ORDER DENYING DEFENDANT'S MOTION TO ENJOIN THE EXPENDITURE OF FUNDS ON HIS PROSECUTION

(Doc. No. 121)

Defendant Richard Daleman is charged with conspiracy to cultivate 1,000 or more marijuana plants in violation of 21 U.S.C. §§ 841 and 846 (Count One); cultivation of 1,000 or more marijuana plants in violation of 21 U.S.C. §§ 841 or aiding and abetting the same in violation of 18 U.S.C. § 2 (Count Two); cultivation of more than 50 but less than 100 marijuana plants in violation of 21 U.S.C. §§ 841 (Count Three); and possession of 100 more kilograms of marijuana with the intent to distribute in violation of 21 U.S.C. §§ 841 or aiding and abetting the same in violation of 18 U.S.C. § 2 (Count Four). (Doc. No. 8.)

This prosecution has a lengthy factual background which both parties have attempted to summarize in their own fashion (see Doc Nos. 121 at 2- 15; 127 at 5-8) and which the court will not repeat in its entirety here. In short, defendant Daleman was investigated for marijuana cultivation by Tulare County law enforcement beginning in 2008, was charged with unlawful cultivation and possession of marijuana for sale in state court and was acquitted of those charges following a jury trial in March 2009. In June 2011 Tulare County law enforcement again executed a search warrant at the defendant's property and seized evidence of a large marijuana cultivation operation. In August of 2011 the Tulare County Resource Management Agency issued the defendant a notice of violation with respect to a county ordinance regarding the cultivation of marijuana and ordered him to cease and desist. In September 2011 defendant Daleman obtained a temporary restraining order in the Tulare County Superior Court preventing the county from destroying the marijuana plants located on his property. In October of 2011 a confidential source introduced undercover Detective Perez to defendant Daleman for purposes of negotiating the purchase of marijuana from him. As a result, purchases of one pound and later pounds of marijuana from the defendant were consummated and the sale of 190 pounds of marijuana for over $200,000 was negotiated and agreed to on October 25, 2011. On October 31, 2011 law enforcement officers executed a search warrant on defendant's property resulting in the seizure of over two thousand marijuana plants and hundreds of pounds of processed marijuana. A federal criminal complaint was filed the following day, November 1, 2011. (Doc. No. 1.) An indictment was returned by the federal grand jury for this district on November 10, 2011. (Doc. No. 8.) This federal criminal action also has a lengthy procedural history which has included the denial of the defendant's motion to suppress evidence following an evidentiary hearing as well as the denial of the defendant's motion to dismiss the indictment. (Doc. Nos. 86, 104.)

Now before the court is defendant Daleman's motion to enjoin the U.S. Department of Justice from spending funds to continue his prosecution. (Doc. No. 121.) At the request of the defense, a supplemental evidentiary hearing was held in connection with defendant's motion on February 13, 2017. At that hearing attorney Marc Days appeared on behalf of defendant Daleman and Assistant U.S. Attorney Kathleen Servatius appeared on behalf of the government.

For the reasons set forth, defendant's motion to enjoin the expenditure of funds by the U.S. Department of Justice in prosecuting this case will be denied.

I. Section 542 of the Consolidated Appropriations Act and the McIntosh Decision

On December 18, 2015, Congress enacted an appropriations act appropriating funds through the fiscal year ending September 30, 2016. Section 542 of that Consolidated Appropriations Act of 2016 provides, "[n]one of the funds made available in this Act to the Department of Justice may be used, with respect to any of the States . . . to prevent them from implementing their own laws authorize the use, distribution, possession, or cultivation of medical marijuana." Pub. L. No. 114-113, 129 Stat. 2242, 2332-33, § 542. In the motion pending before the court, defendant Daleman contends the expenditure of funds to prosecute this case violates this limitation on expenditures enacted by Congress and, therefore, also violates the Appropriations Clause of the Constitution and must be enjoined by this court.

