It’s a case of the trailblazers versus the newcomers.
As the city attempts to crack down on the exploding number of marijuana dispensaries around Los Angeles, a few dozen of the first businesses to set up shop are pushing for increased regulations. That would result in shutting down hundreds of upstart pot shops. In return, the upstarts are threatening litigation to stay in business.
The trailblazers, such as the Farmacy in Westwood and Venice, Cornerstone Research Collective in Eagle Rock and the Natural Way on Pico Boulevard near Miracle Mile, are among the 187 pot shops that had business licenses at the time the city passed a moratorium on new pot shops in September 2007. They have joined neighborhood groups in pressuring the city to close down almost 800 dispensaries that exploited a loophole and opened after the moratorium took effect.
“The dispensary business is out of control,” said Farmacy co-owner JoAnna LaForce. “Fly-by-nighters have come in; they’re trying to make as much money as they can before they get shut down. Now is the time for regulation and standardization.”
But some of the upstart dispensaries examples include the Pico Collective near Miracle Mile, the Rainforest Collective in Mar Vista and Beverly Hills Green Cross in the South Robertson neighborhood are fighting the city’s attempts to close the loophole, which would put a lot of them out of business.
They say they have as much right to operate as the original dispensaries. They may have used a loophole but they followed the rules. Besides, what was supposed to be a temporary moratorium appears headed toward a permanent ban that may retroactively and unfairly kill their shops, they claim.
“I did my due diligence for opening legally and now they want to shut me down,” said Rainforest Collective owner Daniel Halbert. “I invested my life savings in this place.
“I pay sales tax to the city. They can’t just change the rules.”
Halbert and several other dispensary owners are considering filing lawsuits over enforcement of the moratorium; one attorney is trying to see if there’s enough support for a consolidated suit.
“The moratorium is vague and of questionable constitutional merit,” said Stewart Richlin, a Century City attorney representing several L.A. dispensaries.
But the premoratorium dispensaries said that the new operations are taking away their business and poisoning relations with the larger community, threatening the good will they had tried to earn as trailblazers.
Natural Way dispensary owner Matthew Cohen said his patient counts have dropped more than 50 percent over the last four months as several pot shops opened within a mile of his facility on Pico Boulevard just south of the Miracle Mile district.
But, Cohen said, “this is more than a competition issue. We will all lose our businesses if the quality of the people who open up these shops makes us look bad. The backlash from the community will hit every dispensary.”
Street element
Critics said medical marijuana dispensaries in Los Angeles now outnumber Starbucks coffee stores or Subway sandwich shops. And city officials and representatives from neighborhood councils claim many of the newer dispensaries are little more than storefronts that sell street marijuana to healthy-looking young people. Perhaps hundreds of pot shops have not even sought exemption applications to the moratorium and are operating completely outside the law.
“They are setting aside any pretense of legality,” Cohen said.
For example, in the Pico Boulevard district around the Natural Way dispensary, neighborhood council members conducted a survey and found 17 other dispensaries, all of which had opened after the moratorium. Of those, 11 had not properly filed for an exemption to the moratorium and six didn’t even have a business license.
“You can safely take that 800 number of exemption applications and double it to get a true picture of just how many dispensaries there are in this city,” said Scott McNeeley, president of the Pico Neighborhood Council.
If true, that would mean roughly 1,600 pot shops have opened in Los Angeles since the city imposed the moratorium after 187 shops had been established.
Critics say many dispensaries are becoming magnets for crime; they point to some recent burglaries and shootings either at pot shops or near them.
Los Angeles City Councilman Dennis Zine said he was especially concerned after a mid-August shooting at a dispensary on Ventura Boulevard in his West San Fernando Valley district.
“This was meant as a distribution system for marijuana for people with serious illnesses,” said Zine. “They’ve just become a distribution system for people who want to get high. We’re now seeing they are bringing in gang members and criminals.”
All this has unnerved businesses adjacent to many dispensaries, some of which have to contend with unruly pot shop patrons and the odor of burning marijuana wafting into their workplace.
Landlords, in the midst of a brutal downturn in retail, need tenants but are under pressure from neighboring tenants and law enforcement to evict dispensaries. None of four landlords contacted for this article would return calls.
Even some of the trailblazing dispensary owners are becoming concerned about the backlash.
“The extreme growth we’ve been seeing among the dispensaries may be good for patients who should enjoy lower prices,” said Todd Brennan, co-owner of the Venice Beach Care Center, which opened in late 2006, a year before the city moratorium. “But it’s not good for overall neighborhoods and that’s what concerns me.”
“We operate as a dispensary according to the guidelines put forth by Attorney General Jerry Brown,” said Michael Backes, a board member of Cornerstone Research Collective in Eagle Rock, which opened in 2006.
Backes said he supports the city’s attempt to crack down on dispensaries that opened after the moratorium. “With so many dispensaries out there, it’s hard to determine which ones are following the state and city guidelines, and that’s not good for the industry.”
City crackdown
Zine is spearheading the effort to craft a zoning ordinance that would severely limit the number of new dispensaries allowed to open. Also, it would force scores of existing ones to move or shut down.
