BILL ANALYSIS �
SENATE COMMITTEE ON PUBLIC SAFETY
Senator Loni Hancock, Chair S
2013-2014 Regular Session B
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SB 439 (Steinberg)
As Amended April 1, 2013
Hearing date: April 30, 2013
Health and Safety Code
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MEDICAL MARIJUANA
COMPLIANCE WITH GUIDELINES OF THE ATTORNEY GENERAL
HISTORY
Source: Author
Prior Legislation: SB 1182 (Leno) - died on Senate Floor, 2012
Support: Marijuana Policy Project; California Attorneys for
Criminal Justice; Mayor of Sacramento; American Civil
Liberties Union; Drug Policy Alliance; California Norml
Opposition:California Narcotics Officers' Association;
California Police Chiefs Association; International
Faith Based Coalition
KEY ISSUE
SHOULD SPECIFIED MEDICAL MARIJUANA ENTITIES THAT COMPLY WITH THE
GUIDELINES OF THE ATTORNEY GENERAL FOR MEDICAL MARIJUANA NOT BE
SUBJECT TO PROSECUTION OR SPECIFIED LEGAL ACTIONS?
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PURPOSE
The purpose of this bill is to provide that a cooperative,
collective or other business entity that operates within the
Attorney General's guidelines shall not be subject to
prosecution for marijuana possession or commerce, as specified.
Existing law - the Compassionate Use Act of 1996 (Health & Saf.
Code � 11362.5) - includes the following purposes:
To ensure that seriously ill Californians have the right to
obtain and use marijuana for medical purposes where such use
is deemed appropriate and has been recommended by a physician
for treatment of cancer, anorexia, AIDS, chronic pain,
spasticity, glaucoma, arthritis, migraine, or any other
illness for which marijuana provides relief.
To ensure that patients and primary caregivers who obtain and
use marijuana for medical purposes upon the recommendation of
a physician are not subject to criminal prosecution.
To encourage the federal and state governments to implement a
plan to provide for the safe and affordable distribution of
marijuana to all patients in medical need of marijuana.
(Health and Saf. Code � 11362.5, subd. (b)(1)(A)-(C).)
Existing law - the Compassionate Use Act of 1996 - also
provides:
� The act shall not be construed to supersede legislation
prohibiting persons from engaging in conduct that endangers
others, or to condone the diversion of marijuana for
non-medical purposes. (Health & Saf. Code � 11362.5, subd.
(b)(2).)
� No physician in California shall be punished or denied any
right or privilege for recommending medical marijuana to a
patient. (Health & Saf. Code � 11362.5, subd. (c).)
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� Penal laws relating to the possession of marijuana and the
cultivation of marijuana shall not apply to a patient, or to a
patient's primary caregiver, who possesses or cultivates
marijuana for the personal medical purposes of the patient
upon the written or oral recommendation or approval of a
physician. (Health & Saf. Code � 11362.5, subd. (d).)
Existing law provides that 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 existing law. (Health & Saf.
Code � 11362.775.)
Existing law directs the Attorney General to develop and adopt
appropriate guidelines to ensure the security and nondiversion
of medical marijuana. ( Health & Saf. Code � 11362.81, subd.
(d).) Section IV of the guidelines concern collectives and
cooperatives.
Existing law prohibits any medical marijuana cooperative,
collective, dispensary, operator, establishment, or provider who
possess, cultivates, or distributes medical marijuana, as
specified, from being located within 600 feet of a school.
There are specified exceptions for medical or elder care
facilities, local ordinances adopted prior to enactment of the
state standard and for later adopted ordinances that are more
restrictive than state law. (Health & Saf. Code � 11362.768.)
Existing law allows cities or other local governing bodies to
adopt and enforce local ordinances that regulate the location,
operation, or establishment of a medical marijuana cooperative
or collective, as follows:
A local government entity may enforce a medical
marijuana ordinance through civil or criminal remedies and
actions.
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A local government entity may enact other laws
consistent with the Medical Marijuana Program (MMP), as
specified. (Health & Saf. Code � 11362.83.)
This bill provides that for any medical marijuana collective,
cooperative, or other business entities that comply with medical
marijuana guidelines published by the Attorney General, the
following shall apply:
The cooperative, collective or businesses entity, and
the employees, officers and members thereof shall be exempt
from criminal prosecution and nuisance abatement actions,
as specified.
