California marijuana lawWith passage of the Medical Cannabis Regulation and Safety Act (“MCRSA”) in 2015, California took a huge step towards regulating its medical cannabis industry after more than twenty years of minimal state government oversight under Proposition 215. Under the MCRSA, California medical cannabis businesses should expect a bevy of regulations spanning packaging and labeling requirements, mandatory quality assurance testing, advertising, seed to sale tracking, environmental impact restrictions, plant canopy and potency limitations, and financing and ownership restrictions. You should also expect the same level of regulation and government oversight under the Control, Regulate, and Tax Adult Use of Cannabis Act (“AUMA”), California’s legalization of recreational marijuana initiative that passed in 2016.

Though the AUMA and MCRSA are similar, they have distinct differences that will impact how cannabis licenses may be obtained and how cannabis businesses may be operated. Among other things, the AUMA and MRCSA differ on licensing timelines; priority licensing; mandatory distributorships; license categories and types; local approvals necessary before licensure by the state; ownership restrictions; residency requirements; and traceability systems. The MCRSA limits vertical integration of licensees, generally allowing cannabis licensees to hold licenses in no more than two separate categories and only in certain combinations while the AUMA has no such vertical integration restrictions.

In response to these AUMA and MCRSA conflicts, California Governor Jerry Brown recently proposed a technical fix Budget Trailer Bill. The fact sheet attached to that Bill states that as California  “moves forward with the regulation of both medicinal cannabis and adult use, one regulatory structure for cannabis activities across California is needed to maximize public and consumer safety.” Ultimately, Governor Brown’s Bill seeks to to merge the MCRSA and the AUMA into one master regulatory structure with two separate licensing tracks for medical and adult use cannabis operators. Governor Brown’s 79-page proposal generally favors the more liberal regulatory standards set out in the AUMA, and it would specifically do the following:

  1. Change the name of the AUMA to the Medicinal and Adult-Use Cannabis Regulation and Safety Act;
  2. Mandate anyone seeking to operate an adult use cannabis business apply for “A-Licenses,” and those seeking to open a medical cannabis business apply for “M-Licenses.” You can apply for both licenses and operate both kinds of businesses, but you cannot co-locate those businesses on the same premises;
  3. Remove AUMA’s requirement of “continuous residency” in California from at least January 1, 2015;
  4. Allow licensees to submit proof of local approval to the state but leave it up to local governments to ensure the license applicant is in compliance with local laws;
  5. Keep AUMA’s near total vertical integration of licenses except for testing labs, which must be independent of other licensees;
  6. Allow AUMA’s open distributor model for both medical and adult use cannabis businesses by allowing “a business to hold multiple licenses including a distribution license … [to] make it easier for businesses to enter the market, encourage innovation, and strengthen compliance with state law”;
  7. Define “applicant” as “an owner applying for a state license,” with at least a 20 percent ownership in the cannabis business or any person who participates in the “direction, control, or management” of the cannabis business.
  8. Require each cannabis business owner pass a fingerprinting and criminal background check and each applicant disclose “every person with a financial interest in the person applying for the license as required by the licensing authority”;
  9. Support the AUMA’s more liberal allowance for cultivation licenses;
  10. Add a new cultivation license — Type 1C, “specialty cottage” — which will mean California will have 20 types of cannabis business licenses;
  11. Require microbusinesses (licenses only available under the AUMA) to secure regulatory approval from the California Bureau of Cannabis Control and the California Departments of Food and Agriculture and Public Health;
  12. Mandate the AUMA and MCRSA have the same environmental protections and restrictions on licensees; and
  13. Task California’s Department of Food and Agriculture, (not its Bureau of Cannabis Control) with creating California cannabis appellation standards by January 1, 2020.

California’s Legislature must approve Governor Brown’s Bill by a two-thirds vote, and that is expected to occur (at least in some form) this summer.

California cannabis trademarkOne of the biggest hurdles for California cannabis brand owners has been the inability to secure California state trademark registrations for their marks. This has been a point of confusion for many clients who have successfully registered their trademarks in states like Washington, Oregon and Colorado, and hoped to do the same in California.

Until recently, the California state government has been steadfast in refusing to register marks used on cannabis, despite cannabis having been legal in California since 1996. This policy was rooted in Sections 14270-14272 of the Model State Trademark Law of the California Business and Professions Code (CBPC), which are simply titled “Miscellaneous.” Section 14272 states the following:

The intent of this chapter is to provide a system of state trademark registration and protection substantially consistent with the federal system of trademark registration and protection under the Trademark Act of 1946 (15 U.S.C. Sec. 1051 et seq.), as amended. To that end, the construction given the federal act should be examined as non-binding authority for interpreting and construing this chapter.

Recall that there are three ways in which a brand owner can establish trademark rights:

  1. By using the mark in connection with their goods or services (legally) in commerce;
  2. By registering the mark with the United States Patent and Trademark Office (USPTO); and
  3. By registering the mark with an appropriate state trademark registry.