The Ninth Circuit has recently had occasion to address this very issue in United States v. McIntosh, 833 F.3d 1163 (9th Cir. 2016). In McIntosh the court construed the plain text of the appropriations rider at issue in assessing the appellants' assertion that their criminal prosecution must be enjoined and concluded

that § 542 prohibits the federal government only from preventing the implementation of those specific rules of state law that authorize the use, distribution, possession, or cultivation of medical marijuana. DOJ does not prevent the implementation of rules authorizing conduct when it prosecutes individuals who engage in conduct unauthorized under state medical marijuana laws. Individuals who do not strictly comply with all state-law conditions regarding the use, distribution, possession, and cultivation of medical marijuana have engaged in conduct that is unauthorized, and prosecuting such individuals does not violate § 542. Congress could easily have drafted § 542 to prohibit interference with laws that address medical marijuana or those that regulate medical marijuana, but it did not. Instead, it chose to proscribe preventing

states from implementing laws that authorize the use, distribution, possession, and cultivation of medical marijuana.


* * *

If DOJ wishes to continue these prosecutions, Appellants are entitled to evidentiary hearings to determine whether their conduct was completely authorized by state law, by which we mean that they strictly complied with all relevant conditions imposed by state law on the use, distribution, possession, and cultivation of medical marijuana. We leave to the district courts to determine, in the first instance and in each case, the precise remedy that would be appropriate.

We note the temporal nature of the problem with these prosecutions. The government had authority to initiate criminal proceedings, and it merely lost funds to continue them. DOJ is currently prohibited from spending funds from specific appropriations acts for prosecutions of those who complied with state law. But Congress could appropriate funds for such prosecutions tomorrow. Conversely, this temporary lack of funds could become a more permanent lack of funds if Congress continues to include the same rider in future appropriations bills. In determining the appropriate remedy for any violation of § 542, the district courts should consider the temporal nature of the lack of funds along with Appellants' rights to a speedy trial under the Sixth Amendment and the Speedy Trial Act, 18 U.S.C. § 3161.

At the hearing on defendant's request for an evidentiary hearing in connection with the pending motion, held on February 6, 2017, the court determined that it is the defendant who bears the burden of proof on this issue. That determination was made based upon this court's consideration of: (1) the plain text of the appropriations rider; (2) the traditional rule considering the allocation of the burden of proof which, "based on considerations of fairness, does not place the burden upon a litigant of establishing facts particularly within the knowledge of his adversary[.]" United States v. New York, New Haven & Hartford Railroad Co., 355 U.S. 253, 256 n.5 (1957); and (3) the general rule "that the proponent of a motion bears the burden of proof." United States v. Veon, 538 F. Supp. 237, 245-46 (E.D. Cal. 1982).

Finally, the court concluded that the burden borne by the defendant was to prove that he was in strict compliance with California marijuana laws by a preponderance of the evidence. The evidentiary hearing on this issue of compliance with state law is similar to other ancillary proceedings outside the criminal trial where a preponderance of the evidence standard is employed. See, e.g., Veon, 538 F. Supp. at 248 (applying a preponderance of the evidence standard for a criminal forfeiture hearing). Although the court rejected any notion that by seeking to enjoin the expenditure of funds on his prosecution defendant is raising an affirmative defense to the pending federal charges, this conclusion that the preponderance of the evidence standard applies is consistent with the burden of proof imposed upon a defendant in presenting an affirmative defense. See United States v. Sandoval-Gonzalez, 642 F.3d 717, 723 (9th Cir. 2011) United States v. Cruz, 554 F.3d 840, 850 (9th Cir. 2009) ("Generally, 'the defendant must prove the elements of [an] affirmative defense by a preponderance of the evidence," unless some other standard is set by statute.'") (quoting United States v. Beasley, 346 F.3d 930, 934 (9th Cir. 2003) (concluding that the defendant bears the burden of proving the affirmative defense of justification by a preponderance of the evidence because it "does not involve the refutation of any of the elements of [the charged offense], but requires proof of additional facts and circumstances ///// ///// ///// distinct from the evidence relating to the underlying offense.")

