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White Paper AG Guidelines


The Compassionate Use Act of 1996 decriminalized the cultivation and use of marijuana by certain persons on the recommendation of a physician. California's Medical Marijuana Program Act also exempted qualifying patients and primary caregivers from criminal sanctions for certain other activities involving marijuana. Apart from any provisions of state law, the sale of marijuana remains illegal under federal law.

Medical cannabis raises contentious issues placing many local officials uncomfortably between Scylla and Charybdis. On opposing banks of tumultuous waters rest the federal government on the one hand, the State government on the other. Between the two are local navigators charting an uncertain course.

The currents of these waters are irregular and agitated; Federal prohibition and prosecutions, State criminal exemptions from prosecution for cultivation, possession, administration and transportation of medical cannabis, allowance for qualified patients to associate in order to collectively or cooperatively cultivate medical cannabis, States rights verses Federal supremacy, and whether effecting or enforcing state law places municipalities in jeopardy of federal prosecution.

Further, the issue of whether "store front" dispensaries are legal under California law has been the subject of much legal debate. Many cities have been enacting laws banning outright any location from which medical marijuana is made available to qualified patients. The threshold issue is the definition of "dispensary" which is found nowhere in the statutes relating to medical marijuana. The lack of a definition of what is, legally, a dispensary for medical marijuana purposes has led cities to create their own definition to suit the particular activity sought to be prohibited. This in turn has led to a patch work of definitions that vary from city to city or county to county. The guidelines established by the Attorney General is an attempt to provide directions to cities and counties regarding this issue. Unfortunately, the guidelines as presented still provide no definition of "dispensary" or "storefront" although it is implied that any location that distributes medical marijuana may be considered a dispensary. Further, the guidelines raise as many questions as they answer.

This paper will not deal with the issue of Federal v State supremacy as that is adequately addressed in the body of the guidelines. Here will be discussed "first blush" opinions and conclusions that no doubt will be amended and refined as the discussion of the meaning and effects, legal or otherwise, of the guidelines continues to move through the legal and medical marijuana communities.

Collectives and Cooperatives

The AG guidelines state, "Under California law, medical marijuana patients and primary caregivers may 'associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes'." (§ 11362.775.) This part of MMP is intended to shield from liability those patients who together cultivate medical marijuana. It makes no mention of "collectives" or "cooperatives", as such.

While the MMP states, as one of its purposes, to "[e]nhance the access of patients and caregivers to medical marijuana through collective, cooperative cultivation projects, the terms "collective[ly]" or "cooperative[ly]" used above merely describe how cultivation may be carried out by patients who "associate" for that purpose.

The operative word herein is "associate". However, what form that association may take is also no where defined, mentioned or mandated in either the CUA or MMP. Nor have the courts directly as yet addressed this issue.

The AG's office has taken it upon itself, without citable legal authority, to claim that the only form that may be allowed legally for patients together to cultivate medical marijuana is the "collective" or "cooperative" model ("theonly recognized group entities are cooperatives and collectives"). The total absence of any legal authority for this statement, either in the statutes themselves or by judicial ruling belies its validity.

Statutory Cooperatives

Once the AG's office establishes that collectives or cooperatives are the appropriate model by which patients may cultivate medical marijuana, it suggests that "Any group that is collectively or cooperatively cultivating and distributing marijuana for medical purposes should be organized and operated in a manner that ensures the security of the crop and safeguards against diversion for non-medical purposes." From this spring board the AG's office leaps to the conclusion that all forms of association by qualified patients for the purpose of cultivating medical marijuana are "collectives" or "cooperatives" and thereafter suggests guidelines for operation within the law without considering or mentioning other, and less legally cumbersome, statutorily recognized legal entities.

