DISTRICT COURT, DOUGLAS COUNTY, COLORADO Court Address: 4000 Justice Way, Castle Rock, CO 80109 BOARD OF COUNTY

COMMISSIONERS OF DOUGLAS COUNTY Plaintiff, v. S.E.C.A.M., LLC; MILE HIGH MEDICAL GARDENS, LLC; and HATCH WELLNESS CENTER, LLC Defendants. Attorneys for the Board of County Commissioners of Douglas County: LANCE J. INGALLS, # 24607 KELLY DUNNAWAY, # 31896 Office of the Douglas County Attorney 100 Third Street Castle Rock, CO 80104 Phone: 303-660-7490 Fax: 303-688-9343 Email: lingalls@douglas.co.us kdunnawa@douglas.co.us Div.: COURT USE ONLY
EFILED Document CO Douglas County District Court 18th JD Filing Date: Feb 2 2011 5:42PM MST Filing ID: 35734376 Review Clerk: georgia courtright

Case No.: 2011-CV_____

COMPLAINT FOR DECLARATORY JUDGMENT PURSUANT TO C.R.C.P. 57 PLAINTIFF, the Board of County Commissioners of Douglas County (Douglas County), by and through the County Attorney, Lance J. Ingalls, hereby alleges and avers the following as its Complaint for Declaratory Judgment Pursuant to C.R.C.P. 57 against the Defendants: S.E.C.A.M. LLC; Mile High Medical Gardens, LLC and Hatch Wellness Center, LLC. PARTIES, JURISDICTION, AND VENUE 1. Douglas County is a Colorado statutory county and political subdivision of the State of Colorado responsible in part for enacting County zoning regulations and enforcing County regulations and restrictions. 2. Upon information and belief, Defendant S.E.C.A.M., LLC is a Colorado limited liability company formed with the Colorado Secretary of States office in whole or in part for growing and/or dispensing medical marijuana (MMJ) on September 11, 2009, with a principal address of 7517 E. Highway 86, Franktown, Colorado 80116 in unincorporated Douglas County.

3. Upon information and belief, Defendant Mile High Medical Gardens, LLC, is a Colorado limited liability company formed with the Colorado Secretary of States office in whole or in part for growing and/or dispensing MMJ on July 14, 2009, with a principal address 858 Happy Canyon, Suite 150, Castle Rock, Colorado 80108 in unincorporated Douglas County. 4. Upon information and belief, Defendant Hatch Wellness Center, LLC, is a Colorado limited liability company formed with the Colorado Secretary of States office in whole or in part for growing and/or dispensing MMJ on June 23, 2008, with a principal address of 3624 Highlands Ranch Parkway, Highlands Ranch, Colorado 80126 in unincorporated Douglas County. 5. Jurisdiction arises in this Court pursuant to 13-51-101, et seq., C.R.S. (2010) and C.R.C.P. 57. A declaratory judgment in this case would terminate the uncertainty or controversy giving rise to this proceeding. 6. Venue is proper in this Court pursuant to C.R.C.P. 98(c).

FACTUAL BACKGROUND AND GENERAL ALLEGATIONS THE EVOLVING MMJ LAW 7. On December 28, 2000, a Colorado Constitutional amendment became effective that allowed an affirmative defense for the violation of state criminal laws regarding marijuana for specified medical uses and limited possession of marijuana. Colo. Const. art. XVIII, 14 (the MMJ Amendment), attached hereto and incorporated herein as Exhibit A. 8. Despite the MMJ Amendment purporting to allow limited MMJ, all marijuana use and possession, even for purported medical purposes, remained illegal under federal law at that time and currently. 9. Federal law prohibits the manufacture, distribution, or dispensing, or possessing of marijuana for any reason (even medical reasons) as a Schedule I controlled substance (listed as the hallucinogenic tetrahydrocannabinols). See 21 U.S.C. 812 and 841. 10. Federal law has explicit penalties associated with the violation of these laws and has been in effect continuously since 1970. 11. The MMJ Amendment affirmative defense is only available for patients and primary care givers as those terms are defined therein, and for limited amounts of marijuana and only for medicinal purposes. Colo. Const. art. XVIII, 14(2)(a). 12. Effective July 1, 2003, Colorado adopted 25-1.5-106, C.R.S., which created the Colorado MMJ Program for the purposes of collecting fees and creating a confidential registry for patients who apply for and receive a MMJ registry identification card.

