Lawyers, Gaza, and Marijuana: How a Mission District Cannabis Dispensary Fought the Feds and Won

Alcohol and marijuana do not mix. Just ask Lagunitas: In 2006, the Petaluma-based microbrewer's weekly beer tastings went on an infamous hiatus after state liquor officers discovered some of those drinking there were also smoking marijuana (let's hope ABC never pays a visit to the Zeitgeist back patio).

Regardless, Champagne was definitely popped at Shambhala Healing Center last week.

The Mission District medical cannabis dispensary is one of nine city-licensed pot clubs caught up in a federal Department of Justice crackdown. About one-third of San Francisco's permitted and taxpaying pot shops closed. Unlike all the others, Shambhala stayed and fought the feds in court.

On Dec. 8, after a judge tossed out the feds' quest to seize the dispensary's building, Shambhala became the only city pot club to fight the feds and win.

It's a first in the Bay Area. And possibly a first in all of California.

With this, the crackdown that had closed hundreds of pot shops across the state appeared to be over.

In the three years since Melinda Haag, the U.S. Attorney for Northern California, sent Shambhala's landlords a letter warning of property forfeitures unless the dispensary shut down, no new letters have gone out.

The DOJ has since told states that law-abiding cannabis businesses will be left alone, and late last week, Congress voted to deny the feds funding for any future interference with legal weed.

Many believed that the feds were halfhearted from the start and that the letters were all a bluff; seizing property seemed an unpopular and draconian move.

There's also speculation as to why and how Shambhala and shuttered pot clubs were targeted in the first place. Why did the feds choose this club rather than nearby Purple Star Collective even after Mission District merchants petitioned Haag to shut it down?

There is no official explanation for any of this. The U.S. Attorney's Office has not offered comment.

So how did Shambhala win?

Perhaps it was just that it had a good lawyer. And a Palestinian fighter.

Signs of stress are all around Khader “Al” Shawa. Four packs of American Spirit cigarettes are within arm's reach of Shambhala's co-founder and owner as he sits at his desk in the dispensary's back room. As he talks, he regularly glances at the three flat-screen monitors showing the store's surveillance feeds.

A Gaza native, Shawa went into the marijuana business after decades in fashion and hospitality. The story he tells — that he grew tired of a world of money and partying and turned to selling weed to find meaning — at times sounds like the kind of hackneyed “finding myself” bullshit former frat bros use to justify a months-long debauch across Southeast Asia.

But then he sells you on it.

For 18 months, Shawa paid rent on his Mission Street pot shop while the city processed his permit. His business was open for only a year before the feds' letter arrived in February 2012, demanding it close.

The feds told Shambhala the shop had to go, because of the children; there's a city playground and rec center about four blocks away.

The feds didn't seem to care that the rec center was closed, or that the playground served as a hangout for hipsters and neighborhood drunks. They also didn't seem to care that Shambhala had followed all of the city's rules.

“I believed I was right,” Shawa says. “I did everything by the book. So I did what I had to do.”

The dispensary's lease specifically allows for a marijuana business in compliance with state and city law. So instead of closing shop, he took the feds to court. Shawa hired Henry Wykowski, one of the three lawyers who argued a landmark federal case for marijuana in 2007, and who is considered one of the best in the business.

Shambhala's landlords were told to remove the dispensary or lose the building. But because Shambhala had a valid lease, a state judge rejected the eviction proceeding.

The feds may also have overplayed their hand.

Given the chance to take the building, the feds blinked. Instead of seizing the building as they could have done, the feds accepted a $150,000 settlement from the landlords. Once that was paid, the matter was closed. A last-minute attempt to add Shambhala and its lease to the forfeiture proceeding was rejected by a federal judge.

“We had our day in court. Justice was served. But I tell you,” he says, leaning forward across the desk, cigarette in hand, “the worst thing that can happen to you in this country is trouble with the federal government.”

That was true for a long time, for the entire marijuana industry.

But that's over now. And maybe forever.

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