ity.fi,udl Ukt Tahoe NEW BUSINESS a

Transcription

1 ity.fi,udl Ukt Tahoe NEW BUSINESS a "making a positive difference now" STAFF REPORT City Council Meeting June 5, 2012 TO: FROM: Honorable Mayor and City Council Members Patrick L. Enright, City Attorney Date: June 5, 2012 RE: HEARING PURSUANT TO CITY CODE SECTION TO RELOCATE CITY OF ANGELS MEDICAL MARIJUANA DISPENSARY FROM RD STREET TO 2179 LAKE TAHOE BOULEVARD RECOMMENDATION: Hear Staff Report; Open Public Hearing and Receive Public Comments; Close Public Hearing. Review Council Comments; Adopt Resolution to Deny Transfer of Permit ISSUE STATEMENT AND DISCUSSION: Introduction Following nearly two years of hearings, meetings with stakeholders, including the managers of the existing medical marijuana dispensaries in the City, the City Council adopted Ordinance No on September 13, This ordinance authorizes three dispensaries in the City. The Ordinance required the dispensaries to apply for a Phase I permit, and if they met the requirements, the dispensaries could apply for a Phase II permit. Once the Phase II Application was reviewed, the City would issue a permit to operate the dispensary at a specific location in the City. On March 27, 2012, City of Angels received a permit to operate at its current address of rd Street (the corner of Third and Lake Tahoe Boulevard). Ornee of the CHy Allorney Airport Road, Ste SolJlh Lake Tahoe, California City Allomey (530) Legal Analyst (530) FAX (530)

2 Staff Report June 5,2012 Page 2 of 8 Shortly after the adoption of the ordinance two events occurred that impact medical marijuana dispensaries. The case of Pack v. Long Beach was decided where the Court held that a similar regulatory scheme to the City's Ordinance No was illegal under the Federal Controlled Substances Act. The California Supreme Court has decided to hear and decide this case. The Supreme Court also took three other medical marijuana cases to hear jointly with Pack. At this point, the Supreme Court is in the process of receiving written briefs and will probably not be issuing a decision on the four marijuana lawsuits until late 2012 or early The second event that occurred was in October 2011, when the four U.S. Attorney Generals' in the State of California mailed letters to owners of known marijuana dispensaries. The letters stated that the U.S. Attorney has received information that the property is being used to cultivate and/or distribute marijuana in violation of federal law. The letter stated the continued use of the property in violation of federal law may result in forfeiture and criminal or civil penalties. The letters gave the property owners 45 days to come into compliance and cease the violations of federal law. None of the three dispensaries in South Lake Tahoe (Tahoe Wellness, City of Angels, or Patient to Patient) received a letter in October. However, in February 2012 all three received a letter from the U.S. Attorney General for the Eastern District of California (Sacramento), without the 45 day grace period to comply. Based on both of these events, the City Attorney's office reviewed the ordinance and the Pack case, as well as the letter from the U.S. Attorney's Office to other dispensaries, and decided to proceed with processing the applications under the ordinance. On November 29, 2011, the City Council held a hearing on adopting an interim urgency ordinance, banning dispensaries or proceeding with Ordinance No and decided not to take any action. With Ordinance No being in effect, the processing of the applications would be ministerial and would not require any further Council action. Therefore, while the process took longer than expected (as provided for in the Ordinance) each of the dispensaries received a permit to operate on or about March 27, City of Angels Application On or about February 27,2012, the property owner of City of Angels dispensary, DeTarr Properties, received a letter from the U.S. Attorney General. (A copy of the letter is attached as Attachment 4). The letter is clear that the U.S. Attorney believes that the cultivation and distribution of marijuana are felony crimes under the federal Controlled Substances Act, including leasing, renting otherwise making available a place for cultivation or distribution of marijuana. 2

3 Staff Report June 5,2012 Page 3 of 8 City of Angels received an eviction letter in March 2012, and when City of Angels did not move out, on April 3, 2012 an unlawful detainer action was filed by DeTarr Properties. A hearing was set for May 15, 2012, where a stipulation was reached whereby City of Angels will move out of its 989 Third Street location by the middle of July. On April 25, 2012, Dave Walker held a final inspection of City of Angels and Mr. DiMateo was told that the City of Angels at the rd Street location was in compliance with Ordinance NO.1 032, as well as all building and fire codes. On May 10, 2012, City of Angels filed with the City Clerk a request to move his location to 2179 Lake Tahoe Boulevard, a building that City of Angels is in escrow to purchase. Ordinance No City Issued a Medical Marijuana Dispensary Permit to City of Angels to Operate at 989 Third Street on March 27, 2012 Section of the Ordinance NO provides as follows: A dispensary shall not relocate or operate a dispensary at any place other than the address of the dispensary property or the physical location for which the original dispensary permit was granted without obtaining from City Council at a public hearing, authorization to relocate a dispensary. A dispensary permit shall become null and void upon any relocation or operation at any place other than physical location for which the original dispensary permit was granted without such City Council authorization. Mr. Robert Woelfel, attorney for City of Angels, argues that the section is not applicable now (even though Gino DiMatteo requested the hearing per the section), because City of Angels never received a permit. Mr. Woelfel's argument is based on his contention that the Phase 2 Dispensary permit does not "appear to be" or "look like" a Phase 2 Dispensary Permit. The City Building Official, on March 27, 2012, gave a permit to operate the dispensary after all of the conditions of a Phase II application had been complied with by the applicant. The City's position is that a permit was issued and that City of Angels had fully complied with the conditions for a permit. If No Permit was Issued, City of Angels Cannot Amend its Application As the Application was deemed Complete 3

4 Staff Report June 5,2012 Page 4 of 8 City of Angels argues there was no permit issued, and therefore points to two sections that Mr. Woelfel believes allows City of Angels to amend the application without approval of the City Council: 1. Section During the Phase I process requires the City Manager to determine whether the application is completed. If it is incomplete or has been completed improperly, the City Manager shall notify the applicant within 30 days from the receipt of the Phase I application and may grant the applicant an extension of up to 30 days. There is nothing in Section that allows the applicant to unilaterally amend his application. It is in the total discretion of the City Manager or his/her designee, and even there it would be because the application is incomplete. City of Angels' application was complete, it had a clear address listed, and the applicant cannot amend or change the information already listed on the application. 2. Section Upon receiving a phase two application, the City Manager shall determine whether the application is complete. If the City Manager determines that the application is incomplete or has been completed improperly, the City Manager shall notify the applicant and may grant the applicant an extension of up to thirty (30) days to complete the phase two application. Section is clear that it is in the City Manager's discretion to either deny an incomplete application or to give one 30 day period to complete the application. No one argues that the Phase Two application is incomplete, so therefore, even if the "permit" has not been officially issued, there is no means for the applicant to change his location. The Phase I application requires that the applicant, among other information provide: Dispensary Description. A description of the proposed location of the dispensary, including the street address and parcel number, the square footage, the number of expected members, and the characteristics of the neighborhood or surrounding area. (32 72.C.8.). The address given by City of Angels was 989 Third Avenue, and that is the location that was processed by the City. To amend the location will require a new application to describe the location, size, neighborhood, layout plans, 4

5 Staff Report June 5,2012 Page 5 of 8 security and any building and fire code upgrades that will be needed. If City of Angels desires to argue that they may file a new application, they would be prohibited by Section B, which provides that "applications received more than 30 days after the effective date of the Ordinance, shall be rejected." This section is not discretionary, and prohibits any new applications after 30 days.1 If City of Angels does not have a permit, then there is no means for City of Angels to amend or file a new application, except pursuant to Section E.2. Statement of Law In Mr. Woelfel's Memorandum of Points and Authorities in Support of Gennaro DiMatteo's Demurrer to the unlawful container he stated the relevant law as follows: STATEMENT OF RELEVANT LAWS Federal law prohibits the possession and distribution of marijuana (21 U.S.C. sections 812, 841(a)(1); 844); there is no exception for medical marijuana. United States v. Oakland Cannabis Buyers' Cooperative, (2001) 532 U.S. 483, 490. Although, California criminalizes the possession and cultivation of marijuana generally (Health & Safety Code section 11357, 11358), it has decriminalized the possession and cultivation of medical marijuana, when done pursuant to a physician's recommendation. (Health & Safety Code, section (d)). Further, California law decriminalizes the collective or cooperative cultivation of medical marijuana. (Health & Safety Code section ) Case law has concluded that California statutes are not preempted by federal law, as they seek only to decriminalize certain conduct for the purposes of state law. (Qualified Patients Assn. v. City of Anaheim (2010) 187 Cal.AppA 1h 734, 757). Mr. Woelfel's argument stops with the quote from the Anaheim case. The Anaheim case decided whether California's marijuana laws that decriminalize medical marijuana is pre-empted by the Controlled Substances Act. The decriminalization provisions in Proposition 215 and the MMBA are clearly not pre-empted by federal law. However, the question is what stops the U.S. Attorney from enforcing federal law in California and, as Mr. Woelfel admits, federal law prohibits the possession and distribution of marijuana. I Section E.2. does provide that ifan dispensary permit is revoked, voided, nullified or otherwise removed City Council may, at a public hearing, determine that it chooses to allow additional applicants to apply, in accordance with the provisions set forth in sections 32-73, and of the Ordinance for the "vacant" permit. Should City Council elect to allow additional applicants to apply for said permit, the City Council shall direct the City Attorney to amend this Ordinance to reflect such a decision. 5

6 Staff Report June 5,2012 Page 6 of 8 u.s. Constitution Tenth Amendment The 10 th Amendment to the United States Constitution provides: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. A frequent argument is that the Amendment prohibits the federal government to enforce the Controlled Substances Act (at least as regards to marijuana) in the States that have adopted medical marijuana laws. However, it is well established under United States Supreme Court authority that "if a power is delegated to Congress in the Constitution, the Tenth Amendment expressly disclaims any reservation of that power to the States." (New York v. United States, 505 U.S. 144, 156 (1992).) Since the power to regulate the intrastate possession, manufacturing, and distribution of marijuana "is delegated to Congress" through the Commerce Clause (Gonzales v. Raich ('Raich 1'), 545 U.S. 1, p. 15 (2005)), the argument that the power to regulate marijuana in California as reserved to California through the Tenth Amendment is foreclosed by United States Supreme Court precedent. (Sacramento Nonprofit Collective v. Holder, 2012 WL February 28, 2012; Marin Alliance for Medical Marijuana v. Holder, 2011 WL November 28, 2011) 10 th As recently as February, 2012 the federal courts have rejected the argument that the 10 th Amendment reserved to California the right to regulate marijuana. There is nothing that prohibits the U.S. Attorney from enforcing the Controlled Substances Act in California, including South Lake Tahoe. There is no dispute that it is a felony to cultivate or distribute marijuana in the United States. There is no exception under federal law for medical purposes. RECOMMENDAliON California has adopted legislation to authorize medical marijuana in limited circumstances, and federal law clearly prohibits the sale, distribution, cultivation or possession of marijuana. While the U.S. Attorneys had only prosecuted the most egregious cases until last year, it is apparent from the letters being sent to dispensaries and their landlords that the U.S. Attorney's Office is more aggressively prosecuting cases under the Controlled Substances Act. Even if City of Angels is in compliance with California law, there is no question that City of Angels is engaged in illegal activity under federal law. The City and City Council has worked with medical marijuana dispensaries and patients in the City over the last three years to adopt an ordinance that regulates 6

7 Staff Report June 5,2012 Page 7 of 8 the cultivation and dispensing of marijuana in compliance with Proposition 215 and SB 420. The U.S Attorneys Office and recent court cases have made it clear that the conflict between the federal law (Controlled Substances Act) and Proposition 215 and SB 420 must be resolved before the City, or any public agency, can rationally continue to make discretionary decisions to permit the cultivation and dispensing of medical marijuana. The California Supreme Court has decided to address the issue, and it is expected, especially after the Pack v. Long Beach case, that the Court will squarely address if the operation of medical marijuana dispensaries under the model used by the City of Angels (and the other two dispensaries) is consistent with Proposition 215 and SB 420 and if so, if it is compatible with the Controlled Substances Act. Even once the California Supreme Court decides the case, there is a strong likelihood that the case would be appealed to the U.S. Supreme Court since it involves the interpretation of a federal statute (the Controlled Substances Act). While the California Supreme Court is wrestling with the issue, the California U.S. Attorneys Office, including that of Sacramento, continue to prosecute dispensaries and their landlords under the Controlled Substances Act that allows for civil forfeiture of property, assets etc. that are used for the sale, distribution and cultivation, and in some cases, civil and criminal penalties. At the present moment, Council need not take any discretionary (vs. ministerial) actions while the California Supreme Court is reviewing the Pack v. Long Beach case. City of Angels now finds themselves in a situation with their landlord and is thus requesting that the City Council grant a permit to move their dispensary. Ordinance NO provides as follows: 1. If City of Angels has a valid permit under Ordinance No. 1032, then Section requires that City of Angels must receive City Council authorization which is in the total discretion of the City Council and requires three affirmative votes. 2. If City of Angels does not have a valid permit, then Section E.2 applies, which provides that when a dispensary permit is revoked, nullified, or otherwise removed, City Council may, at a public hearing, determine that it chooses to allow additional applicants to apply for the "vacant" permit. In either case, the decision is in the discretion of the City Council. Thus City Council must take a discretionary action in order to permit the change of location for City of Angels. Based on recent cases (especially Sacramento Nonprofit Collective v. Holder and Marin Alliance for Medical Marijuana v. Holder) and, perhaps even more importantly, based on the U.S. Attorneys enforcement of the Controlled Substances Act, I do not recommend transfer of the permit location or addition of a new dispensary. To take either of these actions, Council would 7

8 Staff Report June 5, 2012 Page 8 of 8 have to take a discretionary action in direct violation of the U.S. Attorney's directive. My strong recommendation is not to grant the transfer of the permit to 2179 Lake Tahoe Boulevard. I do not envision the U.S. Attorney prosecuting the City or its Council Members for not taking action to close a dispensary already permitted, but I do believe that affirmatively assisting in the transfer or issuance of a new permit could subject the Council and/or City to sanctions. FINANCIAL and/or POLICY IMPLICATIONS: There are no financial impacts by rejecting the transfer of the dispensary permits. Attachments: 1. Letter from G. DiMateo requesting hearing 2. Proposed Site Plan for 989 Third Avenue 3. Proposed Site Plan for 2179 Lake Tahoe Boulevard 4. Letter from U.S. Attorney to De Tarr Properties 5. Ordinance No Medical Marijuana 6. Permit Received by City of Angels, dated March 27, Memorandum filed by City of Angels and DeTarr on Demurrer for Unlawful Retainer 8. Attorney General Guidelines and Letter from Attorney General Harris to not update them at this time 9. Letter from U.S. Attorney Benjamin Wagner to City of Chico on permits for medical marijuana cultivation facilities 10. Letter from U.S. Attorney Melinda Haag to Eureka on permits for medical marijuana cultivation facilities 11. Americans for Safe Access - Frequently Asked Questions for Property Owners: Asset Forfeiture and Medical Cannabis 12. Recent Cases on Marijuana a. Marin Alliance for Medical Marijuana v. Holder b. Sacramento Nonprofit Collective v. Holder c. James v. U.S. of America - Civil Minute Order, dated May 24,

9 ~ec\id.1j A,!"-..AD~ yo~ {biz ydu.f1l '-f~ ~ CITY CLERK'S OFFICE CITY OF SOUTH LAKE TAHOE

10 CITY OF SOUTH LAKE TAHOE ORDINANCE NO. _ AN ORDINANCE OF 'rhe CITY OF SOUTH LAKE TAHOE CITY COUNCIL AMENDING CITY CODE CHAPTER 32 PLAN AREA STATEMENTS AND OTHER LAND USE REGULATIONS, SECTIONS THROUGH RELATING TO CULTIVATION OF MEDICAL MARIJUANA IN A RESIDENCE - AND ADDING SECTIONS TO RELATING TO MEDICAL MARIJUANA DISPENSARIES WHEREAS, California Government Code, Section 65850(c)(4) provides the authority for the City of South Lake Tahoe to regulate, by Ordinance, the intensity of land use; and WHEREAS, the State of California approved Proposition 215 "The Compassionate Use Act of 1996" (Health and Safety Code Section ), which allowed the use of marijuana for medical purposes; and WHEREAS, the State of California enacted S8 420 in 2004 (Health and Safety Code Section et seq.) to clarify the scope of The Compassionate Use Act to allow local governing bodies to adopt and enforce rules and regulations consistent with S8 420; and WHEREAS, under the Controlled Substances Act, the use, possession and cultivation of medicinal marijuana is unlawful and subject to federal prosecution without regard to a claimed medical need; and WHEREAS, marijuana plants, as they begin to flower and for a period of two months or more during the growing season (ALlgust through October for outdoor cultivation), produce a strong odor, which can be detected at some distance from the plant itself; and WHEREAS, the City has received numerous complaints of odor related to the growing of medicinal marijuana; and WHEREAS, in the case of multiple qualified patients who are in control of the same legal parcel, or parcels of property, or in the case of a caregiver growing for numerous patients, a very large nllmber of plants are often grown on the same legal parcel or parcels, within the City of South Lake Tahoe; and WHEREAS, it is the purpose and intent of this Ordinance to implement state law by providing a means for regulating the cultivation of medicinal marijuana in a manner that is consistent with state law and balances the needs of medical patients and their caregivers and promotes the health, safety, morals and general welfare of the residents 1

11 and businesses within the City of South Lake Tahoe. Nothing in this Ordinance shall be constructed to allow the use of marijuana (cannabis) for non-medical purposes, or allow any activity relating to the cultivation, distribution, or consumption of marijuana that is otherwise illegal; and WHEREAS, the potential adverse effects of allowing the cultivation of medicinal marijuana present a clear and present danger to the immediate preservation of the public peace, health, and safety of the community; and WHEREAS, the City has no rules or regulations governing the cultivation of medical marijuana; and WHEREAS, it is the purpose and intent of this Ordinance to ensure that marijuana grown for medical purposes involves a safe, secure, and healthy process; and WHEREAS, it is the purpose and intent of this Ordinance to help law enforcement agencies perform their duties effectively and in accordance with California law; and WHEREAS, the cultivation of marijuana within a residence has potential adverse effects to the structural integrity of the residence and has the potential to increase the chances of fire which presents a clear and present danger to the occupants and community; and WHEREAS, the indoor cultivation of substantial amounts of marijuana may require great amounts of electricity, which may create risk of fire; and WHEREAS, The Attorney General's August 2008 Guidelines for the Security and NonDiversion of Marijuana Grown for Medical Use recognizes that the cultivation or other concentration of marijuana in any location or premises without adequate security increases the risk that surrounding homes or businesses may be negatively impacted by nuisance activity such as loitering or crime. 2

12 ARTICLE X. MEDICAL MARIJUANA CULTIVATION AND MEDICAL MARIJUANA DISPENSARIES It is the purpose and intent of this Ordinance to require that medical marijuana be cultivated in appropriately secured, enclosed, and ventilated structures, so as not to be visible to the public domain, to provide for the health, safety and welfare of the public, to prevent odor created by marijuana plants from impacting adjacent properties, and ensure that marijuana grown for medical purposes remains secured and does not find its way to non-patients or illicit markets. It is further the purpose and intent of this Ordinance to regulate medical marijuana dispensaries and their cultivation operations consistent with the Senate Bill 420, known as the Medical Marijuana Program, codified at Health and Safety Code sections et seq. Medical Marijuana Dispensaries shall comply with all provisions of the South Lake Tahoe City Code. state law, and all other applicable local codes and regulations. It is neither the intent nor the effect of this chapter to condone or legitimize the illegal use or consumption of marijuana under federal, state, or local law. This Ordinance is in compliance with the California Health & Safety Code section and does not interfere with a patient's right to medical marijuana, nor does it criminalize the possession or cultivation of medical marijuana by specifically defined classifications of persons, pursuant to Proposition 215 and Senate Bill DEFINITIONS For purposes of this Ordinance, the following words shall have the following meaning: Abatement. The removal of marijuana plants and improvements that support marijuana cultivation. Building Inspector/Building Official. The City Building Official or his/her designee. City. The City of South Lake Tahoe. City Code. The Code of the City of South Lake Tahoe, and as it may be amended. City Manager. The City Manager or his/her designee. Cultivation. The planting, growing, harvesting, drying, trimming, clipping or processing of any kind or size of marijuana plants, or any part thereof. Dispensary. Shall have the same definition as "medical marijuana dispensary," as set forth in this section. Dispensary Area. dispensary property. The dispensary property and the area within 100 feet of the 3

13 Dispensary Building. The building, structure, or facility that is owned or leased by a dispensary and within which a dispensary is operated. Dispensary building and includes the area in which the dispensary keeps, holds, grows, or sells "clones" or "mothers" (otherwise known as immature nursery stock marijuana plants, or nonflowering marijuana plants). Dispensary Owner/Dispensary Operator. The dispensary permittee who is issued a City permit pursuant to this Ordinance and whose personal name is listed on the permit application as the Dispensary Owner and Operator. Dispensary Permit. A City of South lake Tahoe Medical Marijuana Dispensary Permit issued pursuant to this chapter. Dispensary Property. The parcel or parcels of real property upon which a dispensary is located. Dwelling Unit. A room or group of rooms (including sleeping, eating, cooking, sanitation facilities, but not more than one kitchen), which constitutes an independent housekeeping unit or living area occupied by one household for a period of time in excess of thirty (30) days. Dwelling unit does not include attached or detached structures such as garages, sheds, greenhouses, and other structures on the same legal parcel(s) as the independent housekeeping unit. Dwelling unit does not include any basements or attics in the dwelling unit. Enforcement Officer. The City Manager, Development Services Director, Fire Marshal, Building Official, or Police Chief of South Lake Tahoe, or any of their designees. Fire Marshal. The City Fire Marshal or his/her designee. Fully enclosed and secure structure. A space within a building, greenhouse or other structure which has a complete roof enclosure supported by connecting walls extending from the ground to the roof, which is secure against unauthorized entry, provides complete visual screening, and which is accessible only through one or more locking doors. Indoor. That area within a fully enclosed and secure structure. Juvenile. Any natural person who is under the age of 18 years. Management Member. The person or persons who are the owners, managers, or principals of a dispensary or industrial cultivation facility. Medical Marijuana! Medicinal Marijuana. (Also known as medical cannabis) Marijuana, including constituents of marijuana or cannabis, Tetrahydrocannabinol (THe) and other cannabinoids, used as a physician-recommended form of medicine in 4

14 accordance with the Compassionate Use Act (California Health and Safety Code section ) and the Medical Marijuana Program Act (California Health and Safety Code section et seq.). Medical Marijuana Dispensary. A cooperative or collective of four or more members who associate at a particular location or real property to collectively or cooperatively distribute marijuana to rnembers for medical purposes, and operate on a not-far-profit basis, consistent with California health and Safety Code section , Article 2.5 of Chapter 6 of Division 10 of the Health and Safety Code (Health and Safety code sections et seq.), the guidelines for the Security and Non-Diversion of Marijuana Grown for Medical Use issued by the California Attorney General in August 2008, and this chapter. Medical Marijuana Cooperative or Collective. Shall have the same definition as "medical marijuana dispensary," as set forth in this section. Medical Marijuana Cultivation Area. That area and space within and in compliance with the maximum dimensions permissible for the cultivation of medical marijuana. Outdoor/Outside. Any location within the City of South Lake Tahoe that is not within a fully enclosed and secure structure. Permitee. Any person issued a City permit pursuant to this Ordinance. Primary Caregiver. Shall have the same definition as set forth in California Health and Safety Code section , as it may be amended and as interpreted by the California courts, including but not limited to the California Supreme Court case of People v. Mentch (2008) 45 Cal.4 th 274. Qualified patient. Shall have the same definition as set forth in the California Health and Safety Code section , as it may be amended and as interpreted by the California courts. Residence. A legal dwelling unit and all detached structures such as garages, sheds, greenhouses, and other structures on the same legal parcel(s) as the independent dwelling unit. Residential Cultivation Permit. Permit issued by the City of South Lake Tahoe pursuant to this Ordinance for cultivation in a residence CULTIVATION OF MEDICAL MARIJUANA IN A RESIDENCE A. Restricted to Qualified Patients and Primarv Caregivers: A qualified patient or primary caregiver shall only be allowed to cultivate medical marijuana for their 5

15 personal use, and for the use of qualified patients, if such cultivation occurs in a residence as defined in this Ordinance. B. Only Permitted Pursuant to a Valid City Residential Cultivation Permit. Cultivation in a residence shall be deemed unlawful except pursuant to a valid Residential Cultivation Permit. Issuance of a Residential Cultivation Permit shall be subject to evaluation by the City Building Official. Residential Cultivation Permits require verification that the person(s) cultivating are qualified patients or primary caregivers. Residential Cultivation Permits shall require an annual inspection by the Building Official and Fire Marshal. Permits shall expire and become void two (2) years following the date on which said Permit was issued, unless said Permit is renewed prior to the expiration date. C. No Vested Rights: No person(s) shall have any vested rights to any permit, right or interest under this Ordinance, regardless of whether such person(s} cultivated marijuana prior to adoption of this Ordinance. D. No Transferring of Rights: No Residential Cultivation Permitee shall have any right to transfer or transfer interest in any permit which they are issued pursuant to this Ordinance. Permits issued pursuant to this Ordinance will become void if transferred, used, or relied upon by any person other than the person to whom the permit was issued. E. Outdoor Cultivation: It is hereby declared to be unlawful, and a public nuisance per se, for any person owning, leasing, occupying, or having charge or possession of any property within the City to cause or allow such property to be used for the outdoor cultivation of marijuana. Cultivation is limited to those areas within a fully enclosed and secure structure. F. Authorization of Property Owner: If the residence where cultivation occurs facility is leased or rented, Residential Cultivation Permits shall only be issued upon a written notarized authorization by the residence property owner which shall be submitted with said permit application. The property owner may require additional security as he/she deems appropriate. The property owner may revoke said authorization by providing a sixty (60) day notice of revocation of authorization, in writing, to the City and the Residential Cultivation Permitee to whom property owner has provided authorization. Sixty (60) days after receipt of said notification, the Residential Cultivation Permit which has been issued pursuant to said property owner's authorization shall be considered null and void. G. Authorization of Tenants: If the residence where cultivation occurs is a building, residence or property shared with other tenants, Residential Cultivation Permits shall only be issued upon written authorization provided to City of adjacent tenants in the building, residence or property. 6

16 H. Public Nuisances: Cultivation shall not create a public nuisance and adversely affect the health or safety of persons residing in or near the residence where the cultivation occurs. A public nuisance may be deemed to exist, if cultivation produces: 1. Odors which are disturbing to people of normal sensitivity residing or present on adjacent or nearby properties or areas open to the public; 2. More than three substantiated responses to valid confirmed complaints in a one (1) year time period to the residence or medical marijuana cultivation facility from law enforcement officers; 3. More than three disruptions in a (1) one year time period to the free passage of persons or vehicles in the neighborhood; 4. Excessive noise which is disturbing to people of normal sensitivity on adjacent or nearby properties or areas open to the public in accordance with Section of the City Code. 5. Adverse affects to health or safety through creation of mold, mildew, dust, glare, heat, noise, noxious gasses, odor, smoke, traffic, parking, vibration, or other impacts, or be hazardous because of the use or storage of materials, processes, products or wastes. I. Environment: Runoff and waste disposal by the residence where cultivation occurs must be in compliance with any applicable City, county, regiona', State, and federal laws and regulations. A violation of any applicable City, county, regional, State, or federal law, will be deemed a violation of this Ordinance and of the permit, and shall render the permit void and revocable by the City. J. Application for Residential Cultivation Permit. 1. The permit shall be filed with the City Manager. The application for a permit shall include, but not be limited to, the following: a. Application and bi-annual inspection fees set by Resolution of the City Council; and b. Adequate information and comments, such as a physician's recommendation, or verification that a qualified patient or primary caregiver resides in the residence. 2. Prior to the issuance of the permit, the Building Official and the Fire Marshal shall conduct an inspection of the cultivation area to confirm that no health or 7

17 safety concerns are present, and that the cultivation area complies with the standards set forth in this Ordinance. 3. The Building Official and the Fire Marshal may require additional specific standards to meet the standards set forth in the California Building Code or other applicable law. The property owner shall obtain building permits and any other permits necessary to comply with the applicable California Building Code or other applicable law. 4. The City Council finds that the public interest served by not disclosing the name and address location of the applicant for a permit clearly outweighs the public interest served by disclosure of the record pursuant to the California Public Record Act. The Council makes this determination based on the security and crime risk to the applicant if the name and address is disclosed under the Public Records Act. K. Renewal of Residential Cultivation Permit. No later than thirty (30) days before expiration of a valid permit for CUltivation of medical marijuana, the permitee shall submit to the City an application for renewal of his/her permit to cultivate medical marijuana. The application shall be on a City form and be accompanied by an application fee as set forth by Resolution of the City Council. An inspection of the premises by the Building Official or Fire Marshal shall be required as part of the process for renewal of a permit. L. Cultivation of medical marijuana in residences shall be in conformance with the following requirements: 1. Cultivation of medical marijuana in a residence is limited to a medical marijuana cultivation area that does not cumulatively exceed ten percent (10%) of the square footage of the living space of a dwelling unit, or twohundred (200) square feet, whichever is lesser. Cultivation may occur in attached or detached structures such as garages, sheds, greenhouses, and other structures on the same legal parcel(s) as the independent housekeeping unit, as long as such structures are fully enclosed and secure structures, and comply with the South Lake Tahoe City Code and all other applicable regulations and laws. The ten percent (10%) limitation on CUltivating marijuana shall be based only on the square footage of the living area of the dwelling unit and will not consider any square footage of detached or attached structures, attics or basements. 2. The qualified patient or primary caregiver shall have his/her primary residence be in the residence where the cultivation occurs. 3. Cultivation shall only occur in residences which are in full compliance with the Code, including the Building Code and Fire Code. 8

18 4. Prior to the cultivation in any residence, the qualified patient or primary caregiver shall have the cultivation area inspected by the Building Inspector and obtain or show proof of the necessary permits under the Building Code or Fire Code. 5. Cultivation shall remain at all times a secondary or accessory use to the residential use of the residence. 6. More than one Residential CUltivation Permitee (s) may reside and cultivate in a single residence, however the number of permitee s residing in a residence shall not affect the requirements set forth in section 32-70(L)(1) or any other provision of this Ordinance. 7. No cooking, baking, or alteration as to form and substance of medical marijuana for commercial purposes, and/or sale, is permitted in a residence which cultivates medical marijuana. 8. From a public right of way, there shall be no exterior evidence of medical marijuana cultivation occurring at the residence. M. Fees and Taxes: The costs to the City arising from the processing and oversight of residential cultivation permits issued pursuant to this Ordinance will be offset through application fees and annual renewal fees, to be adopted by the City Council by Resolution and updated as necessary from time-to-time. In the administration of the permitting requirements under this Ordinance, the City Manager may require, as a condition to granting and renewal of the permits, any information reasonably necessary to implement the intent of this Ordinance, to ensure that the marijuana handled under the permit is grown, processed or distributed in a manner not in conflict with this Ordinance, and to ensure that any and all related sales taxes are being properly reported and paid. N. Implementation of Section 32-70: The City shall adopt procedures to require all cultivation of medical marijuana in a residence to be in compliance with this Ordinance no later than December 19, All cultivation occurring which is not in compliance with this Ordinance on or after December 20, 2011, shall cease operation immediately, unless the City Council adopts an Ordinance to extend these provisions MEDICAL MARIJUANA DISPENSARIES A. Medical Mariiuana Dispensary Permit Required to Operate. No person, group, or entity shall operate a medical marijuana dispensary unless the dispensary has a valid dispensary permit issued pursuant to this chapter. Neither the obtaining of a dispensary permit nor compliance with the terms, provisions, and 9

19 standards set forth in this chapter shall excuse any violation of this code or State law. B. Licensed Medical Marijuana Dispensaries. 1. For purposes of this section, a "licensed medical marijuana dispensary" means a dispensary: (1) that was deemed an "established operation" and issued a business and professions tax certificate to operate a medical marijuana dispensary pursuant to City Ordinance 1007 adopted on November 17, 2009; (2) that is organized and operates as a dispensary within the meaning of this Ordinance; (3) the owner and operator of which has not been cited or convicted of maintaining a public nuisance or of a public safety violation of State or local law relating to the operation of a medical marijuana dispensary by the City or any governmental law enforcement agency; and (4) the owner and operator of which has complied with all terms, requirements, and regulations as set forth in City Ordinance An application for a dispensary permit may only be filed by a licensed medical marijuana dispensary. 3. The applicant for the dispensary permit must be the same owner named on the licensed medical marijuana dispensary's business and professions tax certificate as of the date when such business and professions tax certificate was first issued, and must be a management member of the licensed medical marijuana dispensary. C. No Vested Rights: No person(s) shall have any vested rights to any permit, right or interest under this Ordinance, regardless of whether such person(s) cultivated marijuana prior to adoption of this Ordinance PHASE ONE APPLICATIONS FOR MEDICAL MARIJUANA DISPENSARY PERMIT A. Phase one applications for dispensary permits shall be filed with the City Manager's office no later than 30 days after the effective date of this Ordinance. Applications shall be typed on standard 8.5 x 11 paper, using 12 pt. font, all pages shall be submitted in a single folder, the application shall contain all information set forth in this section, and all such information shall be divided into separate paragraphs with the same heading titles as those set forth in this section. The application shall be accompanied by a non-refundable phase one dispensary permit application fee, in the amount established by resolution of the City Council. The phase one dispensary permit application fee shall be in addition to any other fee or tax imposed by this Code. 10

20 B. Applications received more than 30 days after the effective date of this Ordinance, shall be rejected. C. Content of Phase One Application. The phase one application shall be signed by one or more management members of the dispensary under penalty of perjury and shall set forth in writing: 1. Identity of the dispensary. A description of the statutory entity or business form that will serve as the legal structure for the collective or cooperative and a copy of its formation and organizing documents, including but not limited to, articles of incorporation, certificate of amendment, statement of information, articles of association, bylaws, partnership agreement, operating agreement, and fictitious business name statement. 2. Management Information. a. The name, address, telephone number, title, and function(s) of each management member of the dispensary. b. For each management member, a legible copy of one valid government issued form of photo identification, such as a state driver's license, a passport issued by the United States, or a permanent resident card. 3. Applicant's Phone Number and Mailing Address. The phone number and address to which notice of action on the application and future correspondence is to be mailed. 4. Verification of Age. Evidence that the applicant and all management members of the dispensary are at least 18 years of age. 5. Criminal Background. a. A list of each misdemeanor and/or felony conviction within the past ten (10) years, if any, of the applicant and the management member(s), whether such conviction was by verdict, plea of guilty, or plea of nolo contendere within ten years prior to date of submission of the phase one application. The list shall, for each conviction, set forth the date of arrest, the offense charged, and the offense of which the applicant or management member was convicted. b. The applicant and each management member shall consent to fingerprinting and a criminal background investigation. 6. Employee Information. Approximate number of employees, volunteers, and other persons who will work or provide services at the dispensary. 11

21 7. Plans. A plan describing how the dispensary will operate consistent with state law and the provisions of this chapter, including controls to: a. Ensure that medical marijuana is not purchased or sold by the dispensary in a manner that would generate a profit, as more fully set forth in section 32-74(F). b. Ensure that medical marijuana will be distributed to members only. c. Ensure that access to the dispensary property is adequately monitored and restricted to members. 8. Dispensary Description. A description of the proposed location of the dispensary, including the street address and parcel number, the square footage, the number of expected members, and the characteristics of the neighborhood or surrounding area. 9. Compliance with Applicable State and Local Taxes. The applicant shall provide a current copy of its business operations tax certificate and State sales tax seller's permit. 10.City Authorization. Authorization and consent for the City Manager to seek verification of the information contained within the application. 11. Statement of Owners Consent. Consent to operate a dispensary at the proposed location, specifying the street address and parcel number, from the owner or landlord, of the proposed location. D. Review of Phase One Applications. 1. Upon receiving a phase one application for a dispensary permit, the City Manager shall determine whether the application is complete. If the City Manager determines that the application is incomplete or has been completed improperly, the City Manager shall notify the applicant within thirty (30) calendar days from receipt of applicant's phase one application, and may grant the applicant an extension of up to thirty (30) days to complete the phase one application. 2. If the application is incomplete, or remains incomplete upon the expiration of any extension, the City Manager may deny the application, and shall provide applicant written notice of such denial. 3. In the event of denial, the applicant shall cease operating the dispensary within thirty (30) days from the date notice of denial is served on the 12

22 applicant. Continued operations shall be unlawful and subject to the penalties of this Ordinance as well as any other local, State, or federal penalties. 4. If the City Manager determines that the phase one application is complete and there appears to be no basis for denial of the permit pursuant to section 32-77, the City Manager shall notify the applicant within thirty (30) calendar days from receipt of applicant's phase one application, that the applicant may continue to phase two in the application process pursuant to section PHASE TWO APPLICATIONS FOR MEDICAL MARIJUANA DISPENSARY PERMIT A. If the City Manager notifies the applicant that it may continue to phase two in the dispensary application process, the applicant shall, no later than forty-five (45) days following the date upon which the City Manager notifies applicant that it may continue to phase two, file a phase two application with the City Manager's office containing the following: 1. A non-refundable phase two dispensary permit application fee in the amount established by resolution of the City Council. The phase two dispensary permit application fee shall be in addition to any other fee or tax imposed by this Code. 2. Security Plan. A detailed security plan, prepared by a qualified professional, outlining the measures that will be taken to ensure the safety of persons and to protect the dispensary property from theft. 3. Floor Plan. A scaled floor plan for each level of the entire building showing the interior configuration of the dispensary building, including a statement of the total floor area occupied by the dispensary. The floor plan must include any entrances, exits, restrooms, waiting areas, office space, storage, and areas for distributing marijuana to members. The floor plan must be professionally prepared by a licensed design professional or architect. 4. Site Plan. A scaled site plan of the parcel of real property on which the dispensary building is located, including the outline of all structures, driveways, parking and landscape areas, and boundaries of the parcel. The site plan must be professionally prepared by a licensed design professional or architect. 5. Accessibility Evaluation. A written evaluation of accessibility by the physically disabled to and within the building and identification of any planned accessibility improvements to comply with all state and federal disability access laws, including, but not limited to, Title 24 of the California Code of Regulations and the Americans with Disabilities Act. 13

23 6. Neighborhood Context Map. An accurate straight-line drawing depicting the boundaries of the dispensary property, the boundaries of all other properties within 600 feet of the dispensary property. 7. Electrical and Lighting Plan. A plan prepared by a licensed electrical engineer pursuant to the City Code chapter 8-16, showing electrical layout, fans, pumps, duct size of air intake and exhaust, location of intakes and termination of exhausts, any other electrical loads including conductors, subpanels, and all existing and proposed exterior and interior lighting levels including those used for all clones and non-flowering marijuana plants. 8. Plumbing Plan. A plan showing the layout of water supply, drains and irrigation piping. 9. Information relating to the use of any carbon monoxide producing equipment and equipment specifications if such equipment shall be used by Dispensary. 10. A copy of the dispensary's commercial general liability insurance policy, worker's compensation policy, property insurance policy, and fire insurance policy. 11. A copy of the dispensary's annual budget for operations. 12. A copy of the dispensary's most recent year's financial statement and tax return. 13. Applicant's Certification. A statement dated and signed by each management member of the dispensary, under penalty of perjury, that the management member has personal knowledge of the information contained in the phase one and phase two applications, that the information contained therein is true and correct, and that the applications have been completed under their supervision. B. Review of Phase Two Applications. 1. Upon receiving a phase two application, the City Manager shall determine whether the application is complete. If the City Manager determines that the application is incomplete or has been completed improperly, the City Manager shall notify the applicant and may grant the applicant an extension of up to thirty (30) days to complete the phase two application. 14

24 2. If t~e ~hase two applic~tion is in~omplete, or remains incomplete upon the expiration of any extension, the City Manager may deny the application and shall provide applicant written notice of such denial. 3. In. t~e e~ent of denial, the applicant shall cease operating the dispensary Within thirty (30) days from the date notice of denial is served on the applicant. Continued operations shall be unlawful and subject to all applicable penalties. 4. If the City Manager determines that the application is complete, the City Manager shall notify the applicant that the City Manager has determined that the content in the submitted documents is responsive to the requirements, and has deemed the application complete. C. Issuance of a Dispensary Permit. 1. The City Manager shall either grant or deny a dispensary permit within thirty (30) days from the date the phase two application is deemed complete. 2. Indemnification. Dispensary permits shall contain a condition requiring the dispensary, through its management members, to execute an agreement in a form approved by the City Attorney whereby the dispensary (1) releases the City, and its agents, officers, elected officials, and employees from any injuries, damages, or liabilities of any kind that result from any arrest or prosecution of the dispensary or its management members, employees, or members for violation of state or federal laws, and (2) defends, indemnifies and holds harmless the City and its agents, officers, elected officials, and employees for any claims, damages, or injuries brought by adjacent or nearby property owners or other third parties due to the operations at the dispensary, and for any claims brought by any of their clients for problems, injuries, damages. or liabilities of any kind that may arise out of the distribution of medical marijuana provided at the dispensary. D. Renewal of a Dispensary Permit 1. Unless revoked on an earlier date, all dispensary permits shall expire two (2) years after the date of issuance. 2. A dispensary permit may be renewed for additional periods of two (2) years by filing an application for renewal with the City Managers office. Applications shall be on forms provided by the City and shall be accompanied by a dispensary permit renewal fee. in an amount established by resolution of the City Council. The application for renewal 15

25 and the fee shall be filed at least 30 days, but not more than 60 days, prior to the expiration of the permit. If a timely renewal application is filed, the dispensary permit's expiration shall be stayed until the date that notification is provided by the City Manager pursuant to subsection 4 of this section. 3. Applications for renewal filed less than thirty (30) days prior to the expiration of the dispensary permit shall not stay the expiration date of the permit and may be rejected or denied. 4. The City Manager shall either approve or deny the renewal of a dispensary permit within forty-five (45) days from the date the application for renewal is filed. 5. Applications for renewal shall be acted on using the criteria for review in Section of this chapter. The City Manager may add, remove, or modify permit conditions as a condition of permit renewal. 6. If the City Manager denies the application for renewal of a dispensary permit, written notice of denial shall be served on the applicant. 7. The denial of a renewal shall cause the dispensary permit to expire and the dispensary shall cease operations within thirty (30) days from the date notice of denial is served. Continued operations shall be unlawful and subject to all applicable penalties. E. Transfer of Dispensary Permits 1. Permit - Site Specific. A permittee shall not operate a dispensary under the authority of a dispensary permit at any place other than the address of the dispensary stated in the application for the permit without obtaining City Council authorization as set forth in section of this Ordinance. 2. Transfer of Dispensary Permits. A dispensary permittee shall not transfer ownership or management control of the dispensary or transfer a dispensary permit to another person or entity. 16

26 If a dispensary permit is revoked, voided, nullified, or otherwise removed, City Council may, at a public hearing, determine that it chooses to allow additional applicants to apply, in accordance with the provisions set forth in sections 32-73,32-74, and of this Ordinance, for the "vacant" permit. Should City Council elect to allow additional applicants to apply for said permit, City Council shall direct the City Attorney to amend this Ordinance to reflect such a decision. Under no circumstances shall more than three dispensary permits exist or be issued pursuant to this Ordinance. 3. Request for Transfer with a Revocation Pending. No permit may be transferred when the City Manager has notified the permittee that the permit has been, or may be suspended or revoked. 4. Transfer Without Permission. A dispensary permit is not property and shall have no value. Any attempt to transfer a dispensary permit, directly or indirectly in violation of the provisions of this chapter shall be unlawful and shall result in automatic revocation of the permit. 5. A dispensary permit shall become null and void if the dispensary ceases operations for a period of ten (10) days or more DISPENSARY OPERATING REQUIREMENTS Dispensary operations shall comply with the following: A. Criminal History. No person who has been convicted of a felony within the last ten years, or who is currently on parole or probation for the sale or distribution of a controlled substance, shall operate the dispensary, or manage or handle the receipts, expenses, or medical marijuana of the dispensary. A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere. B. Juveniles. 1. No juvenile shall operate a dispensary in any capacity, including but not limited to, as a management member, employee, contractor or volunteer. 17

27 2. No j~~enile ~hall be all?wed on the dispensary property unless they are a quah'fled patient or a pnmary caregiver, and they are accompanied by their parent or legal guardian. C. Operating Hours. The maximum hours of operation shall be daily from 7:00 a.m. to 9:00 p.m. D. Dispensary Size and Access. 1. The dispensary building shall not exceed 5,800 square feet. 2. Management, members, employees, and volunteers must be registered members of the dispensary. 3. All entrances into the dispensary's building shall at all times be controlled by dispensary employees or personnel. 4. Only dispensary members and persons with bona fide purposes for being in the dispensary shall be allowed entry into the dispensary property. Nonmembers shall be escorted by a management member at all times while in the dispensary building. E. Dispensing Operations. 1. A dispensary shall only distribute to members. All members must be: a. Qualified patients in compliance with the criteria set forth in California Health and Safety Code sections et seq.; or b. Primary caregivers with a verified primary caregiver designation by their qualified patients, and a copy or copies of their qualified patients' valid physician's recommendation in compliance with the criteria in California Health and Safety Code sections et seq. 2. A dispensary shall not have a physician in the dispensary building to evaluate patients or provide a recommendation for medical marijuana. 3. A dispensary shall not conduct or engage in the commercial sale of products. goods. or services, with the exception of (1) medical marijuana, (2) edible marijuana as set forth in subsection (G) of this section, and (3) drug paraphernalia as set forth in California Health and Safety Code and which is necessary for administering medical marijuana. including but not limited to, rolling papers and related materials and devices. pipes, water pipes, and vaporizers. Such paraphernalia may only be provided to members and shall not generate a profit. 18

