Marijuana Smoke in MediLeaf Legal Fight

More than two years after a Gilroy medical marijuana dispensary was shut down for operating without a city business license, a state appellate court has ruled that city officials were in the right by declaring it a “public nuisance” despite prolonged objections by the club’s operators.

In a 36-page opinion filed Tuesday by California’s Sixth District Court of Appeals, Associate Justice Wendy Clark Duffy wrote that the City of Gilroy acted within its power and broke no laws when it ordered MediLeaf to close its doors in August 2010.

City officials are confident the decision is the final nail in the coffin for MediLeaf’s fight, with City Attorney Andrew Faber calling the ruling “a complete judicial victory” in an email sent to Gilroy City Council members Tuesday.

Berliner Cohen, the city’s hired legal firm, is still compiling the final financial tally for Gilroy’s battle to close the dispensary, City Finance Director Christina Turner said. The city spent $202,500 in legal fees as of July, according to attorney bills obtained by the Dispatch, though City Councilman and attorney Perry Woodward predicts the total could approach $300,000 when all is counted.

Though Council members weren’t smiling over the price tag, there were still cheers for the city’s apparent victory.

“Of course, I’m happy. I never thought otherwise to be honest with you. From the beginning, I thought we were well within the law,” Councilwoman Cat Tucker said. “It’s a shame that it would cost so much money and take so long, but we did what we had to do and what the majority of the community wanted us to do.”

MediLeaf reps still have 30 days to submit their case to the state Supreme Court.

“Thirty days before I get a full sigh of relief,” Tucker said.

“I’m very happy that the courts agreed,” Mayor Al Pinheiro wrote in an e-mail Thursday, “and yet it is sad that ultimately the city of Gilroy had to spend so much money in protecting the right to decide what is best for Gilroy.

MediLeaf’s defendants – led by founder Goyko “Batzi” Kuburovich – asserted “various claims of error,” Justice Duffy wrote, including arguments that the dispensary should be allowed under the city’s zoning ordinance, and that prohibiting their operation “was unconstitutional.”

The court ruled their claims were “without merit.”

“We reject appellants’ challenges and conclude that the court properly found that Gilroy was entitled to judgment on its public nuisance claim,” Duffy wrote. “Accordingly, we will affirm the judgment.”

Woodward said the court made the correct decision, but maintained his gripe with the city’s battle against the dispensary has always focused on its climbing legal bills. Woodward – a partner at San Jose law firm Terra Law LLP, said he hasn’t seen the city’s final bill but predicted the $202,500 figure would be “far less” than what it would end up paying. He said the legal battle’s timing couldn’t have been worse.

“When we made this decision, we were laying off firefighters, laying off police officers,” Woodward said. “And to me, it’s just not money well spent.”

Woodward argues the city probably would have been better off allowing the dispensary to operate, though under strict guidelines.

“I would have liked to have seen what was being discussed at the time: I would have preferred to see the city adopt an ordinance that would have strictly regulated the operation, that would have limited the operations to one or two (locations),” Woodward said. “The next thing I had hoped to do was to impose a tax so we could have an additional source of revenue.”

He added, “It seems that the opposition to it was just a philosophical opposition to medical marijuana. So I’d like to get the money back.”

Woodward laughed that a refund was out of the question. And he said Gilroy’s battle against marijuana was far from finished.

“No, of course it’s not over. The issue of medical marijuana is going to go on for all of our lives,” he said. “The younger generation doesn’t see it in the same terms.”

Gilroy isn’t the only spot keeping a close on the MediLeaf saga. Woodward and City Administrator Tom Haglund have also been contacted by the Los Angeles Times for an article examining California cities’ battles with recent marijuana issues, the Dispatch has learned.

While no other marijuana dispensaries exist in Gilroy, Woodward predicted the drug will be fully legalized within the next 10 years, which would make Gilroy’s fight against MediLeaf seem ancient.

“We’re going to look back on this on the same way we look back on prohibition in my view,” he said.

Woodward said the MediLeaf case had some factors that “could be attractive” to the state Supreme Court, but agreed the legal debate was probably dead.

