Cannabis business lawyersRegulated industries like the cannabis industry require careful planning when drafting corporate governance documents. Boilerplate agreements fail to address many of the most important and specific issues for cannabis businesses. Whether it is a limited liability company operating agreement for an LLC or a shareholders’ agreement and bylaws for a corporation, it is a good idea to make sure your cannabis business’s governance documents address the following marijuana-specific points.

1. Licensing Cooperation. Most states that have legalized cannabis require massive amounts of paperwork to secure a cannabis industry license. In addition to mandating the company seeking the license execute documents discussing its floor-plan, its product offerings, its security policy, and overall operational plan, most states also require all of the members of the LLC and all of the corporate shareholders go through criminal and financial background checks. For example, in Washington State any financier, LLC member, or corporate shareholder must submit a personal history form detailing their criminal, residence, and employment history. There is also a financial background questionnaire requiring disclosure of virtually all assets and liabilities. This is in addition to providing bank statements for any accounts that are financing the business and going to an electronic fingerprint facility to provide fingerprints to the Washington State Liquor and Cannabis Board.

Though tedious, these things are vital to the cannabis company’s well-being. The governance documents, therefore, should usually include a clause requiring all LLC members or corporate shareholders, and all corporate officers, cooperate with all licensing and regulatory requirements the cannabis business needs for licensing approval and to continue operating legally. This may not seem like an issue at the outset, where everyone’s goal is to receive the cannabis license, but more than once our cannabis business lawyers (and yes, sometimes our cannabis litigators) have had to deal with cannabis companies that are falling apart because one of its key players becomes recalcitrant about producing all state-required information. A single member, shareholder or officer can hold up or even scuttle the licensing process by refusing to execute mandatory regulatory forms. It is easier for everyone to bind themselves at the outset to meet the regulatory burdens on individuals.

2. Regulatory Violations. Many state marijuana laws require good behavior of LLC members and corporate shareholders after the business has been licensed and is operational. The clearest requirement is that ownership of even a single share of a marijuana business is precluded for felons. If a shareholder is charged and convicted with a felony while the marijuana business license is active, that can place the business in a predicament, where it is violating regulations because a felon owns it. But there is no automatic mechanism to force a felon to exit a marijuana business. Corporate governance documents can address this in two ways: expulsion or buyout. This is slightly easier in an LLC, where more leeway is given to what the company can agree to in its operating agreement. Expulsion strips away any membership interest and dissociates the member from the cannabis business without any type of payment, whereas a buyout right gives the business the right to buy the member out at an agreed upon price or an agreed upon price formula.

3. Confidential Arbitration. As we have written before, arbitration is attractive in cannabis business contracts for many reasons, the most important of which is that it reduces the risk that the contract will be tossed out by a court as being for an illegal purpose. An added bonus of arbitration for an already licensed cannabis business is that the agreement to arbitrate can (and should) include an additional clause binding the parties to confidentiality regarding the dispute, both during and after the arbitration itself. Court cases are very public, and regulatory bodies that catch wind of your protracted legal battle may not know who is actually in charge of your regulated business, which can cause you and your business all sorts of trouble. Aggrieved shareholders and members sometimes try to use their ability to create regulatory turmoil for the cannabis business as a bargaining chip in any dispute. Avoiding that type of extortion is easier when you can point to binding requirements of confidentiality and confidential dispute resolution.

4. Calculating distributable profits under IRC 280e. Sub-chapter S corporations, as well as LLCs that elect sub-chapter S status or default to partnership status, don’t pay federal income taxes. The profits are instead allocated proportionally among the shareholders or members, and those individuals pay extra personal tax on the money. This can be a problem in marijuana businesses, where effective tax rates under IRC 280e tend to be much higher than for other businesses. All of this liability is passed on to the individual partners, regardless of the size of cash distributions over the course of the tax year.

Many companies deal with this by including mandatory tax distributions to shareholders, but those are only valuable if there is cash to distribute. Marijuana businesses are often best-served if their operating agreements require their managers to set aside sufficient capital to fund tax distributions while taking IRC 280e into account.

