DCR Accepting Applications for Undue Concentration in Los Angeles

Posted by Margolin & Lawrence 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. 

WHAT IS "UNDUE CONCENTRATION?"

Phase 3 applicants are subject to the “undue concentration rule” passed into LAMC which restricts business location eligibility based on data from the 2016 American Community Survey, not on any state law requirements. The rule sets a limit on the maximum number of licenses that can be issued in each Los Angeles Community Plan Area. The implementation of undue concentration in Los Angeles further complicates what is already a difficult task for many hopeful cannabis entrepreneurs who have been verified for the City’s Social Equity program, which aims to provide priority licensing and accessibility to individuals who have been disproportionately impacted by the war on drugs. Phase 3 Social Equity applicants must find properties that meet not only the plethora of other local requirements (e.g., correct zoning, 700 feet distance from any other dispensary or “sensitive use” areas) but also within specific communities that has not reached their license cap -- unless the candidate is able to successfully lobby City Council to approve them through the PCN process.

THE PUBLIC CONVENIENCE OR NECESSITY (PCN) PROCESS

The "Public Convenience or Necessity (PCN)" process.  process was established by the City Council and passed into LAMC to provide applicants who wish to apply for a license in an area that has already met undue concentration a chance to appeal their ineligibility based on the undue concentration rule. Applicants must submit an online application and pay a $1,499 PCN request fee to be routed to the City Council. Then, applicants must lobby the City Council to receive their approval and become eligible to apply for a license in an area that is undue.

Six of the 36 Community Plan Areas in Los Angeles have already met undue concentration. These areas were deemed unduly concentrated (with zero licenses available) prior to the Round 1 application cycle which began on September 3rd. At that time, several other Community Plan Areas had as few as two or three licenses remaining. These numbers can be viewed for each Community Plan Area on the DCR’s interactive map. The DCR will only issue the number of licenses indicated as “available” on the map in each Community Plan Area during Round 1, and licenses will be distributed on a first-come-first-serve basis. Therefore, even individuals who applied for a Round 1 license in an area outside of the six that have already reached undue concentration are subject to the consequences of the regulation and may be routed to the PCN process. In its review of applications submitted during Round 1, the DCR will issue licenses to eligible applicants on a first-come-first-serve basis (i.e., applicants with an earlier application timestamp will be processed first).Once an area becomes unduly concentrated, Round 1 applicants with later submission timestamps will automatically be routed to the PCN process unless their location is within 700 feet of a sensitive use property or another dispensary. Although the application window for the 100 Round 1 licenses closed this morning, the online PCN application will remain open for applicants that did not apply during Round 1 and wish to apply for a license in an area of undue concentration.


Other cities and municipalities in California who have not enforced additional location requirements like the undue concentration rule -- including Oakland, the very city Los Angeles modeled its Social Equity program after -- attest to the rule’s redundant and excessive nature. The 187 businesses currently holding retail licenses in Los Angeles who applied in Phase 1 as Existing Medical Marijuana Businesses (EMMDs) were also not subject to this rule. In addition, places like the  Oaksterdam cannabis dispensary district in downtown Oakland have been havens of community, not crime. Moreover, the unfairness that can result from a system like the PCN process -- which has essentially no guidelines and is subject to the very sticky nature of local politics -- would be eliminated if the City simply allowed everyone who applied to run a dispensary, so long as they respected the sensitive use requirements other than the intradispensary buffer. Our firm will continue to advocate for the eradication of the undue concentration restriction but is helping applicants navigate the requirement and its consequences since the situation does exist presently. 

WHY YOU WANT US TO LOBBY FOR YOU

Over 800 applications were submitted in Round 1. It is likely that several more Community Plan Areas in addition to the existing six will become unduly concentrated and applicants in these Areas will be required to undergo the PCN process - regardless of whether or not their Area was one of the original six. Given the high degree of uncertainty regarding who will be subject to the PCN process, our team is proactively preparing to take the first steps of a PCN appeal for each and every one of our clients who applied during Round 1.

Margolin & Lawrence has obtained over 200 state and local cannabis licenses throughout California and one in Massachusetts. Our founding partners, Allison and Raza, have litigated cannabis and other drug cases throughout their careers ( 17 and 16 years, respectively ) across the state and federal courts of our country, and have appeared in Hawaii, Utah, Nebraska, and Nevada, just to name a few. Our years of experience trying marijuana cases in front of juries has trained us for the battleground that is city politics.

