Canna Law Blog ™

Canna Law Blog

LEGAL SUPPORT FOR THE CANNABIS BUSINESS COMMUNITY SINCE 2010

They Said it on Marijuana, Quotable Saturday, Part XXXV

Posted in General

Our marijuana quote of the week this week comes from renowned travel guru, Rick Steves, who has been hosting meetings in Oregon (and elsewhere) to promote legalizing marijuana. This week, Mr. Steves had the following to say about marijuana:

I’m not pro-marijuana. I’m anti-prohibition and pro-smart-law. I think when our society reconsidered the laws against alcohol back in the ‘30s, they weren’t saying booze is good. They were saying the laws against the alcohol were causing more problems than the alcohol problems they were trying to address. And I see that perfectly parallel today in the prohibition of marijuana. The most dangerous thing about marijuana to me is that it’s illegal.

Steves says that his travels have shown him that this country’s approach to marijuana is mistaken, especially when taking into account how enforcement has historically targeted the poor and minorities. He favors legalization because it will mean fewer arrests and more taxes.

Steves’ comments embody what is probably the best reason to vote for marijuana legalization despite flaws in the relevant initiatives and amendments on the table in Alaska, Oregon, Florida and Washington D.C.: prohibition simply does not work. The only groups that benefit from the illegality of marijuana are criminal organizations and those police forces that want to beef up their arrest records. Why should criminal cartels get this money rather than our states? Why not free up police resources to pursue violent criminals?

As Mr. Steves points out, better (and smarter) drug policy hinges on education and control, not ignorance and indifference.

 

The Great Oregon Pot Debate

Posted in Events, Licensing, Oregon, Recreational Marijuana

On Tuesday, Portland State University sponsored the first statewide televised debate addressing marijuana legalization in Oregon. If Measure 91 passes in November, it would allow Oregonians 21 and older to possess up to eight ounces of marijuana and up to four plants, and it would legalize the entire chain of manufacture and distribution of marijuana.

You can watch the debate here.

Richard Harris, former director of Oregon’s Addictions and Mental Health services division, and Inge Fryklund, former prosecutor, presented the arguments for legalization and in support of Measure 91. One of their primary arguments supporting legalization was that a tightly regulated system will divert demand from the black market, undermining drug cartels and other illegal activity. This argument is in line with the enforcement priorities of the federal government outlined in the Cole Memo.

Those who spoke in opposition to Measure 91 argued that the measure will not adequately regulate marijuana stores and took issue with product labeling and child proof packaging requirements.

What the opposition to 91 people seem not to understand is that Measure 91 does not purport to be the be all end all of marijuana regulation in Oregon, nor will it be. The Oregon Liquor Control Commission will be charged with developing specific additional rules and regulations to govern such things as security, advertising, licensing, labeling, and packaging. It therefore makes no sense to oppose Measure 91 because of alleged shortcomings regarding these things. Measure 91 will create a tightly regulated system that will undoubtedly look different from Oregon’s current medical regime.

Fryklund made the point that supporting Measure 91 does not mean condoning the use of marijuana. She explained, “the people who are supporting Measure 91 are not pro-pot, we are pro-regulation. You can’t regulate something that is illegal.” Legalization and strict regulation create a safer system for everyone, whether they consume cannabis or not. Legalization also generates tax revenue, diverting revenue from the cartels and depositing it into the coffers of the state.

Big issues, such as the disparity in marijuana arrest rates between African Americans and Caucasians were also raised. Fryklund noted that in Oregon, African Americans are twice as likely to be arrested for marijuana charges than Caucasians.

The debate was well-attended and the audience was dynamic and we applaud this sort of open debate and especially its being televised

The vote is on November 4.

Vote yes on 91.