5. Distribution of cannabis inventory upon dissolution. When a business dissolves, its non-cash assets are usually distributed to its members or shareholders in equal proportions (though this simplifies matters greatly). Most of the time, the business is able to liquidate assets and distribute cash, but that’s not always possible, especially if it is in a hurry to dissolve for some reason. In non-marijuana businesses, the shareholders generally can take possession of the assets, including inventory. For cannabis businesses, though, it is illegal for individuals to possess the quantities of cannabis inventory that a business can possess, and it is also illegal for a cannabis business to transfer marijuana inventory outside of the licensed system. For these reasons, your cannabis business’s operating agreement or shareholders’ agreement should address what will happen to your business’s cannabis inventory that hasn’t been liquidated prior to company dissolution, as there can be some clever ways to deal with it legally. It also usually (but not always) makes sense for the shareholders or members to agree in writing that all distributions when the cannabis company dissolves should assume that any non-liquidated inventory is valueless.

RRLast week, the Oregon Land Use Board of Appeals (LUBA) ruled against a certain cross section of pot growers in the state. The Petitioners at issue wanted to grow medical marijuana on land covered by a “rural residential” zoning designation. When Jackson County adopted a zoning ordinance prohibiting such activity, the growers sued. Because LUBA sided with the County, medical marijuana grows in that jurisdiction will be limited to land zoned exclusively for farm (EFU), forest or industrial use. In that sense, the ruling is fairly narrow, although it could discourage prospective litigants in other counties on similar appeals.

As covered in the LUBA decision itself, the zoning change was consistent with Jackson County’s Comprehensive Plan and ORS 475B.500, which allows cities and counties to adopt “reasonable regulations on the operation of marijuana grow sites.” The Board found that a county keeping medical marijuana grows off rural residential land is “reasonable” for a couple of reasons, including that there are over one million acres of land in Jackson County that remain suitable for marijuana cultivation under the new ordinance.

The growers took an interesting approach to the “reasonable regulations” issue; they first argued that marijuana production is an exercise in free speech under the First Amendment of the Constitution. Due to this broad protection, the growers argued, the County’s zoning amendments would have to serve a “significant government interest” to withstand scrutiny. As you might expect, LUBA dismissed that argument quickly. More compellingly, the growers also argued that marijuana is now a “crop” under Oregon statutes, and the County did not prohibit other “crops” from being grown on rural residential land. In response, LUBA pointed to the large amount of land still  available for medical marijuana grows even outside the rural residential context.

Though not mentioned in the opinion itself, LUBA surely took note of how Jackson County entertained significant public input before adopting the zoning regulations. Local jurisdictions tend to do this ahead of controversial decisions. In theory, the jurisdictions want to gain as much public input as possible before making impactful decisions; but cynics argue that this process affords only the veneer of democracy, designed to insulate government from criticism and lawsuits. In our experience, early advocacy may be fruitful, if the approach is correct.

As further background to this case, LUBA also surely understood that farmers who had been on rural residential land prior to the ordinance can still “grandfather in” as a non-conforming use under Jackson County Code. We have worked on this issue with growers all around the state, as most local land use codes contain a section on non-conforming uses and vested rights. These concepts allow people to continue to operate as they had operated before a zoning change, even after the change occurs. As such, the only people that should be effected by this decision are those who will resist paying the fee to grandfather in, and those who had not yet begun to operate on rural residential land when the ordinance passed.

The growers in this case have vowed to fight on, which means a date in the Court of Appeals. They will argue, as they did in the press last week, that “it is hard to understand how an ordinance that stops 3,500 farmers from producing medicine for their patients is a reasonable regulation.” It is possible, but unlikely, that they will win. Meanwhile, prospective litigants around the state will have some food for thought when it comes to challenging local land use regulations.

Fortunately, there will be opportunities to distinguish the claims brought by the Jackson County growers, which are limited to a certain class of land in a certain county. This adverse decision should have only minimal impact on the Oregon cannabis industry’s momentum overall.

