in Riverside County reported that within the 3.5 months it was operating in 2012, 3500 persons joined as qualified medical marijuana users. 27 There is every reason to believe a dispensary operating in the City of Del Mar in 26 July 6, 2012 Report of Del Mar Planning and Community Development Director, Kathleen A. Garcia, Compassionate Use Dispensary and Taxation Ordinance Initiative Land-Use Impact Analysis and Inquires to the City Attorney ( Garcia Report. ) [Exhibit K.] 27 May 18, 2012 Deposition of Mr. Eric McNeal taken in the case of People v. McNeil, Riverside County Superior Court Case No , pages 1-5, 35, 36, 49 & [Exhibit J.] 26

34 a region more densely populated than the region where the Murrieta dispensary operated, would see even more customers each month. C. Parking, a significant problem in Del Mar, is not addressed by the Initiative Despite the likelihood of intense customer use of dispensary operations distributing marijuana, the Dispensary and Taxation Initiative does not address parking requirements for dispensaries. Medical marijuana dispensaries are not identified as a land use category by the City s land use regulations and the Initiative does not address that fact. Therefore, the Initiative presents no clear directive regarding how the City will address dispensary parking impacts. Del Mar s Planning Director has reviewed the Initiative and makes the following observation about the seriousness of this defect: The provision of adequate parking for the mix of land uses that occupy the commercially zoned areas of Del Mar is vital to maintaining functional business districts. Due to the City s small size and lack of available land for City-owned parking facilities, the provision of parking by businesses, at an amount relative to each type of use, is essential component of land use regulation. 28 For purposes of comparison, San Diego County s Medical Marijuana regulations impose specific parking requirements. 29 Given that all businesses must address parking impacts pursuant to the City s Code, the City will be required to implement a parking requirement for all dispensary operations and would be within its right to prevent any dispensary from operating that does not comply with the parking regulations adopted by the City. This is the type of regulation that will need to be enacted if the Initiative is adopted and which could expose the City to litigation concerning whether it is a regulation necessary to carry out the Initiative or whether it is an amendment. X. The Initiative places federal grants to Del Mar at risk Council has asked whether existing federal grants to the City would be placed in jeopardy if the City is required to authorize medical marijuana dispensaries to operate pursuant to the Dispensary and Taxation Initiative. We have examined one of the contracts pursuant to which the City receives federal funds and it does state that the City must be in compliance with all federal law. If dispensaries are authorized by the City to operate and they store or distribute marijuana, the City would be open to a charge that it is authorizing violation of the federal CSA. Thus, it would place existing grants at risk as well as pose a question when the City applies for future federal grants. 28 July 6, 2012 Report of Del Mar Planning and Community Development Director, Kathleen A. Garcia, Compassionate Use Dispensary and Taxation Ordinance Initiative Land-Use Impact Analysis and Inquires to the City Attorney. [Exhibit K.] 29 SDCC Regs., (f) [Exhibit G.] 27