Defendant Daleman initially argued that the question of whether DOJ was prohibited from spending funds on his prosecution should be submitted to the jury and only in the alternative, should be the subject of an evidentiary hearing. (Doc. No. 121 at 2-3.) The court rejected the argument that the issue was one for a jury to decide because, for the reasons discussed above, the issue of the defendant's strict compliance with state law is ancillary to and distinct from the prosecution of the alleged violations of federal criminal law and is not an affirmative defense to those charges. The government argued that the evidentiary hearing previously held with respect to defendant's motion to suppress evidence provided a sufficient evidentiary basis upon which to resolve defendant's motion to enjoin and that "[b]ased on the testimony, reports, affidavits, and exhibits, this Court has a complete record for review without the need for additional testimony." (Doc. No. 127 at 10.) The court rejected the government's argument as well, at least in part. In doing so the court relied upon the Ninth Circuit's conclusion in McIntosh that the appellants in that case were "entitled to an evidentiary hearing to determine whether their conduct was completely authorized by state law[.]" McIntosh, 833 F.3d at 1179. As a result of these rulings, as noted above, it was agreed by the parties that in ruling upon the pending motion this court would consider all relevant evidence previously submitted in connection with earlier resolved pretrial motions in this prosecution as well as any additional evidence, including live testimony, which the defendant wished to offer. That hearing was held on February 13, 2017, with ///// ///// defendant Daleman calling four witnesses to testify, including himself.

II. Whether the Defendant Was in Strict Compliance with California Medical Marijuana Laws

Defendant Daleman maintains that he was in compliance with California law regulating medical marijuana because he is a "qualified patient who was authorized to possess, cultivate, and distribute marijuana." (Doc. No. 121 at 19.) He contends that his marijuana operation was in compliance as found by the Tulare County Sheriff's deputies (who did not arrest him after the execution of the June 2011 search warrant) and the three lawyers who testified at the February 13, 2017 evidentiary hearing. In this regard, defendant argues that the number of marijuana plants located by law enforcement officers on his property did not exceed the number authorized by valid medical marijuana recommendations. (Doc. No. 133 at 1.) According to defendant the individual plots on his farm were demarcated and identified the qualified medicinal marijuana patient associated with each plot as well as the number of plants authorized by the patient's recommendation. (Id. at 4.) Defendant contends that he did not have an ownership interest in those plots and that he simply leased them to qualified medical marijuana patients. (Id.) Defendant also maintains that in October of 2011, when he negotiated the sale of 190 pounds of marijuana to Detective Robert Perez (acting in an undercover capacity) for over $200,000, he did not do so for profit because the proceeds of that transaction were to go toward costs related to his farm as well as ongoing litigation fees. (Doc. No. 121 at 20-21.) Moreover, he attempts to justify the recorded transaction on the grounds that he believed the undercover officer was both a qualified patient and acting on behalf of a medical marijuana dispensary in Los Angeles. (Doc. No. 121 at 20-21.)

The government argues that defendant Daleman was clearly not operating in strict compliance with state law in any number of respects. First, the government contends defendant Daleman possessed more marijuana than was authorized. (Doc. No. 127 at 14.) In addition, the government maintains that the defendant's interaction with Detective Perez were not in compliance with state law because the defendant cannot claim caregiver protection with respect to anyone and because Detective Perez was not a member of the collective. (Id. at 15, 19.)

The sale and possession for sale of marijuana is unlawful under California law and this remains the case for purposes of the pending motion. See Cal. Health & Safety Code §§ 11359, 11360; see also People v. Trippet, 56 Cal. App. 4th 1532, 1546 (1997); People ex re. Lungren v. Peron, 59 Cal. App. 4th 1383, 1389 (1997). Nonetheless, this court must consider the evidence and the parties' arguments in light of California's Compassionate Use Act ("CUA") and the Medical Marijuana Program Act ("MMPA"). California's CUA, passed as Proposition 215 in 1996, provides immunity from prosecution for violating state law to "a patient, or to a patient's primary caregiver, who possesses or cultivates marijuana for the personal medical purposes of the patient upon the written or oral recommendation or approval of a physician." Cal. Health & Safety Code § 11362.5(b)(1)(C). In 2003, the California Legislature enacted the MMPA to clarify the scope of the CUA. "In addition to establishing the identification card program, the MMP[A] also defines certain terms, sets possession guidelines for cardholders, and recognizes a qualified right to collective and cooperative cultivation of medical marijuana." California Attorney General's Guidelines for the Security and Non-Diversion of Marijuana Grown for Medical Use (Aug. 2008) at 2, available at http://ag.ca.gov/cms_attachments/press/pdfs/n1601_medicalmarijuanaguidelines.pdf (hereinafter, "the Guidelines") (citing Cal. Health & Safety Code §§ 11362.7, 11362.77, 11362.775). ///// /////