 

 

We’ve written extensively about cannabis trademarks and their appurtenant issues, but this will be the first time we have touched on the concept of trade dress and the benefits it can bring to a brand. Trade dress is the “overall commercial image (look and feel) of a product that indicates or identifies the source of the product and distinguishes it from those of others.” It can include the design, shape and/or configuration of a product, a product’s labeling or packaging, and, in the case of services, the “total visual image” conveyed. It can include elements such as size, shape, color and texture, to the extent those elements are non-functional. More simply put, trade dress is akin to product design.

The following are examples of trade dress that most people would quickly associate with a particular product/brand, even if the name of the brand and the product were nowhere specifically mentioned:

1. Coca Cola.
Cannabis Trade Dress

 

2. Shell Oil.

Cannabis Trade Dress

 

3. Reese’s Peanut Butter Cups.

 

Cannabis Trade Dress

 

Like trademarks, trade dress can be registered with the United States Patent and Trademark Office (USPTO) and protected from exploitation by competitors in connection with their own goods or services. And unfortunately, like trademarks, obtaining protection for trade dress used on products or services that violate the Controlled Substances Act (CSA) is not currently possible. This means that the same tactics for obtaining trademark registrations apply to trade dress – registration of marks used on ancillary products and services is key.

Trade dress protection can be obtained through both common law and federal registration, as with trademark rights; trade dress protection, however, is more difficult to obtain. An application for trade dress registration to the USPTO must include the same basic information as a trademark application, including a “description of the trade dress, identification of the product or service to be covered and payment of the appropriate fee.

For your trade dress to be protectable, it must be distinctive, in that it must be recognizable to consumers as identifying the source of your product or service (“acquired distinctiveness”), and it must be nonfunctional, in that it “cannot be essential to the use or purpose of, and [cannot] affect the cost or quality of, the product or service.” Even distinctive trade dress is not registrable if it is functional.

As with trademarks, for you to be able to assert your rights against a purported infringer, you must establish a likelihood of confusion between the infringing trade dress and your own. The similarity of the trade dress designs is considered, and the likelihood of confusion factors from trademark law are generally the same.

Remember that trade dress registration requires a showing of acquired distinctiveness, meaning that the applicant must show that from extensive use, the design has become recognizable to consumers as associated with the applicant’s goods or services. This is typically shown either by proving that the trade dress has been in continuous use for at least five years, or by providing other evidence of acquired distinctiveness. Often, however, five years of continuous use of your trade dress will be insufficient, and the examining attorney will require supplemental proof of distinctiveness, which could include the following:

  • Statements demonstrating the expense or effort the applicant has undertaken to promote the design
  • Recognition of the design in third-party media (e.g., reviews and community guides)
  • Consumer surveys
  • Consumer testimony
  • Some combination of the above or other types of evidence

Though obtaining federal protection for your trade dress is even more time consuming and difficult than obtaining federal trademark protection, it can be well worth the effort if you have a distinctive product design that meets the requirements of registrability.

vermontThis is proving to be a big year for cannabis. As a result, we are ranking the fifty states from worst to best on how they treat cannabis and those who consume it. Each of our State of Cannabis posts will analyze one state and our final post will crown the best state for cannabis. As is always the case, but particularly so with this series, we welcome your comments. We are now approaching the top of our list. The remaining states all have legalized medical marijuana. The criminal penalties in the remaining states range from bad to good, but many have decriminalized the possession of small amounts of marijuana. This week we cover state number 13: Vermont.  

Our previous rankings are as follows: 14. Rhode Island; 15. Kentucky; 16. Pennsylvania; 17.Delaware; 18. Michigan; 19. New Hampshire; 20. Ohio; 21. New Jersey; 22. Illinois; 23. Minnesota; 24. New York; 25. Wisconsin; 26. Arizona; 27. West Virginia; 28. Indiana; 29. North Carolina; 30. Utah;  31. South Carolina; 32. Tennessee; 33. North Dakota; 34.Georgia; 35. Louisiana; 36. Mississippi; 37. Nebraska; 38. Missouri; 39. Florida; 40. Arkansas; 41. Montana; 42. Iowa; 43. Virginia; 44. Wyoming; 45. Texas;  46. Kansas;  47. Alabama;  48. Idaho; 49. Oklahoma;  50. South Dakota.

