How To Lose A Cannabis Business. Or I’m From The Government….

How to lose a cannabis business. Locate where you are not wanted.

The best you can do to prevent this sort of scene is to have a strong compliance program
The best you can do to prevent this sort of scene is to have a strong compliance program

From individual growers to thriving cooperatives, wise cannabis businesses want their legal bases to be covered should local or federal officials come knocking. Unfortunately, in an industry beleaguered by new and often murky federal, state, and city regulations, surefire legal protection is extremely difficult to come by.

Our cannabis lawyers encounter the same question every day: “What exactly does my cannabis business need to do to prevent a run-in with the law?” If nothing else, recent shut-downs of cannabis dispensaries in Bellingham highlight the impossibility of any marijuana attorney answering this question with any real certainty.

Just weeks after the City of Bellingham Police Department’s raids on three prominent cannabis businesses, the cannabis community is still struggling to make sense of this jarring display of enforcement. Though the long-term impact of the conflict remains to be seen, Bellingham has at least sparked much-needed discussion about the inconsistencies that plague the state’s relationship with medical cannabis.

It would be misleading to describe the March 15th police raids as a complete shock. First of all, cannabis is  illegal under federal law. Therefore anyone operating a cannabis business, regardless of state provisions and regardless of scale, is at some level of legal risk. And though Washington’s Medical Cannabis Act (RCW 69.51) provides for lawful distributing medical cannabis, it is common knowledge that local governments’ actual conduct toward such businesses is patchy to say the least. Yet, when a long stretch of quiet has elapsed without a high-publicity crack-down, it is easy to forget just how vulnerable Washington cannabis businesses really are.

For Starbuds Cooperative and Northern Cross Collective, the first whiff of trouble came in November 2011, when the City of Bellingham revoked and denied these cooperatives’ business licenses (Northern Cross had its license revoked, while Starbuds’ application was denied from the outset.).  The City cited “illegal” operations and “public safety concerns” for denying the co-ops’ licenses.

Starbuds and Northern Cross wasted no time in appealing the City’s business license denials. In their appeals, the co-ops asserted their legal validity and emphasized their social purpose: providing necessary medicine to the City’s qualifying patients. In return, Starbuds and Northern Cross received cease and desist letters from the Bellingham Police Department, demanding that they close their doors immediately. They did not—and without their business licenses, according to the City of Bellingham, they were operating in violation of municipal code.

Threats became reality on March 15, 2012, when the Bellingham Police executed search warrants against Starbuds Cooperative and Northern Cross Collective, shutting down both businesses, seizing pounds of inventory, and arresting five individuals.

It is interesting to note that the police conducted their raids at 4:00 p.m. on the Thursday before a Whatcom County Superior Court furlough/closure day. Had the raids taken place at nearly any other time, the co-ops would have been able to immediately seek a Temporary Restraining Order to attempt to halt the police’s actions against them. Instead, they were forced to wait until the following Monday to take any defensive action against the shut-downs. On that Monday, with several of their employees still in jail, Starbuds and Northern Cross submitted their Temporary Restraining Order to the Court.

Though the cooperatives’ subsequent legal fight has not achieved the same regional attention as the notorious March 15 raids, the drama in Bellingham has continued in full force. The cooperatives’ Motion for Temporary Restraining Order was initially scheduled for hearing on April 10th. On that day, however, Whatcom County Superior Court Judge Charles Snyder, in an admirable show of integrity, announced to the assembled crowd that he would be recusing himself from the case. Judge Snyder felt that his experience with drug court and his ethical views on medical cannabis would interfere with his ability to decide the matter impartially.

The case was then transferred to Judge Steven J. Mura. After hearing the parties’ oral arguments on April 12, Judge Mura denied the Temporary Restraining Order, which would have prevented the City from shutting down the police-raided businesses.  In explaining his decision, Judge Mura cited the cooperatives’ failure to prove that they had suffered irreparable harm.

Nonetheless, in the same decision, the Judge also stated that the cooperatives would be allowed to continue operating legally. Optimists may interpret this provision as a solid nod to the cooperatives’ fundamental right to do business under RCW 69.51A. However, as Judge Mura himself explained, this provision (if approved) would be “an empty order,” essentially authorizing the cooperatives to continue operating as long as they are operating legally.

Though Judge Mura’s order did provide a modest legal validation of the cooperatives, it did nothing to stop the City’s shut-downs and next to nothing to clear up the questions that continue to burden Bellingham and the state as a whole: Who gets to determine whether a cannabis business is operating legally? What rights does a cannabis business have in defending itself against police raids, arrests, and inventory seizures?  And until statewide decision-makers address the biases surrounding the very existence of cannabis, how can we ensure these disputes are handled in a consistent and transparent manner under Washington state law?

Until these and many other questions are conclusively put to rest, what happened in Bellingham will almost certainly happen again. And the frustrating truth is that no one—not even the most diligent business—can absolutely ensure protection from city, state, or federal scrutiny. One thing is certain, though: the haziness of Washington’s cannabis laws and enforcement practices does not give any business a pass to slack on its registration, documentation, taxes, or any other facets of legal compliance.

At the end of the day, you will always be better off with your legal bases covered. After all, if the cannabis industry wants the courts, cities, and police to treat it like any other legitimate business, cannabis businesses must set the tone by complying with state law to the best of their ability.  Though plenty of questions are still up in the air, it remains clear that full legal compliance is the best investment for any cooperative that wants to stay in business.