28 4. A dispensary shall not provide any form of a delivery service. All distribution of medical marijuana must be conducted within the enclosed building areas of the dispensary property. 5. A dispensary shall comply with the operating criteria for the distribution of medical marijuana as required pursuant to California Health and Safety Code sections and et seq. 6. Dispensary operations shall not result in the diversion of marijuana for nonmedical purposes in any manner that violates local or state law. F. Dispensaries and dispensary permittees shall not acquire, buy, or be provided marijuana by any person, entity, or group who is not in compliance with this Ordinance. G. Not for Profit Basis. 1. A dispensary shall operate on a not for profit basis as set forth in California Health and Safety Code section and in the Attorney General Guidelines on Non-Diversion of Marijuana Grown for Medical Use issued in August A dispensary shall receive only compensation for the reasonable costs of operating the dispensary, including reasonable compensation incurred for services provided to qualified patients or primary caregivers. Sale of medical marijuana to cover anything other than reasonable compensation and reasonable out-of-pocket expenses is explicitly prohibited. Any monetary reimbursement that members provide to the dispensary shall not exceed the dispensary's overhead costs and expenses for operating the dispensary, including reasonable compensation for services provided to members. 3. Upon request by the City Manager, based on reasonable suspicion of noncompliance with this section, the dispensary shall provide the City Manager copies of, or access to, such financial records as the City Manager determines are necessary to show compliance with this paragraph. Reasonable suspicion is defined as possession of specific facts warranting a reasonable belief that the dispensary is not complying with the requirement that it be not for profit. Financial records are records of revenues and expenses of the organization, including but not limited to payroll records, business expense records, tax returns, etc. H. Edible Marijuana Products. Dispensaries that prepare, dispense or sell edible medical marijuana products, or food containing any form of medical marijuana, must comply with and are subject to the provisions of all relevant State and local laws regarding the preparation, distribution, and sale of food. Failure to obtain 19

29 and comply with all necessary permits related to the preparation, distribution, and sale of food will be an express violation of this Ordinance. I. Consumption Restrictions. Marijuana shall not be smoked, ingested or otherwise consumed in any form on any part of the dispensary property except the interior of the dispensary building. J. Operating Plans. 1. Entrance. The dispensary's main entrance shall be located and maintained clear of barriers, landscaping, and similar obstructions so that it is clearly visible from public streets or sidewalks. 2. Storage. A dispensary shall have adequate locked storage on the dispensary property, identified and approved as a part of the security plan, for after-hours storage of medical marijuana. Medical marijuana shall be stored at the dispensary property in secured rooms that are completely enclosed or in a safe that is bolted to the floor. 3. Odor Control. A dispensary shall have an air treatment system that prevents odors generated from the storage of marijuana on the dispensary property. 4. Security Plans. A dispensary shall comply with the security plan submitted as part of their phase two application and that has been approved by the City Manager. Such security plan shall include, but is not limited to compliance with building security specifications, lighting, alarms, electrical specifications, and adequate security personnel to preserve the safety of persons and to protect the dispensary from theft. 5. Security Cameras. Security surveillance cameras and a video recording system shall be installed to monitor the interior, main entrance, and exterior dispensary building to discourage loitering, crime, and illegal or nuisance activities. The camera and recording system must be of adequate quality, color rendition, and resolution to allow the identification of any individual present in the dispensary area. 6. Security Video Retention. Video from the security surveillance cameras shall be maintained for a period of not less than 14 days and shall be made available to the City upon lawful request. 7. Alarm System. Professionally and centrally monitored fire, robbery, and burglar alarm systems shall be installed and maintained in good working condition. 20

30 8. Concealed. A dispensary shall not allow or permit medical marijuana to be visible from the building exterior. 9. Emergency Contact. Dispensaries shall provide the City Manager and all neighboring properties, businesses, and/or residences within 300 feet of the dispensary building, with the current name and primary and secondary telephone numbers of at least one 24-hour on-call management member to address and resolve complaints and to respond to operating problems or concerns associated with the dispensary. The dispensary shall make good faith efforts to encourage neighborhood residents to call this person to solve operating problems, if any, before any calls or complaints are made to the City. K. Signage 1. The following signs in measurements of not less than eight by ten inches shall be clearly and legibly posted in a conspicuous location inside the dispensary where they will be visible to members in the normal course of a transaction, stating: a. "Smoking, ingesting or consuming marijuana on the exterior of the dispensary property is prohibited." b. "Juveniles are prohibited from entering this property unless they are a qualified patient or a primary caregiver and they are in the presence of their parent or legal guardian." c. "Neither the City of South Lake Tahoe nor any other governmental agency has tested or inspected any marijuana product for pesticides, or other regulated contaminants, distributed at this location." d. "The sale of marijuana and the diversion of marijuana for nonmedical purposes are violations of state law." 2. Signs on the dispensary building shall not obstruct the entrance or windows of the dispensary. L. Maintenance of Records. 1. A dispensary shall maintain the following records: a. The name, address, and telephone number(s) of each member and management member of the dispensary and the status of each 21

31 member and management as a qualified patient or primary caregiver. b. The name, address, and telephone number(s) of each member and management member who participates in the cultivation of medical marijuana for the benefit of the dispensary. c. A copy of each member's and qualified patient's written physician recommendation and the designation of a primary caregiver by a qualified patient. d. A written accounting of: (1) each transaction of the dispensary including but not limited to the receipt of and sale, donation or trade of each marijuana transaction, (2) all cash and in-kind contributions, reimbursements, and reasonable compensation provided by the management members and members to the dispensary, and (3) all expenditures and costs incurred by the dispensary. e. A copy of the dispensary's commercial general liability insurance policy and all other insurance policies related to the operation of the dispensary. f. A copy of the dispensary's most recent year's financial statement and tax return. g. An inventory record documenting the dates and amounts of medical marijuana received at the dispensary, the daily amounts of medical marijuana stored on the dispensary property, and the daily amounts distributed to members. h. Proof of a valid and current dispensary permit issued by the city in accordance with this Ordinance. Every dispensary shall display at all times during business hours the dispensary permit issued pursuant to the provisions of this Ordinance in a conspicuous place so that it may be readily seen by all persons entering the dispensary. 2. These records shall be produced to the City, in printed format, within twentyfour (24) hours after receipt of the City's request. A dispensary shall maintain these records in a location which shall enable it to produce such records within twenty-four (24) hours. 3. Any loss, damage or destruction of these records shall be reported to the City Manager within forty-eight (48) hours of the loss, damage or destruction. 22

32 M. Site Management. The dispensary shall prevent and eliminate conditions in the dispensary area that constitute a nuisance. N. Alcoholic Beverages. No dispensary or management member shall cause or permit the sale, distribution, or consumption of alcoholic beverages on the dispensary property; hold or maintain a license from the State Division of Alcoholic Beverage Control for the sale of alcoholic beverages on the dispensary property; or operate a business on or adjacent to the dispensary property that sells alcoholic beverages. O. Environment: Runoff and waste disposal by the dispensary where cultivation occurs must be in compliance with any applicable City, county, regional, State, and federal laws and regulations. A violation of any applicable City, county, regional, State, or federal law, will be deemed a violation of this Ordinance and of the permit, and shall render the permit void and revocable by the City LOCATION OF DISPENSARIES A dispensary shall not relocate or operate a dispensary at any place other than the address of the dispensary property or the physical location for which the original dispensary permit was granted without obtaining from City Council at a public hearing, authorization to relocate a dispensary. A dispensary permit shall become null and void upon any relocation or operation at any place other than physical location for which the original dispensary permit was granted without such City Council authorization INSPECTION OF DISPENSARIES A. City officials may enter and inspect a dispensary property at any time between the hours of 7:00 a.m. and 9:00 p.m. with reasonable notice on any day of the week or at any reasonable time to ensure compliance and enforcement of the provisions of this Ordinance. B. City officials may inspect and demand copies of records maintained by the dispensary, except for private medical records that shall be made available to law enforcement agencies only pursuant to a properly executed search warrant, SUbpoena, or court order. C. No person shall refuse, impede, obstruct, or interfere with an inspection pursuant to this chapter. 23

33 32 77 REVIEW, DENIAL, SUSPENSION AND REVOCATION OF RESIDENTIAL CULTIVATION PERMITS AND DISPENSARY PERMITS A. The City Manager may deny, revoke, or suspend a residential cultivation permit or dispensary permit on the following grounds: 1. The permit application(s) and/or documents submitted are incomplete, filed late, or not responsive and/or fail to demonstrate compliance with the requirements of this Ordinance. 2. The issuance of the residential cultivation permit or dispensary permit at the proposed location is inconsistent with State law, the provisions of this Ordinance, or this code. 3. The residence or dispensary has caused secondary criminal or public nuisance impacts in the surrounding area or neighborhood, including, but not limited to, disturbances of the peace, illegal drug activity, harassment of passersby, littering, loitering, illegal parking, loud noises, or lewd conduct. 4. The applicant, permitee, management member, or any employee is a juvenile. 5. The applicant, permitee, management member, or any employee has violated any provision of this Ordinance. 6. The residence or dispensary has failed to pay fees, penalties, or taxes required by this Code or has failed to comply with the production of records or other reporting requirements of this chapter. 7. The residence or dispensary, or one or more management members, employees, or volunteers have violated a provision of this chapter, conditions of the permit, conditions imposed by another City issued permit, or any provision of any other local, State, or federal law, regulation, order or permit. 8. It appears, based upon the information before the City Manager, that the applicant or permitee has provided a false statement of material fact or has knowingly omitted a material fact in the application for, or renewal of, a residential cultivation permit or dispensary permit. 9. The applicant, permitee, or one or more management members, or employees of a dispensary has been convicted of a felony, or has engaged in misconduct that is substantially related to the qualifications, 24

34 functions or duties of a medical marijuana cultivator or dispensary operator. A conviction within the meaning of this section means a plea or verdict of guilty, or a conviction following a plea of nolo contendere. Notwithstanding the above, an application shall not be denied solely on the basis that the applicant, any management member or any employee has been convicted of a felony if the person convicted has obtained a certificate of rehabilitation (expungement of felony record) under California law or under a similar federal statute or state law where the expungement was granted. 10. The applicant, permitee or dispensary has previously or is currently engaged in unlawful, fraudulent, unfair, or deceptive business acts or practices. B. Notice of Permit Violation. When the City Man~ger determines that acts are being performed, or conditions exist, which are in violation of a residential cultivation permit or dispensary permit, the City Manager shall provide the permitee notice that a violation of this Ordinance has occurred. If, based on such violations, the City Manager proposes to suspend, modify, or revoke a dispensary permit, written notice of the proposed suspension, modification or revocation shall be served on the dispensary at least ten (10) days prior to the date of the proposed suspension, modification or revocation. Upon the date of the proposed suspension, modification, or revocation, the dispensary permitee shall immediately cease all operations permitted under the dispensary permit. The notice shall contain: 1. A brief statement of the grounds for such suspension, modification, or revocation. 2. A statement that the permitee may appeal the denial in accordance with Section A statement that the failure to appeal the notice of suspension, modification or revocation will constitute a waiver of all rights to an appeal hearing, and the suspension, modification, or revocation will be final. If the City Manager determines that all operations permitted under the residential cultivation or dispensary permit have not ceased, the City Manager may effectuate the abatement of the public nuisance by the use of City forces or by such contractors as may, in the judgment of the City Manager, be necessary to abate the nuisance. C. If any dispensary, management member, or employee of a dispensary is convicted of a felony or is convicted of a misdemeanor for misconduct that is SUbstantially related to the qualifications, functions, or duties of a dispensary, the City Manager may immediately revoke the dispensary permit without prior notice. 25

35 D. The City Manager may abate any and all nuisances or violations of this Ordinance for cultivating or dispensing marijuana without a permit DENIAL, SUSPENSION, REVOCATION, AND NON-RENEWAL OF RESIDENTIAL CULTIVATION PERMITS AND DISPENSARY PERMITS -APPEALS A. Except as otherwise provided in this chapter, an applicant, permitee, or dispensary aggrieved by the decision of the City Manager in denying, suspending, revoking, or not renewing a residential cultivation permit or dispensary permit, may appeal the decision by filing a written appeal, accompanied by a non-refundable appeal fee, with the City Manager's office within ten (10) days from the date of service of the violation notice or notice of denial, revocation, or suspension from the City Manager. Nothing in this section shall confer on any person the right to appeal a notice of violation for cultivating or dispensing marijuana without a permit. The written appeal shall contain: 1. A brief statement in ordinary and concise language of the specific action protested, together with any material facts claimed to support the contentions of the appellant. 2. A brief statement in ordinary and concise language of the relief sought, and the reasons why it is claimed the protested action should be reversed or otherwise set aside. 3. The verification (by declaration under penalty of perjury) of the applicant or permitee as to the truth of the matters stated in the appeal. B. The appeal hearing shall be conducted by the City Council. C. Upon receipt of any appeal filed pursuant to this section, the City Manager shall calendar it for hearing as follows: 1. If the appeal is received by the City Manager no later than ten days prior to the next regular City Council meeting, it shall be calendared for hearing at said meeting. 2. If the appeal is received by the City Manager on a date less than ten days prior to the next regular City Council meeting, it shall be calendared for the next subsequent meeting, or shall be calendared for a special meeting, upon the decision of the City Manager to do so. D. Failure of any person to file a timely appeal in accordance with the provisions of this section shall constitute an irrevocable waiver of the right to an administrative hearing and the City Manager's decision shall be final. 26

36 E. Only those matters or issues specifically raised by the appellant in the appeal notice shall be considered in the hearing of the appeal. F. Any denial, suspension, revocation, or non-renewal of a residential cultivation permit or dispensary permit shall be stayed during the pendency of an appeal which is properly and timely filed pursuant to this section. Such a stay shall have no impact on the City's right to abate any nuisances in accordance with abatement procedures set forth in this Ordinance. Fines assessed pursuant to this chapter shall be stayed beginning on the date that a proper appeal is filed with the City and shall resume upon a denial of the appeal. G. Appeal Hearings 1. The City Manager shall prepare a staff report for the City Council regarding the City's Manager's decision to deny, suspend, revoke, or not renew a residential cultivation permit or dispensary permit. The staff report shall contain findings of fact and an explanation of the City Manager's determination. 2. At the time set for hearing, the City Council shall proceed to hear the testimony of the City Manager, the appellant, or other competent persons, including members of the public, respecting those matters or issues specifically listed by the appellant in the notice of appeal. 3. If it is shown that one or more grounds exist to condition, deny, suspend, revoke, or not renew a residential cultivation permit or dispensary permit, the City Council shall affirm the City Manager's decision. 4. The decision of the City Council shall be a final decision and shall not be appealable. H. The Appeal procedures set forth in this Ordinance shall be final and conclusive and appellant shall have no other right to appeal under the City Code PENALTIES, VIOLATIONS A. Fines. Any person violating this Ordinance for failing to comply with a permit issued pursuant to this Ordinance, for cultivating marijuana without a permit, or for distributing marijuana without a permit shall be punished by a fine not to exceed one thousand dollars ($1,000.00). Such person shall be deemed guilty of a separate offense for each and every day during any portion of which any violation of this Ordinance is committed, continued or permitted by such person. 27

37 B. Complaints. Complaints of suspected violations of this Ordinance shall be directed to the Building Official. C. Recovery by Property Owner. A property owner who rents or leases a residence building, or any structure, to any person who violates any provision of thi~ Ordinance may recover for actual damages to the residence, building, or structure against the tenant as allowed under federal, State, local, or any other remedy provided by law. D. Nuisance Per Se. Any violation of this Ordinance is hereby declared a public nuisance per se. Any person violating any provision of this Ordinance shall be deemed guilty of an infraction REMEDIES CUMULATIVE Unless otherwise expressly provided, the remedies, procedures and penalties provided in this Ordinance are cumulative to each other and to any other remedies, procedures and penalties available under state law or the City Code. In addition to any other remedy allowed by law, any person who violates a provision of this Ordinance is subject to revocation of a permit pursuant to this Ordinance, criminal sanctions, civil actions, and administrative penalties pursuant to the City Code. In addition to criminal sanctions, civil penalties, and remedies as provided in this Ordinance, imposition of enforcement, collection and administrative review of violations of this Ordinance may be enforced pursuant to any applicable portions of the City Code LIABILITY & INDEMNIFICATION A. To the fullest extent permitted by law, any actions taken by a public officer or employee under the provisions of this Ordinance shall not become a personal liability of any public officer or employee of the City. B. Permitees pursuant to this Ordinance hereby agree to save, defend, indemnify and keep harmless the City and its officials, officers, employees, representatives, agents and volunteers from all actions, claims, demands, litigation, or proceedings, including those for attorneys' fees, against the City in consequence of the granting of this permit, and will, in all things, strictly comply with the conditions under which this permit is granted, if any SEVERABILITY If any provision of this Ordinance, or the application thereof to any person or circumstance, is held invalid or ineffective by any court of competent jurisdiction, or by reason of any preemptive legislation, that invalidity shall not affect the validity of the remaining provisions of this Ordinance. The City Council declares that it would have passed this Ordinance and each section, subsection, subdivision, sentence, clause and 28

38 phrase, irrespective of the fact that anyone or more sections, subsections, subdivisions, sentences, clauses, phrases or words be declared invalid. 29

39 City of South Lake Tahoe limaking a positive difference now" MEDICAL MARIJUANA DISPENSARY APPLICATION PHASE 2 CHECKLIST PHASE TWO APPLICAnON FILING REQUIREMENTS (SLTCC 32-73(A» jg Nonrefundable Phase Two permit fee in the amount of $12,000 l&l Security Plan (security plan prepared by qualified professional) ~ Floor Plan (scaled floor plan for each level of building) ~ Site Plan (scaled site plan ofthe parcel) iii Accessibility Evaluation (showing compliance with ADA) rii Neighborhood Context Map (showing boundaries of property and boundaries of all other properties within 600 feet ofdispensary) C8 Electrical and Lighting Plan (plan prepared by licensed electrical engineer pursuant to SLTCC 8-16) Ii(I Plumbing Plan iii Carbon Monoxide Information (use of any carbon monoxide producing equipment) Ii(J Copy of commercial general liability insurance policy; worker's compensation policy, property insurance policy, fire insurance policy 00 Annual Budget for Operations ~ Financial Statement and Tax Return (for most recent year) ~rl APPROVED: Dave Wa r Building Official City of South Lake Tahoe City of South Lake Tahoe Development Services 1052 Tata Ln. South Lake Tahoe, CA 96150

40 -~ City of South Lake Tahoe INSPECTION RECORD 1052 Tata Lane South Lake Tahoe, CA PERMIT NO: Office: (530) APN NO: Fax: (530) PERMIT TYPE: Commercial Alteration INSPECTION REQUESTS: (530) PERMIT ISSUED DATE: 03/27/2012 Building Address 989 THIRD ST # B Owner Name DETARR VINCENT B TR ETAL Mailing Address 26 VICTORIA III BURLINGAME, CA Phone Cell Contractor Name DETARR VINCENT B TR ETAL Address 26 VICTORIA RO BURLINGAME, CA Phone Cell State License # Classification City License # PROPOSED CONSTRUCTION: PHASE 2 - CITY OF ANGELS TENANT IMPROVEMENT C/lANGE OF OCCUPANCY:NEW ELECTRICAL, FIRE SEPARATION WALLS, VENTILATION DUCTS, e-----~ _. -_._-- _.... _-.._---~ -~---~~---..~._----~ ~ _--- -.~~_ _._ _. _._ ~ _._ INSPECTIONS: All inspection requests are required in advance of inspection. Telephone (S10) , pi iar to 7:00 a.1n. on the date of inspection request. Be prepared to provide the following information: When you want the inspection (date), permit number, street address, type of inspection, YOllr name and telephone number (where you may be reached if there is a problem with the request). If the requested inspection is not ready, call (530) to cancel or a reinspection fee may be charged. Date Ins ector ----~_._ TRPA Winterization._._------_._---._-._S_to_r_rn_Wate_r ~ -1 Tern )orary elcctrieaj.power _ Footin s & re1l1forcernent _ IIl~rior I~_~ated piers _ Exterior isol~ted piers.. _ Masonry r.e.=grout, _ Slab Under round electrical -~ uundergroun~au'~g... _ ~Underground plumbing Under-floor electrical j Under:floor framing Under-floor gas piping Under-floor HVAC Under~u':'m:';'b=;-iJ-) _. ----_._ Exterior shear walls _.._. Interior shear walls ~---c, Truss specificatiol1_s... _ Hold downs, uplift ~overturn hardware Rou h electrical... _ Rough ga~~. _ Rough HVAC Roug!ljJ!umbing. ~_ Rough install woodstove.01' fi:.:.re"-'p.:.:.laccc.:.:.e _ Exterior decks & st~~_~ ~~. _ Framin~..._ -----_.- Insulation._--_._----- ~all nailing...<!l:...screws..~_. ~ _ T-I3ar._.. _ Roof Final Ta issued electrical Ta issu:.clg_as ~. _ Final electrical Final gas...~. ~._ Final fire lace Final HVAC - ---~ Final lumbing Final T-2~_ energy regs Insulation certificate. Health De t F.:.in.:.a::..I STPUD Final Fire De t Final Plannin D~::..F.:.:.in,-a_1 Buildin Final Final Gas Pi Foundation._~ --1 _ ~. CALLS FOR INSPECTORS - HOURS ARE: Monday through Friday 7:00 a.m. to 8:00 a.m. and 3:00 p.m. to 3:30 p.m.

41 "Ill a /dng a jjos f d life I"cn ce 11 ij 11' " r,'ebwary 8, 2012 Gwo D1Mattco 9893''; Street South Lake 'I'aboe, CA [)ear Mr. DiMatteo, 1 have received your Phase 2 Application for a City of SOUtJl Lake Tahoe Dispensary Permit. Your applicatloll is not complete because you are missing the following: 1. ApplIcant's Cettification ( 32-!3(A)(13». Please provide a sullclllcnt dated and signed by ~fj..clltrljl)lap;f;l!l<;nt t~mblt of the dispensary stating: "l.(name) swear under penalty of pe1')ury that I have personal knowledge of the inforrnauon contained in the Phase One a.ad Phase 'I'wo applications submitted by City of Angels and Gino DIMatteo, and the mfonuation contained therein is true and correcl The applicl1 ions have been completed under my supervision." 2. Tax Returns ( 3273(A)(12)). Please provide copies of both your State and Federal tax returns 3. Certificate of CeneralLiabihty Insurance Policy. Show limits of policy. ( 32-73(1\)(10)). 4. Financial Statement and Annual13udget for Operations ( 3273(A)(11.12)) Please provide a copy of your most tecent year's financial statement and you annual budget for operations.,,5'.' Have your Architect address the attached Building comments for the Tenant Improvcrnents. Pblse provide the above materials to me by Fnday, r"cbruary 24, 2012, or your Phase Two appligltion will he deemed incomplete. Regards, Dave Walker Building Official Citv of South Lake Tahoe Community Development Departmenl. Building &SafetJ Division Services Cenler Tata Lane' South Lake Tahoe, California (530) 542"6010. (530) 54l-7524 FAX

42 CITY OF SOUTH LAKE TAHOE, CA ITEM 1 OF 1 PERMIT RECEIPT OPERATOR: dschild COpy # 1 Sec: Twp: Rng: Sub: Blk: Lot: APN DATE ISSUED : 01/26/2012 RECEIPT #. " : BL PERMIT NO SITE ADDRESS SUBDIVISION CITY IMPACT AREA : : : 989 THIRD ST TAMARACK SUB S LAKE TAHOE # B OWNER ADDRESS CITY/STATE/ZIP : : : DETARR VINCENT 26 VICTORIA RD BURLINGAME, CA B TR ETAL RECEIVED FROM CONTRACTOR COMPANY ADDRESS CITY/STATE/ZIP TELEPHONE : : : : : : GINO DIMATTEO LIC # *OWNER* DETARR VINCENT B TR 26 VICTORIA RD BURLINGAME, CA ETAL FEE ID UNIT QUANTITY AMOUNT PD-TO-DT THIS REC NEW BAL ~ ~ BLDG PRMT MATERIAL/LABO TOTAL PERMIT : METHOD OF PAYMENT AMOUNT REFERENCE NUMBER CHECK 12, TOTAL RECEIPT 12,000.00

43 '- --' '-'-~"-"-'--~ "'-"---'- jjl,li1 Check '\Utllbn J~()J0045 CITY OF SOUTH LAKE TAHOE BUILDING & SAFETY DIVISION (530) SUBMITTAL nate: 12!:'0I11 TRPi\ ---' ~)WNEJ~..: City of AnJ..!.g(_~I_s.JOB ;\J)l)H.ESS: 989 JI'lI Stred BUnniNG PLANNING APPROVEDJINITIALS: DATE: APPROVIW/INITrAI8: DATE: CORRECTION/INITIALS: DTW I)\I"~: 2/2/12 CORRECTION/INITIAI,s: DiU'E: -'--'--'-" _._._......_--_ PAGE WHERE CORRECTIONS REQlJIRED CORRECTION AIL ITTi'vlS U" lid 1{1<jIIlRED COI{RECTION. INIW.'A1F ON WHICH P;\(il' Till CORRI:cnON lias IS MADE ---_ BEEN _:. \!IM)I IN TilL IIIII'vlAR(iJN. _---_._._ ALL ---_.. COHRECTIONS SHALL BE RI':PHINTEI> _ ON _- PLANS. _--_.._--_ -.file I(J Ilo\\it~~!'(J(JIl1S ncedth<:_~~':'~lltir~~_lire~l'e<.l!'ntion..,~~~ IJ:'B(~::1..'Ibll' 'i()g. 4: 1-_.. c._ :2 holt._r \\ aljj:~t\\_<:~ n 0 ni c_~a nd \ egeta ti0 1l_1~2.C)IEl U/13 ~. b) 2 hom 1id~.)n~)()nali.()r~"\! ~.0 bel()\v LI()\Veri!lg.. ~OOI1!:~.!}~i _ C)~_J:~~llr \\~~J.~~~~ell!2onation!2IY'r..~12~j S~~!21f',<:~rca. lj!i~.... f. c._\) 2 11()lIr~~~b:::t\vC:C..:l oftic~~!.1_~'~d noc)r~1~~~i~-2 st()r,!~ear_~~~:_ S.. 2._.' B. 1.:,.~~ClU(L~(1 C[;1 ii (1I1 11 ow t~l ese _~~:,~11 s~vjlu2..~bl!~~_..0.1!c1 a1! ~)}:Ji:~t.~l g. _.2'y Provide a note un sheet F-2 that the Panda him \vill rated as FireR\.~sistant....._--... _-~.._}t_~rovicl~. a Ij Ill' (l iagrall1_~t:}:~lectricall:();lds..-_ _ _..._-_.. _.. _.. _ _... 'rhis \Y~U!llClude the<:..~~tll[~~~~)i s_i!_e~_ Sh()Y~_llg whcre!he~)f() ;112~lJtl~_\\~'!.age_or_~111!2:S()Jl.. ~.l~11 circuil C()ml~x_:\l~he_~ l:s~~~i~l~_;?_(_).. i 4) S12,m on ~.~,:,~ t :2 t1~2trccepti_'.lt:_:~illdo\\_conlplj~:~ \\ilh(~c~~~~ib!i~[y.... _..:::"S} OI1P(~~y I sho\\ ;111!\c~es2itJLcr~!..u(eJI~UI11JJlIblie to the Main enlr(llll'e._._... ~.(:_L..s:!lanK~'_tI2_'-:(')!1~~I ticliurl J)'pt' oil_sheet!\.-..~~n T V. I...:-...:-...P.j'()\'ick: nolc that will rc9~lirc~la[ acccssibk' p;ll):.l~g._\.vil!_comply\\it)l~iiiii!~require(_[ _ Sii.'Jl'H!C ;rlld Section 11:29B of the CBC.._-_... _.~-_._<..-...:...~~._~.. -~---,.,.,"'_._._._._-~----..

44 City of South Lake Tahoe OCT ~ /lmaking a positive difference now" I,:i I 2011 :MEDICAL MARIJUANA DISPENSARY ApPLICATION - PHASE 1 (Please type or print clearly) /I-fd-.{, NON-REFUNDABLE PERMIT F'EES: Phase I Application Fee - $5,000 Completed applications shall be submitted along with the Phase I Application Fee (by check made payable to "The City of South Lake Tahoe") to the Development Services Department, Attn: Hilary Hodges, Dev, Services Director no later than November 10,2011 at 5:00 p,m. Failure to timely submit a completed application, all attachments, and the Phase 1 Application :Fee shall result in the application being deemed void.,.----_._----_. DISPENSARY NAME -Please attach information DISPENSARY INFORMATION AND DESCRIPTION PROPOSED LOCATION I ADDRESS fa 91elSO ASSESSOR PARCEL I-.:.N.:..:.U-,'--Mc.::.:.BE=Rc... -f :o::::... =<?'-----"'L-= NO. OF ::}_LLA ~~- -I..'... D.;...;(...)'----- _ MEMBERS r--: ! '~""'-'-.l_...tt_'_a._'\,.",t_ _i (EXPECTED) EMPLOYEE no. of employees: INFORMATION ATTACHMENTS: rz] Description of the business or entity -Clearly mark the title of each attachment on the top of the page r;/copy of dispensary formation and organizing documents (see C.l) r1j A11 names and addresses of partners, officers, directors, or stockholders.; lzj Plan to ensure medical marijuana is not pul;chased or sold to generate a profit ~Ian to ensure medical marijuana will be distributed 10 members only DiPlan to monitor and restrict access to dispensary members ri Manager Information Sheet (attachment I) d Copy of City Business Operations Tax Celiificate ri Copy of State of California Sales Tax Seller Permit City of South Lake Tahoe Development Services 1052 Tata Ln. South Lake Tahoe, CA 96150

45 ApPLICANT NAME MAILING ADDRESS CITY, STATE, ZIP PHONE DATE OF BIRTH ApPLICANT SIGNATURE ApPLICANT INFORMATION (One I ) I hereby certify under the penalty of perjury that the answers I have given are true and correct to the best of my knowledge and belief, and I understand and agree that any false or misleading answer will result in denial or revocation of any permit. Further, the City is hereby authorized to seek and verify information contained in this application. I understand verification of the accuracy of the application information is a matter of public record and may be made available to interested parties upon request. DatJ CONSENT OR ACKNOWLEDGEMENT BY PROPERTY OWNER OF USE FOR MEDICAL MARIJUANA PROPERTY OWNER NAME DE" if\\2q. +'~P6\2.T\ es.d5" MAILING ADDRESS \licioq{ A Au CITY, STATE, ZIP OqZ.LHJQ ~ ~'.1\'-l E I L..~ PHONE (;)'1>0 4 Ito ("h ~~ PROPERTY OWNER SIGNATURE ~#~ DATE: 1t2~/;z // City of South Lake Tahoe Development Services 1052 Tata Ln. South Lake Tahoe, CA 96150

46 MANAGEMENT INFORMATION (All Dispensary managers must provide the following information and must attach a legible copy ofone valid government issued form of photo identification, such as a state driver's license, a passport, or a permanent resident card (see C.2.b)) Attach additional sheets if necessary Mana ername Title/function Mailing Address Cit State, Zi Phone Date of Birth <... Manaeer Name Title/function Mailing Address Citv. State, Zip Phone Date of Birth Manaeer Name Title/function Mailing Address Citv, State. Zip Phone Date of Birth Manager Name Title/function Mailing Address City, State, Zip Phone Date of Birth City of South Lake Tahoe Development Services 1052 Tata Ln. South Lake Tahoe, CA 96150

47 CRIMINAL BACKGROUND All applicants must provide a list of each misdemeanor and felony conviction within the past ten (10) years, ifany, and whether such conviction was by verdict, plea of guilty or plea of nolo contendere. The list shall include the offense charged and the offense ofwhich the applicant or management member was convicted. Attach additional sheets if necessary ~ Date of Arrest Offense Charged Plea Offense Convicted, UONe- City of South Lake Tahoe' Development Services 1052 Tata Ln. to South Lake Tahoe. CA 96150

48 Business Search - Business Entities - Business Programs Page 1 of 1 'vesu\ hbf\ o~- 'D~(Yle&5 Secretary of State Administration Elections Business Programs Political Reform Archives Registries Business Entities (BE) Business Entity Detail Online Services Business Search Data is updated weekly and is current as of Friday, September 09,2011. It is not a complete or - Disclosure search - E-File Statements certified record of the entity,. Processing Times Entity Name: COAC-2 COLLECTIVE Main Page Service Options Name Availability Forms, Samples. Fees Annual/Biennial Statements Ffllng Tips Information Requests (certificates, caples 8< status reports) Service of Process FAQs Contact Information Resources Business Resources Tax Information Startlng A Business International Business Relations Program Customer Alert (misleading business solicitations) Entity Number: Date Filed: Status: Jurisdiction: Entity Address: Entity City, State, Zip: Agent for Service of Process: Agent Address: Agent City, State, Zip: C /10/2009 ACTIVE CALIFORNIA 989 THIRD ST SOUTH LAKE TAHOE CA D/R WELCH ATfORNEYS AT LAW A PROFESSIONAL CORPORATION 555 W 5TH ST 31ST Fl LOS ANGELES CA * Indicates the information is not contained in the California Secretary of State's database. If the status of the corporation is "Surrender," the agent for service of process is automaticaliy revoked, Please refer to California Corporations Code section 2114 for Information relating to service upon corporations that have surrendered..,. For information on checking or reserving a name, refer to.ji!'!m.l!.. ~':'.~.i!~!?i.i.i.~. For information on ordering certificates, copies of documents and/or status reports or to request a more extensive search, refer to.!.~f9r..m!!,!!~!:'...~~.g...!'!s.t.!.l' For help with searching an entity name, refer to.~!i'.r.~!!..:r..i.p.s.. For descriptions of the various fields and status types, refer to.f'illl~i>.l!!s.~.r..ip!!~iis..!i'.ii.~.~!i'.l:...!.l.1:!l!!~!.i:!,!~i.!:l.i)!.l. r-t.t1.~ify.~.ilil.r.c::ilr.!l!!.~..$.ililr..c::!l..r:'.r.i.ii!e..r...!'.r..i.llll!!!v..1:l.1i.c::~..~9..~1l.!!.r.~1i.. ~1l.s..~!~.!.~ri.".!'~.ll.!!!!'t!!m!!!'.! I f.!.!"~..t1.!?~!!m!!.~.t...!!!!!'!i$'.r~ Copyright 2011 CalifOf'nia Secretary of State 9/1 '/./'/.O 11

49 State of California Secretary of State I, DEBRA BOWEN, Secretary of State of the State of California, hereby certify: That the attached transcript of P-P'age(s) has been compared with the record on file in this office, of which it purports, to 'be a copy, and that it is full, true and correct IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this day of JUL &.,~~ DEBRA BOWEN Secretary of State SsclState Form CE 107 (REV )

50 EIN Individual Request. Online Application Itttps://sa I.www4.irs.gov/modieinlindividual/confirmation.jsp 1""-1 ~i 11 [llill il,ll Rn l lldc' :--'u \ (C I oil I,. {' I JI I ' "I j ~,I: (; I., \ You, PlogIw..: t.tdonlilj 4. DoIIII, &. EiN tonllnndllon congratu"uon,1 The EIN hi' bun,uc~.i.'ully...!gnad. EJNA08IgrIed: al'<genoa Logil N,rno: COAC-a CouaCllVE Holp Toplco G ~t!toelllbou..dbero", Ib..onl!mlal!on ttller II moolvtll? Tho Cll~ _will be moiled to..._1cinl. TIIIalolto,wII bo Ibo epjiilcenra oflio:lalir8 noll.. Ind WIg CGfUIn iiqldfllnllnl_llon N,INI'" lilt &tn. "<NI up to 4_kl-'tlI8lotor to""vo by moll. WOl1l'llftOIV _mind you p~nttna9l01 '0'1 """00"''' CIId< "C«I1tnu8" to ae1lddl\lollllllnfcllmlllon.llou1.,ing Iho n... E1N. Continull!"" lofl 7/27/20095:30 PM

51 f.,./~ie "1;... wellhess center Patient;Received By: _ PhysicianContactedBy: Verified I:J'Nbt Verified 0 Patient's Information Date: 'fi!~~_.)ij""':_~---' ~-~ ::J:{~,~~i(~i. <.~_t.a1t.., , :--.e J:ijo~~4dr.'~,~;~(,,A.d4ress 2:.~i::. '.. ~ ;}0itY#S.tate%Ziflf : t')..:>...',"':1<1>". ;i;.m;,.1:~.iii"cti~~i ~~'~i\'lbi&~-~-,;~..., ~_.. ; I --:I J;.:D,....~ ~... it... ~.}Io'~.e1~~::1-7r.\;lV,,-,. ) _ CA priver's LicC11S~ Card No: Expiration Date: _ Physician's Name: Work Address: City, State, Zip: fl~be;(oi'itatted!bv;ii~" o Phone Prescribing Physician's.Informahn D. '1','.' D U.S. postal mall ~------".. _------' Phone#: ( ) Date OfLast Visit: Date (lfnext Visit:...t.-_ Medical Release 1 hereby Authorize my treating Physician, as requh'ed by State and Federai LawS including HlPAA regulations, to release my rnecllcallnformation coneernlng my diagnos,fs, condition, and/or prescription to City ofangels WeI/ness Center and iu duly authorized representatives.

52 , t,l' ~.' '-'.', COA.C - 2 City OfAngeles Collective 2 A Private & Exclusive Organization City OfAngeles CQllective 2" rd Street Unit C South Lake Tahoe, CA As a qualified patient protected by California Law, Health & Safety Code and et seq., and in conjunction with California State Senate BiIl 420, you are required to read and agree to the following statements to become a member ofcoac-2. Please review the following information and understand that these are for the protection of the collective. ;=:'" I)..... ' consent to the benefits provided by COAC-2 and agree to abide by the ~~~~Jh#t{a:1;f~lis~~e).. bylaws, rules, and regulations ofthe Collective. I am. infonned that membership in COAC-2 is a private membership organized under the Mutual Benefit Non-profit Corporation Code ofthe State ofcalifornia and in accordance with CA Health and Safety Code However r acknowledge that my memberl'lhip in this collective. ifaccepted, alone does not warrant the legal use ofmarijuana. I also understood th.at ifat any time I am unableto.meet the necessary requirements to qualify as a member, my membership will be terminated. ~t ~.I'ridi~},.'. '.'-... I..."i~. On~~J,~~W>Y"'ii~S;,,,wP:";fq,.1I.i)';;;'li.I was diagnosed With a "serious medical condition" which substantially limits my ability to conduct one or more major life activities for which the use ofmarijuana provides relief. I understand that as a resident ofel Dorado County, the District Attorney's office has a policy to allow me to cultivate twenty (20) marijuana plants between March 1 and July 31 and ten (1) marijuana plants between August 1 and October as well as possess up to two (2) pounds ofmarijuana between September 1st and February 28 and one (1) pound between March 1 st and August 31st and no more than 10 mature plants and one (l) pound ofmarijuana at any othertime. I understand myrights under the published District Attorneys policy and agree to denounce and void any prior agreements with others and entnlst COAC-2 with the principle responsibility to provide me all the allowable limits ofmedical marijuana that I require..!~~i.ij. I have been informed and understand that acceptance ofmy application is at COAC-2 discretion and that COAC-2 reserves the right to refuse me service(s)....l-' ~I~~~~ I acknowledge that my contributions to the COAC-2, through. products I may acquire fonn the organization, are used to ensure continued operation ofthe COAC-2 and that such transactionin no way constitute commercial promotion:)".- (Jitfm). I understand that as a qualified patient I have the California State Constitutional right to use medicinal. marijuana ifrecommended by a licensed medical physician. Furthermore I acknowledge and accept as true that medical marijuana, although an effective therapeutic agent is illegal under federal law and thereby me~bership and the submission ofan application to join COAC-2 are acts inconsistent with federal law. "_J. _y.'e~1liaj..)... I hereby authorize my -recommending physician to release information regarding my diagnosis and condition to COAC-2.

53 MM MOO'",...,,~_... "~ ;~;~~~~~n Order Number ',,--~ 'J2\a.Y\.~ 'COI~q:D.:L..t' Nature Of Service: Quarterly Billing Current Charges: 09/ /30/11 Recurring Service Amount: $ Tax: $0.00 $ Total Balance Due: I1};Rd r(f~.~ R[~1n\f'1'~'h~' }~~~J!'Hr~ tc:: Knei~~de ydur tnv-oic~ :s':o~.!~d CalL~S{~ r~ d~~~,ay f~.~ Pfl..lC~\~g~h:~.g~Y0irr p~'1jn1i;rnt~ Customer Number: onofi 11.()Oj2:1n(~ Business/Account Name: CITY OF ANGELS 2 Service Address: 989 3rd 8t Unit 3 South Lake Taho, CA I \...J Billing Questions: (877) SaleslRelocation: (800) MonitoringiService:(800) ADT Tax ID Numa.er: How to Read Your'BiD: It's fast and even more important - it's easy! You can """'\ITA ~-;;"'I<'J;l' \,m>..1!!";'u"~'y >'9$.l$. ~... I.!.!.Lul,<:.' :'-'l.f;ii~11 ~,,!\ ;jj11di."i.. paying your bid. Please see the back of your invoice to see how you cad setup your account for automatic payments usiog your bank account! Visit for up-to-date security selvlces Information for your business. Late Fee Policy: A late fee of 1.5% (or highest rate permitted by law, if less) per month will be assessed on the unpaid Total Balance Due when more than 30 days past due. ~ ~ / To pay this invoice and/or future recurring invoice by credit card, follow the instructions on the (back of this invoice. TEST YOUR AL/\RM SYSTEiV! h~ol\~thly TO CONFIR\ 1 Y{}UE SYSTE\-1 IS OPERA.TlON/d... Page' of 6 l.u4t BRE ADT Security Services. Inc E. Exposillon Ave. Aurora. CO 'UucK 'CIIX NO RP.n aaj,uol), IINTNNNNR DDlfL,OIo S1 TlL MB #BWNKFYG # # CITY OF ANGELS RD ST STe 3 SOUTH LAKE TAHOe CA , , "h'''ii',iii,11 IIhllll"IIIIlI,hl'II'I'I'"11JIII Invoice Number: Invoice Date: 08/13/11 Customer Number: Due Date: Upon nef;;::::ji[ Please Pay ~ $ This Amount,.. V MAIL PAYMENT TO V Amount $ Enclosed: _ ADT SECURITY SERVICES INC. Payment Coupon Please detach and enclose this coupon with your payment. Do not P.O. BOX send cash. Please write your customer number en your ch.ck or money order and make payable 10: ADT Security Services. PITTSBURGH, PA servloe account In/ormation, please check here ano enler the new II"'" '11 11 """"1"11"I"','11t,"' ' 11" "1 D If you want fo pay by credft card or make any ci1annes [0 your billing or Information on the back of this invoice _~

54 Plan to monitor & restrict access to dispensary members. To enter our Collective you first enter through our security door into our waiting room. The patient must check in with the person at the window to sign up as a new patient where the employee will verify the doctor's recommendation. Once verified, the patient goes into our data base. From this point every time the patient enters they must check in with the person at the window, after verifying that they are a valid member the patient is let into the Collective.

55 ~S~~J~~. 989 THIRD ST # A... f.