California cannabis companies have, to date, needed to rely on federal trademarks registered with the USPTO (if they could get them for ancillary goods or services), and common law rights that may not even exist in California, given Section 14272 of the CBPC.

But Assembly Bill 64 will change all this. Recognizing the inconsistency between current state trademark law provisions and the new cannabis regulations, AB 64 states the following:

This bill, for purposes of marks for which a certificate of registration is issued on or after January 1, 2018, would, notwithstanding those provisions, authorize the use of specified classifications for marks related to medical cannabis and nonmedical cannabis goods and services that are lawfully in commerce under state law in the State of California.

This is great news for California cannabis companies, but there are a few things to keep in mind:

  1. State trademarks will not be available until January 1, 2018, and then only for cannabis companies that operate in compliance with California state law. Unlicensed cannabis businesses will not be eligible for California state trademark protection;
  2. The same difficulties surrounding cross-state IP licensing deals will still exist in California (see Cannabis IP Licensing: It’s Complicated); and
  3. Federal trademarks are still unavailable for goods and services that violate federal law, so developing a brand protection strategy that involves federal trademark registrations for ancillary goods, and state trademarks for cannabis goods, will still be key. See Cannabis Trademarks: Back to the Basics

Though the protection afforded by a state trademark is geographically limited to the state of registration, state trademarks do provide some level of protection greater than common law rights. And AB 64 will give California cannabis business owners much greater flexibility in developing a brand protection strategy that encompasses their cannabis products.

 

 

California cannabis San BernardinoCalifornia has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we plan to cover who is banning, who is waiting, and who is embracing California’s change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on Yuba County, and before that, Marin CountyNevada County, the City of Lynwood, the City of CoachellaLos Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Welcome to the California Cannabis Countdown.

Location. Ah, San Bernardino County, part of the fearsomely named Inland Empire. The county is located in southern California and it is the fifth most populous county in the state and the twelfth most populous county in the United States. With a geographical area covering 20,105 square miles, San Bernardino County is the largest county by area in the United States. When you fly into San Bernardino County for the first time you’ll probably take a second look at your ticket when you see Ontario as your destination. You will also notice the majestic San Gabriel Mountains and you’ll also feel the winds whipping off of them and making you wish you had driven and not flown.

History with Cannabis and Current Cannabis Laws. In 2011, the San Bernardino Board of Supervisors adopted ordinance No. 4140 banning medical marijuana dispensaries and outdoor cultivation in the Count’s unincorporated areas, with a minor exemption for one or two people to cultivate their own cannabis indoors. It wasn’t then surprising that the Board of Supervisors moved in 2016 to ban all commercial cannabis activities within San Bernardino County with ordinance 4309 (now Chapter 84.34 of the County Code). Section 84.34.040 of this new ordinance provides for the following exemptions:

The prohibition concerning commercial cannabis activity does not apply to a person with an identification card cultivating cannabis for his or her personal medical use or to a primary caregiver cultivating cannabis for the personal medical use of no more than five specified persons with identification cards, subject to the following requirements:

(a)     The cannabis is not sold, distributed, donated, or provided to any other person or entity.

(b)     A primary caregiver may only receive compensation in full compliance with Health and Safety Code § 11362.765, subdivision

(c)       Cultivation may only be conducted indoors at the private residence of the person with an identification card or the primary caregiver of the person with an identification card.

(d)       Cultivation shall be limited to no more than:

(1)         Twelve cannabis plants per person with an identification card or primary caregiver per private residence; and,

(2)       An aggregate total of 24 cannabis plants per private residence when more than one person with an identification card or primary caregiver lives at the private residence.

Proposed Cannabis Laws. Though San Bernardino County still stubbornly maintains a restrictive stance towards marijuana, the residents of the City of San Bernardino voted for Measure O on November 8, 2016. Measure O, known as the San Bernardino Regulate Marijuana Act of 2016, authorizes the City of San Bernardino to regulate both medical and recreational cannabis businesses consistent with California State law. Measure O’s implementation has however been delayed by two lawsuits asserting that its zoning restrictions too narrowly constrict the areas within the city in which a cannabis business can operate. Though it is unfortunate these lawsuits are delaying the issuance of City of San Bernardino cannabis licenses, it is at least good to see progress being made on cannabis in the Inland Empire. San Bernardino County and many of its cities still prohibit marijuana businesses but we see many other cities within the county and the rest of Inland Empire following the City of San Bernardino’s lead within the next year.

 

 

Marin County MarijuanaThough I just wrote about Marin County as part of our Cannabis Countdown series a few weeks ago, there have been major changes since then that warrant this update. Let’s start with a quick recap. In December of 2015 Marin County passed an ordinance (effective in February of 2016) giving its Board of Supervisors authority to license medical cannabis dispensaries in unincorporated Marin. This ordinance allowed up to four dispensaries in two zoned areas. Ten applications were submitted to the Marin County Board of Supervisors and open to public hearings.