The Guidelines note,

"California law does not define collectives, but the dictionary defines them as 'a business, farm, etc., jointly owned and operated by the members of a group.' (Random House Unabridged Dictionary; Random House, Inc. © 2006.) Applying this definition, a collective should be an organization that merely facilitates the collaborative efforts of patient and caregiver members - including the allocation of costs and revenues. As such, a collective is not a statutory entity, but as a practical matter it might have to organize as some form of business to carry out its activities. The collective should not purchase marijuana from, or sell to, non-members; instead, it should only provide a means for facilitating or coordinating transactions between members."

The Guidelines also provide suggested practices for "operating collective growing operations to help ensure lawful operations." Id. at 9. Notably, the Guidelines provide that cooperative or collectives must be non-profit operations as "nothing in Proposition 215 or the MMP[A] authorizes collectives, cooperatives, or individuals to profit from the sale or distribution of marijuana." Id. (citing § 11362.765(a)). However, a letter from the California Attorney General's office dated December 21, 2011 notes that the term "profit" remains undefined in so far as "determining what costs are reasonable for a collective or cooperative to incur. This is linked to the issue of what compensation paid by a collective or cooperative to members who perform work for the enterprise is reasonable." (Doc. No. 133-2 at 4.) In addition, the Guidelines provide that members should acquire, possess, and distribute marijuana among members of the collective only such that "the cycle should be a closed-circuit of marijuana cultivation and consumption with no purchases or sales to or from non-members." Guidelines at 10. Members can also reimburse the collective or cooperative for marijuana allocated to them only as long as "any monetary reimbursement that members provide to the collective or cooperative should only be an amount necessary to cover overhead costs and operating expenses." Id. The guidelines also recommend procedures for verifying the member's status as a qualified medical marijuana patient or primary caregiver:

Unless he or she has a valid state medical marijuana identification card, this should involve personal contact with the recommending physician (or his or her agent), verification of the physician's

identity, as well as, his or her state licensing status. Verification of primary caregiver status should include contact with the qualified patient, as well as validation of the patient's recommendation. Copies should be made of the physician's recommendation or identification card, if any[.]"

Given the evidence before it, this court need not determine whether the number of marijuana plants found on defendant Daleman's property during the searches in 2011 exceeded the number authorized by valid medical marijuana recommendations. Nonetheless, the court does note that defendant's testimony both before and at the February 13, 2017 hearing regarding the specifics of how he was operating is, at the very least, confusing. He testified at the earlier suppression hearing that he did not hold himself out as operating a collective at his property but that he instead belonged to a collective or collectives operating at locations other than his farm. (Doc. No. 56 at 23-24.) At that same hearing he testified as follows: "I wasn't in the business of growing marijuana for my own personal use, and I was in the business of renting land out. I was put in the business of selling marijuana to go do litigation against the County." (Id. at 28.) Nonetheless, even if defendant Daleman had been effectively operating a collective, the court finds that his negotiated sale of marijuana to undercover Detective Perez is a more than sufficient basis upon which to conclude that he was not operating in strict compliance with state law.

