DCR Accepting Applications for Undue Concentration in Los Angeles

Posted by Zachary Tucker on September 17, 2019


 

Don't panic. Although the first application cycle for cannabis retail licensing in the City of Los Angeles closed this morning, the real fun is only beginning. After today, the City’s Department of Cannabis Regulation (DCR) will begin to process and review applications submitted in Round 1. Over 800 applications were submitted in the first round, but only 100 applicants will be issued a license through this electronic process. Applicants who are unable to obtain a license in Round 1 of Phase 3 will be eligible to apply for one of the 150 licenses to be issued in Round 2, although it is anticipated that the final round will yield an even larger applicant turnout. However, applicants can apply for a license in an area of undue concentration, and there is no limit on the number of licenses that can be issued through the undue concentration process. Under Los Angeles Municipal Code (LAMC) SEC. 104.20 (Part a.), the number of Social Equity licenses to non-Social Equity licenses is 2:1, which means that if 190 licenses were issues through Measure M Priority Round 1, 380 should be issued through a combination of Round 1 and Round 2 Phase 3 processing, and the "Public Convenience or Necessity (PCN)" process (for areas of undue concentration) described below. If the city abides by its own ratio, 130 retail storefront licenses will be authorized in addition to the 250 through the electronic process. 

Alternative Dispute Resolution in Cannabis

Posted by Margolin & Lawrence on September 12, 2019

On September 12th, M&L partner Raza Lawrence participated in a roundtable discussion with a group of attorneys in Downtown LA regarding alternative dispute resolution in cannabis law.  This is a growing field becoming more and more important for people operating or starting a cannabis business.  Starting a new cannabis business can be complicated, lengthy, and expensive, often including multiple investors, loans, licenses, employees, asset purchases, and phases of construction.  As people adapt to the new licensed and regulated system, they are forming new companies and making large investments, and want to have ways to make sure their investment is protected and any disputes are resolved efficiently and fairly.

Now, commercial cannabis operators in California need both local and state licenses, and to comply with detailed local and state regulations.  In Los Angeles, the structure and procedure of licensing is complicated further by the social equity program requiring many dispensary licenses to be majority-owned by social equity candidates who meet certain qualifications based on their history of living in certain parts of the city, being arrested for cannabis crimes, and being low income.  In addition, cultivation, manufacturing, and distribution licenses in Los Angeles remain tied to “priority” applicants who can show a history of operating in the City, further complicating the business structures.  


Disputes and problems inevitably arise when starting any business, even with the most careful plans.  This is especially true with California’s complicated and changing cannabis laws, and the continued conflict with federal law.  Until recently, California did not regulate or license commercial cannabis businesses.  Instead, there was an affirmative defense to the criminal laws to people who operated as nonprofit medical marijuana collectives, jointly owned by all members.  Collectives and medical marijuana operators were frequently arrested and prosecuted even when they tried to do things the right way, and laws were vague and unpredictably enforced.  People tended to keep few if any records, because they did not want to keep evidence of criminal activity.  Many cannabis businesses today are continuations or offshoots of these earlier, unregulated businesses, and have some disputes and growing pains when trying to adapt to the new laws.


People in the cannabis industry have traditionally shied away from courts , preferring to resolve disputes through informal means.  That is because what happens in court becomes public record, and testimony and evidence presented in court could incriminate people for violating state or federal criminal laws, or even lead to asset forfeiture.  For licensed operators, testifying in court continues to incriminate them under federal law.  Distributing cannabis remains illegal under federal law, a felony with potential long jail sentences and asset forfeiture.  While there are legal protections against prosecutions for state-licensed medical cannabis operators, the federal law complicates the legal landscape, making court results unpredictable.  It can be difficult to even enforce a cannabis-related contract in court, given the federal illegality.  Under the US constitution, federal law controls over state law when there is any conflict in the laws, including in the area of cannabis.  In addition, many judges and courts start out biased against cannabis, having prosecuted and convicted cannabis defendants with felony charges for years.


Today, as people try to get their companies off the ground and adapt to the new legal regime, they need efficient and effective ways to resolve their inevitable problems and challenges.  Court cases are expensive and take a long time.  Arbitration and mediation can be much faster and cheaper, and a way to avoid potentially biased and uninformed judges.  For all these reasons, we recommend that parties include alternative dispute resolutions in their contracts, requiring the parties to submit any disputes to mediation or arbitration and bypass the traditional court system.  This way, parties can select someone they trust to resolve their dispute, using a transparent process agreed to by everyone.


Our law firm has helped numerous people and businesses resolve disputes relating to commercial cannabis.  If you have a dispute involving your business, or are looking for ways to avoid them, you can contact our firm for help you find a solution.

City of Los Angeles Implies It Will Soon Accept Applications in Areas of Undue Concentration

Posted by Zachary Tucker on August 19, 2019

 

Los Angeles Releases Final Application for September 3rd Licensing Cycle

Posted by Zachary Tucker on August 17, 2019

 

What's the 411 on 420 and "Undue Concentration?"

Posted by Margolin & Lawrence on July 3, 2019

Recently, rumors and misinformation have circulated surrounding LA’s “undue concentration” rules for commercial cannabis licensing. The undue concentration rules have not been eliminated, as some have falsely claimed. LA has recently changed details about the policy, in a way that will allow more retail dispensary licenses to be issued sooner. Some have feared, however, that the latest changes may introduce an element of unfairness to the licensing process.