I attended those meetings and left with the impression that most of the applicants were not properly prepared to deal with the public opposition they faced. The applicants were outmatched on issues like dispensary location and partner selection and they clearly had not invested sufficient time in garnering support from the local community. The County Administrator, Matthew Hymel, obviously felt the same way as he rejected all ten of the applications for a Marin County medical cannabis dispensary per the following statement:

After reviewing 10 vendor and site locations, the County Administrator has not approved any of the applications and has recommended a revised approach to licensing medical cannabis dispensaries in unincorporated areas.

After reviewing license applications and considering comments from the public, a volunteer advisory committee, and County staff, the County Administrator notified all the applicants that he was not approving their applications. Hymel said he plans to recommend that the Marin County Board of Supervisors consider a revised ordinance that would disconnect the selection of the operator from that of the location. In addition, he is recommending that the Board explore a delivery-only dispensary model to address concerns raised by residents at public meetings and via submission of written comments.

“This decision illustrates the challenge in finding the right combination of operator and location to provide patients with safe access to medical cannabis locally,” Hymel said.

The Community Development Agency (CDA) received 10 applications in designated locations where a medical cannabis dispensary could be permitted, and residents voiced opinions at three public meetings hosted this winter by CDA staff and members of the advisory committee. Of the 10 applications, eight were in the Highway 101 corridor zone and two were in the Central/West Marin zone. The 101 corridor applications included three in the Black Point area east of the Novato city limits, one in Santa Venetia near the San Rafael city limits, and four in the Tam Shoreline area between Mill Valley and Sausalito. The Central/West Marin applications included one in San Geronimo Valley and one in Marshall.

Although cannabis is considered an illegal drug by the federal government, Proposition 215 ensures that seriously ill Californians have the right to obtain and use cannabis for medical purposes upon receiving a recommendation from a physician. The County’s ordinance is consistent with the state’s Compassionate Use Act and Medical Cannabis Program. A licensed dispensary would have to be least 800 feet from schools, public parks, smoke shops, and other cannabis dispensaries to qualify for a license.

Medical cannabis dispensaries remain prohibited in unincorporated Marin, and none are open or permitted in any of the county’s towns or cities. The ordinance establishes a regulatory framework to license nonprofit patient collectives to meet the medical needs of local patients, many of whom have voiced the need for local dispensaries before the Board of Supervisors.

Though a big (perhaps fatal) setback for these ten applicants, these rejections open the door for businesses and individuals that want to operate a medical cannabis dispensary in Marin and are willing to invest the time and resources to obtain County approval. It’s important to note that 73% of Marin residents voted in favor of the Compassionate Use Act and nearly 70% approved the Adult Use of Marijuana Act so it’s clear Marin County amply supports medicinal and recreational cannabis, at least for those applicants who do not take that support for granted.

As we have often write on here, if you are looking to snare any sort of cannabis license, it is incumbent upon you (or at least your counsel) to know the sensitive local government and local populace issues in play. We’ve seen cities and counties time and time again change their minds on interim and permanent cannabis ordinances, each of which can tremendously impact our client’s bottom-lines. To position yourself to know when these changes are coming and to be able to influence them, you need to get to know your city or county council/commission’s voting agenda and make yourself a part of the local lawmaking process. Doing this can give you a place at the table in drafting or effect change on pending ordinances while at the same time enabling you to stay on top of potential and actual changes. Staying on top of local laws requires action and vigilance. If you are not going to stay alert so as to benefit your cannabis business, hire someone to do that for you.

Whenever a city or county is about to start issuing cannabis licenses for the first time, there will be a vocal part of the community that will come out forcefully against marijuana or against marijuana in their neighborhood. Fortunately, just being loud is not always going to be a winning position against a cannabis business that has spent the time engaging with the community in which it hopes to operate. There will eventually be cannabis businesses in Marin County, but first some fences need to be mended.

Sacramento cannabis permits

If you are looking to secure a California cannabis business license you should start getting ready now for some seriously tough regulatory regimes. Our cannabis lawyers have had to wade through massive bureaucratic red tape in securing marijuana business licenses for our clients in many different states and in even more counties and cities, but we see California — under its Medical Cannabis Regulation and Safety Act and its Adult Use of Marijuana Act — as likely leading the country in red tape. And of all the California counties and cities, Sacramento is right now leading the pack in tough local law marijuana regimes. Marijuana operators should expect to pay a serious premium if they want to operate in the capital of the Golden State.

On February 2, 2016, the Sacramento City Council adopted Section 17.228.127 of the Sacramento City Code allowing non-residential properties to be used for commercial cannabis cultivation with a Conditional Use Permit.  As defined in Title 8 of the City of Sacramento City Code, cannabis cultivation means “to plant, grow, harvest, dry, cure, grade or trim marijuana.”  Cannabis cultivation can only be done indoors within a fully enclosed building not visible from a public right-of-way.  