The fact that a cooperative, collective or businesses
entity, including an employee, officer or member thereof,
receives compensation for actual expenses for activities
carried out within the guidelines published by the Attorney
General shall not be subject to prosecution under Health
and Safety Code Sections 11359 and 11360.
RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION
For the last several years, severe overcrowding in California's
prisons has been the focus of evolving and expensive litigation
relating to conditions of confinement. On May 23, 2011, the
United States Supreme Court ordered California to reduce its
prison population to 137.5 percent of design capacity within two
years from the date of its ruling, subject to the right of the
state to seek modifications in appropriate circumstances.
Beginning in early 2007, Senate leadership initiated a policy to
hold legislative proposals which could further aggravate the
prison overcrowding crisis through new or expanded felony
prosecutions. Under the resulting policy known as "ROCA" (which
stands for "Receivership/ Overcrowding Crisis Aggravation"), the
Committee held measures which created a new felony, expanded the
scope or penalty of an existing felony, or otherwise increased
the application of a felony in a manner which could exacerbate
the prison overcrowding crisis. Under these principles, ROCA
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was applied as a content-neutral, provisional measure necessary
to ensure that the Legislature did not erode progress towards
reducing prison overcrowding by passing legislation which would
increase the prison population. ROCA necessitated many hard and
difficult decisions for the Committee.
In January of 2013, just over a year after the enactment of the
historic Public Safety Realignment Act of 2011, the State of
California filed court documents seeking to vacate or modify the
federal court order issued by the Three-Judge Court three years
earlier to reduce the state's prison population to 137.5 percent
of design capacity. The State submitted in part that the, ". .
. population in the State's 33 prisons has been reduced by over
24,000 inmates since October 2011 when public safety realignment
went into effect, by more than 36,000 inmates compared to the
2008 population . . . , and by nearly 42,000 inmates since 2006
. . . ." Plaintiffs, who opposed the state's motion, argue in
part that, "California prisons, which currently average 150% of
capacity, and reach as high as 185% of capacity at one prison,
continue to deliver health care that is constitutionally
deficient." In an order dated January 29, 2013, the federal
court granted the state a six-month extension to achieve the
137.5 % prisoner population cap by December 31st of this year.
In an order dated April 11, 2013, the Three-Judge Court denied
the state's motions, and ordered the state of California to
"immediately take all steps necessary to comply with this
Court's . . . Order . . . requiring defendants to reduce overall
prison population to 137.5% design capacity by December 31,
2013."
The ongoing litigation indicates that prison capacity and
related issues concerning conditions of confinement remain
unresolved. However, in light of the real gains in reducing the
prison population that have been made, although even greater
reductions are required by the court, the Committee will review
each ROCA bill with more flexible consideration. The following
questions will inform this consideration:
whether a measure erodes realignment;
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whether a measure addresses a crime which is directly
dangerous to the physical safety of others for which there
is no other reasonably appropriate sanction;
whether a bill corrects a constitutional infirmity or
legislative drafting error;
whether a measure proposes penalties which are
proportionate, and cannot be achieved through any other
reasonably appropriate remedy; and
whether a bill addresses a major area of public safety
or criminal activity for which there is no other
reasonable, appropriate remedy.
COMMENTS
1. Need for This Bill
According to the author:
The legality of medical marijuana collectives,
cooperatives, and other related business entities is
ambiguous under current state law, resulting in
needless arrests and prosecutions. Local governments
have banned collectives and cooperatives, rather than
adopting reasonable regulations to protect public
safety, prevent neighborhood nuisances, and provide
for safe access for qualified patients and their
primary caregivers.
Senate Bill 493 clarifies the legality of medical
marijuana collectives, cooperatives, and other
business entities that are organized and operated in
compliance with the 2008 Attorney General Guidelines
"For The Security And Non-Diversion of Marijuana Grown
For Medical Use." Specifically, the bill provides
that a cooperative, collective or other entity that
operates within the Attorney General's guidelines
shall not be subject to prosecution for marijuana
possession or commerce. Further, the entity and its
employees, officers and members shall not be subject
to prosecution because the entity or its employees,
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officers, or members received compensation for actual
expenses incurred in carrying out activities in
compliance with the guidelines.
