Dispensary’s big win in court battle with feds could ripple across MMJ industry

Just Released! Get realistic market forecasts, state-by-state insights and benchmarks with the new 2024 MJBiz Factbook member program, now with quarterly updates. Make informed decisions.

, Dispensary’s big win in court battle with feds could ripple across MMJ industry

By John Schroyer

A federal judge in northern California has tossed a civil forfeiture case against a San Francisco medical marijuana dispensary, possibly setting a precedent that could give the U.S. government pause before taking similar actions to shut down MMJ companies.

The decision in favor of Shambhala Healing Center marks the first time that a dispensary has won a decisive victory in court over the federal government, according to attorney Henry Wykowski, who represented the defendant in the court battle.

Wykowski said the case amounted to scare tactics used by the local U.S. Attorney’s office in a push to shut down hundreds of California dispensaries.

“Historically, the U.S. Attorney in California and San Francisco… has been very successful at closing down dispensaries by sending letters to the landlords, saying, ‘If you don’t evict this tenant, we’re going to file a forfeiture action against the property, and we’re going to take it,’” Wykowski said. “It was successful because it scared most people.”

Several years ago, the federal government applied pressure to hundreds of MMJ dispensaries around the state, including eight in the Bay Area that were shuttered after U.S. Attorney Melinda Haag threatened to seize properties where dispensaries were operating. In many cases, the threats were enough to get landlords to either evict or close down the businesses.

But several dispensaries fought the moves in court.

Harborside Health Center in Oakland, which Wykowski also represents, was targeted by the U.S. Attorney’s office back in 2012. Not long afterward, Haag filed a separate forfeiture action against nearby Berkeley Patients Group. Both dispensaries took the federal government to court.

Shambhala’s case paralleled the Harborside case. In both instances, Haag’s office tried to strong-arm the landlord into evicting the dispensaries. Shambhala’s is the first forfeiture case to be formally thrown out by a judge, while the Harborside case has been stayed. The Berkeley Patients Group case is ongoing.

Wykowski hopes the Shambhala decision serves as a wakeup call for overzealous federal prosecutors.

“I would really like (the U.S. Attorney’s office) to look at this and say, ‘This really isn’t the best use of our resources, and let’s move on to something that’s more productive for the people,’” Wykowski said.

A call to Haag’s office on Wednesday seeking comment was not immediately returned, so it’s unclear as to whether the decision will be appealed.

It’s also not clear whether the Shambhala case will have a direct effect on either Harborside’s or Berkeley Patients Group’s cases, because the decision hinged on the fact that the dispensary’s landlord paid the federal government $150,000 to settle the forfeiture action.

That settlement was reached after Haag lost the eviction fight, since a judge ruled that Shambhala’s lease was legal and couldn’t be overturned. Then on Monday, Judge Susan Illston ruled that because of the $150,000 payment, the forfeiture claim by the U.S. Attorney was a moot point, and Shambhala’s lease couldn’t be added to the forfeiture claim. So she dismissed Haag’s complaint.

But in the Harborside and Berkeley cases, the government has avoided any overtures of similar settlements.

“In neither of those cases has the government made any offer to settle with the landlords. As a matter of fact, the government has declined to attend a settlement conference with respect to both of those cases,” Wykowski said.

Which means that Haag could decide to keep pursuing Harborside, Berkeley Patients Group and other dispensaries with the same kind of tactics.

But for now, Shambhala co-founder Al Shawa is reveling in his company’s victory.

“Justice prevailed,” Shawa said. “It’s not about money. It’s about doing the right thing for our community and our patients.”

Shawa said he would encourage other dispensaries to fight the feds the same way Shambhala did, and not to simply cave to pressure from officials like Haag.

“If they think they’re right, if they haven’t done anything to break the law…they should stand up and make their voice heard,” Shawa said.

John Schroyer can be reached at Johns@mjbizmedia.com