56 DISPLAYCONSPICUOUSLY AT PlACE OF BUSINESS FOR WHICH ISSUED CALIFORNIA STATE BOARD OF EQUALIZATION SELLER'S PERMIT ACCOUNTNUMBER I 5/10/2006 SR KH l L NOTICE TO PERMIFfEE: You are required to obey all Federal and State laws thai tegljlate or conlrol your COAC-2 COLLECTIVE 939 3RD. ST. business. This permit does not allow you to do SOUTH LAKE TAHOE. CA IS HEREBY AtlTHORllfD PURSUANT TO SALES AND USE TAX LAW 10 ENC-.!\GE IN lhe BUSINESS Of SELLING TANGIBlE PERSONAl PIlOI'ERlY AT THE ABOVE LOCATION. lh1s PERMIT IS VIllID ONLY AT THE ABOVE ADlJRESS. THIS PERMIT IS VAUD UNTIl REVOKED OR CANCElID AND IS NOT T!WlSfERAIllE.lF YOU SEll YOUR BUSINESS OR DROP OUT OF A PARTNERSHIP. NOTIFY US OR YOU COULD BE RfSPONSI6LE FOR SAlESAtlD USE TAXES OWED BY THE NEW OPERATOR OF THE BUSINESS. J othejwise. Not valid e/ anyotheraddress For general tax questions. please call our Information Center at For information on your rights. contact the Taxpayers' Rights Advocate Office at or BOE-442-R REV. 15/2000j A MESSAGE TO OUR NEW PERMIT HOLDER As a seller, you have rights and responsibihtles under the Sales and Use Tax Law. In order to assist you in your endeavor and to better understand the law. we offer the following sources of help: Visiting our website at Visiting a district offlce Attending a Basic Sales and Use Tax Law class offered at one of our district offices Sending your questions in writing to anyone of our offices Calling ourtall-free Information Center at As a seller. you have the right to issue resale certificates for merchandise that you intend to resell. Conversely, you have the responsibility of not misusing resale certificates. While the sales tax is imposed upon the retailer. Vou have the right to seek reimbursement of the tax from your customer Vou are responsible for filing and paying your sales and use taxreturns timely.. Vou have the rigllt to be treated in a fair and equitable manner by the employees of the Board." You are responsible for following the regulations setforth by the Board As a seller, you are expected to maintain the normal books and records of a prudent businessperson. Vou are required to maintain these books and records for no less than four years, and make them available ior inspection by a Board representative when requested. You are also expected to notify us if you are buying. selling, adding a location, or discontinuing your business. adding or dropping a partner. officer. or member, or when you are moving any or all of your business locations. If it becomes necessary to surrender tllis permit. you should only do so by mailing it to a Board office, or giving it to a Board representative. If you would like to know more about your rights as a taxpayer, or if you are unable to resolve an issue with the Board, please contact the Taxpayers' Rights Advocate Office for 11elp by calling toll-free or Their fax number is Please post this permit at the address for which it was issued and at a location visible to your customers. STATE BOARD OF EQUALIZATION Sales and Use Tax Department

57 RELElPI' NM3ER: CR ****************************** * CITY CF ~ IAKE 'llhe * * IT>Si REtEIPI' * ****************************** JlfiIANI' ID: RELE1P1'm1E: 11/01/11 RErErVED FKM: GIN) DlM\TIH) my 'TYPE: ex:: rm::ripi'icn KIJ::USll' NM3ER CI\G KE.Y mje CBJ NAME NvO.NI' J:lI.1RiIIID PI:..l>lNOO APfLIC 2, 'IOIT1L $ 2,000.00

58 ****************************** CI'IY OF SlJlH IAKE 'DHE * CASH REtEIPr * ****************************** RB:ElPI' Nl\'HR: ClW98288 A :!IXM' ill: ~i ~: 11/01/11 RB:EIVED :FKN: GINJ DJlIIFfi'IID my 'TYPE: ex: IESCRIPI'ICN.AaI.XNI' NJVI8ER CH3KEY~ CBJ N1M!: JIM:X.NI' PI..A'mIN3 ~APPLIC 3, 'ItJmL $ 3, rn

59 ParceJQues[ Page 1 of5 v Jean lave 150 yds ; i (J MIcrosoft COfpOnlllOn ~ 2010 NAVTEQ ~ AND ParcelQuest.!!! Subject Co I APN 4- Owner 24 EDX OETARR VINCENT B & CORIENNE J 2175 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA ill Col A.f~'" ~ AddL!llili 2 3 4!~,i! 5 6 EDX EOX EOX EOX EOX J.QQ EDX J.QQ THREE RS LLC NV LLC COPE RUTH J TR COPE 0 G BYPASS TRUST SOUTH TAHOE REFUSE CO INC BANK OF THE WEST CENTRAL BANK MOSS ALAN A &PATRICIA C MOSS ALAN A & PATRICIA C Pal'celQucst 2141 JAMES AVE SOUTH LAKE TAHOE CA ELOISE AVE SOUTH LAKE TAHOE CA ELOISE AVE SOUTH LAKE TAHOE CA LAKE TAHOE BLVD SOUTH LAKE TAHOE CA ELOISE AVE SOUTH LAKE TAHOE CA ELOISE AVE SOUTH LAKE TAHOE CA /2011

60 ParcclQucst Page 2 of 5 7 :v EDX BOUDREAU RICH.A.RD & KATHLEEN RUTH 2118 ELOISE AVE SOUTH LAKE TAHOE CA >/ EDX :,/' EDX ROBERTO JOSEPH E -100 TRUDEAU GARY F TR MENDOZA JOSEPHINE R TR 2128 ELOISE AVE SOUTH LAKE TAHOE CA JAMES AVE SOUTH LAKE TAHOE CA EDX ;;;: EDX ,/ -100 WITHROW MAX W & CARMEN E SOUTH TAHOE REFUSE CO INC 2117 JAMES AVE SOUTH LAKE TAHOE CA ELOISE AVE SOUTH LAKE TAHOE CA EOX :1Q.Q BAKER JOHN A 948 3RD ST SOUTH LAKE TAHOE CA EDX SMITH DARIN RAY & L1SEITE MARIA 2193 ELOISE AVE SOUTH LAKE TAHOE CA EDX CITY OF SOUTH LAKE TAHOE 2209 ELOISE AVE SOUTH LAKE TAHOE CA EOX CEFALU JOHN N &JUDY A 2227 ELOISE AVE SOUTH LAKE TAHOE CA EDX STATE OF CALIFORNIA CALIFORNIA TAHOE ~ CONSERVAN '" 17 EDX BANK OF THE WEST CENTRAL BANK ELOISE AVE SOUTH LAKE TAHOE CA LAKE TAHOE BLVD #1&2 SOUTH LAKE TAHOE CA EDX MCGEE KAREN A 2186 JAMES AVE SOUTH LAKE TAHOE CA EOX REDWOOD INVESTORS -MHP 2227 LAKE TAHOE BLVD #A-E SOUTH LAKE TAHOE CA EOX JOHN CEFALU LTD PTNSP 2205 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA EOX DVR LODGING INC A CA CORP 2215 LAKE TAHOE BLVD #2 SOUTH LAKE TAHOE CA EDX :", -100 PERASSO SCOTT & SHERALD 2177 ELOISE AVE SOUTH LAKE TAHOE CA EDX HENDRICKSON GERALD F SUCC HENDRICKSON [v' -100 FAMTROF12/ RD ST SOUTH LAKE TAHOE CA EOX OETARR VINCENT B & CORlENNE J 2175 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA EDX DODGSON LEE 2179 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA EDX PAKES RUDOLPH M II &MARY L 971 3RD ST SOUTH LAKE TAHOE CA EOX HOllAY MARTIN TR HOLlAI MARTIN TR 2183 JAMES AVE SOUTH LAKE TAHOE CA EDX ;}1 BRUNALD ROBERT J CO TR BRUNALO CAROL L 1;;1 ~ COTR 29 EDX BRUNALO ROBERT J CO TR BRUNALD CAROL L -100 CO TR 2176 ELOISE AVE SOUTH LAKE TAHOE CA ELOISE AVE SOUTH LAKE TAHOE CA ;;;1-100 EOX NELSON JEFFREY LYNN & SHELLY ANN 2179 JAMES AVE SOUTH LAKE TAHOE CA EDX KAELIN MATHILDA KA THERINA KAELIN EXEMP TR -100 OF 9/29/ LAKE TAHOE BLVD #1-6 SOUTH LAKE TAHOE CA EDX SHAIKH MUKHTAR & ZAHEDA 2187 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA O&mach= l,&mode=apnl... 9/20/2011

61 P:~rccIQucst Page 3 ofs 33 iv' EOX BRUNALO ROBERT J CO TR BRUNALO CAROL L COTR 2192 ELOISE AVE SOUTH LAKE TAHOE CA ~\l EOX STATE OF CALIFORNIA CALIFORNIA TAHOE CONSERVAN 2193 JAMES AVE SOUTH LAKE TAHOE CA :;' EOX CARR CHARLES W & BEA ANNE 2161 JAMES AVE SOUTH LAKE TAHOE CA [",: EOX COPE RUTH J TR COPE DARREL QTIP TRUST 2142 ELOISE AVE SOUTH LAKE TAHOE CA :'~', FOX CONVERSE PHILLIPS PROP CA 2226 ELOISE AVE #1-6 SOUTH LAKE TAHOE CA I'" EOX MCKEEN MICHAEL S & LORI W 2227 JAMES AVE #1-8 SOUTH LAKE TAHOE CA "~-/l EDX 023-flH2-100 FLYNN TAYLOR GOULD HEATHER 963 3RD ST SOUTH LAKE TAHOE CA EOX LUK TECK CHUO TIONG TIEN HUNG 2214 BARTON AVE SOUTH LAKE TAHOE CA I'" EDX :1QQ MORGAN JACK B & AUGUSTA A 2218 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA V-' EOX HABASH SAMIR & ESTEAR 2180 LAKE TAHOE BLVD #1-7 SOUTH LAKE TAHOE CA EDX WISSMEIER PETER & KARIN 2149 HELEN AVE SOUTH LAKE TAHOE CA :,,:,,; EDX MEHRENS HENNING & LINDA WALKER 2130 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA t~/i FOX :1QQ GIVANT EDWARD D HARRISION EVA MARIE 2122 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA [,ii EOX COURTNEY CYNTHIA L 2145 HELEN AVE SOUTH LAKE TAHOE CA :", EDX CONKLYN KENNETH D 2139 HELEN AVE SOUTH LAKE TAHOE CA '\I' EOX CARR CHARLES W & SEA ANNE TH 5T SOUTH LAKE TAHOE CA EOX :1QQ CARR CHARLES W & BEA ANNE 2148 BARTON AVE SOUTH LAKE TAHOE CA iv' EDX CARR CHARLES W & SEA ANNE 2152 BARTON AVE SOUTH LAKE TAHOE CA "'i EOX HANSEN SVENO TR HANSEN REV TR OF 06/23/ LAKE TAHOE BLVD SOUTH LAKE TAHOE CA EOX BSM SO LAKE TAHOE LLC TH ST SOUTH LAKE TAHOE CA v EOX HANSEN SVEND TR HANSEN REV TR OF 06/23/ LAKE TAHOE BLVD SOUTH LAKE TAHOE CA jv1! EOX CRIST MARIA B HELEN AVE SOUTH LAKE TAHOE CA iv' EOX CITY OF SOUTH LAKE TAHOE 2166 BARTON AVE SOUTH LAKE TAHOE CA EDX EMERALD BAY PROPERTIES CA 2200 BARTON AVE SOUTH LAKE TAHOE CA 96150~ 'vi' EDX ,100 CITY OF SOUTH LAKE TAHOE 2182 HELEN AVE SOUTH LAKE TAHOE CA SIN avmap.aspx?s=47841 O&mach= 1,&modc=oapnl... 9/20/20 J1

62 P~1rce 1Quest Page 40fS 58 tv EOX CITY OF SOUTH LAKE TAHOE 2180 BARTON AVE SOUTH LAKE TAHOE CA i;';' EDX CITY OF SOUTH LAKE TAHOE 2170 BARTON AVE SOUTH LAKE TAHOE CA [oj1 61 ;v' 62 tv EDX EDX EDX CITY OF SOUTH LAKE TAHOE 2176 HELEN AVE SOUTH LAKE TAHOE CA CITY OF SOUTH LAKE TAHOE SOUTH LAKE TAHOE CA CITY OF SOUTH LAKE TAHOE SOUTH LAKE TAHOE CA EDX SCHUE DARRELL E CO TR SCHUE ELIZABETH A 2152 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA ;\1-100 COTR EDX FRIEDERICI PETER K CO TR FRIEDERICI PAUL K 2212 LAKE TAHOE BLVD SOUTH LAKE TAHOE CA ;", =100 COTR f;l 66 r", 67 ij 68 r./ EDX EOX EOX EOX CROFT NANCY A MCKINNEY JAMES K SOUTH LAKE TAHOE CA CROFT NANCY A MCKINNEY JAMES K SOUTH LAKE TAHOE Gil CROFT NANCY A MCKINNEY JAMES K SOUTH LAKE TAHOE CA CROFT NANCY A MCKINNEY JAMES K SOUTH LAKE TAHOE CA fv< EOX :1QQ BELL GARY ALAN & TERRI LYNN 2152 RUTH AVE SOUTH LAKE TAHOE CA [J' EDX BELL GARY ALAN & TERRI LYNN 2144 RUTH AVE SOUTH LAKE TAHOE Gil IJ EOX WOOD KENNETH R & RICHARD BRADY 937 3RD ST SOUTH LAKE TAHOE CA ij. EOX TAHOE BASIN CONTAINER SERV 2160 RUTH AVE SOUTH LAKE TAHOE CA i / 74 i~/ 75 [V! EOX EOX EOX BELL GARY ALAN & TERRI LYNN 936 3RO ST SOUTH LAKE TAHOE CA CITY OF SOUTH LAKE TAHOE HELEN AVE SOUTH LAKE TAHOE CA ZIGLER STEVEN W CO TR ZIGLER MAURA J CO TR RD ST SOUTH LAKE TAHOE CA I\li EOX ZIGLER STEVEN W & MAURA J 2159 JEAN AVE SOUTH LAKE TAHOE CA ivl EDX SODERMAN CHARLES ROBERT 960 LINDA AVE SOUTH LAKE TAHOE CA r;; EOX SOUTHERS DAVID L & PATRICIA M 2188 RUTH AVE SOUTH LAKE TAHOE CA IV' EOX SOUTH TAHOE REFUSE CO INC 2192 RUTH AVE SOUTH LAKE TAHOE CA l..j\ 81 EDX EOX TIEN TIONG H CHUO LUK TECK SOUTH LAKE TAHOE CA ,.. - EDX TRAILER TOWN MOBILE HOME P SOUTH LAKE TAHOE CA JO&mach= 1.&mode=apn1... 9/20/2011

63 ParcelQuest Page 5 of5 83 v: 84 ~( 85 F2 86 l~j EDX EDX EDX EDX O&mach= 1,&mode=apnl... 9/20/2011

64 CITI OF SO. LAKE TAI-IOE POLICE DEPT -/ () Q Paid By G IJ )(/I'lTTcD Amount $... 0~~ _ Date 1-o---jJ _POI Ref No.,k'f,t1-,Jt.IllM Ck_ Cash 'CO "L.t?cT/ t/?._ fl3lj.{f) Tows N~ Bookings Livescan (DOJIFBI) Taxi Permits Taxi Fines l/fvio_ Other Received By D ~ CITI OF SO. LAKE TAHOE POLICE DEPT. Paid By G, j) &771#IJ An1ount$~/~-L _ Date /-/()-/ ~ Ref No./'"/ lie sqfij Ck_ Cash V'fv1O_ -+-PDI LtJLL-- ;Cpt= Tows N2 1822' Bookings Livescan (DOJIFBI) Taxi Permits Taxi Fines Other Received BYA~

65 CATI.. IN COMMON POLICY DECLARATIONS POLICY NUMBER: RENEWAL OF -...loo..4",-0ol'ol ""' L..- _ Catlin Specialty Insurance Company 160 Greentree Orive 4250 North Drinkwater Hull «Company, Inc. Suite 101 Suite West March Lane, Suite 200 Scottsdale Stockton CA95207 Named Insured: City of Angels 2 Mailing Address: 989 3rd St. Policy Period: South Lake Tahoe CA From 11/23/2010 To 11/23/2011 At 12:01 A.M. Standard Time At Your Mailing Address Shown Above. Business Description Medical Marijuana Distribution [!] Individual 0 Partnership or Joint Venture 0 Limited Liability Company o Corporation 0 Organization (Other than one indicated above) IN RETURN FOR THE PAYMENT OF THE PREMIUM, AND SUBJECT TO ALL THE TERMS OF THIS POLICV, WE AGREE WITH YOU TO PROVIDE THE INSURANCE AS STATED IN THIS POLICY. THIS POLICY CONSISTS OF THE FOLLOWING COVERAGE PARTS FOR WHICH A PREMIUM IS INDICATED. THIS PREMIUM MAY BE SUBJECT TO ADJUSTMENT. COMMERCIAL GENERAL LIABILITY COVERAGE PART $ PREMIUM 1, "SEE ATTACHED CA SURPLUS LINES GARAGE LIABLITY COVERAGE PART $ NOTICE COMMERCIAL INLAND MARINE COVERAGE PART $,---- COMMERCIAL PROPERTY COVERAGE PART' $---- CRIME COVERAGE PART EQUIPMENT BREAKDOWN COVERAGE PART LIQUOR LIABILITY COVERAGE PART $---- $---- OWNERS/CONTRACTORS PROTECTIVE COVERAGE PART $---- TRIA COVERAGE $---- TOTAL PREMIUM $ 1, STATE TAX $ ::::..30~.:..:;0~0 OTHER TAX/SURCHARGE $---- STAMPING FEE $... 2""'... 5:..l4 0 POLICY FEE INSPECTION FEE $---- Broker Fee $...1""'5,:49r.:o' O~O $---- TOTAL ADVANCED PREMIUM: $ 1, FORMS APPLICABLE TO ALL COVERAGE PARTS (SHOW NUMBERS): SEe ATIACHED FORMS SCHEDULE THEse DECLARATIONS, TOGETHER WITH THE COMMON POLICY C~1TI0NS AND COVERAGE FORM(S) AND ANY ENDORSEMENT(S), COMPLETE THE ABOVE NUMBERED POLlCV.,tr~, 4 ~ Countersigned: Stockton CA By: ~.-- "_~..;......_ (Date) (Authorized Representative) ~ Retail Producer: Greater Sierra Insurance services, Inc Ski Run Blvd., Ste 1 South lake Tilhoe. CA DATE ISSUED: 12/06/10 LKG ASAP ISO Properties, Inc., 2001 Page 1 of1

66 ."'I'If""' roiii:v NUr\:H[ H GRANITE STATE INSURANCE COf1PANY we _...--_..._ _ '" CalTY OF ANGELS 2 (A CORP) 9 9 3RD ST. SOUTH LAKE TAHOE, CA see EXTENSION OF ITEM 1, OF THE INFORMATION PAGE WC # r.a I lib ' CHARTISG A Chartis company EXECUTIVE OFFICES: 176 Water Street New Yorlc, NY l'iw,jljcrll', NAM~ AND,\lJIJllbS BUILDERS & TRADESHENS INS SVCS WORKERS COMPENSATION AND EMPLOYERS 6610 SIERRA COLLEGE BLVD UABIUTY POUCY INFORMATION PAGE ROCKLIN. CA INSUREiA'f IPREVIOUS POLICY NUMBER CORPO ION RENEWAL 00 "" In"4 10 OTHER WORKPLACES NOT SHOWN ABOVE: SEE EXTENSION OF ITEM 1. OF THE INFORMATION PAGE WC ITEM 2 POLICY PERIOD U:Of A.M tand.,d time althe Inau,ed'. "'ailing adllra FROM 03118/11 TO 03/18112 ITEM 3 A. WOIkera Compensation Insurance: Part One of the policy applle, to the Workera Compensation Law of the atatea lieted here: CA I B. Employers Uability Insurance; Pert Two of the polley appll.s to Ihe work In each slate listed in item 3.A. The limits of our liability under Part Two are: Bodily Injury by Accident $ 1,000,000 each Kcident Bodily Injury by Disease $ 1.00o,ogo policy limit Bodily Injury by Disease $ 1.00D,OOO each employee ITEM" C. Other States Insurance: Part Three of the policy applies to the atatea, if any. nsted here: AK AL AR AZ CO CT DC DE Fl GA HI IA ID IL IN KS KY LA MA MD ME HI HN MO HS HT NC NE NH NJ NH NV NY OK OR PA RI SC SO TN TX UT VA VT WI WV D. This policy includes Ihese endorsements and schedules: see EXTENSION OF ITEM 3.0. OF THE INFORMATION PAGE WC The premium for thl, policy will be determined by our Manuala of Rules, Classifications, Rates and Rating Plans. All information required below I, subject to verification and change by audit. Oassiflcallons Old. Numb.. A'emIUQ1 Basis IOOolai RBmuOlllion Annual 3 Year RIta Par $fodof Re. mud.r.tlon EsUnlated ~en~uh1 I 00 Annual lj 3 Y.~( SEe EXTENSION OF ITEM 4, OF THE INFORMATION PAGE WC7754 TAXES/ASSESSMENTS/SURCHARGES $534 EXPENSIi CONSTANT (EXCliI"T WHERE APPLICA8LE BV ITA'l1il $230 CA MINIMUM PREMIUM $750 CA TOTAl. EallMA1ED ANNUAL PREMIUM $9.64 J o Semi- Annually 0 OJarterly o Monthly DEP08ITPREMIUM If Indicated below, interim edjustm8ni$ of premium shell be made: 02/15/11 PHOENIX 52 IAtwo Deto ' ulng Office AUlhorlzod Repruenlallve we A 3llD67 (~v'd 04108)

67 Applicant's Certification I Gino DiMatteo swear under penalty of perjury that I have personal knowledge of the information contained in the Phase One and Phase Two applications submitted by City of Angels and myself, and the information contained therein is true and correct. The applications have been completed under my supervision. Gino DiMatteo Date

68 JERRY AVETISYAN, CPA TAX SPECIALIST & BUSINESS CONSULTANT COAe 2 Collective City of Angeles ,d St South lake Tahoe, CA Dear Mr. Tony 0., Per our conversation on 12/26/11, the city has requested the corporation to prepare an Annual Budget for 2011 in consideration for city's Medical Marijuana permitting regulations. However, since the corporation has up to date bookkeeping records, you agreed to accept Its up to date Profit & loss Statement and Balance Sheet for year 2011 Instead of Annual Budget (which would present budget instead of actual figures). As such, enclosed please find the corporate Profit & Loss Statement and Balance Sheetfor period 1/1/U-12/31/11.lfyou have any questions or need additional information please do not hesitate to contact me. \/17 ( I~ 1415 E. Colorado St, Suite 211 Ph: Fax: Glendale, CA jerry@avetlsyancpa.com

69 COAC 2 Collective DBA: City of Angels 2 Profit & Loss January through December 2011 Gross Revenues Gross Donations Inventory Expenses Gross Profit Expenses Auto Expenses Business Reglsttatlon Fees Charitable Contributions Contract Services Accounting Fee. LegalFe.. Contract Services Other Total Conttact Services Facility Fees Free Food Donations to Public Health Insurance Operating Expenses Advertising Cell Phone Postage, Mailing Service Rent Bank and Merchant Fees Supplies Utilities Total Operating Expenses LIability Insurance Worke,.. Compensation Payroll Expenses Payroll Processing Payroll Expenses - Other Total Payroll Expenses Sales Tax Payments Travel and Meeting Expenses Total Expanse Net Income , , , , , , ,07 24, , , , , , , , ,

70 COAC 2 Collective DBA: City of Angels 2 Balance Sheet As of December 31,2011 ASSETS Current Assets Ch8CklngiSlIVlngllPetly Calh PettyCaah Weill Fargo Total CheclclnglSavlnglfPetty Cesh TolIl Current Aue. Fixed Asseta Furniture & Equipment Computer DVDPlayer Frldae OffIce Fumlture Snow Removal Total Fumlture & Equipment Total Fixed Assets Other Alaets Other Alaets Total Other As._ TOTAL ASSETS LIABILll1ES & EQUITY LlablllUes Current Llabilltle. Other Current LIabilities Loan from Officer Total Other Current LIabilities Total Current L1ebllltla. Total Liabilities Equity Opening Balance Equity Unrestricted Net Aseata Netlncoma Total Equity TOTAL UABIUTIES &EQUITY Doc 31, , , , , U , , , ,478.83

71 201 0 TAX RETURN Government Copy Client: Prepared for: COAC COAC-2 COLLECTIVE CITY OF ANGELS 989 3RD ST SOUTH LAKE TAHOE, CA Prepared by: Jerry Avetisyan JERRY AVETISYAN CPA 1415 E COLORADO BLVD STE 211 GLENDALE, CA Date: September 15, 2011 Comments: Route to: FDIL2001 L

72 JERRY AVETISYAN CPA 1415 E COLORADO BLVD STE 211 GLENDALE, CA September 15, 20 II COAC-2 COLLECTIVE CITY OF ANGELS 989 3RD ST SOUTH LAKE TAHOE, CA Dear Client: Enclosed is your 2010 Federal Corporation Income Tax Return. The original should be signed at the bottom of page one. No tax is payable with the filing ofthis return. Mail the Federal return on or before March 15, 20 II to: DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE CENTER OGDEN, UT Enclosed is your 2010 California Corporation Franchise or Income Tax Return. The original should be signed at the bottom of page two. There is a balance of $829 payable by March 15, 20 II. Mail the California return on or before March 15, 2011 and make check payable to: FRANCHISE TAX BOARD P.O. BOX SACRAMENTO, CA Your estimated tax schedule for 2011 is listed below: Due Date Please be sure to call ifyou have any questions. Sincerely, California 4/15/11 $ 800 6/15/11 o 9/15/11 o 12/15/11 o $ 800 Jerry Avetisyan

73 Form at bottom of page. Installment 1 - File and Pay by the 15th day of the 4th month of taxable year. When the due date falls on a weekend or holiday, the deadline to file and pay without penalty IS extended to the next business day. If no payment is due, do not mail this form. WHERE TO FILE: Using black or blue ink, make check or money order payable to the 'Franchise Tax Board.' Write the corporation number and '2011 Form 100-ES' on the check or money order. Detach form below. Enclose, but do not staple, payment with form and mail to: FRANCHISE TAX BOARD PO BOX SACRAMENTO, CA Make all checks or money orders payable in U.S. dollars and drawn against a U.S. financial institution. PAY ONLINE: Beginning November 2010, corporations can make paymenls electronically at the Franchise Tax Board's website using Web Pay. After a one tlme online registration, corporations can make an immediate payment or schedule payments up 10 a year in advance. For more information go 10 ftb.ca.gov and search for web pay. DETACH HERE IF NO PAYMENT IS DUE OR PAID ELECTRONICALLY, DO NOT MAIL THIS FORM DETACH HERE _ Installment 1 TAXABLE YEAR CALIFORNIA FORM 2011 Corporation Estimated Tax 100 ES COAC TYB TYE FORM COAC-2 COLLECTIVE CITY OF ANGELS 989 3RD ST SOUTH LAKE TAHOE CA Est Tax Amt 800. QSub Tax Amt Total Payment Amt CACAOSOIL 12/07110 Form 100-ES 2010

74 Form 1120 Depcu tment of (he Treasury Internal Revenue Service A Check if: 1 a Consolidated relurn 0 (allach Form 851).. U.S. Corporation Income Tax Return For calendar year 2010 or tax year beginning,2010, ending See separate instructions., _ OMB No B Employer identification number b life/nonlife consoli 0 Print COAC-2 COLLECTIVE C Date incorporated daled relurn... or CITY OF ANGELS 2 Pe,sonal holdin9 co 0 type 989 3RD ST 7/10/2009 (altach Sch PH)... SOUTH LAKE TAHOE, CA Total assets (see instruct,ons) 3 Personal service 0 co'p (scc instr)... $ 19, ;~~~~~:M.3... r 1E Check if: (1) r '1 Initial return (2) I I Final return (3) I Name change (4) I 1Address chanae I N C o M E _.".. o F E 0 SR C ~ T ~ 1 a Gross receipts or sales I 463, b Less returns & allowances.1 Ic Balance. ~f---1.:..c=+- --,4:..:6c-:3::...!...,..:.0.::::2'.::8:...:,:... 2 Cost of goods sold (Schedule A, line 8) i----=2::..-t -:1:..::9:-:4:.l,~4:_:9:_.:6:_:. 3 Gross profit. Subtract line 2 from line 1c f---3= '2=6..:.8.L,..=5-=3:..:2:..:.:... 4 DIvidends (Schedule C, line 19),.... f---4-'---1f Interest.... ~5~1- _ 6 Gross rents f--6~1-- _ 7 Gross royalties.... f--7~ Capital gain net Income (attach Schedule D (Form 1120)) ~8:::'-1- _ 9 Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) 1-9:::.-1- _ 10 Other income (see instructions - attach schedule) ~l~o-+ -=-~--=-::-:=-- 11 Total income. Add lines 3 through ~ ,532. '.,-z-compensation of officers (Schedule E, line 4).... ~12;-1- ~10~8,~ 67;.;'1~. 13 Satanes and wages (less employment credits).... f-:: :..7.;;:9.l,--i4;-;6;-;7~.: Repairs and maintenance ~14~1--- -=1..Lc::8:..:2:..:8:...: Bad debts... '" Rents.... ~16~------:;1C-:6;:-,--;5;;-;7:;C5;: Taxes and licenses... ~1.: :.7--,4:...:... o 1 18 Interest.... ~18~1--- ~~ N T 19 Charitable contributions.. ~19~ '0:...:... S b 20 Depreciation from Form 4562 not claimed on Schedule A or elsewhere on return (attach Form 4562).. f-=2:=.0-+ _ s ~ I 21 Depletion , ~2.: :--:---::-:::-:-_ ~ 0 22 Advertising ,036. I N 23 Pension, profit-sharing, etc, plans ~2~ '::":::'L..=-=:":::':" ~ ~ 24 Employee benefit programs f-=:24~f-.-:::5.l,..=5-=5:..::3::.:... ~ 3 25 Domestic production activities deduction (attach Form 8903) =:----t-- -;::-:;;-;:;-;:;~ g ~ 26 Other deductions (attach schedule) See..Statement i-'2~6~---2-::-7968~ll7-=-9=-00.;.04..:... T I 27 Total deductions. Add lines 12 through ~f-~27"----1f-----='~"'--;;e:::-;;-;- I 0 3 ~ ~ 28 Taxable income beforenet operating loss deduction and special deductions. Subtract line 27 from line] f-=2::::8-+ -~2=.L,..=3:..:7~2::.:... s 29 Less: a Net operating loss deduction (see Instructions) 1f-=2:=.9..:.a-l-I..,. ~b~s~;p~le:.:::c::::ia.:...1::::de::::d::.::u:.:::ct~lo:::.n:.:::s~(,:::s~ch:.:.:e::.::d:.:::u:.:::le~c~,~i~m..:.e~2:=.0)l :...:...:.. :...:.' '---,-,";".:.c'..:....:.c...:.....:...:...:.' '..:..':...:.' '..;.'..1-.=2:=.9=b'--- -+=29~c=t- -;::-;:;---:;:;-;:;-;:;- l 30 Taxable income, Subtract line 29c from line 28 (see instructions) f-3~0~ -...:2=3L'.:::3~7..;2:-:.:... x 31 Total tax (Schedule J, line 10) r3=.:1'--1-0.::...:... i ~ 32~ ;~~~ :~~~:i~~~~ c;:~~:~:~2010:: ~ I' ~ D c 2010 refund applied for on Form ". OOd Bal. 32d O. ~ P e Tax deposited with Form e A f--==...:..f i ~ ~ I Credits (1) ~3~' (2) ~?3~ r-32-1-t-- -t E ~ 9 Refundable credits from Form 3800, line 19c, and Form 8827, line 8c h O. ~ ~ 33 Esllmated tax penally (see instructions). Check if Form 2220 is attached ~ U f-..:.33=-1-- _=_ ~ 34 Amount owed. If line 32h smaller than the total of lines 31 and 33, enter amount owed f-=34,:-f--- -=0:...:..:... ~ 35 Overpayment. II line 32h is larger than the total of lines 31 and 33, enter amount ove~paid, f-=3s::--t- _ s 36 Enter amount from line 35 you want: Credited to 2011 estimated tax.... ~ I Refunded. 36 Sign Unde' penau'es elf perjury. I declare Ihal I have exam,ned this relurn, includi"9 accompanying schedules and stalements. and to the best of my knowledge and belief, It IS tllle. correct. and complele. Declaration of preparer (other Ihan laxpayer) 's based on all information of wh,ch preparer has any knowledge. Here ~ -::--:--...,...---;:c ll----_ ~ Signature of officer Dale ::n::7 l1ē May lhe IRS discuss this return with the preparer Shown below t (see Fxl~;:nn No PrinllType preparer's name Ipreparer's si9nalufe IDale Check U if IPTIN Paid Jerrv Avetisvan Jerry Avetisyan self employed P Firm's name JERRY AVETISYAN CPA Firm's EIN Firm's address 1415 E COLORADO BLVD STE 211 GLENDALE, CA Phone no Preparer Use Only BAA For Paperwork Reduction Act Notice, see separate instructions. CPCA0205L 03/02111 Form 1120 (2010)

75 ~- -_._~--- Form 1120 (2010) COAC-2 COLLECTIVE Page 2 L$chedule A ICost of Goods Sold (see instructions) 1 Invenlory at beginning of year. 2 Purchases.. 3 Cost of labor. 4 Additional section 263A costs (attach schedule). 5 Other costs (attach schedule).. 6 Total. Add tines 1 through 5. 7 Invenlory at end of year.. 8 Cost of goods sold. Subtract line 7 from line 6. Enter here and on page 1, line 2. 9a Check all methods used for valuing dosmg Inventory: , , , ,496. (I) ~cost (Ii) Lower of cost or market (lit) Other (Specify method used and attach explanation.) _ b Check if there was a writedown of subnormal goods '.. : 0 c Check if the LIFO inventory method was adopted this lax year for any goods (if checked, attach Form 970). 0 d :~ol~l~~i:~~~~:~~~omethod ~a~.us~d for this tax year, enter percenlage.~or ~~ou.n.ts).~t. ~IOSi~.9 inventory I 9d I e II properly IS produced or acquired for resale, do the rules of section 263A apply to the corporation? ~ f Was there any change in determining quantities cost or valuations between opening and closing inventory? If 'Yes,' attach explanation..' ,.., ,...,,... ".,.., nyes!xl No ~edule C I Dividends and Special Deductions (see Instructions) 1 DIVidends from less-than-20%-owned domestic corporations (other than debt-financed stock) , (a) Dividends received 2 DIVidends from 20% or-more owned domestic corporations (other than debt financed slock) , Dividends on debt-financed stock of domestic and foreign corporations.....,..... see instructions 4 Dividends on certain preferred stock of less than 20%-owned public utiltbes., Dividends on certam preferred stock of 20% or more-owned public utilities Dividends from less than-20%-owned foreign corporations and certain FSCs DIVidends from 20% or-more-owned foreign corporations and certain FSCs DIVidends from wholly owned foreign subsidiaries Total. Add lines 1 through 8. See instructions for limitation......, 10 D'Vidends from domestic corporations received by a small business investment company operating under the Small Business Investment Act of , Dividends from affiliated group members......, DIVidends from certain FSCs Dividends from foreign corporations not included on lines 3, 6,7,8,11, or Income lrom controlled foreign corporations under subpart F(attach Form(s) 5471) FOleign dividend gross-up f-- 16 IC-DISC and former DISC dividends not included on lines 1,2, or Otller dividends....,..., Deducllon for dividends paid on certain preferred stock of public utilities....., Total dividends. Add lines 1 through 17. Enter here and on page 1, line ,. ~ 20 Total special deductions. Add lines 9, 10, 11, 12, and 18. Enter here and on page 1, line 29b ~.~hedulch~compensation of Officers (see instructions for page 1, line 12) 1 (a) -- -_. Name of officer --'...,,"---' -_ (b) Percentage Note: Complete Schedule E only if total receipts (line la plus lines 4 through 10 on page 1) are $500,000 or more. (b) \c) Percent of Percent of corporation stock owned Social security number ime devoted to business (d) Common (e) Preferred % % % % % % % % % % % % % % % Z Tolal compensation of officers......, " 3 Compensalion of officers claimed on Schedule A and elsewhere on return Subtract line 3 from line 2. Enter the result here and on page 1, line ~ (c) Special deductions (a) x (b) (f) Amount of compensation " Form 1120 (2010),, CPCA0212L

76 Fonn 1120 (2010) COAC - 2 COLLECTIVE ~J:teduleJ ITax Computation (see instructions) 1 Check if the corporation is a member of a controlled group (attach Schedule 0 (Form 1120» ~U 2 Income lax. Check If a qualified personal service corporation (see instructions) ,......,..,...,,...,.... ~D 2 3 Alternative minimum tax (attach Form 4626) _ Add lines 2 and , , ,,..., , a Foreign tax credit (attach Form 1118)...,., Sa b Credit from Form 8834, line 29.., ,.... c General business credit (attach Form 3800)., ,....,..... d Credll for prior year minimum tax (attach Form 8827)...., e Bond cledlls from Form 8912, ,...,..., Total credits. Add lines 5a through 5e., '", '" ,... ' Sublract line 6 from line 4.,.....,.,..., , Persunal holding company tax (attach Schedule PH (Form 1120»..,,.., Other taxes. ~Form Form Form 8697 Cllcck if from: Form 8866 Form 8902 Other (att schedule)... ',, Total lax. Add lines 7 throucjh 9. Enter here and on paae 1, line ,......,... ",......,. ' ISchedule K I O!her Information (see instructions) 1 Chcck ilccuunting method a ~Cash b DAccrual c DOther (specify).. Yes See IIle instructions and enter the: a BusJ{,,::;s activity code no." _4~.ljl.Q b BLJ~;Jness activity.. HEALTHCARE C Pioduci or service.. ~~~~T~~~ 3 Is Ihe corporation a subsidiary in an affiliated group or a parent-subsidiary controlled group?...,..., ' ,... If 'Yes.' (;nler name and EIN of the parent corporation..,.. 5b Sc Sd 5e At Ihe,'nd of the lax year: a Old il:;'/ foreign or domestic corporation, partnership (including any enti7, treated as a partnership), trust, or tax-exempt ()r~<.l"',:ijlion own directly 20% or more, or own, directlre or indirectly, 50 Yo or more of the total voting power of all classes of Ill(' co: poration's stock entitled to vote? If 'Yes: comp ete Part I of Schedule G (Form 1120) (attach Schedule G)...,, ' "... b Did ;IIlY individual or estate own, directly 20% or more, or own directly or indirectly, 50% or more of the total voting power of all CI;15'/"; of the corporation's stock entitled to vote? If 'Yes: complete Part \I of Schedule G (Form 1120) (attach Schedule G)... 5 AI the end of lhe tax year, did the corporation: --, a Own (IHcc!ly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled (0 vol" of <lny foreign or domestic corporation not included on Form 851, Affilialions Schedule? For rules of constructive OWflCI~ 'lifl, see Instructions.,....., , ,...,.,., ,.. "..,..... If 'y, '(,omplete (i) through (iv) -~~ - _.._ ,- _.-. --""', (i) Name of Corporation (ii) Employer Identificallon Number (if any) (iii) Country of Incorporation Page 3 I:', J!.l :. ~;;~; O. O. O. No X (iv) Percentage Owned in Voting Stock " X X X - _.. '~ ,---_ BAA Form 1120 (2010) CPCA0234L

77 Form 1120 (2010) COAC-2 COLLECTIVE Page 4 rne!i~.!hj Ie K Continued ~~---'::'="=:-':":::"'::=-= b Own c1"eclly an interest of 20% or more, or own. directly or indirectly, an interest of 50% or more in any foreign or domestic parlnership (including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership see Instructions,,.,, ',, "..,,... X If 'YC0,' complete 0) through (iv) '- (ii) Employer Identifica (iii) Country of (iv) Maximum (i) Name of Entity tion Number (if any) Incorporation Percentage Owned in Profit, Loss, or Capital t t ji ~_._--._ j t DurlJl'1 Illis lax year, did the corporation pay dividends (other than stock dividends and distributions In exchange for stock) in CXCi:~,S or the corporation's current and accumulated earnings and profits? (See sections 301 and 316.) _. X If 'Yes,' llie Form 5452, Corporate Report of Nondlvidend Distributions. If 1I11s is a consolidated return, answer here for the parent corporation and on Form 851 for each SUbsidiary 7 At ihiy time during the tax year, did one foreign person own. directly or Indirectly, at least 25% of (a) the total voting power of all c1as~;es of the corporation's stock entitled to vote or (b) the total value of all classes of the corporation's stock?, I---_J-----=X-=- FOI lilies of attribution see section 318. If 'Yes," enter: (i) ["(:rcentagc owned ~ and (ii) Owner's country ~ _ (c). ~ ": corporation may have to file Form 5472, Information Return of a 25% Foreign Owned U.S. Corporation or a Foreign COl 1':\1 <l1:on Engaged in a U.S. Trade or Business. Enter the number of Forms 5472 attached ~ 8 Check Ihis box if the corporation issued publicly offered debt instruments with original Issue disc~~n~ ~ ~ ~ ~ ~ ~ ~ ~ -; 0 II cl:<k':r!. the corporation may have to file Form 8281, Information Return for Publicly Offered Origmallssue Discount Instruments. 9 Enl.1 :11<.: amount of tax exemptlnterest received or accrued during the tax year ~ $ N.Q~e 10 Enli;1 lire number of shareholders at the end of the tax year (If 100 or fewer) ~ _ 11 If III" cliporillion has an NOL for the tax year and is electing to forego the carryback period, check here, ~ ~ If II" 'I :'''':\lion is filing a consolidated return, the statement required by Regulations section (b)(3) must be au;l ': ".1 :lle election will not be valid. 12 Entei iile d,allable NOL carryover from prior tax years (do not reduce it by any deduction on line 29a.)~ $ N_oni '.., 13 Are:1 '" corporation's total receipts (line 1a plus lines 4 through loon page 1) for the tax year and its total assets at the end of \I.~ 1:.IA year less than $250,000?. '..,..,.. '.'",..,., ' ',,' " ',. f-~t---=-x=-- II Yi:~;.' li'l: corporation is not required to complete Schedules L, M-l, and M 2 on page 5. Instead, enter the:'! '!,',,"unt of cash distributions and the book value property distributions (other than cash) mali.. : l'iii','.) the tax year. ~$ _ 14 Is II,,; COl poration required to file Schedule UTP (Form 1120), Uncertain Tax Position Statement (see instructions)?,,.. '... f--t---=-x-=- If Y.:.' ctjlllplete and attach Schedule UTP. Form 1120 (2010) CPCA0234L

78 ---~ ~ F orm' 20 (20\0) COAC-2 COLLECTIVE Page 5 I Balance Sheets per Books Beginning of tax year End of tax year []chedule --- L, Assets Cash....., ,,... 2a Trade noles and accounts receivable.. bless allow.lnce for bad debts Invclllorics U.S (Jovi.'~nment obligations a:< (~xelll:)1 securities (see instructions)... 6 Othel current assets (attach schedule),......, Lo,JIIS to sljill'eholders Moil~lage :IJ Id real estate loans, Otlle: investi eills (attach schedule).... oa l3u1: ~:Ings and other depreciable assets ,099. b Le~. ilccl'mulated depreciation...., 3,099., a Dcp,dabi" assets, bless accljlllulated deplelton..., l~and (net e,[ any amortization)... 3a Inl;'"gible.';sets (amortizable only),. b Les:, accl!;lulated amortization.,.., , 4 Ollv:' :lsscls (attach schedule) Tol 'ass<'ls _... -,.. - L'"bililocs and Shareholders' Equity, 6 Accounts ; ;lyable., '" Mal :,:Jges,,. '.'i, bonds payable in less than 1year...., ':[ curren' ~!b\lltles (attach sch)......, 9 Lon'ls fro'",hareholders ~., Mor' :HJCS, I' I"S, bonds payable in 1 year or more... 2, Otll' iabtli",:s (attach schedule)., Cit: "ill s!'ek: a Preferred stock b Common stock ~. ' _. '0' 23 AcJe'dlonal ";lid-in capital I?el':j, led e;li :5 - Approp (at! sch) Ikl,,;ned 'nlngs - Unappropriated...,... 26!\{l!f! I t to 51l, ':'olders' equity (all scl1), Le~;, cosl,\ treasury stock.., ,.. 28 ro: ' lial1! '~I()S and shareholders' equity... ~-- jscl;d"ie ly1-lj Reconciliation of Income (Loss) per Books _ StJ ':emc' t Ad :"'(~'.~ ~, and 3~ ~ '. (a) " " r (b) 1,322. 1,322. 1, With Income per Return '-~" Note: Schedule M 3 required Instead of Schedule M l If total assets are $10 million or more - see Instrucllons (c) 20, , Ne! 'ilcon., (loss) per books '" Income recorded on books this year not a Depreciation.. $-_._ b Charitable contribns $ (d) 1, , , , , Fe""I,II" 0 Ine tax per books... ~.., ' included on this return (itemize):.'. " 3 Exr:,ss 0:.~;lpital losses over capital gains.. Tax~exempt Interest $ IrIC,: IliC ~,' )ICct to tax not recorded on books Till (1mize): 5 EXI I1SC~ ccorded on books this year not decl dec\,i) lhis return (Itemize): b CIJJ~,,:)10 ' 3 O1l1'~' '" c " (itemize): n... $ J-1L4... ~~,::ljulions.. $ 1~L33.!~ 8 Deductions on this return not charged against book income this year (itemize): I "!::,nmenl.. $ , Add lines 7 and 8...,.. '... O. 6 I\cl :,nc~. '!lrough 5...,..., Income (Daae 1.line 28) - line 6 less line 9.,. ' -23,372. I Sche~~:!L,;c r, 2 I Analysis of UnaDDropriated Retained Earnings per Books (Line 25. Schedule L), l3ai :lce:' tl(lginning of year..,. ' Nc)! i":n, (loss) per books...,.,... -, , Distributions.,.... a Cash... b Stock c Property.. 6 Other decreases (itemize): 7 Add lines 5 and 6..., Balance at end of year (line 4 less line 7).,..,. ~ 18,344. CPCA0234l 01/19111 Form 1120 (2010) ",n,

79 .,~ Form 4 r:'.").,1, ',_ Depreciation and Amortization (Including Information on Listed Property) Department ci the T't'.1sury 9 TCII!,JiIV' 10 C,J", 11 Gil,;' 12 Sec! 13 ClIT, OMS No, 1545, Attachment Iniornallle',,, ""0 So",ce (99) ~ See separate Instructions. ~ Attach to your tax return. Sequence No, 67 Name(s) Sllt!.vn on l' '''':''d:''n-~.i-l------==:'':::::j:.:=~=::':::==::'''''_-==::::::~:.l:=-=:::'':';=':':':':-----i-:i-:-de-n-'-tify~i::::ng::!::n::::u~m':'b:':'er:::""~-- j::oa_c-=-]. C:C :.:.-:,L-c::E,-",C-,;-T=-IV"-=E~--,--,-=2,-,-7_-0.=...6::..::2:.=2=-=0-=.4.=-3 _ 8lrSilless 01 "cllvll} io which this form relates Form 111'() Le:art 1- " -'c-:t7"io-n-:t="o--=e-xp-e-n-s-e""'::c=""e-rt7""a"':'"in'""""=p-ro-p-e-=rty:--:'u7"n-d:""e-r":s-e-=ct:':"'io-n-=':":7:::9: :=!.~',ie: If you have any listed property complete Part V before you complete Part I 1 M,lXHllltill;lInount (see instructions).,,,,,...., :; [ C' "I "\ section 179 property placed in service (see instructions), Thresllu\ l u 1st of section 179 property before reduction in limitation (see instructions),,..., '.,,.,., l{e(,l('lio, In limitation, Subtract line 3 from line 2. If zero or less, enter -0,,,, ' ",,...,..., Dol"'!' 'Itation,lor tax year, Subtract line 4 from line 1, If zero or less, enter 0, If married filing 'C() Illstrucltons,,, ',,,, " """""""""""",.""""""",.""""""",... 5 G (a) DeSCription of property (b) Cost (business use only) (c) Elected cost -_. 5-Yea:-y)MPUTER 5,174. 5,174. ~ 7-Yea ;' lrniture AND ---, EQUIPMENT 12, , LI~I,'d,' rty, Enter the amount from line 29,,,... ", """I O. 8 Tol;JI ci Note: /]0! [fart II j 'lld cost of section 179 property, Add amounts in column (c), lines 6 and 7",, " ' ". " deducllon, Enter the smaller of line 5 or line 8, ",..., ", 9 of disijllowed deduction from line 13 of your 2009 Form 4562,., " lome limitation, Enter the smaller of business Income (not less than zero) or line 5 (see instrs)., 11 ' ) ('xpcnse deduction, Add lines 9 and 10. but do not enter more than line 11,,,. ',.,, dls:ll1owed deduction to Add lines 9 and 10, less line 12"""" ~113 ' '~atl II or Part III below for listed properly Instead use Part V 17,409. '(;ial Depreciation Allowance and Other Depreciation (Do not include listed property,) (See 500, ,409. 2,000,000. O. instructions.) 500, , ,409. O S~)<":I" 1'lX. ' :,' [1>"!!! III 17 Mllr, ;PI eciillion allowance for qualified property (other than listed property) placed in service during the " inslructions),......,,......, I','Cd lo section 168(f)(1) election,,,.,...., " ,.... ~';on (including ACRS),, ' ,... _ ', Depreciation (Do not Include listed property.) (See Instructions) Section A,,["1' IS lor assets placed in service In tax years beginning before 201 Q,, B If ',' 1I < '-ls:!; -.J 9 a 3'yc 'I' b 5:\" _ ~/'Y'..-J~ : ~'L d IlJ "')~\ ~J S,)" 10 ily f 20\ r(; _.JL?~\ h Res, 'c IHe;' 'I' i No;,'''' pic 20a CI,)' "Ii "",llllcj g(b)... to group any assets placed In service dunng the tax year Into one or more general c',' heck here,, "",,,,,,',,,,',,,, " ",, " " '.', "... Section B - Assets Placed in Service During 2010 Tax Year Using the General Depreciation System ~ (c) Basis for depreciation (d) (e) (f) "Iy year placed (business/investment use Recovery period Convention Method In service only - see instructions) I,, _. ", ", ", vrs S/1 d 27.5 vrs MM S/ vrs MM S/1 eal 39 vrs MM S/1...,, MM 5/1 -, S('clion C -... ~12, ",... c 1)0\,,',. [tart IV j.1 ry (See Instructions,) 21 L'i" 22 Tui Ihe' 23 For UI(~ '1" Assets Placed in Service During 2010 Tax Year Using the Alternative Depreciation System S/1 12 vrs S/1 40 vrs MM S/1 enter amount from line 28,,,,,,,,,,, ",,,,,,, ",. ', '", " ", (g) Depreciation deduction '. from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21, Enter here and on " 0.1 your return, Partnerships and Scorporations - see instructions,,,,.,,.,,,, "r"":"':-',-+-,--,-,-,--,-,-,-,--,-,--,-,-,-,-,-,-..;.l~22~\-- -:-~ ~ \. 'J,lbove and placed in service during the current year, enter I I!lilSis attributable to section 263A costs""",.,.",,,',,' "" 23 eduction Act Notice, see separate instructions. FDIZ0812L 10129/10 Form 4562 (2010) 21

80 2010 Federal Statements COAC 2 COLLECTIVE Page Stat,"'I' Form..0, Line 26 Other 'dl!clions ACCll:,' i; CJ. Au t "l': Truck.... 8M:, : J MERCHANT FEES... BUS];" EXPENSES. Ins~:: ',~. LerJ.:. I Professional fvlisc z:'tture.. Out~;: ;ervices.. PO';'. Sec'" I. SUI Telc. ( Trin;, Ut ~ : '".... $ /850. 4/440. 1/ / , , / , , ".,,.- ~1~6L"O~l~S~. Total ==$===6=:8::::!/:::::::7=0=O",,' SI; FOIlI all CI Schedule M 2, Line 3 ases rum ENTRy. $ 77,144.

