MEDICAL MARIJUANA COLLECTIVES' CLOSURE APPEALS DENIED

On February 11, retired Orange County Judge Jim Smith, who was
appointed to hear the appeals of two of the three medical marijuana
dispensaries red-tagged and closed on January 24 for
municipal/building code violations, announced his plan to rule
against both Holistic Health and Beach Cities Collective.

The decision was reportedly based on Smith's focus on whether the
dispensaries were guilty of actual code violations, rather than the
many other issues surrounding the red-tag orders.

Smith, who presided over the six-hour hearing on February 4, was
approved to hear the case in a special meeting of the City Council
held earlier the same day. The council had previously agreed that the
appeals should be heard by an impartial third party in order to avoid
the appearance of bias against the dispensaries.

Attorneys for Holistic Health and Beach Cities Collective said in the
hearing that the city violated their clients' right to due process by
not inspecting the shops before red-tagging and closing them down and
alleged that the city's use of the municipal and building code was a
tactic used to unfairly target medical marijuana collectives. They
also argued that the city had been given opportunity to inspect their
premises before the closures.

Safe Harbor Collective withdrew their appeal and did not take part in
the hearing.

City officials argued that the closures were not related to the
marijuana issue or the now 18-month legal volley between the city and
the collectives and that in order to be inspected businesses must
have a certificate of occupancy. Beach Cities was operating without
one and Holistic Health's was revoked for incorrectly listing the
type of business.

The city asked Smith to allow the collectives to reopen if they file
the required certificate of occupancy and building permit forms.
Because city zoning codes do not specifically mention collectives,
the sale of marijuana is not a permitted business. A fact that City
Attorney Patrick Munoz said would be taken off the table for now
since the issue is currently in process within the court system.

At issue, besides incorrect and absent certificates of occupancy, the
city cited un-permitted building improvements-such as electrical
wiring and doors with automatic locks-that pose serious threats to
life and safety, as reasons for the closures.

On February 15, an Orange County Court judge is set to hear a
nuisance case filed earlier by the city against the dispensaries.

Because building permit applications can take as long as a month to
pass city review, a judgment in favor of the city on February 15 may
make the city's offer to temporarily allow the dispensaries to open, moot.

Both dispensaries have resolved to move forward with their own
separate lawsuits (protesting the closures) filed in county court,
despite Smith's ruling to deny their appeals to the city.

At the January 24 council meeting-the same day the dispensaries were
red-tagged-Munoz also announced the city was dropping the battle to
obtain the collectives' business records originally subpoenaed in
order for the city to determine whether the dispensaries were
operating according to California State law saying they're now
unnecessary and only complicate the issue.