NAMSDL Case Law Update

Transcription

1 In This Issue Welcome to the inaugural issue of the NAMSDL Case Law Update. As part of its continuing efforts to keep stakeholders informed of the various legal activities surrounding the world of drugs and alcohol, NAMSDL has created this bi-monthly newsletter dedicated solely to those court cases affecting areas in which its readers have an interest. This newsletter will include information on both federal and state court cases. Awaiting Action Future issues will include a list of any cases summarized in prior issues that have had no action since the last issue of the newsletter. Resolved Since Last Issue Future issues will include a list of any cases summarized in prior issues that have been resolved since the last issue of the newsletter. CASES IN THIS ISSUE Brandon Flores and Brandie Larrabee, individually and on behalf of others similarly situated vs. LivWell, Inc. and John Does 1-10 (page 2) Chicago v. Purdue Pharma L.P., et al (page 7) Cristina Barbuto vs. Advantage Sales and Marketing and Joanne Villaruz (page 2) Fourth Corner Credit Union vs. Federal Reserve Bank of Kansas City (page 2) Fourth Corner Credit Union vs. National Credit Union Administration (page 2) Justin L. Smith, et al vs. John W. Hickenlooper, Governor of the State of Colorado (page 3) Nebraska and Oklahoma v. Colorado (page 3) Oregon Prescription Drug Monitoring Program, et al vs. United States Drug Enforcement Administration (page 2) People of the State of California v. Purdue Pharma L.P., et al (page 7) Safe Streets Alliance, Phillis Windy Hope Reilly, and Michael P. Reilly vs. John W. Hickenlooper, Jr., Barbara J. Brohl, W. Lewis Koski, and Pueblo County Liquor & Marijuana Licensing Board, et al (page 3) Safe Streets Alliance and New Vision Hotels Two, LLC vs. Medical Marijuana of the Rockies, LLC, et al (page 4) State of California vs. Lisa Tseng (page 7) State of Colorado vs. Richard Kirk (page 5) State of New Jersey vs. George A. Meyers (page 5) State of Oregon vs. Jared William Lang (page 5) United States of America vs. Pickard, Scheweder, et al (page 6) United States vs. Real Property and Improvements Located at 1840 Embarcadero, Oakland, California, et al (page 6) United States of America vs. Rhonda Lee Firestack-Harvey, Larry Lester Harvey, Michelle Lynn Gregg, Rolland, Mark Gregg, and Jason Lee Zucker (page 6) United States vs. Stephen J. Schneider and Linda K. Schneider (page 7) West Virginia Department of Health and Department of Military Affairs and Public Safety vs. AmerisourceBergen, et al (page 8)

2 Page 2 Cases Related to Prescription Monitoring Programs Oregon Prescription Drug Monitoring Program, et al vs. United States Drug Enforcement Administration, 9th Circuit Court of Appeals, Case No Initially filed as an action for declaratory judgment by the Oregon PMP, the trial court allowed the intervention of the ACLU and ultimately agreed with their argument that law enforcement should be required, under the Fourth Amendment, to have a search warrant in order to receive PMP data. The DEA appealed that decision. All of the appellate briefs in this case were filed in January 2015 and we are simply awaiting a decision from the Ninth Circuit Court of Appeals. For a complete history of this case, please see the April 2014 issue of NAMSDL News, which can be found on the NAMSDL website at Marijuana and Medical Marijuana Related Cases Brandon Flores and Brandie Larrabee, individually and on behalf of others similarly situated vs. LivWell, Inc. and John Does 1-10, Denver District Court, Case No. 2015CV In what is being reported as the nation s first marijuana-related product liability case, on October 5, 2015, two Colorado marijuana users (one recreationally and one a registered medicinal use patient) filed suit against a Colorado corporation that operates eleven marijuana dispensaries ( Defendant ) alleging the use of Eagle 20, a patently dangerous fungicide, in its cultivation of marijuana. Plaintiffs seek to have the lawsuit certified as a class action on behalf of all persons who purchased marijuana from Defendant (for recreational or medicinal purposes) from October 2012 to the present. Among other things, Plaintiffs seek: (1) an injunction preventing Defendant from using Eagle 20 in the future; and (2) damages, calculated as the difference between the amount they