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Alternative Community Health Care Cooperative, Inc. et al v. Eric Holder

March 5, 2012


The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge


Plaintiffs in this civil rights action filed a complaint seeking to enjoin the prosecution of cooperatives operating marijuana dispensaries under California law and landlords leasing real property to such cooperatives. At the same time, Plaintiffs also moved for a temporary restraining order and preliminary injunction, which were denied by orders dated November 18 and December 13, 2011, respectively. Pending before the Court is Defendants' motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Plaintiffs filed an opposition and Defendants replied. For the reasons stated below, Defendants' motion is GRANTED.

Plaintiffs are two patients and four medical marijuana cooperatives who operate marijuana dispensaries under California's Compassionate Use Act, Cal. Health & Safety Code § 11362.5. The Compassionate Use Act "was designed to ensure that seriously ill residents of the State have access to marijuana for medical purposes, and to encourage Federal and State Governments to take steps toward ensuring the safe and affordable distribution of the drug to patients in need. The Act creates an exemption from criminal prosecution for physicians, as well as for patients and primary caregivers who possess or cultivate marijuana for medicinal purposes with the recommendation or approval of a physician." Gonzales v. Raich, 545 U.S. 1, 5-6 (2005) (footnotes omitted) ("Raich I").

The federal Controlled Substances Act, 21 U.S.C. § 21 U.S.C. § 801 et seq. ("CSA"), is "a closed regulatory system making it unlawful to manufacture, distribute, dispense, or possess any controlled substance except in a manner authorized by the CSA." Raich I, 545 U.S. at 13. It is "a comprehensive framework for regulating the production, distribution, and possession of five classes of 'controlled substances.'" Id. at 24. Marijuana is classified as a Schedule I drug, 21 U.S.C. § 812(c), which makes its "manufacture, distribution, or possession . . . a criminal offense, with the sole exception being use of the drug as part of a Food and Drug Administration preapproved research study." Raich I, 545 U.S. at 14. Whereas some other drugs can be dispensed and prescribed for medical use, see 21 U.S.C. § 829, the same is not true for marijuana.

Starting October 5, 2011, the United States Attorney for the Southern District of California sent letters to two of the dispensary Plaintiffs and the landlords of the remaining two dispensary Plaintiffs, formally notifying them "that the marijuana dispensary's operations violate United States law and that the violations of federal law relating to the marijuana dispensary's operations may result in criminal prosecution, imprisonment, fines, and the forfeiture of the proceeds of the operations, as well as the real and personal property used to facilitate the operations." (Compl. Exs. 1-4.) The letters give the recipients 45 days to "discontinue sale and/or distribution" at the referenced locations or face the prospect of prosecution and forfeiture of assets.

Plaintiffs filed this action against the Attorney General of the United States, the Administrator of the Drug Enforcement Administration and the United States Attorney for the Southern District of California. They asserted claims for judicial and equitable estoppel, and violation of the Ninth, Tenth and Fourteenth Amendments to and the Commerce Clause of the United States Constitution. Plaintiffs seek a judgment declaring the CSA unenforceable and permanently enjoining prosecution under the CSA.

Defendants argue Plaintiffs cannot state a claim under Rule 12(b)(6) for any of their causes of action. A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted where the complaint lacks a cognizable legal theory. Shroyer v. New Cingular Wireless Serv., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (internal quotation marks and citation omitted); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law"). Alternatively, a complaint may be dismissed where it presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson v. Dean Witter Reynolds, Inc.,749 F.2d 530, 534 (9th Cir. 1984); see also Shroyer, 622 F.3d at 1041.

Judicial Estoppel

First, Defendants contend Plaintiffs cannot state a claim for judicial estoppel to preclude enforcement of the CSA. Judicial estoppel is an equitable doctrine which "generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase." New Hampshire v. Maine, 532 U.S. 742, 749 (2001). As a basis for their claim, Plaintiffs point to the federal government's representations made during proceedings in County of Santa Cruz v. Holder, U.S. District Court of the Northern District of California Case No. 03cv1802 (the "Santa Cruz Action"). (Compl. at 8.) Upon review of the record in the Santa Cruz Action, this claim was rejected in the order denying Plaintiffs' motion for a temporary restraining order.*fn1 (Order Denying Application for a Temporary Restraining Order and Notice of Hearing, filed Nov. 18, 2011 (the "November 18 Order") at 3-5.) In their opposition to Defendants' motion to dismiss, Plaintiffs present no new arguments. Accordingly, Defendants' motion to dismiss the first cause of action for judicial estoppel is granted for the reasons stated in the November 18 Order.

Equitable Estoppel

Plaintiffs do not oppose Defendants' motion insofar as it seeks dismissal of the second cause of action for equitable estoppel. Accordingly, Plaintiffs have abandoned this claim. See Walsh v. Nev. Dep. of Human Res., 471 F.3d 1033, 1037 (9th Cir. 2006) (failure to raise issue in opposition to motion to dismiss). In this regard, the motion is granted as unopposed. See S.D. Cal. Civ. Loc. R. 7.1(f)(3)(c); Ghazali v. Moran, 46 F.3d 52, 53-54 (9th Cir. 1995).

Alternatively, dismissal of the equitable estoppel claim is granted on the merits. Plaintiffs' claim is based entirely on the estoppel by entrapment theory. (Compl. at 8-9.) Estoppel by entrapment may be asserted as a defense in criminal proceedings "when an official tells the defendant that certain conduct is legal and the defendant believes the official." U.S. v. Tallmadge, 829 F.2d 767, 773 (9th Cir. 1987) (internal quotation marks and citation omitted). Plaintiffs are not asserting estoppel as a defense in a criminal proceeding. Furthermore, they do not allege any of them were told by a government official their conduct was legal. Instead, they point to a publicly-announced change in federal enforcement policy of the CSA, filed in the Santa Cruz Action, which provided as a general matter that federal resources would not be focused on enforcing the CSA in the states which enacted laws authorizing medical use of marijuana against individuals who were in clear and unambiguous compliance with state law. (See Compl. Ex. 6 (Memorandum for Selected United States Attorneys dated Oct. 19, 2009 (the "Medical Marijuana Guidance")).) Plaintiffs allege they reasonably relied on the Medical Marijuana Guidance to operate medical marijuana dispensaries and should therefore not be prosecuted. The Medical Marijuana Guidance, however, did not state that Plaintiffs' conduct was legal. To the contrary,

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. Rather, this memorandum is intended solely as a guide to the exercise of investigative and prosecutorial discretion. (Medical Marijuana Guidance at 2.) "An entrapment by estoppel defense is available only when the defendant can demonstrate a reasonable belief that his conduct was sanctioned by the government." U.S. v. Schafer, 625 F.3d 629, 637 (9th Cir. 2010) (internal quotation marks, brackets and citation omitted). Based on the language of the Medical Marijuana Guidance, Plaintiffs could not have reasonably believed their conduct was sanctioned by the government. Even if ...

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