california cannabis marijuana
Get your comments in by Nov. 5 and help us fix this.

On Friday, the California Bureau of Cannabis Control, California Department of Public Health, and California Department of Food and Agriculture issued 15-day notices of modification to the texts of their respective proposed regulations. The California Cannabis Portal has published links to each notice and the modified texts of the proposed regulations. For each set, the respective Department will accept written comments submitted by November 5, 2018.

And to all parties currently engaging in intellectual property (IP) licensing or manufacturing deals as or with a non-licensee, you should most definitely submit your written comments if you want to be able to keep those deals alive. The modifications to the text of the proposed regulations include the following:

5032. Designated M and A Commercial Cannabis Activity

(a) All commercial cannabis activity shall be conducted between licensees. Retail licensees, licensed retailers and licensed microbusinesses authorized to engage in retail sales may conduct commercial cannabis activity with customers in accordance with Chapter 3 of this division.

(b) Licensees shall not conduct commercial cannabis activities on behalf of, at the request of, or pursuant to a contract with any person that is not licensed under the Act. Such prohibited commercial cannabis activities include, but are not limited to, the following:

(1) Procuring or purchasing cannabis goods from a licensed cultivator or licensed manufacturer.

(2) Manufacturing cannabis goods according to the specifications of a non-licensee.

(3) Packaging and labeling cannabis goods under a non-licensee’s brand or according to the specifications of a non-licensee.

(4) Distributing cannabis goods for a non-licensee.

These regulations would seemingly prohibit most, if not all, IP licensing agreements where the licensor is not licensed by the state, given that such licensing deals call for the licensee’s use of the licensed IP to manufacture particular goods, often utilizing the licensor’s proprietary techniques, recipes or trade secrets. Section (b)(3) above describes exactly what a licensee does under a trademark licensing agreement where the licensor does not possess its own manufacturing license from the state: “packaging and labeling cannabis goods under a non-licensee’s brand or according to the specifications of a non-licensee.”

Until Friday, there was nothing in the proposed regulations prohibiting a non-licensed third-party from engaging in these types of licensing deals, which we have written about extensively. Under those proposed regulations, a non-licensed entity entering into a licensing or manufacturing deal and taking a royalty from a licensed entity would need to be disclosed to the state as a party with a financial interest in a licensee but would not need to obtain a manufacturing license of their own. These kinds of deals are extremely prevalent throughout the industry, and are allowed to varying degrees in the other states in which my law firm’s cannabis business lawyers work (Washington and Oregon). For California to prohibit licensing deals involving non-licensed entities would be a major departure from what we’ve seen in other jurisdictions and would be incredibly disruptive to the cannabis industry as it currently operates.

This change would have far-reaching and unfortunate implications. Here are some examples of deals and structures that would not be allowed if this modification is ultimately adopted:

  • Licensed operators that have set up separate IP-holding companies to hold and license their intellectual property back to the operator;
  • Out-of-state cannabis companies that wish to license their existing cannabis brand to California manufacturers, but do not wish to directly engage in manufacturing in California;
  • Non-licensed third-parties that have developed technology to manufacture a cannabis product or a brand identity and wish to license that technology or brand identity to a licensed manufacturer.

The list goes on. If you have any type of licensing or manufacturing deal in place that involves both a licensed entity and a non-licensed entity, you should talk to your attorney as soon as possible to determine what the implications of this modification would be. And most importantly, you should provide written feedback immediately to the Bureau of Cannabis Control during the very short 15-day comment period expressing opposition to this modification.

california cannabis regulations
Here we go again!

This morning, the California Bureau of Cannabis Control, California Department of Public Health, and California Department of Food and Agriculture issued 15-day notices of modification to the texts of their respective proposed regulations. The California Cannabis Portal has published links to each notice and the modified texts of the proposed regulations. For each set, the respective Department will accept written comments by November 5, 2018.

Stay tuned to the Canna Law Blog for future posts analyzing modified proposed regulations, which are extensive.

california industrial hemp
For the most part, anyway.

