CIVIC CENTER — Proceedings got underway Friday morning for an appeal of a business license denial that shut down Santa Monica’s first, and perhaps last, medical marijuana testing facility.

City Hall denied Richard McDonald a license for his business, Golden State Collective Cannabis Laboratories, in March after a review process that took over three months.

According to city officials, McDonald failed to provide proof that he and his two staff members could legally handle, store and process marijuana at the facility at 3110 Pennsylvania Ave. in Santa Monica, despite the fact that all three have recommendations to possess and consume medical marijuana.

McDonald and his attorney, Roger Diamond, argued that officials in the business license division played a “shell game” in an effort to derail Golden State Collective by first asking for different information each time they communicated with the business and then not defining what documentation it would take to satisfy the business license requirements.

“I followed your flowchart, I did what you told me to do,” McDonald said.

The appeal is part of McDonald’s larger legal strategy currently playing out in Los Angeles Superior Court.

McDonald filed a lawsuit on March 16 in an attempt to force City Hall into issuing the business a license, but the judge sent it back because McDonald hadn’t tried to get the license outright through the appeal process.

McDonald applied for a business license on Dec. 16, 2011. It was officially denied on March 21, 2012, and in the meantime he received two letters from the Department of Finance asking for proof that he could legally handle marijuana.

That’s important to McDonald’s business, which hinges on taking samples of marijuana from dispensaries and collectives and testing them.

McDonald and his team look for toxic substances, like pesticides, and also for information about the marijuana’s potency and the effects that the user can expect when they smoke or otherwise consume the pot.

The first letter asked for proof that McDonald’s business was legal under both state and federal law, an impossible standard in a country where the federal government considers marijuana a dangerous drug on par with party drugs like Ecstasy or hallucinogens like magic mushrooms.

The second sought proof from either a state or federal agency.

The department did not specify what would constitute proof, but McDonald never responded directly to the letters with any additional information, said Haley Favre-Smith, acting business license supervisor with City Hall.

When McDonald didn’t respond, she recommended to Finance Director Gigi Decavalles-Hughes that the department deny the business license application.

Whether or not McDonald’s status as a medical marijuana patient would allow him to proceed with his business is unclear.

In the March 16 lawsuit, McDonald and Diamond claimed that the testing taking place at Golden State Collective would fall under the purview of California law that allows patients with recommendations from their doctors to grow and use marijuana.

Those patients, and their primary caregivers, can get together in collectives to grow marijuana and handle certain quantities.

When the Los Angeles Superior Court sent McDonald back to go through the appeals process, it also dismissed a claim that the testing facility was an “authorized use” under those laws.

The court asserted that the case law Diamond cited in the lawsuit didn’t specifically allow for that kind of facility, and previous decisions from the California Court of Appeal have resisted attempts by pot advocates to widen the interpretation of the Compassionate Use Act, the voter-approved initiative that legalized marijuana for medical use.

It could be difficult to stretch the act to encompass a testing business, said Bruce Margolin, attorney and director for the Los Angeles chapter of the National Organization for the Reform of Marijuana Laws.

“If you’re a member of a collective, they can do all kinds of things — yoga, massage, whatever the collective wants to offer,” he said. “If they want to offer testing to make sure it’s quality controlled, that’s within the scope.”

Doing the testing for multiple dispensaries or collectives independently of those groups could be a stumbling block, Margolin said.

McDonald stated that he is willing to operate as a collective if that’s a condition of the business license, but it may not be enough for City Hall.

Sgt. Saul Rodriguez of the Santa Monica Police Department testified that medical marijuana patients only had the right to consume the drug, not to process it or alter its chemical structure in any way.

“Your client only has the right to consume the marijuana, not test it,” Rodriguez said.

If the SMPD felt that the work undertaken at the laboratory violated any law, be it local, state or federal, they would recommend against issuing the business license, he said.

Diamond and Deputy City Attorney Yibin Shen will now get the opportunity to submit closing statements. Those will be due on staggered deadlines until June 22, at which point the hearing is officially closed.

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