July 17, 2019

Archives for November 13, 2012

Amendment 64 Passed in Colorado: Now What?

On Tuesday, November 6, 2012, Colorado voters approved Amendment 64, and Washington state voters approved Initiative 502. In enacting these ballot measures, Colorado and Washington become the first states in the country to decriminalize marijuana outside of the medical marijuana context.

What does Amendment 64 mean for Colorado?

Amendment 64 has two basic parts: (1) within certain defined parameters, it decriminalizes adult possession, use and cultivation of marijuana for recreational purposes; and (2) creates a framework for the establishment of a regulated and taxed retail marijuana industry, which would include cultivation, marijuana-infused products manufacturing, and retail sales. Respectively, these can be described as the “decriminalization,” and “regulation” components of Amendment 64.

As an initial matter, it is important to note that Amendment 64 does not affect the federal prohibition on marijuana. Marijuana remains illegal for all purposes at the federal level, and possession of any amount can lead to serious federal civil and criminal penalties. Thus, it will still be a federal crime for adults in Colorado to possess, cultivate, or distribute marijuana. Indeed, Colorado law would be irrelevant, and likely inadmissible, in a federal criminal prosecution or asset forfeiture proceeding arising from federal marijuana charges.

The status of federal marijuana law will have a significant impact on what happens in Colorado, but the effect of the conflict between Colorado and federal law will likely play out differently with respect to different components of Amendment 64. Decriminalization will go into effect as soon as the results of the election are made official (which could take several weeks). At that time, Colorado law enforcement authorities will no longer be able to arrest or prosecute adults possessing small amounts of marijuana, or growing up to six plants for personal use, provided they are otherwise acting in compliance with the requirements of Amendment 64. Accordingly, though it is inaccurate to say that marijuana is “legal” in Colorado in light of continued federal prohibition, as a practical matter, Amendment 64 largely eliminates the risk that any adult acting within the limits of the amendment would be arrested or convicted of marijuana crimes in Colorado. There are simply not enough federal law enforcement authorities on the ground in Colorado to deter adult recreational use of marijuana, and federal authorities cannot force Colorado authorities to enforce federal law. This reduced practical risk of prosecution will certainly have an effect on people’s behavior, and there is likely little that federal authorities will be able to do to meaningfully enforce marijuana prohibition as it relates to adult personal use of the drug.

Regulation, however, is likely a different matter, and its success hinges greatly on the federal attitude and approach toward the creation of the first state-regulated recreational marijuana market in the country. Because of federal forfeiture laws, the implications of regulation will be of particular concern to real estate owners, landlords and real estate lenders who may be faced with the opportunities to provide industrial and retail space to this new industry. In a future post, I will discuss some of the real estate-related issues that will arise from regulation.

The critical period will be the next year or so, while the state enacts regulations, and possibly statutes, to control a newly created recreational marijuana industry. Implementing regulations are supposed to be approved by July of 2013, and it would likely be late 2013 or early 2014 before licenses would be issued to new marijuana businesses. Thereafter, licensed businesses would be able to cultivate marijuana, produce marijuana-infused products, and sell marijuana to persons 21 and over at retail stores. Until then, Colorado adults will have the benefit of decriminalization, and will be able to grow their own without violating Colorado law, but will not be able to purchase marijuana at a retail establishment for recreational use, nor will marijuana be taxed.

Given the uncertain federal reaction to Amendment 64, it remains to be seen whether such a regulated marijuana industry will even get off the ground in Colorado. Whereas federal efforts to mitigate personal marijuana use would likely be futile in light of state-level decriminalization, federal authorities would have very effective tools at their disposal if they were inclined to prevent the establishment of a regulated and taxed recreational marijuana market in Colorado.

As a legal matter, it is well-established that state law changes to marijuana laws have no effect on federal marijuana laws, and nothing prevents federal authorities from prosecuting what might appear to be otherwise law-abiding marijuana businesses. This power is already on display in the context of medical marijuana in Colorado. Colorado’s existing medical marijuana industry currently survives solely due to Department of Justice and the United States Attorney for Colorado’s restrained exercise of prosecutorial discretion. These federal authorities have generally not taken any action against licensed medical marijuana operations that are in compliance with Colorado’s extensive medical marijuana industry regulatory regime. However, earlier this year, the Colorado U.S. Attorney’s Office made a determination that its restraint in exercising its prosecutorial discretion would only go so far. Specifically, Colorado U.S. Attorney John Walsh has determined that his office will not tolerate the continued operation of medical marijuana businesses located near schools. Since the decision, his office has been successful in systematically shutting down such businesses merely by making threats of criminal prosecution and asset forfeiture.