Vermont

Criminal penalties. Vermont has decriminalized the possession of up to one ounce of cannabis, categorizing it as a civil violation rather than a criminal offense. Possession of 1-2 ounces earns a maximum sentence of 6 months in prison and a fine up to $500. A subsequent conviction for possession of this amount earns a maximum sentence of 2 years in prison and a fine up to $2,000. Possession of between 2 ounces and 1 pound earns a maximum of 3 years in prison and a fine up to $3,000. Possession of 1-10 pounds earns a maximum of 5 years in prison and a fine up to $100,000.  Possession of over 10 pounds earns a maximum term of 15 years in prison and a fine up to $500,000.

The sale or distribution of cannabis is punished based on weight, as follows:

  • Less than 1/2 ounce earns a maximum sentence of 2 years in prison and a fine up to $10,000.
  • 1/2 ounce to 1 pound earns a maximum sentence of 5 years in prison and a fine up to $100,000.
  • 1-50 pounds earns a maximum sentence of 15 years in prison and a fine up to $500,000.
  • Over 50 pounds earns a maximum sentence of 30 years a fine up to $1,000,000.

The penalties for the sale or distribution of cannabis increase if sold or distributed to a minor.

Medical marijuana. Vermont first legalized medical marijuana in 2004. The Therapeutic Use of Cannabis Act allows patients to possess up to two ounces of cannabis. A doctor must diagnose a patient with a debilitating medical condition. The patient must register with Department of Public Health and obtain an authorization card. A patient must establish a “bona fide health care professional-patient relationship” with the doctor authorizing marijuana use. This means that the doctor must have treated the patient for at least six months prior to recommending cannabis. However, a patient suffering from a terminal illness, cancer with distant metastases, or AIDS may establish this relationship without having to wait six months.

Vermont recently expanded the conditions that qualify a patient for medical cannabis. Patients placed in hospice care and patients suffering from chronic pain or glaucoma now qualify for medical marijuana use. The Cannabist reports that Governor Peter Shumlin had a compelling reason to expand Vermont’s medical marijuana program:

In signing the bill, Shumlin said opiate addiction has become a severe problem in Vermont and around the country. He says if much-less addictive marijuana can be used instead, that can address patients’ pain without the threat of severe addiction.

Recreational use. In 2016, the Vermont State Legislature nearly legalized the adult use of marijuana, without requiring a medical authorization. The proposed legislation was not approved during the 2016 legislative session, but lawmakers continue to research and debate further legalization. Vermont is the home state of Senator Bernie Sanders who has called for cannabis reform at the federal level. Politicians in Vermont appear to be receptive to the idea of legal cannabis.

Bottomline. Vermont has decriminalized the possession of small amounts of marijuana and its criminal penalties are relatively light. Twelve years ago Vermont legalized medical marijuana and recent changes show its lawmakers are willing to reform the program, allowing more patients to use medical marijuana. As Governor Shumlin indicated when signing the bill, Vermont is in the midst of an epidemic of opioid abuse and medical cannabis may serve as a viable alternative to addictive pharmaceuticals. If Vermont legalizes recreational marijuana it could be one of the leading states on cannabis. Unless and until that happens, it will remain just outside of the top-ten cannabis states.

 

 

hunter

Author and journalist Hunter S. Thompson is well known for supporting drug legalization, as well as for his written accounts of his own use. He served on the board of the National Organization for the Reform of Marijuana Laws (NORML) for thirty years, and his estate continues to support NORML after his death.

Thompson’s above quote on marijuana hits the nail on the head. Millions of Americans DO agree with Thompson — as do millions more internationally. But cannabis can only begin to truly be seen as a basic staple if it is legalized everywhere and people aren’t relegated to having to buy it via illegal transactions. Keeping cannabis illegal perpetuates its stigma and criminalizes its users. We must normalize marijuana in for it to be considered “basic” or “a staple,” and that can only happen through legalization.

How do you view your cannabis purchases?

