California Cannabis and the Feds: The Harborside Health Case

Last week the U.S. Ninth Circuit Court of Appeals handed down a disappointing ruling in the ongoing Harborside Health Center case. A three-judge panel unanimously ruled that the U.S. Department of Justice has the legal right to attempt to close Harborside’s doors.

We first wrote about Harborside Health Center over three years ago, when the U.S. Attorney for the Northern District of California, Melissa Haag, moved to shut down Harborside by seeking to seize assets and property under the Controlled Substances Act. It is critical to remember that federal civil asset forfeiture is a risk even the most compliant marijuana businesses run, and that the federal government can and does seize property used for cultivating, manufacturing, or distributing marijuana.

Harborside Health CenterBut the situation with Harborside Health Center and the City of Oakland is exemplary. First of all, since its inception, Harborside has worked closely with the City of Oakland and (by all reports) has always been a model of compliance with both state and local law. Harborside also pays its taxes. And it pays a lot of taxes – Harborside provides the City of Oakland with more than $1 million in annual tax revenue. As a model of compliance, an industry leader, and a major revenue generator for Oakland, Harborside has consistently had strong support from the city council and the city attorney.

So why did the federal government go after Harborside in the first place? Back in 2012, Haag stated, “I now find the need to consider actions regarding marijuana superstores such as Harborside. The larger the operation, the greater the likelihood that there will be abuses of the state’s medical marijuana laws, and marijuana in the hands of individuals who do not have a demonstrated medical need.” So in other words, Harborside was “too big.” Arbitrary as this logic may seem, it is a good reminder that federal prosecutors have discretion, and depending on who holds office, enforcement priorities can change.

In fact, Melinda Haag recently announced that she will be stepping down from her roll as the chief federal prosecutor for Northern California. Haag instituted a crackdown on medical marijuana businesses in 2011 and since then, hundreds of California dispensaries have been forced to close. In addition to the high profile Harborside case, Haag’s office is seeking to shut down Berkeley Patients Group, another of the Bay Area’s largest medical marijuana operations. Her successor has yet to be named, but it’s a safe bet that whoever fills her position will have differing, though not necessarily more progressive, views on medical marijuana as an enforcement priority. Northern California cannabis businesses will once again need to reconsider their operating plans in light of their local U.S. Attorney’s stance on marijuana. It may be that cases like the one against Harborside will become a thing of the past, or it may be that enforcement efforts ramp up.

If the most recent Harborside ruling becomes final, the case will be remanded to the district court for further hearings. This case serves as a harsh reminder that despite shifting public perception and state-level progress toward cannabis legalization, the federal government still holds the ultimate trump card. We are eager to learn who will become the new Bay Area U.S. Attorney, and to see if and how local marijuana enforcement policy will change.