Their experience fighting the war on drugs and fighting for drug and marijuana defendants, specifically, gives them the credibility to discuss the Social Equity program and their clients' willingness to re-enfranchise those who have been systematically excluded. Our firm was founded on the same core values as those of the Los Angeles Social Equity program. Allison and Raza have demonstrated a passion for drug legalization and criminal justice reform throughout (and even before) their careers.

Allison began her drug law reform efforts at age 12 when she discovered the insanity of the drug war while writing her sixth grade DARE essay on the Medellín Cartel. Her parents' careers as criminal defense attorneys and advocacy for drug law reform gave her an early and rare insight into the traumas inflicted on people, by the criminal justice system. During her time as a Harvard law student, she published her thesis On the Right to Get High where she argues for the decriminalization of all drugs and states that current state and federal laws are unconstitutional.

Before working with Allison in 2009, Raza worked at the CATO Institute, the ACLU, and the Center for Individual Rights fighting on behalf of individuals who have been disproportionately impacted by the war on drugs. He was also a federal clerk for the 9th Circuit Court of Appeals. Together, Allison and Raza founded their 501c4-registered lobbying firm, Advocates for Healing America, in order to advocate for drug policy reform and provide support to political candidates with a like-minded agenda.

Margolin & Lawrence remains committed to our founding values and will continue to do everything in our power to ensure we help individuals who have been who have been disproportionately impacted by the war on drugs. Our current efforts are aimed towards ensuring that victims of this war have the access they deserve to reparative government programs such as the Los Angeles Phase 3 Social Equity licensing process. 

If you have applied for a Round 1 retail license or if you are seeking to apply for a license via PCN or Round 2, we invite you to contact a member of our team immediately to discuss how we may be able to advocate on your behalf. We cannot take clients with retail properties that are within 700 feet of our current clients and are accepting new clients on a first-come-first-serve basis. Therefore, we recommend contacting a member of our team sooner than later to minimize the chances of conflict.

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:

Undue Concentration

Posted by Raza Lawrence on June 25, 2019

     

Cannabis Business Law

Posted by Margolin & Lawrence on October 19, 2018

California cannabis entrepreneurs have to go through the often lengthy and cumbersome process of applying for local and state commercial cannabis licenses.  But that is only the beginning of the journey to becoming a successful, fully-compliant business in this emerging industry.

Entrepreneurs interested in operating a cannabis business in California must decide how their business will operate and what business structure will work best for their specific business goals. They must consider the commercial, legal, and tax implications that come with deciding which business structure they want to operate under.  

Once entrepreneurs have decided which business structure will best work for their specific business goals, the next step is to begin the entity formation process. This process consists of deciding what the Company name will be and drafting the entity formation documents that will determine how your cannabis business will operate.

As a full-service cannabis law firm, we represent many clients who have gone through this process already. Two of the most common business structures we have seen entrepreneurs decide to start their cannabis business as have been Limited Liability Companies (LLCs) and Corporations. Although there are some similarities between both business structures, there are some major differences that entrepreneurs need to understand prior to beginning the entity formation process.  

At Margolin & Lawrence, our cannabis attorneys can help you with all the formation and governing documents for your LLC, such as the articles of organization, operating agreements, and statements of information. If you decide on structuring your cannabis business as a corporation, our cannabis attorneys can help you with your corporate formation documents such as bylaws and articles of incorporation.

Additionally, we understand how important it is for new businesses to raise capital to continue to grow their business. Given that cannabis is still illegal under federal law, entrepreneurs looking to raise capital for their cannabis business need to seek private investment capital. In order to do so, there are a series of important documents private investors want to examine before they decide to invest in your cannabis business.

For instance, companies looking to raise capital need private placement memoranda (PPMs) and subscription agreements. A PPM is a legal document that is given to prospective investors when selling stock or any other security interest in a business. The PPM provides prospective investors with an in-depth look at your business, including management, analysis of operations, risks factors, financial information, among other things. The goal of the PPM is for prospective investors to be fully informed about all aspects of your cannabis business.

