SUIT TARGETS RULES FOR MEDICAL-MARIJUANA DISPENSARIES

As if medical marijuana wasn't being litigated enough in Arizona, yet
another lawsuit takes aim at the rules governing dispensaries.

The special action, among six suits involving the state's fledgling
program, claims the rules give unfair advantage to local businesses
in violation of federal law and the state and federal constitutions.

Gerald Gaines, CEO of the for-profit Compassion First AZ, had hoped
to oversee a string of dispensaries operated by "affiliate" managers
who would apply for dispensary permits. Some of those managers,
however, fail to meet the criteria because they haven't been Arizona
residents for three years, haven't filed three years worth of state
income taxes and, in one case, filed personal bankruptcy more than 25
years ago.

Among other things, the rules discriminate against non-residents and
new residents, benefit current property owners and violate federal
bankruptcy laws by holding past financial problems over someone's
head indefinitely, according to the suit, filed last month in
Maricopa County Superior Court.

"They're a mess," Gaines said of the rules. "It's hard to believe
that someone was making a legitimate effort to write rules that would
make the system work."

State health officials said they could not comment on pending
litigation, but the state Attorney General's Office has moved to
dismiss the case or at least put it on hold pending outcome of a
federal lawsuit the state filed in May. Otherwise, attorneys said,
judges may become buried in marijuana lawsuits.

"There is limitless potential for filings in state courts from other
dispensary applications who have been or will be denied their
applications," assistant attorney general Lori Davis wrote. "This
could create a further deluge of complaints and special actions
inundating the courts with countless cases involving the same subject matter."

The dispensary permit process, set to begin June 1, was put on hold
when Gov. Jan Brewer filed the first lawsuit, this one in federal
court, asking the court to decide whether compliance with Arizona's
voter-approved medical-pot law shields state employees, patients,
dispensary owners and others from federal prosecution.

The delay has spawned five more lawsuits, including Gaines' filing
and three others challenging the state's failure to accept dispensary
applications, as the voter-approved law requires.

The sixth and most recent legal action was filed Aug. 4 by Attorney
General Tom Horne to quash "compassion clubs," donation-based
hangouts where members with state-issued medical-marijuana IDs can
get pot that's been donated by other qualified patients.

Proposition 203, approved by voters in November, allows for legal
action in Superior Court if the state fails to implement the law. But
the possession, sale and use of marijuana remain illegal under federal law.

Potential dispensary owners argue that the federal Controlled
Substances Act allows flexibility for states to adopt their own drug
laws, and three appellate cases in California back that argument.
Arizona is among 16 states with medical-marijuana laws.

Gaines' lawsuit is the only one so far to challenge the state's
medical-marijuana rules.

Many of the same people who pushed the ballot measure worked closely
with the state Department of Health Services on the rules. Joe Yuhas
of the Arizona Medical Marijuana Association said his group advocated
several requirements that Gaines and others take issue with,
including the residency requirement for primary investors and
officers. Colorado also has a residency requirement for dispensary
owners, officers and employees.

Yuhas said it's important for the industry, particularly in the early
going, to "demonstrate that it has ties to the community - that they
are not some distant investor."

"I understand how that can conflict with the business interests of
others. But so be it," he said.

But Gaines said his group participated in the rule-making process, too.