The ordinance, which is expected to come before the City Council this fall, will set dispensary distance requirements from schools, parks, religious institutions and other sensitive facilities. It will also limit the number of dispensaries that can be in a single block or within certain neighborhoods.
Existing pot shops that don’t comply with the ordinance will be given a certain amount of time to attempt to move before the city forces them to close.
“Right now, with so many retail vacancies in this city, finding another place to operate should not be a problem,” Zine said.
But the pro-dispensary side is concerned about proposed restrictions.
“We don’t want to have too few dispensaries so that it becomes very difficult for patients to access them,” said Dale Clare, executive chancellor of Oaksterdam University, an Oakland-based school with an L.A. branch that trains dispensary operators and other people, such as growers and doctors, in the business of medical marijuana.
Zine said the ordinance may also address another major issue of contention: the proliferation of doctors offering to provide medical marijuana prescription letters to patients.
“In this ordinance, we’re going to go after the doctors who write these medical marijuana prescriptions without valid evidence and, in some cases, operate right in the dispensaries,” he said.
By some estimates, more than 300 doctors specialize in writing these letters in the L.A. area.
An example is Dr. Allan Frankel, a former internal medicine specialist who is now a full-time medical marijuana physician. Frankel, who charges $200 for an initial consultation and $125 for annual renewal letters, said about one-fourth of the patients he sees suffer from glaucoma, cancer or HIV, and another 50 percent have a variety of complaints including anxiety, mood disorders, insomnia or chronic pain.
He acknowledged that it’s clear that some dispensaries are catering to recreational users in addition to medical patients.
“It’s a mockery to have a 17-year-old on a skateboard going to a dispensary,” he said.
Giant loophole
When the moratorium was enacted two years ago, it contained a “hardship exemption” that allowed dispensary operators who had been evicted to find new quarters with special permission from a City Council committee.
But the council delayed scheduling any hearings, and dispensary operators found they could open by filling out a simple form. As a result, 779 hardship exemption applications have been filed, with most of those coming from new operators.
The first hearings were in June and August. Councilman Ed Reyes, chairman of the committee, said the focus was on a list of dispensaries that were the subject of complaints. Twenty-one of them saw the writing on the wall and shut down before the hearings. The committee rejected 48 other applications.
Eighteen of those have been referred to the office of City Attorney Carmen Trutanich for initiation of legal action with the goal of closure, according to Konrad Carter, acting division chief with the Council and Public Services Division in the City Clerk’s Office.
One dispensary that may soon be targeted is in the Pico Boulevard neighborhood south of the Miracle Mile district. Pico Collective’s exemption application is scheduled for a hearing this week. Its owners plan to fight any attempts to close them down.
“The city is trying to stifle a business,” said Natalia Plyam, co-owner of the Pico Collective, which she started two months ago with her husband, Yuri.
“There is absolutely no reason for them to do what they are doing. I don’t believe they have the authority to shut me down. If they do, I’m going to sue the crap out of them. We’re business people, not some schmucks who just came from the street.”
According to a 2008 article in the Buffalo News, the Plyams are involved in litigation over an L.A. housing development. Niagara Falls developer Frank Parlato alleges they stole construction money to buy personal real estate, including a mansion in Beverly Hills and two vacation homes in Lake Arrowhead. The Plyams allege Parlato ran the project into the ground.
Natalia Plyam declined to comment on pending litigation.
Slow start
Medical marijuana was legalized by California voters with the passage of Proposition 215 in 1996, with the intent of allowing people with serious medical conditions including glaucoma, AIDS or advanced cancer to grow and use marijuana.
Subsequent legislation, which took effect in 2005, established an identification card system for patients. That led to the creation of dispensaries as a supply system and a network of doctors who refer patients to them. It’s become obvious that some doctors are liberal with their referrals and that many patients are going to dispensaries for recreational rather than medical treatment.
Meanwhile, marijuana remains illegal under federal law. The Drug Enforcement Agency has staged raids on dispensaries, sometimes as a deterrent, sometimes as part of criminal cases.
The number of shops boomed in Los Angeles due to the lax enforcement and no special fees for the shops. Other cities successfully limited their number. Oakland, a city of 400,000, charges a minimum of $10,000 in fees for each dispensary; only four could afford to remain in business in warehouse-type facilities, centralizing the marketplace.
San Francisco, which had 40 dispensaries in 2005, required an annual $7,000 permit fee as of late 2005. That culled the number of dispensaries down to about two dozen, where it remains. And in West Hollywood, the City Council passed an ordinance in mid-2005 authorizing only seven dispensaries at any point in time, with strict operating hours.
L.A. officials are now ready to step up their actions.
Councilman Reyes said there will be more referrals to the City Attorney’s Office if the zoning ordinance is adopted.
“The ordinance is going to set the baseline for when and how medical marijuana can be dispensed,” said Reyes. “That will hopefully let everyone know where they stand.”
But even then, threatened legal action from the targeted dispensaries could throw up another roadblock, one that could be in place for many months, if not years.
The prospect of waiting another year or more for the city to winnow the hundreds of dispensaries that opened after the moratorium does not sit well with critics.
“It’s been like the Wild West, and that’s definitely not good for business,” Pico Neighborhood Council President McNeeley said.
