In Case You Missed It: Recent Federal Developments Signal Forthcoming Hemp-Industry Guidance

On Thursday, July 25, 2019, the Senate Agriculture Committee held a hearing before federal regulatory agencies in the agriculture, public health and pesticides space concerning efforts to implement the legalization of hemp. Representatives from the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA) and the Food and Drug Administration (FDA), among others, were invited to attend. The hearing was an effort to provide “certainty and predictability for farmers,” stated Pat Roberts, Chairman of the Agriculture Committee.

Why was this hearing needed?

The passage of the Federal Agriculture Improvement Act of 2018 (the “2018 Farm Bill”), which was signed into law by President Donald Trump on December 22, 2018, took monumental steps to remove several federal prohibitions on the U.S. hemp industry. For instance, the 2018 Farm Bill legalized the cultivation and distribution of hemp, defined as any part or derivate of the cannabis plant with 0.3 percent or less of tetrahydrocannbinol (THC).

However, while the Farm Bill provided some regulatory framework at the federal level for the cultivation of hemp, it did not resolve all uncertainty as to the FDA’s regulatory authority. In addition, there is still unrest as a result of ongoing concerns and … Keep reading

FDA Warning Letter to Curaleaf Inc.

The Food and Drug Administration (FDA), following up on its public concerns about the science, safety, effectiveness and quality of unapproved products containing cannabidiol (CBD), recently issued a warning letter to Curaleaf Inc., of Wakefield, Massachusetts, for illegally selling unapproved products containing CBD online with unsubstantiated claims that the products treat cancer, Alzheimer’s disease, opioid withdrawal, pain and pet anxiety, among other conditions or diseases.

Acting FDA Commissioner Ned Sharpless, M.D., commenting on the warning letter,  indicated that “selling unapproved products with unsubstantiated therapeutic claims — such as claims that CBD products can treat serious diseases and conditions — can put patients and consumers at risk by leading them to put off important medical care.” He further stated that “there are many unanswered questions about the science, safety, effectiveness and quality of unapproved products containing CBD and that the agency stands firm in its commitment to continue monitoring the marketplace and protecting the public health by taking action as needed against companies that deceive consumers and put them at risk by illegally selling products marketed for therapeutic uses for which they are not approved.”

The agency has established an internal working group to explore potential regulatory pathways for various … Keep reading

Supplementing the Pink Slip for a Green Stamp of Approval – Rising Trends of New Employment Protections for Registered Cannabis Users

 

 

Early this month, New Jersey enacted new workplace protections for authorized medical cannabis users

Under the new regulations, employers are prohibited from taking an adverse employment action against an existing or prospective employee on the basis of the person’s status as a registered qualified user of medical cannabis.  Under the recent amendment to the New Jersey Compassionate Use Medical Marijuana Act (“CUMMA”), “adverse employment action” is defined as “refusing to hire or employ an individual, barring or discharging an individual from employment, requiring an individual to retire from employment, or discriminating against an individual in compensation or in any terms, conditions, or privileges of employment.” Any employee or applicant, who is registered and qualified under New Jersey’s medical marijuana program and tests positive for cannabis, is required to receive a written notice by its employer offering the employee or applicant the right to (i) state a “legitimate medical explanation” for the positive test result, which may include authorized use issued by a health care practitioner, or (ii) request a retest of the sample within three days of receiving such notice. Further, the amendment’s notable silence on an employer’s obligation to accommodate an employee’s use of medical marijuana … Keep reading

When Alcohol Leads, Cannabis Follows

The nascent cannabis industry is much like a younger sibling, riding the wake of its forerunner, alcohol.  In joining the vice industry’s consumer products market segment, the cannabis industry has had the benefit of being able to follow in the footsteps of the alcohol industry and anticipate potential upcoming obstacles.  This use of the alcohol industry as a guinea pig can be readily observed in connection with the evolving legal and regulatory frameworks currently being formulated for cannabis.  It is in this light that the June 26, 2019 U.S. Supreme Court decision in Tennessee Wine & Spirits Retailers Association v. Thomas, a case concerning certain Tennessee alcohol regulations, can offer some guidance and foreshadow the future of cannabis laws and regulations.

In Thomas, the Tennessee Wine and Spirits Retailers Association (a trade association of in-state Tennessee liquor stores), sought relief from the Supreme Court in their endeavor to have certain Tennessee state regulations -which required state residency for holders of alcohol licenses- upheld.  Justice Alito and the Court ruled against the Association in their holding that such regulations were unconstitutional.

Although a number of other regulations requiring that alcohol license holders and applicants in Tennessee be residents … Keep reading

The Exhaustion of Marijuana Legalization

On May 30, 2019, the U.S. Court of Appeals for the Second Circuit ⁠—in an opinion delivered by the eminent Guido Calabresi⁠— offered the cannabis industry a glimmer of hope in its pursuit of the federal legalization of marijuana.  In the case of Washington et al. v. Barr et al., a set of plaintiffs challenged the DEA’s classification of marijuana as a Schedule 1 drug under the Controlled Substances Act (“CSA”).  Most courts, including the SDNY (where the case originated), have had a general tendency to dismiss such cases, citing the preeminent precedent established in Gonzales v. Raich, which confirmed the supremacy of the federal government’s prohibition of marijuana over state legalization.  The Second Circuit, in Washington, stopped short of dismissing the appeal from the SDNY and set up the opportunity for a potential challenge to the federal ban in the near future.

