Jesse Harris writes:

Is a landlord who accepts rent from a cannabis dispensary tenant entitled to bankruptcy relief in a federal forum? In In re Olson, 2018 WL 989263 (B.A.P. 9th Cir. Feb. 5, 2018), the Bankruptcy Appellate Panel for the Ninth Circuit answered: maybe, maybe not, but either way, the bankruptcy court must make specific factual findings based on evidence in the record and explain its reasoning.

U.S. Court of Appeals for the Ninth Circuit building in San Francisco, CAIn Olson, a 92-year-old, legally blind landlord owned a shopping center in which a marijuana dispensary—operating legally under California law—was a tenant. Facing a foreclosure sale of her property, as well as ongoing litigation with the dispensary tenant, the debtor filed for Chapter 13 relief. The debtor continued to collect rent from the dispensary tenant, and ultimately proposed a Chapter 13 plan that included the sale of the shopping center within six months of plan confirmation. Before confirmation, however, the bankruptcy court sua sponte dismissed the bankruptcy case because the debtor was receiving “illegal proceeds” by “leasing property for an unlawful purpose under federal law, although lawful under state law.”

The debtor appealed, arguing that the bankruptcy court abused its discretion by dismissing the case. The Ninth Circuit agreed. In vacating the bankruptcy court’s order, the Bankruptcy Appellate Panel found that the bankruptcy court failed to articulate its legal basis for dismissing the case with “clarity and precision.” Specifically, the panel noted that the bankruptcy court did not make findings on its conclusion that the debtor violated the Controlled Substances Act by accepting the dispensary’s rent; that the debtor acted in bad faith; that the trustee would be administering the proceeds of an illegal business; or that the rents were to be used to fund the plan.

A concurring opinion written by Judge Maureen A. Tighe also pointed out that “[w]ith over twenty-five states allowing the medical or recreational use of marijuana, courts increasingly need to address the needs of litigants who are in compliance with state law while not excusing activity that violates federal law.” According to Judge Tighe, “the presence of marijuana near the [bankruptcy] case should not cause mandatory dismissal.”

The holding in Olson not only highlights the ongoing tension between the Controlled Substances Act and state marijuana programs, but it also emphasizes the need for landlords to carefully consider leasing property to cannabis businesses. Should those landlords eventually seek bankruptcy relief, such relief may be limited. That said, the panel in Olson appears to have equipped landlords who choose to lease property to cannabis businesses with certain bankruptcy options to avoid the “harsh penalty of dismissal,” such as rejecting the lease under Section 365 of the Bankruptcy Code.

Jesse M. Harris is an associate in the firm’s Financial Restructuring & Bankruptcy Department, based in its Philadelphia office.

As Florida’s 2018 legislative session comes to a close, its time to review legislative changes to Florida’s medical marijuana laws.

First, Florida’s Senate passed HB 6049,  This bill removes the requirement that the Florida medical marijuana license (Florida has a vertical licensing system) reserved for a Black farmer must go to a Black farmer who is a member of the Black Farmers and Agriculturalists Association.

As I explained in my earlier posts (here and here), Columbus Smith, a Black farmer from Panama City, filed a lawsuit challenging the law implementing Amendment Two (medical marijuana) alleging that the law was unconstitutional.

Second, the Florida legislature has withheld funds for the Florida Department of Health (putting the funds in reserve) in an effort to spur the Department of Health to move more quickly on regulations implementing Amendment Two (medical marijuana) which passed in 2016.

Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or

Richard L. Holzworth writes:

Medical cannabis research
Copyright: thommorrisphotography / 123RF Stock Photo

Despite Pennsylvania’s medical marijuana industry being in its infancy, more than 17,000 patients have registered for the program, and more than 4,000 already have received their medical marijuana card from the Department of Health. Now that cannabis products have burst onto the scene, hospitals and other residential healthcare facilities are struggling with what to do when patients present medical marijuana cards and attempt to use marijuana in the facilities. Indeed, it is high time for the healthcare providers to update their policies and procedures to address these growing concerns.

