POT FIGHT: $100K

Mounting city legal costs incurred to shut down the city's first and
only medical marijuana dispensary exceeded the $100,000 mark in May.
The figure has given some City Council members who initially favored
the court fight pause, particularly in light of an upcoming state
ballot measure that could legalize marijuana.

"You've got to have strategy," Council-man Bob Dillon said. "You
can't be spending money on litigation if the voters turn you on your ear."

The council's hesitation could become more pronounced if Superior
Court Judge Kevin McKenney denies the city's pending request for a
"summary judgment" against the dispensary. That ruling, expected any
day, would indicate there are no legal facts in dispute and that a
trial is unnecessary in order for the city to shut MediLeaf's doors.
Judge McKenney heard arguments from both sides on July 1 and has 90
days to issue a ruling.

If no summary judgment is made, Dillon said it may be wise to wait
for the state's voters to decide the marijuana issue in November. The
marijuana legalization ballot initiative, "Tax, Regulate and Control
Cannabis Act of 2010" would allow localities to tax and regulate
marijuana for recreational purposes as well as for medical use.

City Administrator Tom Haglund said the city has spent $102,861
through May on the litigation against MediLeaf, now in its eighth month.

MediLeaf opened without a business license at 1321 First St. near
Togo's on Nov. 9 after the City Council decided not to enact an
ordinance to regulate such operations. The cannabis club sells more
than 20 varieties of pot. It's directors claim more than 4,000 members.

MediLeaf directors Batzi Kuburovich and Neil Forrest have maintained
that the dispensary uses a not-for-profit model and therefore does
not require a business license. City officials say that is not the
case, claiming that dispensary directors knowingly defied city zoning laws.

Andy Faber of the firm Berliner-Cohen, the attorney who is
representing the city of Gilroy in the MediLeaf suit, declined to
comment Monday on the potential impacts of the state proposition on
the city's suit.

Even if the city succeeds in obtaining a summary judgment, that does
not mean it will automatically obtain a court order to close the
dispensary, said City Councilman Perry Woodward, who is an attorney.

The judge could issue a couple of different types of orders - one
that would automatically shut down the dispensary even if it appeals
the case and another that could allow it to stay open while appealing.

If MediLeaf appealed, Woodward speculated that the case could be in
court for as long as two years.

Woodward, along with council members Craig Gartman and Peter
Arellano, supported an ordinance that would have regulated medical
marijuana dispensaries in Gilroy and has opposed the city's suit to
close it down.

He said he would prefer to let other cities spend money on
precedent-setting cases in opposition to dispensaries.

"I think that we don't want to be on the bleeding edge on the fight
against them," he said.

Councilman Dion Bracco said he thinks the city definitely should
continue with its lawsuit if a summary judgment is granted and
MediLeaf appeals the case.

On the other hand, he speculated that the council would vote on
whether to pursue a trial if McKenney decides in MediLeaf's favor.

If McKenney denies the city's request for a court order and voters
approve a state ballot initiative that would allow medical marijuana
use, it may be a moot point anyway, Dillon said.

Mayor Al Pinheiro said he would continue to support the lawsuit no
matter what, as he believes the city cannot allow businesses to defy its laws.

A trial date already has been set for Oct. 12 if the judge denies the motion.

Faber said the city wants to get a trial date as soon as possible in
case the judge does not issue a court order.

"It's the backup plan but it's the normal course of events," Faber said.

Even though Dillon this week questioned the idea of pursuing a trial
right away if the motion for summary judgment fails, he still made it
clear that he wants to see MediLeaf shut down.

"The city has to enforce its zoning laws or else it doesn't have any," he said.