Frantz Ward attorneys Tom Haren and Pat Haggerty attended the Marijuana Business Conference this past November. Tom was a presenter at the Marijuana Business Crash Course, and Pat attended the Hemp Forum. The biggest takeaway from the conference is that 2019 could be a banner year for cannabis in Ohio and nationwide.
Hemp reform is moving forward.
It has now been confirmed that the 2018 Farm Bill will include the federal Hemp Farming Act, which would remove industrial hemp (cannabis containing less than 0.3 percent THC) from the Controlled Substances Act.
Hemp-derived CBD has been all the rage as of late, with this segment of the industry on track to hit $591 million in 2018. Some analysts predict this could be a drop in the bucket: The Brightfield Group predicts that the CBD industry alone could hit $22 billion by that time.
Legalization of hemp at the federal level is the first step toward a nationwide market for hemp and its derivatives — after passage of the 2018 Farm Bill, it will be incumbent upon the states to develop their own hemp programs.
Broader cannabis reform is possible in 2019.
With the coming change in control of the House of Representatives, many are confident that 2019 will bring significant cannabis reforms. For one thing, the expected Democratic Chair of the House Rules Committee will no longer block cannabis-related amendments from being debated on the House floor.
While that is newsworthy in and of itself, there is also confidence that Congress may finally pass the STATES Act during this session.
The STATES Act would exempt state-compliant cannabis operators from the purview of the federal Controlled Substances Act. In addition to removing the fear of federal prosecution, this change would allow banks to service state-compliant cannabis businesses, and also permit state-compliant cannabis companies to take standard tax deductions on their federal tax returns.
If you have questions about the 2018 Farm Bill, the Hemp Farming Act, or the STATES Act, please do not hesitate to contact one of Frantz Ward’s Cannabis Attorneys.
Frantz Ward’s client, Greenleaf Gardens, LLC was granted summary judgment in an Order from the Common Pleas Court in Franklin County, finding that the method used to issue Level I medical marijuana cultivator licenses is unconstitutional on its face.
The Department of Commerce initially issued twelve Level I cultivator licenses. Greenleaf Gardens was the twelfth highest-scoring applicant, but did not receive a license because the Department was required, by statute, to issue not less than fifteen percent of licenses to entities owned and controlled by members of economically disadvantaged groups. The Court found this set-aside to be unconstitutional.
After receiving a copy of the Order, Greenleaf’s CEO, David Neundorfer, has provided this statement:
“We are obviously pleased with the Court’s ruling in this case, and we value the relationships that our team has built with the Ohio Department of Commerce and Board of Pharmacy. While we look forward to ultimately receiving a license to cultivate medical marijuana, we are actively engaged in bringing our five dispensary licenses and processing license to operational status.
We remain committed to working with the Department and the Board to ensure that Ohio’s patients have access to the safest and most effective medical marijuana as soon as possible.”
For questions, please call Frantz Ward attorney Tom Haren at (216) 515-1664.
To view a copy of the ruling please click here.
Last week, a closely-watched trial involving a Colorado cannabis sued by a neighbor ended with a jury finding in the cultivator’s favor. In Reilly v. 6480 Pickney, LLC, the Reillys complained that their property’s value had decreased due to odor emitted from the cultivator’s property (an unfortunate, if not new, problem in legal cannabis markets) and increased crime in the area. Rather than file a state based standard nuisance claim, however, the Reillys filed claims under the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”).
RICO was originally enacted in the 1970s to give law enforcement another tool to fight organized crime. Civil RICO lawsuits provide remedies where plaintiffs allege they have been harmed by “racketeering activity,” which, arguably, includes cultivating marijuana (because it remains illegal to do so under federal law).
Last year, a ruling from the Tenth Circuit Court of Appeals allowed the Reillys to take their civil RICO case to trial, though the court noted that they still had to prove that the cultivator’s activity caused their property value to be diminished. In a landmark victory for the cannabis cultivator, though, the jury found that the Reillys did not make those required nuisance related showings. The jury’s verdict comes after a federal district court in Oregon refused to allow a civil RICO claim to proceed.
