Pubdate: Thu, 10 May 2012
Source: Arizona Republic (Phoenix, AZ)
Copyright: 2012 The Arizona Republic
Author: Yvonne Wingett Sanchez


Two Arizonans lent a medical-marijuana company in Colorado $500,000, 
but the company didn't pay them back.

So, what did they do? They sued, of course.

But instead of forcing the company to pay back the loan, a Maricopa 
County Superior Court judge told the two Valley business partners 
they were out of luck as far as he was concerned.

Marijuana is illegal under federal law. And the judge said he can't 
enforce the loan agreement because the money was for an illegal 
purpose under federal law. He dismissed the suit.

Judge Michael McVey's ruling could have larger implications for 
contractual relationships tied to medical-marijuana businesses, one 
attorney said.

"This is just one contractual relationship," said Randy Nussbaum, 
managing partner of a law firm that represented the plaintiffs. "The 
macro view of this is, if it's true that anyone who has a contractual 
relationship with anyone dispensing medical marijuana and that 
contract is not enforceable, how does anyone enforce a legitimate 
contract in this business?"

Arizona, Colorado and 14 other states have medical-marijuana laws 
that conflict with federal law, which outlaws the cultivation, sale 
or use of marijuana. Mounting federal pressure in California, 
Washington and other states has led to dispensary raids and 
crackdowns on landlords who lease property to dispensaries.

Recently, several U.S. attorneys have sent letters to local officials 
reiterating that federal authorities have not changed their stance on 
medical marijuana.

Court records show Michele Rene Hammer and Mark Haile in August 2010 
each agreed to lend Today's Health Care II $250,000 to finance a 
"retail medical-marijuana sales and growth center."

When Today's Health Care II did not repay the loan or the default 
interest rate and fees, Hammer and Haile sued. William Kozub, who 
represented Today's Health Care II, did not return a call for comment.

It is unknown if the plaintiffs will appeal.

McVey, in his April 17 judgment of dismissal, wrote that he 
recognizes his ruling was harsh but that federal law pre-empts state 
law and, therefore, the loan agreement was not enforceable because 
the money was for an illegal purpose because the U.S. still 
categorizes marijuana as a Schedule 1 controlled substance.

McVey also wrote that under federal law, it is unlawful to aid and 
abet the commission of a federal crime.

He wrote that dispensation of marijuana, even for medicinal purposes, 
remains illegal.

"The explicitly stated purpose of these loan agreements was to 
finance the sale and distribution of marijuana," McVey wrote. "This 
was in clear violation of the laws of the United States. As such, 
this contract is void and unenforceable."

Phoenix attorney Richard Keyt, who runs medical-marijuana blog, wrote that if McVey's decision is upheld, it could have 
implications for landlords who lease to dispensaries because the 
lease may not be enforceable, and for dispensary investors, 
dispensary medical directors, and employees or independent 
contractors who may have disputes.

Keyt wrote that the ruling could mean "that people who enter into 
contracts that relate in any way to Arizona medical marijuana will 
have to hope the other side to the contract satisfies his/her/its 
obligations because it may not be possible to sue for breach of 
contract and get a judgment against the party who defaults."
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