Pot Clubs’ Racketeering Fight Hits Federal Court

SAN FRANCISCO (CN) - A federal judge seemed incredulous to hear a case Thursday in which a medical pot collective sued the city of Berkeley for allowing three dispensaries to operate for profit and as the city's "authorized dispensaries."

Lead plaintiff Christopher Smith sued Berkeley, its medical cannabis commission, its city council and three dispensaries in Alameda County Superior Court this past April, claiming that the city "has knowingly allowed for-profit organizations to operate as the 'authorized dispensaries' exclusively allowed to sell marijuana to cannabis patients who need the medicine, and to grossly inflate the prices of this medicine to line the pockets of these organizations' owners."

The three dispensaries named in the lawsuit are Berkeley Patients Care Collective, Berkeley Patients Group and Cannabis Buyers Club of Berkeley.

Berkeley's "flagrantly unlawful actions," Smith claims, "establish and enable the unlawful monopolization of the sale of medical marijuana in Berkeley by a few individuals operating in blatant violation of California law."

The plaintiffs brought the case to Federal Court in September under the Racketeer Influenced and Corrupt Organizations Act, known as RICO.

"Mr. Smith deals in an illegal drug under federal law," U.S. District Judge William Alsup said at Thursday morning's hearing. "All the people over there deal equally in an illegal drug under federal law.

"This is a Federal Court, of course. The city of Berkeley isn't doing anything illegal. Mr. Smith wanted to be one of the illegal drug dealers but he got cut out of the action, and now he's suing under RICO."

Then the judge chuckled. "I'm just smiling because it's so hard to imagine this circumstance to me. If you live long enough, reality is better than fiction."

Whitney Leigh, who represented Smith, said that his client's injury was "also related to the loss of his home."

"He was evicted based on the city's allegation that he was engaging in an illegal marijuana operation," Leigh said. "That's a different loss than his loss to participate as a dispensary that the federal government considers illegal. That's a separate injury."

"That's a local law," Alsup said. "You've come to Federal Court to ask me to give you relief to have your client do something that federal law says is illegal."

The relief his client was seeking, Leigh contended, was to "cease the acts of the defendants."

"What if this was a murder for hire?" Alsup said. "I'm a judge, sworn to uphold the law. Federal law says marijuana is illegal. I have no authority to throw my nose at it, and say I believe in medical marijuana. I can't do that. I have to follow the law."

If the same type of case were brought regarding a murder-for-hire operation, Alsup added, "There's no doubt I would throw the case out in a second."

"But this is illegal, too," he continued. "It's just not as bad. It's not as morally reprehensible."

Leigh pointed out that there have been "several cases in this district where the court has addressed the rights of dispensaries without finding that federal law prohibiting this particular substance prohibited those dispensaries from having standing to present their claims in court."

"Doctors have the right to write prescriptions to their clients for marijuana," Alsup said.

"I ruled on that case. That's different. That's First Amendment speech. We're talking about illegal commerce here."

Yasmeen Omidi, who argued for the Cannabis Buyers Club, said that there is no injunctive relief available to a private plaintiff under Ninth Circuit case-law, and declaratory relief is not available to a private plaintiff under RICO.

"His complaint shouldn't move forward anyway," Omidi said. "There are two defects - no standing and timeliness of claims."

A personal injury does not show RICO standing, Omidi said.

"Why is this not injury to business?" Alsup said.

"This entire complaint is about government corruption," Omidi said. "No allegation shows affirmative action by my client. It's all about the city. They say they de facto selected the three [authorized] dispensaries."

Alsup compared the case to a hypothetical situation in which the government puts out a contract for airplanes, and a losing bidder says the people who got the contract were closely involved with the people in the government.

"Why would you not focus on the loss of that contract as an injury to the business?" Alsup said.

Omidi said that since the statue of limitations under RICO is four years, Smith would have had to discover his injury sometime after September 2011 in order to bring timely claims. But Smith was aware of his injury in 2008, the attorney said.

Berkeley City Attorney Zachary Cowan said that Smith's complaint lacked specifics.

"One can generate a conspiracy theory, but you really have to say who's involved and how the parties connect," Cowan said. "The closest they've come is to say that in some manner the Medical Cannabis Commission was doing bidding upon the dispensaries because the dispensaries prevailed upon the city council to appoint a majority of the commission. But they haven't identified one member of the commission who's connected to a dispensary."

Alsup gave the parties until Tuesday to file a five-page brief that addresses whether a federal judge should entertain a request for relief based on federal law "when the underlying activity or way in which the plaintiff has been injured itself is inherently in violation of a different federal law."

Leigh told Courthouse News after the hearing that the three dispensaries named in the lawsuit were involved with the Berkeley Medical Cannabis Commission.

Nicholas Iovino contributed to this report.

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