SB 439 provides a focused solution that clarifies
state law. This simple fix is compatible with, and
may be enacted independently of, any other legislation
that may provide a more comprehensive solution to
state medical marijuana issues. While it is beyond
our reach to resolve the conflict between federal and
state law, we are still responsible for resolving
existing ambiguities in state law that are within our
power to fix.
2. Compassionate Use Act of 1996 (Proposition 215) - Medical
Marijuana
The Compassionate Use Act (CUA) was enacted in 1996. (Health &
Saf. Code � 11362.5.) The CUA established the right of patients
to obtain and use marijuana to treat specified illnesses and any
other illness for which marijuana provides relief.
Additionally, the CUA specifically protects physicians who
recommend the use of marijuana to patients for medical purposes
and exempts qualified patients and their primary caregivers from
California drug laws prohibiting possession and cultivation of
marijuana.
The CUA is a very general law. It establishes the right of a
patient to obtain medical marijuana pursuant to a physician's
recommendation. The initiative then simply encourages the state
and federal governments to "implement a plan for safe and
affordable distribution of marijuana [to qualified patients]."
It has been argued that very little has been done to implement
the initiative. (McCabe, It's High Time: California Attempts to
Clear the Smoke Surrounding the Compassionate Use Act, (2004) 35
McGeorge L. Rev. 545, 546.) Instead of a comprehensive
implementation plan, numerous uncoordinated bills have been
introduced in the Legislature. Further, the courts have only
provided a small measure of clarity and certainty in this area.
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3. California Constitutional Provisions Limit the Ability of the
Legislature to Amend the CUA
Legislation Affecting the Compassionate Use Act - Legislature
Cannot Limit the Amount of Medical Marijuana a Patient may
Possess
The California Supreme Court recently ruled on the power of the
Legislature to amend or affect the Compassionate Use Act (CUA).
(People v. Kelly (2010) 47 Cal.4th 1008.) In Kelly, the court
ruled that the legislative restriction on the number of plants a
qualified medical marijuana patient may possess was
unconstitutional as it interfered with the rights established by
the CUA initiative. Although the Legislature may clarify or
expand the rights established in the CUA, it may not enact
legislation that interferes with those.
The Kelly Court stated:
Under the CUA [patients and primary caregivers] are
not subject to any specific limits and do not require
a physician's recommendation in order to exceed any
such limits; instead they may possess an amount of
medical marijuana reasonably necessary for their, or
their charges', personal medical needs. ? In this
sense, quantity limitations conflict with - and
thereby substantially restrict - the CUA's guarantee
that a qualified patient may possess and cultivate any
amount of marijuana reasonably necessary for his or
her current medical condition. In that respect,
Section 11362.77 improperly amends the CUA in
violation of the California Constitution. (People v.
Kelly, supra, 47 Cal.4th at p. 1044.)
4. Attorney General Compassionate Use Guidelines
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Consideration of Cooperatives and Collectives in the Guidelines
In August 2008, the California Attorney General published
"Guidelines for the Security and Non-Diversion of Marijuana
Grown for Medical Use." (Guidelines for the Security and
Non-Diversion of Marijuana Grown for Medical Use, Cal. Attorney
General. Aug. 2008; hereinafter, Guidelines.) This bill
provides that any collective cooperative or other business
entity that operates in compliance with specified portions of
the guidelines published by the Attorney General would not be
subject to criminal prosecution. (Guidelines, � IV, A and
B.) Further, these entities would not be subject to prosecution
for transporting or furnishing marijuana (Health & Saf. Code
��1359-11360.) The portion of the guidelines referred to by
this bill concern collectives and cooperatives.
A cooperative (coop) is a creature of state law<1> and subject
to detailed regulations. (Guidelines, p. 8.) The guidelines
note that cooperatives are not typical for-profit endeavors.
Coops are democratically controlled and exist mostly for the
benefit of members as patrons. "The earnings and savings of the
business must be used for the general welfare of its members or
equitably distributed to the members in the form of cash,
property, credits or services." (Ibid.) Thus, money earned by
the coop can be distributed among the members in proportions
that reflect their ownership shares or efforts. It appears that
coops could thus not distribute profits to a small group of
owners or pay dividends to shareholders who have little to do
with the operation of the enterprise.
As concerns medical marijuana coops specifically, the guidelines
state this cardinal rule: "Cooperatives should not purchase
marijuana from or sell to, non-members; instead they should only
provide a means for facilitating or coordinating transaction
[among] members." (Ibid.)
