Prop. D Immunity for Dispensaries

Prop. D
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With Proposition 64 on the ballot in next month’s election, it’s important to understand the current state of cannabis in Los Angeles. As of today, city ordinance 182580 bans all cannabis activity with the exception of what are commonly referred to as “Prop. D compliant” dispensaries. Prop. D stands for Proposition D, and was a ballot measure on a city election back in 2013. Prop. D gives limited immunity to these dispensaries to operate within the city by providing them an affirmative defense to any city shutdown.

Essentially, these dispensaries are only tolerated by the city, and Prop. D does not actually give express authorization to distribute cannabis. In other words, Prop. D is just a defense, and is not a license or permit to sell or cultivate cannabis.

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But what is Prop. D compliance?

On June 14, 2013, the City Council adopted Proposition D as ordinance no. 182580, giving limited immunity to collectives (a collective is a group of qualified medical patients who associate to collectively cultivate and distribute cannabis amongst themselves) who comply with a series of requirements listed under subsections A through O of the ordinance. the most important being the following:

  1. the dispensary obtained a business tax registration LO44 Retail Sales with the city clerk by Sept. 13, 2007; obtained a seller’s permit before Sept. 13, 2007, and was issued a tobacco retailer’s license from the city prior to Sept. 13, 2007.
  2. It registered with the city clerk by Nov. 13, 2007, in accordance with the city’s 2007 interim control ordinance.
  3. It notified the city clerk by Feb. 18, 2011, of its intention to register under the city’s temporary urgent ordinance.
  4. It obtained a LO50 business tax registration for taxation as a medical marijuana collective in 2011 or 2012, and has renewed it annually (Both the LO50 and the LO44 BTRCs must have the same account number).
  5. the dispensary must show that it has been in “continuous operation” from the date of its pre-ICO registration up to the present.

Now only a court can definitively determine whether a collective meets the above requirements. the best any attorney can do is assess the strength of an entities’ Prop. D compliance by looking at all the evidence, including documents and any records showing compliance with the above requirements and the remaining ones listed under the ordinance. But any Prop. D due diligence should begin with the aforementioned requirements.

To briefly touch upon requirement number 2, every Prop. D compliant dispensary must have registered with the city clerk under the interim control ordinance. This is where the term “Pre-ICO” originates, because each of the collectives who registered under that ordinance were operating before the ICO, and are hence Pre-ICO.

But understand that a collective may be Pre-ICO but not Prop. D compliant. For example, it may have stopped operating in 2012, or even could be in operation but in violation of the zoning requirements under the ordinance. So a collective may have Pre-ICO status, but not be Prop. D compliant (and thus not enjoy the limited immunity granted under the ordinance) because of its failure to comply with one or more of the ordinance’s remaining requirements.

Also keep in mind that Prop. D’s limited immunity extends to cultivation as well. Collectives are not required to have cultivation on the same property as its dispensary. A collective can have an off site in a separate area of the city, e.g., a retail store in West L.A. and a cultivation facility in Downtown L.A. Of course, any off site cultivation facility must comply witheach subsection of the ordinance. the most important of which are the zoning requirements. the facility must be outside 1000 ft. from a school and 600 ft. from churches or places where kids hang out; the facility cannot share a common corner with a residential zone; and pedestrians or passersby cannot see any plants or products inside the building from the sidewalk or street.

Finally, there are no official lists of Prop. D compliant dispensaries. the city did release a list known as the “134 list,” but it was quickly retracted and disavowed. So currently there is no list of actual Prop. D compliant dispensaries and we can only guess at the actual number of compliant dispensaries operating within the city. This lack of information highlights the need for a proper cannabis regulatory system that grants actual licenses to sell and cultivate cannabis, so the public can definitively know which store is licensed, and which one is operating illegally.  Arturo Castillo

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