81 TAXABLE Y' '" California Corporation 2010 Franchise or Income Tax Return 1'01' calendar y(), or fiscal year beginning month day year, & ending month day year Cor~oral-i~I~1l' ~- - CA corporation number COAC-2 CJ LLI;:C'l'IVE CITY OF ':";i<i,s f:t,jej-re-ss-(-s,-rite-,-re, '1,I 1'['111\ r;;)~~~~~~~~~~~~~~~-~~----~-~~~--~~----+'f~e:;';:in':-::"'::"':::'-= State ZIP Code FORM 100 ~;o UT II.Y''':,'...:l'; I-=-O-=E:L,---=C:.:.;A:...::9'-'6:..:1:..:5:...:0' , ---'-- ~ '_' t Schedule Q ()licslions (continued on Side 2) A 1 JINAL RI "",.,..0 Dissolved 0 Surrendered (withdrawn) LJ Mere. ((;.' lied 0 IRe Section 338 sale D QSub election ~ No [nll)r dal' -~-~-~- 0 Yes 0 No, _. 1 2 ~)1I 3 fhi ~ ~, S T 6 A T 7 E f A o J U 11~ S i T M E I ~ ~ N T I 12 S '1:, i l',. : 1 : (loss) for state purposes. Complete Schedule RIf apportioning income. See inst;:..ru:..:c.::.lio:.;.n;:-s''::'''::''.::.'',::,',::,',;".''::"'.::.',;".':..c'c:.'.::.''::''--=.=---+_1:..:9:...l~_-_---=2-=3-l-'2=-9=-.::.8-'-. C I 2 :,ling loss (NOL) carryover deduction, See instructions.., r20-'--t- ~ \ A N C disease, EZ, LARZ, TIA, or LAMBRA NOL carryover N 0 E M n. See instructions,,.,..,,... f-=-21-'----l- _1 T E I i 2'. loss carryover deduction. See instructions..,... "-=22=-'-- -+-_-,-----'_-' '_,23,ne for lax purposes. Combine line 20 through line 22. Then, subtract from line 19..,, , % x line 23 (not less than minimum franchise lax, if applicable) : ;-1, credit...., a amount generated _ b ra:;..;m.::o:.:u;:-:n::..t.::cf:.:a",im.:..:e""d::.;'c..;.''::'''::''c..;..:...::..--=.~...,:2~5:.:b::l...,..,..---;~ ---;...,..,.._ rne code no. amount., ~ 26a r-==t i... T ;',rne code no. amount.. ~ 26b A r:..:.::.i X 2/ I more lhan two credits, see instructions..,.. c.:2:::7:...j'--- +-_--r'--'-- -'------'_ E S ;' 25b through line 27,, ',,..,,,,, 28 :'. Subtract line 28 from line 24 (not less lhan minimum franchise tax, if applicable)., vc minimum tax, Attach Schedule P (100), See instructions ",,., '. Add line 29 and line 30,,.,..,..,....,, lient from prior year allowed as a credit.,.,, r--::32=-l-- ~_1 I' " y il11ated tax payments. See instructions,,. " _ 33 r-=' i E'" Ilhoiding (Form and/or 593). N I!lctions,...,,.... ".. 34 T I-"--'-t I S 'aid with extension of time to file tax return..., L...-C-'--' _..,-'_----'-'-- _ "nents. Add line 32 through line , CACAOll Form 100 Cl 2010 Side 1

82 (;OI\C "live I. " c orincome tax due. If line 31 is more than line 36, subtract II E r u 0, lj N 0 () H )1J om line 31. Go to line ".,..., ~y(!,nt. If Ime 36 IS more than line 31, subtract line 31 from line , II t unt of line 38 to be credited to 2011 estimated tax....., M (). Tax. This is not a total line. See instructions......, I I. II the sum of line 39 and line 40 is less than line 38, then subtract the result from Ime N 41 T nsl:lictions to have the refund direclly deposited... a Routing number I 41al 0 : C.:cking. D Savings. 0 c Account number , cl l) i.j Ileck if estimate penalty computed using Exception B or C. See instructions am~;il\t due. Add line 37, line 39, line 40, and line 42a. Then, subtract line 38 from the result E I.' '1".. and interest ,.....,.,..,.,.....,...,.,...., Schcdu' 'cstions (continued from Side 1) C. If ::IC C ct on a water's edge basis pursuant to 11,\ Te:. I am' :' previous years, enter lilc cla: d :m ended.. D Was II, s. 10 included in a consolidated lederji '. DYes ~ No E Princil ode. (Ill) 110' HI-:I\LTHCARE I',.,dlll.' 42a 3 Of this and one or more other corporations owned or controlled, directly or indirectly, by the same interests?. 0 Yes IRJ No If 1or 3is 'Yes: enter the country of the ultimate parent.---:--,----,:c-,-,----,--,--:--:--:-~-,_,, :: :_-~~-- Ill, 2, or 3 IS 'Yes: furnish astatement of ownership indicating pertinent names, addresses, and percentages of stock owned. If the owner(s) is an individual, provide the SSN/ITIN. L Has the corporation included a reportable transaction or listed transaction within this return? (See instructions 0 for definitions.) Yes ~ No H':.\I,THCARE If yes, complele and attach federal Form 8886 for each transaction../...:1=--o~/::::;2...:0'-'o=--9=--- --I M Is this corporation apportioning income to California 0 _ CounlryU.o::S""A~ --t using Schedule R? Yes [RJ No - N How many affiliates in the combined report are claiming G DJlc 1:,., 111 lornla or date Income was first immunity from taxation in California under Public Law ?..... _ (1'.. iiv\: lej" cos. 7 /10/ Corporation headquarters are: (1) ~ Within California H r:i; 0 Yes l2{i No (2) 0 Outside of California, within the U.S. (3) 0 Outside of the U.s. -oral IS a successor to a previously P Location of principal accounting records: {',.' ~, ~..!ck. appropriate box. 101'. - (1) P (2) Bpartnership (3) 0 jomt venture (,1) (5) other Jme, addross, and FEIN/SSN/ITIN of previous business) BUSINESS AD Q Accounting method (1) IRICash (2) 0 Accrual (3) 0 Other R Does this corporation or any of its subsidiaries have a :e Instructions _ Deferred Intercompany Stock Account (DISA)? Yes IE] No :Gl', s If 'Yes' enter the total balance of all DISAs. $ ----r-r- J :" :.lr,' there achange in control or S Is this corporation or any of its subsidiaries a RIC? Yes NO 10, corporation or any of its T Is this corporation treated as a REMIC for (under certain circumstances) California purposes? BYes ~ No.llornia Yes IE] No U Is this corporation areit for California purposes? Yes [K] No 2 I,.. :his corporation or any of its 01 or majority ownership of any V Is this corporation an LLC or limited partnership electing to cd or (under certain be taxed as acorporation for federal purposes? Yes ~ No C""! properly in Califorma?. 0 Yes ~ No W Is this corporation to be treated as a credit union?. 0 Yes [R] No 3!~!,[ ItS subsidianes owned or X Is the corporation under audit by the IRS or has it been os) leased real property in audited by the IRS in a prior year? Yes IE] No ',0% of the voting slock of any Y Have all requi red information returns. Jnsfcrred In one or more (e.g. federal Forms 1099, 5471, 5472,8300, 8865, " 1975, which was not reported etc.) been filed with Ihe Franchise Tax Board?... [RJ N/A 0 Yes 0 No :Iurn Yes [R] No Z Does the taxpayer (or any corporation of the taxpayer's (" v - see instructions.) combined group, if applicable) jjwn 80% or IOOre of the 0 Ivl stock of an insurance company? Yes ~ No K II:... uyear, was more than 50% of the voting stock: 1 C. IJy any Single interest?. "... 0 Yes [RJ No AA ff~r~el ~~~~r~~,~~ fl~e ~~e. federal.sched~ie ~~P Yes ~ No 2 Y BB Does any member of the combined report own an SMLLC 01,., r= ncd.b n Yes [Xl No generate/claim credits that are attributable to an SMLLC?..1 IYes IX I No Siqll He,e.Ie ~r ""Iury. I declare that I have exam, ned this return, Including accompanying schedules and statements, and 10 the best of my knowledge and belief.,t IS true. te. Declaration of prepare. (other than laxpayer) IS based on all information of which prepare' has any knowledge. ITitkl IDale Telephone IDate ClleCk Preparer's SSN/PTIN if self 'E:RRY AVETISYAN j employed n P Pilicl P,Cr ll JERRY AVETISYAN CPA FEIN U." ~~ E COLORADO BLVD STE 211 Telephone GLENDALE, CA ij!iscuss this return with the oreoarer shown above? See instructions.. IXIYes I INo Sid: 2 CACA0l For Privacy Notice, get form FTB 1131.

83 C)!\c 'F Sehe'! ducted. Use additional sheet(s) if necessary, (b) r lax Taxing authority (c) (d) Total amount Nondeductible amount Tot"L l" LIS"; C"[,', 'I Schedule F, line 17, and total of column (d) on Side 1,Iine 2 or line 3. If the corporation 'c1 to compute the net income, see instructions,, " Il, 2 LJ C, ~. T I o N S I ' 'r 'ion of Net Income. See instructions. I' pis or gross sales, 463,028. :; and allowance, cbalance,,, ' " _' ~1~c=+-,cis sold, Attach federal Schedule A (California Schedule V) " " ",.1----"2'--+, Subtract line 2 from line 1c.,, ',,,,,,, _,, ',,,, " " f---=3=-+ IIls_ Attach federal Schedule C, California Schedule H (100),,,,,,,,,, " -,., f--4"--j,uligations of the United States and U,S, instrumentalities, " " " " ".!---'5o.,::a=+ :;1. Attach schedule, ',,,,,,,,, ',...,,.1----"5:..::b '6"-+ :ies",.,.,.. "",...,."..,, f--7'--1 I net income, Attach federal Schedule D (California Schedule D) ", f--8 '--l :1\ (loss), Attach federal Form 4797 (California Schedule D 1)" " "9'--+ 'C (loss). Attach schedule,. ', ',,,,,,,,,,..,,,,.,,,,,,,,..,.,,.,,,,.., '...1-1,:.: '-+ -Ill c. Add line 3 throuqh line 10,,,..,.,,,,,,,,,,,, ", ' r;l )[1 uf officers, Attach federal Schedule E or c:hedule",,,.,..,..,,.~12~------'lo..:o:...:8::.j,'--6.::..7.:..-=.1_'_1.! wages (not deducted elsewhere),,,, ',,.,.,,.,, ',, f--=-1::c '--='9L,-:4:...:6:-7'--' ".. ".. " "" """"". f--" 16=--t.=-l..;o6.!-,-=-5-=-7..;05-'-1' 'rnli) Schedule A), See instructions, ",,. f--1c ;...4.:...:..,.,I r:h schedule" ", ", ', ",. 18,;Jch schedule " "... " " " ". 19 I. Attach federal 'l1d FTB ::.:0'-+ 1,- ~ 1 ;,lion claimed '[Idurn.. ", 21a 21b sd:edule, ', ' '... f-=-22=-t , ~6.::..3:::.L.'.::..0::-2.=-8-:-. l=..9::-4.::...l,-=-4=-9-=-6-:-. --:2=-6-=-8.::...L,=-5=-3=.2..: , ' Scheel! 1 LW 2 I,,: , 4 If<C 5 C", (i (;r _,cs and Recapture of Tax Credits. See instructions, corporation election, IRC Sec. 1363(d) deferral: $ 1 () look back method for completed long-term contracts (Allach form FTB 3834).. '... 2 e to installment: a Sales of certain timeshares and residential lots,,,,,, '... b Method for nondealer installment obligations 'l(ii) election,... ", " 'I[ne 5, revise Side 2, line 37 or line 38. whichever applies, by this amount. '. ~ left of line 37 or line 38.,, ',...,,,,..,. ',,,,,,,.,,,,.,..,,,, ',,.,. _,.,,, ", 3a 3b ,372. CI\CI\OU-li Form loa Cl 2010 Side 3

84 CO/\C -: Schcrl!~ 1 I"", 2 PlIf' 3 Co'; ~ a!v:, b O:1i ' C, T" 'J 7 C Me.hoc!, W:,'; II, \l "'cs" E r)~(~r (, C: 'ck :' If 'Ie: Do the l.!.-' :~'_" i ) SillC' A'"l'I'; " h! " I b. 1. " 1,,! 1 ' b: J' )ocls Sold : of year,... ~2~ -=2~1~1CL'-c7~4~6~....,.. f-3 =--t---- _ " 263A costs. Attach schedule..... f--4.:.,:a=t-- _ ':cdule..., f--4.:..:b+- _ :11 line 4b., 5 211, ,250. :Ie 6from line 5. Enter here and on Side 3, Schedule F, line , ' ' L...:7' =9...:4.L...:,4:..:9=--6=--=-... '1 COST :(~fmining quantities, costs of valuations between opening and closing inventory? DYes :1.!II number, if any... ~ _ 'clhod was adopted this taxable year for any goods. If checked, attach federal Form '..., 0 ':'<:IS used for this taxable year, enter the amount of closing Inventory under LIFO. -;==.,--_---; :,:)/\ (with respect to property produced or acquired for resale) apply Lo the corporation?.., 0 Yes ~ Icauired to comolete Schedules L M l and M 2. See Schedule M l instructions for reoortina reauirements. "c!... ':;Ible....,.... ~!iqations....,',.., , "":':lble assets f " i)llly).., Equity...,J. ': in less , '" :,~ 1111 year slock....., ".. slack. " reconciliation. ",Ir d ,llialcd.. '~quity ""'1'1" equity.... Beginning of taxable year End of taxable vear (a) (b) (c) Cd) , , , ,. 1, , , 1, ,344. 1, , CACA0134 L 08/06110

85 nciliation of Income (Loss) per Books With Income (Loss) per Return. ~ corporation completed federal Schedule M 3 (Form 1120n120-F), see instructions, :s,., "e -60, Income recorded on books this year " e not included in this return (itemize) lver capital gains,,,,,,e a Tax-exempt interest $ 'CUJI dcd on books this bother., ""'" " $ e ctotal. Add line 7a and line 7b, "",e 8 Deductions in this return not charged against on book income this year (itemize)!cooks this year not,n (Iicmize) a Depreciation,,,, $ $ 17,409. b State tax refunds, ', $ $ c Other"""",,,, $.... $. dtotal. Add line 8a through line 8c,,,,,,,,, $ 19,34l. 9 Total. Add line 7c and line 8d,,...,;l:,\ I line 5d,,,... " Net income per return, Subtract li{ ': r,ne 5e", line 9 from line 6, ',,,,,,,,,,,,,,,. '" '". O 'Isis of Unappropriated Retained Earnings per Books (Side 4, Schedule L, line 24) : of ycar,,... L Distributions: a Cash,,,,,,""",e..., ',...,., b Stock,,,,.,,,. ",e ).... c Property,,... ",,' e 6 Other decreases (itemize) e Total. Add line 5 and line 6,,,... 1.\. 8 Balance at end of year. Subtract 'f " line 3"",..., line 7 from line 4,,, ,344. Sehe ['pital Gains and Losses I1sandLosses - Assets HeIdOne Year or Less. Use add"itlonai sheet(s)fi necessary, (b) (c) (d) (e) ',;cription Date acquired Date sold Gross sales Cost or other, Company) (mo,. day, yr,) (mo" day, yr,) price basis plus expense of sale (f) Gain (loss) (d) less (e) --' 2 'Hn installment sales from form FTB 3805E, line 26 or line 37",..,, we r from 2009.,,, "" ' "...,, ",..,,,, 4 ; iii (loss), Combine line 1 through line 3,., ",, e Part II,r I1S and Losses - Assets Held More Than One Year. Use additional sheet(s) if necessary,, ,), D-1, line 9 and/or any capital gain distributions,, ,... I I '11 Installment sales from form FTB 3805E, line 26 or line 37. " '... ", 8 :1 (loss), Combine line 5 through line 7,,,,....,, '" ' 9,:r I term capital gain (line 4) over net long-term capital loss (line 8)",...,, ", :0 c "cess of net long-term capital gain (line 8) over net short-term capital loss (line 4).. ~ 1 '" here and on Form 100, Side 1, line 5. 'i"' ;" ry forward losses to 2011.,..,..,,, ,......,., " C '..I: Form 100 Cl 2010 Side 5

86 'IIXf,: operating Loss (NOL) Computation and NOL? Disaster Loss Limitations - Corporations 3805Q CALIFORNIA FORM F.'liWII I _'J'.'}, Form 100S, or Form 109, C!II]I California corporation number C 'flc :v~ ,. l ~g till' )1,,'10'1 II1curred the NOL, the corporation was a(n): X CCorporation FEIN S~,,',1 Organization 0 limited Liability Company (electing to be taxed as a corporation) L:2=-.7:---e..0-"G_2-"2--'O;...4'-3'- If ::10 I' ;II a tax returns under another corporate name, enter the corporation name and California corporation number: _ I' j 11" " _. 2.~;" a combined report of a unitary group, see instructions, General Information C, Combined Reporting. f "H 1 I Ol.:J.! 111e corporation does not have a current year NOL, go to Part II. " i,'.. 1 ]CO. 1'11819; Form loow, line 19; Form 100S, line 16; or Form 109, line 2. L: 1\ :Tl 1 ',; ,, , in line 1. Enter as a positive number.....,, ' 2,;. If zero or less, enter -0- and see instructions..,, ,298 11;1,. ',5 incurred by a new business included in line 3..., 4 a 23, 298 ':s incurred by an eligible small business included In line 3 4b _ 'J 4c 23,298. " : I" " 4c from line 3,.. 5,c ' :Ifle 2, line 4c, and line 5. See instructions ' 6 23,298. f' '\ 1 1 )1.lster loss carryover limitations. See Instructions. (g) Available balance :11e amount from Form 100, line 19; Form 100W, line 19; " 17 (but not less than 0-); or Form 109, line 2. Ifthe,,',er state adjustments (pre-apportioned income) is $300,000 or P 1,.:i.. (d) Initial Loss (e) Carryover from 2009 (f) Amount used in 2010 (h) Carryover to 2011 col (e) - col (I) -,,:. t I-~ 1-- Co 'f :" 'I col (d) - col (I) I i 23,298. I ; 23,298. '"w Business (NS), Eligible Small Business (ESB), or Disaster (DIS). P,I" '. Ilfle 2, column (f)... :t" line 1 thai represents disaster loss carryover deduction here and on Form 100, t,': or Form 100S, line 20. Form 109 filers enter -0...,... I:nter the result here and on Form 100, Ime 20; Form 100W, line 20; Form 100S, 2 3 o. 0. o. c FTS 3805Q 2010

87 r) L.. CALIFORNIA FORM 'I)''t'ation Depreciation and Amortization 3885 I' ell 1.. '1. FORM 100 ( 0' California corporation number f 1 '':I1<,C r.,crtain Property Under IRC Section 179 : )( ~.' I i lc Section 179 for California '''HI 1;.') property placed in service , , property before reduction in limitation...., '1. 'ract line 3 from line 2, If zero or less, enter , , year. Subtract line 4 from line 1. If zero or less, enter -0,.. mof property (b) Cost (business use only) I EQUIPMENT 12, (c) EI ected cost , , , O. 25,000. Section 179 cost) I 7 lion 179 property. Add amounts in column (c), line 6 and line lie smaller of line 5 or line ! IIclion from prior taxable years !~nter the smaller of business income (not less than zero) or line duction. Add line 9 and line 10, but do not enter more than line ,,:tion to Add line 9 and line la, less line I 17,409. ion 0 f Add't' IlonaIF'Irst Year E xpense D e d uc tl on U n d er R&TC 5 ec r Ion u (b) ale (Juired ~ _. _. '---'-'. -"- (c) Cost or other basis (d) Depreciation allowed or allowable in earlier years... _ ~ (e) Depreciation method (I) Life or rate , (g) Depreclallon for this year 11 O. O. (h) Additional first year depreciation 'I) and column (h). The total of column (h) may not exceed 1I1C 14, column (h) , <:ling:, the amount on line 12 and line 15, column (g) or 1m under R&TC Section 24356, add the amounts on line 15, columns (g) and (h) or made), enter the amount from line 15, column (g) O. federal purposes from federal Form 4562, line O. 'f :e 17 is greater than line 16, enter the difference here and on Form 100 or "ne 17 is less than line 16, enter the difference here and on Form 100 or ;1 California depreciation amounts are used to determine net income before o or Form JOOW, no adjustment is necessary.) , (b) Date :Icquired (c) Cost or other basis (d) Amortization allowed or allowable in earlier years (e) R&TC section (see instr) (I) Period or percentage (g) Amortization for this year._ -_.. : III (g) federal purposes from federal Form 4562, line " 21 IS greater than line 20, enter the difference here and on Form 100 or ;ilc 21 is less than line 20, enter the difference here and on Form 100 or.. -_ , O. c FTS

88 0 AMT COMPUTATION I Or(~rating loss (NOl) Computation and NOl ':. (,. Il"i';aster loss Limitations Corporations f,' ::!l,;.) I h, I'orm 100S, or Form 109. C 1 ( : " - '10 r:. '1 I' :.lired the NOL. the corporation was a(n): X CCorporation California corporation number FEIN CALIFORNIA FORM 3805Q I s r 1;" n'oanization 0 limited liability Company (electing to be taxed as acorporation) '-"2 7 -_0::...::,6.=2.=2:.;:0 4:..;:3"-- _ Ii.,,,. lax returns under another corporate name, enter the corporation name and California corporallon number: I'.d'- ~ combined report of a unitary group. see instructions, General Information C, Combined Reporting. ; r )L.::, corporation does not have a current year NOL, go to Part II. Ii:,; 19; Form 100W, line 19; Form 100S. line 16; or Form 109, line ,298. '1 line 1. Enter as a positive number "era or less. enter -0- and see instructions ,298. Incurred by a new business included in line a 2-'3~,_2 '9'-8~. Incurred by an eligible small business included In line 3 4b _ 4c 2:.::-3"'-L-,2::...:..-98~. :t II' ~c from line \0 : i. " 2. line 4c, and line 5. See instructions,. 6 23,298. 'i., fer loss carryover limitations. See Instructions. (g) -fl',; amount from Form 100, line 19; Form 100W, line 19; Available balance! 7 (but not less than -0-); or Form 109, line 2. If the, state adjustments (pre-apportioned income) is $300,000 or ~. y )1 ' (d) Initial Loss (e) Carryover from 2009 (f) Amount used in 2010 (h) Carryover to 2011 col (e) - col (I) :,,:. col (d) - col (I) 23, , ;.> "i pc';i,j\. 'ev Business (NB), Eligible Small Business (ESS), or Disaster (DIS). f',1 '~I ",. line 2, column (f),.. d ft Ine 1 that represents disaster loss carryover deduction here and on Form 100,,,": or Form line 20. Form 109 filers enter -0,. tic' I nler the resull here and on Form 100, line 20; Form 100W. line 20; Form 100S!.,.. '. 2 3 o. o. o. c FTS 3805Q 2010

89 " r sr:. ',~,r beginning month day year 2010, and ending month c ( /. T CALIFORNIA FORM lc"1 lyment of Estimated Tax by Corporations f' t, rp'/.',' Pill. If IIne 7 sows h an underpayment for any Im;tallment, complete the remainder of this form. "IL. tic ~idns. (~\' : I \.Idiom;.. :llons... IS eli 1'; "...!.lliment... '"...., ,..., I (a) (b) (c) (d) 2 4/15/10 6/15/10 9/15/10 12/15/ % (not less than min) 70% less lsi 7a%less prior 100%less prior Sa b 6 ;). ',. I.. : 'rksheets.) , '!\y., met for all four installments, do not attach this form to the return.,,:es) e 26.. Illstrs.. In ".... ) IT'... Yes No Yes No Yes No Yes No 8a X X X X 8b 9 10 '11 7 shows an underpaymenl for any installment and one of the three exceptions was not met. figure the ill by completing line 11 through line th -able... ( on 01, I "efo' IftC' ' J /15/ x.j x In 7 x 0 ',1rc,\ x In 7 % 1,0m " % a 'id line 22a, column (a) through column Cd) Enter here and on Form loa, I'orm laos, line 41a; or Form 109, line b 29. c FTB Side 1

90 r!v,p~';n 11 line 7shows an underpayment for any installment, the Franchise Tax Board (FTB) will not assess a penalty if timely payments were,cd Ille amount determilled under any of the three exceptions for the same installment period. F (' 111: r. T<lx - Regular Corporations r, ';'.,' :cr :1. Cill. 'n Pa 0Cl I "" I.. I, ill,' ",,',I IliJVe been for a full 12 months).,..,..... " ,..., (a) (b) (c) (d) 30% (not less than min) 70% 70% 100%,sl1own, I cilic...,. "on was 'Ihle 'Yes' :;, 'ilan line No' 110re and 24-25, I,"e 8a,. '. 26 Yes X No Yes X No Yes T;l x - Large Corporations 'r "IX IS less than current year tax. 30%.,. 70%....!,.IIP. date (cumulative), 28a 28b 29 X No , st Installment Yes X No 2nd Installment lount on line 29. If line 28 is greater than line 29, the exception was icable boxes on line 8b. To meet this exception you must check Yes 30 Yes I No Yes I ' 10 use for installment 3 and installment 4 lized 'lcome (a) (b) (c) (d) ;Iructions ~ No nc..., ,. liply '., ';ls only),, ~3a '.,,, :e iod...,.. -..,.....,Irns 'he... 'y..., a 33b 33e % 70% 70% 100% 40 (not less than min) 'lie ". "all was rille 'Yes',utline "ere and 9,,.. -" Yes No Yes No Yes No Yes No '. S corporation taxes from Schedule 0 (loos) and from the excess net passive income tax, the QSub, 'edit recapture, and the minimum franchise tax CACZ6313L 12/10110

91 California Statements Page 1 COAC 2 COLLECTIVE ,,I ine 27 :\e" ut. '.J, ::-:ES,,,,,,,.,,,,,, '1' ", $ ,850. 4,440. 1, , , , , , ,692. ",.'",.", ~ ~16~,~0~1~5~. Total ~$==~68~,~7~0~0~. ~ ~. Line 5 lucted ILlons., ""...,.. '." +$ ~1~9~,3~4~1~. Total ~$===1=9!:="3=4=1=.. Line 3,QC " " "... " +$ -;,.77~',-:1;-.;4;...:;4~. Total ~$======= 7==',==1==:4=4=,

92 ._.~- -,I.. 11 r.,!" -:1\' i';t;', I 511,. r', 0' II wi Depreciation and Amortization (Including Information on Listed Property) ~ See se arate instructions. ~ Attach to our tax return. OMB No Allachment 67 Sequence No. Identifying number , Ex; " I1SC Certain Property Under Section 179 we. listed property complete Part V before you complete Part I c III Iclions)..., ,..., '",... /9 I,clly placed in service (see instructions)...,..,.,......,..., I" ':011, Ilroperty before reduction in limitation (see instructions) I:let line 3 from line 2. If zero or less, enter 0-...,, , :').-,,'.X \" ;;ublract line 4 from line 1. If zero or less, enter 0. If married filing...,.... " , , "., 'plioo of property (b) Cost (business use only) 5,174. '1 EQUIPMENT 12,235. "lint from line 29..,....., I 7 ;9 property, Add amounts in column (c), lines 6 and '.' smaller of line 5 or line 8..,..,,,..... '" , , ,000, O ,000. (C) Elected cost 5, ,235. O...,. 8 17,409. '" ,409. 'ion from line 13 of your 2009 Form , '" 1D O.!(~r the smaller of business income (not less than zero) or line 5 (see instrs).. 11 O. 12 O. :1. Add lines 9 and 10, but do not enter more than line 11...,,, !Ion to 2011, Add lines 9 and 10, less line ~113 17,409. ',:'/OW for listed property. Instead, use Part V. n Allowance and Other Depreciation (Do not include listed property.) (See instructions,) lor qualified property (other than listed property) placed in service during the 14 \')(1) election ~:RS) "n (Do not include listed property.) (See Instrucllons) Section A 'dced in service in tax years beginning before 201Q ' assets placed in service during the tax year into one or more general ~...-,..... cts Placed in Service During 2010 Tax Year Using the General Depreciation System,) Month and (C) Basis for de-precialion (d) (e) (f) (g) Depreciation 'ar placed (business/investment use Recovery peliod Convention Method deduction,n service only - see instructions) 25 yrs 8/ vrs MM 8/ vrs MM S/1 39 yrs MM 8/1 MM 8/1 '!s Pace d' In Service During 2010 Tax Year Using the Alternative Depreciation System 8/1 12 yrs S/1 40 vrs MM S/1 (' '((:Io_n.,;s"'.)'--, -,- _ : :'om line 28...,,. 21 : ~ lhrough 17, lines 19 and 20 in column (g), and line 21. Enter here and on " 'ShIPS and S corporations - see instructions..., r'-'-'-'-"'r'';''''.:...;...:..;",.:...;...:..-'--'-c..:...:.'-'-'...:..l.=2=2-t :_--~ :_-- 'cd in service during the current year, enter I I II 'c \0 section 263A costs...,.,,,., Ii I,:\ I 'ollce, see separate instructions. FDIZ0812L 10/29/10 Form 4562 (2010)

93 @,u ree,p BUILDING CODE DATA CONTRACTOR SHAU. SEE' THA T ALL IIOIfl' IS IN ACCORIJANC Jl7H 'THE: 2010 CNIORNIA BIJILDING CODe: CMI. IIIUIIII_.at CMI. IIIUIIII S7lI!IMIIlS DfIE _ IOtD CAIJ'tIIWA MECHANICAL QXlt 1Ot0 CAIJ'tIIWA EN R(JY...,....au..".,,,. QXlt 71 told CAtI'lIINI4 I'UI8IfJ era: told CAtI'lIINI4 ElEC7IIICM. era: AU7HOIfI71D1 HA WNG oijrisdic77on. fj«uwit:y _, :m- rwr ~ ~... '--- - il - 0-lll'RiIfIrorIP"' <!>--fiit'i" t=' lii&s'.to ~ q AJ'.-.A.. AJ'.-.A.. 42:\fBmlor_ ~~ T'--- ""'"- LAKe TAHOI! flllltal...1iiiiir _ATIIlIl AJ'.-.A.. J, -+-_L. t=.,.it. + -,_ATIIlIl t.i TIIlIl TIIlIl... n.,': ~..t.,,'" '. ~'" ;.,' \' 't",.. '." "...,.,", " ', ~ '. W." c. '. '.''''... ZI '\;"1,'1. :... - \ ~_; ; -'''.~r:.~,i''l',....r",,,' -,;' '~1... ""'.-'.~ f'i\::...y~.lfji,.\"... H",>:\",'l''''~ ~,:,)_,~~:~".;".-::."" _:".",,','_,.'.. ~-...,:...,.."".,: ~r ",. '1 ~,a;;.;;.;~"".:.i~;"':"i,o.i--".,..;i"""~~' " ','l-.}.',.ti".'r\";...., ~.: <,'l' l':~, I..J,.,'.., A,: ", ' ~lit',"\._... 'f,".,. j.~:,...;,;j:"...,~,.~.. :=I:I~:N==iliiIJII=ur=!M~.=.~~~~~-~~~~~"": City of Angles 2 Dispensary ee8 3rd Street South Lake Tahoe, California SXMI!QYI lijcinny IW' (, ebl:l.eili IlBmy.mON ~.. 10I til - a_ nolm.-..-0lm _..-0lM 0lM.-..- _..-_0lM..., JIa-... _... II I-I.1'1 ~I:M I III I )I,d I I

94 ~ II,. 10' ~! ~ :: i "") t.11 offtt:e TYPJOF" '1~ S 44'W fj()" E 101' s.o-,.. Intrltn."".,. FJo_ Shop r-1''---._ :::.~-=:.- II".1 cr/c: fhirltlng ~ ~ I I... ~ ~ =t... :z: ~ I-II dl IIl _u I, III filii,,111 cr/c: pfttig ~ ~ l.tindeticrp«i - ~ ~ 3rdStreet site plan 888 8rd 8trHt South Lake Tahoe. apnf EI Dorado Ccu1ty, C& ci ~ Lcrn*:ttped _ ~ II t1itj'".,t of pagel...-..

95 I I I I ~!I r 0 w VI :Tr I ~I UI I I I I I I., I I.1..."_ CIIIr" ~ amr 7 I o.-r t-a......& uiii_ciiul... D..

96 r-7 I III II : 11 " : III : " l I 27 1& "---' -r ij I!.1 un il $% II... - i ~ ~ ~ ~ i i I I '.,. ~ c~~~ oo.or iii III a f~ f~ iii ;I I ~IIII I I I i I... I... ' rrr" UI!!I&;!!I II!!,!IE id $.!$. r--, ~',' :; :... :. I' I "---' r'--:::'~~-l 1 F'"~ Ii '1 1"'-::'---1 I... I L :::'...J s~ I ~I,tI..-:.r'p I',&..."_ _..:...&.-... _U._OMIIIL _.,..,.. 'II' 7 EEl a..r t a.. 0 '

97 I.t/l. 77 I :. ~ I t-i' , I I i I I I Ii I I _"",,117. III a..r t-a _a ~~ 0-

98 ~ (~~~.oo II P iii! iiil il I I 'JIB III ;1 x. x II ~ ~ ~ ~ ill ii II.. - q)% ",. ' rr'.. I i UIIIIUIII ~ ~ ~ ~ II!!I!~! i i I I.. I J lui i I I ill r I I ~I til i'~$$ $$$ i~._.~._.~. ~-..._.~._.~._.~ I, 1 5 I I~ r. ii~._.~._.~.i.._.~._.~._.~ d ~~ $ $ $ $ I 'If is I I i I I I I I i I I.1 Rr ~ I \.. /_-':_-=-_ISI_S1_A_&... :,_'..._; a-... D _ CIlUl. _f_i'_=---_t_u_b_b... ~_=_:_w:=-_r:'_

99 :;iii' i~ ii:i:;' i It aia II III,.11 ~ 1111 Iitt ilt I III d t I} i li II PI( ~ Jill!h:!j.I!j l'l'~ {f5 It! I" I tj 'iij I t. I 'PP~""~ GII~!t II II 'tllil ;IJ11 Yl! lin "i!~ "ll! II J ifi. i t I PU 13 IttI. 'f I Ii I,I t.! I r I.. I i I It I I I /' I I I a I ~ s_7'_sa~~... :'.._'_a lrr_=_:_~_,r_-.....a.a... _Jl_a'_;---_ ~_ ~... D... ".=.

100 I - r - I,..., ~~ i~ it l~ ~I : 'I ~ c. : I ~, ItH > r ~ I > I==~ I u!'i Ii 'a Ii I~ II I I i I I :1 " ":1 " "d I - I I I i I

101 James Ave. u ~t... '"... II iii! CIo ~ II... 2ii. CD c; I..... e; l", 1 tt ~ iji~ a 1lQ ~,I,, c; it :: a i - ;; I m J 51 ;:; It '" US Hiway50... _ alii 0IIIIIr... -_ 'hiiilro t '...

102 Ii ~ ;; _... _.. - w_.~,,'-r I II I = 1 I = Ii I~ I... ~... N D I~ I ~ ~ )0 ~ J ~ ~ ~ c::::::j [OJ ~V1 ~ ~ ~. ~ ~ '::7 [) :I I...&:1 ~, ~ = ~I It I r au ~, :; I: [=1 0 =. f ~ ld ;::r - ~ : I~ 0 I I: ~, r- Do [[] \. [] I w f1 ~ "]] ~ I'. ~ 0 p ]] %~ I ~~ II t10b C '-'" il. n ~ " c ",. ~ '--' (,.. lo~ ~ g ~ o ol~ 0 ;;u ~~ : // ~ ~.... It ~.