On November 22, 2016, Sacramento adopted Ordinance No. 2016-0051 to regulate marijuana cultivation businesses. Under this 44-page ordinance (among its many provisions on security, management, record keeping, signage, and general facility restrictions) cultivation permits may be issued for the following three different cultivation permit types:

  • Class A for indoor cultivation of no more than 5,000 sq. ft. of total canopy size
  • Class B for indoor cultivation of no more than 10,000 sq. ft. of total canopy size
  • Class C for indoor cultivation sites up to 22,000 sq. ft. of total canopy size

Cannabis cultivation will be allowed only in Agricultural, General Commercial, Heavy Commercial, Light Industrial, and Heavy Industrial zones.

As of April 3, 2017, prospective marijuana cultivation businesses can begin requesting appointments with the Planning Division at the Community Development Department to file for the required Conditional Use Permits (“CUP”). Contemporaneous with filing for the CUP, applicants must also file for a Business Operating Permit (BOP) with the City’s Revenue Division. Getting your CUP and BOP for cultivating marijuana will be no small task.

You will be required to provide the following for the CUP:

  1. A completed “Planning Entitlement Application”;
  2. A draft Security Plan, Community Relations Plan and Odor Control Plan;
  3. A written description of the project being proposed for development, which must include a description of the project and detailed scope of work for which the CUP review is being requested and how the project will address any potential negative
    effects on the community. A Design Concept Narrative is also required for Site Plan and Design Review entitlement.
  4. Multiple scale developmental plans that are incredibly detailed and are to include site plans with vicinity map, building elevations, landscape plans, floor plans, reduced plans, streetscape drawings, and color photos of the proposed facility, all of which are subject to a design review by the Planning Division.

You will also be required to submit the following for the BOP:

  1. A Marijuana Cultivation Business Permit Application;
  2. Proof of non-profit status (until state licenses issue in the future);
  3. A Neighborhood Responsibility Plan;
  4. A business operations plan, which must include:
    1. Business Plan;
    2. Community Relations Plan;
    3. State Licenses (once issued);
    4. Tax Compliance;
    5. Insurance;
    6. Budget;
    7. Price List;
    8. Floor Plan;
    9. Site Plan;
    10. Security Plan;
    11. Water Efficiency Plan;
    12. Lighting Plan;
    13. Odor Control Plan;
    14. Energy Efficiency Plan; and
    15. Owner’s Statement of Consent.
  5. Criminal History/Background Check Forms and fingerprinting, which apply to all “interested parties,” none of whom can be convicted felons and which Sacramento defines as follows:
    1. Persons with at least a 10% interest in the marijuana cultivation business;
    2. Partners, officers, directors, and stockholders of every corporation, limited
      liability company, or general or limited partnership that owns at least 10%
      of the stock, capital, profits, voting rights, or membership interest of the
      marijuana cultivation business or that is one of the partners in the
      marijuana cultivation business;
    3. The managers of the marijuana cultivation business; and
    4. The staff of the marijuana cultivation business.

And now for the fees–fees for the CUPs range from $16,640.24 at the Zoning Administrator Level if not making any changes to an existing building or site to $33,610.28 for Planning and Design Commission Site Plan and/or Design Review on buildings 125,000 square feet or greater. Fees for the BOP range from $9,700 for a Class A grow to $28,910 for a Class C grow. And all of these fees have corresponding renewal fees. The bottom line? It’s not going to be cheap or easy to secure a license to operate in Sacramento as a grower.

Applicants have until June 30, 2017 to submit their completed CUPs and BOPs. With the volume of information and compliance proof required, you should begin now if you want a future cultivating cannabis in Sacramento.

California cannabis lawyersIt started in Oregon with the breaking of “A Tainted High.” It then moved to Colorado with 19 marijuana and marijuana product recalls in 19 weeks in 2015. Washington then overhauled its pesticide program to prevent illegal pesticides on its regulated cannabis products (which eventually led to the state adopting recall rules). Now, California is finally learning how dangerous its cannabis can be, and its only a matter of time before California state regulators use the Medical Cannabis Regulation and Safety Act (“MCRSA“) and Adult Use of Marijuana Act (“AUMA“) to institute regulations to reduce the use of toxic and harmful marijuana pesticides.

Since none of California’s existing medical marijuana laws mandate any kind of quality assurance or pesticide testing, California cannabis patients have been taking their chances that their medicine is safe for consumption. You will be hard-pressed to find medical marijuana dispensaries in California that follow Proposition 65, which added marijuana smoke to its list of potentially cancer-causing products in 2009.

But that’s all about to change.

AB 266 of the MCSRA requires medical cannabis be tested:

Medical cannabis and medical cannabis products shall be tested by a registered testing laboratory, prior to retail sale or dispensing, as follows: Medical cannabis from dried flower shall, at a minimum, be tested for concentration, pesticides, mold, and other contaminants.
And AB 243 of the MCRSA states as follows:
The United States Environmental Protection Agency has not established appropriate pesticide tolerances for, or permitted the registration and lawful use of, pesticides on cannabis crops intended for human consumption pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.). The use of pesticides is not adequately regulated due to the omissions in federal law, and cannabis cultivated in California for California patients can and often does contain pesticide residues. Lawful California medical cannabis growers and caregivers urge the Department of Pesticide Regulation to provide guidance, in absence of federal guidance, on whether the pesticides currently used at most cannabis cultivation sites are actually safe for use on cannabis intended for human consumption.

