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.

Phase 3 Round 1 Application Aftermath:

Posted by Margolin & Lawrence on September 5, 2019

Just yesterday, the Department of Cannabis Regulation (DCR) opened up the application process for Round 1 of Phase 3 retail storefront licenses in the City of Los Angeles. Due to heavy restrictions and high demand, appropriate locations for these storefronts can be difficult to come by. Many applicants have locations which meet all guidelines, yet still fall within a community plan area that has reached “undue concentration.” Here’s the 411 on what is expected to happen after the opening of Phase 3 Round 1 applications:

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

 

ALL YOU NEED TO KNOW ABOUT THE DCR PHASE 3 ROUND 1 LICENSING AND SOCIAL EQUITY WORKSHOP HELD ON AUGUST 6, 2019

Posted by Margolin & Lawrence on August 8, 2019

(Picture of DCR building in Los Angeles)

On August 6, 2019, M&L partner J. Raza Lawrence attended the Phase 3 Round 1 Licensing and Social Equity Workshop hosted by the Department of Cannabis Regulation (DCR). The DCR provided an update on Phase 2 applications, the Social Equity Program, and the application process for Phase 3.

Application Requirements for Phase 3

Posted by Xochilt Gama on August 5, 2019

Requirements for Phase 3 Application

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.

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.

Cracking Down on Compliance

Posted by Margolin & Lawrence on April 30, 2019

     

     Operational compliance has become paramount to the success of many cannabis businesses following new state regulations that went into effect earlier this year.  For others, non-compliance has been a great downfall. Following the legalization of commercial cannabis, the state of California hastily drafted and passed emergency regulations which outlined licensing and operational requirements for cannabis businesses under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). These emergency regulations went into effect in December of 2017 to provide a temporary solution for the lack of cannabis legislation until more thorough regulations could be drafted and adopted by state agencies. Just three months ago, the Office of Administrative Law (OAL) approved new regulations which were immediately adopted by all three state licensing agencies. The new regulations include many significant changes from the previous emergency regulations and introduce more restrictive guidelines for cannabis businesses. Further, the new regulations define serious implications for businesses who violate the new guidelines – from fines up to $250,000 to loss of licensure. In recent months, a rapid number of compliance enforcement agencies have emerged at both the local and state level. Licensed cannabis businesses in California have experienced a peak in random compliance inspection visits, raids from local and state law enforcement, and seizure of cannabis products. With the commercial cannabis industry now in full effect, local and state agencies are beginning to focus less on setting the framework for the industry and more on enforcement of regulations.

A majority of licensed cannabis businesses are in some way in violation of current regulations despite their intentional efforts to comply. This is largely due to the cumbersome location-dependent nature of cannabis regulations. Although cannabis is legal in the state of California, commercial cannabis businesses are still federally illegal, and there is no federal legislation governing the licensing and operational compliance of cannabis businesses. As a result, cannabis regulations vary between states. Further convoluting the concept of cannabis compliance, regulations also vary within-state and are dependent on legislation issued by local authorities. All California cannabis businesses must adhere to statewide regulations enforced by the three state agencies – the Bureau of Cannabis Control (BCC), the California Department of Public Health (CDPH), and the California Department of Food and Agriculture (CDFA)  – in addition to guidelines enforced by local agencies. For instance, outdoor cultivation is legal at the state level per the CDFA, but it is prohibited within the City of Los Angeles per the local Department of Cannabis Regulation (DCR). Cannabis businesses must also comply with local Fire Department safety codes which also vary by jurisdiction.

With compliance enforcement on the rise, it is crucial for all cannabis businesses to stay informed about both state and local regulations in order to avoid high penalties or business closure.  Our firm offers full-coverage compliance counseling to licensed cannabis businesses. Our team is in regular attendance of local city hall and county government meetings pertaining to commercial cannabis in all areas of California and maintains current knowledge of the ever-changing regulations. We provide counsel in all areas of business compliance for cannabis retailers, distributors, cultivators, and microbusinesses. Our attorneys have a combined 20+ years of experience in the commercial cannabis industry and are active in compliance consulting throughout the state. We are able to provide our clients with expert contractors in building safety code pre-inspection, packaging and labeling compliance, product inventory and storage, advertisement restrictions, etc. We would love to help ensure that your cannabis business is successful and in compliance with all local and state regulations, giving you one less thing to worry about. If you have any questions or would like to speak with our attorneys to further discuss our compliance services, please feel free to reach us via email (info@margolinlawrence.com) or phone (323-253-9700). 

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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.