“Spark the Discussion” is a monthly Legal Connection column highlighting the hottest trends in the emerging field of medical marijuana law. This column is brought to you by Vicente Sederberg, LLC, a full-service, community-focused medical marijuana law firm.

By Brian Vicente, Esq. and Rachelle Yeung

If a contract is found to be valid under state law, one would assume a judge would order that both parties must carry out their legal obligations under that agreement.  However, one judge in Arapahoe County recently argued that this basic principle of contract law doesn’t apply to our state’s newest licensed businesses—if they sell medical marijuana.

Over a period of several months in 2010, a medical marijuana grower delivered approximately $40,000 worth of product to Blue Sky Care Connection, a regulated dispensary in Littleton. Blue Sky promised to compensate the grower either in cash or with a share of a potential business partnership. When Blue Sky did not follow through with either, the grower sued.

The judge quickly determined that the parties had indeed entered into a valid contract – applying a simple analysis from his first year law school days (offer, acceptance, and consideration). However, the Court complicated the straightforward dispute by inquiring sua sponte whether the contract should be found unenforceable for being against public policy.

The Court went on to reason that, despite medical marijuana being legal according to Colorado Law, the sale of medical marijuana is against public policy because it violates federal law. Though the Court’s analysis could have reasonably stopped there, it goes beyond the “case and controversy” and further finds that federal law preempts Colorado’s medical marijuana law.

Because this opinion was issued by a district court, its ruling is not binding. However, the opinion has left many within the medical marijuana industry wondering how far-reaching its effects could be. Does this opinion find that only this particular contract for this particular sale of medical marijuana was unenforceable? Or can it be expanded to be read that all contracts for the sale of medical marijuana are unenforceable? Or that all contracts related to medical marijuana are unenforceable?  This last scenario would effectively dismantle a regulated industry that both the Colorado legislature and the Colorado Department of Revenue have been carefully building for the past several years.

The people of Colorado voiced their opinion on the public policy of the state in support of medical marijuana in 2000, by the democratic adoption of Amendment 20. The legislative and executive branches further endorsed public policy in favor of medical marijuana by enacting and signing HB 10-1284, the Colorado Medical Marijuana Code, in 2010.  This Code, and implementing legislation and regulations, accounts for well over one hundred pages of strict rules governing every stage of transaction—from seed to sale—for these Colorado businesses.

Shockingly, the judge’s opinion failed to take into account the Colorado Medical Marijuana Code, which became effective July 2, 2010 – approximately one week after the grower made the first of several deliveries to Blue Sky. The Code actually requires certain legal relationships between growers and medical marijuana centers that would not be possible without enforceable contracts. Substantive issues aside, the fact that the Court fails to consider the most relevant piece of law in its analysis leaves one questioning the incomplete legal framework of the opinion.

There are currently seventeen states with medical marijuana laws.  Massachusetts, Arkansas, and North Dakota are primed to pass similar laws this November. Hopefully, one state judge’s hastily drafted opinion won’t pave the way to dismantle these compassionate-use laws.