We’ve been closely following the trajectory of SB 1409 and on September 30, 2018, Governor Brown signed the bill which will go into effect on January 1, 2019. This legislation is a huge step for California cannabis, in that it will add an industrial hemp pilot program to the California Department of Food and Agriculture’s registration system.

Currently, California law regulates the cultivation of industrial hemp, and specifies certain procedures and requirements on cultivators, not including an established agricultural research institution. Existing law defines “industrial hemp,” via the California Uniform Controlled Substances Act, as a fiber or oilseed crop, or both, that is limited to the non-psychoactive types of the plant Cannabis sativa L. and the seed produced from that plant.

Existing California law also requires that industrial hemp only be grown by those on the list of approved hemp seed cultivars. That list includes only hemp seed cultivars certified on or before January 1, 2013. Industrial hemp may only be grown as a densely planted fiber or oilseed crop, or both, in minimum acreages. Growers of industrial hemp and seed breeders must register with the county agricultural commissioner and pay a registration and/or renewal fee.

SB 1409 deletes the exclusionary requirement that industrial hemp seed cultivars be certified on or before January 1, 2013. Additionally, “industrial hemp” will no longer be defined restrictively in the California Uniform Controlled Substances Act as a fiber or oilseed crop, and the bill deletes the requirement that industrial hemp be grown as a fiber or oilseed crop, or both. We initially presumed this would allow cultivators to harvest hemp for CBD derivation, and related use, but given the recent FAQ issued by the California Department of Public Health effectively banning the sale of CBD food products, how hemp-derived CBD in California will be regulated in the future remains to be seen. We are certain this is an issue that will be taken up by the state during the rule-making process.

SB 1409 also authorizes the state Department of Food and Agriculture to carry out, pursuant to the federal Agricultural Act of 2014, an agricultural pilot program for industrial hemp. Twinning a state-sanctioned pilot program with licensed, private cultivation is a model that has worked well in other states, like Colorado and Oregon. Given the recent expiration of the 2014 Farm Bill prior to passage of the Hemp Farming Act of 2018, however, it remains to be seen how new hemp pilot programs will be viewed and treated by the federal government. Our hope is that Congress will resolve its differences and enact the Hemp Farming Act of 2018 before the end of the year, or at least before California is able to build out and implement its own regulatory system.

Some other provisions included in SB 1409 include detailed requirements for sampling and laboratory testing of industrial hemp. The bill provides new time frames for sampling of industrial hemp and destruction of hemp that exceeds the 0.3% THC limit. Also of note, and perhaps unfortunately, the bill adds a provision to the Food and Agricultural Code giving local jurisdictions the ability to ban industrial hemp cultivation in limited circumstances:

A city of county may, upon a finding that pollen adrift from industrial hemp crops may pose a threat to licensed cannabis cultivators permitted by the city or county, prohibit growers from conducting, or otherwise limit growers’ conduct of, industrial hemp cultivation in the city or county by local ordinance, regardless of whether growers meet, or are exempt from, requirements for registration pursuant to this division or any other law.”

We’ve seen recent litigation on this issue in Oregon, so perhaps the state is trying to insulate its licensees from similar outcomes.

As stated above, we’ll be very interested to see how (and if) regulators tackle the issue of industrial hemp-derived CBD in California as they develop the new regulatory framework for hemp. In the meantime, if you are unfamiliar with the current legal status of hemp-derived CBD food products in California, we recommend reading the CDPH’s FAQ and checking out our post on the topic here. We’ll continue to monitor rule development now that the bill has passed and all hemp-related developments in California closely.

For more on industrial hemp generally (including CBD), check out our wealth of archived posts here.

cannabis marijuana IOT
Cannabis things included.

Two years ago, we published a series of posts about the cannabis industry’s embrace of the Internet of Things (“IoT”)—the network of physical objects connected through the Internet—for use in everything from garden sensors to dispensers. In that same series, we also discussed some of the potential legal risks and ramifications of using the IoT in the cannabis business—particularly some of the privacy and security risks inherent in the IoT.

