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    Jared Van Kirk practices in the area of labor and employment. As a counselor on complex federal and state laws and regulations, Jared provides his clients with advice and training concerning best practices for increasing legal ...

Marijuana plantCities and counties don’t always have the power to regulate on anything they please.  Sometimes local action is pre-empted by state or federal law, but determining when local government action is pre-empted is often tricky business.

The general rule in Washington (and Oregon) is that local governments are authorized to make and enforce all laws necessary to further its police power, including zoning laws, so long as they do not directly conflict with state or federal laws.  The Medical Use of Cannabis Act (MUCA), enacted in 2010, codified at RCW 69.51A.085(2), authorized patients to establish collective gardens for growing medical marijuana.  “Collective gardens” are defined by state law to include group efforts to pool resources and grow medical marijuana for patients’ own use.  The MUCA further clarified that local governments retain authority to regulate the production, processing or dispensing of medical marijuana through zoning, business, licensing, health and safety requirements, and business taxes.  RCW 69.51A.140.  Relying on this zoning authority, the City of Kent, Washington enacted an ordinance that prohibited “collective gardens” in every zoning district within the city.

In the recent case, Cannabis Action Coalition (CAC) v. City of Kent, the Washington Supreme Court was asked whether the MUCA authorization for “collective gardens” preempts the Kent ordinance banning them. A statute preempts the field and invalidates a local ordinance “if there is express legislative intent to preempt the field or if such intent is necessarily implied...from the purpose of the statute and facts and circumstances under which it was intended to operate.”  The Court found no express preemption clause, leaving the question of whether preemption is implied.  CAC argued that the express authorization allows cities to zone only commercial production and processing of marijuana and not non-commercial collective gardens.  The court rejected that argument, finding nothing in the express language that distinguished between a profit or the shared use collective garden activities.  The Court went on to find that, although state law prohibits local governments from opting out of medical marijuana altogether, the local ordinance concerned a particular land use, collective gardens, and did not address the personal use of medical marijuana.  Accordingly, the Court found that the City’s ordinance was not pre-empted.

Justice Gonzalez provided an interesting dissent explaining that, although a city may regulate consistent with the MUCA, it may not completely ban what the state permits.  The majority failed to acknowledge that participation in collective gardens is legal under state law and, as a result, Gonzalez asserts, the city may not enact regulations, zoning or not, that prohibit this lawful activity.

It is also important to note that while this appeal was pending, the legislature enacted comprehensive reform concerning the regulation of medical marijuana in Washington including repeal of the statutory provisions authorizing collective gardens.  Laws of 2015, ch. 70.  That said, this case provides an interesting commentary as the Washington Supreme Court prepares to decide whether to hear a case challenging cities’ and counties’ authority to ban licensed recreational marijuana retailers and the legislatures of both Oregon and Washington work to fashion regulations surrounding the production, processing and distribution of both medical and recreational marijuana that focus on standards controlling activities and revenue rather than land use.

Warning Regarding Federal Law: The possession, distribution, and manufacturing of marijuana is illegal under federal law, regardless of state law which may, in some jurisdictions, decriminalize such activity under certain circumstances. Federal penalties for violating the federal Controlled Substances Act (the “CSA”) are serious and, depending on the quantity of marijuana involved, can include criminal penalties of up to 20 years in prison and/or a fine of up to $2,000,000. 21 U.S.C. § 841. The penalties increase if the sale or possession with intent occurs within 1,000 feet of a school, university, playground, or public housing facility. 21 U.S.C. § 860. In addition, the federal government may seize, and seek the civil forfeiture of, the real or personal property used to facilitate the sale of marijuana as well as the money or other proceeds from the sale. 21 U.S.C. § 881. Although the U.S. Department of Justice has noted that an effective state regulatory system, and compliance with such a system, should be considered in the exercise of investigative and prosecutorial discretion, its authority to prosecute violations of the CSA is not diminished by the passage of state laws which may permit such activity. Indeed, due to the federal government’s jurisdiction over interstate commerce, when businesses provide services to marijuana producers, processors or distributors located in multiple states, they potentially face a higher level of scrutiny from federal authorities than do their customers with local operations.

Washington’s Initiative 502 decriminalized, licensed and regulated marijuana sales under state law, and prospective retail licensees are gearing up to begin operations. On June 3, 2014 a suit was filed by one prospective licensee against the City of Wenatchee over its prohibition on issuing business licenses for business activities that are not lawful under city, state, and federal law. Because the sale of marijuana remains unlawful under federal law, Wenatchee has made clear that it will not license marijuana businesses that are duly licensed by the state Liquor Control Board to operate in Wenatchee. In October 2013, the Wenatchee City Council voted 4-3 against a proposed ordinance that would have allowed business licenses to be issued to state-licensed marijuana businesses.

The suit challenges Wenatchee’s authority to prohibit business activity that is lawful under state law and licensed by the state. This issue is being hotly debated by Washington legal authorities. In January the Washington Attorney General issued a non-binding opinion in which he concluded that I-502 did not prevent local governments from banning marijuana businesses within their jurisdictions. In April, a Washington Court of Appeals issued an opinion concluding that local governments could prohibit collective medical marijuana gardens because they remained unlawful under the State’s medical marijuana law. It remains an open question whether Washington courts will allow a local government to prohibit business activity that is lawful under state law or whether the state-licensed and regulated marijuana market will preempt local bans.

This suit will be closely watched by local governments and marijuana businesses alike. If the reaction of Wenatchee’s Mayor reported, as by The Wenatchee World, is any indication, local governments are not excited about becoming the subject of costly litigation to establish the boundaries of state and local law: “‘I’m trying to balance a budget.’ . . . ‘We’ve got big issues in the city. Having the distraction of this marijuana issue is not something I want to deal with.’”  These concerns could rise dramatically if Wenatchee chooses to respond to such suits by arguing that the state’s licensing and regulation of marijuana businesses is in conflict with federal law. That claim would expand the lawsuit while threatening newly forming marijuana businesses statewide, and could invite the participation of groups like the American Civil Liberties Union and possibly Washington State itself to defend state law.

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We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.
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