A California appellate court recently held that neither the Compassionate Use Act (CUA) nor the Medical Marijuana Program Act (MMPA) allows the sale of marijuana for profit and provided clarification on how to determine whether a collective or cooperative is operating properly. The court ruling offers counties and law enforcement in California direction that “[a]ny money received must be no more than a cooperative or collective member’s proportionate share of the actual cost of cultivating and distributing the marijuana” and “no individual may benefit financially from the cultivation or distribution of marijuana.”

California cities and counties continue to prosecute businesses that claim immunity under the CUA and MMPA. This ruling provides some direction in identifying whether a dispensary is truly operating as a non-profit as required by the CUA and MMPA. The ruling also clarifies that it is the defendant’s burden to prove that the dispensary is actually operating as a non-profit.

In People v. Sandercock, a San Luis Obispo County task force conducted several undercover buys at a variety of marijuana dispensaries and marijuana delivery services. Each business verified the officer’s medical marijuana card and identification. Each business charged the officer approximately $50 for 1/8 ounce of marijuana. Three defendants were charged with selling marijuana. Prior to trial, the court ruled that it would give a jury instruction that payment for marijuana “in itself” constituted “associating for the purpose of collective cultivation” under the CUA and MMPA. The prosecution could not proceed because of the instruction and appealed.

The Court of Appeal in Sandercock found that the instruction failed to inform the jury that the CUA and MMPA banned the sale of marijuana for profit, even between members of a collective who each have a physician’s prescription. The court stated that when a member pays for marijuana, as opposed to providing services in exchange for marijuana or receiving marijuana for free, “the defendant must show the member paid no more than the member’s proportionate share of the actual cost of cultivating and distributing the marijuana, and that there was no profit for the collective, cooperative or any individual.”