A subscription agreement is an agreement between a corporation and the investor (the subscriber) in which the corporation promises to sell a certain number of shares at a specific price to the subscriber and, in return, the subscriber promises to buy the shares at the agreed upon price.

At Margolin & Lawrence, our cannabis attorneys can help you and your business with any capital-raising compliance and legal representation. Additionally, our cannabis attorneys can help you decide which business structure best meets your cannabis business goals. And we can help your cannabis business remain compliant with all the governing laws every step of the way, including ongoing compliance with state and local commercial cannabis regulations and employment laws, avoiding and minimizing the expenses of civil litigation, addressing the implications of federal illegality of cannabis, and helping to informally resolve any internal or external disputes that jeopardize the business operation.

All About California Cannabis Taxes

Posted by Margolin & Lawrence on February 1, 2018

Many are excited about California’s new era of legalized marijuana. For the first time, state and local governments are allowing marijuana sales to all adults. There is also a new licensing system for all sectors of the industry. The new system creates many new opportunities for businesses and consumers.   But is also comes with new taxes that have caused sticker shock for many California cannabis operators and customers visiting dispensaries this month. Governments are eager for the new tax revenues, although some predict that if taxes are too high, a black market will persist as people opt out of the licensed system. One of the questions our Los Angeles cannabis attorneys are most frequently asked is about the new cannabis taxes and how they will affect California cannabis businesses.

To sum it up, effective tax rates for marijuana operators are high. Not only do cannabis businesses have to pay corporate taxes like any other business (except that they can't take deductions on their federal taxes due to 280E), but there are also additional city and state taxes specifically for cannabis operators that need to be factored in as well.  Just as Federal, State and Local law apply to cannabis operators, those governments all also apply their own taxes to cannabis.

Here is a chart that gives you an overview of the effective tax rates for different cannabis businesses, using Los Angeles as an example for factoring in local taxes as well:

NOTE that the Excise Tax (15%) and Sales Tax (8.5%) imposed on retailers is passed directly on to the consumer. So the effective tax rate is similar to the other activities when you factor that in, but overall the tax rates are very high for operators. 

One of the reasons cannabis operators must pay so much in taxes is that cannabis is still a Schedule I controlled substance under Federal Law. Section 162 of the U.S. Tax Code allows for businesses to deduct Ordinary and Necessary expenses from their taxes. An exception to this section is 280E, which prevents deductions from Federal Taxes for businesses involved in selling Schedule I controlled substances. You can read the text of 280E here and check out a seminal 2007 Tax Court decision -- CHAMPS v. Commissioner (2007) which allowed an operating dispensary to separate out product-touching deductions and deductions for a separate ancillary business. A related 2015 ruling in U.S. Tax Court held that unlike CHAMPS, an operator running an activism business and selling cannabis could not separate the two businesses and take deductions under 280. These two cases apply to retailers. Other cases have found that cultivators and manufacturers can take certain deductions for costs of production. We will cover this in a future post. 

Here are the individual maximum tax rates that apply:

  Federal Corporate Tax Rate*** California Cannabis Taxes California Business Taxes 8.84% Los Angeles Cannabis Taxes Los Angeles Business Taxes (.425%) Payroll Taxes (Estimated effective rate) Estimated Effective Tax Rate
Retail 21% 23.5% -- 15% excise tax + 8.5% sales tax 8.84% 10% in LA for adult use; 5% in LA for medical 0.43% 3%**** 57%
Cultivation* 21% 12% estimated ($9.25/ounce tax on flower = $148 per pound) + $0 sales tax 8.84% 2% 0.43% 3% 45%
Manufacturing 21% Collect Cultivator Tax + $0 sales for resale 8.84% 2% 0.43% 3% 35%
Distribution 21% Pay CDTFA Cultivator Tax + $0 sales for resale 8.84% 1% 0.43% 3% 35%
Testing 21% + Deductions = Estimated 15% - 8.84% 1% 0.43% 3% 34%
Microbusiness 21% per activity 8.84% per activity 0.43% 3% Varies per microbusiness activity
               
               
*(flower - different tax rates for stems and fresh plants; clones are not taxed by state)          
**280E likely does not apply to testing labs          
***280E prevents deductions for businesses trafficking cannabis          
****Social Security, Medicare, Calif & Fed. Unemployment - this is a percentage of employees' salaries, for purposes of the chart it is converted to be tied to revenue consistent with the other percentages          

 

These are the required California state cannabis taxes by activity: 

Cultivators must pay a $9.25/ounce tax on all dried cannabis flowers (and a lower rate per ounce for cannabis leaves or fresh cannabis plant).

