Saturday, September 3, 2016

City Palm Springs v Luna Crest Inc....Conflict, Obstacle Preemption

Pillsbury Winthrop Shaw Pittman LLP - Carrie L. Bonnington and Derek M. Mayor


...[T]he tension between federal prohibition and state legalization of marijuana, medical and recreational, is perhaps most paramount with regard to issues involving banking, federal taxes, and employment. For all three subject matters, the general consensus is federal prohibition trumps state legalization. 

With regard to banking, due to federal banking laws, marijuana money transfers cannot be effectuated through credit card companies or debit networks, and revenues obtained by marijuana enterprises cannot be stored in FDIC-insured banks. 
With regard to taxes, among other things, marijuana businesses cannot deduct business expenses for federal tax purposes.10 And, with regard to employment, for national employers, especially those with government contracts and zero-tolerance drug policies, it appears that employers cannot be punished for enforcing their drug policies even if they prohibit state-sanctioned marijuana use.11

Furthermore, in a recent decision, City of Palm Springs v. Luna Crest Inc., 12 a California Court of Appeal added another piece of precedent establishing that California’s medical marijuana laws do not conflict or obstruct federal law in violation of the Supremacy Clause of the U.S. Constitution. In the Luna Crest case, Luna Crest Inc. (Luna) opened a medical marijuana dispensary within the City limits of Palm Springs (the City).
The Palm Springs Municipal Code requires, among other things, a permit to operate a marijuana dispensary within the City, which Luna did not obtain. The City subsequently brought suit seeking a preliminary injunction against Luna’s continued operation of its unpermitted dispensary. In response, Luna filed a cross-complaint and a motion seeking a preliminary injunction against the City’s continued enforcement of its permitting requirement. In its motion, Luna contended that the CSA preempts the City’s permit requirement. The trial court denied the motion, and Luna appealed.
The California Court of Appeal affirmed the trial court’s order, rejecting Luna’s preemption argument.
In relevant part, the Court held that the City’s laws did not conflict or obstruct the CSA. With respect to the issue of conflict preemption, the Court concluded that the City’s permitting requirements do not require anything that the CSA forbids—the City is merely exercising its regulatory, licensing, and zoning authority, regarding medical marijuana dispensaries.13 
With respect to obstacle preemption, in relevant part, the Court ruled that a strong local regulatory regime governing medical marijuana related conduct is actually consistent with the purpose of the CSA, which, among other purposes, is meant to combat recreational drug abuse and drug trafficking.14
*all emphasis added by blog

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