Under the MCRSA, California’s Department of Pesticide Regulation (DPR), in consultation with the Department of Food and Agriculture (DFA), is charged with developing standards for using pesticides in cannabis cultivation and “the maximum tolerances for pesticides and other foreign object residue in harvested cannabis.” And the DPR, in consultation with the State Water Resources Control Board, must promulgate pesticide regulations for indoor and outdoor cultivating of medical cannabis equivalent to existing standards of the Food and Agricultural Code.

All of this will eventually make California the most conscientious state on both marijuana pesticides and cannabis’s impact on the environment. Each regional water board and the State Water Resources Control Board may address water waste and discharge of  pesticides and herbicides, which is far more than any other state has done, despite cannabis’s obvious environmental impacts. As far as adult use cannabis pesticide testing goes, the AUMA mandates compliance with the pesticide regulations set forth under the MCRSA by the Bureau of Medical Cannabis Regulation.

We do not yet know what California’s pesticide and testing regulations will look like in final form, but we’re sure to find out in late April when the Bureau will release its first set of draft MCRSA regulations. But our cannabis lawyer’s vast experience in regulated marijuana states tells us that you should, at minimum, expect mandatory analyses of the following:

  1. Microbiological screenings;
  2. Foreign matter inspection;
  3. Residual solvent tests; and
  4. Pesticide and other chemical residue and metals screening.

Though pricey for both the state and for marijuana businesses, mandatory cannabis testing is necessary to give California’s cannabis customers confidence in the state’s marijuana marketplace. The State of California will set the floor for consumer safety through quality assurance testing (and packaging and labeling rules) and all California marijuana businesses should prepare now for the consequences of potentially faulty testing, products liability claims (including against retailers), and start developing their own recall plans.

California Cannabis laws: Yuba CountyCalifornia has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we plan to cover who is banning, who is waiting, and who is embracing California’s change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on Marin County, and before that, Nevada County, the City of Lynwood, the City of Coachella, Los Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Welcome to the California Cannabis Countdown.

Yuba County has a very strict cannabis ordinance and a very active Sheriff’s department. Though at one point the County allowed up to 99 cannabis plants, after an influx of large-scale grows and complaints from locals about the “negative” impacts of cultivation on the community, their current regulations allow a maximum plant count of 12, regardless of acreage, and cultivation is limited to indoor, accessory structures. Attempts to change the ordinance through lawsuits and ballot measures have all failed so far.

LocationYuba County is located in California’s Central Valley along the Feather River. It was one of the original counties of California formed when California became a state. It borders Nevada, Placer, and Butte Counties, which are all popular cannabis cultivation areas. The County lies along the western slope of the Sierra Nevada and a lot of agriculture businesses are located west of the mountains and include fruit orchards, rice fields, and cattle grazing.

History with CannabisOn May 1, 2012, Yuba County adopted its first marijuana regulations under Ordinance No. 1518, which was later amended on December 18, 2012 by Ordinance No. 1522. The County’s first Marijuana Cultivation Ordinance allowed for both indoor and outdoor cultivation with maximum a plant count based on parcel size. No more than 18 plants were allowed on parcels less than one acre with up to 99 plants allowed on parcels 20 acres or more.

In 2014, following concerns from local citizens regarding the effects of marijuana cultivation and other factors, the Yuba County Board of Supervisors initiated a full review of its Marijuana Cultivation Ordinance.

On April 28, 2015, the Board passed Urgency Ordinance No. 1542, which repealed and reenacted the County’s Marijuana Cultivation Ordinance, establishing a complete ban on outdoor cultivation and allowing only limited indoor cultivation.

On June 7, 2016, voters in Yuba County voted to defeat two marijuana ballot measures. Measure A would have increased the number of medical marijuana plants that could be cultivated on parcels of land greater than one acre and allowed for cultivation of medical marijuana outdoors and within residences. Measure B would have established regulations for medical marijuana dispensaries and authorized the licensing of at least one dispensary per 20,000 residents to operate within the County, allowing four or five dispensaries based on the County’s 2015 population.

On November 8, 2016, voters in Yuba County voted to defeat Measure E, which would have allowed for commercial medical cannabis activity and established regulations for cultivation, manufacturing, distribution, and transportation of medical cannabis within the County.

Current Cannabis Laws.