Retailers must pay both a 15% excise tax on all their purchases of cannabis, as well as a sales tax on all their taxable retail sales, which varies by locality but can be close to 10%.

Manufacturers must collect cannabis cultivation taxes from cultivators from which they receive unprocessed cannabis, and pay these cultivation taxes to the distributors.

Distributors must collect cultivation taxes from cultivators and manufacturers from which they receive cannabis, and collect cannabis excise taxes from retailers they supply with cannabis.

In addition to these taxes, localities are free to impose their own cannabis business taxes, and many impose substantial taxes on both cultivation and all business proceeds.

It is important to note that the cannabis specific taxes are in addition to standard taxes like Federal and State corporate tax, and local business taxes for businesses operating in cities like Los Angeles.

While distributors, testing facilities and manufacturers appear to pay less taxes than cultivators or retailers, they will no doubt share the costs of taxation as cultivators increase their prices to account for the cultivation tax.

If these taxes are passed directly on to consumers, that could mean a retail outlet previously charging $60 per 1/8 of an ounce of marijuana would increase their price to $90. On the other hand, many have predicted that the pre-tax prices of cannabis will drop over time, as more large-scale cultivation, distribution, and retail operations reduce their overhead costs and margins, would could counteract some of the higher taxes.

For operators, these effective tax rates are extremely high and it is important to consult with a tax attorney and a qualified accountant who can help you with tax planning and preparation to set up your business for success. For more information and worksheets to calculate your California cannabis taxes, refer to the CDTFA’s website

 

How Do I Find a Compliant Cannabis Property in Los Angeles?

Posted by Margolin & Lawrence on January 25, 2018

As cannabis entrepreneurs and investors learn about the legal requirements to operate a compliant cannabis business, the next question many arrive at is - so how do I find a compliant property?

L.A. Cannabis Update: Who Can Apply for a License Right now?

Posted by Margolin & Lawrence on January 11, 2018

While Jeff Sessions made his announcement last week that he was repealing the Cole Memo, Los Angeles opened their online portal for recreational cannabis applications. The conflict of law continues, but many operators in Los Angeles just want to know - “when can I get my license!?”

Currently, only cannabis retailers who qualify for Measure M Priority Processing are eligible to apply for licensure. Measure M Priority is limited to those operators who have a Business Tax Registration Certificate (BTRC) from 2015, 2016, or 2017 that is categorized as L050. This group is more expansive than just “Pre-ICOs” and will allow for newer businesses that have not been operating in Los Angeles for over a decade, in fact, you could have even opened a store a little over a year ago and qualify (you can read more in our previous post).

If you qualify for Measure M priority, you are considered an EMMD (existing medical marijuana dispensary) by the City. EMMDs numbers will not count towards the neighborhood caps that will be established for undue concentration or the limit on the number of licenses that will be issued for dispensaries in the City (around 390). They will receive licenses before anyone else in the City of Los Angeles, and will also be able to obtain their state licenses once they receive local authorization from the City.


Los Angeles will be issuing the first temporary licenses for Measure M Priority Dispensaries within the next couple of weeks. The temporary license is free to apply and you will need your BTRC number, a site plan, a lease, and identifying information for the owners of the operation. The Los Angeles Department of Cannabis Regulation has not given guidance as to when the annual license applications will be open for EMMD cannabis retailers in the City.


The next wave of applications will be Phase 2, when the City will be rolling out its Social Equity Program. Many of the details for the program are still being ironed out and we expect to hear more from the LA DCR in the coming weeks.

Ask A Cannabis Trademark Lawyer: How Do I Apply For A State Trademark?