Just last week, California Governor Jerry Brown approved of SB-327, the first information security law in the U.S. specifically targeting the IoT. SB-327 takes effect on January 1, 2020, and will require manufacturers of connected devices—essentially, devices in the IoT—to equip them with “reasonable” security measures. These security measures must be appropriate to the nature of the devices and information they collect and contain, and must be designed to protect the devices from unauthorized access, destruction, use, modification, or disclosure. SB-327 also requires devices that can be accessed outside of a local area network either to be equipped with a unique password or to allow a user to generate its own password.

It’s important to emphasize that SB-327 does not impose any requirements on users of IoT devices, but rather to manufacturers. So, for many businesses in the cannabis space that rely on the IoT, no real changes in operations may be necessary. Both plant-touching and ancillary marijuana companies that manufacture qualifying devices, on the other hand, may need to re-do or even re-invent their products.

It’s also important to note that the law applies to more than just California manufacturers. It applies so long as a business manufactures—either itself or through a contracting third party—qualifying devices that will be sold or offered for sale in California. Crucially, there is no threshold for product sales in California. Consequently, any manufacturer, anywhere, could be subject to SB-327.

Complying with SB-327 may be as simple as assigning randomly generated passwords to each device or re-tooling software or firmware to provide more robust security protection. But for some manufacturers—especially of devices that gather or contain sensitive information—compliance may be more involved and may require a ground-up reinvention. Consultation with counsel is always the best step towards compliance.

CBD DEA reschedule epidiolex
We’ve got ’em right here.

As soon as the Food and Drug Administration (FDA) approved Epidiolex as the first cannabis-derived prescription, we knew this day would come. Epidiolex was the first approval for a purified drug substance derived from marijuana plants, after all, and marijuana is classified as a Schedule I controlled substance in the federal Controlled Substance Act (CSA). The CSA considers marijuana to be among the most dangerous controlled substances known to man– so dangerous that a doctor cannot prescribe marijuana to treat any disease or ailment. This classification obviously would not work for Epidiolex.

Last Thursday, the Drug Enforcement Administration (DEA) rescheduled “approved cannabidiol [(CBD)] drugs” to Schedule V of the CSA. Schedule V substances have the lowest potential for abuse of all the schedules. The DEA now defines approved CBD drugs as follows:

Approved cannabidiol drugs. A drug product in finished dosage formulation that has been approved by the U.S. Food and Drug Administration that contains cannabidiol . . . derived from cannabis and no more than 0.1 percent (w/w) residual tetrahydrocannabinols.

This definition creates three conditions for a product to be an approved CBD drug. As such, it must:

  1. Be FDA approved;
  2. Be derived from cannabis; and
  3. Have less than .1% THC.

This definition is obviously limited. Right now the only CBD approved drug is Epidiolex. CBD product like oils, tinctures, lattes, and other foods are not approved CBD drugs. Why? They are not FDA approved.

Many of these CBD products are derived from cannabis. Some come from marijuana (Marijuana-CBD). Marijuana-CBD remains a Schedule I substance. Marijauna-CBD products may be legal under state law in states like Washington, Oregon, and California but their sale is only permitted through a states regulated marijuana market. These products come from licensed producers, are developed by licensed processors or manufacturers, and are sold to the public through licensed retailers or dispensaries. Marijuana-CBD products are only legal in states where they were cultivated and these products are heavily regulated at all stages of production, from seed-to-sale. Marijuana-CBD products may also contain significant levels of THC.

There is another classification of cannabis derived CBD products relevant here: CBD derived from industrial hemp (Hemp-CBD). These products arguably do not fall under Schedule I, or any other Schedule, as they are not governed by the CSA. This is because the cultivation of industrial hemp was legalize by Section 7606 of the Agricultural Act of 2014 (the 2014 Farm Bill). Industrial hemp is defined as the cannabis plant with less than .3% THC. The 2014 Farm Bill also requires that industrial hemp is cultivated under a state agricultural pilot program. This usually means that a state will issue a license or other authorization that permits the cultivation of industrial hemp. Some states also require a license to process industrial hemp into other products like Hemp-CBD.