 Under Section 7.40.300 of the Yuba County Ordinance Code:

  1. Outdoor cultivation on any parcel is prohibited.
  2. Cultivation within a dwelling or any other structure used or intended for human habitation is prohibited.
  3. Cultivation of more than twelve (12) marijuana plants on any parcel is prohibited. This plant limitation applies regardless of the number of qualified patients or primary caregivers residing on the parcel or participating directly or indirectly in the cultivation. Further, this limitation applies notwithstanding any assertion that the person(s) cultivating marijuana are the primary caregiver(s) for qualified patients or that such person(s) are collectively or cooperatively cultivating marijuana.

Section 7.40.310 of the Code states that cannabis cultivation in unincorporated areas of the County may only occur on parcels with an occupied, legally established dwelling and shall be contained within the defined area of cultivation in one, single residential accessory structure affixed to the real property that: (1) meets the definition of “indoor;” (2) is located on the same parcel as the dwelling of a qualified patient or primary caregiver; and (3) complies with all provisions of the County code relating to accessory structures.

An “accessory structure” is defined under the County code as a separate and permitted building located on the same parcel as the residence and must meet several criteria listed under Section 7.40.320. Certain accessory structures may also be required to be surrounded by a solid fence that complies with Section 7.40.330 of the County code.

Marijuana cultivators in Yuba County must also register with the County. The cultivation of marijuana in any quantity upon any premises in unincorporated areas of Yuba County without first registering the cultivation and paying the required fee is declared unlawful and a public nuisance under Section 7.40.340.

In addition, under Section 7.40.140, it is the duty of every real property owner, whether or not he or she is in actual possession of the property, to prevent a public nuisance from arising on, or existing upon, his or her real property.

Proposed Cannabis Laws.

There are currently no proposed laws to change the cannabis ordinance in Yuba County. Attempts last year to repeal the County’s Marijuana Cultivation Ordinance through ballot measures were all defeated by the voters.

Current Cannabis Enforcement.

Efforts to fight against the Marijuana Cultivation Ordinance in Yuba County have so far been unsuccessful. In 2016, the Yuba Patient Coalition filed a lawsuit against the County arguing the County’s ordinance is unconstitutional and discriminatory, however the judge ruled in favor the County.

Though there is a ban on all outdoor cultivation and a 12 plant cap for indoor cultivation in accessory structures, cannabis cultivation still occurs in unincorporated areas of the County in violation of current laws. In response, the County has taken enforcement actions against marijuana cultivators and their landlords. On March 16, 2017, the Yuba County Sheriff’s Department raided several indoor marijuana grows seizing over 3,600 marijuana plants. Property owners who lease property to marijuana growers in Yuba County also face penalties of $100 per plant per day until the plant is removed, which in some cases has resulted in fines of over $200,000, as well as the risk of felony convictions.

Unless and until Yuba County changes its cannabis regulations, it is not a good place for a cannabis business.

Oakland cannabis regulationsTuesday night, in a continuation of more than ten months of contentious debate and revisions, the Oakland City Council revisited and reargued the terms of its yet-to-be-implemented Equity Permit program for cannabis businesses. The program aims to address inequity in the local cannabis industry by prioritizing permit issuance to those with roots in certain identified Oakland neighborhoods that have been historically impacted by disproportionate drug law enforcement, and to members of the Oakland community that have been arrested and convicted of cannabis crimes in Oakland in the last 20 years. The law moves qualifying Equity Applicants to the front of the cannabis permitting line, and it also creates access to approximately $3.4 million in earmarked interest-free business loans and other assistance.

The law was first introduced in May 2016, but in response to community concern about how it might affect the local economy, the City Council commissioned an extensive race and equity analysis of medical cannabis regulations and scheduled another vote for early 2017. Among the most jarring of the City Council’s findings was that over the past 20 years, African Americans, particularly those living within certain Oakland police beats, have been dramatically and consistently overrepresented in cannabis-related arrests, reaching as high as 90% of all cannabis arrests in the late nineties.

Two weeks ago, the Oakland City Council approved a last-minute amendment to the program mandating that any general (non-Equity) applicant must have lived in Oakland for at least three years to get a cannabis business permit. Because Equity Applicants must already demonstrate residency and a past connection with Oakland, this amendment would have effectively placed a residency restriction on all new or existing cannabis businesses. After a motion passed 6-2 Tuesday night removing the residency requirement for general applicants, the current version (which still requires another Council vote to become law) provides that, when issuing permits for any kind of cannabis business, the City must give half (i.e. maintain a 1-to-1 ratio) of all permits issued in its initial issuance phase to “Equity Applicants,” defined as Oakland residents with an annual income at or less than 80% of the City average and who either lived in certain defined Oakland police beats for 10 of the last 20 years, or who have been convicted of a cannabis crime committed in Oakland within the last 20 years. Tuesday night’s motion also requires dispensary staff be at least 50% Oakland residents with at least half of those residents from areas identified as having high unemployment or low household incomes.

Though Oakland’s Equity Permit program has garnered praise for its stated policies and goals, it also has generated controversy—as illustrated by the lively hearing Tuesday night—particularly due to its now-withdrawn general residency requirement. Some questioned its efficacy in achieving the City’s goals, while others argued that it would benefit the City by requiring that Oakland cannabis business permits go only to those living in Oakland. The proposed residency requirement would have jeopardized any existing cannabis businesses that could not meet the residency requirement, regardless of how many jobs or how much tax revenue those entities were contributing to the local economy.