Cannabis clubsBefore the wave of cannabis reform that has swept the United States over recent years, Amsterdam’s cannabis “coffee shops” were the quintessential international icon of legal cannabis consumption. Yet, even as more and more states legalize cannabis, laws allowing consumption in social establishments are all but nonexistent. Will cannabis clubs in the United States ever reach a degree of acceptance similar to Amsterdam’s coffee shops, or, better yet, be treated like bars and clubs that serve alcohol? Recent developments in Alaska and Colorado highlight both the obstacles facing social cannabis establishments and a possibly encouraging step forward for proponents of these clubs.

Alaska’s Attorney General Jahna Lindemuth recently issued an opinion declaring cannabis clubs illegal unless they are licensed as a retail cannabis dispensary. The opinion comes as several cannabis clubs have popped up in Alaska since it approved cannabis legalization. Cannabis clubs, in Alaska and elsewhere, are establishments that provide space for patrons to consume cannabis, socialize, and play games. The clubs — which do not themselves sell cannabis — operate under the theory that they fall outside the scope of the cannabis laws because they do not sell cannabis. Attorney General Lindemuth counters this view by arguing that the law prohibits consumption of cannabis at any “place of amusement or business” other than a licensed retail cannabis store. Lindemuth asserts that the clubs are commercial places of business because they typically charge an entry fee and sell snacks and other refreshments. She also contends that even if a cannabis club is not a place of business it constitutes prohibited “public” consumption if a “substantial” number of people are present. Lindemuth’s opinion effectively puts an end to cannabis clubs in Alaska unless and until its laws are changed.

Denver voters this November will decide whether to approve a measure that would allow regular businesses like bars, coffee shops, and other establishments to have indoor or outdoor spaces for cannabis consumption. These businesses would be allowed to have cannabis spaces if they first obtain a permit and, also have a sponsoring neighborhood organization or business improvement district. The sponsor would participate in the permitting process by submitting proposed conditions that regulate how the business will implement its consumption areas.

The law is pitched as a pilot program and would sunset in 2020 unless extended. Even if voters approve the measure, Denver City Attorneys have expressed concerns regarding whether it conflicts with Colorado’s Amendment 64, which does not authorize cannabis clubs. That has not stopped a handful of other Colorado towns from allowing cannabis clubs, but if Denver’s embracing social cannabis would be a game changer.

Beyond state and local cannabis laws, other challenges to social cannabis consumption loom. Most obviously, near-ubiquitous indoor smoking bans could make the most common form of cannabis consumption impossible in most jurisdictions — an obstacle well known to hookah lounges. Nonetheless, social cannabis reform could usher in an age of widespread vaporizer lounges and cannabis-infused edible restaurants. It may seem far-fetched now, but it was not too long ago legal cannabis retail stores were just as novel.

Last week, three of our California cannabis business and regulatory lawyers (Tiffany WuAlison Malsbury, and Hilary Bricken) put on a webinar regarding California’s marijuana market. Moderated by fellow cannabis corporate attorney Robert McVay, the panel covered compliance issues, licensing standards, investment, the transition from a non-profit to a for-profit entity, and MCRSA and AUMA local law requirements. You can now view the recording of that webinar for free here:

Enjoy.

California cannabisThis week, the Bureau of Medical Cannabis Regulation (BMCR) is holding its first pre-regulatory meeting for stakeholders to discuss topics related to the general licensing requirements for medical cannabis dispensaries, distributors, manufacturers, testing laboratories and transporters. The meetings will be held jointly with the Office of Medical Cannabis Safety (OMCS), which operates under the California Department of Public Health and is responsible for licensing manufacturers.

During each meeting, the agencies will provide updates on the development of medical cannabis regulations under the Medical Cannabis Regulation and Safety Act (MCRSA) and discuss issues relevant to all license types. Topics to be covered during each meeting include:

  • Owners and financial interest
  • Background checks
  • Priority for application review
  • Rehabilitation consideration factors
  • Local-government approval

Separate breakout sessions will be held for each license type. Since the breakout sessions occur at the same time, the agencies have asked that attendees only register for one session per meeting and have also asked stakeholders only register for one meeting location, which means anyone who is interested in multiple licenses types will have to pick one session to attend or send someone on your behalf.