103 u.s. DEPARTMENT OF JUSTICE United States Attorney Eastern District ofcalifornia Benjamin B. Wagner United States Attorney Roberl T. Matsui United Stales Counhouse Phone 916/ I Street, Suite Fax 916/ Sacramento, CA TIl) 916/ I February 27,2012 \ \ I I CERTIFIED U.S. MAu, RESTRICTED DElJYERY RETURN RECEIPT REQUESTED De Tarr Properties Darcy De Tarr 26 Victoria Road Burlingame, CA RE: City of Angels 2, 2175 Lake Tahoe Blvd., South Lake Tahoe, CA APN: i Dear De Tarr Properties and Darcy De Tarr: This office has rec ived information that the above-referenced property is being used to cultivate and/or distribute marijuana in violation of federal law. and that you are an owner, or have management or control, of the property. This letter is formal notice that continued use of the property in violation of federal law may result in forfeiture and criminal or civil penalties. You should consult an attorney concemiii.g this letter. Cultivation and distribution of marijuana are felony crimes under ~e federal Controlled Substances Act. It is also a felony for a property owner to rent, lease or otherwise make a place available for cultivation or distribution ofmarijuana. Violation can result in imprisonment and a fine of up to $500,000; or a civil penalty of $250,000 or twice the gross receipts, whichever is greater. In addition, any property used to cultivate or distribute marijuana may be forfeited to the United States without compensation, along with any proceeds of the illegal activity. Under federal forfeiture law, the "innocent owner" defense is unavailable to those who know or have reason to know of the illegal ~se of their property. This letter puts you on notice. It is not a defense tt claim the property is providing so-called "medical marijuan~." Congress has determined that marijuana is a dangerous drug, and that the manufacture and distribution of I I! 1

104 marijuana are serious crimes. The Department ofjustice remains firmly committed to enforcing the Controlled Substances Act in all states. Accordingly, we will vigorously enforce the prohibitions against cultivation and distribution of marijuana, even ifsuch activities are permitted by state law. Those who allow their property to be used for such activities do so at their peril. If you have any questions about this letter, please contact Assistant U.S. Attorney Kevin C. Khasigian at (916) Sincerely, BENJAMIN B. WAGNER United States Attorney ~" ~ KEVIN C. KHASIGIAN Assistant U.S. Attorney 2

105 Robert M. Henderson, SBN ROLLSTON, HENDERSON, CRABB & JOHNSON, LTD. 591 Tahoe Keys Blvd., Ste. D8 South Lake Tahoe, CA Phone: (530) ; Fax: (530) Attorneys for Plaintiff Darcy DeTarr Trustee of the DeTarr Family Trust SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY EL DORADO DARCY DeTARR, TRUSTEE OF THE Case No. SCU DeTARR FAMILY TRUST PLAINTIFF'S MEMORANDUM Plaintiff, OF POINTS AND AUTHORITIES v. SUBMITTED IN OPPOSITION TO DEMURRER GENNARO DiMATTEO, et al. Date: Defendants. Time: Dept: _/ Trial: Not set INTRODUCTION This unlawful detainer action is based upon defendant's breach ofthe lease covenant to not use the property for an unlawful purpose - cultivating and selling marijuana. Cultivating and selling marijuana is prohibited by the Federal Controlled Substances Act (CSA) and subjects the violator to imprisonment, fines, and forfeiture of property used in connection with a violation. In this case plaintiff was notified by the United States Attorney that the use of her property to cultivate and/or sell marijuana is a violation ofthe CSA, that there is no exception for medical marijuana, advised plaintiff to consult an attorney, and warned that those who allow their property to be used for such activities do so at their peril. Defendant's demurrer is based upon the erroneous contention that California's MPA in Opposition to Demurrer

106 Medical Marijuana Program Act (MMPA) and Compassionate Use Act (CUA) decriminalizing specific medical marijuana activities under state law makes its use of plaintiff's property not unlawful. In Gonzales v. Raich, 545 U.S. 1 (2005), the United States Supreme Court held that the California medical marijuana laws provide no defense for those who violate the CSA because Congress has not provided an exception for medical marijuana. It follows that using plaintiff's property for cultivating and selling marijuana is unlawful. Hence the demurrer is properly overruled. THE COMPLAINT The complaint for unlawful detainer alleges the following essential facts Plaintiffleased to defendant two commercial units at 989 Third Street in South Lake Tahoe. There is a separate lease for each unit. The first lease was entered into in April 2009 (Exhibit 1) and the second one was entered into in January 2010 (Exhibit la). Paragraph 15 of the first lease provides that the use is limited to "retail sales of ayurvedic herbs & wellness center." Paragraph 15 in the second lease is blank and makes no reference to the tenant's use. Paragraph 39 of the second lease provides "growing or smoking ofmarijuana on property is not allowed." Paragraph 16 of each lease provides in pertinent part "tenant shall not... use the Premises for any unlawful purposes, including, but not limited to, using, manufacturing, selling, storing, transporting illicit drugs or other contraband, or violate any law or ordinance...". Paragraph 7 ofthe unlawful detainer complaint alleges on March 15,2012, the tenant was served with a three day notice to perform covenants or quit (Exhibit 2) which states "You are in breach ofthe commercial lease agreement in that you are using the above described premises to cultivate and/or distribute marijuana in violation of the Federal 2 MPA in Opposition to Demurrer

107 Controlled Substances Act which is a direct violation of the covenant in the commercial lease agreement that you shall obey all applicable laws in using the premises. Within three days after service of this notice you must cease and desist from conducting any activities on the premises that are in violation of the Federal Controlled Substances Act, or deliver possession of the premises to the undersigned." Paragraph 7 of the unlawful detainer complaint further alleges that the tenant failed to comply with the requirements of the notice to quit within three days after it was served and that the statements in the notice are true. Attachment 15 to the unlawful detainer complaint alleges defendant uses the premises to operate a marijuana dispensary, purportedly in conformance with California law. It further alleges that plaintiff was notified on February 27, 2012, by the United States Attorney that cultivation and distribution of marijuana are felony crimes under the Federal Controlled Substances Act, that there are no exceptions under federal law for "medical marijuana", even if such activities are permitted by state law. The letter warns violations can result in imprisonment, fines, and property forfeiture. The letter concludes "Those who allow their property to be used for such activities do so at their 20 peril". The notice plaintiff received from the United States Attorney is 21 attached as Exhibit ARGUMENT Standard of Review The purpose ofa demurrer is to test the sufficiency of the pleading based on defects that either appear on the face ofthe pleading or for matters that are subject to judicial notice. Code ofciv. Proc (a). All facts pleaded are deemed true and a complaint needs to be liberally construed in favor of its sufficiency. Here, in addition to the factual allegations in the complaint, it is noteworthy that Code 3 MPA in Opposition to Demurrer

108 1 of Civil Procedure section 1161 (4) provides, among other things, that a tenant is guilty of 2 unlawful detainer when the tenant is "... using the premises for an unlawful purpose..." 3 Since the complaint alleges that the defendant is using the premises for the cultivation and/or 4 selling ofmarijuana in violation ofthe Federal Controlled Substances Act it follows that the 5 complaint states a cause of action The California medical marijuana laws do not make lawful what is 7 unlawful under the Federal Controlled Substances Act. 8 The Federal Controlled Substances Act prohibits the possession, cultivation, and 9 distribution of marijuana. 21 U.S.C. 812, 841(a)(1), 844. There is no exception for 10 medical marijuana, even where lawful under state law. United States v. Oakland Cannabis II Buyers' Cooperative, 532 US 483, 490 (2001). 12 Gonzales v. Raich, 545 U.S. 1 (2005), held thatthe California medical marijuana laws 13 provide a violator of the CSA with no defense. Simply stated, defendant's argument that 14 selling and/or cultivating marijuana in conformance with the California medical marijuana 15 laws precludes a violation of the CSA has been considered and rejected by the Supreme 16 Court of the United States Since the California medical marijuana laws do not provide a defense to 18 a federal prosecution for violating the Controlled Substances Act, it 19 follows that the complaint alleges that the defendant is using the premises 20 for an unlawful purpose. 21 Relying principally on Qualified Patients Assoc. v. City of Anaheim, 187 Cal. App th 734 (2010), defendant argues that the CSA does not preempt the California medical 23 marijuana laws and, therefore, defendant can't be guilty of unlawful detainer for violating 24 the contractual, and statutory, requirements that the premises not be used for an unlawful 25 purpose. Defendant errs. 26 In City of Anaheim the city had adopted an ordinance making it criminal to own or 27 operate a medical marijuana dispensary within the city limits. 28 On the federal preemption question, City of Anaheim concluded 4 MPA in Opposition to Demurrer

109 "As we explain below, California's decision in the CVA 2 and MMPA to decriminalize for purposes ofstate law certain 3 conduct related to medical marijuana does nothing to "override" 4 or attempt to override federal law, which remains in force." [See 5 e.g., Gonzales v. Raich, 545 V. S. I (2005) and United States v. 6 Oakland Cannabis Buyers' Cooperative, 532 V. S. 483 (2001)]. 7 To the contrary, because the CVA and MMPA do not mandate 8 conduct that federal law prohibits, nor pose an obstacle to 9 federal enforcement of federal law, the enactments' 10 decriminalization provisions are not preempted by federal law." II Emphasis in original. 12 City of Anaheim at This passage demonstrates that City ofanaheim concluded that the California medical 14 marijuana laws decriminalize the selling and cultivating of marijuana only ''for purposes of 15 state law" and do nothing to preclude enforcement by the federal government of the CSA. 16 Here the federal government has threatened the plaintiffwith a forfeiture action under 17 the provisions of the CSA because of the defendant's selling and cultivating marijuana on 18 the plaintiff's property in violation of the CSA. 19 Since neither the CVA nor MMPA provide the defendant a defense from a federal 20 prosecution for violation of the CSA it necessarily follows that the defendant is using the 21 plaintiff's property for an unlawful purpose in violation ofboth the defendant's contractual, 22 and statutory, duty to not use the property for an unlawful purpose The lease prohibits use ofthe premises "for any unlawful purposes". This 24 provision is not limited to California law. 25 Defendant's reliance on People v. Tilehkooh, 113 Cal. App. 4 th 1433 (2002), and City 26 ofgarden Grove v. Superior Court, 157 Cal. App. 4 th 355 (2008), in support ofhis argument 27 that the "obey all laws" lease provision is limited to California law fails. 28 Tilehkooh concluded that probation could not be revoked pursuant to an "obey all 5 MPA in Opposition to Demurrer

110 laws" condition ofprobation where the violation was not violative ofthe California medical marijuana laws. The alleged violation was possession of marijuana; however, it was noncriminal possession because ofthe California medical marijuana laws. Tilehkooh concluded that probation could not be revoked pursuant to the "obey all laws" condition of probation where the defendant was in compliance with California law. With regard to the People's contention that the defendant violated the "obey all laws" provision because he was never the less in violation of the CSA, the court pointed out that the state courts only punish criminal behavior that violates state law. People v. Tilehkooh, 113 Cal. App. 4 th at Here, plaintiff is a private citizen seeking to enforce a contractual provision, as well as a statutory duty, to not use its property for any unlawful purpose. Plaintiff is not asking this court to punish the defendant for violation of the CSA but, rather, to enforce the defendant's duty owed to the plaintiffto not use the property for any unlawful purpose which necessarily includes federal, state, regional, and local law. In Garden Grove the Garden Grove police department confiscated marijuana possessed by an individual that had a doctor's approval to use marijuana for medical reasons as permitted under California law. After charges were dismissed the defendant/medical marijuana patient successfully moved the trial court for return ofthe marijuana. The City of Garden Grove petitioned the appellate court contending that to return the marijuana would be a violation of the CSA. Garden Grove ultimately concluded that local law enforcement could not refuse to return marijuana to a medical marijuana patient that was in compliance with California law for the rather straight forward reason that local law enforcement does not enforce federal law. The court, however, did observe "Similarly, here, there is no conflict based on the fact that Congress has chosen to prohibit the possession of medical marijuana, while California has chosen not to. California's statutory framework has no impact on the legality of medical marijuana under federal law: 'enforcement of the CSA can 6 MPA in Opposition to Demurrer

111 continue as it did prior to the [CVA]''' Garden Grove, 157 Cal App. 4 th at 385. Again, the defendant's use of the plaintiff's property in violation of federal law is nothing other than a breach of a valid and enforceable contractual provision. 4. The complaint alleges the defendant is in violation ofthe covenant to not grow marijuana and, therefore, states a cause of action for unlawful detainer. Paragraph 39 ofthe second lease prohibits the growing ofmarijuana on the property. Paragraph 16 of the first lease limits the use to retail sales ofayurvedic herbs. The notice to perform covenant or quit is, among other things, based on cultivating marijuana on the premises and the failure to cease that activity within three days after service. Code of Civil Procedure section 1161(3) provides that a person is guilty of unlawful detainer when they continue in possession of the property after failure to cure a breach of a covenant after three days written notice. CONCLUSION The lease agreements prohibit using the premises for any unlawful purpose including the selling and storing of illegal drugs. Defendant's use of the property to cultivate and sell marijuana is prohibited by the Federal Controlled Substances Act and, therefore, is unlawful regardless what the law is in California. The demurrer is appropriately overruled Dated:, 2012 ROLLSTON, HENDERSON, CRABB, & JOHNSON, LTD By: _=-.---~--.---;-; Robert M. Henderson Attorneys for plaintiff Darcy DeTarr, Trustee ofthe DeTarr Family Trust _ 7 MPA in Opposition to Demurrer

112 PROOF OF SERVICE BY US MAIL I am over 18 years of age and not a party to this action. I am a resident of and employed in the county where the mailing took place. My business address is 591 Tahoe Keys Blvd., Suite D-8, South Lake Tahoe, California I am readily familiar with this business's practice for collecting and processing correspondence for U.S. mailing. On the same day that correspondence is placed for collection and mailing, it is deposited in the ordinary course of business with the United States Postal Service in a sealed envelope with postage fully prepaid. 10 On, 2012, I served the plaintiff's PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES SUBMITTED IN OPPOSITION TO DEMURRER via U.S. mail as indicated below: Robert Woelfel WOELFEL LAW FIRM 1156 Emerald Bay Road, Suite D South Lake Tahoe, CA I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Linda Monje MPA in Opposition to Demurrer

113 or. ~~ :< _:r. z ~g~~ ~~~~ C:>:..,;~ ~~~~ ~s;:g ~:::l:l ~~ ~<; -0:: ~i= _:::> ~ ROBERT WOELFEL (State Bar No ). WOELFEL LAW FIRM 1156 Emerald Bay Road, Suite D South Lake Tahoe, CA Telephone: (530) , Facsimile: (530) Attorneys for Defendant, Gennaro DiMatteo individually and dba City of Angles II, Inc. DARCY DETARR TRUSTEE OF THE DETARR FAMILY TRUST PLAINTIFF V. GENNARO DIMATTEO, individually and dba City ofangles II, Inc.~ DEFENDANT SUPERIOR COURT OF CALIFORNIA COUNTY OF EL DORADO Case No.: SCU PROOF OF SERVICE I, TERI MUIR, hereby declare: I am an employee inthe County ofei Dorado, California. I am over the age ofeighteen years and not a party to the within action. My business address is 1156 Emerald Bay Road, Suite D in South Lake Tahoe. CA On April 19, 2012, I served the following documents as follows: 1. Gennaro DiMatteo's Demurrer to Complaint ofdarcy DeTarr Trustee ofthe DeTarr Fam,ily Trust; Supporting Memorandum; Notice ofhearing 2. Memorandum in Support ofgennaro DiMatteo's Demurrer to Darcy DeTarr Trustee ofthe DeTarr Family Trust's Complaint ProofofService

114 -~ -'" 1 2..,.> i::~ 13 :-:-< ~q! 0=:- ':::::~~~ 14 :l:~<~ <;>-~...!. - <..1'<1" 15 ::i~6~ ~q=s' ;:;<~fri ~$::J~ 16 i~ :.:.:j..e~ =~ ~ ROBERT L. WOELFEL (State Bar No ) WOELFEL LAW FIRM 1156 Emerald Bay Road, Suite D South Lake Tahoe, CA Telephone: (530) Facsihlile: (530) Attorney for Defendant, Gennaro DiMatteo individually and dba City ofangles IT, Inc. SUPERIOR COURT OF TIIE STATE OF CALIFORNIA DARCY DETARR TRUSTEE OF THE DETARR FAMILY TRUST PLAINTIFF v. GENNARO DIMATTEO, individually and dba CITY OF ANGLES II, INC. DEFENDANT COUNTYOF EL DORADO J Case No.: SCU GENNARO DIMATTEO'S DEMURRER TO COMPLAINT OF DARCY DETARR TRUSTEE OF THE DETARR FAMILY TRUST; SUPPORTING MEMORANDUM; NOTICE OF HEARING Hearing: Hearing Judge: Dylan Sullivan Action Filed: April 2, 2012 Trial: Defendant, Gennaro DiMatteo, dba City of Angels II, hereby demurs to the complaint of plaintiff, Darcy DeTarr trustee ofthe Detarr Family Trust, on the grounds th~t the pleading does not state facts sufficient to constitute a cause ofaction Date: April 19, 2012 ROI)~ Woelfel, mey for Gennaro DiMatteo Gennaro DiMatteo's, Demurrer to Complaint ofdarcy DeTarr ofthe DeTarr Family Trust; Supporting Memorandum; Notice ofhearing

115 c:> II'> Q- l"~ 13 l::;< "C!~z ~d';; :i:~~~ 14 ~=:<:<'" ~>V~ JUi 16 ~- V'. :- 17 -<:" -:( ;r ROBERT 1. WOELFEL (State Bar No ) WOELFEL LAW FIRM 1156 Emerald Bay Road. Suite D South Lake Tahoe, CA Telephone: (530) Facsimile: (530) Attorney for Defendant, Gennaro DiMatteo individually and dba City ofangels II, Inc. STJPERIOR COURT OF THE STATE OF CALIFORNIA DARCY DETARR TRUSTEE OF THE DETARR FAMILY TRUST PLAINTIFF v. GENNARO DIMATTEO individually and dba CITY OF ANGLES II DEFENDANT COUNTYOF EL DORADO ' AUTHORITY FOR DEMURRER Case No.: SCU SUPPORTING MEMORANDUM MEMORANDUM IN SUPPORT OF GENNARO DIMATIEO'S DEMURRER TO DARCY DETARR TRUSTEE OF THE DETARRFAMILY TRUST'S COMPLAINT Hearing: Hearing Judge: Dylan Sullivan Action Filed: April 3, 2012 Trial: California CCP 430.1O(e) pennits a party to object to a pleading, by demurrer, if "[t]he pleading does not state facts sufficient to constitute a cause ofaction." Inthe Instant action, landlord has alleged that Mr. Dimatteo is "using the premises to operate a marijuana dispensary, purportedly in compliance with California law." Attachment 15 to unlawful detainer filed 4/2/2012..Landlord asserts that Mr. Dimatteo is in violation ofthe covenant to "obey all laws", presumably because marijuana activities generally are prohibited by F~deral Law, namely the Controlled Substances Act. As the authority below explains, this court has the duty to interpret California Law in a fashion consistent with legislative intent and the intent ofthe electorate. This, 1 Memorandum in Support ofgennaro DiMatteo's Demurrer to Darcy DeTarr Trustee ofthe Detarr Family Trust's Complaint.

116 ' D o The above-referenced documents were served to the following persons: Koben M. tlendcfson, E:sq. Rollston, Henderson, Crabb & Johnson, LTD. 591 Tahoe Keys Blvd., Suite D-8 South Lake Tahoe, CA FACSIMILE TRANSMISSION: I caused such docwnent to be transmitted via facsimile to the above-listed facsimile machine nwnber for the party. A transmission report was properly issued by the sending facsimile machine, and the transmission was reported as complete and without error. U.S. MAIL: I am. personally and readily familiar with the business practice of Woelfel Law Finn for collection and processing of correspondence for mailing with the United States Postal Service, pursuant to which mail placed for collection at designated stations in the ordinary course ofbusiness is deposited the same day, proper postage prepaid, with the United States Postal SelVlce or , ;:':0\ ;;:< 13 ~q~ ~~ ~~o i~~~ 14 <;>:.J...=.. - <..:~ 15 ~~~~ 3:"';2 16 ~<: '00":: V'.::::: -'" 17-5 :r. 18 D PERSONAL SERVICE: I caused a true copy ofabove-entitled document(s) to be hand delivered by hand to the above listed parties and placed in their Court mailbox. OVERNIGHT COURIER: I caused such package to be delivered by Federal Express for delivery by 10:00 a.m. the following business day. I declare Wlder penalty ofperjury 1.U1der the laws ofthe State ofcalifornia that the foregoing is true and correct. Executed on April 19, 2012, at South Lake Tahoe, California. Date: April 19, 2012 TeriMuir ProofofServiCe

117 0,, -..0 '" g~ ;;;:r-z "" 14 ~~~~ ~X<l"": ~;:...,.!. - ~ _::.~:~ ~ r. ~~~~ 16 ~=.:,.; ~<i.0':: v. :- -L: 17 ~ court must follow binding California precedent" including precedent set by the California Supreme CQurt holaing that.~o long a;, IDe compa331qdmc U~C f\~! l1~cr CUl\~ lulu tlu; M~~ Marijuana Program Act, hereafter MMPA are followed, medical marijuana activities are no less legal than a patient using a prescription drug with a valid prescription. STATEMENT OF RELEVANT LAWS. Federal law prohibits the possession and distribution ofmarijuana (21 U.S.C. 812, 841(a)(1), 844); there is no exception for medical marijuana. United States v.oakland Cannabis Buyers' Cooperative, (2001) 532 U.SA83, 490. Although Californiacriminalizes the possession and cultivation ofmarijuana generany (Health & Saf.Code, 11357, 11358), it has decriminalized the possession and cultivation ofmedical marijuana, when done pursuant to a physician's recommendation. (Health & Saf.Code, , subd. (d).) Further, California law decriminalizes the collective or cooperative cultivation ofmedical marijuana (Health & Sar.Code, ) Case law has concluded that California's statutes are notpreempted by federal Jaw, as they seek only to decriminalize certain conduct for the purposes ofstate law. Qualified Patients Assn. v. City ofanaheim, (2010) 187 Cal.AppAth 734, 757. THE COURT IS BOUND BY THE INTENT OF THE LAW AND MUST EFFECTUATE THAT PURPOSE WHEN INTERPRETING THE LAW "Statutory interpretation is a question oflaw in which we ascertain the Legislature's intent '''with a view to effectuating the purpose ofthe statute, and construe the words ofthe statute in the context ofthe statutory framework as a whole lll City oflake Forest v. Evergreen Holistic Collective, (2/29/2012) Fourth Appealate District no , citing (Del Cerro Mobile Estates Y. City ofplacentia (2011) 197 Cal.AppAth 173, 183.) "The Legislature declares state public policy, not the courts" Id, citing (In re Marriage oftavares (2007) 151 Cal.App.4th 620,628), and courts must "'follow the Legislature's intent, as exhibited by the plain meaning ofthe actual words ofthe law, "'''whatever may be thought ofthe wisdom. expediency, or policy ofthe act" llllll Id, 2 Memorandum in Support of Gennaro DiMatteo's Demurrer to Darcy DeTarr Trustee ofthe Detarr Family Trust's Complaint

118 -~ -"" E< ')... :J ~::;- 13 ~:7.z.", ::!o-"' ::: ~ ~~ 14 ~~~~ ~>-t.l..!. - < cr"" 15 ~~~a o :;i~~~.. ~ 16 ~i~ :;:~ ~~ 17 =s ~ citing (Larry Menke, Ip.c. v. DaimlerChrysler Motors Co. (2009),171 Cal.App.4th 1088, 1093). In interpreting avoter initiative, "we apply the same principles that govern statutory construction" (People v. Rizo (2000) 22 Cal.4th 681,685), and "ourprimtlrypulpose is to ascertain and effectuate the mtentofthe voters who passedthe initiative measure" City oflake Forest v. Evergreen Holistic Collective, (2/29/2012) Fourth Appealate District no , citing (In re Littlefield (1993) 5 Cal.4th 122, 130). In 1996, voters passed Proposition 215, the Compassionate Use Act (CliA). The primary purpose ofthe CUA was to "ensure that seriously ill Californians have the right to obtidn and use marijuallafor medicalpurposes where that medical use is deemed appropriate and has been recommended by a physician ~ho has determined that the person's health would benefit from the use ofmarijuana in the treatment" ofillnesses for which marijuana provides relief , subd. (b)(l)(a); see also People v. Wright (2006) 40 CalAth 81, A second purpose was to ensure that patients and their primary caregivers who obtain and use medical manjuana are not subject to criminal prosecution or sanction , subd.(b)(l)(b). The eua therefore provided that section 11357,relating to the possession ofmarijuana, and section 11358, relating to the cultivation of marijuana, "shall not apply to a patient, or to a patient's primary caregiver, who possesses or cultivates marijuana for the personal medical purposes ofthe patient" upon a doctor's recommendation. l1362.5, subd. (d). The CUA thus provided a limited immunity from prosecution, including a defense at trial. People v. Mower (2002) 28 Ca1.4th 457, 470. In response to the CUA's encouragement '1:0 implement a plan to provide for the safe and affordable distribution ofmarijuana to all patients" in need ofit , subd. (b)(l)(c), our Legislature enacted the MMPA ( et seq.). Through the MMPA, the Legislature sought to "(1) [c]larify the scope ofthe application ofthe act and facilitate the prompt identification of qualified patients and their designated primary caregivers in order to avoid unnecessary arrest and prosecution ofthese individuals and provide needed guidance to law enforcement officers. (2) 3 Memorandum in Support ofgennaro DiMatteo's Demurrer to Darcy DeTarr Trustee ofthe J;)etarr Family Trust's Complaint

119 0,,-." ' 12 ;;8 13 i:< ~- ::l7 u.: :s ~dp :!::$:=~ 14 ~~=i;;!; <i>~"':" - <..r... ~~~s ~~<r"i ~~~~ 16 ~:l :.:.:~ r.,c_:- 17 -~ :r Promote unifonn and consistent application ofthe act among the counties within the state. (3) Enhance the access ofpatients and caregivers to medical marijuana through collective, cooperative: cultivation projects." (Stats.2003, ch. 875, l(b), p ) To these ends, section ofthe MMPA provides, "Qualified patients, persons with valid identification cards, and the designated primary caregivers ofqualified patients and persons with identification cards, who associate within the State ofcalifornia in order collectively or cooperatil'ely to c1!-ltivate marijuanafor medical purposes, shall not solely on the basis ofthat fact be subject to state criminal sanctions under Section 11357, 11358, 11359, 11360, 11366, , or " ( , italics added.) The MMPA also "elaborates on" the definition ofprimary caregiver in the eva. People Hochanadel, supra, 176 Cal.App.4 th at p The MMPA reiterates the definition ofa primary caregiver contained in the eva, i.e., ''the individual, designated by a qualified patient. who has consistently assumed responsibility for the housing, health, or safety ofthat patient orperson... ( , subd. (d).) The subdivision goes onto provide examples ofthe Legislature's view ofpersons qualifying as primary caregivers under this definition: (1) Owners and operators ofclinics or care facilities; (2) "An individual who has been designated as a primary caregiver by more than one qualified patient or person with an identification card, ifevery qualified patient or person with an identification card who has designated that individual as a primary caregiver resides in the same city or county as the primary caregiver"; and (3) "An individual who has been designated as a primary caregiver by a qualified patient or person with an identification card who resides in a city or county other than that ofthe primary caregiver, ifthe individual has not been designated as a primary caregiver by any other qualified patient or person with an identification card." ( , subd. (d)(1)-(3).) In People v. Urziceanu, the court observed that "[t]his new law represents a dramatic change in the prohibitions on the use, distribution, and cultivation ofmarijuana for persons who are qualified patients or primary caregivers... Its specglc itemization ofthe marijuana sales law indicates it 4 Memorandum in Support ofgennaro DiMatteo's Demurrer to Darcy DeTarr Trustee ofthe Detarr Family Trust's Comp~m.

120 0 or ) '" ,,- ~ 13 ~'3~ ~$~g 14 ::!:;:;:;; 15 "'=;:.-::""'!' ~~g~ ~~;5 16 ~~ ~~.., 17!2E -~ contemplates theformation and operation ofmedicinallllllrijuana cooperatives thatwouldrecewe retmdllrsemenrfur man/uana anrr me scrvic~ proficleet In (;UII1"","on w«" me pruvbion o/t"," marijuana." Urziceanu, supra, 132 Cal.AppAth at p In City oflake Forest v. Evergreen Holistic Collective, , Fourth Appellate District no. G043909, the court states: Plainly, the Legislature expressly contemplated collective. cooperative cultivation projects as a lawful means to obtain medical marijuana under California law. The Legislature also expressly chose to place such projects beyond the reach ofnuisance abatement under section 11570, ifpredicated solely on the basis that the project involves medical marijuana activities. Specifically, section exempts members ofcollective or cooperative medical marijuana cultivation projects not only from state criminal sanction for project activities involving marijuana possession ( 11357), cultivation ( 11358), possession for sale or distribution ( 11359). transportation ( 11360), maintaining a place for the sale. use. or distribution of marijuana ( 11366). and using property to manufacture. store. or distribute controlled substances ( ), but also expressly prohibits nuisance prosecution under section [5] Although section refers to "criminal sanctions," the statute does not provide immunity against criminal prosecution under section because, as noted above, there is no such enforcement remedy. The Legislature only provided civil remedies to enforce section ( 11571, 11581; Lew, supra, 20 Cal.App.4th at p. 872). To give effect to the Legislature's inclusion ofsection among the penal provisions that section renders inoperative for collective or cooperative medical marijuana cultivation projects. we must conclude section also supplants the purely civil remedies afforded by section Any other construction renders section 's express reference to section mere surplusage, II result we must avoid. (pacificare ofcalifornia v. Bright Medical Associates, Inc. (2011) 198 Cal.AppAth 1451, 1468 (pacificare) [courts give significance to all the words chosen by the Legislature to manifest its intent].) Similarly, in People v. Mower (2002) 28 Ca1.4th 457, our Supreme Court held: ''As a result of tile enactment ofsection [,J[subdivision} (d), the possession lind cultivation ofmarijlulna is no more criminal-so long as. its conditions are satisfied-than thepossession and acquisition oj anyprescription drug with aphysician'sprescription." (Id. at p. 482.) 5 Memorandum in Support of Gennaro DiMatteo's Demurrer to Darcy DeTarr Trustee oftile Detarr Family Trust's Complaint

121 FEDERAL LAW DOES NOT PREEMPT THE eva OR THE MMPA In Qualified Patients Assn. v. Anaheim, the court squarely addressed the issue ofwhether ornot the eva and MMPA are preempted by the Federal CSA See Qualified Patients Assn v. City of Anaheim, 187 CaLApp.4th 734 (2010). As we explain below, California's decision in the CUA and the MMPA to decriminalize for purposes ofstate law certain conduct related to medical marijuana does nothing to "override" or attempt to?venide federal law, which remains in force. (See, e.g., Gonzales and Oakland CannabIs, supra.) To the contrary, because the CUA andthe MMPA do notmandllte conductthatfederallawprohibits, norpose an obstacle to federal enforcement ofjederallaw, the enadments'decriminalimtion provisions li.1'e notpreemptedbyfederal law. Ill. Congress has the power to preempt state law under the Constitution's supremacy clause. (U.S. Const., art. VI, cl. 2; see, e.g., Crosby v. National Foreign Trade Council (2000) 530 U.S. 363, , 120 S.Ct. 2288,147 L.Ed.2d 352 (Crosby); Gibbons v. Ogden (1824) 22 U.S. 1, 211,9 Wheat. 1,6 L.Ed. 23; M'Culloch v. Maryland (1819) 17 U.S. 316,427,4 Wheat. 316, 4 L.Ed. 579.) "[T]here is, however, "a strong presumption against federal preemption when it comes to the exercise ofhistoric police powers ofthe states. Qualified Patients Assn. v. Anaheim, citing (people v. Boultinghouse (2005) 134 Cal.AppAth 619, 625,36 Cal.Rptr.3d 244 (Boultinghouse ).) That presumption will not be overcome absent a clear and manifest congressional purpose." Id. Because regulation ofmedical practices, local land use, and state criminal sanctions for drug possession are historically matters ofstate police power, this court.' must take a narrow view ofany asserted. federal preemption in these areas. See Qualified Patients v. Anaheim, citing (County ofsan Diego, supra, 165 Cal.App.4th atpp , 81 Cal.Rptr.3d 461.). Our Supreme Court has identified "four species offederal preemption: express, conflict, obstacle, and field, noneofwhich apply to createfederal preemption in the case ofti,e CUA and the MMPA. See Qualified Patients v. Anaheim at 761, (where the court takes an exhaustive look at the four species ofpreemption and their application to the CUA, MMPA, and the CSA). In County ofsan Diego, the court concluded the MMPA's "identification card laws do not pose a significant impediment to specific federal objectives embodied inthe esa" because 6.Memorandum in Support ofgennaro DiMatteo's Demurrer to Darcy DeTarr Trustee ofthe Detarr Family Trust's Complaint

122 on...- 0!::< ~~ 13 _~z ;a: c:: -:r--..;: ~ 6:0 14 ~~<;:1; ~;.7-J~ - <...tv 15 ~~~5 =:-:<..<~ :: c::::::...:. 16 ~=:;! ~5 -=- Ir. :- -;= 17 r ' the CSA1s purpose 'is to combat recreational drug use, not to regulate a state's medical practices." (County ofsan Diego, su~ 165 Cal.App.4th at pp , 81 Cal.Rptr.3d 461, citing Gonzales v. Oregon (2006) 546 U.S. 243, ,126 S.Ct. 904,163 L.Ed.2d 748. [construing CSA as a "statute combating recreational drug use" rather than as an "expansive" interposition of""federal authority to regulate medicine"].) The City ofanaheim argued that "[t]he 'obstacle' to federal goals presented by Section is the creation ofthe exemption for collectives," which is "being abused" "by allo'widg the diversion of 'medical' marijuana to those not qualified to use it." The Cotnts responded: " But the city's complaint is thus not that state law amounts to an obstacle to federal law, but that "abuse[ ]" or violation ofstate law does. These circumstances call for enforcement ofthe state law, not its abrogation. Upholding the law respects the state's authority to legislate in matters historically committed to its purview. Qualified Patients Ass'n v. City ofanaheim, 187 Cal.App.4th 734, at (2010) 115 Cal.Rptr.3d 89 citing (Boultinghouse, supra, 134 Cal.AppAth at p. 625,36 Cal.Rptr.3d 244.) ;;Congress does not have the authority to compel the states to direct their law enforcement personnel to enforce federal laws." In Printz v. United States (1997) 521 U.S. 898, 117 S.Ct L.Ed.2d 914, the federal Brady Act purported to compel local law enforcement officials to conduct background checks on prospective handgun purchasers. The United States Supreme Court held the 10th Amendment to the United States Constitution deprived Congress ofthe authority to enact that legislation, concluding that 'in [New York v. United States (1992) 505 U.S. 144, 112 S.Ct. 240&, 120 L.Ed.2d 120,... we ruled] that Congress cannot compel the States to enact or enforce afederal regulatoryprogram. Congress cannotcircumventthatprohibition by conscripting ti,e State's officers directly. The Federal Government may neither issue directives requiring the States to address particularproblems, nor c01lu1ulnd thestates'olflcers, orthose oftl,e;rpoliticalsubdivisions, to administer or enforce afederal regulatory program.' Qualified Patients Assn. v. Anaheim, at 762, citing County ofsan Diego, at pp JustilS the federal government may not commandeer state officialsforfederal purposes, a city may not standinfor thefederal government andrely on purportedfederalpreemption to implement 7 Memorandum in Support ofgennaro DiMatteo's Demurrer to Darcy DeTarr Trustee ofthe Detarr Family Trust's Complaint.

123 z... oj ,,- ~ ;;:~ 13 ~< ~q~ 14 ; ~~ :: ~.<r;. ~ -...", - ~. ~"T ~~~~ 16 ~~~ ::;"'i..0:: 4'.1: -I:; 17 -~ federallegislalive policy that differsfrom co"esponding, express state legislatitjn concerning medicalmarijuana. la, a.t 762~7(jJ, citing TIl~bkooh, mpm, IlJ CI11.App.1-tb COURTS HAVE ALREADY RULED THAT "OBEY ALL LAWS" CONDITiONS ARE NOT VIOLATED BY CONDUCT LAWFUL UNDER THE CUA AND MMPA MERELY BECAUSE OF FEDERAL LAW In People v. Tillehkook the court examined the exact same prohibition the Plaintiffrelies on in this case. That case involved a probation condition stating: "Obey all 1aws. n The People argued the defendant had violated that rule because possession ofmarijuana was illegal under the Federal CSA~ citing the prohation condition that the defendant obey not only the laws of California, but also tlte laws ofthe United States. The court, however, was not persuaded. It explained: '~The People have misunderstood the role that the federal law plays in the state system. The California courts long ago recognized that state courts do not enforce the federal criminal statutes. 'The State tribunals have no power to punish crimes against the laws ofthe United States, as such. The same act may, in some instances, be an offense against the laws ofboth, and it is only as an offense against the State laws that it can be punished by the State, in any event.' " (Id. at pp , 7 Cal.Rptr.3d 226, fu. omitted.) Continuing, the Tilehkooh court reasoned., "Since the state does not punish a violation of the federal law 'as such,' itcan only reach conduct suhjectto thefederal criminallaw by incorporating the conduct into the state law. Id. The government did not claim they were enforcing a federal criminal sanction attached to the federal marijuana law, rather, they claimed to enforce the state sanction ofprob~onrevocation which is solely a creature ofstate law. Tilehkooh, supra, 113 Cal.App.4tb. at p Tilehkooh explained, "The state cannot do indirectly what it cannot do directly. That is what it seeks to do inrevoking probation when it cannot punish the defendant under the criminal law. [~... [~] California courts do not enforce the federal marijuana possession laws when defendants prosecuted/ormarijuanapossession have a qualifiedimmunity under the CUA. Similarly,Califomia courts shouldnotenforcefederal 8 Memorandum in Support of Gennaro DiMatteo's Demurrer to Darcy DeTarr Trustee ofthe Detail' Family Trost's Complaint

124 ,.) ::> """~ g~ 13 ::e~~.~~~o 14 i~~~ <;>-V.: -; ~ c:r;,; 15 ~~~8 ::.:<'::;fri ~ =:" - 16 ~.~~ -...:: -.::> v.: -;:co 17 ~ marijuana lawfor probationers who quajjjjlfor the immunity provided by{the CUAJ. " (Id. at pp , 7 Cal.RptrJd 226.). Here, the court is being asked. to rely solely on Federal law in applying the sanction of eviction, which like the probation sanction in Tilehkooh, is purely a creature ofstate law. Garden Grove v. Kha, 157 Cal.App.4 th 355(2007) is also illuminating to the case at bar. The facts there included: During a traffic stop, Garden Grove police seized about a third ofan ounce of marijuana from real party in interest Felix Kha. However~ because Kha had a doctor's approval to use marijuana for medical reasons, the prosecutor dismissed the drug charge he was facing. The trial court then granted Kha's motion for return ofproperty and ordered the Garden Grove Police Department to give him back his marijuana. Petitioner, the City ofgarden Grove, seeks a writ ofmandate compelling the trial court to reverse its order. It does not contest the dismissal ofthe underlying drug charge, nor does it frontally challenge California's medical marijuana laws. Rather, it contends Kha is not entitled to the return ofhis marijuana because that drug is generally prohibited underfederallaw. Id at 356. The Court held: The City sees itselfc'caught in the middle ofa conflict between state and federal law" - a position with which we can certainly sympathize - on the issue ofmedical marijuana and does not want to be perceived as facilitating a breach offederal law by returning Kha's marijuana to him. Because marijuana possession is generally prohibited under federal law, the City contends the trial court's order is legally flawed and constitutes an abuse ofdiscretion. The City also maintains that to the extent state law authorizes or mandates the return ofkha's marijuana, it is preempted by federal law. Id at 359. The court thereafter ordered law enforcement to return the Medical Marijuana con.tiscated from Mr. Kha despite the esa. The court held that Garden Grove could not "invoke and rely solely onfederallaw tojustify a particular sanction (i.e., the destruction ofkha's (medical marijuana]) when KI,a's conduct was consistent with, and indeed sanctioned untler, state law." (Garden Grove, supra; 157 Cal.App.4th at p. 380, 68 Cal.Rptr.3d 656.) "Applying the reason[ing] oftilehkooh," the court concluded. that ''judicial enforcement offederaldrugpolicy is precluded in this case hecause the act in question-possession ofmedical marijuana -doesnot 9 Memorandum in Support ofgennaro DiMatteo's Demurrer to Darcy DeTarr Trustee of~e Detarr Family Trust's Complaint

125 1 constitute an offense against the laws ofboth the stille and th~federal go'vemment." See Qualified 2 Patients ~ 763~ Quoting Tilebkooh. 11'... ::: ;;;~ 13 E< _;;:z ~d5_ ~ ~:;;:;:: 14 ~~<~. <:,,;,...!.. -< ~f'"=l' 15 ~~~~ ~~:::~ 16 ~~ ~= ~~ 17 -~ d: 18 Similar to the Garden Grove, Plaintiffis asking the court to rely solely on federal. law to justify a particular sanction when their allegations include compliance with California Law. This request is improper given the legal authority cited above. CONCLUSION The allegations inthe complaint do not include a violation ofcalifornia Law, but rather merely assert a violation ofthe Federal CSA. The esa does not preempt the eua or the MMPA. California courts may not act in a situation such as this, imposing a sanction based solely on the CSA when it will directly interfere with the administration ofactivities lawful under the eua and MMPA. Therefore, plaintiffs complaint fails to state a claim upon which reliefcan be granted by this court as a matter oflaw and the demurrer should be granted. WHEREFORE Defendants pray that the Court will sustain their demurrer, and order this matter dismissed with prejudice. Submitted, Date: April 19, Memorandum in Support ofgennaro DiMatteo's DemUlTcr to Darcy DeTarr Trustee ofthe Detarr Family Trost's Complaint

126 EDMUND G. BROWN JR. Attorney General DEPARTMENT OF JUSTICE State ofcalifornia GUIDELINES FOR THE SECURITY AND NON-DIVERSION OF MARIJUANA GROWN FOR MEDICAL USE August 2008 In 1996, California voters approved an initiative that exempted certain patients and their primary caregivers from criminal liability under state law for the possession and cultivation of marijuana. In 2003, the Legislature enacted additional legislation relating to medical marijuana. One of those statutes requires the Attorney General to adopt "guidelines to ensure the security and nondiversion of marijuana grown for medical use." (Health & Saf. Code, (d).J) To fulfill this mandate, this Office is issuing the following guidelines to (l) ensure that marijuana grown for medical purposes remains secure and does not find its way to non-patients or illicit markets, (2) help law enforcement agencies perform their duties effectively and in accordance with California law, and (3) help patients and primary caregivers understand how they may cultivate, transport, possess, and use medical marijuana under California law. I. SUMMARY OF ApPLICABLE LAW A. California Penal Provisions Relating to Marijuana. The possession, sale, cultivation, or transportation ofmarijuana is ordinarily a crime under California law. (See, e.g., [possession of marijuana is a misdemeanor]; [cultivation of marijuana is a felony]; Veh. Code, [possession of less than 1 oz. of marijuana while driving is a misdemeanor]; [possession with intent to sell any amount of marijuana is a felony]; [transporting, selling, or giving away marijuana in California is a felony; under 28.5 grams is a misdemeanor]; [selling or distributing marijuana to minors, or using a minor to transport, sell, or give away marijuana, is a felony].) B. Proposition The Compassionate Use Act of On November 5, 1996, California voters passed Proposition 215, which decriminalized the cultivation and use of marijuana by seriously ill individuals upon a physician's recommendation. ( ) Proposition 215 was enacted to "ensure that seriously ill Californians have the right to obtain and use marijuana for medical purposes where that medical use is deemed appropriate and has been recommended by a physician who has determined that the person's health would benefit from the use of marijuana," and to "ensure that patients and their primary caregivers who obtain and use marijuana for Unless otherwise noted, all statutory references are to the Health & Safety Code. - 1

127 medical purposes upon the recommendation of a physician are not subject to criminal prosecution or sanction." ( (b)(1 )(A)-(B).) The Act further states that "Section 11357, relating to the possession of marijuana, and Section 11358, relating to the cultivation of marijuana, shall not apply to a patient, or to a patient's primary caregiver, who possesses or cultivates marijuana for the personal medical purposes ofthe patient upon the written or verbal recommendation or approval of a physician." ( I I362.5(d).) Courts have found an implied defense to the transportation of medical marijuana when the "quantity transported and the method, timing and distance of the transportation are reasonably related to the patient's current medical needs." (People v. Trippet (1997) 56 Cal.AppAth 1532, 1551.) c. Senate Bill The Medical Marijuana Program Act. On January 1,2004, Senate Bill 420, the Medical Marijuana Program Act (MMP), became law. ( ) The MMP, among other things, requires the California Department of Public Health (DPH) to establish and maintain a program for the voluntary registration of qualified medical marijuana patients and their primary caregivers through a statewide identification card system. Medical marijuana identification cards are intended to help law enforcement officers identify and verify that cardholders are able to cultivate, possess, and transport certain amounts of marijuana without being subject to arrest under specific conditions. ( (e), ) It is mandatory that all counties participate in the identification card program by (a) providing applications upon request to individuals seeking to join the identification card program; (b) processing completed applications; (c) maintaining certain records; (d) following state implementation protocols; and (e) issuing DPH identification cards to approved applicants and designated primary caregivers. ( (b).) Participation by patients and primary caregivers in the identification card program is voluntary. However, because identification cards offer the holder protection from arrest, are issued only after verification of the cardholder's status as a qualified patient or primary caregiver, and are immediately verifiable online or via telephone, they represent one of the best ways to ensure the security and non-diversion of marijuana grown for medical use. In addition to establishing the identification card program, the MMP also defines certain terms, sets possession guidelines for cardholders, and recognizes a qualified right to collective and cooperative cultivation of medical marijuana. ( , , ) D. Taxability of Medical Marijuana Transactions. In February 2007, the California State Board of Equalization (BOE) issued a Special Notice confirming its policy of taxing medical marijuana transactions, as well as its requirement that businesses engaging in such transactions hold a Seller's Permit. ( According to the Notice, having a Seller's Permit does not allow individuals to make unlawful sales, but instead merely provides a way to remit any sales and use taxes due. BOE further clarified its policy in a - 2

128 June 2007 Special Notice that addressed several frequently asked questions concerning taxation of medical marijuana transactions. ( E. Medical Board of California. The Medical Board of California licenses, investigates, and disciplines California physicians. (Bus. & Prof. Code, 2000, et seq.) Although state law prohibits punishing a physician simply for recommending marijuana for treatment of a serious medical condition ( (c», the Medical Board can and does take disciplinary action against physicians who fail to comply with accepted medical standards when recommending marijuana. In a May 13,2004 press release, the Medical Board clarified that these accepted standards are the same ones that a reasonable and prudent physician would follow when recommending or approving any medication. They include the following: I. Taking a history and conducting a good faith examination ofthe patient; 2. Developing a treatment plan with objectives; 3. Providing informed consent, including discussion of side effects; 4. Periodically reviewing the treatment's efficacy; 5. Consultations, as necessary; and 6. Keeping proper records supporting the decision to recommend the use of medical marijuana. ( Complaints about physicians should be addressed to the Medical Board ( or which investigates and prosecutes alleged licensing violations in conjunction with the Attorney General's Office. F. The Federal Controlled Substances Act. Adopted in 1970, the Controlled Substances Act (CSA) established a federal regulatory system designed to combat recreational drug abuse by making it unlawful to manufacture, distribute, dispense, or possess any controlled substance. (21 U.S.C. 801, et seq.; Gonzales v. Oregon (2006) 546 U.S. 243, ) The CSA reflects the federal government's view that marijuana is a drug with "no currently accepted medical use." (21 U.S.c. 812(b)(I).) Accordingly, the manufacture, distribution, or possession of marijuana is a federal criminal offense. (ld. at 841(a)(I), 844(a).) The incongruity between federal and state law has given rise to understandable confusion, but no legal conflict exists merely because state law and federal law treat marijuana differently. Indeed, California's medical marijuana laws have been challenged unsuccessfully in court on the ground that they are preempted by the CSA. (County ofsan Diego v. San Diego NORML (July 31,2008) --- Cal.Rptr.3d ---, 2008 WL ) Congress has provided that states are free to regulate in the area of controlled substances, including marijuana, provided that state law does not positively conflict with the CSA. (21 U.S.C. 903.) Neither Proposition 215, nor the MMP, conflict with the CSA because, in adopting these laws, California did not "legalize" medical marijuana, but instead exercised the state's reserved powers to not punish certain marijuana offenses under state law when a physician has recommended its use to treat a serious medical condition. (See City of Garden Grove v. Superior Court (Kha) (2007) 157 Cal.AppAth 355, , ) - 3