The distribution of Hemp-CBD products is arguably legal under federal law because the 2014 Farm Bill does not explicitly limit distribution. However, the DEA, FDA, and other federal agencies issued guidance in 2016 stating that the 2014 Farm Bill did not permit the interstate transfer or commercial sale of industrial hemp. Despite this, the DEA has rarely taken any enforcement action against distributors of Hemp-CBD, because Congress has limited the DEA’s ability to use federal funds to do so and because the DEA would have to establish that the CSA does in fact cover Hemp-CBD. In oral arguments during HIA v. DEA, the DEA admitted that the 2018 Farm Bill preempted the CSA with regards to industrial hemp. Several states like Idaho prohibit the distribution of Hemp-CBD. Other states like Ohio, Michigan, and California significantly restrict the distribution of Hemp-CBD.

Even though Hemp-CBD does not fall within the CSA, Hemp-CBD products have not been approved by the FDA. This is also true of Marijuana-CBD. This means that even cannabis derived Marijuana-CBD and Hemp-CBD products containing less than .1% THC are not approved CBD drugs for lack of FDA approval. As such, it’s likely that this recent development will have little impact on business distributing CBD, other than for GW Pharma, the makers of Epidiolex who has already seen its stock value surge.

Still, there is always some risk of enforcement action against Hemp-CBD distributors, as the budgetary restriction that prevented the DEA from using funds to prosecute industrial hemp distributors expires on September 30. However, that seems unlikely given the fact that there is a strong argument that industrial hemp is not prohibited by the CSA. It is also possible that the FDA could take a more aggressive approach to limit the distribution of CBD products, but that decision seems to have little relation to the reschedule of approved CBD drugs.

If anything, the DEA’s latest CBD-action is a sign of how the times-are-a-changin’. It’s the first time a cannabis derived product has fallen outside of Schedule I, after all.

california cannabis data privacy
California is taking steps to safeguard canna consumers.

Yesterday, California Governor Jerry Brown signed a new piece of privacy legislation—AB-2402—which places restrictions on how licensed cannabis companies in California share information about their customers.

AB-2402 is significant in that it prevents licensed cannabis businesses from sharing expansive categories of customers’ personal information with third parties—except in limited circumstances in connection with payments, or where a customer has consented to sharing his or her data with a third party. Notably, AB-2402 prohibits licensed cannabis businesses from discriminating against or refusing service to consumers who do not consent to disclosure of their personal information to third parties.

So what kinds of personal information is AB-2402 designed to protect? The bill incorporates the definition of “personal information” from existing California law, which definition includes a person’s first name or initial and last name in combination with a (1) Social Security number, (2) driver’s license number, (3) financial account number in combination with a security or access code, (4) medical information, or (5) health information. “Personal information” can also include a username or email address in combination with a password, or with a security question and answer that would permit access to an online account.

AB-2402 is also significant in that it expands the legal definition of “medical information” in the cannabis context to include medical marijuana identification cards, which also cannot be disclosed except as noted above (and also to certain government officials if necessary to perform certain official duties). In fact, AB-2402 goes so far as to deem licensed cannabis businesses that receive medical marijuana identification cards to be providers of health care—but only for purposes of the Confidentiality of Medical Information Act—which could subject businesses to penalties for improper use or disclosure of information.

The law is welcomed by many privacy advocates, including the Electronic Frontier Foundation, which cited surveys by Politifact which had found that a number of cannabis dispensaries kept broad categories of customer information. It is understandable why privacy advocates support stronger consumer rights in the cannabis industry. Cannabis is, after all, still illegal at the federal level, and so it is not difficult to imagine why customers would want their information to be kept under lock and key.

At the same time, compliance with this new privacy law may appear difficult to cannabis companies. That said, the law is not a totally new concept—California already requires companies (and not just cannabis companies) to provide notification to affected individuals in the event that similar information is acquired by a third party without authorization. AB-2404 simply modifies and expands existing obligations to encompass almost any kind of third-party information sharing.

Complying with AB-2402 will likely require companies to take stock of and retool their data security and sharing practices, and to retrain employees. This is not an impossible task, but it’s one that companies should place at the top of their agenda. After all, California is the state with (arguably) the most intense focus on protecting citizens’ personal information.

