San Diego medical marijuana dispensary hit with $1.8-million fine

A Pacific Beach medical marijuana dispensary has been hit with a $1.8-million penalty for operating outside of San Diego’s zoning regulations, the largest fine against a dispensary in city history.

That more than doubles the total amount of dispensary-related judgments the city has collected to date.

On Nov. 20, San Diego County Superior Court Judge Timothy Taylor ruled against SoCal Holistic Health Inc. and the company’s president, Ryan Murphy. Besides the penalty for operating illegally, Taylor also issued a permanent injunction against the dispensary and its president, prohibiting them from having a dispensary anywhere within city limits.

“The judges are sending a message, and so are we: Marijuana dispensaries can either follow the law or they will pay a high price for their actions,” City Atty. Jan Goldsmith said in a statement Wednesday.

The dispensary will also have to reimburse the city’s code enforcement division $1,065 in investigation costs and pay a currently undetermined amount of litigation costs. A spokesman for the city attorney’s office said the dispensary waived its right to appeal.

Messages to SoCal Holistic Health’s lawyers were not returned, and Murphy did not return a phone message left with a clerk at the Pacific Beach store at 1150 Garnet Ave.

Such penalties send a message to dispensaries that the city will work with some businesses, but it wants regulations and permitting processes followed, said Chris Boudreau, a board member for the Alliance for Responsible Medicinal Access, a trade group for cannabis businesses.

But because of the lengthy permitting process to open a medical marijuana dispensary, and frustration with the way San Diego has handled the industry in the past, this case is unlikely to change the city’s medical marijuana landscape, Boudreau said.

“The city definitely sends a fearful message with this win, but when looking at the atmosphere over the past few years, I don’t know if this is really going to change the perspective of those rogue operators who feel they should proceed with a clandestine operation behind the city’s back,” he said.

Police Chief Shelly Zimmerman said the penalty shows that cooperation between law enforcement and the city’s lawyers can control dispensaries that don’t follow regulations.

“This illustrates why San Diego’s method for closing illegal marijuana dispensaries has proven so successful,” Zimmerman said in a statement.

The penalty against SoCal Holistic Health comes as the city’s medical marijuana industry shifts from dispensaries that skirted regulations and faced government crackdowns to ones that meet a long list of conditions and satisfy legal requirements before they are awarded a city permit and can open as legitimate businesses.

Last year, the City Council passed an ordinance authorizing as many as 36 dispensaries in San Diego, with no more than four in each of the nine council districts. Land-use regulations limit dispensaries to commercial and industrial zones, and require at least 1,000 feet between any two dispensaries, as well as between dispensaries and schools, playgrounds, libraries, child-care facilities, youth centers, parks and churches.

The law also requires dispensary owners to obtain conditional use permits and pay fees ranging from $8,000 to $24,000. The permits are good for five years.

So far three dispensaries have opened with the city’s blessing. The most recent, Southwest Patient Group, opened in November in San Ysidro and follows permitted dispensaries that opened in Otay Mesa and the Midway District in March and August, respectively. Others have received permits and are expected to open soon.

“Every business has to comply with zoning laws.” Goldsmith said. “You can’t open a dog kennel or a dry cleaner anywhere you like, and neither can you open a marijuana dispensary in neighborhoods where city zoning laws forbid them.”

Two hundred ninety illegal dispensaries have been closed through enforcement action since September 2011, the city attorney’s office said.

The city attorney first took action against SoCal Holistic Health in December 2014, and the business was ordered closed in February. But it remained open.

Before this case, the biggest penalty was against John Nobel, a landlord who leased properties to illegal dispensaries. In December 2014 he agreed to pay a $250,000 fine.

The city attorney’s office said it estimates the city has been awarded $3.5 million in judgments. The money goes toward city code enforcement efforts.

joshua.stewart@sduniontribune.com

Stewart writes for the San Diego Union-Tribune.