Oakland sues U.S. to stop medical marijuana property seizuresL.A. Now
The city of Oakland filed suit Wednesday against top federal prosecutors in an attempt to stop them from seizing property leased by the nation’s largest medical marijuana dispensary.
The unprecedented civil complaint, filed in federal court against Atty. Gen. Eric Holder and Melinda Haag, U.S. attorney for the Northern District of California, seeks to “restrain and declare unlawful” a July federal forfeiture action against Harborside Health Center’s landlords in Oakland and San Jose.
The suit comes as federal prosecutors have ramped up efforts to shutter dispensaries statewide, targeting those close to schools as well as operations such as Harborside, which are in compliance with local and state laws but that prosecutors have deemed "superstores."
Launched in 2006, Harborside now counts 108,000 patients in its collective and paid $3.5 million in taxes last year, $1.1 million of that to Oakland. Co-founder Steve DeAngelo worked closely with Oakland officials as they crafted one of the nation's strictest regulatory schemes to monitor and tax the industry.
The lawsuit refers to Harborside as "vital to the safe and affordable distribution of medical cannabis to patients" suffering from pain, illness and injury.
San Francisco attorney Cedric Chao, who is representing Oakland, said in a statement Wednesday that the federal government "acted beyond its authority" by filing the forfeiture action outside the statute of limitations. He added that the government has indicated for many years "by its words and actions that so long as dispensaries and medical patients acted consistently with state law, the dispensaries would be allowed to operate. Oakland has reasonably relied on these assurances."
In an interview, Oakland City Atty. Barbara J. Parker said the lawsuit "is about protecting the rights of legitimate patients who need this medicine” and “doing everything we can to assure that this pipeline is not shut off."
If federal prosecutors succeed in shuttering Harborside, she said, “public safety could be worsened because those patients would be out in the black market purchasing this medicine from criminals.”
A representative for the U.S. attorney’s office did not return a late afternoon call for comment Wednesday.
Advocates for medical marijuana said they know of no other instance in which a city has sued federal prosecutors in an attempt to protect a dispensary.
"I would definitely welcome them to the fight," said Don Duncan, California director for Americans for Safe Access. “The symbolism of this is very important.”
Harborside's Oakland dispensary is the largest in the nation, and the center also operates a smaller sister dispensary in San Jose. Landlords facing the forfeiture action have moved in state court to evict, while Harborside has countered that it is meeting all lease requirements. Court rulings are expected soon.
Meanwhile, a federal court hearing is scheduled for Nov. 1 on a motion by the San Jose property owner "to enjoin us from selling cannabis," Harborside's DeAngelo said. He called Oakland’s lawsuit "the first time that any official governmental body has formally challenged the federal government’s attacks on medical cannabis laws."
"I think the city realizes that Melinda Haag is not only attacking Harborside but attacking the entire system of regulated medical cannabis sales that the city painstakingly developed," he said.
Nation's Biggest Marijuana Dispensary Is Wearing Out Its Welcome in San Jose
It is no secret that Harborside Health Center sells medical cannabis. Harborside sells lots and lots of it, according to United States Attorney Melinda Haag, who wants to shut down the dispensary's two locations in Oakland and San Jose, in part because of Harborside's sheer size.
Concourse Business Center, Harborside's landlord in San Jose and the current target of an asset forfeiture proceeding filed by Haag, knew full well that HHC was in the business of selling weed (one need only watch a rerun of the Discovery Channel's Weed Wars to see Harborside in action). Concourse just didn't know marijuana was illegal, according to court papers filed this week.
In a motion filed in federal court Wednesday, Concourse -- which is in the process of trying to evict Harborside from the property before the feds can take it -- asked a federal judge to stop HHC's marijuana trade. The move appears designed to keep the property out of the feds' hands -- but Harborside's president Thursday pledged to stay put.
Already, Haag's office has shut down more than a dozen dispensaries in the Bay Area since last October; she issued letters to the pot clubs threatening asset forfeiture and jail time if they didn't close. Harborside -- with more than 100,000 registered members, aka "patients" -- would be the biggest haul to date for the feds, which has yet to seize any dispensary property in court.
Most of the other dispensaries agreed to leave their locations after discussions with the landlord, in some cases they left because their leases specifically stated that any violation of law, state, or federal, was cause for eviction.
Harborside's lease has no such clause. In fact, the dispensary's lease "makes it explicitly clear what our activities are," said Steve DeAngelo, Harborside's CEO. "They're claiming that they believed [selling marijuana] was legal in the state of California. Now they've been informed [by the federal government] that it is not legal."