Policy Considerations

In developing a medical marijuana policy, it is important for healthcare administrators to remember that medical marijuana, although legal in most states, is still classified by the federal government as a Schedule I Controlled Substance. With medical marijuana laws varying from state to state, hospitals, healthcare associations, and other stakeholders have developed and implemented a wide range of policies addressing the use and possession of medical marijuana products. These policies range from strict, categorical prohibitions to sanctioned self-therapy during hospital admission. Regardless of a healthcare facility’s philosophy (either from a political or medicinal perspective) on medical marijuana, it is important for each institution to develop and implement a comprehensive set of policies and procedures to address the inevitable circumstance of a patient presenting with a medical marijuana ID card or cannabis products in hand.

Each healthcare facility should consider a number of factors to ensure that policies and procedures align with the facility’s individualized needs:

  • Does the facility treat a population or particular demographic with a higher rate of medical marijuana use?
  • Does the facility specialize in treating one or more of the 17 “serious medical conditions” that qualify a patient for medical marijuana use?
  • Does the institution receive federal funding that could be impacted by permitting the use of medical marijuana?
  • What is the facility’s existing human resources policy on a drug free workplace, and does this policy address use of medical marijuana by employees?
  • What is the facility’s controlled substance diversion prevention protocol?
  • What is the facility’s current policy for medications brought into the facility by the patient?
  • What is the facility’s intake procedure, and how does it address medical marijuana use?

In Pennsylvania, neither the Medical Marijuana Act nor the applicable regulations specifically address these issues. However, guidance can be found in the regulations regarding employer-employee relations, the Department of Health suggestions for schools, and the policies in place at facilities in states with more mature medical marijuana programs.

Employer Regulations

Under the Pennsylvania Medical Marijuana Act, it is unlawful for an employer to “discharge, threaten, refuse to hire, or otherwise discriminate or retaliate against an employee […] solely on the basis of such employee’s status as an individual who is certified to use medical marijuana.” § 10231.2103(b)(1). However, nothing the law prevents an employer from disciplining an employee who is under the influence of marijuana (regardless of the source of the marijuana) or for working while under the influence of marijuana when the employee’s conduct falls below the standard normally accepted for that position. § 10231.2103(b)(2). In other words, employers cannot take an “adverse employment action” simply because an employee has been certified by a physician to use marijuana products, but employers are not obligated to tolerate use of marijuana or substandard performance because of marijuana. Moreover, employers are not required to accommodate the use of marijuana products in the workplace.

For hospitals and other residential healthcare facilities, these employer-employee provisions in the Medical Marijuana Act suggest that the Pennsylvania lawmakers did not intend to require healthcare providers to tolerate or accommodate the use of medical marijuana by patients (or anyone else) on the premises. Importantly, Pennsylvania’s Medical Marijuana Act does not “require an employer to commit any act that would put the employer or any person acting on its behalf in violation of federal law.” § 10231.2103(b)(3). Accordingly, it is unlikely that healthcare facilities or their employees will be required to take any action that is prohibited under federal law, e.g. possession of marijuana products or facilitation of marijuana use.

School Guidelines

The Pennsylvania Medical Marijuana Act directs the Department of Education to promulgate regulations for the use of medical marijuana on school district property. Although those regulations have not been issued, the Department of Health has provided temporary guidelines for schools. According to Department of Health, students should be prohibited from bringing medical marijuana products on school property or storing products at the school. Neither the students nor school personnel should be permitted to administer medical marijuana.

In order for a student to use medical marijuana during the school day, the Department of Health recommends that a parent, legal guardian, or registered caregiver bring the medical marijuana product to school, administer the product, and then remove the unused product from the premises. These arrangements should be made with school administration in advance and in accordance with all visitor protocols.