paid to Defendant for purchases and the (lower) price they should have paid had the public known about the use of Eagle 20. Defendant has twenty-one days from service of the complaint to file an answer. Cristina Barbuto vs. Advantage Sales and Marketing and Joanne Villaruz, Suffolk County (Mass.) Superior Court, Case No. CV In 2014, a Massachusetts woman ( Plaintiff ) was terminated from her job at a Californiabased company ( Defendant ) after her first day at work for testing positive for marijuana. According to Plaintiff, prior to starting the job, Plaintiff informed Defendant that she was a qualified patient under the Massachusetts law allowing the medicinal use of marijuana (suffering from Crohn s disease) and, therefore, she would test positive in the required drug test. One of Defendant s employees allegedly told Plaintiff this would not be a problem, but Defendant changed course and fired Plaintiff. On September 4, 2015, Plaintiff filed suit against Defendant (and its de facto Human Resources representative ) for several violations of discriminatory employment practices, including: (1) the dismissal of an employee due to a handicap without making a reasonable accommodation that would not cause undue hardship on the employer; and (2) terminating an employee for engaging in a lawful activity. In the suit, Plaintiff seeks her reinstatement as an employee as well as damages for lost wages, lost benefits, attorneys fees, costs, interest and emotional distress. Fourth Corner Credit Union vs. Federal Reserve Bank of Kansas City, U.S. District Court for the District of Colorado, Case No. 1:15-cv-01633; Fourth Corner Credit Union vs. National Credit Union Administration, U.S. District Court for the District of Colorado, Case No. 1:15-cv On July 30, 2015, the plaintiff, Fourth Corner Credit Union, filed suit for a declaratory judgment against the defendant, Federal Reserve Bank of Kansas City ( FRB -KC ), seeking a master account with the defendant. On the same date, the plaintiff filed suit against the National

3 Page 3 Credit Union Administration ( NCUA ) seeking judicial review of the agency s rejection of its application for federal share deposit insurance. The plaintiff is a credit union doing business in Colorado that intends to provide banking services to compliant state-licensed cannabis and hemp businesses. In the first case, the defendant, FRB-KC, denied the plaintiff a master account on the basis that to do so would be in violation of federal laws regarding marijuana. The plaintiff argues that the granting of a master account by a Federal Reserve Bank is not a discretionary function but a mandatory one if the entity seeking a master account is eligible to make application to become federally insured. On September 10, 2015, the defendant, FRB-KC, filed a motion to dismiss the case against it for failure to state a claim on the basis that Colorado s grant of a charter to the plaintiff is in violation of federal law and that granting the plaintiff s requested relief would, in effect, grant relief that furthers or assists an illegal purpose, namely, the aiding and abetting of the sale of marijuana. Subsequently, the plaintiff filed a motion for summary judgment on October 7, 2015 seeking a ruling from the court in its favor. No hearings have yet been scheduled on either motion. In the second case, involving defendant NCUA, the plaintiff s application was allegedly rejected on the basis that the defendant had fundamental concerns about the inherent risks of [the plaintiff s] business model. The plaintiff is seeking a judicial declaration that it meets all the requirements for federal share deposit insurance. At this time, nothing beyond preliminary matters of service of process on the defendant and the setting of a deadline date for the submission of a joint case management plan have occurred in this case. Justin L. Smith, et al vs. John W. Hickenlooper, Governor of the State of Colorado, U.S. District Court for the District of Colorado, Case No. 1:15-cv For a complete history of this case, please see the March, May, and July 2015 issues of NAMSDL News, which can be found on the NAMSDL website at On September 18, 2015, the plaintiffs filed a Notice of Related Cases notifying the Court of a similar case that was filed against the Defendant (a full summary of that case, Safe Streets Alliance, et