It should be noted here that, in all candor, the AG's office admits that "California law does not define "collectives" and "a collective is not a statutory entity". That is to say, it has no statutory identity independent of its generic definition as does a corporation, partnership, limited liability company or association. However, while it is true that "No person shall adopt or use the word "cooperative" or any abbreviation or derivation thereof, or any word similar thereto, as part of the name or designation under which it does business in this state, unless incorporated as provided in this part or unless incorporated as a nonprofit cooperative association…."(Corp. Code § 12311(b).), the AG's office neglects to inform that there is no legal authority for the proposition that qualified patients who associate for the purpose of collectively or cooperatively cultivating medical marijuana must call themselves a "cooperative" as opposed to " an association" or "collective". Moreover, there is no statutory requirement that patients must be incorporated in order to adopt or use the word "association" or "collective" much less incorporate in order to engage collective or cooperative cultivation. So much for full disclosure.

In short, as implied by § 11362.775, patients may form groups for the purpose of collective cultivation and call themselves an association or collective without the necessity, burden or expense of incorporating. Whether or not these other forms must assume some particular internal formalities to be recognized as a legal entity will be discussed below.

Medical Marijuana Patients Association

Health and Safety Code Section 11367.775 states "Qualified patients, persons with valid identification cards, and the designated primary caregivers of qualified patients and persons with identification cards, who associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes, shall not solely on the basis of that fact be subject to state criminal sanctions under Section 11357, 11358, 11359, 11360, 11366, 11366.5, or 11570".(emphasis added). This portion of the MMP does not prevent arrest or prosecution for cultivation of medical marijuana. It allows that such patients who do so shall not on the sole basis of collective or cooperative cultivation be subject to criminal penalties for violation of the enumerated statutes.

Association is defined for purposes of Corp. Code §§ 21300-21310 as any lodge; order; beneficial association; fraternal or beneficial society or association; historical, military, or veteran's organization; labor union; foundation; federation; or any other society, organization, or association, or degree, branch, subordinate lodge, or auxiliary thereof (Corp. Code § 21300(a)).

''Unincorporated association'' is defined as an unincorporated group of two or more persons joined by mutual consent for a common lawful purpose, whether organized for profit or not (Corp. Code § 18035(a)).

The criteria applied to determine whether an entity is an unincorporated association are no more complicated than a group whose members share a common purpose, and who function under a common name under circumstances where fairness requires the group be recognized as a legal entity (Barr v. United Methodist Church (1981) 90 Cal. App. 3d 259, 266, 153 Cal. Rptr. 322).

The usual meaning of the term ''association'' is an unincorporated organization composed of a body of people partaking in general form and mode of procedure of the characteristics of a corporation (Estate of Irwin (1925) 196 Cal. 366). By its terms, this definition is not inclusive and exclusive (Law v. Crist (1940) 41 Cal. App. 2d 862, 865), and the formalities of quasi-corporate organization are not required (Barr v. United Methodist Church (1981) 90 Cal. App. 3d 259, 267).

Thus, for example, an organization may be found to be an association even if there are no officers, no constitution and no by-laws (Law v. Crist (1940) 41 Cal. App. 2d 862,).

An unincorporated association may receive and hold property, (Prob.Code § 6102(c); Corp. Code § 18100 et seq.) and may sue and be sued in its own name (Code Civ. Proc. § 369.5(a). Corp. Code § 800). An unincorporated association may register with the Secretary of State by filing a Statement by Unincorporated Association (Corp. Code§18200). There is no requirement that an association have governing documents to be recognized as a legal entity (Corp. Code § 18000).

The operative word of section 11362.775 is "associate". Conjoined with "in order collectively or cooperatively to cultivate marijuana" implies the right to associate for a particular purpose or activity, i.e. cultivate medical marijuana for medical purposes without fear of criminal sanction.

Medical marijuana patients who together "associate" in California in order collectively or cooperatively to cultivate marijuana for medical purposes may form an organization that is a recognized legal entity independent of its individual members. Moreover, the medicine cultivated becomes the collective property of the members through the association. There is no need by the association, or its members, to sustain the formality, burden or expense of incorporating in order to be recognized as a legal entity under state law, nor is there the requirement to maintain the cumbersome and extensive record keeping formalities associated with a corporation in order to be recognized as a legal entity.