Even though these temporary guidelines are not mandatory and are not specifically designed for hospitals and other residential healthcare facilities, the concept could be implemented in a healthcare setting. The Medical Marijuana Act enables qualified patients to designate a “caregiver” who is registered with the Department of Health and permitted to purchase, transport, and administer medical marijuana products. With this in mind, hospitals and other residential facilities could permit a caregiver to possess and administer medical marijuana products to a patient, and then remove the unused product from the premises.

Examples from Other States

The Washington Health Care Association has published a sample medical marijuana policy for use by long-term care facilities. This policy outlines a protocol that is very similar to the Pennsylvania Department of Health’s guidance for school districts. The Washington policy requires each patient to designate a “provider” who will bring medical marijuana product into the facility, administer the medication, and then remove the unused product. The policy also states that staff will not assist patients in obtaining or using medical marijuana, store medical marijuana, or ensure that medical marijuana is being used appropriately. Staff involvement is to be limited to confirming a patient’s status as a qualified medical marijuana user and ensuring that the use of medical marijuana does not impact any other patients. Should a designated provider or patient fail to follow the policy, the facility reserves the right to enforce appropriate consequences, including discharge from the facility.

The Minnesota Hospital Association has published three different policy templates for medical marijuana use, which offer healthcare providers a range of options for handling medical marijuana issues. The first template completely bans medical marijuana from hospital property. If a patient is found to be using or in possession of marijuana products, this policy directs hospital personnel to first determine whether the patient is a qualified and certified to use medical marijuana under state law. Qualified patients will be asked to remove medical marijuana products from the facility, or the products will be secured with the patient’s other personal belongings. For patients who are not qualified users, the hospital will dispose of the marijuana in accordance with hospital policy for handling other illicit drugs.

Generally, the second and third policy templates offered by the Minnesota Hospital Association suggest that qualified patients should be permitted to continue use of medical marijuana in accordance with state regulations. These policy options include suggested protocols for incorporating medical marijuana as either a “self-directed therapy” or as part of the hospital’s medication process. Importantly, these policy templates include provisions that require patients to verify that they are enrolled in the state’s medical marijuana program, and state that the hospitals are not required to certify a patient as eligible for medical marijuana or to permit the continued use of medical marijuana during an in-patient stay.


Drafting comprehensive medical marijuana policies and procedures is an imperative for Pennsylvania healthcare facilities, including hospitals, long-term care facilities, nursing homes, and others. However, the specifics of these policies and procedures must be tailored to each facility’s individualized interests and needs. These policies also must balance patient rights and interests, compliance with divergent state and federal law, and the facilities’ own financial, operational, and political circumstances. This can be accomplished with the careful evaluation of existing facility policies, practices, and operations, and with the assistance of experienced counsel.

Richard L. Holzworth is an associate in the firm’s Litigation Department, based in its Pittsburgh office.

As I’ve posted before, Florida’s implementation of Amendment Two (medical marijuana) does not permit patients to smoke medical marijuana.

Not surprisingly, the ban on smoking of medical marijuana triggered litigation.  Now, that case has been set for a bench trial in May 2018.

The lawsuit seeks a declaratory judgment that the smoking ban is contrary to the amendment’s language, which itself does not expressly say medicinal cannabis can be smoked. The suit is against the Department of Health, which regulates medical marijuana.


Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or

On Fox’s Physician Law blog, associate Richard Holzworth recently outlined the requirements for physicians in Pennsylvania who wish to issue medical marijuana “certifications” to their patients under Act 16, the commonwealth’s recently signed law legalizing medical marijuana.