Undue Concentration

Posted by Raza Lawrence on June 25, 2019

     

Take Our Quiz to Find Out if You May Qualify for Social Equity

Posted by Zachary Tucker on June 13, 2019
 

Retail Cannabis Licensing Draft Ordinance Heads to L.A. City Council

Posted by Margolin & Lawrence on June 4, 2019

On Tuesday, May 28, the Los Angeles City Attorney Michael Feuer filed a draft ordinance regarding retail cannabis licensing.

L.A. Retail Cannabis Legislation Moves Forward: What Happens Now

Posted by Margolin & Lawrence on April 22, 2019

 

 

Wednesday, April 17 - The City of Los Angeles Rules, Elections, and Intergovernmental Relations Committee discussed and approved an April 12, 2019 report and proposed ordinance from the LA City Attorney regarding cannabis licensing, with recommendations to make some amendments.

All recommendations were approved and will be redrafted for Council consideration and presented on Tuesday, April 30.

Today’s meeting moves the City closer to the opening of the highly anticipated Phase 3, which is the first chance that will allow the general public to receive dispensary licenses. The City Attorney was directed to make requested changes to the proposed new ordinance, to present for City Council consideration on April 30.

 

Notable Takeaways from Wednesday’s Meeting

The City of Los Angeles and the DCR have been hard at work in recent months, particularly as they sort through the specifics of Phase 3. While Phases 1 and 2 focused on existing cannabis dispensaries, non-retailers (i.e. growers and manufacturers), and social equity applicants, Phase 3 has been the main attraction for many entrepreneurs and would-be business owners looking to break into the industry.

In an earlier April meeting, the fate of Phase 3 was largely unknown due to funding. The DCR claimed that licensing was on hold as they awaited the Fee Deferral Program, which would allow Phase 3 to commence.

While a date has not been announced for the opening of Phase 3 applications, Wednesday’s meeting shed some light as to the direction the City and DCR are taking to solidify the process.

 

Among the notable new details that are coming out through these recent meetings and reports are:

● Changes to the Los Angeles Municipal Code establishing a first come, first served application process for retailer commercial cannabis activity licenses, with details regarding what is required for an application to be considered complete

● A proposal to allow applications for retail storefront dispensaries beginning January 1, 2020, in neighborhoods that have already exceeded Undue Concentration caps, with City Council approval

● Modifications to the process for issuing non-storefront retail licenses

● Allowing the Department of Cannabis Regulation (DCR) to grant Temporary Approval to Phase 3 storefront retail applicants

● Exempting Phase 2 applicants from the Undue Concentration requirements

● Setting deadlines for Phase 2 applicants to finalize their business location (May 15) and obtain Temporary Approval (substantial progress by July 1)

● Revising various requirements to qualify as a Tier 3 Social Equity Applicant and revising various benefits provided to Tier 1 and Tier 2 Social Equity Applicants

● Adding an additional reason to deny a license application — if the City has taken enforcement action against unlicensed cannabis activity at the same address since January 2018

● Clarifying the definition of license ownership relative to management companies

 

In addition, one of the recommendations to the draft ordinance that was approved on Wednesday was to instruct the DCR to finalize a timeline for all Phase 3 and Type 9 Pilot activities and post the information on the Department’s website. This indicates that an exact date for Phase 3 licensing could be established by April 30, if not sooner.

 

DCR Prepares to Open Phase 3 Applications

Posted by Margolin & Lawrence on April 2, 2019

An Important Step Forward for Los Angeles Cannabis Licensing – DCR Prepares to Open Phase 3 Applications, Starting with Retail for Social Equity Applicants

 Cannabis licensing has been on the lips of hundreds of interested Los Angeles retailers and users for months.  Important steps were taken to move the process forward at yesterday’s meeting of the Los Angeles Budget and Finance Committee at City Hall.  During the meeting on April 1, City reps discussed delays in the licensing due to the delayed funding for the social equity program. It was also revealed that many people in LA have been holding properties for months waiting for the license application process to open up.

In order to continue with the licensing process, based on the specifics of the LA ordinance, the City of Los Angeles needs to issue a set number of retail dispensary licenses to social equity applicants (defined so that people may qualify based on low-income status, having a prior cannabis arrest, and/or living in specified zip codes within the City for at least 5 or 10 years that have had the most cannabis arrests). 

For several months, interested parties have been awaiting the opening of “Phase 3” of Los Angeles’s cannabis licensing program, which is the first opportunity for members the general public to apply for cannabis licenses in the City.  The previous two phases awarded licenses to certain qualified “priority” retail and non-retail businesses who had been operating in the City since before 2016. 

The City is required to issue retail dispensary licenses to social equity applicants on a 2:1 ratio as compared to non-social equity applicants.  To date, the City has issued 178 Phase 1 retail (non-social equity) applications, meaning that it needs to issue 356 social equity licenses in order to catch up with the required ratio.  To start reaching these numbers, the City has proposed issuing 200 licenses (in two batches of 100) to social equity applicants.

This process has been delayed because, under the City’s law, social equity applicants are entitled to receive certain business licensing and compliance assistance, but so far there have been no funds allotted to provide this assistance.  At yesterday’s meeting, the Budget and Finance Committee finally approved funding for the social equity program, meaning the whole licensing process can now move forward.

Categories

This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.