Pot Shop Calls It Quits in Lawsuit with City Hall

In its ongoing legal battle with Green Well medical marijuana dispensary — formerly located at 500 North Milpas Street — Santa Barbara City Hall appears to have dodged what could have been a damaging bullet. Several weeks ago, dispensary owners agreed to call it quits in exchange for $75,000 to help defray legal expenses accrued while trying to fight City Hall. The terms of the agreement were surprising given that Green Well owners spent nearly $300,000 in legal fees and initially appeared to have an ironclad case.

The Green Well opened for business in January 2010 after reportedly spending $400,000 and nine months securing all the necessary city permits to legally open shop. In addition, Green Well’s owners at the time — James Lee and Nate Reinke — bent over backward to ingratiate themselves with the community, leading cleanup drives and donating to the neighborhood clinics. But in response to growing opposition to storefront marijuana dispensaries, the City Council voted to change the rules of the game and, in so doing, effectively put Green Well out of business. When Green Well was first approved, city regulations required dispensaries to be 500 feet from the nearest school. The dispensary, located 532 feet from Santa Barbara Junior High, complied. But the new language required a separation of at least 600 feet.

Initially, City Hall offered the owners — who have since parted ways — a 180-day grace period, but in the face of intense skepticism by the judge reviewing the case, expanded that to a four-year phaseout period. Whether that would be sufficient to inoculate City Hall from legal attack became moot last May when officials with the Drug Enforcement Agency and the U.S. Justice Department called a meeting with property owners renting space to Santa Barbara’s dispensaries and threatened them with legal action if they did not evict their tenants. To show they were serious, federal officials initiated legal actions to seize the property of three dispensary landlords. Law enforcement officials refer to this event as “The Great Shutdown,” and almost overnight, Santa Barbara’s once flourishing dispensary scene disappeared.

City Attorney Steve Wiley argued the federal government, not City Hall, was responsible for whatever financial losses Green Well suffered. He also argued that Green Well did not operate in accordance with California’s notoriously vague rules and regulations governing such dispensaries. The dispensaries, according to Wiley and a number of court rulings, must provide a modicum of medical care and guidance and cannot simply be retail moneymaking operations. Storefront dispensaries could meet the requirements of state law, he said, if they functioned similarly to a doctor’s office. Wiley said he was prepared to demonstrate that Green Well operated simply as a ka-ching machine with thousands of customers.

Reinke, however, still feels cheated by the whole experience. “The city did everything they are capable of to drag this case out and bleed us to death,” he said in an email Wednesday afternoon. “It worked. Without any source of revenue the Cooperative was unable to pay the legal team. … We were facing the chance of having to either release the names of the cultivators or my attorney being sanctioned tens of thousands of dollars for redacting the names from the bank records. Neither if these was worth risking so we settled for pennies on the dollar.”

As a matter of law, the City of Santa Barbara’s medical marijuana ordinance still allows for up to three dispensaries within city limits. As a practical matter, many in the medical marijuana business say they’ve been waiting for Wiley to retire at the end of the year before exploring their options. The city attorney, they contend, has waged a legal campaign to put them out of business. Wiley has shrugged off such suggestions, insisting that the federal government — not City Hall — is the real obstacle to any resurgent dispensary action.

In the meantime, the medical marijuana business has hardly disappeared. As dispensaries shut their doors, home-delivery services have popped up to take their place. Some are operated by former dispensaries; many are not. There are no solid statistics, but anecdotally, there could be about a dozen serving the South Coast. Some that specialize in precise formulations of edible pot deliver from as far away as San Diego.

While such services are considered illegal, for the most part they don’t show up on law enforcement’s radar screen. Santa Barbara police report no arrests or incidents involving medical marijuana deliveries, though spokesperson Sergeant Riley Harwood suggested those in the trade are at risk of being robbed. “It happens to people delivering pizza,” he said, “and these people are carrying something considerably more valuable.” Sheriff’s Office deputies arrested one delivery driver last month in the Santa Ynez Valley, but it appears the suspect was pulled over in a routine traffic stop. The California Highway Patrol, however, is the lead agency in a multi-jurisdictional law enforcement effort targeting the pot trade known as Saber Net. At least one suspected medical marijuana delivery service has been on the receiving end of Saber Net raids, but the take was too small for any charges to be filed.

Whether more or less marijuana is being sold and smoked throughout Santa Barbara since the dispensaries have closed remains anyone’s guess. Anecdotal reports suggest that prices, at least, have dropped. What impact all this has had on Santa Barbara’s crime profile defies quantification, said Sgt. Harwood. “I think it comes down to a matter of feelings, and we can’t keep statistics on feelings,” he said. When the dispensary trade was flourishing, he said, many residents reported “feeling” unsettled by “some of the less than savory characters” making up the walk-in trade. “Whether it was real or imagined,” he said, “the fear associated with these enterprises is no longer there.”