washington employment marijuana

The Washington Legislature concluded its 2018 Session last week, and joined Oregon and California in “banning the box” when it comes to employment applications. Specifically, Washington’s new law, dubbed the “Fair Chance Act” (the “Act”),  prohibits employers from looking into any criminal history of potential employees at the point an applicant first applies for a job. The Act is less stringent than California’s legislation and tends to mirror Oregon’s legislation.

The Act passed through both houses of the Washington legislature on March 3, and Governor Jay Inslee wasted no time signing it into law. At this point, the only thing that would prevent the Act from taking effect is a provision which states that funding must be appropriated “by June 30, 2018, through the omnibus appropriations act.” The likelihood of that not happening is very slim. For this reason, we are advising all of our cannabis businesses clients to treat HB 2198 as the law of the land in Washington, starting now.

It is important to note that the Act does not bar employers from inquiring as to criminal history at all points in the application process. Once an employer has determined the applicant is “otherwise qualified” for the position, the inquiry may begin. “Otherwise qualified” means that the applicant meets the basic criteria for the position as set out in the job advertisement or job description. In most cases, whether the applicant is otherwise qualified can be determined from the application materials. Thus, employers in Washington may be able to ask about criminal history during interviews, but not before.

In addition to the initial screening rules, it is important to note that the Act also prohibits employers from advertising open positions in any way that excludes people with a criminal record from applying. Job advertisements that state “felons need not apply” or “no criminal background”, or that convey similar messages are prohibited. Finally, employers that are required by either federal or state law to perform criminal background checks are exempt from the law. This exemption does not apply to Washington cannabis businesses.

Ban the box legislation is trending nationwide: today, 31 states and more than 150 cities and counties have adopted a ban-the-box law regulating either public or private employers. These laws are especially important for cannabis businesses, which may, anecdotally, have a higher incidence of applicants with colorful backgrounds. Some states seem to care more about this than others: Oregon, for example, runs a background check while individually permitting cannabis employees; Washington does not.

The big take-aways here are: 1) do not ask about past criminal history on applications; and 2) consider seriously whether asking this question is necessary at all during interviews. By turning over too many rocks, you may find that an applicant has a past conviction for something like marijuana possession or distribution, and you may unintentionally violate one of Washington’s newest laws. Above all, and when in doubt, have an experienced employment attorney review your hiring techniques.

california immigration marijuana
The Feds and California are not getting along so well.

If you’ve been following the news lately you’ve probably noticed that that the Trump administration, along with the U.S. Department of Justice (DOJ), have not exactly been getting along with the state of California. Just last week the Department of Justice filed a lawsuit against the Golden State, claiming that three of its laws interfere with the federal government’s authority to regulate the country’s immigration system. The California laws in question are Senate Bill 54 (“SB 54), Assembly Bill 450 (“AB 450”), and Assembly Bill 103 (“AB 103”). This is not the proper venue for an in-depth breakdown of every provision in these laws, but a brief description of each will help frame this discussion:

  • SB 54: Also known as the “California Values Act” was signed by California Governor Jerry Brown on October 05, 2017. SB 54 places limitations on when California law enforcement authorities can cooperate with federal immigration officials.
  • AB 450: Signed by Gov. Brown on October 05, 2017, AB 450 prohibits employers from cooperating with immigration enforcement officers unless the employer has been served with a subpoena or judicial warrant.
  • AB 103: Approved by Gov. Brown on June 27, 2017, AB 103 is a public safety omnibus bill (meaning it is a law that covers a number of measures). The DOJ takes issue with the provisions regarding state inspection of immigration detention facilities and granting the California Attorney General the authority to review the conditions of confinement and the standards of due process at these facilities (Section 12532).

In its lawsuit, the DOJ asserts that all three laws violate the Supremacy Clause of the United States Constitution by “constituting an obstacle to the United States’ enforcement of the immigration laws and discriminating against federal immigration enforcement.” I’ll save you from having to attend a semester of Con Law 101 by giving you a succint explanation on the Supremacy Clause: the Supremacy Clause is the constitutional provision that federal law takes precedence over conflicting state laws (assuming, of course, that the law is constitutional) . California has not yet filed an answer to the DOJ’s lawsuit but any response will be sure to include a Tenth Amendment argument.