In the papers filed this week, Concourse's attorneys state that it has taken action "since learning that Harborside's activity at the Property violates federal law."
This maneuver is designed to help Concourse hold onto its property, DeAngelo said -- plain and simple.
"It's unfortunate -- they're in a difficult position," DeAngelo said. "But we intend to remain in both of our locations to the best of our ability, with every single legal means at our disposal."
It's unclear what impact the injunction, if granted at a hearing scheduled for Oct. 11, would have on the forfeiture proceedings on Oct. 16. If granted, it would certainly put a damper on Harborside's business -- which might make any further lawsuits moot.
Oakland protests U.S. attorney's crackdown on large medical marijuana dispensary
City leaders say Harborside Health Center follows state and local laws and that its closure would have serious economic consequences.
Don't deny the resemblance. -UA
OAKLAND — A day after federal prosecutors moved to shutter the country's largest medical marijuana dispensary, city leaders andother officials came to the defense of Harborside Health Center, warning of dire economic and social consequences if Oakland's carefully regulated industry is quashed.
"We cannot afford the money, we cannot afford the waste of law enforcement resources, and we cannot afford the loss of jobs that this would entail," City Councilwoman Rebecca Kaplan said Thursday at a news conference as dozens of Harborside Health Center patients stood by.
Co-founded in 2006 by Executive Director Steve DeAngelo, Harborside has in many ways set standards for the medical marijuana industry.
The sleek operation — which has a smaller sister dispensary in San Jose — lab tests its cannabis to assess quality and measure key chemical components; offers acupuncture, pain management and other free wellness services to its thousands of members; and employs more than 125 people.
DeAngelo worked closely with Oakland officials as they crafted one of the nation's strictest regulatory schemes to monitor and tax the industry, and officials say he complies with all local and state laws.
But Melinda Haag, the U.S. attorney for California's Northern District, is now seeking to seize the properties where Harborside operates, alleging its marijuana sales violate federal law and that its size as a "superstore" increases the likelihood that it is in violation of state law. A civil forfeiture action was served Wednesday against Harborside's two landlords.
If the move drives Harborside out of business, a chunk of its $30 million in annual sales would no doubt return to the streets, benefiting dealers who don't lab test their products or work with patients to customize medications, DeAngelo and other advocates said Thursday.
Jason David, father of a 5-year-old boy with Dravet syndrome, a rare form of epilepsy, wept as he recounted his son's positive response to a glycerine-based tincture developed with DeAngelo's help. The tincture uses a strain high in cannabidol, which is not psychoactive.
"He's down from 22 pills a day to four. When I look in his eyes and tell him, 'Give me a kiss,' he can now give me a kiss," David said. "Please, Ms. Haag, have some compassion. Don't let me lose my son."
DeAngelo pledged to "never abandon our patients." Harborside attorney Henry Wykowski added that he is conferring with the property owners and has not decided how to proceed. The landlords are expected to reply to the federal action within 20 days and a hearing has been set for October.
"There is no reason to kick down our door," Wykowski said, and invited federal prosecutors to arrange a visit.
Aside from the effect on patients, Harborside's closure — or failure to find another property if the current forfeiture action moves forward — would deal a direct financial blow to the Bay Area city.
Last year alone, Harborside paid $3.5 million in taxes — $1.1 million of which went to Oakland coffers as a business tax. Additional sales tax and payroll taxes were paid as well.
The business tax represents the bulk of the $1.4 million paid last year by Oakland's four permitted dispensaries combined, among them one associated with medical marijuana pioneer Richard Lee that was shuttered in April after a federal raid and is now regrouping without Lee's participation.
Lee's company, which operated the industry trade school known as Oaksterdam University, dissolved, forcing 45 direct employees off the payroll, cutting their health benefits and eliminating 63 other union jobs in related businesses, said Dale Sky Jones, who now operates the university and is rebuilding its curriculum.
Out-of-towners had flocked to the university's classes, staying at downtown hotels and further spurring the city economy, added Oakland revenue manager Dave McPherson.
McPherson said the business taxes paid by dispensaries make up about 2.5% of the $54 million paid citywide. But that is no small contribution in a city struggling with a shrinking police force and the return to the state of $21 million in redevelopment funds, said City Councilman Ignacio De La Fuente.
"This action will have a long-term impact," he said. "Landlords will be intimidated into not leasing buildings" to dispensaries.