For dispensaries, the breakout sessions will cover:

  • Subtypes of dispensary licenses
  • Employee requirements
  • Delivery requirements
  • Transaction limits

For distributors, the breakout sessions will cover:

  • Product quality assurance
  • Repurposing of medical cannabis
  • Labeling
  • Sample collection for testing purposes

For transporters, the breakout sessions will cover:

  • Shipping requirements
  • Transportation thresholds
  • Vehicle requirements

For manufacturers, the breakout sessions will cover:

  • Extraction methods
  • Minimizing incidental exposure
  • Variables in licensing fees
  • Standards or practices for quality and safety

For testing labs, the breakout sessions will cover:

  • Best practices for safety and quality
  • Analytes to test for
  • Variables in licensing fees
  • Practices or standards for statistically valid samples

Attendees will have several opportunities to provide input and the agencies state that they are interested in exploring any alternatives suggested. On their published agenda, the agencies also made sure to emphasize that any thoughts they share are not final and that neither licensing authority will be making any decisions on regulations during the meetings.

The stakeholder meetings will continue through September and October throughout California so there is still time to register, though several of the dates are already sold out. These pre-regulatory meetings are only the first step in the regulations process, however the agencies are currently still set on completing their rule-making by the end of 2017 with the goal to begin accepting applications on January 1, 2018. We will be following this process closely and will continue to provide updates as the agencies move forward, but for anyone hoping to get a state license under the new medical cannabis regulations this is the time to reassess your business plans and either provide your input or get ready to make some changes.

Los Angeles CannabisThe situation for medical marijuana collectives in the City of Los Angeles is a total tangle under Proposition D, a zoning and city registration measure meant to control and limit the number of collectives within city limits. We’ve written extensively about Proposition D (see herehere, here, here, here, here, and here), and from what we can glean, things aren’t necessarily getting better for the expansion of MMJ in the City of Angels.

Back in March of this year, California Assembly Member Reginald Sawyer-Jones, who was instrumental in securing passage of the Medical Cannabis Regulation and Safety Act (“MCRSA“), introduced AB 2385 to try and rectify MMJ in L.A. under the MCRSA.

Under the MCRSA, if your local city or county doesn’t create and issue local licenses, permits, or authorizations for operation under the MCRSA, the state of California has no obligation to license you because both a local and a state license are required to operate legally under the MCRSA. Proposition D is not a licensing measure and Los Angeles hasn’t created any local MCRSA licenses yet. In addition, Los Angeles gets its own special carve-out from normal MCRSA licensing standards (under AB 266):

Issuance of a state license or a determination of compliance with local law by the [state] shall in no way limit the ability of the City of Los Angeles to prosecute any person or entity for a violation of, or otherwise enforce, Proposition D, approved by the voters of the City of Los Angeles on the May 21, 2013, ballot for the city, or the city’s zoning laws. Nor may issuance of a license or determination of compliance with local law by the [state] be deemed to establish, or be relied upon, in determining satisfaction with the immunity requirements of Proposition D or local zoning law, in court or in any other context or forum.

AB 2385 would abolish the creation of local MCRSA licensing, permitting, or authorizations in L.A. while enforcing the status quo of Proposition D.

The bill would, among other things, prohibit state agencies in charge of MMJ licensing from “requiring a local license, permit, or other authorization [in Los Angeles], and would require the issuance of a state license, if the authorities determine, as specified, that the applicant meets all of the requirements of MCRSA and specified criteria relating to Measure D, which was approved by the voters of the City of Los Angeles at the May 21, 2013, general election.” In other words, though license applicants in Los Angeles would not need to show the state that they had secured a license, permit, or authorization from L.A. to operate under the MCRSA, state authorities would not issue licenses to L.A. operators unless they can show compliance with Proposition D. To demonstrate compliance, the City of Los Angeles will provide written or electronic notice to the licensing authority and without confirmation from the City, the state could not to issue a license to that operator.