“The supreme court takes very few cases. Any case going to the supreme court is an extreme long shot,” he said.

MediLeaf opened Nov. 9, 2009 without a business license at 1321 First St. because they were operating as a nonprofit, the shop’s owners argued.

Superior Court Judge Kevin Murphy turned down the city’s request for a preliminary injunction Dec. 15, 2009 that would have shut down MediLeaf pending a trial, partly because of accusations that the city had violated the Brown Act during a closed session discussion Nov. 16.

The Council voted 4-3 in open sessions Dec. 30 to approve litigation. Mayor Al Pinheiro and Council members Cat Tucker, Dion Bracco and Bob Dillon voted yes in favor of the resolution. Woodward, along with Councilmen Peter Arellano and Craig Gartman voted against it.

MediLeaf was forced to close Aug. 9, 2010 after Superior Court Judge Kevin McKenney issued an eight-page order on July 20 upholding the city’s claim that MediLeaf was operating illegally following a Gilroy lawsuit.

Attorneys for MediLeaf filed a notice to appeal the prohibitory injunction the day after McKenney’s Santa Clara County court decision and requested the dispensary be allowed to operate during the appeals process. McKenney denied MediLeaf’s request on Sept. 13, 2010.

The dispensary maintains it used a not-for-profit model and therefore did not require a business license.

On Dec. 9, 2010, dozens of undercover law enforcement officers from across Santa Clara County raided eight homes and MediLeaf offices in Gilroy, Morgan Hill and San Jose as part of an eight-month investigation of illegal sales of marijuana and money laundering into the medicinal pot club.

The MediLeaf search warrant obtained by the Dispatch names the six people who law enforcement refused to release at the time of the warrant: founder Goyoko “Batzi” Kuburovich, 50, Patricia Kuburovich, 46, Kristel Kuburovich, 21, Neil Forrest, 58, Bruce Ziegelman, 53, and Kevin Keifer, 54.

Charges have not been filed against MediLeaf’s proprieters as of Thursday, said Lisa McCrary, spokeswoman for the Santa Clara County District Attorney’s Office.

Calls to “Batzi” Kuburovich and Forrest on Thursday were not returned as of press time.

Councilman Dion Bracco, who along with Councilman Woodward is running for the city’s mayoral seat in 2012, called Tuesday’s court decision “good news,” and said he doesn’t think MediLeaf will have a chance to continue its fight.

“According to our legal counsel, they don’t believe the high court would even listen to it,” Bracco said. “They’ve lost every step of the way. Who would believe they would finally win something?”

Bracco also called the city’s hefty legal bills “the cost of doing business.”

“A city can operate as it sees fit. They can’t just come in and do what they feel like and get away with it,” he said. “The way it’s set up, they have nothing to lose by filing these frivolous lawsuits. We have to defend our city. Otherwise, people can do whatever they feel like and get away with it.”

He added, “If you’re going to run your city according to price sheet or make decisions on how much it costs someone to fight your decisions, I don’t know what type of city you’d be living in.”

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Lorillard Recalls Certain Newport Non-Menthol Packs

Lorillard Inc., the third largest manufacturer of cigarettes in the United States, said that it voluntarily implemented a precautionary recall of certain Newport Non-menthol cigarettes. The company initiated the recall “out of an abundance of caution” following its discovery that some Newport Non-Menthol cigarettes manufactured June 29 and 30, 2011, could contain small pieces of plastic.

The company sought and received guidance from the U.S. Food & Drug Administration (FDA) upon discovering the foreign substance.

No plastic has been found in any of the cigarettes. If burned, the plastic may create discomfort or irritation of the respiratory tract. The recall is limited to products distributed with the following code numbers, which are located on the bottom of the pack:
Newport Non-Menthol Box 80s: 1-O-29-750, 1-O-30-750.
Newport Non-Menthol Box 100s: 1-O-29-440, 1-O-30-440.
No other Lorillard products are affected, including Newport Menthol and other brands, said the company.