Unlike cooperatives, collectives are largely undefined. (Ibid.)
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<1> Corp. Code �� 12201, 12300 and 12311; Food & Agric. Code �
54033.
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The guidelines rely on the dictionary definition of a
collective as a business, farm or other entity operated by
members of an organization of group. The guidelines then
conclude that "a collective should be an organization that
merely facilitates the collaborative efforts of patient and
caregiver members - including the allocation of costs and
revenue. ? [A] collective is not a statutory entity, but as a
practical matter it might have to organize as some form of
business ?" (Ibid.)
As to transactions involving marijuana specifically, the
guidelines state: "The collective should not purchase marijuana
from, or sell to, non-members, instead, it should only provide a
means for facilitating or coordinating transactions between [or
among] members." (Ibid.)
Guideline Recommendations for Cooperatives and Collectives
Operate as a non-profit. (Health & Saf. Code �
11362.765, subd. (a).) (It remains unclear, despite the
guidelines, whether a distribution of "earnings" of the
cooperative or collective to the members constitute
realization of a profit.) (Id, at p. 8.)
Business Licenses, Sales Tax and Sellers' Permits: The
Board of Equalization has held that medical marijuana
transactions are subject to sales tax, regardless of
whether or not a coop or collective generates profits.
Persons who engage in medical marijuana transactions must
obtain a Seller's Permit. Many cities and counties would
require collectives and coops to hold business licenses.
Membership - Guidelines recommend written applications,
as follows:
o The coop or collective should verify the
applicant's status as a patient or qualified
caregiver. Verification can be done through a valid
state medical marijuana card or the recommending
physician.
o Members should explicitly agree not to
distribute to non-members and to use marijuana only
for medical purposes.
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o Membership records should be accessible.
o The entity should track the status and
expiration of recommendations and identification
cards.
o The entity should enforce conditions of
membership through excluding persons who violate the
conditions.
Coops and collectives should deal only in lawfully
cultivated marijuana. In particular, a coop or collective
should only acquire marijuana from constituent members.
Coop or collective marijuana should not be distributed
to non-members.
Allocation of medical marijuana and reimbursement for
services.
o Medical marijuana can be distributed free to
member patients and caregivers.
o Medical marijuana can be provided in exchange
for services.
o Medical marijuana can be provided for a fee
that reflects costs and expenses.
o Any combination of these allocation processes
can be used.
The guidelines discuss possession limits in the Medical
Marijuana Program Act. (Health & Saf. Code � 11362.765.)
However, the California Supreme Court in People v. Kelly
(2010) 47 Cal.4th 1008, held that a legislatively enacted
limit on the amount of medical marijuana a patient or
caregiver may possess violates the Compassionate Use Act
initiative. The court in Kelly held that a patient or
caregiver may possess any amount reasonably necessary to
address the medical needs of the patient.
Security should be maintained to protect patients,
caregivers and the neighborhood in which the coop or
collective is located.
Enforcement Guidelines - Staying within the Law
Storefront Dispensaries: Dispensaries are not
recognized in the law. The operators of a dispensary that
is not organized as a coop or collective may be subject to
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prosecution. A dispensary that describes itself as a
caregiver for patients, but only supplies marijuana to a
patient is not acting as a caregiver under the law. A
caregiver must consistently take responsibility for the
housing, health, or safety of patient. (People v. Mentch
(2008) 45 Cal.4th 274, 283-285; Health & Saf. Code �
1162.5.)<2>
Law enforcement will look for the following signs that a
coop or collective is violating the law:
o Excessive cash.
o Excessive amounts of marijuana.
o Failure to follow local and state laws
applicable to similar businesses, such as failure to
pay sales tax or failure to obtain a business license.
o Transactions with non-members, especially
out-of-state buyers.
o Weapons or illicit drugs.
5. Difficult Times for Medical Marijuana Entities
Recently, medical marijuana entities - including coops,
collectives and dispensaries - have been under intense pressure
from new restrictions in state law concerning locations of these
entities near schools and myriad local ordinances authorized by
state law. The federal government has ordered the closure of
numerous medical marijuana facilities. It appears that the
basis for federal enforcement has not been consistent. Some
facilities have been closed because of proximity to schools.
