Court Of Appeal Upholds City’s Ban On Medical Marijuana Dispensaries

A cooperative corporation that operates a nonprofit medical marijuana collective challenged city ordinances that ban medical marijuana dispensaries.  The court of appeal held that the ordinances are not preempted by the Compassion Use Act of 1996 (“CUA”) or the Medical Marijuana Program Act of 2003 (“MMPA”) and upheld the trial court’s decision to permanently ban the collective from selling, providing, or making marijuana available within the city.  (Conejo Wellness Center, Inc. v. City of Agoura Hills, (--- Cal.Rptr.3d ----, Cal.App. 2 Dist., March 29, 2013).

Facts

Conejo Wellness Center, Inc. (“Conejo”) is a California cooperative corporation that operates in the City of Agoura Hills (“City”) as a nonprofit collective that engages in the distribution of medical marijuana to its members.  Conejo began operating in April 2006 and incorporated as a cooperative in June 2006.  Conejo kept marijuana at its location to distribute to its members.  

In 2008, City adopted ordinance No. 08-355, which expressly prohibits the operation of medical marijuana dispensaries in the City.  Ordinance No. 08-355 states “‘[i]t shall be unlawful for any person or entity to own, manage, establish, conduct, or operate . . . . any [m]edical [m]arijuana [d]ispensary, or to participate as a landlord, owner, employee, contractor, agent or volunteer, or in any other manner or capacity, in any [m]edical [m]arijuana [d]ispensary, in the [c]ity.”  Medical marijuana dispensary is defined as any location, co-op, or facility where “marijuana is sold, traded, exchanged, bartered for in any way, made available, located, stored, placed, or cultivated, including any of the foregoing if used in connection with the delivery of marijuana.”

Although prior to 2011 City did not require nonprofit entities to obtain a business registration permit, Conejo applied for a 2010 business registration permit.  City did not formally act on Conejo’s application until February 2011, when it denied the application and refunded Conejo’s application fee.  City commenced a code enforcement investigation of Conejo in January 2010.  In connection with the investigation, the Sheriff executed a search warrant at Conejo’s location on October 14, 2010 and seized marijuana, paraphernalia, and paperwork.  In June 2010, Conejo requested a building permit to expand its location but City rejected the request “because Conejo’s business ‘was a nonconforming use.’”

City adopted ordinance No. 10-379 on October 27, 2010, which expressly prohibits any medical marijuana dispensary “from receiving ‘compensation’ for the distribution of marijuana.”   Ordinance No. 10-379 also made other changes to the municipal code such as bringing nonprofit entities within the definition of a business, requiring a business registration permit for the operation of “any business,” expressly prohibiting the operation of a business without a permit, prohibiting the city manager from issuing a business registration permit for a business that is not a permitted use under the code, identifying a medical marijuana dispensary as a nonpermitted use, and prohibiting advertising of a business until a registration permit is obtained.  Ordinance No. 10-379 also makes a violation of these provisions of the municipal code a misdemeanor.

Conejo applied for a 2011 business registration permit on November 12, 2010, but the assistant to the city manager refused to accept the application.  Conejo filed a complaint that sought declaratory and injunctive relief against ordinance No. 08-355 and ordinance No. 10-379.  City filed a cross-complaint seeking a permanent injunction to abate Conejo’s continued operation on the ground that it is a public nuisance.  The trial court dismissed some of Conejo’s causes of action and entered judgment against it on other causes of action.  The trial court also “permanently enjoined Conejo from ‘selling, providing, or otherwise making available marijuana at or from’ its current location or any other location within Agoura.”

Decision

The court of appeal affirmed the trial court’s decision to enjoin Conejo from selling, providing, or otherwise making marijuana available within City.  Conejo asserted that the CUA and the MMPA preempt ordinance No. 08-355 and parts of ordinance No. 10-379 and therefore City cannot enforce the ordinances.  The court of appeal held that neither the CUA nor the MMPA preempt the ordinances.

The CUA, approved by California voters as Proposition 215 in 1996, provides “no physician shall be punished for recommending marijuana to a patient for medical purposes.”  The CUA also gives qualified patients and their caregivers a defense to state cultivation and possession charges if the cultivation or possession is for medical purposes upon the recommendation of a physician.  The court noted that the only “right” created by the CUA “is the right of a qualified patient or primary caregiver to possess or cultivate medical marijuana without thereby becoming subject to criminal prosecution” pursuant to specified state criminal statutes.  The CUA does not create a right to cultivate, obtain, or distribute marijuana collectively.  The court held that the CUA does not preempt City’s ordinances because (1) the ordinances are not coextensive with and therefore do not duplicate the CUA, (2) the ordinances do not contradict the CUA because the CUA does not create a right to cultivate, distribute or obtain medical marijuana, and (3) the CUA was not intended to “occupy fully the entire field of medical marijuana.”

The MMPA expanded the list of state crimes to which the defense of medical marijuana use applies and specifically includes the sale of marijuana.  The MMPA makes the defense available to not only qualified patients and primary caregivers but also holders of identification cards and “persons who assist members of these three groups in administering medical marijuana or acquiring the skills necessary to cultivate or administer medical marijuana.”  The MMPA also extends immunity from prosecution “to qualified patients, identification card holders, and their primary caregivers who “collectively or cooperatively . . . cultivate marijuana for medical purposes.”  However, the MMPA, like the CUA, “provides only limited criminal immunity for specified offenses to specific groups of people for specific actions.”  The MMPA expressly contemplates local regulation in the area of medical marijuana use.  The court of appeal found no basis for preemption of City’s ordinances by the MMPA.  City’s ordnances “are not coextensive with and therefore do not duplicate the MMPA,” the “ordinances do not contradict the MMPA,” and “the MMPA does not occupy the entire field of medical marijuana cultivation, distribution, or use.”

The court held that the CUA and MMPA do not preempt either City ordinance.  The court also held that ordinance No. 10-379 does not violate Conejo’s substantive due process rights.  Conejo never had a vested property right because its operation of a collective medical marijuana dispensary was never lawful within City.  From the time Conejo opened the dispensary and throughout its entire operation, “medical marijuana dispensary” was not a permitted use in any commercial district within City.  The court also held Conejo failed to show that its procedural due process rights were violated.  Ordinance No. 10-379’s permit requirements do not deprive Conejo of any statutorily conferred benefit.  The court also concluded that Conejo failed to show that City’s collective medical marijuana dispensaries ban violates Conejo’s members’ rights to privacy and intimate association under the California Constitution.  The challenged ordinances do not require disclosure of any information and they do not affect the members’ rights “to associate and discuss medical marijuana cultivation, storage, and use with whomever they please.”

Similar issues to those raised in this decision, including whether a municipality may legally ban medical marijuana dispensaries, is currently pending before the California Supreme Court in the case of City of Riverside v. Inland Empire Patient's Health and Wellness Center, California Supreme Court Case No. S198638.  See our previous Legal Alert on this topic.  In the meantime, we expect a decision from the Supreme Court in the Riverside case later this year.