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Calif. cities lift medical marijuana delivery ban: Is L.A. next?

April 24, 2017

Under the Medical Cannabis Regulation and Safety Act, enacted Jan. 1, 2016, California authorized the delivery of medical marijuana by licensed dispensaries to qualified patients but allowed municipalities to ban such deliveries. After initially imposing such a ban, San Jose and other California cities have recently lifted the prohibition and other municipalities have considered doing the same.

The changing sentiment is based on a preference for regulated delivery provided by licensed dispensaries over the illegal variety that has emerged in jurisdictions where medical marijuana delivery is prohibited.  With both the medical marijuana and delivery service industries booming, the legality of medical marijuana delivery services is of paramount importance to the future of the cannabis industry. In Los Angeles, medical marijuana delivery remains banned, but the recently passed Proposition M and general public sentiment has increased the likelihood that the City Council will reconsider the city’s stance in the coming months.

Medical marijuana delivery in California

Medical marijuana was decriminalized in California in 1996 under the Compassionate Use Act (CUA). CUA provided a limited defense against criminal prosecution for the use of medical marijuana but did not provide regulatory oversight or guidance.

After two decades of uncertainty in the industry, the Medical Cannabis Regulation and Safety Act (MCRSA) established a statewide licensing system to regulate the cultivation, transportation and sale of medical marijuana.  Upon signing the act into law, Gov. Jerry Brown called it a long-overdue framework that would “make sure patients have access to medical marijuana, while ensuring a robust tracking system.”

The governor’s declaration is rooted in Section 19340 of MCRSA. The provision authorizes the delivery of medical marijuana by licensed dispensaries, increasing access to patients who are physically unable to visit a dispensary and those who prefer the convenience and privacy of delivery services.

Simultaneously, it requires dispensary employees to carry proper licenses during deliveries and present such documentation upon law enforcement’s request. This facilitates the government’s ability to track delivery operations and creates transparency absent from illegal delivery services.  Counties are authorized to tax each delivery and such revenues can be used to finance tracking efforts.

Yet Gov. Brown’s statement does not apply to many patients in California. Section 19340 prohibits the delivery of medical marijuana in any municipality that has banned such activity. Additionally, deliveries are forbidden by any dispensary located in a municipality that has banned deliveries, even if the recipient’s municipality has not done so.

In the months before and after the enactment of MCRSA, several municipalities across the state established ordinances banning the delivery of medical marijuana. These include some of the most populous cities and counties including San Jose, Los Angeles, Santa Ana, Orange, Tustin, Irvine, Gardena, Oceanview, and Newport Beach.

Medical marijuana delivery in San Jose

In December 2015, San Jose, the third-most-populous city in California, passed an ordinance prohibiting the delivery of medical marijuana, regardless of the origin of the medical marijuana, to any person or location within the city. The sole exception is for deliveries made to patients by their primary caregiver.

At the time, the San Jose City Manager’s office supported the ban and said, “Delivery operations offer too many opportunities for diversion of product to minors and other significant risks to the public health and safety.”

Upon passing the ordinance the San Jose City Council stated:

City Staff has spent a number of years and many hours of hard work dealing with Medical Marijuana and we are almost at the finish line…The constant refrain when dealing with the issues of Medical Marijuana in San Jose has been to get it done right, not fast. The consequences of getting it wrong are great. We do not want the re-emergence of a “Black Market” or “Underground Market” where there are no regulations, no tracking, and no age limit.

Yet less than a year later, San Jose City Council readdressed the issue, passing a new ordinance in October 2016 that lifted the ban.

In a statement in favor of removing the ban, San Jose Police Chief Garcia said, “Regulated delivery is a better option than the illegal delivery currently happening in San Jose.” Garcia added that the new ordinance meets the needs of elderly and disabled patients and helps quash the illegal delivery services. At the time, more than 30 prominently advertised unlicensed delivery services had emerged in San Jose since the enactment of the initial ordinance banning the practice.

The City Council believed these benefits outweighed the potential risks Garcia noted, such as an increased likelihood of diversion to underage patients and crimes against drivers delivering medical marijuana.

The San Jose ordinance closely regulates the delivery of medical marijuana. Delivery vehicles must be inspected by San Jose Police Department and outfitted with GPS, cameras and a secure lockbox. Drivers must be employees of the licensed dispensary and undergo background checks.

Prior to beginning delivery operations, licensed dispensaries must go through an additional review process and receive a registration notice. San Jose issued its first registration notice in February 2017 and currently only two dispensaries, Elemental Wellness and The Guild San Jose, are registered to deliver medical marijuana in the city. Any other company delivering medical marijuana in San Jose faces fines of up to $50,000 per offense per day.

Nevertheless, various technology companies have entered the space as “delivery facilitators.” These services, such as San-Francisco based Eaze, works with registered dispensaries to deliver medical marijuana to the patient’s door, facilitating the transaction but never touching the medical marijuana products. Upon receiving an order from a patient, Eaze submits the request to Guild which performs the delivery.

Delivery of medical marijuana in Los Angeles

In Los Angeles, few marijuana regulations were established in the two decades following the 1996 enactment of CUA. As medical marijuana businesses claimed a right to open and operate under the vague state law, Los Angeles voters passed Proposition D in 2013. The proposition prohibited medical marijuana businesses in the city but granted to certain businesses a “limited immunity” from the enforcement of the prohibition. To receive this limited immunity, the medical marijuana business must have opened prior to Sept. 14, 2007 and satisfy other requirements and restrictions.

Proposition D does not provide immunity from enforcement for a medical marijuana business made up of a vehicle that is transporting, delivering or distributing medical marijuana, according to the city attorney's office.

Los Angeles City Attorney Mike Feur has relied on Proposition D to strongly oppose medical marijuana delivery services. In 2014, he shut down Nestdrop, which marketed itself as the country’s first app-based, on-demand medical marijuana delivery service. With a business model similar to that of Eaze, Nestdrop argued that it is not subject to Proposition D regulations because it is a technology service company.

However, since delivery of medical marijuana is illegal in Los Angeles, the city attorney prevailed in his argument that Nestdrop’s business model amounts to abetting illegal activity. An appellate court agreed that although the app itself may not necessarily be illegal, Nestdrop was facilitating violations of Proposition D.

A second Los Angeles medical marijuana delivery service was shut down in May 2016 when city prosecutors entered into a judicially enforced agreement with the popular medical marijuana delivery company Speed Weed to cease its operations in Los Angeles.

In 2017, Los Angeles voters approved Proposition M which allows the city to license marijuana businesses. Although the measure did not address the legality of delivery medical marijuana services, it gives the Los Angeles City Council broad authority to create a licensing scheme and operating rules for marijuana businesses.

As the City Council begins to establish a new framework to regulate medical marijuana issues, proponents are urging City Councilmembers to re-address the question of medical marijuana delivery. If the Los Angeles City Council agrees with San Jose that the benefits of regulated delivery services outweigh the illegal alternative, legal delivery of medical marijuana may soon become a reality in Los Angeles.

Thompson Coburn advises clients on state laws governing the business of cannabis to facilitate compliance with those state laws. Federal laws concerning cannabis currently conflict with state laws in states that have legalized cannabis or possession of cannabis. Although federal enforcement policy may at times defer to these states’ laws and not enforce conflicting federal laws, interested businesses and individuals should be aware that compliance with state law in no way assures compliance with federal law, and there is a risk that conflicting federal laws may be enforced in the future. In addition to this Cannabis-specific note, readers should review Thompson Coburn’s Conditions of Use / Disclaimers page containing other important information.