Daring to go where no municipal government has apparently gone before, the city of Oakland has sued the federal government to block forfeiture proceedings against the giant Harborside Health Center medical marijuana collective and its dispensaries.

The city is relying on a defense used in 1998 when the operators of bingo games in Tennessee were charged with profit-skimming and told to forfeit $515,060.42. The defendants argued that the government knew they were breaking the law for more than five years and that the statute of limitations and passed six months earlier. The U.S. Court of Appeals for the Sixth District agreed with them.

Harborside opened in 2006 and quickly became a thriving business with high visibility. Oakland argues that the statute of limitations on when the government knew or should have known a crime was being committed on its premises ran out last year.

The government believes that the five-year clock restarts every day a new crime is committed at the dispensary and brought its forfeiture action in July. The collective has two dispensaries, one in Oakland and the other in San Jose. Both properties were served with notices.

Oakland also maintains that the federal government had given tacit approval to dispensary operations and is now violating “principles of equitable estoppel,” which basically say that if you act like the law is one thing for a period of time, you can’t turn around one day and claim it’s another thing.

“After 2006 and continuing up to October 2011, the DOJ repeatedly stated that patients, caregivers, and those who complied with state law would be left alone,” the city’s attorneys wrote in their legal filing. “Oakland relied on those statements and the DOJ's policy of non-enforcement of conflicting federal law to support the growth of a local industry that is considered a national model for safe access.”

Harborside, which was featured last year in the Discovery Channel mini-series “Weed Wars,” currently has more than 100,000 customers. The nonprofit employs 100 people and paid $3.5 million in taxes last year, including $1.1 million to Oakland.

Harborside was targeted for its size, not location or any proven illegal behavior beyond its marijuana operations. The IRS also hit Harborside with a $2.5 million tax bill last year, just after “Weed Wars” stopped shooting.

U.S. Attorney Melinda Haag told the New York Times that size matters and the larger the dispensary, “the greater the likelihood that there will be abuse of the state’s medical marijuana laws, and marijuana in the hands of individuals who do not have a demonstrated medical need.”

Possession and sale of marijuana is illegal under federal law. California legalized medical marijuana in 1996 and 17 states have followed suit. The Obama administration explicitly pursued a hands-off policy until October 2011 when U.S. Attorney offices began to crack down in California. They have closed 500 dispensaries so far this year.

–Ken Broder

To Learn More:

Harborside Raid Missed Deadline, City Says (by Bob Egelko, San Francisco Chronicle)

Oakland Sues U.S. to Halt Closure of Marijuana Dispensary (by Laird Harrison, Reuters)

Oakland Sues U.S. to Prevent Closing of Marijuana Dispensary (by Malia Wollan, New York Times)

City of Oakland v. Eric Holder and Melinda Haag (U.S. District Court Northern District of California) (pdf)

United States v. $515,060.42 in U.S. Currency (U.S. Court of Appeals for the Sixth District)