However, in the climate of medical marijuana activities, it is more than advisable to maintain books and records of associational activities as evidence to preserve its associational status. And while the necessity of maintaining books and records falls upon the association, the labor and cost of such maintenance can be substantially less than that associated with a corporation.

Further, as will be discussed below, the AG's guidelines regarding membership, non-diversion of medical marijuana, verification of patient recommendation, etc. are easily facilitated through the association without the above mentioned burden and expense of becoming a corporation.

The conclusion that may be drawn here is that not only are "cooperatives" and "collectives" allowed by the statutes, they are not exclusive and other forms of association, less cumbersome and expensive, may be utilized to facilitate the cultivation of medical marijuana by qualified patients.

One final note regarding agricultural cooperatives and collectives. Traditionally, they have been utilized to maximize profits from the sale of whatever crops the members produced. The profits are divided among the members. As the AG states, "Agricultural cooperatives are likewise nonprofit corporate entities "since they are not organized to make profit for themselves, as such, or for their members, as such, but only for their members as producers." (Food & Agric. Code, § 54033.) Cooperative corporations are "democratically controlled and are not organized to make a profit for themselves, as such, or for their members, as such, but primarily for their members as patrons" (Corp. Code, § 12201 emphasis added)

The suggestion that medical marijuana patients form agricultural cooperatives that are intended to operate as for profit to its members exposes the members to violation of (§)11362.765 (a) of the MMP that forbids sale of marijuana for profit in that, while the cooperative may not make a profit from the sale of medical marijuana, the end result of the internal transactions by and between members may result in a profit to one or more of the members of the collective.

This is but one internal inconsistency found in the AG's guidelines and recommendations. Thus, using the "collective" or "cooperative" model is not desirable from either a practical or legal prospective. Another, more troubling aspect is the use of cooperatives or collectives as primary caregivers dispensing medicine to qualified patients. Various courts have already ruled that cooperatives and collectives cannot be a primary caregiver (United States v Oakland Cannabis Buyers' Cooperative 532 U.S. 483;People ex rel. Lungren v. Peron (1997) 59 Cal.App.4th 1383;) although some authority may be found in the affirmative (People v. Urziceanu, 132 Cal. App. 4th 747 (2005)). Recommending that cooperatives be formed and act as a primary caregiver to its members is, at best, problematic.

Guidelines for Lawful Operation

The guidelines for operation of collectives or cooperatives should be equally applied to other forms of patient associations, and are more easily established and implemented through the association model whose members are serviced by a primary caregiver, whose role will be discussed below.

Associational membership documents, executed by each member of the association as a condition of membership, should contain all the recommended AG guidelines and more, e.g. membership application and verification of doctors recommendation, non diversion of medicine to non qualified individuals as a condition of membership and expulsion upon breach of that condition; exclusivity of membership to qualified patients only, confidentiality of membership records and recommendations, authorization for release of medical information, provision for lower cost of medicine to fixed or low income members, and a growers agreement by and between the association and any member who provides crops to the association. These and other written conditions of membership and operation will serve to establish and maintain the association as a lawful entity operating within the ambits of the CUA and MMP.

The Role of the Primary Caregiver

The Supreme Court decision in People v Mench held that in order to qualify as a Primary Caregiver, that person must have, at or before the distribution of marijuana to qualified patient, an actual caregiving relationship that goes beyond provision of medical marijuana, advice on its use and occasional personal assistance such as trips to the doctor or the grocery store. It would seem, based on this decision, that the role of the primary caregiver as it exists vis a vis current operating "dispensaries" is no longer legally viable.

As anyone engaged in the cultivation, acquisition and dispensation of medical marijuana is aware, not all medical marijuana patients have the knowledge, training or experience or the physical ability to cultivate quality strains of medical marijuana, because most physicians do not study the applications or efficacy of medical marijuana, this is the role that is filled by individuals with knowledge, training and expertise in these areas.