AB-2402 was only just signed, and its text does not identify when it takes effect.  We’ll keep you posted on any updates.

california marijuana cannabis SB1459
Provisional licensing would benefit state AND industry.

The California legislature is currently finalizing a bill (SB-1459) which would establish a provisional licensing regime for California cannabis businesses. The bill moved into “enrolled” status late last week, which means that SB-1459 has been approved by both houses of the state legislature and is being proofread to ensure all amendments were properly inserted. Once SB-1459 is “correctly engrossed”, only a signature from Governor Brown is needed for the bill to take immediate effect. In all, provisional licensing seems imminent.

These pending, provisional licenses would provide holders with a year-long, non-renewable, provisional license to operate after filing completed license applications. These provisional licenses would alleviate pressures on licensing agencies caused by the backlog of pending applications. Provisional licenses would also allow holders to continue operating, rather than potentially ceasing operations later this year. On that point, the SB-1459 legislative findings are compelling:

The significant number of cultivation license applications pending with local authorities that do not have adequate resources to process these applications before the applicants’ temporary licenses expire on January 1, 2019, threatens to create a major disruption in the commercial cannabis marketplace.”

Cannabis licensing in California is a relatively recent phenomenon and is a requirement for any cannabis business operating in the state. Under current law, licensing authorities may issue temporary licenses pending the approval of final licenses. Temporary licenses can be issued for 120-day periods, with certain allowable extensions. According to the Senate Floor Analysis of SB-1459, the temporary license was intended as an intermediary step while local and state regulatory bodies themselves came into compliance with California’s new law. Notably, under the current law, temporary licenses cannot be issued after December 31, 2018.

Perhaps as expected, thousands of cannabis businesses submitted license applications this year. Many of these licenses were sought in Humboldt, Monterey, and Santa Barbara counties, where regulators were not prepared to (and have not been able to) address the flurry of applications. As noted in the Senate Analysis accompanying SB-1459, the barrage of environmental disasters in California—particularly in Santa Barbara—have contributed to the delay in the process. Thus, of the thousands of applications that have been submitted to date, many have yet to be completed.

Originally introduced in February 2018 as a method to bill concerning agricultural reporting issues, SB-1459 underwent substantial revisions during the legislative process. SB-1459 is now almost an entirely new piece of legislation and contains the provisional licensing scheme intended to alleviate the pressures identified above. If the current SB-1459 is codified into law, it would permit licensing authorities—in their sole discretion—to issue provisional licenses for a non-renewable period of 12 months. These licenses could be issued to applicants that hold or even held a temporary license for the same premises and same commercial cannabis activity sought to be licensed, have submitted completed license applications, and in connection with those completed license applications have submitted evidence that compliance with the California Environmental Quality Act (or “CEQA”) is underway. Notably, the Senate Analysis accompanying SB-1459 notes that a provisional license applicant could obtain a license without proof of full CEQA compliance.

SB-1459, if passed, would remain in effect only until January 1, 2020. This would both provide an additional year of breathing room for already swamped regulators and would prevent cannabis businesses from potentially having to cease operations. Not surprisingly, numerous public bodies, private entities, and industry groups (including our California cannabis business lawyers) have supported the bill. Barring unforeseen circumstances, it’s a safe bet that SB-1459 will become law.

marijuana north dakota missouri utahLast week, we discussed New Jersey, Oklahoma, Michigan, and Virginia’s recent legislative and/or referendum developments in ending marijuana prohibition.

Today, we look at the three other states that will decide the fate of recreational and medical marijuana locally during the November election.

North Dakota

Last month, North Dakota’s recreational pot measure, Measure 3, was approved for bringing the matter to a public vote. Legalize ND, the committee that introduced this measure, managed to submit more than the 13,452 valid petition signatures which are required to get a measure on the November ballot.

Measure 3 aims to legalize marijuana use by people 21 and older and seeks to seal the records of anyone convicted of a marijuana-related crime.

