Attorney Warren Edson was practicing medical marijuana-related law before doing so was cool. And now, with the industry growing in Colorado like never before, he's expanding his operations by merging his practice with Kumin Sommers LLP, a San Francisco-based firm with a specialty in medical marijuana law in California, whose nonprofit dispensary approach would be duplicated here under a controversial bill assembled by Representative Tom Massey.
Kumin Edson LLP, as the combination will be known in Colorado, will have plenty to keep it busy once the deal is finalized, probably within the next week or so. Right now, Edson says, "we're sitting on various injunctions" aimed at municipalities that have either banned or restricted medical marijuana businesses.
And while he mostly keeps the specifics of this litigation to himself, he shares a few details about one case involving a Westminster dispensary. The prospect that this dispute is likely to spawn a lawsuit has already prompted a warning letter from the city attorney.
One of the main reasons Edson is hooking up with the SF outfit involves new partner Matthew Kumin's expertise when it comes to the intersection of federal and state law. He was lead counsel on Californians Helping to Alleviate Medical Problems, Inc. [CHAMP], v. Commissioner of Internal Revenue, a 2007 case (read a related document here) that allowed California dispensaries to deduct wellness services and other expenses not related to so-called "drug trafficking" from their federal income taxes.
"It was a big case where the federal courts ended up dealing with CHAMP as, for the lack of a better term, a regular business, and detailed what's deductible and what's not," Edson notes.
Today, Edson continues, Kumin "advises around 500 dispensaries in California on a business level, on stuff we haven't even started touching here -- things like OSHA compliance and employee manuals and business-compliance manuals and all this fun business stuff that starts taking place as soon as dispensaries become more like regular businesses."
Kumin's expertise in the nonprofit realm could come in handy here. After all, Edson points out, "nonprofits are much more complicated than for-profits. LLCs are pretty simplistic here, but nonprofits are a completely different thing. You have to do salary surveys to justify salaries -- look at other comparable nonprofits to see what their salary structures are -- and a lot of things like that.
"And here's another nuance. All these folks will have to file as nonprofits in Colorado, but none of the dispensaries in California have ever been qualified as nonprofits federally -- so they've had to file as for-profits on a federal level. And that could be what happens here."
This seeming contradiction is only one of the reasons Edson has a hard time seeing the appeal of the nonprofit approach being touted by Massey and the bill's senate sponsor, Chris Romer.
"I don't know how they can stand there and say, 'We want you to all be nonprofits. We think we can fix the industry' -- and then point at California and say, 'Look how F-ed up things are there.' That makes no sense to me as an argument, but they keep making it."
Of course, giving clients advice is complicated mightily by the lack of a state standard, not to mention the crazy quilt of rules and regulations coming from assorted counties and communities.
"It's fascinating," Edson says. "Sometimes it drives me crazy, and sometimes it doesn't. We have various city maps plastered all over our offices, and we have to constantly update our list of municipal rules. We probably have fifty municipalities on the list, with all their nuances."
Many ordinances are unfriendlier than others -- a phenomenon Kumin Sommers has seen and battled in California.
"They just finished their eleventh injunction," Edson maintains. "They just finished one in Sonoma County and the City of Irvine. And we have new associates here who are starting to finalize research on how to move forward injunction-wise."
Which brings us to Westminster. According to Edson, a client's dispensary had been in operation there for around a year when Westminster instituted a December ban on such businesses. At the meeting where this decision was made, Edson spoke publicly about suing the city over the move, even though the dispensary in question had not yet been closed. This statement prompted the Westminster city attorney to send him a letter (see it below) "saying, 'You can't file an injunction against us until we cause damages to your client -- and if you bring a claim, we want to remind you that we'll come after you under this statute.'"
What to do? Edson says his client's sales tax license will come up for renewal around June -- and under the ban, the city won't be able to renew it. At that point, damages to the dispensary will be evident, and he'll be able to file an injunction. In the meantime, he says, "My clients continue to pay their taxes."
How that process will work in the future depends in part on what kind of legislation the state passes, if any -- but confusion runs rampant. As Edson tells it, a lot of dispensary owners don't seem to understand that the Massey-Romer bill is merely a proposal at this point.
"Their latest draft isn't even in committee yet," he points out. "But I can't count the number of times I've had to say, 'Take a deep breath and think about Schoolhouse Rock and remember that a bill's got to go through a lot of steps before it becomes a law.'"
Nonetheless, he's concerned that those officials doing the amending lack a basic understanding about many of the practical facts about medical marijuana.
For instance, he says, "I want to preserve the patient's right to shop. I don't think the legislature, the politicians, appreciate the fact that we don't know enough about these different strains and what works and what doesn't for who. Patients should have the ability to go to different places to look for what works best for them. They shouldn't be tied to one place, or even to four places."
Such arguments will have to wait for another day. Edson's first got to put the finishing touches on his merger, then fly to California to conduct classes for budding medical marijuana entrepreneurs. "I'm flying there twice a month to teach in Los Angeles and San Francisco, because there's such a demand for knowledge about what's going on here," he says.
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Edson's next class in Denver takes place on March 11; click here for more details. As for what subjects he'll cover, it's anyone's guess, given how quickly the medical marijuana industry is evolving/mutating. "It's nutty," Edson says -- and there's no arguing with that analysis.
Here's the text of the letter sent to Edson by Westminster's city attorney:
December 15, 2009
VIA FACSIMILE, E-MAIL, AND U.S. MAIL
Tae Darnell, Esq. (Fax: 720-542-8391) 36 Steel Street, Suite 200 Denver, CO 80206
Warren Edson, Esq. (Fax: 303-339-0402) 1490 Lafayette Street, Suite 407 Denver, CO 80218
It is my understanding from the public comments that you made at last night's City Council meeting that you intend to initiate a lawsuit against the City of Westminster concerning Councillor's Bill No. 41.
This letter is intended to bring your attention to the requirements of C.R.C.P. Rule 65(b), which provides as follows:
A temporary restraining order may be granted without written or oral notice to the adverse party or his attorney only if: (1) it clearly appears from specific facts shown by affidavit or by the verified complaint or by testimony that immediate and irreparable injury, loss, or damage resulting the applicant before the adverse party or his attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court in writing or on the record the efforts, if any, which have been made to give the notice and the reason supporting his claim that notice should not be required.
At this point in time no enforcement action has been taken against your client. Therefore, no irreparable injury, loss or damage has occurred and no case or controversy exists. Nevertheless, should you decide to file a lawsuit against the City, request is hereby made that notice be given to the undersigned prior to any appearance in either Adams County or Jefferson County District Court for the purpose of obtaining a temporary restraining order pursuant to C.R.C.P. 65(b). A similar requirement is set forth in F.R.C.P. Rule 65(b). All of the following numbers may be called to provide this notice anytime during the hours of 8 a.m. and 5 p.m., Monday through Friday: 303-658-2232, 303-658-2234, or 303-658-2237.
Martin R. McCullough City Attorney
cc: Jeff Betz, Assistant City Attorney Tom Rice, Esq. (via e-mail)