The AG, also state that "collectives and cooperatives may cultivate and transport marijuana in aggregate amounts tied to its membership numbers." That a collective, or any member thereof may transport aggregate amounts tied to its membership numbers is the AG's interpretation of current case and statutory law. Although the opinion expressed by the AG has no force of law binding upon the courts, the courts will give it great deference. In that vein, recent court decisions have indicated that transportation of marijuana by members of a collective will have the protection of the Medical Marijuana Program Act.

It is the opinion of this writer that qualified patients are better served by forming an association composed of qualified patients whose purpose is the collective and cooperative cultivation of medical marijuana for the use and benefit of its members, designate a single or multiple individuals to serve as an officers of the association and register the association with the Secretary of State of California.

Storefront Dispensaries

Without defining either the term "storefront" or "dispensary", the AG's office declares that "dispensaries, as such, are not recognized under the law". A true statement, as far as it goes. However, the recent enactment by the legislature of Health and Safety Code Section 11363.768 has established that "a dispensary" commonly designated as "storefronts" may not be placed within 600 feet from a school, thus implying that storefront dispensaries are recognized under MMP as legal operations, assuming of course, that they comply with other demands of the CUA and MMP.

However, it should be noted that, regarding land use, many cities continue to be hostile to any distribution of medical marijuana and have outright bans or have a dragnet ordinance stating that if a use is not permitted, it is prohibited. Cities have recently used this provision, and other zoning ordinances such as moratoriums as grounds for prohibiting medical marijuana activities within their jurisdiction. A few appellate court decisions have upheld these provisions. However, the issue whether cities or counties may completely ban the distribution of medical marijuana is currently pending before the California Supreme Court with a decision expected by spring of 2013. In the mean time, cities and counties continue to file nuisance suits against medical marijuana "dispensaries" or storefronts" for violation of their zoning ordinances banning such land use. Anyone attempting to engage in any form of medical marijuana activity should be aware that, while their operation may comply with the CPU and or the MMP, it is no guarantee that any given city will not attempt to prohibit such activities using their zoning powers to "zone out" medical marijuana.

The AG's office goes on to state that if a "collective" or "cooperative" storefront dispensary operates pursuant to the guidelines set forth, it MAY BE legal, "but that dispensaries that do not substantially comply with the guidelines set forth in sections IV(A) and (B), above, are likely operating outside the protections of Proposition 215 and the MMP, and that the individuals operating such entities may be subject to arrest and criminal prosecution under California law".

The words, "may be", "likely" and "may be subject to" are vague and ambiguous qualifiers lending little guidance that may lead to more criminal prosecutions and civil litigation rather than less. In fact, while recent appellate cases dealing with criminal prosecution of transportation of medical marijuana by members of collectives have indicated that "storefront dispensaries", if formed and operated properly are legal, criminal prosecutions of "storefront" operators continue, both by local and federal agencies.

That being said, the AG's guidelines and recent court decisions have crossed a threshold that does provide validation of existing state law and the right of qualified patients and caregivers to cultivate and dispense medical marijuana.

However, the implication that the only form of association that may be utilized by qualified patients and primary caregivers to cultivate and distribute medical marijuana are "incorporated collectives or cooperatives" finds no support in statute or case law. It is the opinion of this writer that associations, properly formed and operated, with detailed bylaws setting forth the nature and purpose of the association, the general form and mode of procedure or the association as well as operational and procedural rules governing the rights, duties and obligations of it's members and officers continue to be a lawful vehicle to adequately serve the needs of qualified medical marijuana patients while complying with both the letter and spirit of CUA and MMP.

Anthony Curiale and Associates, A Professional Corporation - Orange County Marijuana Lawyer
Located at 265 S. Randolph Ave., Suite 105, Brea, California 92821 View Map

Phone: (714) 684-6922 | Local Phone: (714) 529-9376

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