Medical Marijuana Lawsuits Divide California, Federal Government

The conflict between California's legalization of marijuana and a federal crackdown intensified this week, as lawyers acting on behalf of dispensaries and medical marijuana patients sought to halt government enforcement they said was unconstitutional.

Federal prosecutors announced in October that they were launching an aggressive campaign of shutting down dispensaries and arresting marijuana users, citing a proliferation of large for-profit enterprises that were more concerned with making money than with helping ailing patients. Attorneys filed lawsuits in all four of California's federal districts on Monday, arguing in part that the government had reversed an earlier position, invoked during a lawsuit, to leave alone legal dispensaries.

They can't take the position in one litigation and have it not apply universally to everybody else, said attorney David Michael, co-lead counsel for the plaintiffs. They can't say we believe something is true and one case and then say they believe the opposite is true in the other case.

California's Medical Marijuana Sector

California's medical marijuana industry occupies a tenuous place, legal under state law but still banned under the federal Controlled Substances Act, which also maintains that marijuana has no proven medicinal value. A 2009 memo written by then Deputy Attorney General David W. Ogden instructed federal prosecutors to focus on traffickers rather than patients and cannabis clubs that were unambiguously compliant with state law, language that advocates and dispensary owners interpreted as a green light. Federal prosecutors cited that memo in order to settle a lawsuit brought by a Santa Cruz County medical marijuana cooperative, strengthening the impression that it reflected an established policy.

But a 2011 memo issued by Deputy Attorney General James M. Cole signaled a shift from that position, taking aim at those who cultivate or sell marijuana in defiance of federal law. The U.S. attorneys in California said at an October press conference that the California law legalizing medical marijuana has been hijacked by profiteers who are motivated not by compassion, but by money.

The prosecution of significant traffickers including those involved in the commercial cultivation and distribution of marijuana remains a core priority, Northern California U.S. Attorney Melinda Haag said, dismissing the notion that large marijuana businesses can shelter themselves under state law and operate without fear of federal enforcement.

The Justice Department has sent letters to California cities warning them against authorizing expanded cultivation of marijuana, and landlords of buildings that house dispensaries have received letters warning them their property will be seized. Michael said that in asking a judge to prevent dispensaries from being shut down, his clients sought to repel a broader effort.

They're going after the whole medical cannabis industry in California, and in my opinion they're using California as the first assault in a national battle to destroy the medical marijuana movement, Michael said.

Did the Government Overstep?

A lawsuit recently filed by the pro-medical marijuana organization Americans for Safe Access similarly charged the government with overstepping its bounds.

Adamant in its disagreement with the policy choice made by the State of California to decriminalize marijuana for medical use -- which is California's sovereign right under out federalist system of government -- the federal government ('government') has instituted a policy to dismantle the medical marijuana laws of the State of California and to coerce its municipalities to pass bans on medical marijuana dispensaries, the complaint read.

Money complicates the situation. In justifying the escalated enforcement, the U.S. attorneys underscored a need to curtail the for-profit marijuana industry that has flourished in California since 1996. But while state law requires marijuana businesses to operate as nonprofits, municipalities have increasingly encouraged the industry in an attempt to bolster tax revenue. In a statement accompanying the lawsuit, Max DelReal, president of the California Cannabis Business League, pointed specifically to the jobs and tax money associated with marijuana businesses now threatened with shutdowns.

California earns hundreds of millions of dollars per year through taxes paid by the Medical Cannabis Industry to the state and the Board of Equalization, DelReal said. These funds go directly to law enforcement and public safety projects - and make our communities safer, and stronger.

IRS' Analysis

The Internal Revenue Service has gotten involved, charging that dispensaries are prohibited under federal law from deducting business expenses and seeking millions of dollars in back taxes. Michael Vitiello, a professor at the University of the Pacific's McGeorge School of Law who has studied the issue, said that heavy financial penalties could have the unintended consequence of shuttering smaller, law-abiding businesses while powerful cartels survive.

Here's the kick in the shin: these organizations, some of them are nothing but fronts - there's no question some folks just want the patina of legitimacy so they can avoid prosecution, Vitiello said. But the true believers in medical marijuana, and they're out there and trying to obey the law, are going to be run out of business. So the only people trying to deliver marijuana in California are then crooks.

Marijuana advocates who saw the 2009 memo as an affirmation that the Obama administration would take a more lenient approach argue that dispensary owners and cities have been misled. But the fact that marijuana remains illegal under federal law may undercut their argument.

My sense is that it was more misreading of that memo than a change in policy, Sam Kamin, a professor at the University of Denver's Sturm College of Law. The memo said quite explicitly that this is not a green light, it is still illegal conduct, commercial sales are still prohibited, and we reserve the right to prosecute people. This was not reversing the Ogden memo so much as clarifying it.