Governor Brewer lost her Federal suit to stop Prop 203, and she had decided not to appeal.  In turn, this has prompted DHS to lift its moratorium on accepting dispensary applications.  

 Per DHS Director, Will Humble’s blog, DHS is expecting to start accepting dispensary applications in April.  However, due to a significant victory in the Compassion First v. Arizona case, the application qualifications and rules that DHS published last year are going to change significantly.  Per Director Humble, DHS is working at fever pace to amend the regulations to conform to the Superior Court ruling. 

 Amongst the changes coming to the dispensary application process include: 

• Removal of the 3 year Arizona residency requirement;
• Removal of the requirement that an applicant never filed for bankruptcy (personal or corporate);
• Removal of the requirement that the applicant have submitted their past 3 year Arizona tax returns;
• Removal of the requirement that the applicant be current on child support.

 You can read Director Humble’s blog here.  The blog also has a link to the Compassion First v. Arizona decision. 

 As a result of the Compassion First v. Arizona decision, there are two issues of which you need to be aware.  First, we don’t know if any of the parties to the Compassion First v. Arizona case intend to appeal.  If they do, it may result in a further delay to DHS accepting applications and/or may result in post-application lawsuits pitting the non-winners of dispensary certificates against the winners and DHS.  Second, the removal of the residency requirements means no hometown advantage and a probable influx of out-of-state players vying for dispensaries.  This may also result in DHS abolishing or altering its plans to hold a lottery to award certificates in CHAAS that produce multiple qualified applicants.

Smith & Craven is keeping its finger on the pulse of these issues and remains available to assist you and your referrals with all stages of the application process, including real estate, zoning, corporate formality, and regulatory compliance.  We also provide litigation services, appeals, and can provide on-going legal counseling for dispensaries and their owners.

Smith & Craven is proud to announce that founding partner, Gary Michael Smith, was today awarded an AV rating by Martindale Hubbell.

WHAT ARE MARTINDALE-HUBBELL® PEER REVIEW RATINGS™?
The Martindale-Hubbell® PEER REVIEW RATINGS™ are an objective indicator of a lawyer’s high ethical standards and professional ability, generated from evaluations of lawyers by other members of the bar and the judiciary in the United States and Canada. The first review to establish a lawyer’s rating usually occurs three years after his/her first admission to the bar.

Smith & Craven were honored to be featured in the August 2011 issue of Attorney at Law Magazine.   To read the article, click HERE.

Last October’s hail storms in the Phoenix Metro area resulted in an influx of out-of-state contractors soliciting work and using the licenses of Arizona roofing contractors.

A.R.S. § 32-1154(A)(10) provides that the following conduct is unlawful: “[a]iding or abetting a licensed or unlicensed person to evade this chapter, knowingly or recklessly combining or conspiring with a licensed or unlicensed person, allowing one’s license to be used by a licensed or unlicensed person or acting as agent, partner, associate or otherwise of a licensed or unlicensed person with [the] intent to evade this chapter.” (Emphasis added).

A violation of this statute may result in the suspension or revocation of the license held by the Arizona contractor.

Secretary of State Ken Bennett notified Governor Jan Brewer of his determination that recall petition serial number RC-04-2011, filed by the Citizens for a Better Arizona Committee, exceeds the number of minimum signatures required by the Arizona Constitution to be placed on the ballot at the next consolidated election date that is 90 days or more after the order calling the election. Today constitutes the official filing date of the petition.

On May 31, 2011, the Committee originally filed 1,711 petition signature sheets containing 18,076 signatures.

On June 3, 2011, after performing its duties required by ARS 19-121.01, the office of the Secretary of State forwarded 1,648 petition signature sheets containing 16,949 signatures to the Maricopa County Recorder for verification.

On July 8, 2011, the County Recorder returned 1,648 petition sheets and certified that they contained 10,365 valid voter signatures.

The total number of verified signatures for recall petition serial number RC-04-2011 exceeds the 7,756 minimum required by the constitution to subject the Honorable Russel Pearce, state senator for legislative district 18, to a recall election.

Senator Pearce may choose to resign from office within five business days, in which case the recall election would not be needed and the vacancy in office would be filled as otherwise provided by law. If Senator Pearce chooses not to resign, he will automatically become a candidate in the recall election.

The Governor now has 15 days to isssue an order calling the special recall election. There is also a ten day period within which the County Recorder’s certification of signatures may be challenged in the Superior Court.  Senator Pearce has filed such challenege, which is pending.

Arizona insurance law requires any person who “adjusts, investigates or negotiates settlement of claims” to have a license from the Arizona Department of Insurance. 