13. The MMJ Amendment did not mention or attempt to allow MMJ businesses dispensing in any form. 14. The original Colorado MMJ Program did not mention or attempt to allow dispensing of MMJ in any form, but was limited to a confidential registry for approved MMJ users and related fees. 15. Paragraph 3 of the Colorado MMJ Program was slightly amended effective July 1, 2009, leaving its original limited purpose intact. 16. On October 19, 2009, United States Department of Justice issued a publicly discussed and expected guidance and clarification statement of Department policy (the Federal Guidance Document) to United States Attorneys in certain states regarding the interaction and enforcement of federal drug enforcement law and any state law that permitted MMJ, attached hereto and incorporated herein as Exhibit B. 17. That Federal Guidance Document provided in part that DOJ drug enforcement priorities should not focus federal resources in [the target States] on individuals whose actions are in clear and unambiguous compliance with existing state law providing for the medical use of marijuana. 18. However, the Federal Guidance Document provided further that prosecution of commercial enterprises that unlawfully market and sell marijuana for profit continues to be an enforcement priority of the Department. 19. Immediately preceding and following the publishing of the Federal Guidance Document, despite the limitations of the document and the existing limitations of the MMJ Amendment, medical marijuana dispensing and growing businesses increased in number and in public visibility throughout Colorado and on a limited basis in Douglas County. 20. Effective July 1, 2010, the Colorado legislature adopted the Colorado Medical Marijuana Code. 12-43.3-101 et seq., C.R.S. (2010) (the MMJ Code). 21. The MMJ Code broadly addressed for the first time MMJ issues in Colorado and created various deadlines for compliance with some of its allowances and mandates. 22. For purposes of Colorado law, the MMJ Code contemplated commercial dispensing of MMJ as a legal use for the first time. 23. Prior to adoption of the MMJ Code, MMJ dispensaries remained illegal under State and Federal law. 24. Defendants all began their MMJ businesses prior to adoption of the MMJ Code.

25. Prior to adoption of the MMJ Code, MMJ proponents were publicly lobbying for MMJ regulation, recognition, and acceptance.

26. At that time, any MMJ business should have been aware that atypically heavy regulations may affect their businesses. 27. Prior to adoption of the MMJ Code, Defendants should have been aware that atypically heavy regulations may affect their businesses. 28. Any expectation by any Defendant that they would escape anticipated MMJ regulation would have been unreasonable. 29. The Colorado MMJ Program was substantially amended effective June 7, 2010 to reflect and compliment the adoption of the MMJ Code. 30. At the time the Defendants began their operations (June 2008-September 2009) Douglas County had in full force and effect the Douglas County Zoning Resolution (DCZR) that made no mention or allowance of MMJ businesses. 31. The version of the DCZR at all times relevant herein was a permissive zoning code which only allowed the uses specifically and explicitly delineated therein. See DCZR 206, attached hereto and incorporated herein as Exhibit C. 32. MMJ businesses were not mentioned in or allowed by the DCZR in any form in any zone district at the time the Defendants began their operations. 33. On October 20, 2009, Douglas County enacted a temporary prohibition on all MMJ dispensaries and growing operations (the Zoning Moratorium) related to all land use and zoning issues related to MMJ. Douglas County Resolution R-009-189, attached hereto and incorporated herein as Exhibit D. 34. This Zoning moratorium had been under consideration by the Board of County Commissioners for a substantial period of time prior to its adoption. 35. On October 20, 2009 when the Zoning Moratorium was adopted, upon information and belief, only the three Defendants had Douglas County MMJ dispensaries within the boundaries of unincorporated Douglas County. 36. Consistent with the purposes of the Zoning Moratorium and for some land use control in case MMJ businesses were ultimately legalized, Douglas County, on April 6, 2010, adopted zoning regulations permitting medical marijuana facilities (MMJ Zoning) in general industrial (GI) zoned areas of the County and only with a use by special review (USR) permit. Douglas County, Colo., Resolution R-010-061 (April 6, 2010), attached hereto and incorporated herein as Exhibit E. 37. Each Defendant was issued a Douglas County zoning non-conforming use letter after the Zoning Moratorium was instituted and after the MMJ Zoning was adopted. See Exhibits F, G and H, attached hereto and incorporated herein by this reference.

38. Exhibits F, G and H were written in significant part relying on information provided by Defendants. 39. Exhibits F, G and H were not local licenses or approvals.