(Pot Shop Crackdowns in San Francisco All About Location, Sac.
Bee, April 15, 2012.) Some facilities have been closed because
federal law does not recognize the use of marijuana for any
purpose, especially commerce.
The United States Attorney in Sacramento - Benjamin Wagner - has
effectively stated that he will close or prosecute the operators
of medical marijuana entities that run a business for profit.
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<2> The guidelines were published about three months before
Mentch was published.
Wagner, in an address to the Sacramento Press Club, would not
say how much of a profit is enough to attract a federal
prosecution. (Sacramento's U.S. Prosecutor Defends Medical
Marijuana Crackdown, Sac. Bee, Feb. 29, 2012.)
The January 13, 2013, issue of the New York Times<3> published a
story about the federal prosecution of Matthew Davies of
Stockton on charges of cultivation of marijuana. Davies told
the reporter that he had complied with all California laws.
U.S. Attorney Wagner has argued that Davies was neither a
"seriously ill user of marijuana nor was he a medical
caregiver?" Ironically, it appears that Davies' meticulous
record keeping and faithfulness to accepted business practices
made it easier for the federal government to prosecute him.
Davies' customers and employees praised his ethics and empathy,
but the U.S. Attorney maintained that Davies was a major
marijuana trafficker. Davies and his supporters have appealed
to Attorney General Eric Holder and President Obama to halt the
prosecution. A search of recent news stories does not reveal
the status of the case.
Recent California state court decisions have been more favorable
to collectives and cooperatives that operate within California
law and the guidelines of the California Attorney General. The
California Court of Appeal in San Diego reversed the conviction
of Javon Jackson for marijuana cultivation. The prosecutor in
Jackson's case had obtained an order from the trial court
preventing Jackson from presenting a medical marijuana defense.
The appellate court reversed Jackson's conviction on the grounds
that Jackson was entitled to present a defense that he operated
a valid non-profit medical marijuana collective.
The guidelines issued in the Javon Jackson decision are directly
relevant to this bill, particularly in light of the fact that
the California Supreme Court denied review of the case, letting
the decision stand:
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<3>
http://www.nytimes.com/2013/01/14/us/14pot.html?pagewanted=all&_r
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While?the relatively large size of a collective or
cooperative will not per se take it outside the scope
of [the defenses in] section 11362.775, in any given
case the size of an enterprise may nonetheless be
quite relevant in determining whether a defendant's
participation is protected by the MMPA. In this
regard we note that although section 11362.775 itself
does not require that collective or cooperative
projects be nonprofit enterprises, there is little
doubt the Legislature did not intend to authorize
profit-making enterprises. The clearest expression of
that limitation is set forth in ? section 11362.765,
subdivision (a): "However, nothing in this section
shall authorize ? any individual or group to cultivate
or distribute marijuana for profit." (Italics added.)
The nonprofit limitation on group cultivation in
section 11362.765, subdivision (a) would make little,
if any, sense, if it did not also apply to collective
or cooperative projects permitted under section
11362.775. ? Thus, when a defense under the MMPA is
offered, the
People are entitled to an instruction advising the
jury that a collective or cooperative protected by the
MMPA must be a nonprofit enterprise.
[I]n determining whether a collective or cooperative
is a nonprofit enterprise, its establishment as such
under Corporations Code section 12201 and any
financial records? will be relevant, including ?
processes or procedures by which the enterprise makes
itself accountable to its membership. An operator's
testimony as to the nonprofit nature of the enterprise
is of course also relevant. (Id, at pp. 538-539.)
However, as demonstrated by the decision in Jackson, what is a
commercial enterprise may be difficult to distinguish from a
coop or collective that reimburses members for expenses incurred
and activities done on behalf of the entity and its members.
This bill appears intended to provide some certainty and clarity
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for operators of coops and collectives, at least as concerns
state law. The bill provides objective standards for allowable
or proper operation of a coop or collective. That is, a coop or
collective will not be subject to prosecution under state
marijuana laws if the entity abides by the guidelines published
by the California Attorney General. Perhaps a relatively
consistent and clear set of state rules will induce or persuade
the federal government to respect state law on medical
marijuana.
WILL THIS BILL PROVIDE CLEAR GUIDELINES FOR MEDICAL MARIJUANA
COOPERATIVES AND COLLECTIVES TO OPERATE WITHIN CALIFORNIA LAW?
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