RICO suits are attractive to plaintiffs because, if they succeed, the plaintiffs can obtain treble damages and attorney fees. Perhaps that is why there appears to be a dedicated effort to use RICO in cannabis-related litigation. Given the increased risks associated RICO litigation, coupled with the fact that more of these cases are likely to be filed in the future, cannabis companies should be prepared to vigorously defend against these claims.
On January 4, 2018 the Department of Justice rescinded Obama-era guidance to United States Attorneys, including the 2013 memorandum issued by then-Deputy Attorney General James Cole, calling previous guidance “unnecessary” in light of general principles governing federal prosecutorial discretion. Up until this point, the 2013 Cole Memo was widely viewed as the biggest reason state-legal marijuana programs to flourished over the past 5 years, as it directed United States Attorneys to consider distinct federal enforcement priorities when deciding whether to utilize finite government resources to prosecute state-legal marijuana businesses or whether to rely on state and local law enforcement to address those concerns. Click here to read the full client alert.
Today, the Ohio Department of Commerce announced the 12 Level I medical marijuana cultivator provisional license recipients (with one recipient having a possibility of choosing from two different locations) and the 12th recipient of the Level II cultivator provisional license.
In awarding the medical marijuana cultivator licenses, the Department appears to have placed a large amount of emphasis on experience, awarding many of the licenses to companies who have licenses in other states. The emphasis on experience was one of the reasons why the Department declined to include a residency requirement during the application process, which riled many Ohio medical marijuana advocates.
Level I cultivators may have up to 25,000 square feet of cultivation area in a growing facility, with the ability to increase that area up to 75,000 square feet with approval from the Department of Commerce. Level II cultivators may have an initial cultivation area of up to 3,000 square feet, with an option to increase to up to 9,000 square feet with prior approval. The winners will have nine months from the date they were notified of selection for a provisional license to obtain a certificate of operation by passing all applicable inspections.
The winning applications may be seen here: https://www.medicalmarijuana.ohio.gov/cultivation.
To learn more about Ohio’s medical marijuana industry, you can reach out to one of the firm’s Marijuana Law & Policy attorneys.
What was scheduled as a hearing by the House Judiciary Committee regarding Attorney General Jeff Sessions’ testimony about possible Russian Government contacts with the Trump Campaign, also included another hot-button issue: Jeff Sessions’ views regarding marijuana.
Representative Steve Cohen, a Democrat from Tennessee, stated some of the purported benefits of marijuana, and his hope that the Department of Justice would consider states as the “laboratories of democracy.” (Justice Louis Brandeis). Attorney General Sessions stated that they would look at purported benefits and would conduct a “rigorous analysis of marijuana usage,” but he added that he was not as “optimistic” as Representative Cohen. Further, when Attorney General Sessions was asked to clarify his comment that people who use marijuana are “not good people,” he tried to explain that the context in which he made this comment was his experience as a U.S. Attorney where “it was seen” that “good people did not use marijuana.”
In the end, Jeff Sessions did not explain his prior comments on marijuana. Nonetheless, his statement that he is not optimistic that any investigation or research would show any purported benefit of marijuana may be a harbinger of things to come.
The Ohio Board of Pharmacy releases model dispensary applications
Today the Ohio Board of Pharmacy released, through the Ohio Medical Marijuana Control Program Website, the application materials for Ohio dispensaries. The Board will accept applications electronically beginning on November 3 at 8:00am and ending on November 17 at 2:00pm.
Similar to what the Department of Commerce did for medical marijuana cultivator applicants, the Board will hold two Q&A periods where it will accept questions from the public. These Q&A periods will be from September 19 – October 5 and October 16 – October 20. The Board will host an informational webinar on October 3.
Ohio will license 60 dispensaries, allocated among several geographic districts. There is a $5,000 fee per dispensary application.