In May, the North Dakota Sheriff’s and Deputies Association introduced a measure opposing Measure 3 as it believes legalizing recreational marijuana would create more problems for law enforcement, such as more impaired drivers and fatalities. Another anti-legalization organization, Smart Approaches, is also working to oppose the ballot measure.

In response, Legalize ND is planning to bring in members of Law Enforcement Against Prohibition, better known as LEAP, a pro-legalization organization composed of former and current police officers, federal agents, judges and prosecutors, that are critical of existing drug policies.

Utah

Although Utah is a rather conservative state, state voters are ready to decide the fate of medical marijuana ballot measures.

Proponents of Utah Proposition 2 collected about 200,000 signatures, which is roughly 80,000 more signatures than is required for ballot inclusion.

If the measure were approved, patients suffering from qualifying medical conditions with medical cards would be able to buy up to 2 ounces of unprocessed marijuana with no more than 10 grams of tetrahydrocannabinol (THC) or cannabidiol (CBD) every two weeks. The measure would continue to ban smoking marijuana, driving under the influence of marijuana, or using marijuana in public view except in a medical emergency.

Missouri

Missouri voters will get to choose from three medical marijuana measures in the November ballot. Two of the ballot measures are constitutional amendments; the third one is a statutory change. Although the details of the three measures vary, all would provide legal protection to patients and would regulate the production, processing and retail sales of cannabis.

New Approach Missouri championed one of the proposed constitutional amendments, which would allow doctors to recommend medical cannabis for any medical condition they see fit. Registered patients would be allowed to grow up six marijuana plants and purchase up to four ounces from dispensaries each month. A four percent tax would be imposed on the sales of medical cannabis.

The other proposed constitutional amendment, backed by Find the Cures, would let doctors recommend medical marijuana to patients who suffer from one or more of the listed qualifying conditions. The retail sales tax, which would be set at 15 percent, would be used to support research to develop cures and treatments for cancer and other diseases.

Lastly, the proposed statutory change, sponsored by Missourians for Patient Care, would also afford access to medical marijuana to qualifying patients who suffer from specific conditions. Under this measure, sales would be taxed at 2 percent.

Undoubtedly, it will to be a busy election season for the legal marijuana industry. We will keep you posted on any other legislative or referendum developments between now and the November 6 election.

OLCC marijuana cannabis oregon
The new OLCC rules won’t really solve the problem.

New Oregon Liquor Control Commission (OLCC) rules affecting outdoor recreational growers went into effect on September 1, 2018. It’s likely that the rules are in direct response to concerns expressed by Attorney General Jeff Sessions and, more recently, Oregon US Attorney Billy Williams, over Oregon’s marijuana industry. As we’ve previously reported, Attorney Sessions is not a fan of marijuana and Williams has expressed concern over Oregon’s marijuana overproduction and black market.

Significantly, the new OLCC rules: 1) severely curtail the amount of marijuana flower that medical marijuana cardholders are allowed to purchase in a day, from 24 ounces to 1 ounce; and 2) require recreational outdoor marijuana grows to notify the OLCC prior to harvest. Both rules were issued with the stated intent to reign in diversion outside of the OLCC system. The purchase limit rule is “temporary”, meaning it expires in six months and could be modified or rescinded after investigations are completed. The harvest notification rule is permanent, and discussed in detail below.

Under the harvest notification rule, outdoor growers are now required to report all harvests to OLCC no later than 9 a.m. on the date of the harvest. The purpose of the rule is to keep a better track of the harvests, where they are going, and to combat transporting weed out of state. Failing to comply is a Category III violation for each day the violation occurs.

The new tracking requirements will also come with audits from the OLCC. OLCC investigators will make sure plant counts and harvest amounts match whats in the system. If it doesn’t, the OLCC could issue the outdoor licensee a charging document, alleging a violation of the OLCC rules and threatening suspension, license revocation, or a civil penalty.

Right now, there are 23 inspectors statewide to audit and inspect the state’s 397 outdoor grows. Most of the outdoor grows are located in Jackson and Josephine counties (and won’t be going anywhere anytime soon.) The OLCC has readily admitted it is overworked and understaffed. This begs the question: Will the OLCC even have time to implement the new audit program? Only time will tell.