While the plaintiffs in Washington surmounted an incredible obstacle, by avoiding outright dismissal, the Court did not go so far as to provide them with the relief they sought.  Instead, Calabresi and his peers opted to concur with the SDNY’s ruling that the plaintiffs had failed to fully exhaust their available alternative remedies … Keep reading

Looking Beyond the Green – Garden Remedies’ Commitment to Mentoring New Cannabis Entrants

Retail sales of medical and recreational marijuana in the U.S. have been projected to reach $12 billion by the end of 2019. In Massachusetts, the total sale of recreational marijuana have topped $100 million last month according to data released by the Cannabis Control Commission (“CCC”). This is a significant rise from the CCC’s January report of nearly $24 million in recreational sales. However, statistics also show that at the beginning of this year only 4 marijuana licenses were held by Economic Empowerment Applicants (“EEA”) out of a total of 247 license applications – amounting to a mere 3 percent of all recreational license applicants qualifying as minority-owned.

At the foundation of Massachusetts’ cannabis legislation is a commitment to ameliorating the disproportionate harm done to minority communities as a result of the War on Drugs, specifically in the context of the prohibition on marijuana. Pursuant to St. 2017, c. 55, the CCC is required to ensure that members from communities that have been disproportionately harmed by the enforcement of marijuana laws are not excluded from the cannabis industry. As a result, the CCC established a system of priority review for EEAs who meet three out of the six criteria, … Keep reading

The cannabis industry has a corporate governance problem. It is a topic that legal analysts have discussed at length, and yet it continues to be an area that is especially important to emerging cannabis companies and mature cannabis companies alike.

In the world of startups and emerging companies, it is not uncommon to see founders sacrifice best corporate governance practices in an effort to become established faster and build their market presence. Early investors and shareholders are often tolerant of governance shortcomings as companies focus their energy on growth and market-share. After all, the consequences of lacking sufficient corporate governance controls are not always a clear deterrent in the early stages of a closely held company. However, many cannabis companies do not have the luxury of a normal growth period, with time to mature and adopt normal governance policies. With stringent (and ever-changing) regulatory requirements, and an ongoing demand for transparency, cannabis companies can avoid headaches (and potentially worse) by implementing strong corporate governance practices early on.

When it comes to corporate governance, best practices suggest that, among other things, (i) boards (whether board of directors or board of managers) should consist of diverse and independent members, (ii) management … Keep reading

In a post last week, we discussed the ongoing personal bankruptcy case In Re Adair, in which a United States Trustee is seeking to have the court dismiss a Chapter 13 plan of an individual that is employed by a “non-plant-touching” ancillary marijuana business. The Trustee argued that, as the debtor’s salary is paid by an employer that derives income from the sale of cannabis, which remains federally illegal, approval of the bankruptcy plan would “improperly involve a federal court in administering the fruits and instrumentalities of federal criminal activity”. This argument has also been made in other bankruptcy cases in which the debtors engage in activities related to the marijuana industry, resulting in a seemingly blanket refusal by the bankruptcy courts to confirm any plans involving state-sanctioned marijuana operations.

However, a significant chink in the armor occurred last week when the Ninth Circuit Court of Appeals issued a ruling in Garvin v. Cook, which affirmed a bankruptcy court’s confirmation of a Chapter 11 plan involving income derived from the sale of marijuana. The Trustee in Garvin objected to the plan in question based, in part, upon 11 U.S.C.A. § 1129(a)(3), which provides that “[t]he court shall … Keep reading

The U.S. Justice Department (“DOJ”) has said that an Oregon woman who is employed by a marijuana staffing agency cannot use bankruptcy protection because of her firm’s ties to the cannabis industry. The U.S. Trustee—a DOJ bankruptcy administrator—objected to confirmation of the debtor’s Chapter 13 plan and moved to dismiss on the grounds that her income is earned in violation of the federal Controlled Substances Act (“CSA”).

The debtor, Ms. Adair, works for Greenforce Staffing, which advertises itself as a full-service staffing and temporary employment agency focused on labor solutions for the cannabis industry. Moreover, its website claims that the company specializes “in providing skilled harvesting, cultivation lifecycle, and trimming temporary labor services for licensed Oregon producers” as well as providing “a suite of permanent and temporary placement services for all aspects of the cannabis industry, including, but not limited to, bookkeeping, product packaging, garden management, and retail.”

Even though Greenforce is by no means a plant-touching operation, the Trustee argued that confirming Ms. Adair’s Chapter 13 plan would nonetheless improperly involve a federal court in administering the fruits and instrumentalities of federal criminal activity. The objection continued:

The Debtor receives her income from Greenforce, and Greenforce receives … Keep reading

Cannabis Businesses are Subject to the Same Laws that Other Businesses Are: So Don't Let the TCPA Bite You

Whether a cannabis firm is in the recreational or the medicinal space it seems as though there is an excess of rules and demands whichever way you turn. The new California regulations read like those for a proper pharmaceutical firm, while we know that bank financing or even financing receivables can demand extraordinary documentation. And there’s no need to dwell upon the continued uncertain status of cannabis and its derivatives per the Cole Memo and the fact that cannabis remains largely a cash business with its attendant risks.

So with all of that to consider, it would not be surprising for a consumer facing cannabis firm not to think much about sending out a few text messages. Well, perhaps more than a few. In early April it was reported that Eaze Solutions, Inc. agreed to pay $1.75 million in settlement of a class action claim that it had bombarded consumers with unsolicited, autodialed text messages. The company’s mobile app facilitates the personal delivery of recreational and medical marijuana throughout California, earning it the moniker (at least by plaintiff’s counsel) of the “Uber of weed.” (No report from Uber as to how they feel about this compliment.) The successful plaintiffs … Keep reading