Application materials for medical marijuana processors have not been released yet by the Department of Commerce, though it is anticipated that processor applications will be accepted after cultivator provisional licenses are awarded in November.
Conflicting messages from the federal government results in continued uncertainty in the legal marijuana industry.
Tom Angell reports that Deputy Attorney General Rod Rosenstein discussed the 2013 Cole Memo during an appearance at the Heritage Foundation recently. According to Angell, Rosenstein said, “[w]e are reviewing that policy. We haven’t changed it, but we are reviewing it. We’re looking at the states that have legalized or decriminalized marijuana, trying to evaluate what the impact is[.]” He continued, “[a]nd I think there is some pretty significant evidence that marijuana turns out to be more harmful than a lot of people anticipated, and it’s more difficult to regulate than I think was contemplated ideally by some of those states[.]”
Rosenstein also reiterated that while the Cole Memo may be interpreted to mean that the risk of prosecution is unlikely, it does not mean that an individual’s conduct is legal under federal law, even if that individual is acting in compliance with a conflicting state law.
While Rosenstein is right that the Cole Memo merely guides federal law enforcement in making decisions whether or not to charge marijuana businesses, Rosenstein apparently did not discuss the Rohrabacher-Farr amendment that has been renewed in every appropriation bill since 2014 – and was recently renewed until this December.
Under Rohrabacher-Farr, the Department of Justice is prohibited from using funds to interfere in the implementation of state medical marijuana programs. The Ninth Circuit has held that this means the Department cannot prosecute individuals acting in strict compliance with state law. United States v. McIntosh, 833 F.3d 1163 (9th Cir. 2016). And at least one Michigan federal court has allowed a hearing to determine whether a federal defendant can take advantage of Rohrabacher-Farr’s protections. United States v. Samp, E.D. Mich. No. 16-cr-20263 (March 29, 2017). Attorney General Jeff Sessions objected to the renewal of Rohrabacher-Farr earlier this year.
The conflicting signals by various federal officeholders could be the new normal for marijuana policy. Over the last year, for example, we have seen the following:
For more information on the application process for Ohio medical marijuana dispensaries and processors, please contact Frantz Ward attorney Tom Haren or another member of the firm’s Marijuana Law & Policy group.
Shortly after being confirmed as Attorney General, Jeff Sessions created various task forces to review Obama-era DOJ policies. In late July he received a report back from the task force evaluating federal marijuana enforcement policy, and the Associated Press is reporting that the news is good for state-legal marijuana businesses:
The Task Force on Crime Reduction and Public Safety, a group of prosecutors and federal law enforcement officials, has come up with no new policy recommendations to advance the attorney general’s aggressively anti-marijuana views. The group’s report largely reiterates the current Justice Department policy on marijuana.It encourages officials to keep studying whether to change or rescind the Obama administration’s more hands-off approach to enforcement — a stance that has allowed the nation’s experiment with legal pot to flourish. The report was not slated to be released publicly, but portions were obtained by the AP.
While this report does not bind the DOJ to any particular policy stance, it is in line with recent comments that have come from Jeff Sessions. Indeed, he said that the 2013 Cole Memo was “valid,” while noting he may have some “different ideas . . . in addition to that, but essentially we’re not able to go into a state and pick up the work that the police and sheriffs have been doing for decades.”
In a meeting with Colorado Governor John Hickenlooper earlier this year, Sessions appeared open to maintaining the “hands off” approach the DOJ has taken in legal states. “He’s obviously reviewing the Cole (Memo),” Hickenlooper said. “(They’re working on) a version of that that makes sense for this administration. We’ll have to see how far they go.” Doug Friednash, Hickenlooper’s chief-of-staff, told The Denver Post that Sessions said the Cole Memo was “not too far from good policy.”
Now that’s all good news, but the DOJ has also sent letters to Colorado, Oregon, and Washington state officials questioning the efficacy of their state regulatory structures. Washington state officials, for their part, have begun responding to the allegations contained in the letter they received.