In the circumstances, it is entirely reasonable to question whether federal authorities will allow the development of a regulated market for marijuana outside of the medical context. If national or Colorado-based federal authorities decide to draw a line in the sand on this issue, it could set up a significant conflict. Alternatively, if Colorado’s medical marijuana experience is any guide, federal authorities may decide to simply weigh in at the margins, thereby constraining the retail recreational marijuana industry in Colorado, without entirely foreclosing its development.

Colorado’s governor appears to recognize this distinction between the effect of decriminalization and regulation. Following the announcement of the voters’ approval of Amendment 64, Governor Hickenlooper made a statement strongly affirming Colorado’s intent to push forward with decriminalization, while expressing skepticism about the prospects for regulation:

I think the federal government is probably going to come down just like in prohibition–you can’t do it by state by state–but I think at the very minimum we should work aggressively to decriminalize it; make sure kids don’t get felony records. I mean, the voters–the voters are pretty clear what they feel and what they want, so within the limits of federal law and whatever the federal government will permit, we have to figure out what’s a–how are we going to go forward.

He continued, acknowledging the difficulties involved in regulation of marijuana:

If the federal government says its going to be illegal and they’re going to prosecute, we don’t have much of a voice there. We’re not going–we’re not going to secede from the union. But, we do recognize that the public has spoken loudly and we’re going to communicate that to our friends in Washington.”

It will be very interesting to see how this plays out over the next weeks and months.

Bill Kyriagis represents business and real estate clients in litigation, bankruptcy and land use matters. In the land use context, Bill counsels clients on a variety of local government issues, including posturing land use matters for potential litigation and pursuing claims when necessary. Bill has also developed expertise regarding the issues faced by landlords and  property owners related to Colorado’s medical marijuana industry. Bill has worked on a number of pro bono cases, including a successful First Amendment challenge to local government land use regulations, and assisting tenants in landlord/tenant disputes. Bill contributes to his firm’s blog, where this post originally appeared.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Tenth Circuit: Failure to Allow Cross-Examination on Prior Determination of Witness’s Credibility Violated Sixth Amendment

The Tenth Circuit issued its opinion in United States v. Woodard on Friday, November 9, 2012.

Rommie Woodard, the defendant, was convicted of possessing more than 100 kilograms of marijuana with the intent to distribute. Woodard was driving a tractor-trailer that had been loaded full of cartons by FedEx employees. While stopped at a New Mexico port of entry, a New Mexico Motor Transportation Division (MTD) inspector and police officer discovered six duffle bags containing marijuana among the cargo of the tractor-trailer Woodard was driving. Woodard argued the district court violated his Sixth Amendment confrontation rights when it refused to allow him to cross-examine the MTD inspector about a prior judicial determination that the inspector was not credible. The district court granted the government’s motion in limine, holding that under FRE 403, allowing the questioning would likely confuse the jury, create a trial-within-a-trial, and unfairly prejudice the government.

The court agreed with the test adopted by the Second Circuit in determining whether another court’s determination that a witness lied should be admitted under FRE 608(b). Applying the Second Circuit’s factors, the court found that cross-examination under FRE 608(b) would have been appropriate, given the similarity in circumstances. In both cases, the MTD inspector’s testimony that he smelled a strong odor of marijuana upon opening the tractor-trailer door supported a critical determination; here, that Woodard knowingly possessed the marijuana. Given the strong probative value of the finding of non-credibility, the testimony should have been admitted under FRE 403.

The court found Woodard’s Sixth Amendment right was violated because a “reasonable jury might have received a significantly different impression of [the witness’s] credibility had [the defendant] been permitted to pursue his proposed line of cross-examination.” The court then applied Van Arsdall factors to determine whether the violation was harmless error. Given the importance of the inspector’s testimony to the case and the otherwise weak evidence showing the defendant placed the marijuana in the trailer, combined with the fact that the jury only convicted after receiving an Allen charge, the conviction was reversed.

