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CannaBiz: Court decisions make huge waves

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Judgment days

The first half of August has been a little court-crazy, with two big decisions affecting the way medical-marijuana business is done in Colorado.

• First, that initial Arizona court ruling saying a contract between two MMJ centers is basically unenforceable ("I've got rights," CannaBiz, May 23) was echoed in this state last week. District Court Judge Charles Pratt, in Arapahoe County, essentially came to the same conclusion in a case where a grower sued a Littleton MMJ center for allegedly shorting that grower $40,000.

As first reported by Westword, at the heart of the ruling is the court's job to look at how any contract affects "public policy." As the ruling reads, "Colorado courts are responsible for upholding the public policy of the state of Colorado and the 'state' of the nation." That means state law is just the beginning, not the end.

Here's what Pratt says: First, that Amendment 20 does not create a constitutional right to use marijuana, just the absence of prosecution for its use if everything's in order with the cardholder; second, that possession and use of marijuana are federally illegal; third, that federal pre-empts state law; and fourth, the court is unable to reclassify marijuana.

"Consequently, contracts for the sale of marijuana are void as they are against public policy," Pratt writes. "Accordingly, the contract here is void and unenforceable."

This could call into question the entire framework of Colorado's licensing scheme, but Medical Marijuana Enforcement Division spokeswoman Julie Postlethwait says that technically, a license is only a registration with a state body — not a contract.

• Second, on Aug. 2, a U.S. Tax Court offered the final word that dispensaries absolutely cannot deduct business expenses, even if they run the deductions through a second, federally legal "care-giving" company.

Local criminal defense attorney Clifton Black calls the ruling "a devastating blow."

"Seemingly, the IRS will use this Tax Court ruling to conduct audits of medical marijuana dispensaries throughout the [country]," Black writes in an e-mail. "Audits normally are expensive, time consuming, and exhaustive for an owner of a business that is being audited."

Bud break-ins

On Aug. 6, burglars stung three MMJ centers in quick succession: White Mountain Medicine, Cannabis Therapeutics and Briargate Wellness Center. While police say several items were missing from the first two locations, BWC suffered only a broken front door.

Though the Colorado Springs Police Department often receives criticism from the MMJ industry for response times to similar incidents, spokeswoman Barbara Miller says that each call was responded to within five minutes of notification from dispatch.

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