Posted by Margolin & Lawrence on January 9, 2018

 As of January 1st, 2018, the long wait is over: cannabis business owners can apply for California state trademarks. The application form can be obtained here: http://bpd.cdn.sos.ca.gov/ts/forms/tm-100.pdf. Because cannabis is still federally illegal and cannabis products themselves cannot be trademarked, this is a viable avenue for many California cannabis brands that will protect your business marks within the state. You can read our prior post about USPTO Trademarks here.

According to the website for the Office of the California Secretary of State:

“Beginning January 1, 2018, customers may register their cannabis-related Trademark or Service Mark with the California Secretary of State's office so long as:

1.The mark is lawfully in use in commerce within California; and 

2.Matches the classification of goods and services adopted by the United States Patent and Trademark Office.  

If the application submitted to register a Trademark or Service Mark is found deficient, the application will be returned to the registrant for correction.

Note: Not all cannabis-related products can be registered under current law due to the inability to meet federal classifications.”

This means that in order to obtain your state marks, you must be lawfully using the marks in commerce at the time of the application. Therefore, you will need to be licensed in compliance with SB 94,  both at the local and state level, before you’re eligible for trademark approval. Otherwise, if you claim an unlicensed use, you may run into issues with the Secretary of State. Further, once your license is obtained, you must also show that you’re making actual, bona fide use of the trademarks on your products in the stream of commerce. That means that customers are identifying you by your brand when they purchase your goods or services in the marketplace.

L.A. City Council Passes New Cannabis Ordinances

Posted by Margolin & Lawrence on December 7, 2017

Yesterday the LA City Council passed three ordinances that will regulate recreational cannabis sales, manufacturing, cultivation, distribution, delivery, and microbusiness in the city of LA. The council also voted on the Social Equity Program and cannabis zoning, including the setbacks from sensitive-use areas that will be required of licensed cannabis businesses. Volatile cannabis manufacturers, for example, will have to be not only 600 feet away from schools, but also at least 200 feet away from any residential parcel.

The city is also imposing caps on the number of licenses granted per neighborhood, so licensing will be a competitive process in some areas; if you haven’t already, now is the time to start preparing your cannabis business for licensure. The city has rigorous requirements for proof of operation in compliance with Prop D if your business is a pre-ICO, as well as strict safety and environmental regulations for marijuana cultivators and manufacturers.

The new regulations passed by the city can be found here:

If you are a cannabis operator with an existing marijuana business in the city of LA, email us at info@margolinlawrence.com to speak with one of our cannabis attorneys. We can advise you on the next steps for your operation as Los Angeles enters a new era for cannabis.

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Ask a Cannabis Lawyer – Free Seminar Series @ Hitman Coffee

Posted by Margolin & Lawrence on October 12, 2017
 

Where Can I get a Cannabis Distribution License in California?

Posted by Margolin & Lawrence on September 21, 2017

Under California’s SB-94 (aka MAUCRSA), the retail sale of marijuana products to consumers is only legal if the business owner holds a license for cannabis distribution. Since this covers all sales of cannabis products, from marijuana proper to derivatives like hash oil and CBD, these licenses are in high demand. Many clients often ask our cannabis lawyers what happened to the Transportation license. This was a license type under the MCRSA but that provision was repealed in SB 94 and the activities covered by the old Transportation license have now been merged into the Distribution license. So, the state license is now for the same activity but under a different name.

In order to qualify for the state license, your business must first hold a local license (or local authorization), which can only be granted by the municipality the business intends to operate in. For those eager to enter the world of cannabis distribution, the question is: which cities are giving out these licenses? Here are a few cities that have distribution in their ordinance and are either already issuing distribution licenses or are on the road towards doing so:

  • Adelanto
  • California City
  • Cathedral City

 

  • Coalinga
  • Desert Hot Springs
  • Emeryville
  • Long Beach
  • Los Angeles (expected* but we will have to wait for the Ordinance to be sure)
  • Maywood
  • Needles
  • Nevada City
  • Oakland

An ordinance does not necessarily mean that it will be easy to secure a license. Many cities put heavy restrictions on how many distribution licenses will be granted, and the regulations that must be complied with are robust.  

Regarding Los Angeles, all indications appear that LA will allow this cannabis activity. However, the City has until September 30th to promulgate an ordinance, and we will not know for sure until we see the final version. The fact that they have included distribution in the draft location ordinance (which you can read more about here and here) and in the operating requirements suggests that they will. Stay tuned for updates from our LA cannabis attorneys as the City’s local regulations take shape.