129 In light of California's decision to remove the use and cultivation of physicianrecommended marijuana from the scope of the state's drug laws, this Office recommends that state and local law enforcement officers not arrest individuals or seize marijuana under federal law when the officer determines from the facts available that the cultivation, possession, or transportation is permitted under California's medical marijuana laws. II. DEFINITIONS A. Physician's Recommendation: Physicians may not prescribe marijuana because the federal Food and Drug Administration regulates prescription drugs and, under the CSA, marijuana is a Schedule I drug, meaning that it has no recognized medical use. Physicians may, however, lawfully issue a verbal or written recommendation under California law indicating that marijuana would be a beneficial treatment for a serious medical condition. ( I (d); Conant v. Walters (9th Cir. 2002) 309 F.3d 629, 632.) B. Primary Caregiver: A primary caregiver is a person who is designated by a qualified patient and "has consistently assumed responsibility for the housing, health, or safety" of the patient. ( I (e).) California courts have emphasized the consistency element of the patient-caregiver relationship. Although a "primary caregiver who consistently grows and supplies... medicinal marijuana for a section patient is serving a health need of the patient," someone who merely maintains a source of marijuana does not automatically become the party "who has consistently assumed responsibility for the housing, health, or safety" of that purchaser. (People ex rei. Lungren v. Peron (1997) 59 Cal.App.4th 1383, 1390, 1400.) A person may serve as primary caregiver to "more than one" patient, provided that the patients and caregiver ali reside in the same city or county. ( I (d)(2).) Primary caregivers also may receive certain compensation for their services. ( (c) ["A primary caregiver who receives compensation for actual expenses, including reasonable compensation incurred for services provided... to enable [a patient] to use marijuana under this article, or for payment for out-of-pocket expenses incurred in providing those services, or both,... shall not, on the sole basis of that fact, be subject to prosecution" for possessing or transporting marijuana].) C. Qualified Patient: A qualified patient is a person whose physician has recommended the use of marijuana to treat a serious illness, including cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief. ( I (b)(1 )(A).) D. Recommending Physician: A recommending physician is a person who (1) possesses a Iicense in good standing to practice medicine in California; (2) has taken responsibility for some aspect of the medical care, treatment, diagnosis, counseling, or referral of a patient; and (3) has complied with accepted medical standards (as described by the Medical Board of California in its May 13, 2004 press release) that a reasonable and prudent physician would follow when recommending or approving medical marijuana for the treatment of his or her patient. - 4

130 III. GUIDELINES REGARDING INDIVIDUAL QUALIFIED PATIENTS AND PRIMARY CAREGIVERS A. State Law Compliance Guidelines. 1. Physician Recommendation: Patients must have a written or verbal recommendation for medical marijuana from a licensed physician. ( (d).) 2. State of California Medical Marijuana Identification Card: Under the MMP, qualified patients and their primary caregivers may voluntarily apply for a card issued by DPH identifying them as a person who is authorized to use, possess, or transport marijuana grown for medical purposes. To help law enforcement officers verify the cardholder's identity, each card bears a unique identification number, and a verification database is available online ( addition, the cards contain the name of the county health department that approved the application, a 24-hour verification telephone number, and an expiration date. ( (a); (a)(3)-(4); ) 3. Proof of Qualified Patient Status: Although verbal recommendations are technically permitted under Proposition 215, patients should obtain and carry written proof of their physician recommendations to help them avoid arrest. A state identification card is the best form of proof, because it is easily verifiable and provides immunity from arrest if certain conditions are met (see section IILBA, below). The next best forms of proof are a city- or county-issued patient identification card, or a written recommendation from a physician. 4. Possession Guidelines: a) MMP: 2 Qualified patients and primary caregivers who possess a stateissued identification card may possess 8 oz. of dried marijuana, and may maintain no more than 6 mature or 12 immature plants per qualified patient. ( (a).) But, if"a qualified patient or primary caregiver has a doctor's recommendation that this quantity does not meet the qualified patient's medical needs, the qualified patient or primary caregiver may possess an amount of marijuana consistent with the patient's needs." ( (b).) Only the dried mature processed flowers or buds of the female cannabis plant should be considered when determining allowable quantities of medical marijuana for purposes ofthe MMP. ( 1I362.77(d).) b) Local Possession Guidelines: Counties and cities may adopt regulations that allow qualified patients or primary caregivers to possess On May 22, 2008, California's Second District Court of Appeal severed Health & Safety Code from the MMP on the ground that the statute's possession guidelines were an unconstitutional amendment of Proposition 215, which does not quantify the marijuana a patient may possess. (See People v. Kelly (2008) 163 Cal.AppAth 124, 77 Cal.Rptr.3d 390.) The Third District Court of Appeal recently reached a similar conclusion in People v. Phomphakdy (July 31, 2008) --- Cal.Rptr.3d ---, 2008 WL The California Supreme Court has granted review in Kelly and the Attorney General intends to seek review in Phomphakdy. - 5

131 medical marijuana in amounts that exceed the MMP's possession guidelines. ( (c).) c) Proposition 215: Qualified patients claiming protection under Proposition 215 may possess an amount of marijuana that is "reasonably related to [their] current medical needs." (People v. Trippel (1997) 56 Cal.AppAth 1532, 1549.) B. Enforcement Guidelines. 1. Location of Use: Medical marijuana may not be smoked (a) where smoking is prohibited by law, (b) at or within 1000 feet ofa school, recreation center, or youth center (unless the medical use occurs within a residence), (c) on a school bus, or (d) in a moving motor vehicle or boat. ( ) 2. Use of Medical Marijuana in the Workplace or at Correctional Facilities: The medical use of marijuana need not be accommodated in the workplace, during work hours, or at any jail, correctional facility, or other penal institution. ( (a); Ross v. RagingWire Telecomms., Inc. (2008) 42 Ca1.4th 920, 933 [under the Fair Employment and Housing Act, an employer may terminate an employee who tests positive for marijuana use].) 3. Criminal Defendants, Probationers, and Parolees: Criminal defendants and probationers may request court approval to use medical marijuana while they are released on bail or probation. The court's decision and reasoning must be stated on the record and in the minutes ofthe court. Likewise, parolees who are eligible to use medical marijuana may request that they be allowed to continue such use during the period of parole. The written conditions of parole must reflect whether the request was granted or denied. ( ) 4. State of California Medical Marijuana Identification Cardholders: When a person invokes the protections of Proposition 215 or the MMP and he or she possesses a state medical marijuana identification card, officers should: a) Review the identification card and verify its validity either by calling the telephone number printed on the card, or by accessing DPH's card verification website ( and b) If the card is valid and not being used fraudulently, there are no other indicia of illegal activity (weapons, illicit drugs, or excessive amounts of cash), and the person is within the state or local possession guidelines, the individual should be released and the marijuana should not be seized. Under the MMP, "no person or designated primary caregiver in possession ofa valid state medical marijuana identification card shall be subject to arrest for possession, transportation, delivery, or cultivation of medical marijuana." ( I (e).) Further, a "state or local law enforcement agency or officer shall not refuse to accept an identification card issued by the department unless the state or local law enforcement agency or officer - 6

132 has reasonable cause to believe that the information contained in the card is false or fraudulent, or the card is being used fraudulently." ( ) 5. Non-Cardholders: When a person claims protection under Proposition 215 or the MMP and only has a locally-issued (i.e., non-state) patient identification card, or a written (or verbal) recommendation from a licensed physician, officers should use their sound professional judgment to assess the validity of the person's medical-use claim: a) Officers need not abandon their search or investigation. The standard search and seizure rules apply to the enforcement of marijuana-related violations. Reasonable suspicion is required for detention, while probable cause is required for search, seizure, and arrest. b) Officers should review any written documentation for validity. It may contain the physician's name, telephone number, address, and license number. c) Ifthe officer reasonably believes that the medical-use claim is valid based upon the totality ofthe circumstances (including the quantity of marijuana, packaging for sale, the presence of weapons, illicit drugs, or large amounts of cash), and the person is within the state or local possession guidelines or has an amount consistent with their current medical needs, the person should be released and the marijuana should not be seized. d) Alternatively, if the officer has probable cause to doubt the validity of a person's medical marijuana claim based upon the facts and circumstances, the person may be arrested and the marijuana may be seized. It will then be up to the person to establish his or her medical marijuana defense in court. e) Officers are not obligated to accept a person's claim of having a verbal physician's recommendation that cannot be readily verified with the physician at the time of detention. 6. Exceeding Possession Guidelines: If a person has what appears to be valid medical marijuana documentation, but exceeds the applicable possession guidelines identified above, all marijuana may be seized. 7. Return of Seized Medical Marijuana: If a person whose marijuana is seized by law enforcement successfully establishes a medical marijuana defense in court, or the case is not prosecuted, he or she may file a motion for return of the marijuana. If a court grants the motion and orders the return of marijuana seized incident to an arrest, the individual or entity subject to the order must return the property. State law enforcement officers who handle controlled substances in the course of their official duties are immune from liability under the CSA. (21 U.S.C. 885(d).) Once the marijuana is returned, federal authorities are free to exercise jurisdiction over it. (21 U.S.C. 812(c)(10), 844(a); City ofgarden Grove v. Superior Court (Kha) (2007) 157 Cal.AppAth 355, 369, 386, 391.) - 7

133 IV. GUIDELINES REGARDING COLLECTIVES AND COOPERATIVES Under California law, medical marijuana patients and primary caregivers may "associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes." ( ) The following guidelines are meant to apply to qualified patients and primary caregivers who come together to collectively or cooperatively cultivate physician-recommended marijuana. A. Business Forms: Any group that is collectively or cooperatively cultivating and distributing marijuana for medical purposes should be organized and operated in a manner that ensures the security of the crop and safeguards against diversion for non-medical purposes. The following are guidelines to help cooperatives and collectives operate within the law, and to help law enforcement determine whether they are doing so. 1. Statutory Cooperatives: A cooperative must file articles of incorporation with the state and conduct its business for the mutual benefit of its members. (Corp. Code, 12201, ) No business may call itself a "cooperative" (or "coop") unless it is properly organized and registered as such a corporation under the Corporations or Food and Agricultural Code. (Jd. at (b).) Cooperative corporations are "democratically controlled and are not organized to make a profit for themselves, as such, or for their members, as such, but primarily for their members as patrons." (Id. at ) The earnings and savings of the business must be used for the general welfare of its members or equitably distributed to members in the form of cash, property, credits, or services. (Ibid.) Cooperatives must follow strict rules on organization, articles, elections, and distribution of earnings, and must report individual transactions from individual members each year. (See id. at 12200, et seq.) Agricultural cooperatives are likewise nonprofit corporate entities "since they are not organized to make profit for themselves, as such, or for their members, as such, but only for their members as producers." (Food & Agric. Code, ) Agricultural cooperatives share many characteristics with consumer cooperatives. (See, e.g., id. at 54002, et seq.) Cooperatives should not purchase marijuana from, or sell to, non-members; instead, they should only provide a means for facilitating or coordinating transactions between members. 2. Collectives: California law does not define collectives, but the dictionary defines them as "a business, farm, etc., jointly owned and operated by the members of a group." (Random House Unabridged Dictionary; Random House, Inc ) Applying this definition, a collective should be an organization that merely facilitates the collaborative efforts of patient and caregiver membersincluding the allocation of costs and revenues. As such, a collective is not a statutory entity, but as a practical matter it might have to organize as some form of business to carry out its activities. The collective should not purchase marijuana from, or sell to, non-members; instead, it should only provide a means for facilitating or coordinating transactions between members. - 8

134 B. Guidelines for the Lawful Operation of a Cooperative or Collective: Collectives and cooperatives should be organized with sufficient structure to ensure security, non-diversion of marijuana to illicit markets, and compliance with all state and local laws. The following are some suggested guidelines and practices for operating collective growing operations to help ensure lawful operation. I. Non-Profit Operation: Nothing in Proposition 215 or the MMP authorizes collectives, cooperatives, or individuals to profit from the sale or distribution of marijuana. (See, e.g., I I (a) ["nothing in this section shall authorize... any individual or group to cultivate or distribute marijuana for profit"]. 2. Business Licenses, Sales Tax, and Seller's Permits: The State Board of Equalization has determined that medical marijuana transactions are subject to sales tax, regardless of whether the individual or group makes a profit, and those engaging in transactions involving medical marijuana must obtain a Seller's Permit. Some cities and counties also require dispensing collectives and cooperatives to obtain business licenses. 3. Membership Application and Verification: When a patient or primary caregiver wishes to join a collective or cooperative, the group can help prevent the diversion of marijuana for non-medical use by having potential members complete a written membership application. The following application guidelines should be followed to help ensure that marijuana grown for medical use is not diverted to illicit markets: a) Verify the individual's status as a qualified patient or primary caregiver. Unless he or she has a valid state medical marijuana identification card, this should involve personal contact with the recommending physician (or his or her agent), verification of the physician's identity, as well as his or her state licensing status. Verification of primary caregiver status should include contact with the qualified patient, as well as validation of the patient's recommendation. Copies should be made of the physician's recommendation or identification card, if any; b) Have the individual agree not to distribute marijuana to non-members; c) Have the individual agree not to use the marijuana for other than medical purposes; d) Maintain membership records on-site or have them reasonably available; e) Track when members' medical marijuana recommendation and/or identification cards expire; and t) Enforce conditions of membership by excluding members whose identification card or physician recommendation are invalid or have expired, or who are caught diverting marijuana for non-medical use. - 9

135 4. Collectives Should Acquire, Possess, and Distribute Only Lawfully Cultivated Marijuana: Collectives and cooperatives should acquire marijuana only from their constituent members, because only marijuana grown by a qualified patient or his or her primary caregiver may lawfully be transported by, or distributed to, other members of a collective or cooperative. ( , ) The collective or cooperative may then allocate it to other members of the group. Nothing allows marijuana to be purchased from outside the collective or cooperative for distribution to its members. Instead, the cycle should be a ciosedcircuit of marijuana cultivation and consumption with no purchases or sales to or from non-members. To help prevent diversion of medical marijuana to nonmedical markets, collectives and cooperatives should document each member's contribution of labor, resources, or money to the enterprise. They also should track and record the source oftheir marijuana. 5. Distribution and Sales to Non-Members are Prohibited: State law allows primary caregivers to be reimbursed for certain services (including marijuana cultivation), but nothing allows individuals or groups to sell or distribute marijuana to non-members. Accordingly, a collective or cooperative may not distribute medical marijuana to any person who is not a member in good standing of the organization. A dispensing collective or cooperative may credit its members for marijuana they provide to the collective, which it may then allocate to other members. ( (c).) Members also may reimburse the collective or cooperative for marijuana that has been allocated to them. Any monetary reimbursement that members provide to the collective or cooperative should only be an amount necessary to cover overhead costs and operating expenses. 6. Permissible Reimbursements and Allocations: Marijuana grown at a collective or cooperative for medical purposes may be: a) Provided free to qualified patients and primary caregivers who are members ofthe collective or cooperative; b) Provided in exchange for services rendered to the entity; c) Allocated based on fees that are reasonably calculated to cover overhead costs and operating expenses; or d) Any combination of the above. 7. Possession and Cultivation Guidelines: If a person is acting as primary caregiver to more than one patient under section (d)(2), he or she may aggregate the possession and cultivation limits for each patient. For example, applying the MMP's basic possession guidelines, if a caregiver is responsible for three patients, he or she may possess up to 24 oz. of marijuana (8 oz. per patient) and may grow 18 mature or 36 immature plants. Similarly, collectives and cooperatives may cultivate and transport marijuana in aggregate amounts tied to its membership numbers. Any patient or primary caregiver exceeding individual possession guidelines should have supporting records readily available when: a) Operating a location for cultivation; b) Transporting the group's medical marijuana; and c) Operating a location for distribution to members of the collective or cooperative. - 10

136 8. Security: Collectives and cooperatives should provide adequate security to ensure that patients are safe and that the surrounding homes or businesses are not negatively impacted by nuisance activity such as loitering or crime. Further, to maintain security, prevent fraud, and deter robberies, collectives and cooperatives should keep accurate records and follow accepted cash handling practices, including regular bank runs and cash drops, and maintain a general ledger of cash transactions. C. Enforcement Guidelines: Depending upon the facts and circumstances, deviations from the guidelines outlined above, or other indicia that marijuana is not for medical use, may give rise to probable cause for arrest and seizure. The following are additional guidelines to help identify medical marijuana collectives and cooperatives that are operating outside of state law. 1. Storefront Dispensaries: Although medical marijuana "dispensaries" have been operating in California for years, dispensaries, as such, are not recognized under the law. As noted above, the only recognized group entities are cooperatives and collectives. ( ) It is the opinion of this Office that a properly organized and operated collective or cooperative that dispenses medical marijuana through a storefront may be lawful under California law, but that dispensaries that do not substantially comply with the guidelines set forth in sections IV(A) and (B), above, are likely operating outside the protections of Proposition 215 and the MMP, and that the individuals operating such entities may be subject to arrest and criminal prosecution under California law. For example, dispensaries that merely require patients to complete a form summarily designating the business owner as their primary caregiver - and then offering marijuana in exchange for cash "donations" - are likely unlawful. (Peron, supra, 59 Cal.AppAth at p [cannabis club owner was not the primary caregiver to thousands of patients where he did not consistently assume responsibility for their housing, health, or safety].) 2. Indicia of Unlawful Operation: When investigating collectives or cooperatives, law enforcement officers should be alert for signs of mass production or illegal sales, including (a) excessive amounts of marijuana, (b) excessive amounts of cash, (c) failure to follow local and state laws applicable to similar businesses, such as maintenance of any required licenses and payment of any required taxes, including sales taxes, (d) weapons, (e) illicit drugs, (f) purchases from, or sales or distribution to, non-members, or (g) distribution outside of California. - 11

137 STATE OF CALIFORNIA OFFICE OF THE ATTORNEY GENERAL KAMALA D. HARRIS ATTORNEY GENERAL December 21, 2011 Re: Medical Marijuana Guidelines Dear Partners and Colleagues: As the state's chief law enforcement official, I am troubled by the exploitation of California's medical marijuana laws by gangs, criminal enterprises, and others. Senior members -ofmy staffrecently concluded an almost yearlong series ofmeetings with representatives across the state from law enforcement, cities, counties, and the patient and civil rights communities. The primary purpose ofthe meetings was to assess whether we could clarify the medical marijuana guidelines that my predecessor published in 2008 in order to stop the abuses. These conversations, as well as the federal government's recent unilateral enforcement actions, reaffirmed that the facts today are far more complicated than was the case in The consensus from our conversations is that state law itself needs to be reformed, simplified, and improved to better explain how, when, and where individuals may cultivate and obtain physician-recommended marijuana, and to provide law enforcement officers with guidelines for enforcement. In short, it is time for real solutions, not half-measures. At the same time, almost every group of stakeholders has asked me to postpone issuance ofnew guidelines until the courts have acted in a number ofkey cases. Because I have come to recogni;ze that non-binding guidelines will not solve the problems with the state's medical marijuana law, I have decided to honor this request and am urging the California Legislature to amend the law to establish clear rules governing access to medical marijuana. We cannot protect the will ofthe voters, or the ability ofseriously ill patients to access their medicine, until statutory changes are made that define the scope ofthe group cultivation right, whether dispensaries and edible marijuana products are permissible, and how marijuana grown for medical use may lawfully be transported. I have begun discussions with the California Legislature about legislative solutions. One point is certain-california law places a premium on patients' rights to access marijuana for medical use I STREET SUITE 1740 SACRAMENTO, CALIFORNIA PHONE (916)

138 I look forward to working with you on these issues going forward. Please do not hesitate to contact my office ifyou have questions or concerns. Sincerely, KAMALA D. HARRIS Attorney General

139 I-OH011 14:17 From-US ATTORNEY T-459 P.002/003 F-804 U.S. DEPARTMENT OF JUSTICE United Stales Attorney Eastel'J'/ District a/california B~njamin B. Wagner United Slare". A/larney Rob~rl T. Matsui United States CoUrthDUS~ Phone 916/S54-27DO so I I Slreet, Suire I ~llx \H6/ SDcramenlD. CA 'D July 1,2011 Mayor Ann Schwab City of Chico PO Box 3420 Chico, CA Dear Mayor Schwab: It has come to my attention that the City of Chico is considering an ordinance which would authorize pennits fot two medical marijuana cultivation facilities, each up to 10,000 square feet. TIns letter is written to ens1.u"e there is no confusion regarding the U.S. Department of Justice's position regarding municipal ordinances and state laws that purport to establish proposed marijuana cultivation or licensing programs. Congress has determined that marijuana is a controlled substance.. Congress placed marijuana in Schedule I of the Controlled Substances Act (CSA) and, as such, growing: distributing, and possessing marijuana in any capacity, other than as part of a federally authorized research program, is a violation of federal law regardless of state laws permitting such activities. The Department of Justice is firmly committed to enforcing the CSA in all states. As stated in the October 2009 memorandum from then Deputy Attorney General David Ogden, and In the memorandwn issued yesterday by Deputy Attorney General James Cole, while the Department does not focus its limited resources on prosecuting seriously ill individuals who use marijuana as part ofa medically recommended treatment regimen in compliance with state law, we will enforce the CSA vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana, even ifsuch activities are permitted under state law. Consistent with federal law, the Department maintains the authority to pursue criminal Or civil actions for ally CSA violations whenever the Department detennines that such legal action is warranted. This includes, but is not limited to, actions to enforce the criminal provisions of the CSA such as Title 21) United States Code, Section 841. making it illegal to manufacture, distribute. or possess with intent to distribute any controlled substance including marijuana; Title 21) United States Code, Section 856, making it unlawful to knowingly open, lease, rent, maintain, or use property for the manufacturing, storing, or distribution of controlled substances; and Title 21. United States Code,

140 Jul-OHOll 14:17 FrDm-US ATTORNEY T-459 P.003/003 F-3D4 Section 846, making it illegal to conspire to commit any of the crimes set fonh in the CSA. Federal money laundering and related statutes which prohibit a variety of different types of financial activity involving the movement of drug proceeds may likewise be utilized. The government may also pursue civil injunctions. and the forfeiture ofdrug proceeds, property traceable to such proceeds, and property used to facilitate drug violations. The Department is concerned about the proposed ordinance in the City of Chico, as it would authorize conduct contrary to federal law and threatens the federal government's efforts to regulate the possession, manufacturing, and trafficking of controlled substances. Individuals who elect to operate industrial marijuana cultivation facilities will be doing so in violation offederal law. Others who knowingly facilitate such industrial cultivation activities, including property owners, landlords, and financiers, should also know that their conduct violates federal law. Jhope this letter assists you in making informed decisions regarding a proposed ordinance which would pennit the establishment of significant marijuana cultivation facilities in the City of Chico. Very truly yours, \S~W~~ B~aInillitWagner, United States Attorney Eastern District of California cc: Kamala D. Harris, Attomey General of the State ofcalifomia Mil<.e Ramsey, Butte County District Attorney David Burkland, Chico City Manager Lori J. Barker, Chico ell)' A1.!Omey -2

141 u.s. Department of Justice United States Attorney Northern District a/california Melinda Haag. United Slales Attorney Floor, Federal Building (415) Golden Gale Avenue, Box Sail Francisco, California 94/ FAX:(415) Robert S. Wall Director ofcommunity Development City of Eureka 531 K Street Eureka, CA Dear Mr. Wall: August 15, 2011 RECPJrVRlJ AUG 1 820ft " DEPARTMENT OF COMMUNITY DEVELOPMENT I write in response to your letter dated August 8, 2011, seeking guidance regarding medical cannabis growing facilities in the City of Eureka, California. As the Department has stated on many occasions, Congress has determined that marijuana is a controlled substance. Congress placed marijuana in Schedule I of the Controlled Substances Act (CSA) and, as such, growing, distributing, and pos~,essing marijuana in any capacity, other than as part of a federally authorized research program, is a violation of federal law regardless ofstate laws permitting such activities. The prosecution of individuals and organizations involved in the trade of any illegal drugs and the dismption of dnlg trafficking organizations is a core priority of the Department. This core priority includes prosecution ofbusiness enterprises that unlawfully market and sell marijuana. As stated in the October 2009 Ogden Memorandum and reiterated recently in the 2011 Cole Memorandum, the Department does not focus its limited resources 011 seriously ill individuals who use marijuana as part of a medically recommended treatment regimen in compliance with state law. However, individuals and organizations who are in the business of cultivating, selling, or distributing marijuana, and those who knowingly facilitate such activities, are in violation of the Controlled Substances Act and are subject to federal enforcement, even if such activities are permitted under state law. Consistent with federal law, the Department maintains the authority to pursue criminal or civil actions for any CSA violations whenever the Department determines that such legal action is warranted. This includes, but is not limited to, actions to enfqrce the criminal provisions ofthe CSA such as Title 21 Section 841 making it illegal to manufacture, distribute, or possess with intent to distribute any controlled substance including marijuana; Title 21 Section 856 making it unlawful to knowingly open, lease, rent, maintain, or use property tor the manufacturing, storing, or distribution ofcontrolled substances; and Title 21 Section 846 making it illegal to conspire to commit any ofthe crimes set forth in the CSA. Federal money la~dering and related statutes that prohibit a variety of different types of financial activity involving the movement ofdrug

142 Robert S. Wall August 15,2011 Page 2 proceeds may likewise be utilized. The government may also pursue civil injunctions, and the forfeiture of drug proceeds, property traceable to such proceeds, and property used to facilitate drug violations. The Department is concerned about the City ofeureka's creation of a licensing scheme that permits large-scale industrial marijuana cultivation, processing, and distribution, as it authorizes conduct contrary to federal law and threatens the federal government's efforts to regulate the possession, manufacturing, and trafficking of controlled substances. Individuals who elect to operate any such facilities will be doing so in violation of federal law. Others who knowingly facilitate the actions of these individuals, including property owners, landlords, and financiers should also know that their conduct violates federal law. Ifthe City ofeureka were to proceed, this office would consider injunctive actions, civil fines, criminal prosecution, and the forfeiture ofany property used to facilitate a violation ofthe CSA. As the Attorney General has repeatedly stated, the Department of Justice remains finuly committed to enforcing the CSA in all states. I hope this letter assists the City of Eureka in making informed decisions regarding this matter. Very truly yours, ~~ / Melinda~. United States Attorney Northern District of California cc: David Tyson, City Manager Mike Knight, Assistant City Manager City Attorney

143 M:~ AmericansFor -"SafeAccess Advancing Legal Medical Marijuana Therapeutics and Research Frequently Asked Questions for Property Owners: Asset Forfeiture and Medical Cannabis Updated October 8, 2011 Voters and lawmakers in sixteen states and the District of Columbia have legalized medical cannabis (marijuana). The scope and details of these laws vary from one state to another, but each of the laws seeks to protect legitimate patients from criminal prosecution. Unfortunately, medical cannabis remains illegal under federal law. Patients and advocates hoped for a change in federal policy when President Barack Obama was elected in November of However, the President and his Administration have failed to uphold promises of a more enlightened policy. On October 7,2011, US Attorneys in California announced a new offensive against medical cannabis patients and providers in that state. Around the same time, the US Department of Justice (DOJ) started sending letters to property owners who rent to medical cannabis tenants threatening prosecution and asset forfeiture proceedings. This is not a new tactic. The Bush Administration sent similar letters in 2007, but never filed criminal or civil charges against a property owner. Americans for Safe Access (ASA), the nation's leading medical cannabis advocacy organization, is already working with state and federal lawmakers to stop federal interference and intimidation like this. ASA is confident that we will be successful in harmonizing federal law with state laws that allow medical cannabis use. In the meantime, property owners may receive letters threatening them with penalties. Below you will find answers to some common questions about medical cannabis collectives, federal intimidation, and where you can get assistance. Please contact ASA toll free at (888) or at info@safeaccessnow.org if you have questions or need assistance. Headquarters National Office General Information 1322 Webster St, Suite 402, Oakland, CA M Street NW, Washington DC WEB: PHONE: 510, FAX: PHONE: FAX: TOU FREE:

144 Frequently Asked Questions for Property Owners: Asset Forfeiture and Medical Cannabis Updated October 8, 2011 Why should I rent space to a medical cannabis tenant? Medical cannabis dispensing centers (MCDCs) and cultivators provide an incredibly important service both to medical cannabis patients and to the community at large, which has an interest in caring for its sick and dying members. Without MCDCs, many legitimate medical cannabis patients would have no way to get the medicine they need. Renting property to an MCDC is not just your right. It also assists in protecting patients and the community, while implementing state law. Are MCDCs legal under state law? Despite federal opposition, states are moving to regulate MCDCs and cultivation. The details vary from state to state, but in most cases, MCDCs and cultivating medicine can be legal. Your tenant should be able to demonstrate compliance with state and, where applicable, local regulations. What is asset forfeiture? Asset forfeiture refers to a civil or criminal action in which the state or federal government confiscates assets that were acquired with proceeds of a criminal act or were used to commit a criminal act. Congress and state legislatures created asset forfeiture laws to target large-scale narcotics trafficking operations, but they are most often used against small-scale offenders. Asset forfeiture laws generate a tremendous financial windfall for law enforcement agencies, and widespread abuse of these statues led to federal reform measures in What are my risks as a landlord who rents to an MCDC? The major risk is that, if the federal government chooses to, it can raid the MCDC; and at some point, it could initiate asset forfeiture proceedings or criminally prosecute even the landlords of such facilities. Medical cannabis is legal in sixteen states and the District of Columbia, but federal law still prohibits its use under any circumstances. Until federal law changes, people who use or provide medical cannabis are at risk of federal prosecution - even if their conduct is legal under state law and sanctioned by local government. Despite threats by the DOJ, the risk of asset forfeiture proceedings against a landlord who is not the owner/operator of the facility is still relatively small. In 2007, the federal government did not follow through on any of its threats against property owners. In fact, in the sixteen years of federal opposition to medical cannabis, ASA is only aware of one Headquarters National Office General Information 1322 Web,ter St, Suite 402, Oakland, CA M Street NW, Washington DC WEB: PHONE: FAX: PHONE: FAX: TOll FREE:

145 instance where the federal government has been even partially successful in an asset forfeiture case against a non-owner/operator landlord (In that case, after the defendant raised a lack of proportionality defense, the government agreed to cease its attempt to seize the property in exchange for defendant's payment of a fine). What would this have to do with my property? The DOJ recently sent notices to property owners in California informing the owners that they may face criminal prosecution or asset forfeiture for knowingly renting their property to an MCDC or cultivator. The notices do not indicate that any property owner is being charged with a crime or is now subject to asset forfeiture. Because these notices do not initiate any particular action against the property owner, there is no requirement that the property owner respond to the notice or take any action. ASA strongly recommends you consult with an attorney experienced in asset forfeiture before talking with any law enforcement official. Is this legal? Yes. Although asset forfeiture charges are controversial, they have been upheld in court. The US Attorney's office can file criminal charges or initiate asset forfeiture charges if it can prove that a landlord knew that the actions of the tenant were illegal and did not take reasonable measures to stop those actions. Why is this happening now? The Drug Enforcement Administration (DEA) and DOJ have been active in trying to close and intimidate MCDCs in states where it is legal since Until now, the federal government's primary tool to do this was to raid a handful of facilities and confiscate the medical cannabis inside. Most of these raids do result in criminal prosecutions, and many raided facilities simply reopen. Sending notices to landlords is a cynical tactic designed to intimidate property owners into evicting the tenants without the cost and inevitable public backlash of raiding facilities. This tactic is also meant to discourage landlords from renting to collectives at all, in an effort to deny safe access to patients. Does the US Attorney intend to prosecute property owners? The US Attorney's office has the authority to prosecute property owners, but there is no indication as to whether or not they intend to do so. In 2007, the DEA and DOJ sent hundreds of letters to property owners, but never filed criminal or civil cases. Despite the new DOJ letters, there is still no firm evidence of the US Attorney moving to prosecute a property owner. Headquarters National Office General Information 1322 Webster St, Suite 402, Oakland, CA M Street NW, Washington DC WEB: PHONE: FAX: PHONE: FAX: TOLL FREE:

146 What should a landlord do upon receiving a notice? Property owners who receive a notice from the DOJ have not been charged with a crime. Nevertheless, the landlord may wish to consult with his or her attorney or an asset forfeiture specialist about a landlord's rights and responsibilities under the law. Lawyers will likely advise you not to make any statement to the DOJ, indicating knowledge of or agreement with a tenant engaged in an allegedly illegal activity. Doing so may mean giving up important rights in the unlikely event that charges are filed. There is no need to act immediately if one receives a notice, and there may never be a need to act at all. Any legal action that might be initiated would take months to unfold, so a landlord should take time to consider the issue and talk with the tenant, before making up her or his mind. Always remember that the DOJ is trying to intimidate and manipulate landlords into evicting these tenants as soon as possible. Landlords do not have to succumb to this pressure without due consideration of their own financial interest in maintaining the lease and their rights as a property owner. What if a landlord was unaware of the tenant's actions? Federal asset forfeiture laws provide for an "innocent owner" defense for property owners who were unaware of the allegedly illegal activity and subsequently take reasonable steps to stop the activity. In some instances, this may involve initiating eviction procedures or requiring tenants to refrain from violating the law. A landlord should discuss how the innocent owner defense applies with his or her lawyer or asset forfeiture specialist. Where can landlords get help on this issue? Americans for Safe Access (ASA) is working with state and federal lawmakers to ensure that landlords' rights are protected and that MCDC can remain open. Please contact our Oakland office toll free at (888) if you have further questions so that we can keep you posted about our work on this topic. ASA is the nation's largest organization of patients, medical professionals, scientists and concerned citizens promoting safe and legal access to cannabis for therapeutic use and research. We have already won important court victories on medical cannabis issues and are leading the campaign to change federal medical cannabis laws. Visit for more information about ASA. You can find a list of lawyers who may be able to advise you about asset forfeiture issues by viewing the Attorney's Directory published by Forfeiture Endangers Americans Rights (FEAR) at This organization operates independently of ASA Headquarters National Office General Information 1322 Webster St, Suite 402, Oakland, CA M Street NW, Washington DC WEB: PHONE: FAX: PHONE: FAX: TOLL FREE:

147 Marin Alliance For Medical Marijuana v. Holder,.. F.Supp.2d.. (2011) [7] medical necessity defense was legally unavailable WL Only the Westlaw citation is currently available. United States District Court, N.D. California, Oakland Division. Motion denied. West Headnotes (19) MARIN ALLIANCE FOR MEDICAL MARIJUANA, a not-for-profit association; John D'Amato, an individual, Medthrive, Inc., a not-for-profit cooperative corporation doing business as MedThrive Cooperative; the Jane Plotitsa Shelter Trust, a revocable living trust; the Felm Trust, an irrevocable living trust; and the Divinity Tree Patients' Wellness Cooperative, Inc., a not-for-profit cooperative corporation, Plaintiffs/Petitioners, v. Eric HOLDER, Attorney General of the United States; Michelle Leonhart, Administrator of the Drug Enforcement Administration; Hon. Melinda Haag, U.S. Attorney for the Northern District of California, Defendants/Respondents. Synopsis No. C SBA./ Dkts. Nos. 5, 23. I Nov. 28, Background: Medical marijuana dispensaries, one of their landlords, and medical marijuana patient brought action challenging threats by United States Department of Justice (DOJ) to take legal action against landlords of medical marijuana dispensaries. Plaintiffs moved for temporary restraining order (TRO). Holdings: The District Court, Saundra Brown Armstrong, 1., held that: [I] United States was not judicially estopped from instituting legal proceedings against plaintiffs; [2] doctrine of estoppel by entrapment did not preclude United States from instituting legal proceedings; [3] plaintiffs failed to establish likelihood ofsuccess on merits oftheir substantive due process claim; [4] plaintiffs failed to establish likelihood ofsuccess on merits of their Tenth Amendment claim; [5] plaintiffs failed to establish likelihood ofsuccess on merits oftheir equal protection claim; [6] plaintiffs failed to establish likelihood ofsuccess on merits of their Commerce Clause claim; and [1) [2] [3] [4J [5] Injunction i= Grounds and Objections Injunction i= Restraining Order Pending Hearing of Application To obtain temporary restraining order (TRO) or preliminary injunction, moving party must show: (I) likelihood ofsuccess on merits; (2) likelihood of irreparable harm to moving party in absence of preliminary relief; (3) that balance ofequities tips in moving party's favor; and (4) that injunction is in public interest. Injunction i= Nature and Scope of Provisional Remedy Injunction ~ Evidence and Affidavits Preliminary injunction is extraordinary remedy that may only be awarded upon clear showing that plaintiff is entitled to such relief. Estoppel i- Claim Inconsistent with Previous Claim or Position in General "Judicial estoppel" is equitable doctrine that precludes party from gaining advantage by asserting one position, and then later seeking advantage by taking clearly inconsistent position. Estoppel i= Estoppel Against Public, Government, or Public Officers Government may not be estopped on same terms as any other litigant. Estoppel WestlawNext

148 Marin Alliance For Medical Marijuana v. Holder, --- F.Supp.2d ---- (2011) ~ Claim Inconsistent with Previous Claim or Position in General United States was not judicially estopped from instituting legal proceedings against medical marijuana dispensaries, their landlords, and their patients for violations of federal drug laws due to fact that United States had previously stipulated to dismissal of similar lawsuit and Department of Justice (DOJ) had issued memorandum suggesting that Department's resources generally not be used against individuals who were in compliance with state laws providing for medical use ofmarijuana, where United States reserved in stipulation right to "withdraw, modify, or cease to follow [memorandum]," memorandum did not promise not to enforce federal laws against dispensaries, judge's approval was unnecessary for dismissal to become effective, and current plaintiffs were not parties in prior action. [6] Estoppel """ Claim Inconsistent with Previous Claim or Position in General In determining whether party is subject to judicial estoppel, court considers: (I) whether party's later position is clearly inconsistent with its original position; (2) whether party has successfully persuaded court of earlier position; and (3) whether allowing inconsistent position would allow party to derive unfair advantage or impose unfair detriment on opposing party. [7] Criminal Law ~ What Constitutes Entrapment "Estoppel by entrapment" is defense in criminal actions wherein government official or agent leads defendant into criminal conduct by affirmatively misrepresenting what is legal. [8] Criminal Law ~ Narcotics and Drugs Doctrine of estoppel by entrapment did not preclude United States from instituting legal proceedings against medical marijuana dispensaries, their landlord, and their patients for violations of federal drug laws, despite fact that United States had previously stipulated to dismissal of similar lawsuit, and Department of Justice (DOJ) had issued memorandum suggesting that Department's resources generally not be used against individuals who were in compliance with state laws providing for medical use of marijuana, where no criminal proceeding had yet been instituted against plaintiffs, nothing in memorandum affirmatively informed medical marijuana growers and distributors that their conduct was legal, and memorandum was directed to United States Attorneys, not plaintiffs. [9] Constitutional Law ~ Ninth Amendment Constitutional Law ~ Liberties and Liberty Interests Ninth Amendment, in tandem with Fifth Amendment, protects fundamental rights and liberties that are, objectively, deeply rooted in Nation's history and tradition, and implicit in concept of ordered liberty, such that neither liberty nor justice would exist if they were sacrificed. U.S.C.A. Const.Amends. 5,9. [10] Civil Rights ~ Criminal Law Enforcement; Prisons Medical marijuana dispensaries, one of their landlords, and medical marijuana patient failed to establish likelihood of success on merits of their claim that application of Controlled Substances Act (CSA) to growers and users of marijuana for medical purposes, as otherwise authorized by California Compassionate Use Act, violated their right to substantive due process, and thus were not entitled to temporary restraining order (IRO) preventing Department of Justice (DOJ) from taking legal action against them, despite plaintiffs' contention that right to use medical marijuana had reached level of popular acceptance to qualify as fundamental; majority of states did not recognize right to use marijuana for medicinal purposes, and there was no allegation or evidence of pattern of non-enforcement of laws proscribing its use. U.S.C.A. Const.Amends. 5, 9; Comprehensive WestlawNext

149 Marin Alliance For Medical Marijuana v. Holder, F.Supp.2d. (2011) Drug Abuse Prevention and Control Act of 1970, 101 et seq., 21 U.S.CA. 801 et seq.; West's Ann.Cal.Health & Safety Code I Cases that cite this headnote 111) Injunction i= Restraining Order Pending Hearing of Application Medical marijuana dispensaries, one of their landlords, and medical marijuana patient failed to establish likelihood of success on merits of their claim that application of Controlled Substances Act (CSA) to growers and users of marijuana for medical purposes, as otherwise authorized by Califomia Compassionate Use Act, violated Tenth Amendment, and thus were not entitled to temporary restraining order (TRO) preventing Department of Justice (DOJ) from taking legal action against them. U.S.CA. Const.Amend. 10; Comprehensive Drug Abuse Prevention and Control Act of 1970, 101 et seq., 21 U.S.CA. 801 et seq.; West's Ann.Cal.Health & Safety Code I Cases that cite this headnote (12] Constitutional Law ~ Relationship to Equal Protection Guarantee Fifth Amendment's Due Process Clause subjects federal government to constitutional limitations that are equivalent of those imposed on states by Fourteenth Amendment's Equal Protection Clause. U.S.c.A. Const.Amends. 5, ) Constitutional Law i= Decision to Prosecute; Discretion To make claim for selective prosecution under equal protection component of Fifth Amendment's Due Process Clause, plaintiffs must establish that: (I) similarly situated persons were not prosecuted, and (2) defendants were motivated by discriminatory purpose. U.S.c.A. Const.Amends. 5, 14. ~ Decision to Prosecute; Discretion Where no suspect class or fundamental right is involved, plaintiff asserting selective prosecution claim under equal protection component of Fifth Amendment's Due Process Clause must demonstrate that there is no rational basis for difference in treatment. U.S.C.A. Const.Amends. 5, ] Civil Rights i= Criminal Law Enforcement; Prisons Medical marijuana dispensaries, one of their landlords, and medical marijuana patient failed to establish likelihood of success on merits of their claim that application of Controlled Substances Act (CSA) to growers and users of marijuana for medical purposes, as otherwise authorized by California Compassionate Use Act, violated their right to equal protection, and thus were not entitled to temporary restraining order (TRO) preventing Department of Justice (DOJ) from taking legal action against them, even though patients in federal government's investigational new drug (IND) program were permitted to receive medical marijuana, and plaintiffs contended that United States permitted patients in Colorado access to medical marijuana through state licensed distributors; CSA expressly allowed marijuana use in connection with research projects funded by federal government, and plaintiffs failed to provide any evidence to support their claims about Colorado. V.S.C.A. Const.Amend. 5; Comprehensive Drug Abuse Prevention and Control Act of 1970, 303(f), 21 U.S.c.A. 823(f); West's Ann.Cal.HeaIth & Safety Code Cases that cite this headnote 116] Criminal Law "'" Official Acts There is presumption that prosecutor has acted lawfully, and to overcome that presumption, criminal defendant must present clear evidence to contrary. [14] Constitutional Law WestlawNext

150 arin Alliance For Medical Marijuana v. Holder, --- F.Supp.2d ---- (2011) [17] Injunction 'if= Restraining Order Pending Hearing of Application Medical marijuana dispensaries, one of their landlords, and medical marijuana patient failed to establish likelihood of success on merits of their claim that application of Control1ed Substances Act (CSA) to growers and users of marijuana for medical purposes, as otherwise authorized by California Compassionate Use Act, violated Commerce Clause, and thus were not entitled to temporary restraining order (TRO) preventing Department of Justice (DOJ) from taking legal action against them. U.S.CA. Const. Art. I, 8, cl. 3; Comprehensive Drug Abuse Prevention and Control Act of 1970, 10 I et seq., 21 U.S.C.A. 801 et seq.; West's Ann.Cal.Health & S. (18) Injunction ~ Nature and Extent of Injury; Irreparable Injury Injunction ~ Restraining Order Pending Hearing of Application Plaintiffs seeking temporary restraining order (TRO) or preliminary injunction must demonstrate that there exists significant threat of irreparable injury. Attorneys and Law Firms David M. Michael, Law Offices of David M. Michael, Matthew William Kumin, Kumin, Sommers, LLP, San Francisco, CA, for Plaintiffs/Petitioners. Opinion ORDER DENYING PLAINTIFFS' MOTION FOR TEMPORARY RESTRAINING ORDER SAUNDRA BROWN ARMSTRONG, District Judge. *1 Three medical marijuana dispensaries, one of their landlords and a medical marijuana patient bring the instant action to challenge recent threats by the United States Department of Justice ("DOl") to take legal action against landlords of medical marijuana dispensaries in the Northern District ofcalifornia. The parties are now before the Court on Plaintiffs' motion for a temporary restraining order ("TRO"), which seeks an immediate injunction to prevent the federal government from arresting, prosecuting, or otherwise seeking sanctions or forfeitures against medical marijuana growers and providers who operate under the auspices of California's Compassionate Use Act of As wil1 be set forth below, binding Supreme Court and Ninth Circuit precedent foreclose Plaintiffs' claims, and therefore, the Court DENIES Plaintiffs' motion for a TRO. I I. BACKGROUND A. STATUTORY OVERVIEW [19) Injunction 'if= State or National Boards and Officers Medical necessity defense was legally unavailable to medical marijuana dispensaries, one of their landlords, and medical marijuana patient to establish irreparable harm required to obtain injunctive reliefpreventing Department of Justice (DOJ) from taking legal action against them. Comprehensive Drug Abuse Prevention and Control Act of 1970, 202,21 U.S.C.A The instant action arises from the tension that exists between federal and California laws governing marijuana use. Before turning to the substantive issues presented in Plaintiffs' motion for TRO, it is useful to first review these distinct statutory frameworks. 1. The Federal Controlled Substances Act After taking office in 1969, President Nixon declared a national "war on drugs." Gonzales v. Raich, 545 U.S. I, 10, 125 S.Ct. 2195, 162 L.Ed.2d I (2005) [hereinafter "Raich 1" ]. Shortly thereafter, Congress passed the Comprehensive Drug Abuse Prevention and Control Act of 1970, also known as the Controlled Substances Act ("the Act" or "CSA"). Pub.L. No , 84 Stat "Enacted in 1970 with the main objectives ofcombating drug abuse and controlling the legitimate and illegitimate traffic in control1ed substances, WestlawNext