Washington Cannabis: Liquor Control Board Proposes New/More Rules

Posted in Licensing, Recreational Marijuana, Washington

The Washington State Liquor Control Board gave notice to the public last Friday that it is proposing more (and clarifying some) regulations for Washington’s recreational marijuana industry. Some of these proposals will be a welcome relief (like expanding the current producer plant canopy from 2 million to 8.5 million square feet and finally defining “selling price”), while others will have licensees and applicants pulling their hair out (like additional restrictions on packaging and labeling of marijuana-infused goods).

The following are the highlights of the proposed rule changes:

1. The Board plans to define “employee” as any person performing services on a licensed premises for the benefit of the licensee. This is important since many I-502 applicants have had questions regarding the definition of employees, as opposed to independent contractors.

2. The “selling price” of cannabis will be defined as “the total amount of consideration.” Important to note is that the Board will mandate that “no deduction from the total amount of consideration is allowed for the following: (a) The seller’s cost of the goods sold; (b) The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller; (c) Charges by the seller for any services necessary to complete the sale, other than delivery charges; and (d) Delivery charges.”

3. Transportation requirements will be amended to include transporting live plants. Specifically, live plants “may be transported in a fully enclosed, windowless locked trailer, or in a secured area within the inside body/compartment of a van or box truck. A secured area is defined as an area where solid or locking metal petitions, cages, or high strength shatterproof acrylic can be used to create a secure compartment in the fully enclosed van or box truck. The secure compartment in the fully enclosed van or box truck must be free of windows. Live plants may not be transported in the bed of a pickup truck, a sports utility vehicle, or passenger car.”

4. The Board plans to clarify that while processor to processor sales are exempt from the 25% excise tax, processors must pay tax on marijuana concentrates sold to retailers and retailers must pay tax on marijuana concentrates sold to consumers.

5. The Board is likely going to increase the plant canopy from 2 million to 8.5 million square feet. This could mean allowing producers to activate their additional licenses, potentially re-opening the licensing window, and allowing producers to go from the current 70% maximum production rate to full production capacity (i.e., tier 3 growers may be permitted to go from 21,000 square feet of plant canopy to the original 30,000 square feet).

6. There will be an added requirement that I-502 applicants must provide certification to the Board that their extraction equipment is a professional grade closed loop system commercially manufactured and built to codes of recognized and generally accepted good engineering practices.

7. Packaging and labeling requirements will now include marijuana concentrates. In addition, marijuana-infused products in solid form containing more than one serving must be packaged in a package and/or container that remains child resistant after opening.

The full drafts of the proposed rule changes can be found here, here, and here. If you’re an I-502 stakeholder, we urge you to review these proposed changes carefully and if you take any exception to any of them, let the Liquor Control Board know before the comment period ends on December 3, 2014.

 

California Cannabis: Get Your Regulatory Act Together

Posted in California, Federal law and policy, Legal Issues, Medical Cannabis, Recreational Marijuana

Whenever one of our cannabis business lawyers speaks on what the future of recreational marijuana legalization will look like in California, we usually start by directing everyone to the Cole Memo. The primary goal of any state attempting to legalize recreational marijuana should be to avoid federal intervention, and the best way to do that is to use the basic framework U.S. Deputy Attorney General James Cole provided in this memo.

Just last week, Cole spoke about California needing a strong regulatory system to govern the use and sale of marijuana. Cole was quoted as saying, “If you don’t want us prosecuting [marijuana users] in your state, then get your regulatory act together.” This should provide some serious incentive for California to get a comprehensive, well thought-out measure on the ballot to address marijuana regulation in 2016 at the latest.

In 1996, California became the first state to legalize medical marijuana by passing Proposition 215. In 2003, Governor Gray Davis signed Senate Bill 420, also known as the Medical Marijuana Protection Act, which established a medical ID card system administered by the Department of Health’s Medical Marijuana Program and allowed for the formation of patient collectives. Overall, however, this system is incomplete and fractured, leaving much of the California marijuana industry functioning in a legal gray area.