Do I Need A Cannabis Lawyer To Advise My Business?

Posted by Margolin & Lawrence on August 3, 2017

As California gears up for the full legalization of adult-use commercial cannabis, entrepreneurs across the state are considering breaking into the marijuana industry. However, the entry costs for marijuana businesses can be high, and the exact legal requirements for starting an operation are often confusing. Given this background, a would-be cannabis enterpreneur might wonder: is it worth it for a new marijuana business to hire an attorney?

On this subject, it's fair to take a cannabis law firm's comments with a grain of salt – a little like asking a barber whether you need a haircut. That said, as lawyers with years of experience providing legal support to california's top cannabis businesses, we're familiar with the legal demands of the cannabis industry in California. Given this inside perspective, we will advise you that the state and local laws which marijuana businesses must adhere to are extremely complex and intertwined, with harsh consequences possible for even relatively minor violations. In this context, our view is that it's a dangerous gamble to try to maintain a business in the cannabis industry without a cannabis attorney. 

Of course, we can’t advise anyone to enter the industry in the first place – according to federal law, possessing, using, or selling marijuana in any capacity is still entirely illegal. The only thing protecting California marijuana consumers and businesses from federal prosecution is the Department of Justice's decision to allow “state and local authorizes [sic] to address marijuana activity through enforcement of their own narcotics laws.” While this federal deference to state law has been the norm since 2013, there's no guarantee that this won't change in the near future, especially given that Trump administration appointees like Attorney General Jeff Sessions have announced their intent to crack down on marijuana use. To avoid federal prosecution, then, it's crucial to stay within the bounds of state and local law. However, in a state as large as California, this is easier said than done.

While California currently affords limited immunity from prosecution to certain marijuana businesses, many cities and counties don't, which means that even a business which follows state law to the letter could be operating in a manner that violated local regulations. Our Los Angeles cannabis lawyers have advised hundreds of businesses who ran into issues with Prop D and have defended their rights since even before that regulation was passed. With the new cannabis regulations being introduced into the City of LA, it is important to speak to a los angeles cannabis attorney who is familiar with the regulations and can advise you on how to set up your business for success. (For more on these changes, see our recent blog posts on LA marijuana licensing.)

Retaining a cannabis lawyer provides a degree of access and ease in interpretation of these regulations that a private citizen doesn't have. Though it's easy to find information online, but the amount of outdated, contradictory, misleading, or outright false advice on marijuana business on the internet is nothing short of overwhelming.

For these reasons, it's worth considering hiring a california cannabis attorney for your business. Not only does having legal counsel help you stay within the law, it helps offset the financial risk inherent to any new business by ensuring that your organization's paperwork and cannabis licensing applications are in order. For more information or to arrange a consultation with one of our los angeles cannabis lawyers, check our brief overview of California's marijuana laws or email us at info@margolinlawrence.com.

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LA's Draft Cannabis Regulations Should Strive For Fairness And More Fun - Our Cannabis Law Op-Ed In The LA Daily News

Posted by Margolin & Lawrence on July 13, 2017

As med. cannabis lawyers, we think LA's regulations should allow for those operators already existing who have had prop D violations to still apply. Moreover, karaoke and cannabis should not make an illegal combo.

Today's Los Angeles Daily News includes a guest editorial on LA's new marijuana regulations by M&L partners Allison Margolin and Raza Lawrence!

Read more on our previous blog posts on Prop D compliance and social equity measures for more information on this field of cannabis law – or email us at info@margolinlawrence.com with any questions!

LA Cannabis Licensing & Social Equity

Posted by Margolin & Lawrence on June 29, 2017

As explained in our previous blog post, “compliance” will be a major factor in the distribution of marijuana licenses in Los Angeles – and cannabis lawyers around the city are fielding a number of questions about what, exactly, LA’s priority licensing process will entail.

The draft regulations the City has released extend a certain amount of privilege to existing marijuana sellers when it comes to licensing. Businesses and dispensaries that have operated “in substantial compliance” with prior iterations of marijuana law will be given priority, allowing them to continue operating while their license approvals are pending. Clearly, this confers a major business advantage, which has raised concerns about whether a compliance-based approach to awarding priority is equitable.

