Oakland Urges Stay of Medical Pot Club Seizure

     SAN FRANCISCO (CN) - The city of Oakland asked a federal judge Thursday to stay forfeiture proceedings against a medical marijuana club while it defends its standing on appeal.
     Government lawyers meanwhile urged the court to let it seize Harborside Health Center's Oakland and San Jose locations. It claims that the dispensaries sell marijuana in violation of the Controlled Substances Act.
     While medical marijuana is legal in California, and voters have approved the recreational use of marijuana by adults in Washington and Colorado, it is still illegal under federal law.
     Oakland sued the government in 2012 for abandoning its alleged promises not to interfere with a state's plan to regulate medical marijuana shops.
     The government said the action could not survive because only parties named in forfeiture actions have standing to challenge them.
     U.S. Magistrate Maria Elena James agreed in dismissing the case. She also ruled that the forfeiture proceeding did not constitute a final agency action that gave Oakland an avenue to sue under the Administrative Procedure Act.
     As Oakland appeals to the 9th Circuit, it asked James to stay the forfeiture proceedings pending this appellate review.
     Cedric Chao, attorney for Oakland, argued at a hearing Thursday that the city had standing to request a "moderate" stay because it presented serious legal issues by arguing that Oakland should have standing to challenge the government's seizure.
     Precedent from the 9th Circuit allows for stays if serious legal questions are raised, Chao said.
     "I don't have to prove the case on the merits," he continued. "I have to show serious legal issues, which we've done in spades."
     Justice Department attorney Kathryn Wyer replied that, even if the court accepts that Oakland has raised serious legal questions, the city's argument "still doesn't hold up."
     She said the court must consider the likelihood that Oakland will succeed on the merits of the case.
     "Our view is there is no possible way Oakland could succeed," Wyer said, referring to the city's equitable estoppel and statute of limitations claims. "Both of those issues can be resolved as a matter of law."
     Every act of selling marijuana at Harborside constitutes a new violation of the CSA and resets the statute of limitations, Wyer argued.
     The government had said in earlier court filings that "the United States has never misrepresented the fact that marijuana distribution, possession, and cultivation remain illegal under federal law."
     Wyer also argued that, even if the court granted a stay, it had limited jurisdiction over the issue and could do nothing more than preserve the status quo.
     The "status quo was that the forfeiture cases were free to proceed," Wyer said. "If the court stays those cases it would be disrupting the status quo."
     Chao strongly objected to this point, noting that the "status quo is determined at the time Oakland filed its appeal."
     "The status quo was that Harborside was open," Chao said.
     "If the forfeiture action proceeds and if for whatever reason Harborside is shut down, then Oakland and its 400,000 citizens would be injured," he added.
     When pressed by the court to explain how a stay would prejudice the government, Wyer replied: "Now that the government has decided to initiate this action it does feel some urgency to litigate the action. Illegal activity is still going on and that is a significant factor."
     She claimed the court could, "on its own motion," order illegal activity at the club to cease. "That would certainly alleviate some of the government's concern," Wyer said.
     Henry Wykowski, attorney for Harborside, noted that the government had not made any motion here to enjoin activity at the club.
     "I object to the government raising that issue here," Wykowski said. "We had no notice of it and no opportunity to respond."
     Oakland attorney Chao said that, while Wyer talked a lot, the "only answer we heard is 'we have an interest in enforcing drug laws.'"
     Quoting the magistrate judge's earlier ruling, Chao said that "any argument of urgency rings hollow."
     The government waited five years before trying to seize Harborside, while knowing the entire time it was selling marijuana, he added.
     "They knew from the get-go that marijuana was being sold," Chao said. "They were fine with it. They can't argue to the court that there is any prejudice."
     But Judge James said Chao was misquoting her.
     "I don't think the government's argument rings hollow," James said. "They're entitled to some normal proceedings in this case."
     Wyer also argued that discovery would not be possible even if the court were to allow Oakland to proceed on its claims under the Administrative Procedure Act (APA), since APA claims depend on final agency action and there has been no final agency action.
     She said the APA argument from Oakland "illustrates its attempt to confuse everything and mix it all up to stop a forfeiture action without any reason to do so. Oakland seems to be saying it wants a voice in the political process. It has a voice there. It has no voice in the forfeiture proceedings."
     Chao responded: "The essence of [the government's] position is that Oakland has no right to redress the injury in courts. ... We have to sit idly by while the government, we believe illegally, proceeds with the forfeiture claim."
     He said he found it "extraordinary that they're saying Oakland cannot access the courts."
     Attorneys for Oakland, Harborside and Concourse Business Center, which owns the property where the San Jose club is located, urged the court to also stay proceedings in the forfeiture case against Harborside's San Jose location.
     Wykowski said almost all discovery sought from the government would apply to both cases.
     If tried separately it would duplicate Harborside's work, he added.
     There is "no prejudice in waiting for the 9th Circuit to rule," Wykowski said. "If the 9th Circuit holds that Oakland has the right to bring their action San Jose might bring its own."
     Wyer objected, stating that similar issues "could arise anywhere that could have a bearing [on this case], and Oakland cannot go out and stay every single case that might raise an issue that is related to its claims."
     The lawyer then tried to raise the point that the U.S. Attorney's Office had moved last month to seize Shambhala Healing Center in San Francisco. Prosecutors have accused the club of selling marijuana within 1,000 feet of a public playground.
     "Once you start staying every forfeiture action with the same defenses you might get into a situation where the attorney's office is helpless to enforce any forfeiture actions," Wyer said.
     Judge James replied that she does not "have those [other] cases before me."
     "I understand the government's concern but I am concerned with the cases in front of me," James said. Chao is a partner with DLA Piper in San Francisco. Wykowski is from Henry G. Wykowski & Associates in San Francisco.