The more important question, though, is whether the new rules will actually stop Oregon marijuana from crossing state lines. It seems unlikely that the new rules will help. First, as any licensee knows, its expensive to be regulated as much as the marijuana industry is. Licensees invest significant money into required security systems, tracking requirements, general compliance costs, in addition to the costs of running a business. It seems ridiculous that any business in Oregon that has spent significant amounts of money just to be compliant and licensed would risk losing its license and livelihood by diverting marijuana out of state.

Additionally, the feds have been cracking down on out-of-state Oregon marijuana trafficking. Most of that seized marijuana is being grown illegally and not from the regulated industry. In other words: stricter regulation of OLCC licensees isn’t likely to move the needle much on diversion into unregulated markets.

So, again, what’s the point of the new rules? They really do seem like an attempt to appease US Attorney Billy Williams, who has been vocal about his dissatisfaction with the Oregon system. Perhaps by regulating the industry more, Mr. Williams will trust that Oregon is doing what it can to keep legal weed within its state lines.

For more on Oregon cannabis and the oversupply issue, check out the following:

oregon hemp nuisance litigation
Nuisance pollination can cause a row.

In recent posts, we’ve discussed cases where a neighbor to a cannabis grow sued the grower for nuisance, claiming that growing cannabis interfered with the neighbor’s use of their land. See here, here, here, here, here, and here. These lawsuits relied on the non-cannabis landowner’s claims that the federally illegal cannabis business caused harm because of odor, disruptive activity, and diminution of property values.

As of last week, we have another variation on the nuisance theme. On August 31, 2018, Jack Hempicine LLC (“Hempicine”), a Polk County hemp grower, sued fellow hemp farmers for nuisance and other torts. Unlike the previous cases, this case claims that the harm to the property was caused when the other farms cross-pollinated the Hempicine farms and ruined its crops. Jack Hempicine LLC v. Leo Mulkey Inc., Case No. 18CV38712, Polk Cty. Sup. Ct.

In this case, Hempicine alleges:

Cross-pollination is a significant risk in the hemp growing industry. There are two specific risks. First, male plants that contain higher THC levels can pollinate female hemp plants that originally contain low THC levels. The resulting seeds produce plants with highest levels than the original female plant, which means the resulting plants also have lower amounts of CBD and CBG. Second, pollinated female plants may produce both male and female seeds. Female seeds are more desirable because female plants are grown to full maturity and harvested at the end of the season, whereas male plants die off shortly after pollination… The risk associated with cross-pollination is well known in the hemp and cannabis growing industries.”

According to the complaint, Hempicine began producing hemp and hemp seed in Polk County in 2015 and 2016. In 2016, Hempicine allegedly told defendants that Hempicine only produced feminized seed, warning the defendants of the risks from cross-pollination from male plants. Hempicine says that after this meeting, the defendants grew male hemp plants that cross-pollinated Hempicine’s female plants, giving them high levels of THC and making them unmarketable. The Hempicine complaint calculates its damages for loss to the 2016 and 2017 crops to exceed $8 million, and says that it will amend its complaint to include damages from the lost 2018 crop later.

Hempicine’s complaint seeks recovery under four separate legal theories. First, it alleges that the defendants breached a duty of care to Hempicine and was thus negligent. Second and third, it alleges that the defendants acted negligently or recklessly in growing male hemp plants on their property, and thus are liable for trespass or nuisance. Fourth, the complaint alleges that defendants grew male plants in the vicinity of the Hempicine farms that they knew would likely result in cross-pollination, and thus have intentionally interfered with Hempicine’s economic relations.

This is not the first time this issue has arisen. During the Oregon Legislature’s efforts to pass hemp legislation, cannabis producers noted the risk of cross pollination between cannabis and hemp, which of course are just two varietals of the cannabis sativa plant. Among other things, some cannabis producers urged the legislature to create separate agricultural zones for hemp and cannabis (which didn’t happen). There are also a number of lawsuits involving similar claims of cross-pollination by GMO crops. Hopefully this industry can find a way for hemp and marijuana farms alike to be neighbors.