Disqualifying potential cannabis business owners for past violations, but opening the door to “compliant” newcomers, threatens to reinforce inequality. As Drug Policy Alliance policy director Cat Packer, slated to head the City of LA’s Cannabis Commission, explained in an interview with Merry Jane, “The impact of marijuana prohibition and the drug wars was heaviest in black and brown latino communities. If you say people with prior arrests and convictions can’t participate, it automatically has a disproportionate effect on communities that were punished by the War on Drugs.” In other words, privileging “compliance” could compound the negative effects of marijuana prohibition, blocking communities which have historically been more likely to be punished for cannabis use from gaining access to the benefits of the new, legal marijuana industry. As attorneys who have practiced in cannabis law for many years, we have seen the damage prohibition has done to these communities, and are fully supportive of a restorative approach to justice through the licensing process.

The LA City Council recently moved to create a Social Equity Program for marijuana licensing, intending to serve “those individuals and communities that were disproportionately harmed by cannabis prohibition.” This follows in the path of a similar program in Oakland, which reserved half of new dispensary permits for residents who lived in certain neighborhoods, had below-average annual incomes, or had previously faced cannabis convictions. Given how much larger Los Angeles' marijuana industry is than Oakland's, however, the mechanics of the LA program may need to be worked out, and it may not be able to mirror the Oakland model in every way.

Whatever the exact parameters of LA's Social Equity Program end up being, (and however they'll be affected by recent changes to state and city licensing regulations,) the priority-based system will continue to play a major role in deciding which marijuana businesses are allowed to operate. At present, the city plans to reserve a special round of applications for organizations that fit a profile similar to the requirements Oakland used. For more on priority and marijuana laws to the new state law (MAUCRSA), check our previous blog posts or guide to Prop 64, or email us at info@margolinlawrence.com.

 

Which Marijuana Dispensaries Will Los Angeles Allow?

Posted by Margolin & Lawrence on June 20, 2017

Los Angeles is moving ahead with regulating marijuana, a shift that will bring many businesses out of the gray and black and into compliance with municipal and state law. As cannabis lawyers who have been practicing throughout the implementation of various California marijuana regulatory regimes, we could not be happier to see these changes coming to fruition. The city will go from granting limited prosecutorial immunity to a short list of dispensary operators, as it did under 2013’s Prop D, to fully regulating a host of medical cannabis businesses with the implementation of 2017’s Measure M. This post will give you an overview of the Draft Regulations released by City Council President Herb Wesson’s office in June 2017, and will answer the question of how the city will treat existing cannabis businesses.

The regulations treat dispensaries differently from cultivators and manufacturers, and lay out different requirements for priority processing for each. Measure M will give priority to existing medical marijuana dispensaries (EMMDs) that have a 2016 or 2017 Business Tax Registration Certificate, are operating in compliance with current zoning law, and have been in “substantial compliance” with the city’s 2013 regulations. Those regulations, as laid out in Proposition D, require 1000-foot distancing from sensitive use areas, restrict operating hours to between 10 a.m. and 8 p.m., and introduce a host of other factors for compliance. “Substantial compliance” has not yet been defined by the city. Note that it is expected the City of LA will put a cap on the number of dispensary licenses granted. This number is not established in the draft regulations, but will likely be decided upon in the next 50 days, through discussions with Angelenos in the public comment period.

For existing medical marijuana businesses (EMMBs) which are not dispensaries (i.e. cultivators and manufacturers), the rules are similar. If an EMMB is located within the correct zoning, hasn't violated earlier regulations, and has been operating from a consistent location since January 1, 2016 or earlier, they qualify as “compliant.”

If an existing cannabis business that meets the above requirements applies for a license within 30 days of the applications opening, it'll have a chance to receive a compliance certification – which not only puts them in the first round of applications, but also allows their business to continue operating while its license is being processed. Any organization which isn't an EMMD or EMMB must wait until after they're licensed to begin operating.

The second round after “priority processing” will be the Social Equity round, which we will discuss in our next post. For more information about marijuana licensing, consult our blog post on Gov. Jerry Brown's recent changes to licensing restrictions, our guide to California marijuana laws, or email us at info@margolinlawrence.com.

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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.