40. The non-conforming use letters were issued in error in part because no Defendants business complied with DCZR 206. 41. The non-conforming use letters were issued in error in part because no Defendants MMJ dispensing businesses was lawful or legal under Colorado law. 42. The non-conforming use letters were issued in error in part because no Defendants MMJ dispensing businesses constituted a lawful uses of a building or structures protected under 30-28-120(1), C.R.S. 43. No Defendants MMJ dispensing businesses was lawful at the time of inception pursuant to 38-1-101(3), C.R.S. 44. No Defendant was ever in compliance with the newly adopted MMJ Zoning.

45. None of the Defendants, nor any other entity or person, ever applied for a USR permit for any medical marijuana dispensary pursuant to the April 6, 2010 adopted MMJ Zoning. 46. None of the Defendants has its MMJ dispensary within GI zoned property in unincorporated Douglas County and none of the Defendants has received a USR permit for any such operation. 47. 48. Non-conforming use is a specific legal doctrine. The non-conforming uses are limited to zoning issues.

49. The MMJ Code explicitly allowed a county to adopt a moratorium until July 1, 2011 consistent with the purposes of the MMJ Code. 50. Douglas County, on June 22, 2010 passed a resolution that among other things enacted a moratorium under the MMJ Code effective July 1, 2010. Resolution R-010-108 (June 22, 2010), attached hereto and incorporated herein as Exhibit I. 51. Prior to adoption of the MMJ Code, possession and/or sale of marijuana was criminal activity, except for the affirmative defense provided in the MMJ Amendment. See 1818-406, C.R.S. (2010). 52. Until August 1, 2010 it was explicitly unlawful for any person knowingly to manufacture, dispense, sell, distribute, or possess with intent to manufacture, dispense, sell, distribute marihuana or marihuana concentrate 18-18-406(8)(b)(I), C.R.S. (2009)

53. Pursuant to section 12-43.3-103, C.R.S. the terms medical marijuana center, medical marijuana infused products, and optional premises cultivation operations were applied to MMJ in Colorado and created legislatively expanded MMJ business under state law (Statutorily Expanded MMJ Uses). 54. The Statutorily Expanded MMJ Uses were defined in the MMJ Code as: 1) A Medical Marijuana Center which sells marijuana and marijuana infused products with the restriction that no more than 30% of its product is acquired from or for export to another facility. 12-43.3-402, C.R.S. (2010); 2) A Medical Marijuana Infused Products Manufacturer which must produce such infused products exclusively at the premises where it is permitted and may not sell any of the non infused marijuana 12-43.3-404, C.R.S. (2010); and 3) An Optional Premise Cultivation license which can only be obtained in addition to one of the preceding two licenses to allow for the cultivation of product for the conduct of its businesses. 12-43.3-403, C.R.S. (2010). 55. These terms were not included in the MMJ Amendment and were substantially different and more expansive than the MMJ Amendments affirmative defense and provision of MMJ by primary care givers. 56. Primary care givers were defined in the MMJ Amendment as a person, other than the patient and the patients physician, who is eighteen years of age or older and has significant responsibility for managing the well being of a patient who has a debilitating medical condition. Colo. Const. art. XVIII, Sec. 14(1)(f). 57. The MMJ Code did not redefine primary care giver but rather added the Statutorily Expanded MMJ Uses and other terminology not found in the MMJ Amendment. 58. The MMJ Program amendments of 2010 adopted the MMJ Amendments definition of primary care giver and further defined the terms historic limited meaning. 59. The MMJ Amendment provision and definition is, under its plain language, limited to a real person. 60. The MMJ Code expands the definition of person to include entities. 12-43.4104(13), C.R.S. 61. This MMJ Amendment provision and definition also establishes a substantial and ongoing relationship between a primary care giver and a patient, and would not permit the mere sale of MMJ from a business or from a person to a patient or separate entity. People v. Clendenin, 232 P.3d 210 (Colo. App. 2009). 62. There is no provision in the MMJ Amendment that addresses third party businesses providing MMJ by sale or otherwise to patients or primary care givers.