Pennsylvania flag on a white backgroundIn April 2016, Gov. Tom Wolf signed into law Pennsylvania’s compassionate medical cannabis legislation (Act 16), effectively legalizing medical marijuana in the Commonwealth. Since that time, the Pennsylvania Department of Health (DOH) has awarded 12 licenses to grow medical marijuana and 27 licenses to operate medical marijuana dispensaries. It is anticipated that the grow operations and dispensaries will be open for business in early 2018. Although the proponents of medical marijuana have enjoyed widespread support (as evidenced by the 29 states that have enacted a medical marijuana law, including six since 2016), those in the industry are left to trust that Pennsylvania physicians will register with the DOH and send patients to the dispensaries. In other words, now that the legal medical marijuana system is in place, the onus is on physicians to ensure that patients have access to treatment.

It is important for medical professionals to understand that they are not permitted to “prescribe” medical cannabis products. Rather, physicians who have met the registration requirements of Act 16 are permitted to issue “certifications” to patients who qualify for medical marijuana treatment.

To read Richard’s full discussion of the steps physicians must take to comply with Act 16, please visit the Physician Law blog.

Citrus greening, a disease that has been slowly spreading throughout Florida since 2004, has been putting the squeeze on Florida’s key agricultural crop (the citrus industry in Florida is worth $10.7 billion).  Citrus greening impairs the citrus trees ability to produce fruit and eventually kills the trees.  Many Florida citrus farmers are turning to other crops to replace their orange juice and citrus fruit business including olives, hops (for beer), pomegranates, and even pongamia (a type of legume).

Another crop that has been proposed for the Florida agriculture industry as a replacement for oranges is hemp.  Hemp can be used in the industrial market for fibers, rope, construction, paper, insulation materials and clothing.

Hemp was a key crop in the early years of America providing rope, clothing and sail material among other materials.  Hemp was a favored crop because it grew quickly with little cultivation and, even today, can be found growing wild in many parts of the mid-west.  President Thomas Jefferson invented the hemp brake which was used to separate fibers from the stalk of the hemp plant.  It has also been reported that Thomas Jefferson said this about hemp:

Hemp is of first necessity to the wealth and protection of the country.

In 1937, the cultivation of hemp was made virtually impossible with the passage of the The Marijuana Tax Act.   And, hemp was banned for good in 1957 mostly because it looked too similar to marijuana despite the fact that it produces little to no THC.

With medical marijuana and recreational marijuana being legalized on the state level across the country, hemp has also slowly started to make a come back.

In 2017, the Florida Legislature took the baby step of passing Florida Statute s. 1004.4473 which has created an industrial hemp pilot program in Florida.  The pilot program permits the two Florida land grant universities — University of Florida and Florida A&M University — to develop public-private partnerships to produce hemp, analyze results and report back to the Legislature.

Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or

New Jersey map outline
Copyright: adamgolabek / 123RF Stock Photo

Peter Kelly writes:

New Jersey Governor Phil Murphy signed an executive order directing the New Jersey Department of Health and the Board of Medical Examiners to review the state’s existing medical marijuana program with a focus on ways to expand access to marijuana for medical purposes. The review will include:

  1. An evaluation of the current rules regulating operating and siting of dispensaries and cultivation facilities with particular focus on whether relaxation of rules should be revised to remove obstructions to expansion;
  2. A review of the current process for obtaining a license to operate, including recommendations to expedite the process;
  3. An examination of conditions for participating physicians to ensure such requirements are not onerous;
  4. An analysis of the current list of debilitating conditions for which use my be authorized and a recommendation as to whether doctors should be given flexibility to make such determination on their own;
  5. An assessment of the methods through which patients obtain medical marijuana and whether rules should be amended to approve additional methods to facilitate patient access;
  6. A review of regulations governing the forms in which medical marijuana can be ingested; and
  7. Any other aspect of the program that hinders or fails to effectively achieve the statutory objective of ensuring safe access to medical marijuana for patients in need.

The Executive Order mandates that the DOH and BME complete the review within 60 days and requires that the review’s findings be submitted along with recommendations for new rules and regulations or for the elimination of existing ones.