Particularly problematic is that California’s marijuana regulations vary widely from county to county and city to city, often making it difficult to determine the state of the law at any given time in any given location. If California wants to avoid federal government intervention it needs to establish a consistent, statewide regulatory system, supplanting the majority of regulatory power of counties and municipalities.

The Cole Memo contained eight major concerns of the federal government and made clear that states where these eight concerns are not adequately addressed will be targeted by the feds for intervention. Federal enforcement priorities detailed in the Cole Memo include preventing distribution to minors, preventing diversion of revenue from marijuana sales to criminal enterprises, gangs and cartels, preventing diversion of marijuana from states where it is legal under state law to other states, preventing marijuana activity that is a cover or pretext for the trafficking of other illegal drugs or other illegal activity, preventing violence and the use of firearms, preventing drugged driving, preventing grows on public lands, and preventing use and possession on federal property.

There are specific aspects of other recreational marijuana regimes that aim to address the concerns of the federal government. If you look at the regulations put in place by I-502 in Washington and Amendment 64 in Colorado, you will see that they were crafted with the guidelines from the Cole Memo in mind. For example, to prevent distribution to minors, I-502 requires that all marijuana businesses locate more than a thousand feet from certain restricted uses, like schools. There are minimum age requirements for consumption and tight advertising restrictions. To prevent revenue from going to criminal enterprises, gangs and cartels, I-502 mandates use of state-approved tracking software to track all inventory from seed to sale. The state also requires detailed financial reporting and auditing.

Going through each point of the Cole Memo, it is easy to see how both Washington and Colorado have implemented regulations to address the specific concerns of the federal government. Those eight points should provide the baseline for any marijuana regulatory framework California develops. Cole made it clear that the feds are specifically concerned with California’s lack of oversight and control over its marijuana industry. If California does not put in place an adequate regulatory framework for marijuana soon, the federal government is likely to intervene in a way that will not be good for either the recreational or the medical marijuana industry there.

Please note that one of our California licensed cannabis lawyers will be speaking at UC Irvine this Thursday about cannabis in California.

Florida Cannabis: Amendment 2, The Good, The Bad, and The Indifferent

Posted in Events, Florida, Medical Cannabis

As we Floridians (I grew up in Florida and received both my undergraduate and law degrees there) get closer to voting on whether to adopt Amendment 2, both the yes and no camps are interpreting the Amendment in an effort to illuminate for the public what will happen if the Amendment passes. In this post, we try to figure out what this Amendment will likely mean for Florida based on our work in multiple other medical marijuana states.  Amendment 2 itself is short, but relatively broad in scope; here are the highlights of which voters should be aware (in our opinion):

1.   “A physician licensed in Florida shall not be subject to criminal or civil liability or sanctions under Florida law for issuing a physician certification to a person diagnosed with a debilitating medical condition in a manner consistent with this section.” Contrary to what some in the “Say No On 2″ campaign believe, this provision does not license doctors to prescribe cannabis. Doctors cannot “prescribe” cannabis because it is still a Schedule I illegal substance under Federal law. Moreover, doctors can lose their medical licenses (which are overseen by the DEA) for even recommending that their patients use cannabis. Most importantly, the Amendment mandates that only licensed physicians can make a cannabis recommendation after fully documenting why their patient needs the marijuana and that marijuana is a good alternative to other drugs. This is different from California or Washington, where a “licensed health care provider” can recommend cannabis. Though Florida once had a “pill mill” epidemic, it is very unlikely that it will experience the same fate with marijuana where marijuana is still a Federally illegal substance. In addition, Floridians should trust in their own law enforcement to bust unscrupulous physicians.