Though it is unclear what the ordinance will look like in its final form, and though the residency requirements were relaxed by Tuesday night’s revision, a residency requirement remains for Equity Applicants and dispensary staff. Because the City of Oakland intends to issue only eight cannabis dispensary licenses per year (excluding delivery-only operations), an aggrieved party may challenge the ordinance for favoring longtime residents of certain Oakland neighborhoods at the expense of newer Oakland residents and those living in other neighborhoods, or even for favoring Oaklanders over out-of-towners. Some who spoke at Tuesday night’s meeting explained how, despite having lived all of their lives in Oakland, but not in one of the identified neighborhoods or having lived in a historically disadvantaged neighborhood but not for long enough or having been forced to move out of Oakland after many years because of gentrification, they would not qualify as Equity Applicants. It is these sorts of presumably unintended consequences of the residency requirements that could lead to the program getting bogged down in legal challenges.

The Equity Permit Program’s express preference for Oakland residents over out-of-towners, as an element of its greater approach to addressing longstanding systemic racial disparity in cannabis enforcement, raises some important legal issues. We have previously touched on the constitutionality of residency requirements and the potential difficulties presented by California’s own residency requirement in Proposition 64, such as access to funding from out-of-state investors—a challenge that has been somewhat ameliorated by Oakland withdrawing its requirement that majority ownership and control of cannabis permittees must be strictly City residents.

The Privileges and Immunities Clause of the U.S. Constitution and the Dormant Commerce Clause generally prevent states from discriminating against residents of other states. When a state or local government enacts legislation that facially discriminates against nonresidents, reviewing courts will ask whether the government has a “substantial reason” for the difference in treatment, and whether the law is “closely related” to that rationale. But because cannabis is federally illegal, constitutional claims would likely be a stretch.

As California rolls out its new regulations under the Adult Use of Marijuana Act (AUMA), it will be important to watch how those laws address a state licensee’s right to do business within the state, and how local regulations interact with state law. Though the Medical Cannabis Regulation and Safety Act (MCRSA) requires local government approval before a state license can issue, the AUMA does not, but the AUMA does allow localities to enact their own regulations so long as they do not conflict with state law. It remains uncertain how the AUMA will apply to a state-licensed cannabis entity seeking to conduct business in Oakland if that entity is unable to obtain a business license from Oakland because of its residency requirements. We will be tracking the rollout of California’s new regulations and how the interplay between the state and localities like Oakland will affect cannabis businesses and the state’s soon-to-be massive regulated cannabis economy.

Editor’s Note: Daniel recently joined our firm as an attorney in our San Francisco office, where he will be focusing on mostly California cannabis real estate and dispute resolution issues.

Marin County CannabisCalifornia has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we plan to cover who is banning, who is waiting, and who is embracing California’s change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on Nevada County, and before that, the City of Lynwood, the City of Coachella, Los Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Welcome to the California Cannabis Countdown.

I’d bet most Californians would be surprised that Marin County, known for its affluence and laid back lifestyle, does not have a single licensed medical marijuana dispensary collective (though there are some delivery services). It’s been twenty years since the enactment of the Compassionate Use Act – which 73% of Marin residents approved – and Marin is still figuring out how to convert the will of its voters into practice. This resistance by Marin County elected officials to move forward on cannabis is even harder to grasp after the more recent results of the Adult Use of Marijuana Act (AUMA) vote where nearly 70% of Marin residents voted for marijuana legalization. Prior to the AUMA, the California State legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA). The MCRSA covers the comprehensive licensing and regulatory framework for medical cannabis while also granting local jurisdictions the authority to enact their own licensing requirements. Under the MCRSA, a license applicant must demonstrate local approval to secure state licensure. And under the AUMA — though licensees do not need local approval to receive a California state cannabis license, they must be in compliance with all local laws to be able to open the doors of their cannabis business. In turn, the MCRSA and the AUMA are motivating jurisdictions to act, and with the intent of its voters so clear, Marin is slowly taking steps towards local marijuana business licensing.

Medical marijuana is still banned in Marin County’s cities but some, like San Rafael and Larkspur, are gradually adopting local marijuana regulations. The Marin County Board of Supervisors – which has jurisdiction over the unincorporated areas of Marin County – has taken the lead in licensing medical marijuana entities, but not recreational marijuana businesses yet. Under its current medical marijuana ordinance, the Board has authority to issue up to four medical cannabis licenses in Marin County’s unincorporated areas. Over the past couple of months, the County held three public hearings for ten applicants vying for those four licenses.

I attended those hearings and it was clear to me that many of the applicants had not done their homework and therefore had essentially disqualified themselves from getting one of the four medical cannabis licenses. Many disqualified themselves by submitting incomplete or misleading forms. Worse yet, some disqualified themselves by having questionable business partners, which in turn incited the community’s ire — which is not something you want to do in Marin County!