It is not unusual for a property owner’s contractor to discuss the details of building damage with the insurance company’s adjuster, particularly when there is extensive or complex damage.  Often the contractor’s expertise is essential to identify precisely what was damaged, the extent of the damage, and the cost to repair it; however, contractors cannot “negotiate” the settlement of the insurance claim with the insurance company representatives on behalf of the property owner, unless they have an adjuster’s license. 

In a recent case, a contractor had his homeowner client sign an “Authorization” form which stated that he was representing the homeowner in negotiations with the insurance company “to obtain full reimbursement under the terms of [her] policy for a property damage claim.” The massive hail storm that hit the Phoenix valley last October generated over 100,000 homeowner’s insurance claims in a single day.  The storm created so much repair work, property owners sometimes had to wait weeks to get estimates from their insurance company’s adjuster and to schedule contractors for the repair work.  It is likely that the increased demand for building contractors, especially roofers, prompted an influx of contractors from out of state.  Non-resident contractors may not be aware of the Arizona Department of Insurance adjuster license requirements for representing someone in an insurance claim settlement.   

If someone contacts you and offers to represent you in the settlement of your homeowner’s insurance claim, you should verify the adjuster’s references and credentials, including whether they have a license.  To confirm licensure call Arizona Department of Insurance at 602-364-2499 or 800-325-2548 or check online at http://az.gov/app/doilookup/. 

If you choose to hire a public adjuster, read the contract carefully.  You may have to pay the adjuster a significant percentage of your insurance settlement for his/her services.  Some adjuster contracts even require that you instruct your insurer to name the adjuster as a “loss payee” on any settlement check from the insurance company, or possibly preclude your insurer from directly communicating with you about your claim. 

Homeowners should also verify their building contractor’s license with the Arizona Registrar of Contractors (www.azroc.gov).

This is a reprint of the article I authored that was published in the June 2011 issue of the Green leaf magazine:

Arizona’s Medical Marijuana Act has a flaw that has the potential to make dispensary operation significantly more expensive than presently assumed.  Specifically, the Act omits “independent contractor” from the definition of who may be a dispensary agent.

Per A.R.S. § 36-2801, “dispensary” is defined as a “not-for-profit entity that acquires, possesses, cultivates, manufactures, delivers, transfers, transports, supplies, sells or dispenses marijuana or related supplies and educational materials to cardholders.”  Since a dispensary is essentially an entity, it can only perform physical acts through licensed dispensary agents, which are statutorily defined as “a principal officer, board member, employee or volunteer of a nonprofit medical marijuana dispensary who is at least twenty-one years of age and has not been convicted of an excluded felony offense.”  Note that “independent contractor” is NOT in the definition.

To control costs and to foster efficiencies, some dispensaries may want to contract functions, such as cleaning, cultivation, waste disposal, food-stuffs infusion, etc.   If the service provider cannot be an independent contractor, then they must be a volunteer, officer, or employee of the dispensary, which means added expense to the dispensary, such as payroll, worker’s compensation, employment and labor laws, vicarious liability, etc.  Obviously, independent contractors are an attractive alternative, especially if the work they provide is intermittent, infrequent, or highly specialized.  But, if by definition an independent contractor cannot be a dispensary agent, then an independent contractor cannot acquire a dispensary agent license; and if it cannot acquire a dispensary agent license, then it cannot perform any of the functions of a dispensary.

Perceiving this problem, at regulation R9-17-311, ADHS expanded the statutory definition of dispensary agent to include independent contractors.    However, ADHS’ powers are strictly limited by the terms of the statute that created it, and ADHS is not authorized to amend the statute by regulation.  Schwartz v. Superior Ct., 186 Ariz. 617, 619, 925 P.2d 1068, 1070 (App.1996); A.R.S. § 36-104.   As such, ADHS’ attempt to expand the statutory definition of dispensary agent through regulation may have been an exercise beyond its authority.

For anyone tempted to argue that despite omission of “independent contractor” from the statute,  clearly the public initiative meant to include it, I remind that being a public initiative and not a legislative act, there are no legislative committee minutes to reference.  Moreover, there is the statutory construction doctrine of exclusio unius est exclusio alterius, which the Arizona Supreme Court describes as “the expression of one or more items of a class and the exclusion of other items of the same class implies the legislative intent to exclude those items not so included.”  Southwestern Iron and Steel Industries, Inc. v. State of Arizona, 123 Ariz. 78, 79, 597 P.2d 981, 982 (1979).  Put more simply, if there is an omission in a statute, it is presumed deliberate.   Equally fundamental is the presumption that what the Legislature means, it will say.  Padilla v. Industrial  Comm’n, 113 Ariz. 104, 106, 546 P.2d 1135, 1137 (1976).  For this reason, the courts have often stated that the “best and most reliable index of a statute’s meaning is its language”.  Janson v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991).  And where the language is plain and unambiguous, courts generally must follow the text as written.  Mid Kansas Fed.  Sav. & Loan Ass’n v. Dynamic Dev.  Corp., 167 Ariz. 122, 128, 804 P.2d 1310, 1316 (1991).  The foregoing in mind, one would be hard-pressed to argue that A.R.S. § 36-2801 is ambiguous. 

