L.A. Is Not S.F., Shuts Down Networked Medical Marijuana Delivery Service

Friday, December 26, 2014

In a direct YouTube appeal to the pot-smoking public, Nestdrop co-founder Michael Pycher complained that “it wasn’t exactly in our budget as an early-stage startup” to fend off attempts to shut down his medical marijuana delivery service by the Los Angeles city attorney.

It should have been.

Nestdrop, an alcohol-delivery service that launched a pot option in the summer, uses a smartphone app to bring together a network of medical marijuana dispensaries. L.A. City Attorney Mike Feuer, on the other hand, takes pride in having closed, during the past 17 months, 402 illegal dispensaries, which is what he considers Nestdrop.

Earlier this week, Superior Court Judge Robert H. O’Brien issued a temporary injunction against Nestdrop, blocking the service, after Feuer filed a lawsuit. The city attorney claimed the company is “a flagrant attempt to evade the restrictions on the unregulated and illegal delivery of marijuana by motor vehicles to homes and places of business throughout the City of Los Angeles, in blatant disregard of the strictures of Proposition D, enacted by the voters of the City in the Spring of 2013.”

Pycher says his company has nothing to do with Prop. D because it doesn’t dispense  marijuana, it just connects customers and properly-licensed dispensaries and drives the pot around.

Pycher made reference in his video to what has became a legal mantra among a new breed of startups that are challenging brick and mortar industries—and confounding regulators—by claiming not to be one of them. Airbnb, Uber and Nestdrop say they are not in the hospitality, transportation or medical marijuana business, respectively.

They would like to be thought of as just phone apps that facilitate connections between service providers and customers. They are like the Yellow Pages, not the thing listed in the Yellow Pages. Unlike brick and mortar competitors, sharing-economy startups generally don’t assure customer safety, protect employee rights, set insurance standards or collect taxes. 

That does not endear them to regulators. The courts and government at the local, state and federal level are just now beginning to grapple with the issues raised by the new business model.    

A company similar to Nestdrop, Eaze Solutions LLC, operates in San Francisco and raised $1.5 million from 40 Silicon Valley-based angel and institutional investors last month to expand. Eaze launched in July and has received a much warmer reception up north than Nestdrop.

While the judge blocked Nestdrop in the city of Los Angeles, the company will continue to offer its pot service to areas in the county where it delivers alcohol, like Beverly Hills, Inglewood and Santa Monica, while it ponders its next legal move. Nestdrop is also considering expanding―to the Bay Area.   

–Ken Broder


To Learn More:

Marijuana Delivery App Shut Down by L.A. Authorities (by Dennis Romero, LA Weekly)

No More Pot Delivery by Nestdrop, Judge Orders (by Soumya Karlamangla, Los Angeles Times)

“Uber for Pot” Eaze Raises $1.5 Million to Deliver Medical Marijuana (by Timothy Hay, Wall Street Journal)

L.A. Sues to Stop Mobile App Medical Marijuana Deliveries (by Ken Broder, AllGov California)

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