al, vs. John W. Hickenlooper, et al, can be found below) as the cases present similar complaints against the Defendant. Procedurally, this case is awaiting a hearing date on the Defendant s Motion to Dismiss filed May 1, Nebraska and Oklahoma v. Colorado, U.S. Supreme Court, Case No. 22O144 Orig. A full summary of this case appeared in the May 2015 edition of NAMSDL News, a copy of which can be found on the NAMSDL website at In May 2015, the Supreme Court invited the Office of the Solicitor General ( Solicitor General ) to file a brief expressing the views of the United States in the matter. This brief has not been filed to date, and there is no deadline for its filing. NAMSDL will provide its next update about the case once the Solicitor General s brief has been filed. Safe Streets Alliance, Phillis Windy Hope Reilly, and Michael P. Reilly vs. John W. Hickenlooper, Jr., Barbara J. Brohl, W. Lewis Koski, and Pueblo County Liquor & Marijuana Licensing Board, et al, U.S. District Court for the District of Colorado, Case No. 1:15-cv The Plaintiffs in this case filed suit against sixteen parties, both private and state, alleging that the private defendants violated their rights under the Racketeer Influenced and Corrupt Organizations (RICO) Act, and that the constitutional amendment related to recreational marijuana is preempted by

4 Page 4 federal law. On March 19, 2015, the State Defendants (John W. Hickenlooper, Barbara J. Brohl, and W. Lewis Koski) filed a Motion to Sever Count VII of the Plaintiffs Complaint into a separate civil action as it is the only count that applies to the State Defendants. A similar motion was filed by the Pueblo County Commission and Pueblo County Liquor and Marijuana Licensing Board ( Pueblo Defendants ) on April 1, The Plaintiffs filed an amended Complaint on April 13, 2015 to include the Pueblo Defendants in the RICO claims. On April 30, 2015, the State Defendants filed a Motion to Dismiss Count VII of the Complaint, namely the preemption argument and the only count alleged against those Defendants. The Motion argues that private plaintiffs have no cause of action to abolish a State s police powers through preemption, especially when the allegedly preempting statute does not contemplate private enforcement. They further argue that the Plaintiffs lack standing and that federal law does not preempt Colorado laws regarding the licensing and regulation of marijuana. Nine other private defendants and the Pueblo Defendants have also filed Motions to Dismiss. On May 1, 2015, an Order dismissing two of the private defendants, David Patch and Patch Construction, was entered leaving fourteen remaining defendants. The court granted the State Defendants and Pueblo Defendants motions to sever or bifurcate certain counts on July 14, 2015 based on the rationale that RICO claims are very fact-specific which will require a significant amount of discovery while the preemption claims are a pure question of law. No hearing date has been set for the Motions to Dismiss. Safe Streets Alliance and New Vision Hotels Two, LLC vs. Medical Marijuana of the Rockies, LLC, et al, U.S. District Court for the District of Colorado, Case No. 1:15-cv The Plaintiffs, Safe Streets Alliance and New Vision Hotels Two, LLC, filed suit on February 19, 2015 against twelve defendants, including Medical Marijuana of the Rockies, LLC, doing business as Summit Marijuana. (Note that five of the named defendants have since been voluntarily dismissed from the proceedings.) The plaintiffs alleged in their Complaint that New Vision has suffered injuries to its business and property by the planned opening and operations of Summit Marijuana, a state-licensed recreational marijuana store, and that all named defendants are in violation of the Racketeering Influenced and Corrupt Organizations ( RICO ) Act and sought an injunction and damages. The remaining named defendants have filed Motions to Dismiss the case. New Vision filed a Motion for Summary Judgment seeking a ruling in its favor without a trial based on the allegation that there are no genuine issues of material fact in dispute. On June 15, 2015, Plaintiff Safe Streets Alliance was voluntarily dismissed from the suit as that plaintiff lacked standing to pursue any claims against the defendants leaving New Vision as the only remaining plaintiff. Defendant Merchants Bonding Company made a settlement offer of $50,000 to the plaintiff, which was accepted, and a judgment was entered with the Court in favor of the plaintiff against Merchants on July 9, Defendants Accounting Specialists, Inc. and Michael Massa also made a settlement offer which was accepted, and judgment against those defendants in the amount of $20,000 was entered on September 9, Still pending in this case are the Motion to Dismiss filed by Defendants Medical Marijuana of the Rockies, LLC and Gerald Jay Olsen and the Motion for Summary Judgment filed by the Plaintiff. Should the case go to trial and the jury find in favor of the