63. Notwithstanding the MMJ Code and related statutory changes, marijuana remains a Schedule I controlled substance in Colorado pursuant to state law under the Uniform Controlled Substances Act of 1992. 18-18-203(2)(c)(XXIII), C.R.S. COUNTY PROHIBITION 64. Douglas County incorporates by reference each and every allegation contained in paragraphs 1 through 63 of this Complaint. 65. The MMJ Code explicitly allows for a local option for counties and other local governments to prohibit the operation of medical marijuana centers, optional premises cultivation operations, and medical marijuana infused products manufacturers licenses. 12-43.3103(2)(a) and 106, C.R.S. (2010). 66. One means of deciding whether to exercise the local option to prohibit the Statutorily Expanded MMJ Uses was by a local jurisdiction vote. See 12-43.3-106, C.R.S. (2010). 67. The June 22, 2010 resolution that adopted a moratorium consistent with the MMJ Code approved an election question to allow local voters to vote on the local option. 68. As a result, unincorporated Douglas County general election ballots included Douglas County 1A which read: PURSUANT TO THE AUTHORITY GRANTED BY C.R.S. SECTION 12-43.3-106, SHALL MEDICAL MARIJUANA CENTERS, OPTIONAL PREMISES CULTIVATION OPERATIONS AND MEDICAL MARIJUANA-INFUSED PRODUCTS MANUFACTURERS LICENSES, AS THOSE TERMS ARE DEFINED IN C.R.S. SECTION 12-43.3-104, BE PROHIBITED WITHIN THE UNINCORPORATED BOUNDARIES OF DOUGLAS COUNTY, COLORADO? Yes_________ No_______

69. On November 2, 2010, unincorporated Douglas County voters determined Douglas County 1A by a vote of 34,949 for (62.06%) to 21,357 against (37.94 %) to exercise the local option and prohibit medical marijuana centers, optional premises cultivation operations, and medical marijuana infused products manufacturers licenses. A copy of the official election result is attached hereto and incorporated herein as Exhibit J. 70. The 2010 general election result became official on November 19, 2010.

71 . The Statutorily Expanded MMJ Uses are prohibited in unincorporated Douglas County as a result of the 2010 general election result for Douglas County 1A (the County Prohibition).

THE LEGAL DISPUTE 72. Douglas County incorporates by reference each and every allegation contained in paragraphs 1 through 71 of this Complaint. 73. Upon information and belief, Defendants all are or purport to be medical marijuana centers, optional premises cultivation operations, and/or medical marijuana infused products manufacturers under the provisions of the MMJ Code. 74. Upon information and belief, the Defendants want to continue operating their MMJ businesses despite the County Prohibition. 75. The MMJ Code provides in part that a person who is operating an established, locally approved business for the purpose of cultivation, manufacture, or sale of medical marijuana or medical marijuana infused-products or a person who has applied to a local government to operate a locally approved business for the purpose of cultivation, manufacture, or sale of medical marijuana or medical marijuana infused-products which is subsequently granted may continue to operate that business in accordance with any applicable state or local laws. 1243.3-103(1)(a), C.R.S. 76. However, [t]o continue operating a business or operation as described, the owner shall, on or before August 1, 2010, complete forms as provided by the department of revenue and shall pay a fee 12-43.3-103(1)(b), C.R.S. The forms mentioned in this paragraph are hereinafter referred to as the State Forms. 77. Upon information and belief Defendant Mile High Medical Gardens did not complete the State Forms as provided by the department of revenue on or before August 1, 2010. 78. It is unknown if Defendant SECAM and/or Defendant Hatch completed the State Forms on or before August 1, 2010, so upon information and belief, the County asserts that they did not. 79. proval. 80. According to a representative at the Department of Revenue, if an applicant asserted that they had local approval, the Department accepted that assertion and did not attempt to confirm with the local jurisdiction. 81. Timely filing of the State Forms with the Department did not result in issuance of any license by the State or otherwise. 82. On and after July 1, 2011, all businesses for the purpose of cultivation, manufacturer, or sale of medical marijuana or medical marijuana-infused products, shall be subject to the terms and conditions of the MMJ Code. See 12-43.3-103(2)(c), C.R.S. The State Forms required an applicant to assert that they in fact had local ap-