2. “Debilitating Medical Condition” means cancer, glaucoma, positive status for human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS), hepatitis C, amyotrophic lateral sclerosis (ALS), Crohn’s disease, Parkinson’s disease, multiple sclerosis or other conditions for which a physician believes that the medical use of marijuana would likely outweigh the potential health risks for a patient.” If Floridians care about the recreational use of marijuana and/or its “abuse,” this is probably the most problematic provision in the Amendment. Why? Because it includes “other conditions.” Medical marijuana statutes that allow for using marijuana for chronic or intractable pain do have a tendency to lead to loopholes that allow for recreational use and to gray market tactics like phony recommendations or a medical marijuana card that never expires. Washington, California, and Oregon all allow medical cannabis for chronic pain and we cannot deny that all three states have had issues with perfectly health “patients” getting legal medical cannabis.

3. “Personal caregiver” means a person who is at least twenty-one (21) years old who has agreed to assist with qualifying patient’s medical use of marijuana and has a caregiver identification card issued by the Department. A personal caregiver may assist no more than five (5) qualifying patients at one time.” Designated care providers have been used to circumvent medical marijuana laws in multiple states that have failed to create a designated care provider registry and where the relevant statutory language allows “caregivers” to serve an infinite number of patients with no regulation or oversight by the state. But Florida is not likely going to be susceptible to that because its Amendment 2 mandates that caregivers register with the state, that the Department of Health oversee caregiver participation, and that caregivers be limited in the number of patients they can serve.

4. “Nothing in this section shall require any accommodation of any on-site medical use of marijuana in any place of education or employment, or of smoking medical marijuana in any public place.” Just like all other states that have legalized cannabis, Florida employers can still maintain zero tolerance drug policies and smoking marijuana in public places will be forbidden.

5. “Duties of the Department [of Health].” The “No on 2″ campaigners are stirring up hysteria by claiming that Florida will become like California if it implements a full medical marijuana program. California has become the wild west for marijuana because it continues to have no real state oversight of its marijuana program, but Florida cannabis will be regulated by Florida’s Department of Health. Lest anyone believe the Department of Health is not up to the task of strictly regulating medical cannabis, please check out the onerous regulations under Florida’s recently passed Charlotte’s Web law.

Though Amendment 2 is not without its flaws, it is worth passing and we urge you to vote yes on November 4th. For the reasoning behind our position on this vote, please check out Vote Yes On Florida’s Medical Marijuana Amendment 2, No Matter What.

Cannabis Promises to Keep

Posted in Business Basics, Illinois, Legal Issues, Licensing, Nevada, Washington

For most of our clients in Illinois, Nevada, and Washington, the heady days of applying for state marijuana business licenses are behind them. These states have either reviewed or are still reviewing the application submissions, which included operating plans and financials and criminal histories. In those applications, especially in competitive states, the applicants made statements about their businesses intended to make their applications more attractive to state decision makers. Sure, we’ll have a written employee training program and will have a two week regulatory education course for new hires. Of course we’ll perform ongoing financial and security reviews and keep all records on file. Yes, our compliance officer will conduct quarterly compliance audits and will update our compliance manual to prevent future problems. Oh, and we will be donating five percent of our profits to drug education programs in the local schools as well. These statements seemed relatively painless at the time; the applicants just wanted the state to say yes.

Licensees, however, need to realize that these promises are likely as enforceable as any regulation, and if you said you were going to implement something, you actually have to do it.

Most states have inspectors who will be conducting unannounced audits of your new cannabis business. These inspectors will be checking to make sure that you have complied with state rules, but their audits do not have to stop there. They likely will also include a review of whether your business has actually complied with its stated plans. No state wants to approve an applicant to operate a marijuana business based on a plan that the applicant fails to fulfill, and they state that clearly in their regulations. See Washington Administrative Code 314-55-050 (failure to operate in accordance with board approved operating plan subjects license to suspension or cancellation), Nevada Administrative Code 453A Sec. 39(3)(c)(state may suspend or revoke license for failure of medical marijuana establishment to carry out the policies and procedures in the application of the medical marijuana establishment), and Illinois Administrative Code 1290.70(g) and Section 1000.70(f) (Information and plans provided in an application become a condition of the state’s authorization. Dispensaries and cultivators have a duty to disclose any material changes to the application. Failure to comply with the conditions or requirements in the application may subject the dispensing organization or cultivation center to discipline, up to and including suspension or revocation of its authorization by the state).