Colorado Court of Appeals: No Bright Line Rule that Claims that Survive Summary Judgment Are Not Abuse of Process

The Colorado Court of Appeals issued its opinion in Health Grades, Inc. v. Boyer on Thursday, November 8, 2012.

Abuse of Process—Summary Judgment—Directed Verdict—Judgment Notwithstanding the Verdict—Sham Litigation.

Plaintiff Health Grades, Inc. appealed the trial court’s judgment following a jury verdict in favor of defendants Christopher Boyer and Patrick Singson on their abuse of process counterclaim. The judgment was reversed and the case was remanded with directions.

Health Grades is a Web-based information resource that provides health-care information and provider ratings online. Defendants are former Health Grades employees who resigned over a dispute as to whether websites they created improperly competed with Health Grades’ business.

Health Grades contended that the trial court erred by denying its motions for directed verdict and judgment notwithstanding the verdict as to defendants’ abuse of process counterclaim. Health Grades argued that, once its claims survived motions for summary judgment and directed verdict, they could not, as a matter of law, constitute “sham litigation.” However, there is no bright-line rule—and the Court of Appeals declined to adopt one—that states that any lawsuit that survives a motion for summary judgment or directed verdict cannot be the basis for an abuse of process claim. Thus, defendants’ abuse of process counterclaim was not automatically barred, because Health Grades’ claims survived motions for summary judgment and directed verdict. Nonetheless, the constitutional aspect of Health Grades’ defense to the abuse of process claims should have been decided by the court and should not have been submitted to the jury. Because the court failed to apply the heightened standard to determine whether the claims asserted by Health Grades were devoid of reasonable factual support or had no cognizable basis in law, the judgment was reversed and the case was remanded to the trial court to make this determination.

Summary and full case available here.

Colorado Court of Appeals: Trial Court Erred in Deviating from ICWA Preference for Placement and Adoption in Dependency and Neglect Proceeding

The Colorado Court of Appeals issued its opinion in People in Interest of A.R., and Concerning F.N. on Thursday, November 8, 2012.

Dependency and Neglect—Parental Rights—Termination—Indian Child Welfare Act—Active Efforts.

In this dependency and neglect proceeding, mother appealed from the judgment terminating her parent–child legal relationship with A.R. The Department of Human Services (Department) joined mother’s appeal of the termination and also challenged that part of the judgment addressing the Department’s guardianship. The judgment terminating mother’s parental rights was affirmed, the part of the judgment addressing guardianship was reversed, and the case was remanded.

Because A.R. is an “Indian child” as defined in 25 USC § 1903(4), these proceedings were subject to the Indian Child Welfare Act (ICWA), 25 USC §§ 1901 to 1963. Mother contended that the court erred in terminating her parental rights. She asserted that the Department did not meet the ICWA’s “active efforts” requirement, and there were viable, less drastic alternatives to termination, including A.R.’s placement with A.W. and C.W. The ICWA’s “active efforts” standard requires more effort than the “reasonable effort” standard in non-ICWA cases. Here, despite the court’s use of the term “best efforts,” the record supports the court’s determination that the Department’s actions met the requisite “active efforts” standard under the ICWA with regard to mother, A.W. and C.W. The trial court found, with record support, that although mother substantially complied with her treatment plan, it was unsuccessful in rendering her a fit parent and that her conduct or condition was not likely to change within a reasonable time. It also found that A.R. needs lifelong care or intensive services for her special needs, and mother was unable to provide those services. Additionally, placement with A.W. and C.W. without terminating mother’s parental rights was not a less drastic alternative; A.R. needed permanency, so it was not in her best interests.

The Department contended that, even if the court’s termination of mother’s parental rights was proper, the court erroneously deviated from the ICWA’s placement preferences when, in granting the Department guardianship, it denied the Department permission to place A.R. with A.W. and C.W. for purposes of adoption. The ICWA presumes that the child’s best interests are served by placement with an extended family member who also has Indian heritage. Here, the record does not support the trial court’s finding that there was good cause to deviate from the ICWA’s placement preferences. Therefore, the court erred in deviating from the ICWA’s placement preferences. The trial court’s judgment was reversed in this regard and the case was remanded with directions for the court to allow the department to arrange a home visit with A.W. and C.W., and to consider an adoption or preadoptive placement of A.R. consistent with the ICWA placement preferences, including possible placement with A.W. and C.W. or her foster parents.

