In previous articles concerning the Arizona Medical Marijuana Act (AMMA),
we discussed
land use issues for dispensary owners (and land owners) and the
dispensary application requirements and process. We also touched on the numerous
federal and state court cases that had been filed by the State of Arizona and
various pro-medical marijuana organizations.
Of these cases, the most noteworthy
were Arizona, et al. v. Holder, et al., filed in federal district court for
Arizona, and Compassion First, LLC, et al. v. State of Arizona, et al., filed in
Maricopa County Superior Court.
• See
Related Articles:
Medical Marijuana
Act Raises Thorny Challenges for Commercial Landlords
and
Medical Marijuana in Arizona: The
Dispensary Application Process
In Arizona, the State, citing concerns that its employees
could face federal
prosecution for approving dispensary applications, requested that the court
clarify whether federal anti-drug laws could co-exist alongside the AMMA, or
whether the federal laws invalidated the AMMA. As a result of the lawsuit, which
was filed just prior to the date that dispensary applications were due to be
accepted, the Arizona Department of Health Services (DHS) suspended the
dispensary application process pending a resolution of the litigation. The
federal government and the Arizona Medical Marijuana Association both filed
motions to dismiss the lawsuit on several grounds, including that the lawsuit
was premature. On January 4, 2012, the court granted the motions to dismiss but
gave the State the opportunity to re-file its complaint to resolve the problems
identified in the motions. Gov. Brewer opted not to re-file the lawsuit and
directed DHS to begin accepting dispensary applications.
In Compassion First, a number of pro-AMMA groups filed suit against the State,
claiming that the State acted unlawfully in refusing to accept dispensary
applications and that the rules enacted by DHS regarding eligibility to run a
dispensary were invalid. On January 17, 2012, the Court granted the pro-AMMA
groups’ motion for summary judgment and, in so doing, invalidated several of the
regulations setting forth eligibility requirements for dispensary applicants,
including the (a) residency and Arizona tax return requirements, (b) prohibition
on prior personal or corporate bankruptcies, and (c) requirement that applicants
be current on child support obligations. The Court’s order also directed DHS to
enforce the lawful provisions of the AMMA and to implement new regulations that
conform to the lawful provisions.
The decisions were undoubtedly victories for pro-AMMA groups, and they paved the
way for the dispensary application process to begin. Unfortunately, it quickly
became “two steps forward, one step back.” As mentioned earlier, the Court’s
ruling in Compassion First required DHS to promulgate new rules implementing the AMMA. Without going into great detail, suffice it to say that the State’s
rule-making process requires much more than simply putting pen to paper: initial
drafts of the rules must be written and then submitted for public comment before
they can be finalized. Early predictions were that the new rules would be
finalized by the end of the summer or early fall and that the first dispensary
applications would be awarded in November.
However, DHS recently posted to its website a note that it is developing an
“express” set of rules that would remove the regulations that were invalidated
in Compassion First, with the goal to begin accepting applications “as soon as
April” and awarding registration certificates in early June. We would, however,
caution everyone to temper their enthusiasm (if, indeed, you are enthusiastic
about these developments), as the State has shown that it is not excited about
the prospect of approving the operation of non-profit dispensaries. Moreover,
the position of the U.S. Justice Department (on the subject of enforcing federal
law on the subject) remains uncertain.
The take-away from the court decisions is that the dispensary application
process will move forward, whether on the timeframe posted on the DHS
website or later on this year. Competition to obtain one of the approximately
125 dispensary registration certificates is still expected to be very intense.
While the state court invalidated some restrictions, the application process
will still have numerous hoops through which applicants must jump, including
start-up capital requirements and compliance with local zoning ordinances. We
therefore recommend that anyone interested in opening a dispensary do their
legwork now in order to be ready when DHS finally green-lights the dispensary
application process.
On the real estate side, we
anticipate that parties interested in obtaining a dispensary license will try to
firm up their locations (since the projected location is part of the application
process) and that the various city planning departments and councils will
begin to re-focus on these issues in terms of zoning, variances, special use
permits, and the like. ■
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to the subject matter covered. It is provided with the understanding that the
author is not engaged in rendering legal, accounting, or other professional
service. Although prepared by professionals, these materials should not be
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