5 Page 5 Plaintiff, this could leave the door open for a flood of additional lawsuits against marijuana stores in Colorado. State of Colorado vs. Richard Kirk, Denver County (Co.) District Court, Case No. 14CR1853. A Denver-area man ( Defendant ) stands accused of killing his wife in April 2014 while she was on the phone with a 911 operator. During the call, the wife reported that Defendant was behaving erratically and totally hallucinating. In September 2015, Defendant changed his plea from not guilty to not guilty by reason of insanity. Although Defendant s reasoning for the change has not been fully explained, based on recent court filings containing psychological and medical evaluations, it appears that the Defendant may argue that his actions were, in whole or in part, clouded by intoxication from ingesting a marijuana edible. As a result, future case testimony may include expert opinion about the possibility of marijuana contributing to a person s psychotic episode. Due to the change in Defendant s plea, the planned trial was postponed and Defendant instead was ordered to undergo a psychological evaluation by a court-appointed psychiatrist. Defendant s next court appearance is scheduled for December State of New Jersey vs. George A. Meyers, Superior Court of New Jersey Appellate Division, Case No. A T4. While responding to a report of gunshots fired, a police officer approached a car and, upon detecting the smell of burnt marijuana, ordered the occupants out for a search. The search revealed a bag of marijuana and a handgun on the driver s ( Defendant ) person. The Defendant was charged with two crimes and convicted. On appeal, Defendant argued that the evidence from the search should have been excluded. Defendant s reasoning was that due to New Jersey s 2010 enactment of the Compassionate Use Medical Marijuana Act ( CUMMA ), marijuana was no longer per se contraband and thus its smell could not be the sole basis for a probable cause search. In an opinion issued on September 8, 2015, the appellate court rejected the Defendant s argument and affirmed the conviction. In rebuffing the Defendant s assertion that marijuana should be treated like alcohol (where, in New Jersey, odor on the driver s breath alone does not provide probable cause for a vehicle search), the appellate court held that absent evidence the person suspected of possessing or using marijuana has a [CUMMA] registry identification card, detection of marijuana by the sense of smell, or by the other senses, provides probable cause to believe that the crime of unlawful possession of marijuana has been committed. State of Oregon vs. Jared William Lang, Oregon Court of Appeals, Case No. CM ; A After several neighbors complained about the smell of marijuana coming from an Oregon man s ( Defendant ) apartment, a police officer sought and received a search warrant. The warrant was issued because the officer provided an affidavit that there existed probable cause that a search would result in the discovery of evidence of second-degree disorderly conduct under Oregon law, due to the neighbors being subjected to a physically offensive condition [marijuana odor] by the residents of [the apartment] who did not have a license or privilege to do so. The apartment search revealed graffiti-making materials and Defendant was charged with several counts of criminal mischief. At trial, the Defendant moved to suppress evidence from the search, on grounds that the smell of marijuana did not constitute a sufficient basis to allow the warrant. The trial court disagreed, and Defendant was convicted. On appeal, an Oregon appellate court reversed the decision not to suppress the warrant. In an opinion issued on August 19, 2015, the appellate court found that the extent to which any odor (including marijuana) can rise to the level of a physically offensive condition is dependent on several factors, including the nature of the odor, its intensity, duration, and frequency, whether it is continuous or intermittent, and the circumstances in which it is smelled. The court

