Venice marijuana dispensary is ordered to stop sales

April 12, 2010

C.J. Lin, Los Angeles Daily News

In a ruling that city officials hope will lead to the shutdown of hundreds of medical marijuana clinics across the city, a Los Angeles Superior Court judge Tuesday barred a Venice dispensary from selling or distributing the drug. The preliminary injunction against Organica Inc. boosts City Attorney Carmen Trutanich's effort to crackdown on dispensaries citywide, contending that most of them illegally offer the drug for sale.

Judge James C. Chalfant's ruling may be used as a guideline as officials continue to target some of the 600 facilities that have popped up in the last several years, said assistant city attorney Asha Greenberg. Of that number, about 100 are in the Valley. That figure has been revised downward from about 800 to 1,000 citywide that officials had estimated previously.

"We're very pleased with the ruling," Greenberg said. "I think that the court understood the law and applied the law correctly. It certainly helps us in our efforts to shut down illegal dispensaries."

In a morning hearing, Chalfant ruled that Organica could not operate as a retail store selling marijuana to the collective's members, saying that qualified members must perform labor necessary to cultivate and harvest marijuana for the group's benefit.

"Maybe I am too old, but those of us who grew up in the 1960s know what a collective is," he said.

Organica grew pot for harvest at its Washington Avenue facility and in Malibu and Topanga.

Chalfant likened Organica's operations to that of Costco, which charges customers a membership fee and then allows them to buy goods at the store.

"There is no evidence that Organica is a non-profit entity," he wrote in a tentative decision, citing that undercover narcotics agents were able to buy marijuana and that dispensary records showed $5.2 million in sales over a 13-month period. "In short, Organica is a multi-million dollar retail operation that is no different in nature than Costco, albeit on a much smaller scale."

Profitability disputed

But Organica's attorney, David Welch, and other medical marijuana advocates said that paying for the marijuana is how members keep their dispensaries operating.

"These donations are how they pay for overhead, building rent, utilities, everything that goes on in any other type of business," said Eric Matuschek, owner of Starbudz in North Hollywood. "So of course there has to be some sort of money transferring to pay for this stuff."

The ruling was troubling news for some advocates, since most dispensaries sell the drugs to their members. The injunction is the second that Chalfant has ordered against an L.A. dispensary, saying that the sales are in violation of state law and the 1996 Compassionate Use Act, which allows authorized patients and nonprofit providers to cultivate and possess the drug.

"We strenuously disagree with the reasoning," said Joe Elford, attorney for advocacy group Americans for Safe Access. "He's hinting that they're making money off of it, but they're not making money off of it."

Trutanich has also filed suits against two Holistic Caregivers dispensaries in South Los Angeles and Hemp Factory V in Eagle Rock. Chalfant ordered a preliminary injunction on Hemp Factory V in January.

"We're all very concerned about how this is going to effect all of us and what our future has in store for all of us," Matuschek said. "They all need to just wake up and embrace this and regulate it and control it and tax it well and help the city get out of debt."

However, others argued that Organica's troubled history make the ruling unlikely to be any sort of landmark decision.

The lawsuit originally stemmed from complaints that the dispensary was passing out fliers to Culver City High School students. The store had been raided by narcotics agents three times, and authorities said they also found hallucinogenic mushrooms on the premises and on the owner, who was also carrying large amounts of cash. Marijuana bought by undercover agents was improperly labeled in violation of state law, prosecutors said.

'Unique' accusation

"It's very troubling but at the same time, all these things they're accusing Organica of are pretty unique to Organica," said Marc Kent of the Green Alliance of Patients and Providers. "This is very remote and highly individual and it has to be looked at on a case-by-case basis."

Some said prosecuting the case against a dispensary with several criminal violations may be a legal tactic by the city to dissuade the opening of more facilities.

"This case is just one more step in a long battle between the marijuana dispensaries in the L.A. area and city attorneys, so I'm not sure that this particular case will have a necessary effect," said Rebecca Lonergan, a USC law professor and former prosecutor. "(The city is) trying to make an example, sure. You've got hundreds of these popping up all over the county, so they're setting these up to a couple of cases as a deterrent to say 'Stop this.'"

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