Q&A With Jeffrey S. Kaufman, Lead Attorney in Watershed AZ Medical Marijuana Case

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In the court decision heard round the medical cannabis world, a judge upheld Arizona’s MMJ law this week and stifled an attempt by local officials to derail the state’s dispensary program.

It ranks as a huge win for Arizona’s medical marijuana industry, and nearly 100 dispensaries could open over the next eight months as a result (here are links to the case and the ruling). But the legal battle is far from over: Arizona officials quickly filed a motion to suspend the ruling as they appeal the judge’s decision, throwing another wrinkle into the state’s dispensary program.

The attorney who won the case – Jeffrey S. Kaufman – said he is hopeful that dispensaries will still be able to open as planned. He warned, however, that some local officials will keep up their crusade against MMJ by “continuing to attempt to intimidate all patients, caregivers and other MMJ professionals.”

In an interview with Medical Marijuana Business Daily, Kaufman spoke about why the case is critical to the future of medical cannabis in Arizona, what’s next for MMJ startups in the state and the risks involved in the industry.

Following are excerpts of that discussion:

On the importance of the case

I think it clears the way for dispensaries to open. These people who have been waiting for a ruling in this case can now go about constructing their dispensaries in earnest. If the judge ruled the other way, though, I believe the whole dispensary aspect of the program would have been on hold until the appeals process played out. It would’ve given the state the green light to bust everybody.

On what tipped the scales in favor of MMJ…

The two most important factors were that there are 17 other states with medical marijuana laws that are all chugging along pretty well, and that in Arizona we have a voter-passed MMJ initiative. Since judges in Arizona are not elected – they’re essentially appointed for life – they don’t necessarily feel political pressure to side with the state and local government.

On what this means for caregivers/home-growers…

This opens up as many cans of worms as it closes. The Arizona Medical Marijuana Act provides for 126 dispensaries, and only people who live more than 25 miles from a dispensary are allowed to grow marijuana or have it grown for them by their caregiver. Because the state has delayed the implementation of the dispensary program, for roughly two years many patients and caregivers have grown a lot of marijuana and have distributed it, lawfully or unlawfully, to other people who need medicinal cannabis. Those growers are not happy with the opening of dispensaries, which is now going to occur because of this court decision.

On where dispensary finalists stand…

Virtually none of the dispensary owners to my knowledge have wanted to spend a great deal of money to construct dispensaries or do anything else until this decision came through. So it will still take many of them several months to start up.

On how much it costs to start a dispensary or grow operation in Arizona..

If you’re talking about building out a dispensary without a cultivation site, it costs about $100,000 to $125,000 to build out an attractive dispensary. If you want to build a 99-plant cultivation site, you’re probably talking another $125,000. In Arizona, only dispensary operators are allowed to operate a cultivation site.  At least this will be the case because most patients’ and caregivers’ growing rights will expire in one year or less.

On the need for investment money/financing to get dispensaries off the ground…

There many opportunities to get involved. I have spoken with a number of underfunded dispensaries that need money to open up. A lot of MMJ entrepreneurs had the wherewithal to come up with the necessary funds – $150,000 in a bank account – to file an application to get a dispensary license. These people are happily sitting on a dispensary registration certificate, but they no longer have enough money to actually open a dispensary. So there are opportunities for people to buy into this industry by investing in these operations.

On the risks involved…

We have seen a number of growers and people who produce tinctures who have been raided, and their equipment, medicine, their own personal property – including their vehicles – have been seized by police. People are sitting there deprived of their property and ability to help patients and earn a living. The cops have not returned their property and have not charged them. They are in purgatory.

The question then becomes how aggressive are you going to be to try to get your stuff back and by doing so risk the chance you will actually be charged with a crime? The government’s strategy so far has been to confiscate property, threaten criminal prosecution and charge some people – but  none of these case have gone to trial, and some have been dismissed. In my opinion the police and local government will use this strategy more going forward, and someone will actually have to sue to get their property returned.

On whether state and local officials will try to shut down dispensaries despite the recent ruling…

No, I don’t think they’ll try to close dispensaries as they open up. But they will look for every minor violation and try to use that to shut some down.

On what dispensaries can do to lower the chances they will end up in the state’s crosshairs…

You’ve got to know the law backwards and forwards and abide by every aspect of it. If you don’t know the entire law, you’ve got to call a lawyer. And if the police show up at their doors, they should not open them. They clearly should work through an intermediary like a lawyer.

The dispensaries that are opening now could face some scrutiny. Arizona’s medicinal marijuana act envisioned that when you received permission to open a dispensary, only then would you be able to start growing. It takes about three months to cultivate cannabis. There’s a concern that the state might look into how the dispensaries opening up now got their medicine, because they only recently received permission to operate.

Having said that, I don’t expect this to be a major issue. Rather, I expect that some dispensaries, just like White Mountain Health Center in Sun City, won’t be able to get county or municipal approval of their sites. That could be the big issue going forward.

On whether risk levels have changed since the court ruling…

It’s less risky in the sense that there has been a decision that Arizona’s medical marijuana act is viable and enforceable and not pre-empted by federal law. But essentially, 100% of the people making edibles in Arizona at this time are not affiliated with a dispensary. So a year from now if they are not affiliated, what they’re doing might be totally illegal, because their rights as caregivers are going to go away. That’s because, under the law, to make edibles you must operate a dispensary or live more than 25 miles from a dispensary. The only way I believe these edibles providers can lawfully exist in the future is if they align themselves in some way with a dispensary.

On the biggest challenges for those trying to open an MMJ business…

Financing is a big one, as is finding a location. Another hot issue here is going to be for people who make tinctures and similar products. There’s a huge unanswered question: What forms of marijuana are legal and what forms are illegal? Under our statutes resins are illegal, so any type of chemical extraction from the plant would probably be considered resin. Therefore, if you use a chemical method of extraction it’s probably illegal.

On risks to ancillary MMJ companies that don’t deal directly with marijuana…

The government might say they face some risks, but I would say definitely not. If you’re selling bags, potting soil or hydroponics equipment, I don’t think there’s anything illegal about that.