6 Page 6 concluded that, in this case, the officer s affidavit was nearly silent regarding the intensity and persistence of the marijuana odor, and thus there was no probable cause to allow the warrant. The decision appears to leave open the possibility that marijuana odor could be so physically offensive to others as to be against the law, if the odor is sufficiently intense and/or pervasive. United States of America vs. Rhonda Lee Firestack-Harvey, Larry Lester Harvey, Michelle Lynn Gregg, Rolland, Mark Gregg, and Jason Lee Zucker, U.S. District Court for the Eastern District of Washington, Case No. 2:13-cr NAMSDL has been following this case for several months, and full summaries of the previous activity can be found in prior issues of NAMSDL News which can be accessed at As previously reported, Defendants Rhonda Lee Firestack-Harvey, Michelle Lynn Gregg, and Rolland Mark Gregg were found guilty of the charge of manufacturing marijuana. Sentencing hearings for the defendants were held on October 2, 2015 with the defendants being sentenced as follows: Rhonda Lee Firestack-Harvey imprisonment of one year and one day and three years of supervised release; Michelle Lynn Gregg imprisonment of one year and one day, three years of supervised release, and a fine of $2,000; Rolland Mark Gregg imprisonment for 33 months, three years of supervised release, and a fine of $7,500. United States of America vs. Pickard, Scheweder, et al, U.S. District Court for the Eastern District of California, Case No. 11-CR No material activity in this case has occurred since the last case summary was published in the July 2015 issue of NAMSDL News, a copy of which can be found on the NAMSDL website at A jury trial on the merits is scheduled to begin in February United States vs. Real Property and Improvements Located at 1840 Embarcadero, Oakland, California, et al, U.S. District Court for the Northern District of California, Case Nos. 3:12-cv and 3:12-cv-03567; City of Oakland vs. Loretta E. Lynch and Melinda Haag, U.S. Court of Appeals for the Ninth Circuit, Case No These three cases are related. In 2012, the U.S. Department of Justice ( DOJ ) initiated forfeiture actions in the Northern District of California ( Northern District ) to close two locations where the largest marijuana dispensary in the United States operates. Later in 2012, the City of Oakland, the site of one location, filed a suit against the DOJ in response, seeking an injunction preventing the forfeiture. Oakland argued that it (and its residents) would be injured by the closing in the form of: (1) a loss of tax revenue; (2) an increase in crime from the black market marijuana trade; and (3) a loss of its interest in regulating the medicinal use of marijuana as allowed by California law. Of interest, Oakland does not have a right to contest the forfeiture actions themselves, because Oakland is neither an owner of, nor the tenant at, either of the two properties. In February 2013, the Northern District dismissed Oakland s suit, concluding that the DOJ suits were not final agency action that would allow the court to undertake judicial review. Oakland appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit. On August 20, 2015, the Ninth Circuit affirmed the dismissal, finding that DOJ s decision to bring the forfeiture actions was committed to agency discretion by law and allowing Oakland s suit to proceed would impermissibly disrupt the existing forfeiture framework. In October 2015, Oakland petitioned the Ninth Circuit for rehearing in front of all of the Ninth Circuit judges, as the original appeal was before a three-judge panel. The odds of the Ninth Circuit granting the rehearing are low. If the August 2015 decision stays in force, Oakland will not have a means to contest the forfeiture actions. The forfeiture actions themselves have been held in abeyance since July 2013 to allow Oakland s case to reach conclusion. The forfeiture actions will resume once the outcome of the Oakland case is final.