So, for anyone about to open their cannabis business or who is already open for business, please take a moment to look back at your application submissions. If you promised to distribute employee safety manuals to your employees, you should do it. Now. If you said that you would maintain audited financials, get with your accountant now to plan for it. Getting your license suspended for failing to do what you said you were going to do would be an unfortunate and silly outcome, so stick with your plan. Your state said that you could start running a marijuana business because of your plan, and they will not allow you to do so if you fail to implement it.

Any questions?

Cannabis Law Myths, Part I — Retailers Are Not Liable For Bad Product

Posted in Business Basics, Legal Issues

Many myths surround cannabis laws and this is the first post we will be doing as part of an intermittent series of posts examining some of the more prevalent ones. This post focuses on the myth that cannabis retailers cannot be held liable for the defective cannabis products they sell — only the grower or processor can be.

Not true.   

Though the product liability laws in all states generally favor those not involved in manufacturing a defective product, there are circumstances when retailers can be held liable for having sold a defective product, even if they did not know about any defect. Contrary to popular belief, just because a retailer has no part in making the defective product it sold, the retailer can still be held liable for having sold it.

In about half of all states, a retailer that sells a defective product can be subject to liability for harm caused to a consumer from a defect. What this can mean for cannabis dispensaries is that they can be held liable if someone falls ill from anything sold at retail, including edibles or tinctures or whatever.

Many state laws set forth exceptions for retail sellers of products, but they do not absolve retailers of all liability. These laws typically provide that a product seller can be liable for damages caused to a consumer if the consumer’s harm was caused by the product seller’s own negligence, if the product seller made a warranty about the product and then breached that warranty, or if the product seller intentionally misrepresented the product it was selling

Beyond these affirmative acts that can inflict liability, most states also have laws rendering product sellers liable for defective products if the court deems it unlikely that the injured consumer be able to enforce a judgment against any manufacturer. In real life terms, this means that if someone is injured by a defective medible and the manufacturer of that medible cannot pay damages to the injured consumer, the retailer will be required to pay those damages, even though it did nothing wrong.

In an industry as new as cannabis it is certain that some manufacturers will succumb to insolvency, so the possibility of product liability attaching to retailers is not remote.

Bottom Line: If you are a cannabis retailer, you are wrong to assume that you cannot be held liable for defects in the products that you sell and for the injuries that result from those defects. This means that you need to be careful in vetting the manufacturers from whom you buy and the products you sell. You also should have insurance to cover worst case scenarios.

They Said It On Marijuana, Quotable Saturday, Part XXXIV

Posted in General

Back in 2001, Afroman did a song Because I Got HighThat song started out on the Internet and then went viral. It mostly dealt with the problems of smoking weed.

Last week Afroman came out with a new version of Because I Got High, with very different lyrics, this version calls for legalizing pot and extols its virtues. Though light-hearted, it does speak some interesting truths, and we analyze a bit of the song’s lyrics below.

 

“I used to drink beer and wine, but then I got high.”Cannabis is showing promising results for leading some people away from excessive alcohol consumption.

“Anxiety attacks, but then I got high. I used to take Xanax, but then I got high No more prescription pills and I know why. Because I got high, because I got high, because I got high.” A legitimate study recently found states that have legalized medical marijuana have 25 percent fewer opioid-related deaths.”

“The state made revenue, because I got high. They built a school or two, because I got high.” Both Washington and Colorado are going to bring in hundreds of millions of dollars in tax revenues from cannabis.