83. The MMJ Code requires that even previously established, locally approved businesses must apply for and go through the MMJ Code licensing process. 12-43.3-103(1)(b), C.R.S. (2010). 84. The Defendants are required under the provisions of the MMJ Code to get a local and then a state license on or before July 1, 2011, the date the MMJ Code fully takes effect, before they may legally conduct any Statutorily Expanded MMJ Uses. 12-43.3-303(5), C.R.S. (2010). 85. The state shall not issue a state license until a local licensing authority has approved an application for a local license and issued a local license. 12-43.3-305(2), C.R.S. (2010). 86. Douglas County has not issued a license to any Defendant for the purpose of conducting any Statutorily Expanded MMJ Uses. 87. Douglas County has not issued a license to any entity for the purpose of conducting any Statutorily Expanded MMJ Uses. 88. Due to the County Prohibition, a local license cannot be issued to the Defendants for purposes of conducting any of the Statutorily Expanded MMJ Uses. 89. Due to the County Prohibition, a local license cannot be issued to any person or entity for purposes of conducting any of the Statutorily Expanded MMJ Uses. 90. The state licensing authority shall also deny a state license if the premises on which the applicant proposes to conduct its business do not meet the requirements of 12-43.3305. See 12-43.3-306(1), C.R.S. (2010). 91. Under the MMJ Code, without a county license, state licensure will not be possible for any of the Defendants on or before July 1, 2011. 92. Douglas County believes the County Prohibition enacted by vote pursuant to the MMJ Code applies to all Statutorily Expanded MMJ Uses, including those of the Defendants. 93. The County Prohibition is a local law as that term is used in 12-43.3103(1)(a), C.R.S. 94. The County Prohibition terminated any Defendants ability to continue operating after November 2, 2010 from November 19, 2010 forward, the date that the 2010 general election results were certified, even if any Defendant had previously completed and timely filed the State Forms.

95. The MMJ Amendments affirmative defense does not apply to any person who is cultivating or selling MMJ unless the person is in compliance with applicable County law. 1243.3-103(2)(a), C.R.S. (2010). 96. The County Prohibition is a County law that prohibits cultivation and sale of MMJ and licensure of any medical marijuana center, medical marijuana infused products, and/or optional premises cultivation operations. 97. The Defendants cannot legally conduct any Statutorily Expanded MMJ Uses following the County Prohibition. 98. The Court can effectively resolve this legal controversy by a declaratory judgment. Board of County Commissioners, La Plata County v. Bowen/Edwards Associates, Inc., 830 P.2d 1045 (Colo. 1992). CLAIM FOR RELIEF Declaratory Judgment Pursuant to Colorado Declaratory Judgments Act and C.R.C.P 57 99. Douglas County incorporates by reference each and every allegation contained in paragraphs 1 through 98 of this Complaint. 100. finding that: A. Douglas County seeks the following disputed issues be resolved by the Court by

No Defendants MMJ dispensing businesses constituted a lawful uses of a building or structures protected under C.R.S. 30-28-120(1), C.R.S. No Defendants MMJ dispensing businesses was lawful at the time of inception pursuant to 38-1-101(3), C.R.S. Compliance with the MMJ Code is not a zoning determination. Douglas County has legally prohibited Medical Marijuana Center, Optional Premises Cultivation Operation, or Infused Products Manufacturing operations within the unincorporated areas of the County at its 2010 general election. The prohibition of Medical Marijuana Centers, Optional Premises Cultivation Operations, or Infused Products Manufacturing operations within the unincorporated areas of the County applies to each of the Defendants. Because of the County Prohibition, Douglas County may not issue a local license for any Medical Marijuana Center, Optional Premises Cultivation Operation, or Infused Products Manufacturing operation within the unincorporated areas of the County.

B.

C. D.

E.

F.

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G.

Douglas County may not certify to the State of Colorado, for purposes of obtaining state licensure or any other purpose, that any Medical Marijuana Center, Optional Premises Cultivation Operation, or Infused Products Manufacturing operation within the unincorporated areas of the County that any such operation is locally licensed and/or legally approved by the County. The Defendants must cease operations for any Medical Marijuana Center, Optional Premises Cultivation Operation, or Infused Products Manufacturing operation within the unincorporated areas of the County effective no later than July 1, 2011.

H.

WHEREAS, Douglas County respectfully requests a declaratory judgment that the Defendants must cease operating any Medical Marijuana Center, Optional Premises Cultivation Operation, or Infused Products Manufacturing operations, in unincorporated Douglas County and for any further relief the Court deems proper.

By: /s/ Lance J. Ingalls LANCE J. INGALLS, # 24607 KELLY DUNNAWAY, # 31896 Office of the Douglas County Attorney 100 Third Street Castle Rock, CO 80104 Phone: 303-660-7490 Fax: 303-688-9343 ATTORNEYS FOR BOARD OF COUNTY COMMISSIONERS OF DOUGLAS COUNTY

Plaintiffs Address: 100 Third Street Castle Rock, CO 80104

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