October 11, 2013

Week in Review: Feds Retreat on Forfeiture Cases + Seattle Welcomes Cannabis Businesses (Sort Of)

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By Chris Walsh

Last fall, the fear of finding a piece of paper in the mail featuring the words “civil forfeiture” and “asset seizure” kept dispensary owners and their landlords up at night. Fast forward a year, and few MMJ professionals are losing shuteye over the issue.

Once the federal government’s primary tool for cracking down on the medical marijuana industry, civil forfeiture threats have subsided in most areas of the country as of late.

Sure, some centers have received letters this year, and several landlords and dispensaries are still battling the government over civil forfeiture lawsuits filed previously – most notably Harborside Health Center in Oakland. But the government has largely abandoned this strategy, and there are signs the feds could be easing up on current cases as well.

The latest positive development on this front came earlier this week, when federal prosecutors dropped a civil forfeiture case against a landlord in California who leased space to a marijuana dispensary. Particularly notable is the fact that the government backtracked, big-time. Its only stipulation for dropping the case: the landlord must refrain from seeking reimbursement from the feds for his legal fees. Compare that to the previous demands – that the landlord submit to surprise inspections and not rent to another dispensary ever again – and it’s clear the government felt the case was a no-win situation. The feds also went so far as to say they will never bring up these charges against the landlord again.

In another encouraging sign, the government dropped several other suits last week against MMJ landlords in Los Angeles and Santa Ana.

As California attorney Matthew Pappas told OC Weekly: “It’s pretty amazing for them to come up and dismiss the cases, pretty unusual. I think it’s a major victory for patients, [and] for citizens in general.” And for medical marijuana businesses as well as their landlords, we might add.

So what’s behind the about-face?

Chalk it up to the Department of Justice’s recent announcement that clears the way for recreational marijuana businesses in Colorado and Washington and redirects federal prosecutors when it comes to cannabis, as well as a general easing in the crackdown on MMJ.

Of course, there are still some district attorneys (cough, Melinda Haag, cough) who seem to have a vendetta against the industry. And the ongoing case against Harborside in particular is a bit different, as the landlord still leases space to the dispensary. Additionally, the cases that the government dropped this week are all in the central district of California. Henry Wykowski, Harborside’s lead attorney, said this could simply reflect a decision by the district attorney in that area to back off in light of the DOJ announcement, rather than a larger shift by the feds.

Still, prosecutors now have fewer arrows in the quiver, and at the very least it will be difficult for them to level new lawsuits against dispensaries and landlords, let alone win their current cases.

Also this week, the Seattle City Council voted to allow both medical and recreational marijuana businesses to operate within its limits. While this is good news on the surface – the city theoretically could have tried to boot MMJ businesses or enacted a moratorium on recreational shops – not everyone is happy with the outcome.

For one, cultivation operations will be severely restricted in Seattle, primarily relegated to a smattering of industrial areas. There are also size limitations, meaning the largest commercial grow operations will be elsewhere in the state.

Some medical marijuana business owners are also upset that they will have to obtain business licenses by 2015 and submit to oversight. Due to a lack of statewide regulations, dispensaries, grows and edibles companies currently operate in a relatively lax environment. Under the new rules, they will have to apply for a license and meet stringent guidelines and requirements – which could lead to significant expenses. And some businesses won’t make the cut to get a license, either because the owners won’t pass the newly required background check or can’t afford to make the necessary changes to stay in compliance.

While those are valid concerns, overarching MMJ regulations are actually good for the industry, helping to prevent federal pressure, weed out questionable players and provide some structure and stability to the business. They are also inevitable: In the long-run, all states will have some type of regulatory structure surrounding their medical and recreational cannabis industries. Better to move forward with that process sooner rather than later.

Other top stories in MMJ Business Daily:

MA Marijuana Applicants Grappling With Moratoriums

Chevron Pressuring Landlord to Evict Dispensary

Seattle to Allow Medical, Recreational Cannabis Businesses

Tapping the $1.3B Canadian Medical Marijuana Market

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