A letter provided to CSP Daily News that Lorillard sent to all direct-buying customers on July 19 said, “We are pleased to inform you that all involved Newport Non-Menthol Box 80s and Newport Non-Menthol Box 100s manufactured on 6/29/2011 or 6/30/2011 located in Direct Account locations have now been identified and segregated. As such, all Direct Account customers may resume retail shipments of all other on-hand inventories of Newport Non-Menthol products that were not segregated and discussed with you.”

A letter sent to all retail customers said, “All public distributing warehouses and our direct buying customers have already segregated this product and therefore, any future shipments you
receive have no issue. We are, however, now asking for your assistance in identifying any involved Newport Non-Menthol product that may have reached your retail outlet.”

The company added, “Should you identify any Newport Non-Menthol product in your retail outlet with the involved lot codes please hold them separately from your other Newport Non-Menthol products and arrange to have them returned to your wholesale supplier. We have authorized your wholesale supplier to accept returns of Newport Non-Menthol with the above lot codes. Also, if any of your customers have purchased any Newport Non-Menthol product with the above lot codes and returned them to you please provide them with a full refund of the purchase price and return the product to your wholesale supplier.”

Greensboro, N.C.-based Lorillard, through its Lorillard Tobacco Co. subsidiary, is the third largest manufacturer of cigarettes in the United States. Founded in 1760, it is the oldest continuously operating U.S. tobacco company. Lorillard’s flagship menthol-flavored premium cigarette brand is the top-selling menthol and second largest selling cigarette in the United States. In addition to Newport, the Lorillard product line has four additional brand families marketed under the Kent, True, Maverick and Old Gold brand names. These five brands include 43 different product offerings which vary in price, taste, flavor, length and packaging.

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Danville company proposes new use for tobacco

If a new company at Dan River Business Development Center has its way, that will happen — but the product will be used to create biofuels instead of cigarettes.
Peter Majeranowski, a founder and managing director of Tyton BioSciences, said years of development have gone into the product, which will be genetically modified to produce “both ethanol and biodiesel at yields that far surpass the traditional crops of corn and soy.”
And, because corn and soy are also food crops, using tobacco to create the same products can alleviate the complaints that food prices are rising because of demand for crops as fuel, Majeranowski said.
Smoking-grade tobacco was much more difficult to grow than the crop his company is developing, Majeranowski said.
Farmers will be able to plant between 80,000 to 100,000 plants per acre, rather than the average 6,000 plants per acre of smoking-grade tobacco. It can be mechanically harvested and can be processed “green,” as opposing to going through the drying process that smoking-grade tobacco goes through. Tobacco fields for biofuels also can yield two to three harvests a year, Majeranowski said.
“We can chop it close to the ground, and it grows back,” Majeranowski said. “We don’t have to worry about flavor, just how many green leaves and stems we can get per acre.”
The seeds are still being tested, but the company has successfully processed the genetically altered plants to extract sugars for ethanol and oil for biodiesel fuel; the process has a patent pending on it, Majeranowski said.
During processing, sugar for ethanol and oil for biofuel are extracted, both in larger quantities than comparable amounts of soy or corn, Majeranowski said.
According to Majeranowski, the group was encouraged by Gov. Bob McDonnell’s office to visit Danville, and Secretary of Agriculture and Forestry Todd P. Haymore recommended they talk to the Institute for Advanced Learning and Research about their project.
Majeranowski said he met with Liam Leightley, executive director at the institute, and Barry Flinn, who directs the Institute for Sustainable and Renewable Resource, and was impressed with the facility. The new Sustainable Energy Technology Center at the institute also was one of the reasons that Tyton BioSciences chose Danville for its new home.
“It’s just five minutes from our office,” Majeranowski said. “We will collaborate on certain parts of our research; it’s a great fit for us.”
Next week, the company hopes to learn whether it will get a $2.2 million grant from the Tobacco Commission, which, combined with about $2 million of its own investment, will get the new seeds closer to the production stage.
Majeranowski said: “We have committed to stay in Danville beyond the potential Tobacco Commission grant period because of Danville’s rich tobacco history and growing know-how, as well as its new research facilities.
“We are also excited to help re-ignite the agricultural community with a new tobacco crop that can help the country break its addiction to foreign energy.”

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