SAN FRANCISCO (CN) - A federal judge refused to grant a cannabis club's request for a restraining order against Oakland, finding that the request is based on "a false premise."
Joe Hemp's First Hemp Bank and its founding member David Clancy sued the city on Nov. 5 for imposing "exorbitant fees for the purpose of shutting down the business," according to the lawsuit.
The club claims that, because it operates as a members-only warehouse, it qualifies for a federal exemption that allows it to legally handle marijuana under the Controlled Substances Act.
Meanwhile, it says the city's medical marijuana dispensary permit program violates federal law because marijuana is considered a schedule 1 controlled substance.
On Thursday, U.S. District Judge William Alsup issued a ruling denying all relief to First Hemp Bank because the entire lawsuit "is predicated on a false premise."
Even if the club does qualify for an exemption under the Controlled Substances Act, that does not make it immune from local taxes, the judge ruled.
"Plaintiff could certainly qualify as a 'dispensary' under local law and simultaneously as a 'warehouse' under the federal law but, even if so, nothing in the Controlled Substances Act prohibits a local tax on warehouses," Alsup wrote in his brief, two-page ruling.
Alsup rejected First Hemp Bank's argument that, because it is not a dispensary and because the city's pot permit program is illegal under federal law, it should not be forced to take part in it.
The judge said the city has the power to designate businesses like First Hemp Bank as dispensaries and make them subject to local laws.
The city penalized First Hemp Bank on Oct. 12 for not registering with its dispensary permit program and ordered the club to pay a $3,500 fine followed by $1,000 fines for each day of noncompliance.
The city established its medical marijuana dispensary permit program in 2004. Applying for a dispensary permit in Oakland costs $5,000. The city also charges $60,000 annual dispensary permit fees and $211,000 annual cultivation fees.
The judge recommended the parties stipulate to an entry of judgment in favor of the city, rather than "incurring the delay and expense" of a motion to dismiss.
Alex Katx of the Oakland City Attorney's office and Quynh Chen, the cannabis club's attorney, did not immediately return requests for comment Friday morning.
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