Defendant's first interaction with Detective Perez occurred on October 21, 2011. (Doc. No. 127 at 6.) The parties dispute whether Detective Perez represented himself to the defendant ///// ///// as a qualified patient from a medical marijuana dispensary in Los Angeles. While defendant maintains that he was quickly shown paperwork by someone suggesting that Detective Perez represented "a smoke shop" or that his uncle owned a medical marijuana dispensary in Los Angeles, defendant has conceded that he did not make a copy of that paperwork. (See Doc. No. 56 at 19.) At their first meeting, Detective Perez purchased one pound of marijuana from the defendant for $1220 and indicated a desire to purchase a large amount of marijuana to ship out of state. (Doc. No. 127 at 6.) Defendant stated that he could provide more than 150 pounds. (Id.) On October 25, 2011, at a meeting that was surreptitiously recorded by law enforcement, defendant Daleman advised Detective Perez that an individual from Santa Cruz had arrived with over 160 pounds of marijuana and was waiting in a motel in Tulare. Defendant Daleman further represented that he had another 24 pounds and that he could obtain an additional 40 pounds of marijuana. (Doc. No. 127-1 at 70.) Defendant Daleman ultimately arranged to sell 190 pounds of marijuana to Detective Perez for over $200,000 to be picked up the following Monday. (Doc. Nos. 127 at 7; 127-1 at 71, 81-82, 84.) Detective Perez specifically advised defendant Daleman that they were "taking it [the marijuana] back east," not to a Los Angeles dispensary. (Doc. No. 127-1 at 74.) Detective Perez and another undercover agent then purchased an additional two pounds of marijuana from defendant Daleman at $1220 per pound. (Doc. Nos. 127 at 7; 127-1 at 73.) Finally, defendant has testified that he intended to use the money he believed he would make from this transaction to pay his litigation related fees and expenses, which he estimated to be approximately $250,000. (Doc. Nos. 56 at 20; 121 at 21; 127 at 6.)

The evidence of defendant Daleman's interaction with Detective Perez appears to this court to be compelling evidence of the unlawful sale of marijuana in violation of California law and certainly not of a transaction authorized by California's medical marijuana laws. Under those laws, certain transactions among members of a collective are protected. However, here, defendant's sales of marijuana to Detective Perez did not include any member of a collective with which he was associated. Defendant has presented no persuasive evidence that the individual from Santa Cruz who he alleges donated 160 pounds of the marijuana to be sold was a member of defendant's, or any other, collective. Likewise, defendant has offered no persuasive evidence that Detective Perez and the other undercover agent who accompanied him were members of a collective. He has failed to offer a copy of Perez's physician's recommendation or identification card (see Guidelines at 9), offering the explanation that he did not have a cord for his copy machine at the time. Even if an expansive view of a "collective" is adopted wherein, "large-scale cultivation and transportation of marijuana, memberships in multiple collectives, and the sale of marijuana through dispensaries" (Doc. No. 133-2 at 3) is permitted, defendant Daleman has failed to present any persuasive evidence that Detective Perez was representing a legitimate medical marijuana dispensary in Los Angles or that he was a qualified patient. Rather, the evidence before the court establishes that Detective Perez and the other undercover agent represented to defendant that they intended to take the marijuana they were buying from him "back east" to distribute it and not to an authorized dispensary in Los Angeles. Finally, under California law for medical marijuana transactions to be authorized, "the cycle should be a closed-circuit of marijuana cultivation and consumption with no purchases or sales to or from non-members." Guidelines at 10; see also People v. Hochanadel, 176 Cal. App. 4th 997, 1018 (2009); County of Los Angeles v. Hill, 192 Cal. App. 4th 861, 869-70 (2011). Defendant Daleman's transaction with undercover Detective Perez clearly does not comply with that requirement.

The Ninth Circuit has emphasized that in order to find that the Rohrabacher-Farr amendment prohibits DOJ's expenditure of funds in connection with a federal marijuana prosecution, a defendant must establish at an evidentiary hearing that he or she "strictly complied with all relevant conditions imposed by state law on the use, distribution, possession, and cultivation of medical marijuana." McIntosh, 833 F.3d at 1179 (emphasis added). Defendant Daleman has failed to make that required showing by a preponderance of the evidence.

CONCLUSION

Accordingly and for all of the reasons set forth above, the court denies defendant Daleman's motion to enjoin the expenditure of funds on his federal prosecution. (Doc. No. 121.) The jury trial in this action remains scheduled for February 28, 2017, absent further order of the court. IT IS SO ORDERED.

Dated: February 17 , 2017

/s/_________

UNITED STATES DISTRICT JUDGE