In 1996, voters passed the Compassionate Use Act (CUA) to ensure that seriously ill Californians were able to obtain and use marijuana for medical purposes, and to ensure that patients and caregivers were not going to be criminally prosecuted for using marijuana. The Legislature then enacted the Medical Marijuana Program Act (MMPA) in order to clarify the scope of the CUA, to promote uniform application of that act, and to “enhance the access of patients and caregivers to medical marijuana through collective, cooperative cultivation projects.”
The MMPA provides in part that “qualified patients, persons with valid identification cards, and the designated primary caregivers of qualified patients and persons with identification cards, who associate within the State of California in order to collectively or cooperatively cultivate marijuana for medical purposes, shall not, solely on the basis of that fact be subject to state criminal sanctions.” The MMPA provides a defense to qualified people from criminal prosecution for growing and distributing marijuana as a collective.
The question that has been arising more frequently is what is a collective or cooperative and when does a marijuana collective or cooperative become a retail business that is no longer entitled to this defense?
A California Court of Appeals was recently asked this question in a case involving a collective of 1,600 people, of which six were actively cultivating marijuana and then selling it to the other 1,600. The Court held that the mere number of members did not make this a retail business. In order for this organization to be recognized as a collective entitled to the MMPA defense giving immunity from prosecution turned on whether the organization was truly a nonprofit enterprise operated solely for the benefit of its members.
The court found that factors that can be used in determining whether an entity is nonprofit include, but are not limited to: “testimony from the operators of the enterprise, its formal establishment as a nonprofit organization, the presence or absence of any financial records, the presence or absence of processes by which the enterprise is accountable to its members, the size of the enterprise’s members and the volume of business it conducts.
If an entity does not have fairly complete financial records and is comprised of a large number of members with a high volume of business, then it is more likely that entity will be found to be for profit and will not be eligible for the MMPA defense against marijuana charges.