The state’s highest court rejected a lawsuit filed by San Diego and two other counties challenging California’s medical marijuana law on Thursday, but will be appealed to the U.S. Supreme Court, according to a county counsel.

San Diego, Merced and San Bernardino counties sued the state in February 2006. The suit claimed federal laws forbidding marijuana use and possession supercedes a state measure approved by voters in 1996 that allows dispensaries to sell the drug to people who can provide a doctor’s prescription.

The counties’ first attempt was rejected in 2006 by the San Diego Superior Court and then again by the District Court of Appeals in July. Now the California Supreme Court chose not to review the decision.

According to Senior Deputy County Counsel Thomas Bunton, San Diego County will appeal the case to the U.S. Supreme Court in the next 90 days.

Attorneys for the state said the settlement they examined that would end a county lawsuit over a San Diego redevelopment area  appears to be legal.

State Sen. Christine Kehoe asked the Attorney General’s Office earlier this month to investigate the June agreement regarding the Grantville redevelopment zone.

Under the terms of that deal, more than $60 million in redevelopment money was earmarked to be exchanged in a complicated swap that would use funds originating from Grantville to support a downtown portion of the San Diego Trolley.

In return, money slated for downtown redevelopment  would be channeled to the county for projects in the North Embarcadero. The city maintained that redevelopment tax proceeds from Grantville could be spent downtown because the Green Line trolley, which passes through Grantville, connects with downtown trolley lines.

The opponents who filed suit to stop the transfer of funds on Friday say the deal is a “sham transaction.”

In a letter yesterday, an attorney for the state wrote that critics raise “a legitimate question” about the trolley issue. However, contemporary laws prevent “judicial challenges to such expenditures.”

On another issue, namely the use of redevelopment funds to end a legal battle, the attorney wrote that it could be regarded as an end-run around changes in the law that bar such maneuvers. The city and county bypassed the provision by including $31 million in downtown funds to settle the county’s claim. Downtown redevelopment plans were passed a year before the law changed.

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