“I don’t have to buy from gang bangers shooting craps, if it’s legalized.” Every state that has legalized medical or recreational marijuana has strict standards aimed at preventing criminals from getting involved in a legal marijuana business. The more marijuana sold on the legal market, with the profits going into the pockets of legitimate businesspeople, the less marijuana sold on the illegal market, with the profits going into the pockets of “gang bangers.”

Don’t you agree?

Vote Against Marijuana Taxes in Washington

Posted in Legal Issues, Washington

On Washington State voting ballots this year, there is an advisory vote — Advisory Vote No. 8 to be exact — on whether Washington State cannabis businesses should receive tax breaks to which they are technically required. In other words, should marijuana taxes be different than all other taxes?

Right now, marijuana is heavily taxed in Washington. Really heavily taxed. Our firm is involved in cannabis legal matters in many states (Alaska, California, Florida, Illinois, Nevada, New York, Oregon, to name just those where our attorneys are licensed) and none of those states have or will tax cannabis businesses at a level approaching Washington. You talk about food being from farm to table, well Washington prides itself on taxing (again and again) marijuana from farm to consumer, and every single step in between.

Despite this, the Washington Legislature earlier this year acted to exclude marijuana businesses from eligibility for 36 different tax preferences for business, sales and property taxes, most of them aimed at agriculture. In other words, the legislature voted to treat marijuana differently than other crops. And the Seattle Times, in a very short editorial, thinks that this sort of discrimination is just fine.

We don’t.

The Times calls on Washington State votes to concur with the Legislature and in an upcoming advisory vote, vote to maintain the discrimination. The Seattle Times rationalizes this opinion as follows:

Good move: It makes no sense to impose steep “sin taxes” on marijuana, and then open up tax breaks intended to help farmers. Marijuana is a crop, but the legalization measure approved by voters in 2012, Initiative 502, rightly puts pot alongside alcohol as an adult indulgence that should be taxed to offset its social costs.

In closing the tax preferences for marijuana, the Legislature added $2.8 million a year in revenue, which in turn requires an advisory vote on the November ballot thanks to a 2007 initiative from anti-tax activist Tim Eyman.

The vote is meaningless, but voters should nonetheless back the Legislature’s decision to exclude marijuana tax breaks. When you see Advisory Vote No. 8 on the ballot, vote to “maintain” it.

In other words, we should advise everyone that we are okay with marijuana being excessively taxed and treated differently from other crops. And hey, your vote is meaningless anyway.

Your vote is not meaningless. This ballot measure may be meaningless, but your vote is going to tell politicians how you feel about marijuana. Therefore, we think it important that you vote and that you vote for marijuana businesses getting the same tax benefits as any other business. We think it important that you not let our elected representatives treat marijuana businesses any worse than they treat other businesses.

Vote REPEAL on Advisory Vote No. 8.

Thanks for listening.

Lawsuit To Stop Cities From Banning Marijuana

Posted in Legal Issues, Litigation, Washington

Tomorrow our cannabis lawyers will be in Chelan County Superior Court arguing to stop the City of Wenatchee from banning marijuana dispensaries within its city limits.

To grossly summarize, our position is that because Washington voters chose to legalize marijuana throughout the entire state, no city should be able to override that vote. In other words, all we are asking is that the vote of the people be honored. Far too many cities in Washington and in other states that have legalized recreational or medical cannabis are of the view that they know best and that they are not bound by state law. Our goal is to use this lawsuit to advance the cause of legalization both in Washington and in other states, by shutting down the alleged right of these cities to subvert state-wide legalization votes.

Though the laws of each state vary, we are making a copy of the brief we filed in this case available so as to help lawyers in other states (particularly states other than Washington, Alaska, California, Florida, Illinois, Nevada, New York, Oregon where we have our own licensed lawyers) to pursue similar cases, should such a case make sense.

If you want to learn more about the importance of tomorrow’s hearing, we suggest you read some or all of the articles below:

Oh, and please wish us well in this fight.