Pot club, even if illegal, can collect stolen funds, court rules

Medical marijuana dispensaries operate in violation of federal law, but they still have rights, a federal appeals court said Friday. Like the right to recover $25,000 from a lawyer who was given the money for a trust fund, then stole it and later declared bankruptcy.

Lower courts had barred the now-defunct Northbay Wellness Group of Santa Rosa from reclaiming the money from now-disbarred attorney Michael Beyries, relying on a legal doctrine known as “unclean hands,” which prevents lawbreakers from asserting their rights in court. But the Ninth U.S. Circuit Court of Appeals in San Francisco said any wrongdoing by a pot dispensary pales in comparison to the transgression of a lawyer who steals from a client.

“Allowing Beyries to avoid through bankruptcy his responsibility for misappropriating his client’s money would undermine the public interest in holding attorneys to high ethical standards,” Judge Michelle Friedland said in the 3-0 ruling reinstating Northbay’s claim against Beyries’ bankruptcy estate.

The court refused to revive Northbay’s malpractice claim for $319,000 the dispensary alleges it lost because of Beyries’ bad tax advice. Northbay’s lawyer, Lisa Gygax, said the losses drove the dispensary out of business in 2006. She said police and prosecutors declined to file theft charges, and the State Bar was slow to respond to the dispensary’s complaints against Beyries, taking until this March to disbar him.

The ruling was nonetheless a victory, Gygax said, establishing that “you have the right to an honest, loyal lawyer.” That doesn’t change because you’re a marijuana client,” she said.

There was no immediate comment from Beyries or his lawyer.

The court said Northbay entrusted Beyries, its lawyer and a member of its board of directors with $25,000 of its sales revenue for a fund to be used if any employees or patients were arrested on marijuana charges. Beyries resigned his position in June 2006 and took the money, the court said.

A Sonoma County jury later awarded damages to the dispensary for the theft and the $319,000 in losses attributed to Beyries’ tax advice. After filing for bankruptcy in 2010, the attorney won rulings freeing him from most of that debt. But the appeals court said he still owes the money he stole.

Bob Egelko is a San Francisco Chronicle staff writer. E-mail: begelko@sfchronicle.com Twitter: @egelko