These hearings also call to mind something our cannabis business lawyers are always telling our clients: be careful what you share on social media because your posts can come back to haunt you. At one of the hearings I attended, one license application faced a barrage of attacks because the applicant had partnered with someone whose social media posts glorified essentially the worst stereotypes of marijuana. This individual had Facebook and Instagram accounts glorifying guns, drugs and money, perfectly feeding into the sort of cannabis fears pot prohibitionists love to peddle. Printouts of this person’s social media posts were passed out to everyone at the hearing, both attendees like me and representatives of the Marin County Board.

As California cities and counties continue to put local regulations in place for medical and recreational marijuana operators, marijuana business applicants must start now in developing the first (and second) impressions they will be conveying on their communities, especially if you are looking to open a cannabis business in an county like Marin that is really just getting started with legal cannabis businesses.

What I saw at these Marin County hearings reinforced how critical it is for potential cannabis licensees to do their due diligence regarding the pressure points of the community in which the cannabis business will be located. For example, are you seeking to enter a community where you are likely to run into aggressive NIMBYs or one with such restrictive cannabis business regulations that it is nearly impossible to operate? See High Dive: How To Fail In The Marijuana Industry. With California’s “new” legalization comes new opportunities to find the best possible and permissible location for your new or renewed cannabis business and new opportunities to engage and educate the relevant community to alleviate concerns and misbeliefs.

Editor’s Note: Habib recently joined our firm as an attorney in our San Francisco office, where he will be focusing on mostly California cannabis regulatory and dispute resolution issues.

Los Angeles Cannabis LawsCity of Los Angeles Voters Approve Measure M. The City of Los Angeles is making moves to change its current marijuana policies, which have so far made it impossible to start and operate a new cannabis business in the City. Yesterday, voters in the City were asked to decide between two ballot measures to repeal and replace Proposition D with one of two new cannabis ordinances that both regulate and permit marijuana businesses. Both ballot measures also opened up the opportunity for the City to permit activities besides retail sales by dispensaries, including cultivation, manufacturing, transportation, testing, as well as distribution. As of last night, Measure M was officially passed by voters, making the City of Los Angeles the largest municipal cannabis market to regulate cannabis businesses. The City Council hopes to have comprehensive regulation set up by September 30, 2017, and the existing 135 dispensaries operating in compliance under Prop D will be be first in line to receive city approval under the new regime. These 135 dispensaries just became even more valuable, and the “buying and selling” of those dispensaries will no doubt continue apace. For more on that, see How to “Sell” Your California Medical Marijuana Collective.

Los Angeles County May Lift Its Cannabis Ban Today. Today the Los Angeles County Board of Supervisors will hold a regular meeting to consider a plan for closing all unlicensed medical marijuana dispensaries within unincorporated areas of the County. The details of the proposed plan have not yet been ironed out, but the Board will be reviewing a yet to be submitted report from the Sheriff, District Attorney and County Counsel. If this plan is passed, the Los Angeles County Sheriff will be tasked with shutting down about 70 medical marijuana dispensaries currently operating in the County without a license. Since passage of Proposition 64, the Los Angeles County Sheriff’s Department’s Narcotics Bureau been cracking down on illegal marijuana dispensaries popping up throughout the County.

Los Angeles County currently has a ban on almost all marijuana activities. Since 2011, the County has banned marijuana dispensaries, and in 2016, the County extended the ban to include cultivation, manufacturing, testing, and distribution activities. For more on Los Angeles County’s cannabis laws and enforcement measures, check out The California Cannabis Countdown: Los Angeles County.

On February 7, 2017, the County Board voted ahead of time to extend its current ban on medical marijuana activities as well as implement a new ban on all recreational marijuana activities. During this meeting, the Board also requested the plan to close all unlicensed dispensaries that is being considered today and requested $25 million to fund the shut-down plan.

However, during this same meeting, the Board also voted unanimously to consider allowing marijuana businesses within the County, stating they “support moving from a ban to permitting and regulating the use.” The apparent softening of marijuana policies followed by the proposed plan to shut down all unlicensed businesses has left marijuana advocates in the County confused and concerned. They recommend that instead of punishing the unlicensed businesses, the County provide clear regulations and create a pathway for current operators to obtain a license and establish legitimacy.

Based on comments made by the Board, it is unlikely Los Angeles County will keep its ban in place, though they raised concerns about the state’s ability to meet the January 1, 2018 deadline to issue recreational licenses, the concentration of dispensaries in low-income communities, and increased access to marijuana by young people.

The shift in policies in both Los Angeles County and the City of Los Angeles is a welcome change in an area where there is a great demand from cannabis patients and consumers but a long history of unfriendly cannabis laws and enforcement. Though the County may ultimately shut down its current unlicensed businesses, it does at least look as though it will at the same time begin paving the way towards a regulated and legitimate local market.

What are your thoughts?