Tenth Amendment jurisprudence states that the federal government can enact laws but it can’t force (or “commandeer”) state officials to administer them. In Printz v. U.S., 521 US 898 (1997), Justice Scalia, writing the majority opinion in a close decision (the case was a 5-4 traditional conservative-liberal split) held that “Congress cannot compel the States to enact or enforce a federal regulatory program.” California can make the plausible argument (and likely winning one) that under the Printz ruling the federal government cannot force local law enforcement to assist in federal immigration enforcement. However, the Printz decision will likely only apply to SB 54. Whether AB 103 or AB 450 can survive federal judicial scrutiny is far from certain.

The concern for states that have legalized medical and adult-use cannabis activities, along with state-legal cannabis businesses, is that the DOJ’s Supremacy Clause argument can be made against a state’s lawfully regulated cannabis industry. Under the federal Controlled Substances Act marijuana is still a federally illegal Schedule I drug and that is the supreme law of the land. The conflict between federal law’s cannabis prohibition and the states in the U.S. that now regulate cannabis activities is not an issue that the U.S. Supreme Court has yet to rule on directly but it has been bubbling around the surface for some time now and that day will arrive soon enough — leave it to California to lead the way! Assuming it does, we explained in detail how a state might defend its cannabis programs here.

With respect to California state laws, we should also note that in February of 2017, California state Assemblyman Reginald Jones-Sawyer introduced AB 1578. Just like with SB 54, AB 1578 would prohibit state or local agencies from assisting the federal government in taking certain actions, except in this instance it’s cannabis activities instead of immigration enforcement. AB 1578 ended up stalled in the state legislature but ever since the rescission of the Cole Memo by U.S. Attorney General Jeff Sessions there’s been a push to reintroduce AB 1578.

Hopefully AB 1578 is revived, but if the federal DOJ is eager for a fight before that happens it doesn’t have to wait: the city of Berkeley has already fired the first shot. Last month, the Berkeley city council voted to prohibit city agencies from using resources in enforcing federal cannabis laws or providing information on cannabis activities. Because the underlying theme between SB 54 and the Berkeley resolution are the same–prohibiting local officials from assisting federal authorities in enforcing federal law–one would assume that the DOJ will let their immigration lawsuit make its way through the courts before going after Berkeley (or AB 1578, if it’s ever enacted). All of that said, the Trump administration continues to pursue a path that continuously defies logic, so why would it show restraint now?

The DOJ immigration lawsuit will likely find its way to the Supreme Court and although I highly doubt a majority of conservative justices would overturn Justice Scalia (a conservative icon to many) there’s no guarantee that the Supreme Court won’t find a way to somehow differentiate Printz from the DOJ lawsuit. This is definitely a case to follow and we’ll be sure to keep you updated on all developments.

Oregon Josephine County marijuana
Josephine County skipped a step.

In the past six months, we have closely followed the efforts of Josephine County, Oregon, to ban cannabis farming in its rural residential 5 (RR-5) zone (see our coverage here and here). Just last week we mentioned that a coalition of local growers (“Petitioners”) challenging the local ordinance finally had their day in court, presenting their case to Oregon’s Land Use Board of Appeals (“LUBA”). In brief, the challenged ordinance, adopted in December, banned marijuana production on RR-5 lots smaller than five acres, and seriously curtailed production on larger lots. The Petitioners challenged the ordinance on three grounds, alleging:

  1. The ordinance violated ORS 215.130(5) because it does not allow farms operating at the time the ordinance was adopted to continue operating. (ORS 215.130(5) essentially prohibits a county from adopting an ordinance that retroactively bans existing lawful uses.)
  2. The county failed to give mandatory notices to the owners of any properties that would be limited or prohibited from any previously allowed uses.
  3. Local jurisdictions are only allowed to place “reasonable regulations” on commercial cannabis production, and this ordinance did not qualify.

Yesterday, LUBA issued its opinion in favor of the Petitioners, and sent the County back to square one on the ordinance. The Petitioners deserve a hearty congratulations, but the fight is far from over. This is because LUBA kicked the case back to the County after determining that the County failed to provide the mandatory pre-hearing notices required for any proposed zoning change. As a result, LUBA did not reach the merits of whether 1) the ordinance violated ORS 215.130(5) because of its retroactive application or 2) whether the ordinance went beyond the County’s right to impose “reasonable regulations” on cannabis production. LUBA simply found that the County acted without the required public input.

By kicking the case for a procedural error, LUBA left the door open for the County to continue to pursue this or a similar ordinance. That isn’t to say that the County is going to have an easy time of it. LUBA’s Opinion requires the County to comply with the notice requirements and hold at least one more public hearing. This is no easy feat, as the County will need to issue individual written notice, by mail, to the owners of all 16,000 RR-5 lots.

Although public scrutiny will no doubt increase, we expect the County to continue to push forward in its misguided attempt to regulate away its fledging cannabis industry, as well as all the taxes and jobs that will go with it. In a County that has struggled to provide even basic services following the timber revenue dive, that seems like a shame.

industrial hemp california

On Thursday, SB 1409, which proposes changes to California’s industrial hemp laws, was referred to committee. This piece of legislation proposes some much-needed updates to California’s industrial hemp laws. In our experience, states with adult use marijuana regulations, like California, tend to move more slowly building out their industrial hemp programs, which often come in as an afterthought. In that respect, SB 1409 is a welcome effort.

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 proposes to delete the exclusionary requirement that industrial hemp seed cultivars be certified on or before January 1, 2013. Additionally, “industrial hemp” would no longer be defined restrictively in the California Uniform Controlled Substances Act as a fiber or oilseed crop, and the bill would delete the requirement that industrial hemp be grown as a fiber or oilseed crop, or both. Presumably, this will allow cultivators to harvest hemp for CBD derivation, and related use.

SB 1409 would also authorize 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. SB 1409 seems to have been well-researched in that sense.

To read more about the current state of industrial hemp under federal law, as well as what other states have done to regulate it, take a look at these posts:

We look forward to seeing whether California will take the lead, or at least take serious steps, toward regulating industrial hemp in a progressive way. SB 1409 was introduced only last month and seems to be moving along nicely. We will keep an eye on this bill, and keep you updated on any developments.

california CUA collective MAUCRSA
Is the tide finally coming in for gray market California cannabis?

For state-by-state legalization to succeed in the long run, state and local governments often need to take significant enforcement measures against existing “gray” cannabis markets to ensure that there’s an even playing field for licensed operators who face the financial pinch and responsibility of comprehensive licensing regulations and robust taxation. To date, each state with an existing, unregulated medical cannabis industry has taken action to make sure that unlicensed, unregulated medical cannabis operators don’t undermine or disenfranchise their otherwise licensed counterparts (see Washington State as a prime example, or the continuing legislative efforts in Oregon).

It appears that California is finally taking certain steps to stop the unlicensed and illegal sale of cannabis within its borders. To regulators’ credit, they don’t have a choice but to tolerate the Compassionate Use Act (“CUA”) collective model through early 2019: the MAUCRSA preserves the criminal immunity of CUA collectives and cooperatives up to one year after the first MAUCRSA licenses begin to issue. The drop dead date on those collectives and cooperatives is now January 9, 2019.

Although these CUA collectives and cooperatives can continue to serve qualified patients and their caregivers without the administrative annoyance or cost of having to comply with MAUCRSA, they can’t engage in the for-profit sale of cannabis or any level of “commercial cannabis activity” without a license. However, many of these collectives and cooperatives continue to engage in illegal commercial cannabis activity: such activity is hard to monitor and police where the CUA has pretty much no government oversight. In addition, many CUA collectives and cooperatives believe that they can do business with MAUCRSA temporary and/or annual licensees (and vice versa), but this is just another piece of unreliable industry hearsay that violates the law.

In turn, California has started sending cease and desist letters to unlicensed operators they believe to be engaged in commercial cannabis activity in violation of MAUCRSA. And regulators have also started to crackdown on ancillary advertisers, like Weedmaps, for promoting unlicensed operators and their products in violation of MAUCRSA marketing and advertising restrictions. Certainly, these won’t be the last efforts we see regarding the takedown of illegal cannabis operators in California. Here’s what else we can expect:

  1. Industry self-policing. It’s highly unlikely that licensed operators are going to allow CUA collectives and cooperatives to take away their market share and/or to conduct sales of cannabis without facing the same onerous state and local taxes as licensees. As a result, we’re likely to see a spike in industry reporting on CUA collectives and cooperatives that don’t have a MAUCRSA license.
  2. Increased scrutiny of ancillary businesses. Going after Weedmaps represents the state’s willingness to chase third parties that are directly or indirectly assisting illegal operators. We can expect then that consultants, landlords, equipment sellers/lessors, etc., who assist or continue to assist unlicensed operators violating MAUCRSA will feel the same heat as Weedmaps.
  3. Policing of attorneys. Yes, there are still attorneys forming CUA collectives and cooperatives with the sole purpose of helping their clients evade MAUCRSA licensing to make one last stream of profit before 2019. At this point, if a potential client wants to engage in the commercial cultivation, manufacture, distribution, and/or sale of cannabis, helping them start a CUA collective or cooperative is unethical and constitutes malpractice.
  4. Getting local governments involved. Half the problem with current CUA collectives and cooperatives violating MAUCRSA is that local laws still allow them to operate in a completely gray area. Sometimes, local governments haven’t even regulated under MAUCRSA but they have and maintain existing laws that only allow for CUA collectives and cooperatives. State regulators would be wise to dialogue with local governments about CUA collectives and cooperatives acting in violation of MAUCRSA. Otherwise, those collectives and cooperatives will have free reign under local law to continue to violate MAUCRSA through January of next year.
  5. Federal intervention. If CUA operators ignore state mandates to cease commercial cannabis activity, there’s a solid chance that state regulators (and local governments) will call upon U.S. prosecutors to assist in sweeps. Given Sessions’ rescinding of the Cole Memo in January, U.S. Attorneys are going to act in accordance with the resources and priorities of their districts. And if local and state governments demand action in regards to violations of MAUCRSA, we can expect more arrests and prosecutions from the Feds.

Let us know what you are seeing out there, and what you expect to see in the coming year for California enforcement against gray market cannabis.

oregon marijuana hempThe Oregon legislature concluded its 2018 session last weekend. As we wrote last month, because 2018 is an even-numbered year, this was a short session lasting just 35 days. We predicted that not all four proposed cannabis bills would pass and that is exactly what happened: the proposed legislation on “special events” for marijuana licensees quickly fell by the wayside. You can be sure someone will push that one again in 2019.

Still, three bills made it through, two of which will impact the Oregon marijuana and hemp industries considerably. These “enrolled” bills have been approved by both legislative houses, and will become law as soon as Governor Brown signs– or within 30 days of passage if she does not. Because these bills passed through two Democrat-controlled chambers, and because Governor Brown is also a Democrat who has never vetoed a cannabis bill, you can be 99.99% sure these bills will soon become law.

Each bill is linked to and summarized below. If you click through to view the bills themselves, remember that text in bold typeface is proposed new language, and text in [italicized and bracketed] typeface is language that will be removed from existing statutes.

Senate Bill 1544  (Marijuana)

This was the gut-and-stuff bill we discussed last month, which ended up covering a range of issues related to medical and non-medical marijuana, and industrial hemp. Below are the highlights. Note that references to the Oregon Liquor Control Commission (OLCC) concern the adult use program, which allows recreational operators to serve the medical market nowadays. The Oregon Health Authority (OHA) references relate strictly to the medical marijuana program.

Unlike most cannabis legislation passed in Oregon over the past few years, SB 1544 does not carry an “emergency” designation. This means that its provisions are not effective on passage. Instead, the effective date of this bill is June 1, 2018, with some of its provisions operative at designated intervals thereafter.

Below, we have emphasized the big moves in bold and added brief commentary to those items.

  • Allows OLCC producer licensees who are registered to grow medical canopies to provide immature plants to OHA program participants.
  • Exempts OLCC processors from labeling and packaging requirements and standard when those processors are dealing direct with medical marijuana patients and their caregivers.
  • Requires OHA grow sites to include a U.S. Postal Service address in their application, if they have one. If not, the grow site has to cough up an assessor’s map showing the exact location of the grow site, or a tax lot number.
  • Caps the amount of immature plants that a person responsible for an OHA grow site (PRMG) can grow, at 12 immature plants that are 24 or more inches high. Requires also that OHA cap the number of immature plants that are less than 24 inches high. This is an effort to curb black market activity.
  • Reduces the amount of both mature and immature plants that can exist at an OHA site if a PMRG’s authority is revoked or suspended by OHA.
  • Exempts small OHA grow sites with two or fewer cardholders, from tracking and reporting requirements. This is to give the little guy a break.
  • Re-jiggers the Department of Revenue distribution protocol for taxes collected from marijuana.
  • Clarifies that although OHA grow sites may be subject to certain tracking requirements, they are not “commercial operations” for the purposes of state law.
  • Pushes out dates for Oregon Cannabis Commission reporting obligations.
  • Grandfathers OLCC and OHA retailers from the school proximity standard, if they were established prior to August 1, 2017 under a city or county ordinance.
  • Establishes a tough-sounding “Illegal Marijuana Market Enforcement Grant Program” administered by the Oregon Criminal Justice Commission, and earmarks about $1.25 million in grants to “address and prosecute unlawful marijuana cultivation or distribution operations.” This may be more symbolic than anything: $1.25 million is not a lot of money as far as the state budget goes.
  • Requires industrial hemp products sold by OLCC retailers to contain labels that clearly identify whether the products are derived from hemp or marijuana. Think, hemp-derived CBD products.

Senate Bill 1555  (Marijuana)

This simple bill temporarily enables the Oregon Department of Revenue to distribute a portion of marijuana tax revenues to community mental health. This is an emergency bill, effective on passage. It also sunsets on July 1, 2019, at which point things revert to the current scheme.

House Bill 4089  (Industrial Hemp)

House Bill 4089 is a multifaceted law brought by the Oregon Hemp Farmers Association. When we first saw this bill last month, we observed that although it was comprehensive in scope, it did not include a provision limiting the ability of hemp growers to sell high THC products, and it did not contain tracking provisions related to the movement of hemp into OLCC channels. Maybe Salem was listening, because the legislature fixed both issues.

Below is everything of note in HB 4089, with comments on the big moves in bold.

  • Names the hemp research program operated by the Oregon Department of Agriculture (ODA) the Oregon Industrial Hemp Agricultural Pilot Program.
  • Clarifies ODA’s authority to administer the program. Specifies that agricultural hemp seed is agricultural or flower seed for the purposes of statutes regulating labeling, testing, or certifying seeds.
  • Directs the Director of Agriculture and Dean of College of Agricultural Sciences of Oregon State University to establish a program for labeling and certifying agricultural hemp seed.
  • Provides that an accredited independent testing laboratory that has been approved by OHA or ODA may test industrial hemp and industrial hemp commodities and products produced or processed by a grower, handler, or agricultural hemp seed producer.
  • Transfers responsibility from the testing laboratory to the registered grower, handler, or processor, for entering hemp, commodity, or product into the tracking system before the hemp, commodity, or product is transferred to a laboratory for testing.
  • Requires the OLCC to track the hemp, commodity, or product when it is transferred, sold, or transported to a licensed premises, or area under the control of the premises licensee. This is an expansion of OLCC’s current obligation to track all cannabis in the state, with the exception of home grow and limited medical grow.
  • Specifies that industrial hemp products that contain more than 0.3 percent tetrahydrocannabinol may not be sold to a consumer by a person other than a retailer, and requires that the OLCC adopt rules to ensure compliance. This shores up a huge gap: until now, ODA growers could theoretically sell these products without oversight.
  • Authorizes OLCC actions regarding industrial hemp to enforce and ensure compliance with marijuana laws and provisions of industrial hemp laws that incorporate requirements, restrictions, or other provisions of marijuana laws. More oversight for OLCC.
  • Specifies that a person may not produce, process, or store homemade industrial hemp extracts. This further curtails ODA growers’ options, which were nearly limitless under existing state law.
  • Changes the description of the limit on production and storage of homegrown cannabis plants.
  • Allows ODA to adopt rules establishing a higher average tetrahydrocannabinol concentration limit for industrial hemp if a higher average concentration limit is established by federal law.
  • Revises language regarding grower retention of agricultural hemp seed for producing industrial hemp.
  • Establishes the Industrial Hemp Fund and appropriates moneys to ODA to implement, administer, and enforce industrial hemp statutes.

Like SB 1555, the hemp bill is “emergency” legislation that is effective on passage. When coupled with the new OLCC rules around industrial hemp passed a few months back, it’s safe to say that the Oregon hemp program is fully formed at last. Like the marijuana programs, Oregon hemp has come a long way.

Crafting laws and regulations is more art than science. The authors of initiatives, legislators, and administrative agencies who create and implement rules to legalize medical and recreational marijuana are bound to get some things wrong. This may be due to political pressures, competing interests, and the simple fact that marijuana is prohibited under federal law.

Now that so many states have legalized, we figured a good way to determine what was working and what was not, would be to ask individuals those living in those states. So we did just that on our lively Facebook page by asking for our readers’ feedback. The responses were interesting and all over the board.

marijuana cannabis surveyMany of our readers expressed a concern that California has been over-regulating cannabis since voters approved legalizing recreational marijuana in 2016. (We wrote about this issue recently here.) Complaints were focused on the increased price of cannabis products since legalization went into effect on January 1. There were also complaints about how medical patients no longer had access to products that were available prior to the state’s new and expansive cannabis regulations.

In a similar fashion, many commentators claimed that Washington‘s regulatory framework was overly burdensome, though there were not nearly as many complaints about the price of cannabis which has dropped significantly since Washington retail stores first opened in 2014.  Washingtonians did take issue with the state being the only state that legalized recreational cannabis without allowing for home cultivation. Washington regulators have also faced criticism for the slow implementation of the state’s new traceability system.

Generally, people commented positively on Colorado and Oregon, citing the ability to home grow and good access to dispensaries. Some commentators complained about inconsistent enforcement in certain counties, claiming that police in some areas seemed to continually take issue with marijuana despite legalization. Hopefully, this issue subsides.

We did not get much feedback on other adult use states. One Facebook user was happy with Nevada but hoped that the state would have more options with regards to available strains. Alaska‘s program was criticized for problems with lab testing and the unfulfilled expectation that Alaskans would have social use cannabis clubs. One user from Massachusettes complained that legalization was progressing too slowly. And we did not receive any feedback on Maine or Washington D.C., unfortunately.

Some common complaints regarding states that only permitted medical marijuana were that it was too expensive to obtain an authorization card, and that the state burdened patients by the ways which patients could consume cannabis products. For example, New York allows medical cannabis but does not allow for smokeable forms of cannabis. Others argued that the cost of medical marijuana was too high or that states did not have enough products to satisfy the needs of patients.

Finally, in states that have either no legal marijuana program or medical programs that are limited only to CBD, the criticism was fairly straightforward: prohibition is not working! However, many commentators were hopeful that their state would legalize in the near future or that federal cannabis prohibition would end soon. Here’s hoping.

Oregon marijuana josephine
Josephine County’s anti-cannabis ordinance is frozen, for now.

The last few months have been a bit of a whirlwind for cannabis producers in Josephine County, Oregon. Back in September, a coalition of producers stopped a county ordinance targeting farms in rural residential zones that would have drastically increased setback requirements, required the OLCC licensee itself to own the real property, and prohibited any farm from using private roads, easements, or owner-maintained public right-of-ways.

Celebration proved premature, as the county adopted a new ordinance on December 6, 2017 that is arguably worse. The ordinance targets all properties zoned rural residential with more than 12 mature plants and drastically curtails commercial cannabis production. For example, on rural residential lots:

  1. Cannabis production is banned on all lots or parcels of five acres or less.
  2. Cannabis production on lots larger than five acres is limited to an eighth of the size that would otherwise be allowed under OLCC rules.
  3. 100 foot setback are on all sides are required for all structures and grow canopies.
  4. The OLCC licensee must itself own the real property.

Farms hoping to avoid these requirements must have been fully licensed by the OLCC before March 6, 2018 in order to apply for a variance from these regulations.

As expected, earlier this year a group of growers filed suit against the county before Oregon’s Land Use Board of Appeals (“LUBA”). Although LUBA petitions are not easily available, LUBA issued an order on February 5, 2018 that stayed (froze) implementation of the ordinance pending further proceedings, and gives us an insight into the claims raised by the petitioners.

The petitioners were tasked with establishing 1) “a colorable claim of error in the land use decision or limited land use decision under review;” and 2) “that the petitioner[s] will suffer irreparable injury if the stay is not granted.” The petitioner met both thresholds, so let’s see how they did it.

A Colorable Claim of Error

In Thurston Hills Neigh. Assoc. v. City of Springfield, 19 Or LUBA 591 (1990), LUBA stated that the standard to establish a colorable claim of error is “not a demanding standard”. The petitioners do not need to establish they will win on the merits. Rather, they need only show “that the errors alleged are sufficient to result in reversal or remand of the decision if found to be correct.” In fact, in Thurston Hills, LUBA simply looked to whether the petitioner’s claims were “devoid of any legal merit.” In the present case, LUBA found that the petitioners claims have legal merit. Specifically, the petitioners argue:

  1. The ordinance violates ORS 215.130(5) because it does not allow farms operating at the time the ordinance was adopted to continue operating. ORS 215.130(5) essentially prohibits a county from adopting an ordinance that retroactively bans existing lawful uses.
  2. The county failed to give mandatory notices to the owners of any properties that would be limited or prohibited from any previously allowed uses.
  3. Local jurisdictions are only allowed to place “reasonable regulations” on commercial cannabis production, and this ordinance does not qualify. Note that this same argument was advanced against a similar ordinance in Jackson County but that LUBA and the Oregon Court of Appeals determined that Jackson County’s ordinance qualified as a reasonable regulation.

Irreparable Injury

Because the “irreparable injury” requires an injury that cannot be compensated adequately in money damages, the petitioners focused primarily on the existing strains and customer goodwill that would disappear if the county succeeds in banning their farms. LUBA easily sided with petitioners on this point, but the question got a bit trickier because the petitioners needed to also show that the county’s conduct was “probable rather than merely threatened or feared” and that “the resulting injury must be probable rather than merely threatened or feared.”

The county argued that these negative effects on petitioners were overblown because the ordinance provided an opportunity for non-compliant properties to obtain a non-conforming use application. The petitioners cleverly noted that the OLCC will likely refuse any license renewals while a licensee is undertaking the non-conforming use process, so even participating in the process itself puts the farms at risk. The court was convinced and issued a stay.

Next Steps and Predictions

The petitioners and the county will advance their arguments at a hearing today, so we will soon find out whether this ordinance qualifies as a “reasonable regulation.” Similar arguments against Jackson County were shot down, but perhaps these petitioners have identified some nuances that will win the day. In this case, with the retroactivity and notice problems identified by the petitioner we feel comfortable putting our money on the growers.

Courts often invalidate unfair spot zoning ordinances.

We recently discussed the California Environmental Quality Act as a limitation on local zoning authority through environmental regulation. Another important limitation on local authority when it comes to cannabis ordinances is spot zoning, which is the act of singling out specific parcels of land to benefit specific owners at the expense of others in the surrounding areas. Spot zoning can exist in the form of restricting activities from occurring on specific parcels, or by providing exclusive use benefits to specific parcels—such as allowing licensed marijuana operations in select places. It is essentially the practice of creating zoning “islands” that are decidedly dissimilar to their surrounding areas, and is often the subject of legal challenges.

Recently, a San Bernardino County Superior Court judge invalidated Measure O, a voter-approved ballot initiative that eliminated a city-wide ban on medicinal cannabis and required the City of San Bernardino to allow commercial cannabis operations in certain parts of the city. The court found that although Measure O provided a variety of areas in which cannabis cultivation, manufacturing, testing, transportation, and distribution could occur, it limited the possible dispensary sites to just two addresses, one of which was the Flesh Showgirls strip club.

The court noted that not all spot zoning is invalid per se, but spot zoning is impermissible if there is no rational basis for it—i.e. if it is arbitrary or capricious. An example of potentially permissible spot zoning would be restricting a portion of land within a commercial development to residential use, because doing so might benefit the public interest by maintaining dedicated housing. Similarly, a city might allow an island of land within a residential neighborhood to obtain commercial licenses for retail and light manufacturing, in order to preserve a neighborhood commercial district for the benefit of the local community.

In the San Bernardino County case, however, the court found no such rational basis. The court opined that no justification was provided for why two particular parcels were singled out as the only locations in the city that could have dispensary use. According to the court’s ruling, “these two addresses are separated from each other by several miles and are surrounded on all sides by similarly situated yet non-qualifying properties,” and that there was no rational basis for doing so, nor was there any discernible public interest served. The court determined that Measure O effectively created a zoning duopoly in the two dispensary addresses “with the owners of these two locations the sole beneficiaries.” Accordingly, the court concluded that unlawful spot zoning had occurred, and held that because it was not feasible to sever the dispensary zoning from the overall initiative, Measure O was invalid in its entirety.

We have heard rumblings of special interest groups organizing to pass initiatives in California jurisdictions that currently prohibit commercial cannabis activity. Any groups pursuing such a path should be mindful of the Measure O case and the invalidity of spot zoning without rational basis. While the idea of eliminating competition by drafting a ballot measure favoring select parcels of land may seem like an attractive business proposition, even if an initiative passes with support of the voters, it can still be overturned by a court of law if it is legally defective.

While San Bernardino County may have to go back to the drawing board on its cannabis zoning, the lesson is clear: if you’re going to limit the places where cannabis businesses can operate, there has to be a rational basis for doing so that serves a legitimate public interest, and it cannot create an unfair monopoly over the market for select participants. Otherwise, you risk a court invalidating the ordinance altogether.

cotati california marijuana
Hang a left for cannabis licensing by March 26th.

California 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 cover who is banning cannabis, who is embracing cannabis (and how), and everyone in between. 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 California 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 the City of San Luis Obispo, and before that the City of Redding, the City of San Rafael, City of Hayward, Alameda County, OaklandSan FranciscoSonoma County, the City of Davis, the City of Santa RosaCounty and City of San BernardinoMarin 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.

Today’s post is on the City of Cotati.

Welcome to the California Cannabis Countdown.

Location. Cotati is an incorporated city in Sonoma County and is about a 90 minute drive north of San Francisco. The City was founded in 1893 and is dubbed the “Hub” of Sonoma County because of its central location and hexagonal plaza.     

History with Cannabis: Although no one would call Cotati a hub of commercial cannabis activity, the City did pass an ordinance in 2007 (Ord. 787) allowing for one (1) medical cannabis dispensary. One may be a lonely number, but it sure is better than zero. After the passage of Ord. 787 things remained pretty quiet until the state passed the Medical Cannabis Regulation and Safety Act (MCRSA) near the end of 2015. Shortly thereafter, the Cotati City Council adopted a resolution to its Land Use Code to specifically prohibit the cultivation of cannabis in all of the city’s zoning districts (Resolution 2016-4). The City Council then followed up with a moratorium on all commercial cannabis activities. It was clear that the moratorium would be temporary as nearly 79% of Cotati residents voted in favor of a ballot measure establishing a commercial cannabis tax. The tax measure granted the city the authority to tax cannabis cultivators up to $25 per square foot of cultivation area, or up to 8% of gross receipts (all other cannabis businesses would also be subjected to the 8% tax).

New Cannabis Law: On February 13th of this year, the City Council lifted its moratorium and adopted a comprehensive cannabis ordinance to regulate commercial cannabis activities. It’s important to note that prior to enacting the cannabis ordinance, the City Council held public hearings in October and January and made amendments to the ordinance based on public comments. This process and result shows how important it is to show up at local hearings and voice your opinion.

Here are some of the ordinance’s highlights:

  • Authorizes both medical and adult-use cannabis activities.
  • Authorizes up to two retail licenses (one can be a microbusiness).
  • Authorizes one delivery-only retailer license.
  • Authorizes up to five indoor cultivation permits.
  • Outdoor cultivation is prohibited.
  • The City will cap the number of manufacturing, distribution, delivery and testing permits at seven. That’s cumulative across the four license types. However, a distribution license issued in conjunction with another permit will not count against the cap.
  • Volatile and non-volatile cannabis manufacturing is allowed, but volatile manufacturers will require an additional permit.
  • Edible manufacturers will need to obtain a Sonoma County Health permit.
  • On-site consumption is prohibited.
  • Permits will be issued for up to two years before renewal.
  • Allows for the sale of promotional items such as clothing and hats (the 2007 ordinance banned such sales).
  • The City decided on a tax rate of less than the 8% authorized by the tax ballot measure. Cultivators will be taxed at 2% of gross receipts or $5 per square foot of cultivation, manufacturers at 1% of gross receipts, and retailers at 3% of gross receipts.
  • Up to two cannabis plants or a maximum of twenty square feet of plant canopy may be cultivated outdoors for personal use, so long as the cultivation is attached to one residential unit (outdoor cultivation is prohibited in multi-family dwelling units).

With the ordinance in place, the City just recently released a request for proposal (RFP) for businesses to apply for a cannabis permit. The RFP will score applications based on the following forty-five point scale:

  • Project description, site plan, and community benefit (10 points).
  • Environmental Quality (10 points).
  • Safety and Security Plan (10 points).
  • Operating Plan (10 points).
  • Experience (5 points).

Since the total number of cannabis permits is capped at fourteen, the application process is sure to be competitive. Cotati is a small city (approximately 7,300 residents) so starting with a cap and moving cautiously is a reasonable first step for the city – especially considering the fact that Cotati is allowing seed to sale license types. A slow and thoughtful approach, with strong community support, will hopefully prevent political reversals and legislative bans (you know who you are, Calaveras County).

If you’re interested in applying for a commercial cannabis license in Cotati, mark your calendar: the March 26th deadline to submit applications is coming up quickly. And good luck!