Specifically, AB 2385 would require the following:

With regard to commercial cannabis activity in the City of Los Angeles, the [state] licensing authorities shall not require a local license, permit, or other authorization and shall issue a state license to engage in commercial cannabis activity only if the licensing authorities determine the applicant satisfies all of the requirements of [the MCRSA] and demonstrates that it meets all of the following criteria established by Measure D, approved by the voters of the City of Los Angeles at the May 21, 2013, general election:
(i) The applicant was operating in the City of Los Angeles as a medical marijuana business by September 14, 2007, as evidenced by a business tax registration certificate issued by the City of Los Angeles on or before November 13, 2007.
(ii) The applicant registered with the City of Los Angeles city clerk by November 13, 2007, in accordance with all of the requirements of the City of Los Angeles’ Interim Control Ordinance.
(iii) The applicant obtained a City of Los Angeles business tax registration for taxation as a medical marijuana collective (class L050).
AB 2385 does state that, “if the voters of Los Angeles approve an initiative, after January 1, 2016, but prior to the time the [state] begins issuing state licenses, that authorizes the City of Los Angeles to issue local licenses to medical marijuana businesses in Los Angeles, the exemption for local licensing in Los Angeles as set forth [in the MCRSA] shall be superseded by the local licensing requirements as enacted by that initiative.” So though Los Angeles may never issue any local MCRSA licenses, permits, or authorizations, AB 2385 ensures that patients will have access to medical marijuana within the city of Los Angeles, which is important given the huge number of patients living there. However, passage of AB 2385 will also mean that only Proposition D compliant collectives will have a shot at licensure under the MCRSA, which ultimately means Los Angeles will continue on with its limited MMJ access.

Oregon marijuanaEvery week, without fail, we speak with prospective clients looking to make an appearance in Oregon’s marijuana industry. Some of these entrepreneurs boast impressive business pedigrees; others are decidedly less experienced. Still, one question we regularly field across the board is: “What’s the biggest challenge about starting a marijuana business in Oregon?” My answer is always: “Finding a location.” Once the site is secured, everything tends to fall into place.

We have written before that location is critical in any business venture, but especially so with Oregon marijuana. Currently, the state is a curious patchwork of friendly and unfriendly marijuana jurisdictions, and even in the friendly locales, zoning rules and time, place and manner restrictions may govern where pot ventures can exist. This November, local voters in 47 cities and six counties will decide whether to open those barricaded locales to marijuana businesses. So, the pool of available locations will once again expand. The question is only to what extent, and where.

Our clients who have gone through licensing know that even before applying for any class of Oregon Liquor Control Commission (OLCC) license, the applicant must submit a Land Use Compatibility Statement (LUCS), showing local approval to operate. In certain jurisdictions, and for certain zones and license types, this process may require a conditional use application that even allows for public participation. In other situations, the LUCS involves nothing more than ministerial zoning review, processed over the counter. Once the LUCS is in place, OLCC will assume the location is viable and the applicant can proceed toward licensure.

Although acquiring the LUCS presents an occasional challenge, the main hurdle remains finding a viable site in the first place. Some uses are easier than others: for example, finding land to lease for marijuana production tends to be simpler than acquiring a storefront to sell it. This is because fewer properties around the state are eligible for storefront cannabis development than for agricultural use, especially given the proximity rules (schools, other dispensaries, etc.) applicable to marijuana retailers. As a general proposition, it is also easier to secure a property if you are willing to purchase, rather than lease.

Some common advice we give to new parties is that there is no replacement for research and for pounding the pavement in search of a site that will work. Although we occasionally get leads on properties from realtors, sellers and others, there are a great number of channels that should be explored, from listing sites like loopnet to networking opportunities through organizations like the Oregon Cannabis Association and Women Grow.

Once you find a site you like, it is critical to make sure it complies with the local zoning code and that the relevant city or county does not have any rule-making on the horizon that could affect you negatively. Unfortunately, we have seen people trip on these steps, and it can be devastating. Finally, once your diligence is complete, it is also important to ensure that the timing of the close will work with everything else you are doing: no one wants to sit on an unproductive asset for a minute longer than necessary.

In all, if you are determined to participate in Oregon’s marijuana industry, you will find a location that works. At that point, and unlike with other states, you will not have to worry about residency requirements, high compliance barriers, or a lottery for licensure. Oregon is wide open and it should remain that way for the foreseeable future. The biggest step is finding a place.