7 Page 7 Miscellaneous Controlled Substance Cases Chicago v. Purdue Pharma L.P., et al, U.S. District Court for the Northern District of Illinois, Case No. 14-CV In June 2014, the City of Chicago ( Chicago ) sued nine pharmaceutical companies ( Defendants ) in Illinois state court, alleging in a multiple count complaint that Defendants had violated Illinois and Chicago law by developing a fraudulent plan to convince doctors to write, and healthcare payers to pay for, unnecessary opioid prescriptions. Chicago seeks restitution from Defendants for over $9.5 million in workers compensation claims paid plus disgorgement of profits, treble damages, and punitive damages. The case was removed to Illinois federal court, and the Defendants moved to dismiss the case on various grounds. In May 2015, the court dismissed one defendant, Teva Pharmaceutical, from the case entirely because it could not exercise personal jurisdiction over it. At that time, the court also dismissed most of the individual claims on the grounds that the allegations were insufficient to rise to a legal cause of action. The court, however, rejected Defendants contention that the entire case should be dismissed (or stayed) because the central issues should be addressed by the U.S. Food and Drug Administration and not a court. Chicago was given limited time to amend its complaint to try to revive one or more of the dismissed claims. Chicago filed its amended complaint in August Under the current briefing schedule, court filings addressing the amended complaint will not be finished until mid-february In the meantime, the court has stayed all discovery in the case until after its decision on one or more expected motions to dismiss the amended complaint. People of the State of California v. Purdue Pharma L.P., et al, Superior Court of California, County of Orange, Case No In May 2014, the state of California sued five pharmaceutical companies ( Defendants ) in a complaint alleging a fraudulent opioid marketing scheme similar to the one filed by Chicago in Illinois (see summary above). Unlike the Illinois action, in August 2015, the California judge put a complete hold on the case to allow the U.S. Food and Drug Administration to complete current research into the effectiveness and safety of opioids. The judge indicated that he would allow the case to be dismissed if Defendants agree that California can bring the case at a later time. State of California vs. Lisa Tseng, Superior Court of California, County of Los Angeles, Case No. BA Dr. Lisa Tseng, a physician practicing in Rowland Heights, California, was arrested in 2012 on charges of second degree murder for the overdose deaths of Joey Rovero, Vu Nguyen, and Steven Ogle as a result, according to allegations made by the prosecutors in the case, of prescriptions written by Dr. Tseng. According to prosecutors, Tseng was notified more than a dozen times that patients of hers had overdosed, one of whom overdosed in the hallway outside her clinic. Moreover, prosecutors allege that Tseng would hand out prescriptions to patients in as little as three minutes with no physical exam and despite evidence of addiction. The jury trial in this case began in late August 2015 and is expected to continue through October. United States vs. Stephen J. Schneider and Linda K. Schneider, Tenth Circuit Court of Appeals, Case No Stephen Schneider, an osteopath in Kansas, and his wife, Linda Schneider, a licensed practical nurse, were arrested in 2007 on charges of conspiracy to commit healthcare fraud, unlawful distribution of controlled substances, conspiracy to defraud the United States, illegal money transactions, and money laundering linked to the deaths of at least 56 patients by accidental overdose. Stephen Schneider was tried and convicted in 2010 of conspiracy to defraud the United States, health care fraud, illegal monetary transactions, and unlawful distribution of controlled substances. He

8 Page 8 was sentenced to 30 years in prison. Linda Schneider was tried and convicted of the same offenses and sentenced to 33 years in prison. Following their convictions, the Supreme Court decided the case of United States vs. Burrage (Case No , decided Jan. 27, 2014). The defendant in Burrage case was accused of unlawfully distributing heroin and that death resulted from the use of that substance, subjecting the defendant to a mandatory minimum sentence of 20 years under the penalty enhancement provision of the Controlled Substances Act. The Court ultimately held that a defendant cannot be held liable for penalty enhancement unless but for the decedent s use of the drug he would not have died. Based on that decision, both defendants in the Schneider case filed Motions to Vacate, Set Aside, or Correct their sentences. The court granted their motions and the defendants were resentenced in September Stephen Schneider s sentence was reduced to 360 months, and Linda Schneider s sentence was reduced to 396 months. Both defendants have appealed to the Tenth Circuit Court of Appeals to have the sentences reconsidered. West Virginia Department of Health and Department of Military Affairs and Public Safety vs. AmerisourceBergen, et al, Boone County, WV Circuit Court, Case No. 12-C-141. Filed in 2012 by the West Virginia Department of Health and the Department of Military Affairs and Public Safety, this lawsuit alleges that the defendants shipped excessive amounts of painkillers to West Virginia pharmacies helping fuel the state s pain pill epidemic. The case is currently pending in the Boone County West Virginia Circuit Court. This project was supported by Grant No. G15599ONDCP03A, awarded by the Office of National Drug Control Policy. Points of view or opinions in this documents are those of the author and do not necessarily represent the official position or policies of the Office of National Drug Control Policy or the United States Government. The successor to the President s Commission on Model State Drug Laws, NAMSDL is a 501(c)(3) non-profit corporation that was created in A non-partisan provider of legislative and policy services to local, state, and federal stakeholders, it is a resource for comprehensive and effective state drug and alcohol laws, policies, regulations, and programs and is funded by the United States Congress.