AWFUL ADVICE – Last week the Office of the California Attorney General published a 16-page report entitled “Guidelines for the Security and Non-Diversion of Cannabis Grown for Medical Use.”
The apparent purpose of this publication is laudable. The first 12 pages are useful, although we noted the author does not appear to have read then-Attorney General Brown’s 2008 Memorandum on cooperatives and collectives. The author also appears to have overlooked the “safe and affordable” clause in Proposition 215. It is perhaps unfair to criticize the author of these guidelines for overlooking the “safe and affordable” clause since most of the population of California appears to be unaware of this clause.
The publication of Part IV of these guidelines – the last four pages – is an embarrassment for the Office of the Attorney General. Part IV addresses collectives and cooperatives. This portion of the guidelines should be immediately withdrawn. The Office of the Attorney General should immediately withdraw these pages with an explanation that this portion of the document was a draft that was not intended for publication.
We would have directly contacted the author of the guidelines, but the guidelines have no attribution. We did not attempt to contact Attorney General Xavier Becerra as we assumed, he would not accept our call.
The guidelines would have been fine if Part IV had not been included. Part IV is entitled, “GUIDELINES REGARDING COLLECTIVES AND COOPERATIVES.” The author is neither a student of history nor a student of cooperatives.
One example will suffice. The first five sentences of Part IV.A.1. of the guidelines state,
“1. Statutory Cooperatives: Cannabis cooperatives are subject to the General Corporation Law. (Bus. & Prof. Code, § 26222.5.) A cooperative must file articles of incorporation with the state and conduct its business for the mutual benefit of its members. (Corp. Code, §§ 12201, 12300.) No business may call itself a “cooperative” (or “co-op”) unless it is properly organized and registered as such a corporation under the Corporations or Food and Agricultural Code. (Corp. Code, § 12311, sub. (b); Food & Agr. Code, § 54036.) No business may call itself a “cannabis cooperative” unless it is in compliance with the MAUCRSA. (Bus. & Prof. Code, § 26222.2.) Cooperative corporations are ‘democratically controlled and are not organized to make a profit for themselves, as such, or for their members, as such, but primarily for their members as patrons.’ (Corp. Code, § 12201.)”
The problem with the preceding paragraph is that the cooperatives referenced in the first and the fourth sentences are Cannabis Cooperative Associations (“CCAs”) organized pursuant to Title 10, Chapter 22 of the Business and Professions Code, and that the cooperatives referenced in the second, third and fifth sentences are cooperatives organized pursuant to other provisions of California law. It is our impression the provisions of California law that are cited in the second, third and fifth sentences do not even apply to CCAs organized pursuant to Title 10, Chapter 22.
Proposition 64 preserved the rights granted to Californians under Proposition 215. Old-fashioned Proposition 215 medical collectives and cooperatives continue to be entitled to exist and operate in California. In addition to Proposition 215 cooperatives, two other groups of cooperatives are entitled under the California law to engage in the distribution of medical cannabis in the cannabis industry.
One group consists of CCAs organized pursuant to Title 10, Chapter 22. The entities in this group are a special form of corporation. The other group consists of all entities that are not organized pursuant to Title 10, Chapter 22, and that engage in commercial cannabis activity in California as cooperatives. The entities in this second group can be one of several types of corporation. The entities in this second group are not necessarily corporations.
An entity from either of the groups described in the preceding paragraph is entitled to engage in commercial cannabis activity as a cooperative provided the entity is properly licensed. Every entity in either group is subject to the Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”). Each entity in either group is required to be licensed under MAUCRSA for each commercial cannabis activity in which the entity engages.
We have pointed out on multiple occasions the problems that have been created in the regulation of California’s cannabis industry because the various regulatory agencies have not followed a carefully coordinated and cohesive agenda. Now we have the Office of the Attorney General issuing guidelines to California’s cannabis industry regarding laws that the Office does not understand. Perhaps Russia has hacked the Office of the California Attorney General?