Summary and full case available here.

Colorado Court of Appeals: Failure by Trustee to Diversify Investments Not Breach of Fiduciary Duty Where Trust Document Gave Trustee Discretion for Investments

The Colorado Court of Appeals issued its opinion in Van Gundy v. Van Gundy on Thursday, November 8, 2012.

Beneficiary—Trustee—Breach of Contract—Irrevocable Trust—Breach of Fiduciary Duty—Prudent Investor Rule—Discretion.

Defendant Quinton Van Gundy (trustee) appealed a portion of the judgment entered after a bench trial in favor of plaintiff Eldon Van Gundy (beneficiary) on beneficiary’s breach of contract claim, as well as the court’s award of attorney fees to beneficiary. The judgment was affirmed in part and reversed in part, and the case was remanded.

In 2004, beneficiary created an irrevocable trust to be managed by trustee, his son, funding it with real estate and shares of stock in a family business. Beneficiary later filed a complaint against trustee, asserting claims for breach of fiduciary duty, breach of contract, breach of duty to provide a complete accounting, and to quiet title. Following a bench trial, the district court found that trustee had breached his contractual duty to beneficiary by purchasing stocks on margin, which, “under the circumstances,” violated the prudent investor rule. In addition, the court held that trustee was required to diversify trust investments, but had failed sufficiently to do so. The court awarded beneficiary $399,819.24 in damages, plus attorney fees, on his breach of contract claim.

On appeal, trustee contended that the district court erred in applying the prudent investor rule and consequently ruling that he had breached the trust agreement by purchasing stock on margin and failing to sufficiently diversify. If a trustee is empowered to exercise his or her discretion under the terms of the trust in a manner that might otherwise be inconsistent with the prudent investor rule, the trustee’s performance under that power does not give rise to a claim for breach of duty. Here, the trust agreement expressly granted trustee the discretion and power to invest in stocks, “whether or not . . . of the character permissible for investments by fiduciaries under any applicable law, and without regard to the effect [the investment] may have upon the diversity of the investments.” Therefore, the district court erred by deeming trustee’s purchases on margin and failure to diversify investment as breaches of his duty under the trust agreement. The court’s award of attorney fees was reversed and the case was remanded for the court to determine the proper amount of fees to which beneficiary was entitled.

Summary and full case available here.

Colorado Court of Appeals: Juror’s Racially Biased Statements Made During Deliberations Were Personal Opinion and Not Outside Influence

The Colorado Court of Appeals issued its opinion in People v. Pena-Rodriguez on Thursday, November 8, 2012.

Jury—Racial Bias—Deliberations—Voir Dire—Misrepresentation—CRE 606(b)—Unconstitutional as Applied.

Defendant appealed the judgment of conviction entered on a jury verdict finding him guilty of unlawful sexual contact and harassment. The judgment was affirmed.

Defendant contended that the trial court abused its discretion by not properly addressing allegations of Juror 11’s racial bias and denying defendant’s motion for new trial. After the jury returned its verdict and was dismissed, two jurors told defense counsel that a juror—later identified as Juror 11—had made racially biased statements during deliberations. Those two jurors completed affidavits describing the statements of racial bias, which were shared with the court. However, to obtain a new trial based on juror misrepresentation, counsel must have asked specific questions about the subject of the misrepresentation during voir dire, which defendant failed to do in this case. Juror 11 inadvertently misrepresented his law enforcement background during voir dire; however, his employment in law enforcement ended more than four decades before trial, and defendant failed to prove this misrepresentation resulted in actual bias. Therefore, the trial court did not abuse its discretion in denying defendant’s motion for new trial.

Defendant also contended that, because the statements of bias attributed to Juror 11 in the juror affidavits showed deliberations were corrupted by extraneous prejudicial information or an outside influence, he is entitled to a new trial. CRE 606(b) broadly prevents attacks on verdicts using information from jury deliberations. Because the statements at issue illustrate Juror 11’s beliefs and opinions and not any outside influence, the juror affidavits describing statements of racial bias made during deliberations do not fall under the outside influence exception to 606(b). Thus, because the juror affidavits were inadmissible, the record contains no admissible evidence of Juror 11’s bias. Furthermore, because defendant failed to conduct specific voir dire on racial bias, his challenge as to whether CRE 606(b) was unconstitutional as applied failed.

Summary and full case available here.