151 Marin Alliance For Medical Marijuana v. Holder, --. F.Supp.2d ---- (2011) the CSA creates a comprehensive, closed regulatory regime criminalizing the unauthorized manufacture, distribution, dispensing, and possession of substances classified in any of the Act's five schedules." Gonzales v. Oregon, 546 U.S. 243,250, 126 S.C!. 904, 163 L.Ed.2d 748 (2006). The CSA places substances in one of five classifications or schedules, see 21 U.S.c. 812, "based on their potential for abuse or dependence, their accepted medical use, and their accepted safety for use under medical supervision," Gonzales, 546 U. S. at 250. Substances listed in Schedule I are the most restricted in terms of access and use, while those in Schedule V are the least restricted. Id. In enacting the CSA, "Congress was particularly concerned with the need to prevent the diversion ofdrugs from legitimate to illicit channels." Raich I, 545 U.S. at Marijuana is classified as a Schedule I substance under the Act, and therefore, is subject to the most restrictions. See 21 U.S.C. 812(c). Although substances on Schedules IT through V may be dispensed and prescribed for medical use, "[S]chedule I drugs cannot be dispensed under a prescription." United States v. Oakland Cannabis Buyers' Co-op., 532 U.S. 483, 492 n. 5, 121 S.C!. 1711, 149 L.Ed.2d 722 (2001) [hereinafter "Oakland Cannabis"]. The inclusion of marijuana on Schedule I reflects the federal government's determination that "marijuana has 'no currently accepted medical use' at ail" Id. As such, the federal CSA makes it illegal to manufacture, distribute, or possess marijuana. 21 U.S.c. 841, 844. Further, it is illegal under the CSA to open, use, lease or maintain any place for the purpose of manufacturing, distributing, or using any controlled substance. [d. 856(a)(I). The only exception to these prohibitions is the possession and use of marijuana in federally-approved research projects. Id. 823(f). 2. California's Compassionate Use Act *2 In contrast to the federal law, California law expressly authorizes the use of marijuana for medical purposes. In 1996, California voters passed Proposition 215, known as the Compassionate Use Act of 1996, which permits seriously ill patients to obtain medical marijuana upon written or oral recommendation of a physician. See Cal. Health & Safety Code The Compassionate Use Act provides, in part: (b) (l) The people ofthe State ofcalifornia hereby find and declare that the purposes of the Compassionate Use Act of 1996 are as follows: (A) To ensure that seriously ill Californians have the right to obtain and use marijuana for medical purposes where that medical use is deemed appropriate and has been recommended b a physician who has determined that the person's health would benefit from the use of marijuana in the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief. (B) To ensure that patients and their primary caregivers who obtain and use marijuana for medical purposes upon the recommendation of a physician are not subject to criminal prosecution or sanction. To encourage the federal and state governments to implement a plan to provide for the safe and affordable distribution ofmarijuana to all patients in medical need of marijuana. Cal. Health & Safety Code II362.5(b)(I)(A)-(C). In 2003, the California legislature added the Medical Marijuana Program, id , to "address issues not included in the CUA [i.e., Compassionate Use Act] so as to promote the fair and orderly implementation of the CUA." People v. Wright, 40 Cal.4th 81, 85, 51 Cal.RptrJd 80, 146 P.3d 531 (2006). B. LEGAL DEVELOPMENTS The conflict between the federal CSA and California's Compassionate Use Act with respect to the issue of medical marijuana has spawned several Supreme Court and Ninth Circuit decisions, as well as other litigation. These decisions are controlling with respect to most of the claims alleged in the Amended Complaint filed in this action and otherwise animate the Court's analysis of the issues presented in Plaintiffs' motion for TRO. These cases are summarized below. 1. Oakland Cannabis In January 1998, the United States brought an action under the CSA in the Northern District of California against the Oakland Cannabis Cultivators Club ("the cooperative") and its executive director seeking to enjoin them from distributing and manufacturing marijuana. Oakland Cannabis, 532 U.S. at 487. Judge Charles Breyer granted the Government's motion for preliminary injunction, and later denied the cooperative's motion to modify the injunction to allow for the distribution of "medically necessary" marijuana. [d. The cooperative WestlawNext

152 Marin Alliance For Medical Marijuana v. Holder, --- F.Supp.2d --.- (2011) appealed, and the Ninth Circuit reversed and remanded the ruling on the motion to modify the injunction. ld. at 488. The Ninth Circuit held that medical necessity was a legally cognizable defense and the district court had mistakenly believed it possessed no discretion to issue an injunction more limited in scope than the CSA. Id. In addition, the Ninth Circuit found that the district court should have weighed the public interest and considered factors such as the serious harm in depriving patients of marijuana in deciding whether to modify the injunction. [d. *3 The Supreme Court reversed the decision of the Ninth Circuit, holding that there is no medical necessity exception to the CSA's prohibitions on manufacturing and distributing marijuana. ld. at 490. In reaching its decision, the Court explained that a necessity defense is inapt where the legislature has made a "determination of values." Id. With respect to the value of medical marijuana, the Court explained that Congress, in enacting the CSA, had made a legislative determination that "marijuana has no medical benefits worthy of an exception (outside the confines of a Government-approved research project)." ld. at 491. While some drugs may be dispensed for medical use, the same is not true for marijuana, which, for purposes of the CSA, has "no currently accepted medical use at all." 1d. (internal quotations omitted). Additionally, the Court held that the Ninth Circuit erred in instructing the district court to consider "any and all factors that might relate to the public interest or the conveniences of the parties, including the medical needs of the cooperative's patients" because "[c]ourts ofequity cannot, in their discretion, reject the balance that Congress has struck in the [CSA]." Id. at Raich I Four years after rendering its decision in Oakland Cannabis, the Supreme Court again addressed the interplay between the Compassionate Use Act and the CSA in Gonzales v. Raich, another case originating from this District. In that case, plaintiffs-respondents-two California residents who, in accordance with their physician's recommendations used marijuana for serious medical conditions-sought injunctive and declaratory relief prohibiting enforcement of the CSA to the extent that it prevented them from possessing, obtaining, or manufacturing marijuana for their personal medical usc. Raich I, 545 U.S. at 7-8. They alleged that the CSA's categorical prohibition against the manufacture and possession of marijuana as applied to the intrastate manufacture and possession of marijuana for medical purposes under California law exceeded Congress' authority under the Commerce Clause. ld. at 8. Judge Martin Jenkins denied the respondents' motion for preliminary injunction. Id. On appeal, the Ninth Circuit reversed and ordered the district court to enter the requested injunction on the grounds that respondents had demonstrated a strong likelihood of success on their claim that, as applied to them, the CSA is an unconstitutional exercise of Congress' Commerce Clause authority.ld. The Supreme Court reversed the Ninth Circuit and held that the legislature's authority under the Commerce Clause includes the power to prohibit local cultivation and use of marijuana. Id. at 9. The Court reasoned that the CSA was within Congress' Commerce Clause power because production of marijuana, even if limited to home consumption, "has a substantial effect on the supply and demand in the national market for that commodity." 1d. at 19. In the Supreme Court's view, the exemptions permitting marijuana use under the Compassionate Use Act "will have a significant impact on both the supply and demand sides of the market for marijuana," since they provide physicians with an economic incentive to grant their patients permission to use the drug which, in tum, "can only increase the supply of marijuana in the California market." ld. at 31. The Court remanded the case to the Ninth Circuit for further proceedings consistent with its opinion. 1d. at Raich II *4 Following remand from the Supreme Court, plaintiff Raich ("Raich") renewed her claims based on common law necessity, fundamental rights protected by the Fifth and Ninth Amendments, and rights reserved to the states under the Tenth Amendment. Raich v. Gonzales, 500 F.3d 850, 857 (9th Cir.2007) [hereinafter "Raich If" ].2 The court concluded that Raich had failed to meet her burden of establishing a likelihood ofsuccess on these claims, and affirmed the district court's denial of her motion for preliminary injunction. ld. In her common law necessity claim, Raich argued that the federal government was precluded from enforcing the CSA against her because she faced a Hobson's choice of either complying with the CSA and enduring excruciating pain and possibly death-or violating its provisions by using marijuana. ld. at 858. While acknowledging that Raich had understandably chosen "the lesser evil" of using marijuana and had otherwise satisfied the factual predicate for a necessity defense, the court questioned whether such a defense remained legally viable after the Supreme Court's decision in Oakland Cannabis. Raich /1, 500 F.3d at 859 WestlawNext

153 Marin Alliance For Medical Marijuana v. Holder, --- F.Supp.2d ---- (2011) 60. Consequently, the court concluded that Raich's necessity claim "is best resolved within the context of a specific prosecution under the [CSA]," as opposed to a civil action seeking to enjoin enforcement of the CSA. ld. at 860. Next, the court considered Raich's claim for substantive due process under the Fifth Amendment, which states that "[n]o person shall... be deprived oflife, liberty, or property, without due process of law[.]" U.S. Const. amend. V. Citing the two-step approach enunciated in Washington v. Glucksberg, 521 U.S. 702, 719 (1997), the Raich II court considered (1) whether the "right is deeply rooted in this nation's history and traditions implicit in the concept of ordered liberty," and (2) "the description of the asserted fundamental right." Raich II, 500 F.3d at Considering the second step first, the court found that it was constrained under Supreme Court precedent to "narrowly" identify the right at stake. Jd. at 864. Though Raich broadly described her right as one to "make life-shaping medical decisions that are necessary to preserve the integrity of her body, avoid intolerable physical pain, and preserve her life," the court concluded that Raich's asserted right was more accurately characterized as "the right to use marijuana to preserve bodily integrity, avoid pain and preserve her life." ld. at 864 (emphasis in original). The court then considered the question of whether Raich's asserted right was one that was deeply rooted in United States' history and tradition and implicit in the concept of ordered liberty. ld. To answer that question, the court looked to the Supreme Court's landmark decision in Lawrence v. Texas, 539 U.S. 558, 123 S.Ct. 2472,156 L.Ed.2d 508 (2003), which involved a challenge to a Texas state law that criminalized sodomy between consenting, adult homosexuals. ld. at ; Raich II, 530 F.3d at Prior to Lawrence. the Supreme Court had upheld Georgia's then-applicab[e sodomy statute, holding that there was no constitutionally protected right for "homosexuals to engage in acts of consensual sodomy." Bowers v. Hardwick, 478 U.S. [86, [92, 106 S.Ct. 2841,92 L.Ed.2d [40 ([ 986). The Lawrence court, however, observed that even ifa particular interest has not been deemed as fundamental in the past, "an emerging awareness" of a liberty interest in modem times may require protection of an asserted right. Lawrence, 539 U.S. at 572. The Court then pointed out that of the twenty-five states that had laws crimina[izing sodomy when it decided Bowers, only thirteen still had such laws and a mere four enforced their laws only against homosexual conduct. ld. at 573. In those states that maintained sodomy laws, "there [was] a pattern of nonenforcement with respect to consenting adults acting in private." ld. *5 Raich argued that over the course ofthe last decade, there has been an "emerging awareness of marijuana's medical value," as evidenced by the growing number of states that have passed laws permitting the use of marijuana for medical reasons.ld. at 865. The Ninth Circuit recognized the potential viability of Raich's argument, but ultimately found that the right to use medical marijuana had not yet reached the point of being "fundamenta[" and "imp[icit in the concept of ordered liberty." ld. at 866. While acknowledging that since 1996 medical marijuana has been [egalized in eleven states, the court concluded that medical marijuana use had not "obtained the degree of recognition today that private sexual conduct had obtained by 2004 in Lawrence. " ld. at 865. The Raich Jl court did note, however, that medical marijuana may attain similar status "sooner than expected." ld. at 866. Finally, the court addressed Raich's claim that the CSA infringes upon the State of California's police powers, as conferred by the Tenth Amendment. ld. 3 The Ninth Circuit agreed that the Compassionate Use Act is "aimed at providing for the health of the state's citizens [and] appears to fall squarely within the general rubric of the state's police powers"; nonetheless, the Court rejected Raich's contention that the CSA contravened the Tenth Amendment. Id. at 867. The court found that "after Gonzales v. Raich, it would seem that there can be no Tenth Amendment violation in this case," and for that reason, concluded that "Raich [had] failed to demonstrate a likelihood of success on her claim that the [CSA] violates the Tenth Amendment." Id. 4. The Santa Cruz Lawsuit During the pendency of the district court proceedings in Raich v. Ashcroft, N.D. Cal. No. C MJJ, the County of Santa Cruz and others filed suit in this Court seeking to enjoin various federal government defendants from conducting further raids or seizures against Plaintiff WolMen's Alliance for Medica[ Marijuana ("WAMM") and its member-patients, and from conducting raids or seizures against patients using marijuana for medicinal purposes in compliance with California's Compassionate Use Act within the City and County of Santa Cruz. County of Santa Cruz v. Aschcroj't, No. C JF [hereinafter "Santa Cruz" ]. On January 25, 2010, the parties filed a Joint Stipulation of Dismissal Without Prejudice, pursuant to Federal Rule of Civil Procedure 41(a)(I) (ii). Am. Compi. Ex. 5 at 4-6, Dkt The stipulation states that "[a]s a result of the issuance ofthe Medical Marijuana Guidance, plaintiffs agree to dismiss the case without prejudice." Id. WestlawNexr

154 Marin Alliance For Medical Marijuana v. Holder,.-- F.Supp.2d ---- (2011) The "Medical Marijuana Guidance" attached to the stipulation is a memorandum from the United States Department of lustice ("DOl"), dated October 19, 2009, prepared by then Deputy Attorney General David Ogden (the "Ogden memo"). The purpose of the Ogden memo, which is addressed to "SELECTED UNITED STATES ATTORNEYS," is to provide "clarification and guidance to federal prosecutors in States that have enacted laws authorizing the medical use of marijuana." Id. In pertinent part, the DOJ advises that: *6 The prosecution of significant drug traffickers of illegal drugs, including marijuana, and the disruption ofillegal drug manufacturing and tratlicking networks, continues to be a core priority of the Department's efforts against narcotics and dangerous drugs, and the Department's investigative and prosecutorial resources should be directed towards these objectives. As a general matter, pursuit of these priorities should not focus federal resources in your States on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana. Id. at 2. The above notwithstanding, the DOJ explicitly states that: "This memorandum does not alter in any way the Department's authority to enforce federal law... [and] does not 'legalize' marijuana or provide a legal defense to a violation of federal law... Rather, this memorandum is intended solely as a guide to the exercise of investigative and prosecutorial discretion." Id. C. THE INSTANT LAWSl1IT In late September and early October 2011, the United States Attorneys for each of the four federal districts in California contacted various entities involved in California's Medical Marijuana program, alleging that marijuana dispensaries, landlords who rent to dispensaries, patients and other supporting commercial entities are in violation of federal law. Am. Compl. ~ 21. By letters dated September 28, 20 II, Melinda Haag, the United States Attorney for the Northern District ofcalifornia, contacted landlords providing space to MAMM, Medthrive Cooperative ("Medthrive") and The Divinity Tree, notifying them that medical marijuana dispensaries are illegal under federal law and that they may be subject to "criminal prosecution, imprisonment, fines, and forfeiture of assets, including the real property on which the dispensary is operating." E.g., Am. Compl. Exs The letters (hereinafter "Haag letters") warn: "Please take necessary steps to discontinue the sale andlor distribution of marijuana at the above-referenced location within 45 days of this letter." Id. In response to the Haag letters, MAMM and John D'Amato, a medical marijuana patient, filed suit in this Court on November 4, 2011 seeking to enjoin the Attorney General, the Administrator of the Drug Enforcement Agency, and the U.S. Attorney for the Northern District of California (collectively "Defendants") from arresting, prosecuting, or otherwise seeking sanctions or forfeitures against them and similarly situated medical marijuana growers and providers who operate in compliance with California state law. Compl., Dkt. 1. They also seek a declaration that enforcement of the CSA is unconstitutional to the extent that it prevents Plaintiffs and similarly situated individuals from obtaining medical marijuana with a doctor's recommendation. Id. Four days later on on November 8, 20 II, Plaintiffs filed a Motion for a TRO and Preliminary Injunction. First Mot. Prelim. Inj., Dkt *7 On November II, 20 II, Plaintiffs filed an Amended Complaint adding four plaintiffs-two additional dispensaries, Medthrive and The Divinity Tree, and Medthrive's landlords, the Jane Plotitsa Shelter Trust and the Felm Trust. Am. Compl. ~~ Like the original Complaint, the Amended Complaint alleges six claims for relief: (l) judicial estoppel, (2) equitable estoppel, (3) violation ofthe Ninth Amendment, (4) violation ofthe Tenth Amendment, (5) violation of the Equal Protection Clause of the Fourteenth Amendment, and (6) violation of the Commerce Clause. Am. Compl. ~~ Along with their Amended Complaint, Plaintiffs filed an Amended Motion for a IRO and Preliminary Injunction. Am. Mot. Prelim. Inj., Dkt. 23. Pursuant to an agreement among the parties, Defendants filed their Opposition to the TRO application on November 15,20 II. Opp'n, Dkt. 31. The matter has been fully briefed, and it is now ripe for adjudication. Dkt II. LEGAL STANDARD (1] (2] The same standard applies to a motion for a TRO and a motion for a preliminary injunction. See Stuhlbarg Int'I Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n. 7 (9th Cir.200 I). To obtain a TRO or preliminary injunction, the moving party must show: (I) a likelihood of success on the merits; (2) a likelihood of irreparable harm to the moving party in the absence ofpreliminary relief; (3) that the WestlawNext

155 Marin Alliance For Medical Marijuana v. Holder, --- F.Supp.2d ---- (2011) balance of equities tips in the moving party's favor; and (4) that an injunction is in the public interest. Winter v. Natural Res. Del Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L. Ed.2d 249 (2008). Under the Ninth Circuit's "sliding scale" approach, the first and third elements are to be balanced such that "serious questions" going to the merits and a balance of hardships that "tips sharply" in favor of the movant are sufficient for relief so long as the other two elements are also met. Alliance/or the Wild Rockies v. Cottrell, 632 FJd 1127, (9th Cir,201!). Nevertheless, a preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief," Winter, 555 U.S. at 22, and the moving party bears the burden of meeting all four Winter prongs, see Cottrell, 632 F.3d at 1135; DISH Network Corp. v. FCC, 653 F.3d 771, (9th Cir.2011). Ill. DISCUSSION A. LIKELIHOOD OF SUCCESS ON THE MERITS 1. Judicial Estoppel [3] In their first claim for relief, Plaintiffs allege Defendants are judicially estopped from instituting any legal proceedings against them under the CSA in light of the stipulation of dismissal and attached Ogden memo filed in Santa Cruz. Am. Compl. ~~ 24-27; Pis.' Am. Mem. Supp. Mot. Prelim. Inj. ("Pis.' Am. Mem.") at 12-13, Dkt. 27. "Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by asserting one position, and then later seeking an advantage by taking a clearly inconsistent position." Hamilton v. State Farm Fire & Cas. Co., 270 FJd 778, 782 (9th Cir.200 I). Application of the doctrine is made on a caseby-case basis and is entrusted to the discretion of the Court. See Russell v. Ro/ft, 893 F.2d 1033, 1037 (9th Cir.1990). Id. *8 [4] [5] As a threshold matter, it is entirely questionable whether the doctrine applies to Defendants in view of the inherent policy questions presented. "[I]t is well settled that the Government may not be estopped on the same terms as any other litigant." Heckler v. Cmty. Health Servs., Inc., 467 U.S. 5I, 60, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984). "[B]road interests of public policy may make it important to allow a change of positions that might seem inappropriate as a matter ofmerely private interests." New Hampshire v. Maine, 532 U.S. 742,755,121 S.Ct. 1808, 149 L.Ed.2d 968 (2001) (internal quotation marks omitted). This is particularly true where estoppel "would compromise a governmental interest in enforcing the law." Id. Here, Plaintiffs seek to estop Defendants from taking further action to enforce the CSA as it applies to medical marijuana in California. This is precisely the type of circumstance in which the Supreme Court has counseled against applying the doctrine of judicial estoppel to the Government. See Heckler, 467 U.S. at 60 ("When the Government is unable to enforce the law because the conduct of its agents has given rise to an estoppel, the interest of the citizenry as a whole in obedience to the rule of law is undermined."). [6] But even ifdefendants were subject to judicial estoppel, Plaintiffs have failed to establish that the relevant factors justify its application in this instance. Although the doctrine has no precise bounds, certain clear prerequisites exist for its application in a particular case. New Hampshire, 532 U.S. at Specifically, in determining whether a party is subject to judicial estoppel, the court considers: "( 1) whether a party's later position is 'clearly inconsistent' with its original position; (2) whether the party has successfully persuaded the court of the earlier position; and (3) whether allowing the inconsistent position would allow the party to 'derive an unfair advantage or impose an unfair detriment on the opposing party.' " United States v. Liquidators 0/ European Fed. Credit Bank, 630 F.3d 1139, 1148 (9th Cir,201 I) (citations omitted). Plaintiffs have failed to make a clear showing in support of these salient considerations. First, there is no clear inconsistency between the Government's position in Santa Cruz and the actions threatened in the Haag letters. According to Plaintiffs, the Government "entered a stipulation [in Santa Cruz] predicated on an announced change in policy by the new administration and promised to abide by this new policy enunciated in the Medical Marijuana Guidance" such that "users and dispensers of medical marijuana operating in accordance with their state laws would no longer be prosecuted by the federal government under the CSA." Pis.' Am. Mem. at 11, 13 (emphasis added). The Government "promised" no such thing. To the contrary, in the Santa Cruz stipulation, the parties explicitly agreed that the government reserved the right to "withdraw, modify, or cease to follow the [Odgen memo]," and, on that occasion, the Santa Cruz action could be reinstituted. See Am. Compi. Ex. 5 at 3. Indeed, the Ogden memo itself does not promise to forbear any future enforcement actions under the CSA and, in fact, explicitly states that the DOJ "does not alter in any way [its] authority to enforce federal law[.]" ld. at 5. Additionally, the memorandum makes clear that it was "intended solely as a guide to the exercise of investigative and prosecutorial discretion." Id. 7 WestlawNexr

156 Marin Alliance For Medical Marijuana v. Holder,. F.Supp.2d. (2011) *9 Second, Plaintiffs have failed to show that Defendants successfully persuaded the district court in Santa Cruz to dismiss the action based upon any promise to indefinitely forego enforcement of the CSA against persons or entities involved in the production, sale or use of medical marijuana. As noted above, the stipulation for dismissal expressly recites the possibility that Defendants could "withdraw, modify, or cease to follow the Medical Marijuana Guidance [i.e., the Ogden memo]" in which case the plaintiffs could reinstate their case. Am. Compl. Ex. 5 at 2. The parties filed their stipulation for dismissal under Federal Rule of Civil Procedure 41 (a)(1)(ii), which provides that "the plaintiff may dismiss an action without a court order by filing: ['1]... a stipulation of dismissal signed by all parties who have appeared." Fed.R.Civ.P. 41(a)(l)(ii) (emphasis added). Although Judge Fogel countersigned the stipulation for dismissal, his approval was unnecessary for the dismissal to become effective. Finally, Plaintiffs have failed to establish that Defendants gained an unfair advantage by virtue of submitting the Ogden memo as a basis for the stipulation for dismissal in Santa Cruz. Since Plaintiffs were not parties to the Santa Cruz action, it is unclear how Defendants could have obtained any advantage over Plaintiffs based on their decision to send the Haag letters to their landlords. See State of Ariz. v. Shamrock Foods Co., 729 F.2d 1208, 1215 (9th Cir.1984) ("A plaintiff who has obtained relief from an adversary by asserting and offering proof to support one position may not be heard later in the same court to contradict himself in an effort to establish against the same adversary a second claim inconsistent with his earlier contention.") (emphasis added and internal quotation marks omitted). That aside, Plaintiffs overlook that the stipulation for dismissal filed in Santa Cruz permitted the plaintiffs in that action to reinstitute their lawsuit in the event the Government declined to follow the guidance set forth in the Ogden memo. Thus, even ifplaintiffs herein had standing to assert any prejudice on behalf of the plaintiffs in Santa Cruz, it is clear that any alleged change in the Defendants' enforcement policy has not conferred an unfair advantage upon them. In sum, the Court finds that Plaintiffs have failed to show the requisite likelihood of success on the merits of their judicial estoppel claim. 2. Equitable Estoppel [7] Plaintiffs second claim is for equitable estoppelspecifically, estoppel by entrapment-and avers that they reasonably relied on the Ogden memo as a basis for leasing or continuing to lease their properties to medical marijuana operators. Am. Compl. ~~ 28-32; Pis.' Am. Mem. at 14 n. 16. Estoppel by entrapment is a defense in criminal actions wherein a government official or agent leads a defendant into criminal conduct by affirmatively misrepresenting what is legal. See United States v. Tallmadge, 829 F.2d 767, 773 (9th Cir.1987). To succeed under this theory, the defendant must show "that the government affirmatively told him the proscribed conduct was permissible, and that he reasonably relied on the government's statement." United States v. Ramirez-Valencia, 202 F.3d 1106, 1109 (9th Cir.2000) (emphasis added). *10 [8] Plaintiffs' estoppel by entrapment theory fails for at least three reasons. First, the doctrine has no application here because there is no allegation or evidence that any criminal proceeding has been initiated against Plaintiffs. Second, nothing in the Ogden memo affirmatively informs medical marijuana growers and distributors that their conduct is legal. To the contrary, the Ogden memo plainly states that "[t]his guidance regarding resource allocation dues not 'legalize' marijuana or provide a defense to a violation of federal law[.]" See Am. Compl. Ex. 5 at 5 (emphasis added). Third, even ifthe Government had affirmatively informed Plaintiffs that their conduct was legal-which it clearly did not-any reliance on the Ogden memo would be unreasonable. The memorandum was not directed to landlords or the medical marijuana community in general; rather, it was directed to various U.S. Attorneys, not as a statement of official policy, but "solely as a guide to the exercise of investigative and prosecutorial discretion." ld. 8 As such, Plaintiffs are hard pressed to claim that it was reasonable to rely on a memorandum that was not even addressed to them-and which unequivocally did not state that marijuana for medical reasons was "legal" Plaintiffs have thus failed to show the requisite likelihood of success on the merits of their equitable estoppel claim. 3. Due Process [9] Plaintiffs' third claim alleges that Defendants have violated their right to substantive due process by threatening to seize their property and pursue civil and criminal sanctions against them. Am. Compl. 'l~ The Ninth Amendment, in tandem with the Fifth Amendment, protects fundamental rights and liberties "which are, objectively, 'deeply rooted in this Nation's history and tradition,' and 'implicit in the concept of ordered liberty,' such that 'neither liberty nor WestlawNext

157 Marin Alliance For Medical Marijuana v. Holder, --- F.Supp.2d ---- (2011) justice would exist if they were sacrificed.' " Raich II, 500 F.3d at 862 (quoting Glucksberg, 521 U.S. at ).9 As discussed, the Court's evaluation of Plaintiffs' due process claim requires an examination of (l) the fundamental right being asserted and (2) whether the "right is deeply rooted in this nation's history and traditions implicit in the concept of ordered liberty[.]" Id. Here, Plaintiffs describe the fundamental rights at issue as the "rights to bodily integrity that may not be interfered with by the federal government" and "to consult with their doctors about their bodies and health." Am. Compl. '\l '\l 37. Plaintiffs' articulation of their asserted rights is virtually identical to rights which the plaintiff in Raich II sought to vindicate. See 500 F.3d at 864 ("[The plaintiff] asserts that she has a fundamental right to 'make lifeshaping medical decisions that are necessary to preserve the integrity of her body, avoid intolerable physical pain, and preserve her life.' "). In Raich II, the Ninth Circuit held that the plaintiffs "careful statement" of her rights was flawed because "[c]onspicuously missing from [her] asserted fundamental right is its centerpiece: that she seeks the right to use marijuana to preserve bodily integrity, avoid pain, and preserve her life." Id. (emphasis in original). As in Raich II, Plaintiffs' purported fundamental right conspicuously omits any reference to "marijuana." See PIs.' Am. Mem. at Thus, Raich II compels the Court to construe Plaintiffs' asserted right narrowly as the right to use marijuana in order to preserve the bodily integrity ofmedical marijuana patients. 1d. *11 The second part of the Glucksberg test requires the Court to consider whether the right to use marijuana to preserve bodily integrity is a right which is deeply rooted in this nation's history and traditions implicit in the concept of ordered liberty. Raich II. 500 F.3d at 862. Again, Raich II is directly on point: We agree with Raich that medical and conventional wisdom that recognizes the use of marijuana for medical purposes is gaining traction in the law as well. But that legal recognition has not yet reached the point where a conclusion can be drawn that the right to use medical marijuana is "fundamental" and "implicit in the concept ofordered liberty. "... For the time being, this issue remains in "the arena of public debate and legislative action." As stated above, Justice Anthony Kennedy told us that "times can blind us to certain truths and later generations can see that laws once thought necessary and proper in fact serve only to oppress."... For now, federal law is blind to the wisdom of a future day when the right to use medical marijuana to alleviate excruciating pain may be deemed fundamental. Although that day has not yet dawned, considering that during the last ten years eleven states have legalized the use of medical marijuana, that day may be upon us sooner than expected. Until that day arrives, federal law does not recognize a fundamental right to use medical marijuana prescribed by a licensed physician to alleviate excruciating pain and human suffering. 500 F.3d at 866 (emphasis added). (10) Plaintiffs argue that the "future day" envisioned in Raich II has arrived. PIs.' Am. Mem. at 23. They insist that, much like the gradual elimination of state anti-sodomy laws paved the way for the Lawrence Court's decision to overrule Bowers, five states and the District ofcolumbia have enacted laws permitting the medical use of marijuana since the Ninth Circuit rendered its decision in Raich II four years ago in d. at 6 n. 7. It is quite clear, however, that the use of medical marijuana has not reached the "degree of recognition... that private sexual conduct had obtained... in Lawrence." Raich II. 500 F.3d at 865. In Lawrence. only thirteen states continued to maintain anti-sodomy laws, and there was an overall "pattern of nonenforcement with respect to consenting adults acting in private." 539 U.S. at 573. Although the number ofjurisdictions that have medical marijuana laws has increased by six, the fact remains that the majority of states do not recognize the right to use marijuana for medicinal purposes. Moreover, as to those states that have not legalized medical marijuana, there is no allegation or evidence of a pattern of non-enforcement of laws proscribing its use. Finally-and significantly-it is difficult to reconcile the purported existence ofa fundamental right to use marijuana for medical reasons with Congress' pronouncement that "for purposes of the [CSA], marijuana has no currently accepted medical use at all." Oakland Cannabis, 532 U.S. at 491; see also 21 U.S.c. 812(b)(I) (classifying marijuana as a Schedule I drug with no approved medical or other use). *12 In sum, the Court is bound by Raich II, which compels the conclusion that Plaintiffs have failed to demonstrate a likelihood ofsuccess on their third claim for due process. 4. Tenth Amendment (11) Plaintiffs' fourth claim alleges that Defendants' "threatened actions to raid, arrest, prosecute, punish, seize medical cannabis of, forfeit property of, or seek WestlawNexr

158 Marin Alliance For Medical Marijuana v. Holder,. F.Supp.2d _- (2011) civil or administrative sanctions against" them violates California's state police powers in contravention of the Tenth Amendment. This claim is legally indistinguishable from the Tenth Amendment claim which the Ninth Circuit considered and rejected in Raich 1I. 500 F.3d at 867 (holding that "after [Raich [ ], it would seem that there can be no Tenth Amendment violation in this case."); see also United States v. Jones, 231 F.3d 508, 515 (9th Cir.2000) ("We have held that if Congress acts under one of its enumerated powers, there can be no violation ofthe Tenth Amendment."). In a footnote, Plaintiffs attempt to dismiss the Raich II court's rejection of the plaintiffs Tenth Amendment claim as mere dicta. Pis.' Am. Mem. at 25 n. 24. Their attempt to do so is entirely specious, as this clearly was a holding of the court-which is binding on this Court. See Zuniga v. United Can Co., 812 F.2d 443, 450 (9th Cir.1987) ("District courts are, of course, bound by the law of their own circuit[.n. Thus, as in Raich II, Plaintiffs have failed to show a likelihood of success on the merits of their Tenth Amendment claim. 5. Equal Protection Plaintiffs' fifth claim alleges that the actions threatened by Defendants in the Haag letters violate their right to equal protection. Am. Compl Specifically, they complain that Defendants are discriminating against "medical cannabis patients in California without a rational basis" because they (1) allow patients in the federal government's Armstrong, 517 U.S. 456,465, 116 S.Ct. 1480, 134 L.Ed.2d 687 (1996). "To make a claim for selective prosecution, Plaintiffs must establish (I) that similarly situated persons were not prosecuted, and (2) that the defendants were motivated by a discriminatory purpose." Lacey v. Maricopa Cty F.3d 1118, 1142 (9th Cir.20 II). Where no suspect class or fundamental right is involved, plaintiff must demonstrate that "there is no rational basis for the difference in treatment.'" Squaw Valley Dev. Co. v. Goldberg, 375 F.3d 936,944 (9th Cir.2004) (internal quotations omitted). *13 (IS] "A similarly situated offender is one outside the protected class who has committed roughly the same crime under roughly the same circumstances but against whom the law has not been enforced." United States v. Lewis, 517 F.3d 20, 27 (1 st Cir.2008) (citing United States v. Armstrong, 517 U.S. 456, 465, 116 S.Ct. 1480, 134 L.Ed.2d 687 (1996)). Plaintiffs cannot make this showing. Unlike Plaintiffs, the IND participants have committed no crime because the CSA expressly allows marijuana use in connection with research projects funded by the Government. 21 U.S.C. 823(f); Oakland Cannabis, 532 U.S. at 490 (noting that the CSA contains "but one express exception, and it is available... for Government-approved research projects."). Hence, IND participants are not "similarly situated" because, unlike Plaintiffs, their use ofmarijuana is expressly permitted by the CSA. See United States v. Wilson, 639 F.2d 500, 503 (9th Cir.1981). IND program 10 to receive medical marijuana and (2) have permitted patients in Colorado access to medical marijuana through state-licensed distributors. [d Plaintiffs allege that Defendants have no rational basis for "enforcing federal laws prohibiting cannabis possession and distribution" in California while simultaneously allowing medical marijuana to be used in the IND program and by Colorado patients. Am. Compl. ~ 46; Pis.' Am. Mem. at 26. Likewise, Plaintiffs have not shown that they are similarly situated to medical marijuana users in Colorado. Plaintiffs aver that they are in the same position as medical marijuana dispensaries in Colorado, which, like those in California, are required to obtain licenses to operate. Pis.' Am. Mem. at 27. However, Plaintiffs fail to support these conclusory assertions with any evidence. But even if they had, Plaintiffs have not demonstrated that any alleged disparity in enforcement of (12] [13] [14] "[T]he Due Process Clause of the the CSA by Defendants is attributable to any impermissible Fifth Amendment subjects the federal government to constitutional limitations that are the equivalent of those imposed on the states by the Equal Protection Clause of the Fourteenth Amendment." Consejo De Desarrollo Economico De Mexicali, A.C. v. United States, 482 F.3d 1157, 1170 n. 4 (9th Cir.2007). "The Equal Protection Clause... is essentially a direction that all persons similarly situated should be treated alike." City of Cleburne v. Cleburne Living Center, Inc., 473 U.S. 432, 439, 105 S.Ct. 3249, 87 L.Ed.2d 313 (1985); Philips v. Perry, 106 F.3d 1420, (9th Cir.1997). "The requirements for a selective-prosecution claim draw on ordinary equal protection standards." United States v. motive. [16] There is a "presumption that a prosecutor has acted lawfully." Reno v. Am.-Arab Anti-Discrimination Comm., 525 U.S. 471, 489,119 S.Ct. 936,142 L.Ed.2d 940 (1999). To overcome that presumption, a criminal defendant must present "clear evidence" to the contrary. Id. Here, Plaintiffs assert that the motivation to pursue landlords in California but not in Colorado must be illicit because "there is no plausible basis for this disparity other than geography." Pis.' Am. Mem. at 28. But the mere fact that Defendants have sent letters threatening legal action under the CSA to persons WestlawNext

159 Marin Alliance For Medical Marijuana v. Holder,.. F.Supp.2d.. (2011) in California, as opposed to Colorado, does not give rise to an inference of improper motive. See Futernick v, Sumpter Township, 78 F.3d 1051,1056 (6th Cir.1996) ("There is no right under the Constitution to have a law go unenforced against you, even ifyou are the first person against whom it is enforced, and even if you think (or can prove) you are not as culpable as some others who have gone unpunished. The law does not need to be enforced everywhere to be legitimately enforced somewhere[.]"), overruled on other grounds by Village of Willowbrook v. Olech, 528 U.S. 562, 120 S.Ct. 1073, 145 L.Ed.2d 1060 (2000). Based on the record presented, the Court finds that Plaintiffs have failed to demonstrate a likelihood of success on their claim for selective prosecution in violation of the Fifth Amendment. 6. Commerce Clause [17] In their final claim for relief, Plaintiffs allege that Defendants' attempt to regulate the intrastate medical marijuana business violates the Commerce Clause. Am. Compl. 'I~ This claim was categorically rejected by the Supreme Court in Raich 1, which held that Congress has a rational basis to regulate the purely intrastate manufacture and possession of marijuana. 545 U.S. at 22. For their part, Plaintiffs "acknowledge" the "binding precedent" ofraich J, but insist that they find it "difficult to imagine that marijuana grown only in California, pursuant to California State law, and distributed only within California, only to California residents holding state-issued cards, and only for medical purposes" could be subject to federal regulation under the Commerce Clause. 1d. ~ 51. Irrespective of Plaintiffs' views on Raich J. this Court is bound by the Supreme Court's decision, *14 Accordingly, the Court finds that Plaintiffs have failed to show a likelihood of success on their claim under the Commerce Clause. B. IRREPARABLE HARM [18) The second prong of the Winter test for a TRO or preliminary injunction requires that a party seeking immediate injunctive relief establish the likelihood, not merely the possibility, of irreparable injury. Winter, 555 U.S. at 22, Injunctive relief is an "extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Id. (citing Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) (per curiam». Put differently, plaintiffs must demonstrate that "there exists a significant threat of irreparable injury." Oakland Tribune, Inc. v. Chronicle Publ'g Co., 762 F.2d 1374, 1376 (9th Cir.1985) (emphasis added). "Speculative injury does not constitute irreparable injury." Goldie's Bookstore v. Superior Court, 739 F.2d 466, 472 (9th Cir.1984). As an initial matter, Plaintiffs suggest that they are entitled to a presumption of irreparable harm based on their purported showing that Defendants violated their constitutional rights. PIs.' Am. Mem. at 30, This argument is unavailing. While the Ninth Circuit has recognized that "[a]n alleged constitutional infringement will often alone constitute irreparable harm," see Goldie's Bookstore, 739 F.2d at 472, such a presumption is inapposite where, as here, the plaintiffs fail to demonstrate "a sufficient likelihood of success on the merits of [their] constitutional claims to warrant the grant of a preliminary injunction," Assoc'd. Gen, Contractors o.fcal., Inc. v. Coal. for Econ. Equity, 950 F.2d 1401, 1412 (9th Cir.1991); see also Beal v. Stem, 184 F.3d 117, (2d Cir.1999) ("the presence of irreparable injury turns on whether the plaintiff has shown a clear likelihood of success on the merits."). As discussed above, Plaintiffs' constitutional claims are too tenuous to support a presumption of irreparable harm. See Goldie's Bookstore, 739 F.2d at 472 (noting that while "[a]n alleged constitutional infringement will often alone constitute irreparable harm... the constitutional claim is too tenuous to support our affirmance on that basis."). Next, Plaintiffs allege that absent an immediate injunction, individual patients "who are served by their cooperatives will endure severe pain, spasms, and suffering and, nightmares, flashbacks, overwhelming anxiety, panic, seizures, nausea, life-threatening weight loss, malnutrition, cachexia, and starvation, and possibly other life-threatening problems such as tumors and paralysis~all constituting irreparabl[e] injury." Pis.' Am. Mem. at J Though conceding that any use of marijuana is illegal under federal law, Plaintiffs assert that marijuana is medically necessary for dispensary patients. See D'Amato Dec!. ~ 6, Dkt. 13; Shaw Decl. ~ 14, Dkt. 10; M. Breyburg Dec!. ~ II, Dkt. 25; Pappas Dec!. ~ II, Dkt. 28. The insurmountable challenge for Plaintiffs, however, is that the Supreme Court has expressly held that courts may not consider the efficacy of medical marijuana as a basis for challenging the Government's enforcement of the CSA. Oakland Cannabis, 532 U,So at 491 (internal quotation marks and citations omitted), *15 In Oakland Cannabis, federal authorities sought to enjoin a Bay Area non-profit medical marijuana cooperative WestlawNext

160 I Marin Alliance For Medical Marijuana v. Holder, - F.Supp.2d (2011) from distributing marijuana with a physician's authorization under the Compassionate Use Act. The Supreme Court held that the cooperative's medical necessity defense was legally unavailable because Congress, in enacting the CSA, had made a legislative determination that marijuana has no medical benefits worthy of an exception outside the confines of a federal government-approved research project. Oakland Cannabis, 532 U.S. at 491. In the Supreme Court's view, "for purposes ofthe Controlled Substances Act, marijuana has 'no currently accepted medical use' at all." Id. (citing 21 U.S.c. 812). Notably, the Court went on to hold that "a court sitting in equity cannot ignore the judgment of Congress, deliberately expressed in legislation," and thus, is bound by "the balance that Congress has struck in the [CSA]." Id. at [191 Subsequently in Raich I, the Supreme Court found that a patient's reliance on a physician's recommendation, even if sanctioned under the Compassionate Use Act, does not alter Congress' finding that marijuana has no medical value. 545 U.S. at 27. "The CSA designates marijuana as contraband for any purpose; in fact, by characterizing marijuana as a Schedule I drug, Congress expressly found that the drug has no acceptable medical uses." ld. (emphasis in original). Thus, this Court expresses no view as to whether medical marijuana is effective in ameliorating pain or discomfort for some patients. As discussed, this Court is bound by the foregoing Supreme Court decisions which legally nullify Plaintiffs' claim of irreparable harm. C. BALANCE OF EQUITIES With regard to the third requirement under the Winter test for preliminary injunctive relief, Plaintiffs argue that the balance of equities, sometimes referred to as the balance of hardships, "tilts sharply" in their favor because patients will experience "extreme suffering and pain" without access to medical marijuana. PIs.' Am. Mem. at 30. This argument fails for the same reasons expressed above; to wit, Congress has concluded-rightly or wrongly-that marijuana provides no medical benefit. See Oakland Cannabis, 532 U.S. at 491 ("for purposes of the [CSA], marijuana has no currently accepted medical use at all.") (internal quotation and citation omitted»; Raich I, 545 U.S. at 27 (finding that marijuana has no legally cognizable uses even when used under direct medical supervision). In other words, the only hardship articulated by Plaintiffs is one that federal courts may not consider. See Oakland Cannabis, 532 U.S. at 499 (holding that the court cannot consider evidence of medical necessity where enforcement of the CSA is challenged). As for Plaintiffs' contention that Defendants will suffer "absolutely no hardship" if a TRO were granted, see PIs.' Am. Mem. at 30, it ignores the federal Government's interest in ensuring enforcement of its laws. See Heckler, 467 U.S. at 60. Thus, the Court finds that Plaintiffs have not established that the balance ofequities tip in their favor. D. PUBLIC INTEREST *16 The final step in the Winter analysis requires the Court to consider whether a TRO or preliminary injunction is in the public interest. 555 U.S. at 20. Plaintiffs maintain that "[t]here is an undeniable public interest in the availability of a doctor-recommended treatment..." PIs.' Am. Mem. at 30. As a general proposition, Plaintiffs are correctbut not all treatments are legally available. Although the public has a general interest in having access to doctorrecommended treatments, the public also has a corresponding interest in being protected from treatments that either have not been sanctioned by the requisite authorities or are explicitly proscribed because of any number of harms. The question here is whether there is a public interest in the availability of medical marijuana as a doctor-recommended treatment. "The public interest may be declared in the form of a statute." Golden Gate Rest. Ass'n v. City & Cnty. of San Francisco. 512 F.3d 1112, 1127 (9th Cir.2008) (internal quotation marks omitted). Where the elected branches have enacted a statute based on their understanding of what the public interest requires, this Court's "consideration of the public interest is constrained[,j for the responsible public officials... have already considered that interest." ld. at Thus, as set forth above, Congress clearly and unequivocally concluded in enacting the CSA that there is no public interest in the use marijuana for medical reasons. See 21 U.S.c. 812(b)(I). To that end, the Supreme Court in Oakland Cannabis has forbidden courts from considering the whether the public's interest will be furthered by access to marijuana for medical purposes, since Congress has already made that determination. 532 U.S. at 497. IV. CONCLUSION The Court finds that Plaintiffs have neither demonstrated a likelihood of success on the merits of any of their claims nor have they demonstrated that they will suffer immediate, irreparable harm in the absence of a TRO. The Court is sensitive to the desires of individuals to use medical marijuana with a doctor's recommendation, as permitted by California law. Nonetheless, marijuana remains illegal under federal law, and in Congress' view, it has no medicinal value. The claims which Plaintiffs seek to advance in this lawsuit WestlawNexr

