Cannabis Club Calls Oakland Permits Illegal

SAN FRANCISCO (CN) - A members-only marijuana club says Oakland is forcing it out of business because it refuses to take part in the city's "unlawful marijuana dispensary permit program."

Joe Hemp's First Hemp Bank and Distribution Network and its founding member David Clancy sued the City of Oakland in Federal Court on Wednesday for allegedly depriving the club of its constitutional right to property.

The city sanctioned First Hemp Bank for not registering with its dispensary permit program on Oct. 12 and ordered the club to pay a $3,500 fine followed by $1,000 daily fines for each day of noncompliance, according to the lawsuit.

"The administrative decision ordered plaintiffs to pay exorbitant fees for the purpose of shutting down the business," the 9-page complaint states.

The First Hemp Bank, which was established in 1999 and opened a second Oakland location in 2009, describes itself as a closed distribution network for members only. The business does not provide storage services to third parties or the general public, and it does not sell, prescribe, administer or dispense marijuana, according to the complaint.

The cannabis club says it is not a dispensary and operates legally under a federal exception in the Controlled Substances Act, which states a "warehouseman, or employee thereof" may possess a controlled substance "in the usual course of business or employment."

Dale Gieringer, executive director of the cannabis legalization nonprofit NORML's California chapter, said he believes the warehouse exception was intended to protect shipping and postal workers that handle legally permitted controlled substances.

The California NORML director said he knows of the First Hemp Bank's founder, Clancy, and that this is not the first time city officials have tried to shut down Clancy's cannabis club.

"He got closed down then and keeps resurfacing," Gieringer said. "He never complies with any laws, and I don't expect this lawsuit to go anywhere."

Regarding the First Hemp Bank's claims that city's permit program violates federal law, Gieringer said that argument has been raised in countless other losing lawsuits ever since more states began moving towards legalizing marijuana.

"Everything about marijuana violates federal law," Gieringer said.

Oakland's pot dispensary permit program charges $5,000 to apply for a permit, $60,000 annual dispensary permit fees, and $211,000 annual cultivation fees.

Gieringer, who sits on Oakland's Measure Z Committee for cannabis policy, said the committee has recently discussed complaints over excessively high dispensary permit fees. He said the goal is to eventually make fees lower as more dispensaries register with the city, but no formal proposal to lower the fees has been made yet.

The First Hemp Bank seeks a declaration and a preliminary and permanent injunction to stop Oakland from sanctioning and fining the business. It is represented by Quynh Chen in Oakland.

The City of Oakland did not immediately respond to a request for comment.

In August, the Ninth Circuit upheld a federal judge's dismissal of Oakland's challenge to a federal government forfeiture action against two of the city's licensed pot dispensaries. A federal judge stayed a federal forfeiture action against a licensed Berkeley marijuana dispensary in February, pending an appeal to the Ninth Circuit.

Follow @NicholasIovino

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit