Labeling CBD-Infused Foods: Part 2

Cannabis Events: MJBizCon 2018 and Beyond

Thanks to Marijuana Business Daily for hosting MJBizCon 2018 in Las Vegas earlier this month! MJBizCon has separated itself from other cannabis conferences in both quality of content presented and sheer number of attendees. According to the Las Vegas Review-Journal, the conference was projected to draw 25,000 attendees, a 50% jump in attendance from last year. When the dust settled, the event actually surpassed that projection, with Marijuana Business Daily reporting that nearly 28,000 people attended the conference.

Contributing to those solid attendance numbers were several folks from Harris Bricken including attorneys Hilary Bricken, Robert McVay, Alison Malsbury, Megan Vaniman, Tatiana Logan, and Julie Hamill, and paralegals Meghan Saunders, Desiree Andersen, Kait LaPorte and Madeline Williams.

To celebrate the occasion, Harris Bricken hosted a pre-conference cocktail party, “Vegas Magic: A Cannabis Industry Soiree.” The sold-out event allowed our team to meet and mingle with cannabis entrepreneurs attending the conference. There was also a magician to keep the crowd entertained. Thanks to the following businesses for providing SWAG (i.e. “Stuff We All Get”) for the Soiree:

• Canndescent
• The Caputo Group
• DomPen
• Redbarn
• Saku Cannabis

If you missed MJBizCon, or if you attended but still have an appetite for more cannabis analysis, we have good news! Our attorneys are speaking at a number of events before the year’s end, including a handful this week and next:

The Seminar Group presents: The Business of Marijuana in Washington State | November 29, 8:30 AM-5:00 PM PST & November 30, 9:00 AM-12:45 PM PST | This two-day CLE will take place at the Crowne Plaza in Seattle. It will cover a wide range of topics relating to Washington cannabis law, with several Harris Bricken attorneys presenting. Robert McVay will chair the event and present on investing in Washington’s marijuana industry. Megan Vaniman will discuss employment law considerations for Washington cannabis businesses. Daniel Shortt will give a presentation on the complex legal considerations for industrial hemp and CBD derived from industrial hemp.

NJCPA presents Cannabis: How it is Working in Other States – CA, CO, WA | November 30, 12:00 PM – 1:00 PM PST | Hilary Bricken will host a webinar discussing which states have taken a smart approach to legalization and which ones are in need of improvement and how New Jersey should address legalization.

New York University School of Law presents Cannabis: The Path to Regulation and Representation | December 5, 4:30 PM – 7:00 PM EST |  Hilary Bricken will present on ethical and practical issues lawyers face while representing the cannabis industry.

The Seminar Group presents: CLE Bootcamp – Hot Topics in the Law | December 7,  9:00 AM PST | Daniel Shortt will present on the second day of the 17th annual CLE Boot Camp, taking place at the Washington State Convention.  He’ll provide an update on the state of cannabis in Washington and at the federal level, including a summary of recent changes to Washington’s market, an overview of federal law and policy on marijuana and hemp and, a summary of common issues cannabis businesses face.

Ethically Navigating Local and State Licensing for Cannabis Businesses | December 7,  12:00 PM – 1:00 PST | Julie Hamill will provide tips on how to navigate the ever-changing landscape of local and state licensing without getting your clients or yourself in trouble. Topics will include changes to the California Rules of Professional Conduct, and update on federal policies and state regulations, and cautionary tales of cannabis attorneys who have found their ethics called into question.

Free Webinar: Employment Law for Oregon Cannabis Businesses | December 12, 12:00 PM PST | Megan Vaniman will host a webinar focused on how to navigate employment law for cannabis businesses and the employment laws that most affect cannabis businesses in Oregon.

We hope you can join us for these upcoming events!

source https://www.cannalawblog.com/cannabis-events-mjbizcon-2018-and-beyond/

Industrial Hemp Litigation: U.S. Postal Service Loses CBD Delivery Case

Oregon Cities and Counties Continue to Refine Cannabis Rules

We always talk about the cannabis industry being dynamic. That’s true from a markets perspective and it’s true from a regulatory point of view. When it comes to regulations in particular, industry observers tend to focus on the big picture developments: e.g., whether marijuana will finally be re- or de-scheduled at the federal level, whether we will get a farm bill legalizing industrial hemp nationwide, or which new states have legalized marijuana. Those broad issues deservedly get a lot of press. However, marijuana business owners are often more concerned about what is going on locally, at the city or county level. In fact, most cannabis business owners get more passionate about proposed changes to local regulations than proposed state- or even federal law developments.

My law firm has worked with regulated cannabis business in Oregon, Washington and California since 2010. I suspect that none of our cannabis business lawyers support extensive local regulation of marijuana (let alone local licensing programs). Because states tend to promulgate extensive regulatory structures, local rules tend to be duplicative and controversial once you get beyond basic land use concepts. That said, cities and counties are often pressed by their citizens to regulate cannabis businesses, and state governments give ample regulatory authority to local jurisdictions– often including the choice to “opt out” of industry participation altogether.

When localities do regulate cannabis, the process is often iterative, meaning rules are adopted and amended over time. Sometimes the changes accrue in response to changes in state law; sometimes they are in response to litigation; sometimes they are needed when current rules are failing; and sometimes the local population just changes its opinion about cannabis businesses altogether (usually, for the better).

We continue to see cities and counties modify their rules in Oregon. Below is a brief encapsulation of what is going on around the state today, based on client projects. This list is probably not exhaustive, so if you have updates on what is going on in your area, we’d love to hear from you.

Clackamas County

Clackamas County is home to 220 cannabis licenses by our count, making it home to over 10% of OLCC licensees, and the fourth largest county statewide. We have been a part of most rulemaking processes on offer at the County, from the original implementation of Measure 91 to the reversal of the ban on cannabis processing. Recently, Clackamas County proposed to modify its rules yet again, by limiting the availability of production on certain lots. The relevant Planning Commission hearing was held last night, and the Board of Commissioners will hold a public hearing on the proposed license limits on January 16. The amendments, if approved, would limit continguous lots of record under the same ownership to one OLCC producer license, or one medical marijuana (OHA) grow site. The change would apply only to lots zoned as Ag/Forest, Exclusive Farm Use, and Timber. Current OLCC producer licenses existing on contiguous lots in these zones would be grandfathered. The proposed revised regulations are here, and an FAQ is here. There is still plenty of time to submit comments.

Josephine County

Anyone familiar with the Oregon marijuana industry knows that Josephine County has had a rough time in its efforts to regulate cannabis. The County has suffered several consecutive legal setbacks, but apparently is pushing forward with a new effort to limit OLCC marijuana activities on rural residential properties. The Board of Commissioners most recently held a land use hearing on November 7, with a first reading of the proposed new ordinance. No word yet on next steps, but it appears that the County is going through the proper public notice requirements this time, and fortunately the current ordinance draft includes grandfathering rights for current licensees (“non-conforming use” application options).

Deschutes County

Deschutes County Ordinance 2018-012 took effect on Friday. The new regulations reduced the availably county acreage for cannabis by 17%, mostly by prohibiting marijuana production and processing in the multiple use agricultural (MUA) zone. The ordinance contains many other provisions as well, from new setback requirements to noise and odor mitigation rules. Although Ordinance 2018-012 is now in effect, we are including Deschutes County here because an appeal of this ordinance was filed with the Oregon Land Use Board of Appeals a few weeks back. The appeal means that these regulations are in flux to some extent, and will not be affirmed or rejected for several months.

New Oregon cities 

Last month, we covered the industry-friendly reversals of Ontario, Klamath Falls, Clatskanie and Sumpter, a quartet of cities scattered about the state which initially prohibited cannabis but are now opening their borders to OLCC licensed businesses. It now appears that the cities of Gates and Joseph may have “legalized” as well. For information on Ontario rulemaking, go here. For information on the Klamath Falls process, go here. We do not yet have information on the remaining four cities, but interested parties should reach out to those City Councils to gauge the plans for rulemaking in the newly green jurisdictions.

source https://www.cannalawblog.com/oregon-cities-and-counties-continue-to-refine-cannabis-rules/

Data Breaches are Coming and Will Wreak Havoc in the Cannabis Industry

California Cannabis Landlords: More Regulatory Snags to Avoid

Tenth Circuit to Decide if Fair Labor Standards Act Applies to Cannabis Businesses

As we all know, cannabis remains a federally controlled substance, and therefore illegal at the federal level. However, most states have some form of legalization. I have always advised my cannabis business clients to comply with both state and federal laws when it comes to employment laws. It seems to be the safest bet to ensure cannabis companies are not sued by employees for violating federal laws, and it seems to be the smart move in terms of keeps the feds out of their state legalized cannabis businesses.

Recently, a lawsuit arose in the Tenth Circuit challenging whether the Federal Labor Standards Act (FLSA) was meant to provide wage and hour protection to employees of cannabis businesses. In Kenney v. Helix TCS, Inc., the Tenth Circuit will decide whether the FLSA applies to such businesses. The FLSA sets federal wage and hour requirements and sets the standards for when employers must pay employees overtime wages.

In the litigation at issue, Helix TCS, INC. (“Helix”) provides security services to cannabis businesses. Kenney, an employee of Helix, was classified as an exempt employee, meaning Helix did not pay him overtime pursuant to the requirements of the FLSA. Kenney brought suit against Helix claiming he was misclassified as exempt and should have been paid overtime.

Helix moved to dismiss the case, arguing that Kenney was not entitled to the protections of the FLSA because cannabis was entirely forbidden under the CSA. The district court denied the motion to dismiss but certified the ruling for immediate appeal to the Tenth Circuit Court of Appeals.

On Appeal, Helix contends that its employees are not entitled to the protections of the FLSA. Helix’s main argument is that all participants in state recreational marijuana industries assume the risk that their activities will subject them to federal criminal sanctions and therefore they are not entitled to benefits under federal law, and cannot expect federal court to aid their conduct. Essentially Helix is arguing that the federal government would be assisting employees in drug trafficking if they afforded the employees the protections of the FLSA.

It remains to be seen whether the Tenth Circuit will buy Helix’s argument (and whether any of Helix’s remaining employees will want to stick around, for that matter). Helix clearly has the means to fight Kenney’s allegations. Perhaps Helix’s costs will increase substantially if they must pay all security guards overtime and litigation makes sense for them. However, litigation is extremely expensive, and Helix will have to balance those two issues as it proceeds.

In the meantime, best practices are to ensure your cannabis business is paying employees correctly under both state and federal wage and hour laws. If you pay your employees what they deserve, that alone may save you from a lawsuit. That sounds much better than fighting a wage and hour claim through the federal court of appeals.

source https://www.cannalawblog.com/tenth-circuit-to-decide-if-fair-labor-standards-act-applies-to-cannabis-businesses/

OLCC Report: Oregon Cannabis Producers in Substantial Compliance

Is Your Cannabis “Trademark Use” Merely Ornamental?

The notion of ornamental trademark use is one that many of my clients are initially unaware of when they come to me seeking guidance on how to protect their brands. This is unfortunate, because it’s an important issue to understand in the cannabis industry, where the only federal trademark protection we can obtain is for ancillary goods and services. (See here for the limitations of federal trademark protection in the cannabis industry.) The issue of ornamental use comes up frequently in the context of trademarks for apparel.

The United States Patent and Trademark Office (USPTO) may reject a trademark application if the specimen indicates that the use of the mark is merely ornamental or a decorative feature on the goods and does not function as a trademark to indicate the source of the goods. Here is an example of ornamental use provided by the USPTO:

“[A] slogan prominently displayed on the front of a t-shirt may be considered merely ornamental use and not trademark use. That is, most purchasers of the t-shirts would not automatically think the slogan identified the source of the goods but would view the slogan only as a decoration on the goods.”

Of course, not everything displayed on the front of a t-shirt would be considered ornamental and be ineligible for trademark protection. There are a number of factors an examining attorney will consider in determining whether a logo is ornamental or functioning as a source-identifier. The USPTO has explained that,

“a small, neat, and discrete wording/design located on the pocket or breast portion of a garment (for example, a small design of an animal) may create the commercial impression of a trademark, whereas a larger depiction of the same wording/design prominently displayed across the front of a garment may be more likely to be seen as a purely decorative or ornamental feature of the goods. The size, location, dominance, and significance of your mark as applied to the goods are factors used to determine whether your mark functions as a trademark to identify the source of your goods or is merely ornamental. Although there is no definitive method or place to affix a mark to the goods, the location and size of a mark on the goods is part of the environment in which the public perceives the mark and may influence how the mark is perceived.”

It is also important to keep in mind that common expressions and symbols (like the peace symbol or the phrase “Have a Nice Day”) are normally not the type of matter perceived as a trademark. There are three ways in which an applicant can overcome a refusal based on ornamentality:

1. By proving inherent distinctiveness;
2. By establishing acquired distinctiveness; or
3. By showing that the mark is registered for other goods or services, and thus that the applied-for mark serves as a secondary source indicator.

It is possible for an ornamental design to be inherently distinctive if its primary function is to identify the source of the goods, with its ornamental aspect being only incidental.

In building your cannabis brand, it is important to pursue a trademark strategy that does not open any of your marks up to refusal for merely ornamental use. If you intend to pursue trademark protection for ancillary goods like apparel, be certain that your mark is functioning as a source-identifier for that clothing, and isn’t just ornamental in nature. We’ve seen many instances recently of trademark applications that appear ornamental, and those applications will likely be vulnerable to rejection or challenge.

Happy Thanksgiving!

source https://www.cannalawblog.com/is-your-cannabis-trademark-use-merely-ornamental/

Five Key Documents Necessary to Understand Industrial Hemp Law

On Thursday, November 30, I’ll be speaking at a presentation hosted by the Seminar Group titled, “The Business of Marijuana in Washington State.” In preparation for this event, I’ve put together a list of materials that I think are vital to understanding the law on hemp-derived CBD (Hemp-CBD). Below is a list of statutes, cases, and other authority that frames the legal status of Hemp-CBD.

The Agricultural Act Of 2014 Section 7606 (the 2014 Farm Bill). Any analysis of US policy regarding hemp must the begin with the 2014 Farm Bill. Section 7606 of the 2014 Farm Bill is the starting point of the country’s rapidly expanding Hemp-CBD industry. The 2014 Farm Bill allows states to implement agricultural pilot programs overseeing the cultivation of industrial hemp. Industrial hemp is defined as the cannabis plant with less than .3% THC on a dry weight basis. States that have implemented an agricultural pilot programs are then authorized to issue licenses or permits to individuals and entities who can then cultivate industrial hemp. The 2014 Farm Bill requires a research component. What constitutes research is not defined within the “four corners” of the 2014 Farm Bill. Some states, such as Colorado, Kentucky, and Oregon, have interpreted the 2014 Farm Bill liberally, allowing the commercial sale and distribution of industrial hemp and industrial hemp products, such as hemp-CBD.

Statement of Principles on Industrial Hemp (the Statement). In 2016, the Drug Enforcement Administration (DEA), issued the Statement. The stated goal of this guidance document is to provide clarity as to how federal law applies to activities associated with industrial hemp, grown pursuant to the 2014 Farm Bill. The DEA interpreted the 2014 Farm Bill taken narrowly as the Statement indicates that the general commercial sale of industrial hemp is not permitted except for “marketing research” conducted by institutions of higher education or state departments of agriculture. The DEA also interprets the 2014 Farm Bill to prohibit the interstate transfer of industrial hemp. The DEA has not enforced the Statement robustly. For the most part, the commercial sale of industrial hemp and Hemp-CBD and the interstate transfer of industrial have been unimpeded by the DEA.

The Agricultural Appropriation Act of 2018, Section 537. One of the major reasons that the DEA has not followed up on the Statement, is that Congress has exercised its “power of the purse” to prevent the DEA from using federal funds to prevent the interstate transfer of industrial hemp or the commercial sale of industrial hemp. This was first enacted in 2017 and recently was renewed to run through December 9, 2018.

Hemp Indus. Ass’n v. U.S. Drug Enf’t Admin., 720 Fed. Appx. 886 (9th Cir. 2018). This case, decided by the US Court of Appeals for the Ninth Circuit, was brought by the Hemp Industry Association in response to the DEA’s “marijuana extract rule.”

The rule established a new drug code specifically for marijuana extracts and defined a marijuana extract as any extract containing cannabinoids derived from the cannabis plant. On its face, the rule makes no distinction between industrial hemp and marijuana. Shortly after issuing the rule, the DEA issued a clarifying statement that said that the rule only applied to derivative of marijuana, and that it would not make any extracts that were otherwise legal under US law illegal.

HIA was unsuccessful in the sense that the Ninth Circuit upheld the rule, dismissing the HIA’s challenges on procedural grounds. However, the DEA’s rule was left largely toothless by the time the Court issued its memorandum as the DEA had already walked back the rule through its clarification. Additionally, the Court stated that the 2014 Farm Bill preempted the Controlled Substances Act (CSA), meaning that when the CSA and 2014 Farm Bill conflict, the 2014 Farm Bill prevails. This preemption interpretation does not set precedent, as the memorandum is non-binding. It does, however, give credence to the argument that the 2014 Farm Bill preempts the CSA.

Hemp Farming Act of 2018. The Hemp Farming Act of 2018 was introduced by Senate majority leader Mitch McConnell. Mitch McConnell hails from the state of Kentucky, which has become a major player in industrial hemp. The Hemp Farming Act is much more detailed than the 2014 2014 Farm Bill. It explicitly removes industrial hemp and derivatives from industrial hemp, including CBD, from the CSA. It also provides a more robust regulatory framework’s for states to implement industrial hemp programs.

The Hemp Farming Act was adopted in its entirety in the Senate version of the 2018 Farm Bill. The house version of the 2018 Farm Bill did not include the Hemp Farming Act. Before the 2018 Farm Bill can be enacted into federal law, both houses of Congress must agree on the language of the Bill. Recently, McConnell guaranteed that the hemp provisions included in the Senate Bill would make the final cut. If that’s true, then as early as next year we will see a much more thoughtful (and discernible!) federal policy on industrial hemp.

source https://www.cannalawblog.com/five-key-documents-necessary-to-understand-industrial-hemp-law/

FREE Webinar December 12: Employment Law for Oregon Cannabis Businesses

If you missed our October 11 event on employment law for Oregon cannabis businesses, fret no longer. On December 12, 2018 at 12pm PST, Harris Bricken employment lawyer Megan Vaniman will present the first unit of our lunchtime employment law webinar series. The webinar will last an hour or so.

Megan will discuss how to navigate employment law for cannabis businesses and the employment laws that most affect cannabis businesses in Oregon. Most importantly, she will provide you with a whole host of tips and tricks to ensure solid management and compliance, and take questions along the way. Topics will include:

• What to consider when hiring
• Oregon and Portland’s “ban-the-box” ordinance
• Oregon’s sick leave requirements
• Final paychecks
• Independent contractor versus employee designations
• OLCC issues

With moderator Vince Sliwoski, Megan will address audience questions throughout the presentation. To register, please go here. Should you have any questions, please feel free to reach us at firm@harrisbricken.com.

If your cannabis business is located in Washington or California, don’t worry–we’ve got you covered. Stay tuned for webinars on cannabis employment law in Washington and California in the new year!

source https://www.cannalawblog.com/free-webinar-december-12-employment-law-for-oregon-cannabis-businesses/

California Cannabis: The Race is On for Temporary State Licenses

Unless you’ve been completely out of the loop, you already know that many, many people are in a race to submit their California state temporary cannabis license applications before December 31 of this year, which represents the “drop dead” date for cannabis temporary licenses. Add to that the regulatory curve balls thrown by the California Department of Food and Agriculture (CDFA) and the California Department of Public Health (CDPH) at the end of October (those agencies moved up the their temp licensing submission deadlines to December 1) and you have a stampede of people now trying to get their temporary license applications in by the end of this month. Thankfully, the Bureau of Cannabis Control (BCC) hasn’t yet said that there’s a low chance of successful processing if you submit after December 1, but given the back and forth it takes with the BCC to even get the temp, you may be out of luck.

Why does all of this matter? If you don’t have, or haven’t held, a temporary license for your current cannabis location (which is good for 120 days and gets renewed for additional 90 day periods so long as you’ve applied for your annual cannabis license), you’re ineligible for a provisional license next year, which means you’ll be on ice and non-operational unless and until you get your state annual license. No one really knows how long that will ultimately take.

If you’re finding yourself scrambling to get a temp license in before December 1, you’re not alone. The biggest roadblock of all has been would-be licensees securing local approval from their cities or counties. Certain local governments, though (like Long Beach, the City of Los Angeles, and San Diego) are obliging folks in their local licensing processes by providing them with letters of authorization. These letters of authorization only allow the applicant to go and apply for their state temp license(s)–they do not allow an applicant to actually open their doors until all conditions of official local approval have been met. That’s only half the battle though. Then you have to complete and submit your state temporary license applications, which depending on agency, is no picnic.

All three agencies will ask that you submit proof of local approval from your local government when applying for the temp license. They then contact the local government to verify local approval and the local government has no less than ten days to respond. By far though, CDPH has the simplest and easiest temporary license application. It’s literally one page, and you email or mail it to the agency. And you don’t have to submit even a lease agreement or a premises diagram either. Contrast that though with the BCC and the CDFA, which are a little more intense– especially since the re-adoption of the emergency regulations, which tweaked the temporary license submission requirements for those agencies.

For BCC (for which you must have an online account and then submit online or via hardcopy in Sacramento), you have to submit:

(1) The legal business name of the applicant; (2) The email address of the applicant’s business and the telephone number for the premises; (3) The business’ federal employer identification number; (4) A description of the business organizational structure of the applicant, such as partnership or corporation; (5) The commercial cannabis license that the applicant is applying for, and whether the applicant is requesting that the license be designated as medicinal, adult-use, or both; (6) The contact information for the applicant’s designated primary contact person including the name, title, phone number, and email address of the individual; (7) For each “owner” of the business, the owner’s name, title, percentage of ownership, mailing address, telephone number, and email address if applicable; (8) The physical address of the premises to be licensed; (9) Evidence that the applicant has the legal right to occupy and use the proposed location (that meets all mandatory buffer requirements); (10) A detailed premises diagram; (11) A copy of a valid license, permit, or other authorization issued by a local jurisdiction, that enables the applicant to conduct commercial cannabis activity at the location requested for the temporary license; and (12) a penalty of perjury statement.

For CDFA (for which you must also have an online account and then submit online or via hardcopy in Sacramento), you have to submit:

(1) The license type for which the applicant is applying and whether the application is for an M-license or A-license (note that CDFA still forces people to apply separately for M and A licenses even though those license type designations have since been combined); (2) If the applicant has already submitted an application for annual licensure, the application number; (3) The legal business name of the applicant entity; (4) The full legal name, mailing address, phone number, email address, and affiliation of the “designated responsible party,” who must: (A) Be an owner with legal authority to bind the applicant entity; (B) Serve as agent for service of process; and (C) Serve as primary contact for the application; (5) The physical address of the premises; (6) Copy of local approval; (7) A proposed cultivation plan; (8) Identification of all the following water sources for the cultivation site (as applicable): (A) A retail water supplier; (B) A groundwater well; (C) A rainwater catchment system; (D) A diversion from a waterbody or an underground stream flowing in a known and definite channel; and (9) Evidence of enrollment with the applicable Regional Water Quality Control Board or State Water Resources Control Board for water quality protection programs or written verification from the appropriate board that enrollment is not necessary.

Where are most people going to get screwed up here? Without a doubt, with the BCC it is the premises diagram and the proof of “right to real property” (I.e., your lease agreement). With CDFA, it’s going to be the cultivation plan, identifying water sources, and proof or registration or exemption with the applicable water boards. And many people don’t realize that the cultivation plan, itself, demands the inclusion of a detailed premises diagram, lighting diagram, pest management plan (for which you better have a good amount of knowledge regarding lawful and illegal pesticides and their applications), and waste management plan. All of this is not an insignificant amount of information to compile.

While folks are in the race now to get that initial (and very important) temporary license, there will be another push for these folks prior to the expiration of that 120-day validity period on the temp license where provisional licensing also requires that you have submitted a complete annual license application to the state, which will be another massive information gathering expedition about your cannabis business and how it operates. Undoubtedly, many would-be licensees are going to be out of the game if they don’t get their temps in on time, so stay tuned with updates as the California cannabis regulatory world turns.

source https://www.cannalawblog.com/california-cannabis-the-race-is-on-for-temporary-state-licenses/

Starting a Cannabis Business: What Contracts Do You Really Need?

You can spend a lot of money on lawyers, accountants and consultants when starting a cannabis business. There is so much ground to cover from concept to execution– especially in a complex and highly regulated industry. Related to this issue, we have written on this blog about finding a team, and we have talked about the importance of things like operating formally, staying away from generic agreements and avoiding the seemingly bottomless pit of industry scams and schemes.

Today’s blog post will cover which documents are really necessary when structuring a cannabis business, and what you may be able to do without— at least in the beginning. Note that these are general guidelines. They are not intended to serve as legal advice and every business should use its best judgment and consult with counsel on these items.

1. Stuff you cannot do without

Articles of Incorporation or Organization

This is very basic, but you cannot have a company unless the entity has been duly registered with the relevant Secretary of State. These days, most filings in most states can be done online, although there are situations where online filings are a bad idea, like when you want to do anything nonstandard with your Articles of Incorporation (for a corporation) or Articles of Organization (for an LLC). Those situations arise somewhat frequently. For example, you may want specific indemnity provisions for your board of directors beyond what the statutes contemplate. Or you may need to outline the attributes of preferred stock your corporation plans to issue. Many state registration portals do not allow “check the box” options for this type of tailored structuring. Get a solid cannabis business lawyer to help.

Internal Governance Agreements

If you have registered a multi-member LLC, it is a bad idea to proceed without an operating agreement and without an initial set of consent resolutions. The operating agreement in particular is going to define the spectrum of voting and economic rights each member has in the company, as well as crucial operational concepts. These concepts include non-industry specific matters (what happens when the company requires more capital?) to cannabis-specific matters (what happens when a member endangers the company’s state-issued license?).

In a corporation, you are going to have a few more agreements to start. Of these, bylaws and initial consent resolutions cannot be skipped. You will also need a shareholder agreement in most instances, and you will need to issue shares to owners (certificated or uncertificated). Other items, like a voting agreement, proxy agreements, etc., may be less important for some companies and you can often skip these to start.

Lease Agreement

Even if one of the cannabis business owners also owns the real estate at issue, you are going to need an industry-specific lease. A well drafted lease will insulate the property and its owners from liability if the cannabis business fails, or finds itself in litigation. When your business is leasing from a perfect stranger, the lease becomes even more important to outline the basic terms of the landlord-tenant relationship, on everything from your rights to occupy the property, to your rights to make modifications required to obtain a license.

Employee Handbook

If you have even one employee in your new business, get a handbook together. These internal business documents serve as a key communication tool between a business and its employees. A good handbook will set forth guidelines and expectations for workers, and perhaps most importantly, it can give a broad array of legal protections to business owners, as we previously explained here.

Third-Party Agreements

If your brand new cannabis business is doing a business transaction with a third party (some frequent, early examples include loans and services agreements) make sure you have adequately papered those items. Not memorializing a business or financial relationship in writing is asking for trouble.

2. Stuff you can probably skip (for now)

Employment Agreements

Today, all states recognize at-will employment, with various limitations. This means that a written employment agreement is not needed (or even desirable) for many types of employees. An exception may be where the employee is occupying a highly specialized or highly compensated position, or has rights to vest in ownership. But if all you are worried about an employee having access to proprietary information, you can generally cover this in an employee handbook, or through a simple non-disclosure agreement.

Stock Purchase Agreement

Lots of cannabis businesses try to raise capital shortly after formation, or as they approach licensure. They do this by selling stock or another form of ownership in the company. In our experience, though, it’s often best to wait until the business understands exactly how much money it needs to raise, and from whom, before drafting a stock purchase agreement. In many cases funds are raised from just one or two targets, and it does not make sense to draft purchase agreements until terms have been negotiated, or even memorialized in a letter of intent or other term sheet with prospective purchasers.

Business Plan

It’s a great idea to have a business plan, but not to pay a lawyer or consultant thousands of dollars to draft this for you. There is enough publicly available information out there for anyone to put together his or her own marijuana business plan these days; and you will know more than anyone you could hire about your goals. Even if you are unsure about some of the concepts at first, doing the research needed to put this document together will go a long way in educating and setting yourself up for success.

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It’s easy to get lost when starting a business, and to rack up costs on unnecessary items, or items that are less important in the near term. Focus on the basics to start, and enlist a knowledgeable cannabis business attorney to get you off the ground. The lawyer should be able to provide you estimates for basic services, and allow you to focus mostly on what matters most– running a successful cannabis industry business.

source https://www.cannalawblog.com/staring-a-cannabis-business-what-agreements-do-you-really-need/

Senate Majority Leader Guarantees Industrial Hemp Legalization

Just two weeks after Speaker of the House Paul Ryan expressed public support for the legalization of industrial hemp, Senate Majority Leader Mitch McConnell is now guaranteeing that the 2018 Farm Bill will include the industrial hemp legalization provision once the House and the Senate solve their difference regarding this issue.

If there’s a Farm Bill, it’ll be in there, I guarantee that,” McConnell told reporters last Friday.

(To watch McConnell’s hemp legalization guarantee, go to 13:15 into this video clip).

As we have discussed at length, the House and the Senate versions of the bill differ in that the House version is silent on the legalization of industrial hemp whereas the Senate version, which was introduced by the Senate Majority Leader himself, would remove the crop from the definition of “marijuana” under the Controlled Substance Act, and instead treat hemp like a standard agricultural crop. Indeed, although industrial hemp and marijuana are the same species, hemp contains a negligible amount of tetrahydrocannabinol (“THC”), the psychoactive compound that gives its users a high.

In justifying his support of the legalization of the crop, McConnell stressed the immense value and versatility of industrial hemp. In addition, McConnell declared that he became aware of the international implications of hemp legalization during his visits of hemp processors this past year and explained that major foreign investors have expressed interest in the hemp business, signaling the crop’s tremendous potential.

I don’t want to overstate this—I don’t know if it’s going to be the next tobacco or not—but I do think it has a lot of potential. And as all of you already know, in terms of food and medicine but also car parts…it’s an extraordinary plant.”

According to the Senate Majority Leader, once legalized, industrial hemp will be “lightly regulated” by the U.S. Department of Agriculture. In addition, there will be no more federal involvement except for the issuance of crop insurances to hemp farmers—which is one of the most significant provisions included in the Senate version of the bill. Instead, industrial hemp would be regulated by local law enforcement, pursuant to the state program under which hemp farmers would be registered.

Although McConnell acknowledged that a provision pertaining to work requirements for food stamp recipients had caused delays in the enactment of the 2018 Farm Bill, he declared that the enactment of the bill will be one of his top priorities when Congress reconvenes for a lame-duck session.

The continuing public support for the legalization of industrial hemp by conservative Congressional leaders strongly suggests that the enactment of the 2018 Farm Bill is imminent, which is fantastic news!

source https://www.cannalawblog.com/senate-majority-leader-guarantees-industrial-hemp-legalization/

Oregon Cannabis: OLCC No Longer Tolerating Rules Violations?

California Cannabis: Cities and the End of Temporary Licenses

Don’t Be a Marijuana Mooch!

California Cannabis Development Agreements: Part Three

How Cannabis Fared in the Oregon Elections (Hint: Very Well!)

Uncertainty Abounds in Defining “Commercial Cannabis Activity” under California’s New Rules

Washington State Regulates CBD Additives as Used in Marijuana Products

How Cannabis Fared in the California Elections

As we wrote on Tuesday, the midterm elections were monumental for cannabis: Michigan voters approved of a proposal legalizing recreational marijuana for adult use, Utah and Missouri will soon establish medical marijuana regimes, and Texas Representative and marijuana antagonist Pete Sessions lost to a Democrat.

All in all, Tuesday was a good day at the state and national level. But cannabis wasn’t just on the ballot at the state or national level—many cities had measures on that would regulate cannabis in one form or another. This post discusses some of the more impactful ballot measures that won and lost in California.

To start, dozens of cities and counties in California had cannabis taxation measures, which is a good sign for the expanding market. Oakland voters, for example, approved of Measure V, which amends the local code to allow cannabis manufacturers and cultivators to deduct the value of raw materials when calculating gross receipts for tax purposes. Fresno voters approved of Measure A, which adopts a cannabis business license tax. As noted above, numerous cities had tax measures on the ballot—and they are quite literally all over the map.

El Dorado County had a number of cannabis measures on its ballot. Measures P, Q, R, and S each passed, allowing the retail sale, delivery, distribution, and outdoor/indoor cultivation of commercial cannabis for recreational and medicinal purposes. Interestingly, El Dorado County’s Measure N (a tax measure), didn’t pass.

Los Angeles County’s well-publicized Measure B, which would have established a municipal bank, failed. This was a closely watched measure in the cannabis industry, as many had hoped for a local bank in which to bank their earnings. Because the California effort to charter a state bank has cooled, local businesses may have limited options until a federal fix occurs.

Elsewhere, the City of Malibu passed Measure G, which will now allow retail sales of commercial cannabis and deliveries. Before, Malibu only allowed medicinal sales. But wait before delivering into Malibu from other cities; you’ll need a regulatory permit from the City of Malibu to do so. No word yet on what that application process will look like.

As noted above, these are just a few of the measures that were adopted (or not) on Tuesday. California, like many other places nationally, is certainly moving toward a more open marijuana landscape.

source https://www.cannalawblog.com/how-cannabis-fared-in-the-california-elections/

California Intellectual Property Licensing: Our Comments to the Bureau of Cannabis Control

BREAKING NEWS: Anti-Marijuana Attorney General Jeff Sessions Resigns

BREAKING NEWS: Cannabis Wins Big at the Midterm Elections

Today was a stellar day for marijuana advocates around the country. Not only did a handful of states authorize legalization of medical and recreational marijuana at the polls, but the Democratic Party took control of the House of Representatives, and one very problematic Congressman, Pete Sessions, was sent packing down in Texas.

Below is a summary of the big changes nationwide, with many of these results still firming up at the time of writing. Note that this post does not detail some of the “smaller” local developments, such as decriminalization in certain Ohio cities, enthusiasm for cannabis by Wisconsin voters, or many other positive developments ushered in by this evening’s voting.

Michigan

Congratulations to the Wolverine State, which voted to legalize adult use (recreational) marijuana statewide. Individuals who are at least 21 years of age will be permitted to possess and use marijuana and marijuana-infused edibles, and grow up to 12 marijuana plants for personal consumption (that’s quite a bit). Permitted retail sales will be subject to a relatively modest 10% tax. Per state law, ballot initiatives take effect 10 days after results are certified, which can take up to three weeks from yesterday. So, legalization should take effect by the end of the year. Michigan is the tenth most populous state in the nation, and the first Midwestern state to legalize cannabis– which is a big deal. (Yes, Michigan is a part of the Midwest.)

Missouri

Missouri is another Midwestern state to make giant strides on cannabis, legalizing medical marijuana statewide. Missourians reviewed three medical cannabis legalization measures on the ballot: the one that passed is known as Amendment 2. Amendment 2 is an impressive entrée into legalization for a couple of reasons: first, it actually amends the state constitution to allow medical cannabis; and second, it contemplates a licensing program extending far beyond decriminalization, to state licensure for cultivators, manufacturers, testing labs and dispensaries. Under the new regime, qualified patients with physician approval will be allowed to receive cards for any condition the physician sees fit. There will be a 4% tax on retail transactions. Of the three initiatives on Missouri’s ballot, this one was the best.

North Dakota

Alas, North Dakota failed to move beyond the confines of its medical marijuana program. Measure 3 would have allowed people 21 and older to possess, use, grow, buy and sell marijuana for recreational purposes, and it would have expunged previous cannabis convictions from criminal records. Stepping back, Measure 3 was an odd initiative in that it failed to include any language regarding regulation or taxes. Apparently, the idea was to let the legislature figure that part out, but Measure 3 advisers may be kicking themselves for that strategy today.

Utah

Like North Dakota, Utah is a fairly conservative state. In keeping with that ethos, Utah passed a fairly conservative ballot measure last night to legalize medical marijuana – but passed it nonetheless. Proposition 2 allows qualified patients with physician approval to a purchase two ounces of medical marijuana in any two week period, or products containing 10 grams of CBD or THC. Curiously, smoking medical marijuana isn’t allowed. To the good, patients who live more than 100 miles from a dispensary will be able to cultivate 6 plants at home, and there will be a caregiver program. The state will issue licenses for cultivation, processing, testing and dispensaries.

In all, Proposition 2 had a very interesting backstory, such that today’s legalization of medical marijuana in Utah was something of a fait accompli. You can read about that here.

Congress

Democrats took back the House of Representatives last night, which is great news for federal legislation prospects. Although cannabis is not a distinctly partisan issue these days, most progressive cannabis legislation tends to come from the House, and the prospects of moving marijuana legislation are far superior today than yesterday. The fact that the Senate is still solidly Republican is not idea for federal legalization, but the prospect of compromise legislation on everything from decriminalization to banking to taxes — to say nothing of issues like industrial hemp — is better than ever.

Pete Sessions (“Prohibition Pete”)

This one could probably fall under the “Congress” paragraph above, but it’s a significant enough development to merit special mention. Back in March, I had fun writing about how Pete Sessions was almost single-handedly blocking cannabis reform, including bipartisan proposals, from his perch as Chair of the House Rules Committee. Well, Pete lost yesterday. This means that the undemocratic nonsense of blocking floor votes on issues that both parties want to vote on, is likely over. This development will probably be under-reported given everything else that occurred today, but it’s huge.

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All in all, voters across the U.S. once again expressed their desire to do away with prohibition on November 6. This morning, 33 states and the District of Columbia have laws broadly legalizing marijuana in some form. The President may be open to reform, and we expect industrial hemp to be legalized within a couple of months. Interestingly, the U.S. has also found itself in a marijuana sandwich of sorts, between Canada’s recent federal legalization and Mexico’s imminent legalization. But that’s a story for another day.

For now, cannabis reform advocates should rejoice: Voters rejected prohibition in many places, nationwide.

source https://www.cannalawblog.com/breaking-news-cannabis-wins-big-at-the-midterm-elections/