The news from the DOJ comes on the heels of a bill introduced by New Jersey Senator (and likely 2020 presidential candidate) Cory Booker that would legalize marijuana. While Booker’s bill is unlikely to get much traction in Congress, it is a sign that legal marijuana could shape up to be a pivotal issue in the 2020 race.
Marijuana policy at the federal and state levels continues to change at seemingly breakneck speed. I’ll be updating this blog more often to keep you all up-to-date on the most recent news. Check back for new posts on Ohio’s proposed districts for Ohio medical marijuana dispensaries, the release of applications for Ohio medical marijuana testing laboratories, information about Ohio’s medical marijuana cultivator applicants, and other marijuana law and policy news.
Finally, later this week I’ll also be sharing some pretty big personal news. So I’ve got that going for me. Which is nice.
Two recent events serve as continuing examples of how attitudes towards marijuana are changing in the U.S. The National Football League (“NFL”), which strictly enforces its drug policies, may be changing its mind on medical marijuana. The NFL Players Association (“NFLPA”) has already been working on its own study for the potential use of medical marijuana for pain management. On August 1, 2017, the NFL wrote a letter to the NFLPA indicating its willingness to work together to study the potential use of marijuana for pain management and for acute and chronic conditions for players.
Further, former players have come out in favor of the use of marijuana for medical reasons. For example, on July 24, 2017, former New York Jets Defensive End Marvin Washington was one of five plaintiffs in a lawsuit filed in the Southern District of New York against Attorney General Jeff Sessions, the Department of Justice, and the Drug Enforcement Agency. See Washington, et al. v. Sessions, et al., No. 1:17-cv-05625 (S.D.N.Y.). The lawsuit seeks to remove marijuana from the list of Schedule I drugs, as it is currently classified under the Controlled Substances Act. Marijuana is classified in the same category as heroin, LSD, and Quaaludes, to name a few. However, drugs such as methamphetamine and cocaine are classified as Schedule II drugs and are subject to less strict enforcement.
In Cristina Barbuto v. Advantage Sales & Marketing LLC and Joanne Meredith Villaruz, Massachusetts Supreme Judicial Court Case No. SJC-12226, the Massachusetts Supreme Court held on July 17, 2017, that an employee in Massachusetts can bring a claim of disability discrimination after being fired for using medical marijuana.
Medical marijuana was approved by Massachusetts voters in 2012, and the law provides that individuals who qualify for the use of medical marijuana cannot be punished for using it. Barbuto suffers from Crohn’s disease and was using medical marijuana two to three times per week, although never during the work day, when she began working for Advantage Sales in 2014. After failing a mandatory drug test, Barbuto was terminated by Advantage Sales on the basis that Advantage follows federal law and not state law, and of course the use of marijuana is illegal under federal law.
In upholding Barbuto’s right to bring a disability discrimination claim under State law, the Massachusetts’ high court stated that although an employee’s possession of medical marijuana may violate federal law, that fact does not make it a per se unreasonable accommodation. The court further stated that even if allowing the use of medical marijuana was unreasonable, Advantage should have still engaged in the interactive process with Barbuto to determine if there was another potential, reasonable accommodation, such as using another drug that did not violate the company’s drug policy. Advantage will have the opportunity to demonstrate the unreasonableness of medical marijuana as an accommodation on remand.
While the court allowed Barbuto’s disability claim to stand, it did state that employers do not have to tolerate the use of medical marijuana during work time, nor allow medical marijuana for individuals in safety-sensitive jobs or those covered by the federal drug-free workplace laws. The court additionally stated that there is no implied statutory cause of action for individuals alleging a violation of the state’s medical marijuana law.
As reported in prior postings, Ohio’s medical marijuana law is much more protective of employers than the law passed in Massachusetts, but it is of course difficult to prevent determined courts from finding ways around what would otherwise be clear provisions of the law.