According to Governor Murphy, the goal of the review is to eliminate barriers to access for patients who suffer from illnesses that could be treated with medical marijuana. The state’s current program limits prescriptions to only those who have certain state-approved conditions and the more than 15,000 enrollees have access to only five dispensaries in the state.

You can find Executive Order #6 at the New Jersey state government website.

Peter F. Kelly is a partner in the firm’s Corporate Department and Cannabis Law Practice, resident in its Princeton, NJ, office.

Jack Praetzellis writes:

Green California Vector IllustrationCalifornia law requires all contracts to have a “lawful object”.  Previously, this posed a problem for contracts involving cannabis since cannabis-related contracts are largely unlawful under federal law.  On January 1, 2018, California enacted Civil Code Section 1550.5. That Code Section explicitly states that cannabis-related contracts have a lawful object under California law.

California’s new law provides that commercial activity relating to adult-use cannabis conducted in compliance with California law is deemed to be the lawful object of a contract.  Section 1550.5 means that cannabis businesses can enter into and enforce contracts knowing that courts will not (or at least, should not) find their contracts invalid for lack of a lawful object.

Businesses in the cannabis industry should draft their contracts to take advantage of this change in the law and there are at least two immediate implications.  First, choice of law provisions should require application of California law (e.g., this contract shall be governed by California law).  Second, forum selection clauses should be used to make it mandatory that any claims relating to the contract be brought in California State Courts and not in any United States District Court (e.g., any action relating to this contract shall be decided by the Superior Court for the City and County of San Francisco).

Jack Praetzellis is an associate in the Litigation Department, resident in the San Francisco office.

Following up on my post from earlier this week, the Florida Senate Health committee unanimously passed SB 1134 which would strip out the requirement that black farmers who want to obtain a coveted medical marijuana license be a member of the Florida Chapter of the Black Farmers and Agriculturalists Association (which has closed its membership).

As I explained in my earlier posts (here and here), Columbus Smith, a black farmer from Panama City, filed a lawsuit challenging the law implementing Amendment Two (medical marijuana) alleging that the law was unconstitutional.

Recently, a Leon County, Florida Judge sided with Smith and granted a temporary injunction in the case, which signals that Smith’s case has a strong likelihood of prevailing in court.

Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or

Jack Praetzellis writes:

Sunset at Manhattan Beach and Pier in Southern California, Los Angeles.California Governor Jerry Brown signed an amendment to California Evidence Code Section 956 ominously known as the “crime-fraud exception”.  The newly-revised Code Section attempts to address the tension between state and federal law governing cannabis.

Under normal circumstances, California’s attorney-client privilege makes confidential communications among an attorney and a client exempt from disclosure.  Essentially, neither a lawyer nor a client can be compelled to testify about the substance of their communications.

The crime-fraud exception punctures the attorney-client privilege.  It provides that if a client used the services of a lawyer to commit a crime or a fraud, then the attorney-client privilege doesn’t apply.  The conflict between state and federal laws governing cannabis raises the specter of whether or not legal advice about cannabis falls into the crime-fraud exception.

Under California’s newly enacted Evidence Code Section 956(b), so long as an attorney “advises the client on conflicts with respect to federal law,” the crime-fraud exception won’t impact the attorney-client privilege where the advice is “rendered in compliance on state and local laws on medical cannabis or adult-use cannabis.”

Before celebrating, however, be mindful of Federal Rule of Evidence 501.  Where federal law governs a claim, federal courts do not apply state law privileges and therefore will not apply Evidence Code Section 956(b).  And obviously no similar special exception has been written in to federal law.

What’s the takeaway?  If you are providing or receiving advice about cannabis in California, be sure that some of the advice concerns conflicts with respect to federal law.  While it’s not guaranteed to preserve the attorney-client privilege under all circumstances (see Federal Rule of Evidence 501), it’s undoubtedly better than nothing.

Jack Praetzellis is an associate in the Litigation Department, resident in the San Francisco office.