City Hall's possible refusal to issue licenses to marijuana businesses — despite a voter-approved measure that appeared to promise a permitting process — has cannabis business associations and experts raising the specter of a court battle.
Instead of offering licenses, the city could issue "compliance documents" that will cover approved pot shops, cultivators and producers with "limited legal immunity," the same term that applied to pot shops under 2013's flawed Proposition D. In fact, Measure M was pitched as a fix for Proposition D and as a way to make dispensaries legal under forthcoming state regulations that would have outlawed shops that didn't receive local licensing.
However, that local licensing requirement was stripped via "trailer" legislation backed by Gov. Jerry Brown and approved by both California houses recently. "L.A. can decide to do its own licensing," Drug Policy Alliance staff attorney Jolene Forman said in April. "It's just not mandated."
In June, the city unveiled its draft regulations under Measure M. Limited legal immunity would be given to approved local cannabis concerns, but licenses might not be on the table. Organizations representing marijuana businesses in the city are so incensed that lawsuits are possible.
"Southern California Coalition is currently in talks with the Los Angeles City Council regarding the limited immunity language and other fundamentally flawed language currently in the draft regulations, and we are actively working with the city to make material changes to its proposed ordinances," Adam Spiker, executive director of the group, the city's largest organization of cannabis businesses, said via email. "While it is premature to say whether we would consider litigation or other remedies, we can say that if the city fails to remove the limited immunity language from Proposition M's regulations, it would send droves of small businesses, millions of tax dollars and thousands of well-paying jobs to surrounding cities that have demonstrated a willingness to embrace the cannabis industry through licensing. The city has an obligation to uphold the will of the voters, and should it fail to do so, we will consider all options at that time."
The United Cannabis Business Alliance (UCBA), which represents a good portion of current, "limited legal immunity" shops in L.A., has a similar sentiment.
“The UCBA represents many dispensaries who feel that the draft ordinance the city has provided does not meet the intent to legalize marijuana or create a licensing standard that was promised to voters and the cannabis industry," Jerred Kiloh, president of the organization, said via email. "We will continue to dialogue and shape the foundational licensing requirements of Proposition M — the requirements that we all strongly believe exists within the spirit and letter of the law. We would prefer to use our resources on policy, not in the courtroom."
Attorney Aaron Herzberg, a partner at marijuana real estate firm CalCann Holdings, says any group that sues over local licensing would "likely win." "The way I see it, L.A. has to give out licenses of some sort," he said via email.
The City Attorney's own analysis of Measure M said it "makes it unlawful to engage in commercial cannabis activity without a license after Jan. 1, 2018, and establishes criminal and civil penalties for violations." And it seemed clear during the runup to the March election that M was about providing long-sought licenses for well-behaved pot shops in Los Angeles. Yet in laying out potential rules for cannabis businesses under M, the city states that approved businesses would be "recognized by a compliance document" that granted limited legal immunity from prosecution. It outlines the same legal gray area that otherwise legit pot shops have endured for four years.
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The City Attorney's Office appears to think this is what voters approved. Asked about the limited legal immunity language, a spokesman said, "Any changes to Measure M have to be resubmitted to voters."
City prosecutors have long said that marijuana delivery is illegal under 2013's voter-approved Proposition D. Those new state "trailer" bill regulations open the door to delivery so long as it's attached to a licensed marijuana facility. However, a lack of local licensing could allow City Hall to keep delivery illegal.
"Under the new marijuana trailer bill legislation, only a licensed retailer may deliver cannabis and cannabis products," Jolene Forman of the DPA said via email yesterday. "However, a retail business may be licensed for the sole purpose of delivering cannabis and cannabis products without actually operating a brick-and-mortar retail store. The retailer must have a brick-and-mortar location, but that location does not need to be open to the public and no sales are required to occur at the physical location."
In any case, California NORML state coordinator Dale Gieringer says avoiding licensing would make for bad policy. "No other city or county in the state has done this," he says. "For all I know, this might open the door to lawsuits."