161 Marin Alliance For Medical Marijuana v. Holder, --- F.Supp.2d ---- (2011) are foreclosed by Supreme Court and Ninth Circuit Court of Appeals precedent, which bind this Court and constrain its discretion to grant the immediate injunctive relief they request. Accordingly, IT IS HEREBY ORDERED THAT: I. Plaintiffs' motion for a TRO is DENIED. preliminary injunction and submit their proposed schedule to the Court in the form or a stipulation and proposed order (or administrative motion, ifno stipulation is reached) within five (5) days of the date this Order is filed. *17 3. This Order terminates Docket 5. IT IS SO ORDERED. 2. The parties shall meet and confer regarding the submission of further briefing in connection with Plaintiffs' motion for Footnotes I The Court adjudicates the instant motion without oral argument. See Fed.R.Civ.P. 78(b); Civ. L.R. 7-I(b). 2 In its initial decision. the Ninth Circuit did not reach any issues beyond the Commerce Clause. Raich li, 500 F.3d at 856. On remand, the court considered the remaining arguments relating to the motion for preliminary injunction. Id. 3 The Tenth Amendment states in its entirety as follows: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." U.S. Const. amend. X. 4 On the same date that Plaintiffs filed this action. their counsel filed three virtually identical actions on behalf of different entities and individuals in the Eastern, Southern and Central Districts of California. See Sacramento Non-Pr~fil Collective v. Holder, E.D. Cal. No. C GEB; Conejo Wellness Cnlr. Coop. v. Holder, C.D. Cal. No. C DMG; Alternative Cmty. Health Care v. Holder. S.D. Cal. No. C DMS. TRO motions were filed in the Central and Southern District actions, On November 18, 20 II, Judge Dana Sabraw ofthe Southern District issued an order denying plaintiffs' application for a TRO. Alternative Cmty. Health Care, No. C DMS, 2011 WL (S.D.Cal. Nov.18, 2011). 5 The Court also notes that at least one of the named Plaintiffs in this suit appears to be foreclosed from obtaining the requested relief in light ofa previous order from Judge Breyer of this Court permanently enjoining the MAMM "from engaging in the distribution of marijuana, the possession of marijuana with the intent to distribute, or the manufacture of marijuana with the intent to distribute, in violation of21 U.S.c. 841 (a)( I)." See Opp'n Ex. A, Dkt. 31-1; see also Wash. Mut. Inc. v. United Slates, 636 F.3d 1207, 1216 (9th Cir.20II) ("Collateral estoppel, or issue preclusion, bars the relitigation ofboth issues oflaw and issues of fact actually adjudicated in previous litigation between the same parties."). 6 The parties agreed that Defendants wcre to file an opposition only as to the TRO motion, and that following resolution ofsuch request, they would meet and confer regarding a briefing schedule with respect to the request for preliminary injunction. See 11/10/11 Letter, Dkt. 20. Absent prior leave of Court, any further briefing in this matter shall conform to the page limits set forth in the Civil Local Rules and this Court's Standing Orders. 7 Notably, other federal courts reviewing the Ogden memo have rejected the argument that the memo embodies a "promise" by the federal government not to prosecute marijuana growers. See United States v. Stacy, 734 F.Supp.2d 1074, 1080 (S.D.Cal.2010) ("No promise was made [in the Ogden memo] that the DEA would never raid medical marijuana dispensaries claiming to operate in compliance with state law or that individuals operating such dispensaries would not be prosecuted."); United States v. Hicks. 722 F.Supp.2d 829,833 (E,D.Mich.2010) ('The Department of Justice's discretionary decision to direct its resources elsewhere [in the Ogden memo] does not mean that the federal government now lacks the power to prosecute those who possess marijuana."). 8 Moreover, once Plaintiffs received the Haag letters, which placed them on notice that their actions may violate the CSA and afforded them forty-five days to cease any medicinal marijuana-related activities, they were on notice to inquire further regarding the legality of their conduct. As such, to the extent that Plaintiffs reasonably relied on the Ogden memo, such reliance was no longer reasonable after their receipt of the Haag letters. See United States v. Weitzenhoff, 35 F.3d 1275,1290 (9th Cir.1993) (noting that in order to invoke a defense of estoppel by entrapment, "the defendant must show that he relied on the official's statement and that his reliance was reasonable in that a person sincerely desirous of obeying the law would have accepted the information as true and would not have been put on notice to make further inquiries."). 9 Raich II is discussed in detail in the Background section of this Order at Section 10 The patients to which Plaintiffs refer are participants in the federal investigational new drug (IND) program who receive drugs under clinical investigation in a controlled study. See 21 U.S.c. 355(b)-(d). 11 Plaintiffs' assertion that immediate injunctive relief is necessary to avoid irreparable harm is contravened by the fact that they filed their request for emergency relief over a month after receiving the Haag letters. E.g, Dahl v. Swift Distrib. Inc.. 20 I0 WL , WestlawNext

162 Marin Alliance For Medical Marijuana v. Holder,... F.Supp.2d... (2011) at *4 (C.D.Cal. Apr. I, 20 I0) (finding that eighteen-day delay in filing TRO application "implies a lack of urgency and irreparable harm."). End of Document ".' )012 ltlulnsul' Reuters No clall" to urrginal US Cov8rr1nll c lll VV,)rks WestlawNext

163 Sacramento Nonprofit Collective v. Holder,. F.Supp.2d -.- (2012) 2012 WL Only the Westlaw citation is currently available. United States District Court, E.D. California. SACRAMENTO NONPROFIT COLLECTIVE, dba El Camino Wellness Center, a mutual benefit non-profit collective; Ryan Landers, an individual, Plaintiffs, v. Eric HOLDER, Attorney General of the United States; Michelle Leonhart, Administrator of the Drug Enforcement Administration; Benjamin B. Wagner, U.S. Attorney for the Eastern District of California, Defendants. NO.2:U-CV GEB-EFB.1 Feb. 28, Synopsis Background: Medical marijuana dispensary located in California and medical marijuana patient brought action seeking declaratory relief and permanent injunction to preclude federal officials from enforcing the Controlled Substances Act (CSA) against them. Federal officials moved to dismiss. Holdings: The District Court, Garland E. Burrell, Jr., J., held that: [I] CSA's categorical prohibition on manufacture, distribution, and possession of marijuana as applied to the intrastate manufacture, sale, and possession of marijuana for medical purposes pursuant to California law did not exceed Congress' authority under the Commerce Clause; [2] CSA's prohibition as applied to intrastate manufacture, sale, and possession of marijuana for medical purposes did not violate the Tenth Amendment; [3] CSA's prohibition as applied to intrastate manufacture, sale, and possession of marijuana for medical purposes did not violate the Ninth Amendment; [4] enforcement of CSA against plaintiffs did not violate equal protection; and [5] officials were not judicially or equitably estopped from enforcing the CSA against medical marijuana dispensaries and patients in California. Motion granted. West Headnotes (21) [I) Federal Civil Procedure i=> Insufficiency in General A claim has facial plausibility, as required to survive a motion to dismiss for failure to state a claim, when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Fed.Rules Civ.Proc.Rule l2(b)(6), 28 U.S.CA [2] Federal Civil Procedure i=> Insufficiency in General Conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim. Fed.Rules Civ.Proc.Rule 12(b)(6), 28 U.S.C.A. [3] Evidence i=> Judicial Proceedings and Records Federal Civil Procedure... Matters Considered in General In a motion to dismiss for failure to state a claim,judicial notice may be taken ofcourt filings and other matters of public record. Fed.Rules Civ.Proc.Rule l2(b)(6), 28 U.S.CA [4) Federal Civil Procedure i=> Matters Considered in General A court deciding a motion to dismiss for failure to state a claim may consider materials that are submitted with and attached to the complaint. Fed.Rules Civ.Proc.Rule l2(b)(6), 28 U.S.CA [5] Federal Civil Procedure i=> Matters Considered in General In deciding a motion to dismiss for failure to state a claim, a court may consider evidence on which the complaint necessarily relies if: (I) the complaint refers to the document, (2) the WestlawNexr

164 Sacramento Nonprofit Collective v. Holder,.-. F.Supp.2d... (2012) document is central to the plaintiff's claim, and (3) no party questions the authenticity ofthe copy attached to the motion. Fed.Rules Civ.Proc.Rule [9J Constitutional Law 12(b)(6), 28 U.S.CA tlfo> Ninth Amendment Controlled Substances tlfo> Validity [6J Commerce Categorical prohibition on the manufacture, tlfo> Federal Offenses and Prosecutions distribution, and possession of marijuana in the Controlled Substances Controlled Substances Act (CSA) as applied to tlfo> Validity the intrastate manufacture, sale, and possession of The categorical prohibition on the manufacture, marijuana for medical purposes did not violate the distribution, and possession of marijuana in the Ninth Amendment, as no recognized fundamental Controlled Substances Act (CSA) as applied to right to use or access marijuana for medical the intrastate manufacture, sale, and possession purposes existed. U.S.C.A. Const.Amend. 9; of marijuana for medical purposes pursuant to Controlled Substances Act, 401(a)(1), 404(a), California law did not exceed Congress' authority 21 U.S.CA 841(a)(I), 844(a). under the Commerce Clause. V.S.C.A. Const. Art. I, 8, cl. 3; Controlled Substances Act, 401(a)(I), 404(a), 21 U.S.CA. 841(a)(I), (10] Constitutional Law 844(a); West's Ann.Cal.Health & Safety Code tlfo> Decision to Prosecute; Discretion Controlled Substances tlfo> Medical Necessity [7] States tlfo> Powers Reserved to States If a power is delegated to Congress in the Constitution, the Tenth Amendment expressly disclaims any reservation of that power to the States. U.S.C.A. Const.Amend. 10. Federal officials' enforcement of categorical prohibition of the manufacture, distribution, and possession of marijuana in the Control1ed Substances Act (CSA) against medical marijuana dispensaries and patients in California did not constitute selective prosecution, in violation of the equal protection clause; although officials did not enforce CSA against individuals who received medical marijuana through federally [8J Controlled Substances approved investigational new drug programs, tlfo> Validity those individuals were not similarly situated to States California dispensaries and patients, as the CSA tlfo> Federal Laws Invading State Powers expressly al10wed marijuana use n connection with the federally-approved programs. U.S.CA. Categorical prohibition on the manufacture, Const.Amend. 5; Controlled Substances Act, distribution, and possession of marijuana in the 401(a)(1), 404(a), 21 U.S.c.A. 841 (a)(i ), Controlled Substances Act (CSA) as applied to 844(a). the intrastate manufacture, sale, and possession ofmarijuana for medical purposes did not violate the Tenth Amendment, since the power to regulate the intrastate possession, manufacturing, (11] Constitutional Law and distribution of marijuana was delegated ~ Relationship to Similar Provisions to Congress through the Commerce Clause. Equal protection analysis in the Fifth Amendment U.S.CA Const. Art. I, 8, cl. 3; U.S.CA. area is the same as that under the Fourteenth Const.Amend. 10; Controlled Substances Act, Amendment. U.S.C.A. Const.Amends. 5, (a)(1), 404(a), 21 U.S.CA. 841(a)(1), 844(a). WestlawNext

165 Sacramento Nonprofit Collective v. Holder, F.Supp.2d -- (2012) [12] Constitutional Law ~ Discrimination and Classification Constitutional Law ~ Statutes and Other Written Regulations and Rules Equal protection under the Fifth Amendment entrenches a right to be free from discrimination based on impennissible statutory classifications and other governmental action. U.S.CA. Const.Amend. 5. [13] Constitutional Law ~ Discrimination and Classification The first step in equal protection analysis is to identify an impennissible classification of groups. U.S.C.A. Const.Amend. 5. The conscious exercise of some selectivity in enforcement of a law is not in itself an equal protection violation, so long as the selection was not deliberately based upon an unjustifiable standard such as race, religion, or other arbitrary classification. U.S.C.A. Const.Amend. 5. [17] Constitutional Law ~ Decision to Prosecute; Discretion A similarly situated offender, for purpose of selective prosecution claim, under the equal protection clause, is one outside the protected class who has committed roughly the same crime under roughly the same circumstances but against whom the law has not been enforced. U.S.C.A. Const.Amend. 5. [14) Constitutional Law ~ Statutes and Other Written Regulations and Rules Constitutional Law ~ Enforcement, Application, or Administration in General To identify an impennissible classification, as required to meet the first step of an equal protection claim, a plaintiffcan show that the law is applied in a discriminatory manner or imposes different burdens on different classes of people. U.S.C.A. Const.Amend. 5. [15] Constitutional Law ~ Decision to Prosecute; Discretion To establish selective prosecution based on an impennissible classification, as will violate equal protection, plaintiffs must show that others similarly situated have not been prosecuted and that the prosecution is based on an impennissible motive. U.S.C.A. Const.Amend. 5. (IS] Estoppel ~ Particular United States Officers, Agencies, or Proceedings Federal officials were not judicially or equitably estopped from enforcing the categorical prohibition on the manufacture, distribution, and possession of marijuana in the Controlled Substances Act (CSA) against medical marijuana dispensaries and patients in California by Department of Justice memorandum, indicating that the enforcement of CSA against medical marijuana patients would be lower priority, or by similar representations made by federal prosecutors in another case; Department memorandum and officials also indicated that the government intended to enforce the CSA in all states and that compliance with state law did not create a legal defense to a violation of the CSA, and government did not make any affinnative misrepresentations. Controlled Substances Act, 40I(a)(1), 404(a), 21 U.S.C.A. 84l(a)(l), 844(a). [16) Constitutional Law ~ Enforcement, Application, or Administration in General [19) Estoppel *"" Claim Inconsistent with Previous Claim or Position in General WestlawNext

166 Sacramento Nonprofit Collective v. Holder,.-. F.Supp.2d.- (2012) Judicial estoppel does not apply unless a party's later position is clearly inconsistent with its earlier position. Circuit, and the remaining claims are not actionable. Plaintiffs oppose the motion. I. 12(b)(6) Standard 120] Estoppel Ii=> Estoppel Against Public, Government, or Public Officers Before the government may be equitably estopped, the movant for estoppel must establish that the government engaged in affirmative misconduct, and that the government's conduct has caused a serious injustice. 121] Estoppel Ii=> Estoppel Against Public, Government, or Public Officers Affirmative misconduct, as required to support equitable estoppel against the government, requires an affirmative misrepresentation. Attorneys and Law Firms Matthew W. Kumin, Kumin Sommers LLP, San Francisco, CA, for Plaintiffs. Varu Chilakamarri, Govt., U.S. Department of Justice, Washington, DC, for Defendants. Opinion ORDER GRANTING DEFENDANTS' * DISMISSAL MOTION GARLAND E. BURRELL, JR., District Judge. *1 The federal defendants, Attorney General of the United States Eric Holder, Administrator of the Drug Enforcement Administration Michelle Leonhart, and the United States Attorney for the Eastern District of California Benjamin Wagner ("Defendants") move for dismissal of Plaintiffs' Complaint under Federal Rule of Civil Procedure ("Rule") 12(b)(6). Defendants argue their motion should be granted since the majority of Plaintiffs' claims have already been rejected by the United States Supreme Court and the Ninth (1) Decision on Defendants' Rule 12(b)(6) motion requires determination of"whether the complaint's factual allegations, together with all reasonable inferences, state a plausible claim for relief." CaJasso. U.S. ex ret. v. Gen. Dynamics C4 Sys., 637 F.3d 1047, 1054 (9th Cir.201 1) (citing Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, , 173 L.Ed.2d 868 (2009»). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007». 12] When determining the sufficiency of a claim, "[w]e accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the non-moving party[; however, this tenet does not apply to] '" legal conclusions '" cast in the form of factual allegations." Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir.20ll) (internal quotation marks and citations omitted). "Therefore, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Id. (internal quotation marks and citation omitted). II. Requests for Judicial Notice 13] Defendants include in their motion a request thatjudicial notice be taken of the criminal indictments and related court documents filed in United States v. Bartkowicz, NO.1: 10 cr pab (D.Colo. May 5, 2010), and United States v. Do, No. 1:II-cr REB (D.Colo. Oct. 13,2011), which are attached to the motion as Exhibits D and E. Judicial notice may be taken "of court filings and other matters of public recor4[;]" therefore, this request is granted. Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n. 6 (9th Cir.2006). Defendants also request that judicial notice be taken of three judicial opinions from other district courts in California. (Defs.' Mot. to Dismiss ("Mot.") Exs. A-C.) "The court does not need to judicially notice the[se] opinion[s] to consider [them]." Thompson v. Residential Credit Solutions, Inc., No. CIY. 2: was DAD, 2012 WL , at *2 (E.D.Cal. Jan. 26, 2012). WestlawNexr

167 Sacramento Nonprofit Collective v. Holder, F.Supp.2d. (2012) [41 Plaintiffs request that judicial notice be taken of a joint stipulation of dismissal and an attachment thereto, which were filed in an unrelated case, County of Santa Cruz v. Ashcroft, No. CV-D JF (N.D.Cal. Jan. 25, 20ID) ("Santa Cruz action"). (Pis.' Request for Judicial Notice ("RJN") Ex. I; Compl. Ex. 3.) The document attached to the stipulation of dismissal is a memorandum issued by Deputy Attorney General David W. Ogden ("the Ogden Memo") dated October 19, 2009, which states that it "provides clarification and guidance to federal prosecutors in States that have enacted laws authorizing the medical use of marijuana." (Ogden Memo at I, PIs.' RJN Ex. I; PIs.' Compl. Ex. 3.) Plaintiffs attached these documents to both their Complaint and their request for judicial notice. Since "[a court] may. materials that are submitted with and attached to the Complaint" in reviewing a 12(b)(6) motion, these documents are considered. United States v. Corinthian Colleges, 655 F.3d 984,999 (9th Cir.2011). *2 (5) Plaintiffs also request that judicial notice be taken of the transcript of proceedings from the October 30, 2009 hearing in the Santa Cruz action, since Plaintiffs' judicial estoppel claim relies on statements made by the Department of Justice at that hearing. (Pls.'s RJN Ex. 2.) "A court may consider evidence on which the complaint necessarily relies if: (I) the complaint refers to the document; (2) the document is central to [Plaintiffs'] claim; and (3) no party questions the authenticity ofthe copy attached to the 12(b)(6) motion. The court may treat such a document as part ofthe complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6)." Marder v. Lopez, 450 F.3d 445, 448 (9th Cir.2006) (internal quotation marks and citations omitted). Since the transcript satisfies these criteria, it will be considered. Plaintiffs also seek judicial notice ofthe following documents attached to their request for judicial notice: Declaration of Rick Doblin in Support of Plaintiffs' Petition for Temporary Restraining Order/Preliminary Injunction in Conejo Wellness Center Cooperative, Inc. v. Holder, No. CVII-9200 DMG (PJWx) (C.D. Cal. Nov. 8, 2011) (Exhibit 3); three online news articles discussing the use of marijuana for medical purposes (Exhibits 4, 5 & 8); Declaration of Paul Armentano in Support of Plaintiffs' Petition for Temporary Restraining Order/Preliminary Injunction in Marin Alliance for Medical Marijuana v. Holder, No. CV DMR (N.D.Cal. Nov. 8,2011) (Exhibit 6); Declaration of Lester Grinspoon, M.D. in Support of the Brief of the Nat'l Org. for the Reform of Marijuana Laws, et al. as Amici Curiae Supporting Respondents, at App. B, Gonzales v. Raich, 545 U.S. I, 125 S.Ct. 2195, 162 L.Ed.2d I (2005) (No ) (Exhibit 7); Cannabinoids as Antioxidants and Neuroprotectants, U.S. Patent No. 6,630,507 (filed Oct. 7, 2003) (Exhibit 9); and a print-out from the National Institute on Drug Abuse website providing information on marijuana, printed January 5, 2012 (Exhibit 10). Plaintiffs do not refer to these documents in their Complaint and do not explain how the evidence contained in these documents is central to their claims. Marder, 450 F.3d at 448. Therefore, "[these documents] cannot be considered in resolving whether [Plaintiffs] state [claims] upon which relief can be granted without converting the motion to one for summary judgment[.]" Am. Express Travel Related Servs. Co., Inc. v. D & A Corp., No. CV-F OWW/TAG, 2007 WL , at *12 (E.D.Cal. Aug. 28, 2007). However, "[they] may be considered in determining whether... amendment [ofthe Complaint] should be allowed [.]" Id. III. Background Plaintiffs are the "Sacramento Nonprofit Collective, doing business as EI Camino Wellness Center" ("EI Camino Wellness Center"), which Plaintiffs allege "is a medical cannabis [dispensary] made up of patients which operate pursuant to California Health and Safety Code section "; and Ryan Landers, "a medical cannabis patient with a California doctor's recommendation to use medical cannabis." (Compl ) Plaintiffs allege that "in late September and early October 20 II, the United States Attorneys... for each of the four federal districts in California wrote to numerous individuals and entities involved in California's Medical Marijuana program, alleging that the dispensaries, landlords who rent to the dispensaries, patients and other supporting commercial entities, even though they are fully in compliance with state law, are nonetheless in violation of federal law." (Compl. ~ 17.) Plaintiffs allege that "[s]wift sanctions[, including criminal prosecution, imprisonment, fines, and the forfeiture ofassets,] were threatened if those involved did not cease their... activities." (Compl. ~ 17.) Plaintiffs allege that "[i]t is the threatening actions of these... [United States Attorneys] in mounting a comprehensive attack-mainly on all the support systems that any legitimate business needs-that will eviscerate and likely eradicate California's Medical Marijuana Program." (Compl. 119.) *3 Plaintiffs allege that in early October 2011, United States Attorney Benjamin Wagner sent one of these letters to EI WestlawNexr

168 Isacramento Nonprofit Collective v. Holder, --- F.Supp.2d ---- (2012) Camino Wellness Center's landlord, who is not a party in this case. (Compl. '\!7; Compl. Ex. I.) The letter, which is attached to Plaintiffs' Complaint as Exhibit I, states in part: (Compl. Ex. I.) This office has received information that [the property occupied by EI Camino Wellness Center] is being used to cultivate and/or distribute marijuana in violation of [the Controlled Substances Act], and that you are an owner, or have management or control, ofthe property. This letter is formal notice that continued use of the property in violation of federal law may result in forfeiture and criminal or civil penalties... Under federal forfeiture law, the "innocent owner" defense is unavailable to those who know or have reason to know of the illegal use of their property. This letter puts you on notice. It is not a defense to claim the property is providing so-called "medical marijuana." Congress has determined that marijuana is a dangerous drug, and that the manufacture and distribution of marijuana are serious crimes... Those who allow their property to be used for such activities do so at their peril. Plaintiffs seek declaratory relief and a permanent injunction that would preclude the United States from enforcing the Controlled Substances Act ("CSA") against Plaintiffs and third parties in California. (Compl. '\!'\! A-F.) Plaintiffs allege in their Complaint that Defendants' enforcement of the CSA "violate[s] the Ninth Amendment," since "[Defendants'] actions threaten" "[t]he plaintiff patients[']... fundamental right[ ] to bodily integrity" and "their right to consult with their doctors about their bodies." (Compl. '\!'\! ) Plaintiffs allege that Defendants' actions "violate the Tenth Amendment," since Defendants' enforcement of the CSA against California citizens "overturn[s]" California's "primary plenary power to protect the health of its citizens." (Compl. '\!'\l ) Plaintiffs also allege Defendants' enforcement of the CSA violates the Fourteenth Amendment equal protection clause, since Defendants "unlawfully discriminate[ ] against medical cannabis patients in California" and have failed to show "a rational basis for [Defendants'] recent effort to end the supply of medical cannabis to qualified patients in California." (Compl. '\!'\l ) Finally, Plaintiffs allege the doctrines of judicial estoppel and equitable estoppel preclude Defendants from enforcing the CSA, since Defendants' actions are contrary to the enforcement policy Defendants announced in the Ogden Memo. (Compl. '\!'\! ) A. Commerce Clause IV. Discussion (6] Defendants argue "Plaintiffs' Commerce Clause... claim[ ] [is] plainly foreclosed by the binding precedent and reasoning of[gonzales v. Raich ('Raich 1'), 545 U.S. I, 125 S.Ct. 2195, 162 L.Ed.2d I (2005) ]." (Mot. 9:3--4.) In Raich I, the United States Supreme Court held that the "CSA's categorical prohibition of the manufacture and possession of marijuana as applied to the intrastate manufacture and possession of marijuana for medical purposes pursuant to California law [does not] exceed[ ] Congress' authority under the Commerce Clause." 545 U.S. at 9, 15, 125 S.Ct Therefore, Plaintiffs' Commerce Clause claim is foreclosed by United States Supreme Court precedent and is dismissed. B. Tenth Amendment *4 Defendants argue Plaintiffs' Tenth Amendment claim is "plainly foreclosed by the binding precedent and reasoning of.., [Raich v. Gonzales ('Raich 11'), 500 F.3d 850 (9th Cir.2007),)" (Mot. 9:3-5), in which the Ninth Circuit stated that "after [Raich I], it would seem that there can be no Tenth Amendment violation in this case." Raich II, 500 F.3d at 867. Plaintiffs counter that the language in Raich II on which Defendants rely is dicta and the Ninth Circuit "never decided th[e] ultimate issue." (PIs.' Opp'n ("Opp'n") 17:19-20.) (7) (8] However, it is well-established under United States Supreme Court authority that "[i]f a power is delegated to Congress in the Constitution, the Tenth Amendment expressly disclaims any reservation of that power to the States." New York v. United States, 505 U.S. 144, 156, 112 S.Ct. 2408, 120 L.Ed.2d 120 (1992). Since the power to regulate the intrastate possession, manufacturing, and distribution of marijuana "is delegated to Congress" through the Commerce Clause, Raich I, 545 U.S. at 15, 125 S.Ct. 2195, Plaintiffs' allegation that the power to regulate marijuana in California was reserved to California through the Tenth Amendment is foreclosed by United States Supreme Court precedent. New York, 505 U.S. at 156, 112 S.Ct Therefore, Plaintiffs' Tenth Amendment claim is dismissed. C. Ninth Amendment WestlawNexr

169 Sacramento Nonprofit Collective v. Holder, -_. F.Supp.2d - - (2012) [9) Defendants argue Plaintiffs' Ninth Amendment claim should be dismissed since "the Ninth Amendment does not independently secure any judicially-enforceable constitutional rights." (Mot. 9: (citing Schowengerdt v. United States, 944 F.2d 483, 490 (9th Cir.199 I».) Further, Defendants argue even if Plaintiffs' Ninth Amendment claim is "construed as a substantive due process claim under the Ninth and Fifth Amendments collectively," the claim is foreclosed by "this Circuit's precedent" in Raich II. (Mot. 9:18-20.) Defendants argue in Raich Il the Ninth Circuit "considered the Ninth... Amendment[ ] in addressing whether there is a [fundamental or] substantive due process right to use marijuana for claimed medical purposes, and it held that no such right exists." (Mot. 9:21-23 (citing Raich I1, 500 F.3d at 861--(2).) Plaintiffs counter that in Raich II, "the Ninth Circuit inviterd] [the district courts] to... recognize [a fundamental right to use cannabis to alleviate pain and suffering]." (Opp'n 16:8 9, 16: 15.) Plaintiffs also argue in footnotes in their opposition brief that seventeen states have enacted laws that legalize the medical use of marijuana and six states have similar legislation pending. (Opp'n IS n. 8 & 16 n. 9.) In the Ninth Circuit's 2007 Raich Il decision: Raich argue[d] that the last ten years have been characterized by an emerging awareness of marijuana's medical value. [Raich] contend[ed] that the rising number of states that have passed laws that permit medical use of marijuana or recognize its therapeutic value is additional evidence that the right is fundamental. Raich aver[red] that the asserted right in [Raich 11 ] should be protected on the emerging awareness model that the Supreme Court used in Lawrence v. Texas, 539 U.S. [558, 571,123 S.Ct. 2472,156 L.Ed.2d 508 (2003).] *5 500 F.3d at 865. The Ninth Circuit responded to Raich in pertinent part, as follows: We agree with Raich that medical and conventional wisdom that recognizes the use of marijuana for medical purposes is gaining traction in the law as well. But that legal recognition has not yet reached the point where a conclusion can be drawn that the right to use medical marijuana is 'fundamental' and 'implicit in the concept of ordered liberty.' For the time being, this issue remains in 'the arena of public debate and legislative action.'... For now, federal law is blind to the wisdom of a future day when the right to use medical marijuana to alleviate excruciating pain may be deemed fundamental. Although that day has not yet dawned, considering that during the last ten years eleven states have legalized the use of medical marijuana, that day may be upon us sooner than expected. Until that day arrives, federal law does not recognize a fundamental right to use medical marijuana prescribed by a licensed physician to alleviate excruciating pain and human suffering. Raich II, 500 F.3d at 866 (internal citations omitted). Plaintiffs indicate in their argument that the day referenced in Raich Il on which a federal court recognizes their asserted fundamental Ninth Amendment right to obtain and use medical marijuana has emerged because the number of jurisdictions that have medical marijuana laws has increased since Raich II was decided. (Opp'n 13:4-17:6.) Although the number of jurisdictions that have medical marijuana laws has increased [since Raich 11 was decided]..., the fact remains that the majority of states do not recognize the right to use marijuana for medicinal purposes. Moreover, as to those states that have not legalized medical marijuana, there is no allegation or evidence of a pattern of non-enforcement of laws proscribing its use. Finally-and significantlyit is difficult to reconcile the purported existence of a fundamental right to use marijuana for medical reasons with Congress' pronouncement that "for purposes of the [CSA], marijuana has no currently accepted medical use at all." Marin Alliancefor Med. Marijuana v. Holder. - F.Supp.2d --, --, 2011 WL , at *11 (N.D.Cal. Nov. 28, 20 II ) (quoting United States v. Oakland Cannabis Buyers' Coop. 532 U.S. 483, 491, 121 S.Ct. 1711, 149 L.Ed.2d 722 (2001)); cf United States v. Fogarty. 692 F.2d 542, 548 (8th Or. 1982) ("[I]t should be noted that under Section 811 [of the CSA,] Congress has provided a comprehensive reclassification scheme, authorizing the Attorney General to reclassify marijuana in view of new scientific evidence."); Krumm v. Holder, No. ClV JB/WDS, 2009 WL , at *10 (D.N.M. May 27, 2009) (stating that "a scheduling decision is not a legal detennination that an Article III court is qualified to make without an administrative record to review[; and w]hat states attempt to do with their medical marijuana laws may be helpful to the [Drug Enforcement WesUawNext

170 Sacramento Nonprofit Collective v. Holder,.. F.Supp.2d (2012) Agency] in making its decisions, but the states' actions do not eliminate the need for the complex inquiry that Congress has required for drug scheduling changes"). *6 Defendants also argue that "given the posture of this matter-where a marijuana dispensary is challenging a threatened enforcement action against its landlord and not against any individual's marijuana use-plaintiffs' actual [argument] appears to be that individuals have a right to access marijuana for medical purposes via dispensaries such as the EI Camino Wellness Center." (Mot. 12:12-15 (emphasis in original).) Defendants argue: Such a right would extend well beyond the right considered (only to be rejected) in Raich 11, where the court evaluated the right to use medical marijuana. The two concepts are not synonymous. Even if there were some narrow right to privately use marijuana for medical purposes-and no court has ever found one-the recognition of such a right would not equate to the right of access to marijuana through the Plaintiff dispensary or the right to immunity from eviction or other measures. Cf Carey v. Population Servs., 431 U.S. 678,687 [97 S.Ct. 2010, 52 L.Ed.2d 675] (1977) (distinguishing the right to "use" contraceptives identified in Griswold v. Connecticut, 381 U.S. 479 [85 S.Ct. 1678, 14 L.Ed.2d 510] (1965), from the right of access, though recognizing that subsequent jurisprudence had broadened the specific rights related to childbearing). (Mot. 12:15-23 (emphasis in original).) Essentially, as the Defendants contend, the referenced right on which Plaintiffs rely is a "right of availability" or "right of access" to a non-federally approved Schedule I controlled substance. Neither Plaintiffs' allegations in their Complaint nor arguments in their opposition brief support Plaintiffs' conclusory contention that these rights exist under federal law. As the United States Supreme Court stated in United Public Workers ofamerica (CI. 0.) v. Mitchell, 330 U.S. 75, 95-96, 67 S.Ct. 556, 91 L.Ed. 754 (1947): The powers granted by the Constitution to the Federal Government are subtracted from the totality of sovereignty originally in the states and the people. Therefore, when objection is made that the exercise of a federal power infringes upon rights reserved by the Ninth... Amendment[ ], the inquiry must be directed toward the granted power under which the action... was taken. If granted power is found, necessarily the objection of invasion of... rights, reserved by the Ninth... Amendment[ ], must fail. Since the Supreme Court has held that the CSA's categorical prohibition ofthe possession, manufacturing, and distribution of marijuana does not exceed Congress' authority under the Commerce Clause, Plaintiffs do not have a viable Ninth Amendment claim. See Raich 1,545 U.S. at 9, IS, 125 S.Ct (upholding Congress's authority under the Commerce Clause to regulate intrastate possession, manufacturing, and distribution of marijuana). Therefore, Plaintiffs' Ninth Amendment claim is dismissed. D. Equal Protection [10) [11) Defendants argue Plaintiffs' Fourteenth Amendment claim should be dismissed, since "Plaintiffs have failed to... articulat[e] a prima facie equal protection claim." (Mot. 20:10-11.) For purposes of this motion, Plaintiffs' Fourteenth Amendment claim is construed as a Fifth Amendment equal protection claim, since "[t]he Fourteenth Amendment applies to actions by a State." San Francisco Arts & Athletics, Inc. v. U.S. Olympic Comm., 483 U.S. 522,542 n. 21, 107 S.Ct. 2971, 97 L.Ed.2d 427 (1987). "The Fifth Amendment, however, does apply to the Federal Government and contains an equal protection component. Equal protection analysis in the Fifth Amendment area is the same as that under the Fourteenth Amendment." Cecelia Packing Corp. v. U.s. Dep't ofagric., 10 F.3d 616,623 (9th Cir.1993) (internal quotation marks and citations omitted). *7 [12) [13) (14) [15) [16) "Equal protection under the Fifth Amendment... entrenches a right to be free from discrimination based on impermissible statutory classifications and other governmental action." Doe v. United States, 419 F.3d 1058, 1062 (9th Cir.2005) (internal citation omitted). "The first step in equal protection analysis is to identity the [Defendants'] classification of groups. To accomplish this, [Plaintiffs] can show that the law is applied in a discriminatory manner or imposes different burdens on different classes ofpeople." Freeman v. City ofsanta Ana, 68 F.3d 1180, 1187 (9th Cir.1995) (internal quotation marks and citations omitted). To establish selective prosecution based on WestlawNext

171 Sacramento Nonprofit Collective v. Holder, F.Supp.2d.. (2012) the classification, Plaintiffs "must show that others similarly situated have not been prosecuted and that the prosecution is based on an impermissible motive." Id. (internal quotation marks and citation omitted). Further, " 'the conscious exercise of some selectivity in enforcement is not in itself a federal constitutional violation' so long as 'the selection was [not] deliberately based upon an unjustifiable standard such as race, religion, or other arbitrary classification.' " Bordenkircher v. Hayes, 434 U.S. 357, 364, 98 S.Ct. 663, 54 L.Ed.2d 604 (1978) (quoting Oyler v. Boles, 368 U.S. 448, 456, 82 S.Ct. 501,7 L.Ed.2d446 (1962)). Here, Plaintiffs allege that Defendants enforce the CSA against medical marijuana patients and dispensaries in California, but do not enforce it against individuals who receive medical marijuana through federally approved "investigational new drug" ("IND") programs or against medical marijuana patients or dispensaries in Colorado. (Compl. ~ 41.) Defendants argue that individuals who participate in IND programs are not "similarly situated" to Plaintiffs, since "[t]he CSA expressly allows marijuana use in connection with research pr~iects funded by the federal government." (Mot. 20: (citing 21 U.S.c. 823(f)).) [17) "A similarly situated offender is one outside the protected class who has committed roughly the same crime under TOughly the same circumstances but against whom the law has not been enforced." United States v. Lewis, 517 FJd 20, 27 (I st Cir.2008) (citing United States v. Armstrong, 517 U.S. 456, 469, 116 S.Ct. 1480, 134 L.Ed.2d 687 (1996)). Since the possession and distribution of marijuana in conjunction with IND programs does not violate the CSA, participants in IND programs are not similarly situated to Plaintiffs. Defendants also argue Plaintiffs do not have a viable equal protection claim "based on the alleged level of enforcement in [Colorado]." (Mot. 21:1-2.) The judicially noticed documents evince that Defendants have prosecuted medical marijuana patients and dispensaries in Colorado under the CSA, even though the medical marijuana patients and dispensaries claimed to be in compliance with Colorado's medical marijuana law. (United States v. Bartkowicz, No. I: IO-cr-oO 118-PAB (D.Colo. May 5, 20 I0), attached as Ex. D to Defs.' Mot.; United States v. Do, No. I: II-cr REB (D.Colo. Oct. 13,2011), attached as Ex. E to Defs.' Mot.) Therefore, Plaintiffs' allegation that Defendants prosecute medical marijuana patients and dispensaries in California but not those in Colorado is belied by evidence showing that Defendants have enforced the CSA against similarly situated individuals in Colorado. *8 Plaintiffs argue in their opposition that Defendants' "briefing regarding equal protection focuses primarily on one component identified in the complaint, relating to selective prosecution[;]" however, "[e]qual protection is a broader concept." (Opp'n at 18 n. 10.) Plaintiffs further argue in their opposition that "there is no rational basis to classify cannabis as having no medical value" and "the CSA's prohibition against medical use in compliance with State law is invidious discrimination as applied to patients generally that use cannabis to resolve illnesses and health problems versus patients who use other drugs to do the same thing." (Opp'n 20:24-21 :2.) However, Plaintiffs' equal protection challenge to the classification of marijuana as a Schedule I drug under the CSA is foreclosed by Ninth Circuit precedent, since "[t]he constitutionality of marijuana laws has been settled adversely to [Plaintiffs] in this circuit." United States v. Miroyan, 577 F.2d 489, 495 (9th Cir.1978) (internal quotation marks and citation omitted); see Raich I, 545 U.S. at 9, 125 S.Ct (upholding federal regulation of intrastate medical marijuana); Fogarty, 692 F.2d at 547 ("[W]e conclude that [defendant] has not met his heavy burden of proving the irrationality of the Schedule I classification of marijuana."). For the stated reasons, Plaintiffs do not have a viable equal protection claim, and this claim is dismissed. E. Judicial Estoppel and Equitable Estoppel [18) Defendants argue Plaintiffs cannot state viable judicial estoppel and equitable estoppel claims, since these claims rely on the Ogden Memo, which supports neither claim. (Mot. 15: 16-18: II.) Both claims are premised on allegations that the Ogden Memo contains the Department of Justice's "pledge [ ] not to use federal resources against [medical marijuana] patients [who] [are] in compliance with state law" and that Defendants' enforcement of the CSA violates that pledge. (Compl. ~ 21.) Plaintiffs allege in their judicial estoppel claim that Defendants' "recent crackdown... against medical cannabis patients flouts the representations made on the record by the Department of Justice" in the Santa Cruz action about Defendants' non-enforcement policy of the CSA. (Compl. ~ 22.) Plaintiffs allege in their equitable estoppel claim that "patients[,] their cooperatives[,] and the landlords of these cooperatives... reasonably relied on [the Ogden Memo] to operate or continue to operate medical cannabis facilities or, in the case of landlords, to lease their properties... to patient cooperatives which were in WestlawNext

172 Sacramento Nonprofit Collective v. Holder, F.Supp.2d. (2012) compliance with California state law," but now Defendants threaten to prosecute them under the CSA. (Compl. ~ 26.) Defendants counter: "Plaintiffs are simply incorrect in asserting that the Department has ever issued a promise or guarantee in any prior judicial proceeding that the CSA would never be enforced against marijuana distributers or their landlords simply because they claim to comply with state law."(mot. 16:17-19; Defs.' Reply6:2G-23.) *9 In the... Ogden Memo, the Department of Justice communicated to its attorneys that certain marijuana users and providers would be a lower priority for prosecution than others. For example, "[I]ndividuals with cancer or other serious illnesses who use marijuana as part of a recommended treatment regimen consistent with applicable state law, or those caregivers in clear and unambiguous compliance with existing state law who provide such individuals with marijuana," would be a lower priority than "large-scale criminal enterprises, gangs, and cartels." But the Department also made clear that it did not intend to "legalize" marijuana (nor could it). The Ogden Memo states, for instance: The Department of Justice is committed to the enforcement of the Controlled Substances Act in all states. This guidance regarding resource allocation does not "legalize" marijuana or provide a legal defense to a violation of federal law, nor is it intended to create any privileges, benefits, or rights, substantive or procedural, enforceable by any individual, party or witness in any administrative, civil, or criminal matter. Nor does clear and unambiguous compliance with state law... create a legal defense to a violation of the Controlled Substances Act. A reasonable person, having read the entirety ofthe Ogden Memo, could not conclude that the federal government was somehow authorizing the production and consumption of marijuana for medical purposes. Any suggestion to the contrary defies the plain language of the Memo. Mont. Caregivers Ass'n, LLC v. United States, -F.Supp.2d --,--- --,2012 WL , at *1-2 (D.Mont. Jan. 20,2012) (intemal citations omitted.) [19] Since judicial estoppel does not apply unless "a party's later position [is] 'clearly inconsistent' with its earlier position," and the Ogden Memo does not contain a promise not to enforce the CSA, Defendants' enforcement of the CSA is not inconsistent with the enforcement policy stated in the Ogden Memo. New Hampshire v. Maine, 532 U.S. 742, 750, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001) (citations omitted). Therefore, Plaintiffs fail to state a viable judicial estoppel claim based on the Ogden Memo. Plaintiffs argue in their opposition that their judicial estoppel claim is also based on representations that Department of Justice attorneys made at the October 30, 2009 hearing in the Santa Cruz action, which Plaintiffs argue "are far stronger than the actual language in the [Ogden Memo]." (Opp'n 8:25 27.) However, the transcript ofthat hearing demonstrates that the Department of Justice did not make representations about non-enforcement of the CSA beyond what is stated in the Ogden Memo. (PIs.' RJN Ex. 2.) Therefore, Plaintiffs do not state a viable judicial estoppel claim based on the Ogden Memo or the Department of Justice's representations at the hearing in the Santa Cruz action, and this claim is dismissed. (20] (211 Nor have Plaintiffs supported any other equitable estoppel contention they assert with factual allegations sufficient to preclude Defendants from enforcing the CSA. Before the government may be equitably estopped, the movant for estoppel "must establish that the government engaged in affirmative misconduct, and that the government's conduct has caused a serious injustice." United States v. Bell, 602 F.3d 1074, 1082 (9th Cir.201O) (internal quotation marks and citation omitted). Further, "affirmative misconduct requires an affirmative misrepresentation[.]" Id. (internal quotation marks and citation omitted). Plaintiffs have not made this showing. Therefore, Plaintiffs' equitable estoppel claim is not actionable and is dismissed. *10 For the stated reasons, all of Plaintiffs' claims have been dismissed. However, Plaintiffs request leave to file an amended Complaint. (Opp'n 21:16.) This request is denied, since it is evident that Plaintiffs' claims are foreclosed by United States Supreme Court or Ninth Circuit precedent, or other authority cited in this Order. Further, neither Plaintiffs' arguments nor the documents they submitted in support of their claims evince that Plaintiffs could allege an actionable claim even if they were given opportunity to amend their Complaint. Since "any amendment would be futile, there [i]s no need to prolong the litigation by permitting... amendment." Lipton v. Pathogenesis Corp., 284 F.3d 1027, 1039 (9th Cir.2002). Therefore, Plaintiffs' Complaint is dismissed with prejudice, and judgment shall be entered in favor of Defendants. WestlawNext