So, what does this all mean?  Either the statute needs amendment, or there will be unavoidable and costly litigation regarding whether independent contractors can acquire dispensary agent licenses.   However, given that the Voter Protection Act requires three-fourths vote in the Legislature before the Legislature could amend the statute, amendment appears near-impossible.  So, client should think twice before relying on the more-permissive ADHS regulations, as they might just be violating the statutes.

You can contact the author at gary.smith@smithcraven.com, or visit www.smithcraven.com

The 2011 Regular Legislative Session adjourned on Wednesday, April 20, 2011 after 100 days.  During that time, 1,350 bills were introduced along with 146 memorials and resolutions.  Although 386 bills passed, 29 were vetoed for a total of 357 bills enacted.

Most of these bills will take effect on July 20, 2011. The Arizona Constitution states that the acts of the Legislature are not effective until 90 days after the final adjournment.  The 91st day after adjournment is the general effective date; however, there are certain exemptions for appropriations, bills with an emergency clause and tax and fee increases.

The Arizona State Bar’s Government Relations webpage www://azbar.org/sectionsandcommittees/governmentrelations provides a list of bills by A.R.S. Section and Chapter Number for all legislation that was enacted during the First Regular Session.  A list of legislation passed by specific Code Title with a link to each chaptered bill is also included.

While the populace voted to legalize the use of medical marijuana in Arizona, and the creation of dispensaries and cultivation sites to provide medical marijuana to such authorized users, the implementation of this new law has been left to the Arizona Department of Health Services (AZDHS) and to Cities and Counties throughout the state.  AZDHS has promulgated state-wide regulations that provide for such things as minimum distances from schools, churches, public parks and residences.  However, for dispensaries and cultivation sites, the process doesn’t stop there.   Depending upon whether they choose to establish their operations, the dispensary or cultivation business must comply with the local zoning ordinances and obtain permission to operate at the chosen location. 

The problem is that each governing body handles the zoning and use issues differently.  For example, many municipalities deem the use of the property as a medical marijuana dispensary to be automatically permitted so long as the property is zoned for commercial (or industrial) use and the property meets the state-required minimum distances from schools, parks, churches and residences.   The City of Phoenix proves the exception to this rule, though, requiring a dispensary to obtain a use permit even where the property is zoned for a commercial operation.  Further, before a medical marijauan dispensary can apply for the use permit, it has to first obtain from the City a “pre-registration,”  and among other requirements it must provide as part of the permit process a floor plan for the site and a survey map showing the property location and the location of churches, schools, parks and residences in the area.  Also, the proposed site cannot be within 1 mile of another proposed dispensary or proposed dispensary (information that likely is only known to the City’s Planning and Development department presently).

But the part that will likely catch many applicants by surprise is that the “pre-registration” is valid for 90 days, may be extended only once for an additional 30 days, and cannot be renewed.  Meanwhile, during this limited period the applicant has to obtain a use permit (which requires a hearing following a 60-day notice period), a construction permit for the required tenant improvements, a dispensary license from AZDHS, and a certificate of occupancy.  That’s a lot to accomplish in a mere 90 days.   Meanwhile, the limited number of CHAAs results in a competing process to obtain a dispensary license within the CHAA, and one of the requirements for obtaining the license is that the dispensary have approval from the governing body for the property (i.e., the City).  It appears the City of Phoenix may not be issuing “pre-approval” letters but only Use Permits, which means that the Use Permit process may have to be completed prior to submitting the application for a dispensary license.

In other words, if you hope to operate a dispensary within the City of Phoenix, you may already be too late.   It appears that some of the proposed dispensaries started the process of locating a property and culling together the requirements for the Use Permit and such many months ago, before the AZDHS regulations were finalized (and perhaps even before the City of Phoenix finalized its regulations and processes for medical-marijuana dispensaries).    The rest of the applicants are under a severe time pressure to obtain all of the requirements before the June application submission process, and may ultimately be left to wait to see whether their CHAA remains available after the first round of applicants for licenses have been processed.