Oakland moved in 2004 to limit dispensaries, and in 2009 became the first city to tax the operations. The City Council recently raised the number of dispensaries from four to eight. Applicants are moving through the permitting process but have had difficulty finding willing landlords, said Deputy City Administrator Arturo Sanchez.
Also coming to the defense of Harborside on Thursday were Rep. Barbara Lee (D-Oakland); State Board of Equalization member Betty Yee, who said her office collects $58 million to $105 million in annual state tax from California dispensaries; and Oakland City Atty. Barbara J. Parker, a former federal prosecutor.
"I strongly oppose federal actions against members of Oakland's business community who are complying with California and Oakland laws and regulations and paying their fair share of taxes," Parker wrote in a statement.
Delivering medical marijuana under the law in San Francisco
Special to The SF Examiner
It's not easy to open a medical cannabis dispensary in San Francisco, but it's very easy for patients to purchase their medicine from the comfort of home — even if the service is illegal.
Delivery services operating in seeming violation of city law advertise in print and on the Web, and operate in full knowledge of city officials, who say their hands are tied.
Meanwhile, the U.S. Department of Justice has shut down five licensed storefront dispensaries in The City since October, yet has not taken action on unlicensed delivery services.
San Francisco law requires vendors distributing marijuana to 10 or more people to obtain a medical cannabis dispensary license from the Department of Public Health. State medical marijuana law provides for nonprofit collectives or cooperatives to provide cannabis to people with a doctor's recommendation, but does not specifically address delivery services.
More than a year ago, Kevin Reed of The Green Cross -- which was then San Francisco's lone licensed delivery-only dispensary -- asked city officials to "level the playing field" between businesses such as his, which must pay local and state taxes and $8,656 in dispensary permit fees, according to The City's 2005 Medical Cannabis Act, and the roughly 19 delivery services at the time that advertised here.
Unlicensed delivery vendors escape paying fees by being based or claiming to be based outside city limits, according to Dr. Rajiv Bhatia, director of occupational and environmental health at the health department, which "did not anticipate" the legal wrinkle.
"These delivery establishments may be operating outside the bounds of state law," Bhatia said in an e-mail, adding that "confirming the nature and location of these operations require the use of surveillance and investigational tools not available to the Department of Public Health" and is the purview of law enforcement.
Melinda Haag, the U.S. attorney for Northern California, has shut down five of San Francisco's 26 licensed storefront dispensaries since an October news conference where she announced medical marijuana providers violating state and local law would be prosecuted. Spokesman Jack Gillund said Haag's office would not comment on the delivery services.
San Francisco currently has three licensed delivery-only dispensaries: The Green Cross, Medithrive and Divinity Tree. The latter two went delivery-only after the Justice Department shut down their storefront locations in the Mission and Tenderloin neighborhoods, respectively.
Two delivery services operating without city permits in San Francisco do have business licenses on file with the Office of the Treasurer and Tax Collector, policy and legislative manager Greg Kato said — Foggy Daze Delivery is registered as "Business Services, Except Advertising," and Nature's Relief has a license for "Other Retail Stores."
Foggy Daze Delivery has a business address in San Jose, according to records on file with the secretary of state.
Representatives for SF Green Delivery and Foggy Daze declined to comment on their businesses.
Other municipalities in the Bay Area regulate delivery services based outside their city limits. San Francisco's Medical Cannabis Task Force, a City Hall body created to recommend policy to the Board of Supervisors, included a recommendation to regulate out-of-town delivery services in its annual report, issued in the fall. To date, no legislative action has been taken.
Unlicensed delivery services "play in a legal gray area, and it isn't fair," said Shona Gochenaur, a marijuana activist with low-income patient network Axis of Love who sits on the task force. "This loophole needs to be closed."
Paying the man
Medical marijuana collectives doing business in San Francisco are required to pay taxes to both the state and The City.
$381,000 Local sales tax revenue in 2011 from city's 26 dispensaries
$8,656 Dispensary permit fee charged by SF
$4,019 Dispensary license and annual inspection fee in SF
$0 Cost to deliver medical marijuana in SF while based outside The City
$0 Tax collected from such delivery services
Source: Ted Egan, city's chief economist
Door to door
Medical cannabis delivery services offering marijuana to patients in San Francisco. None have operating permits from the Department of Public Health.
SF Green Delivery
California Green Medical
The Union Collective
The Greener Side
Mr Purple Skunk