On November 14, 2018, I will be presenting a Seminar entitled “Cannabis: We Are Not in College Anymore” at the Double Tree Hotel in Reading, Pa. I will be joined by Kevin McGinn, CPA, MST of HBK CPAs and Consultants.

Light bulb symbol composed of cannabis, illustrating concept of cannabis-related patents

The event is co-sponsored by the Berks County Bar Association and the Reading Chapter of the Pennsylvania Institute of Certified Public Accountants, and offers both CLE and CPE credit. At the Seminar, Kevin and I will present an overview of Pennsylvania and federal cannabis law, and provide attendees with both practical and ethical advice on representing cannabis businesses and businesses affected by Pennsylvania’s Medical Marijuana Act.

Registration is still open! For more information, check it our here (for lawyers) or here (for accounting professionals). Hope to see you there!

J.B. Pritzker (Democrat) won the election for Governor of Illinois and will be sworn into office in January 2019. Based on Governor-elect Pritzker’s statements on the campaign trail and the current acquisition market in Illinois, the cannabis industry appears to believe that legalized adult use recreational marijuana is a foregone conclusion and that Pritzker will sign a marijuana legalization bill shortly after taking office, which will legalize recreational marijuana in Illinois.

Pritzker has stated that adult use recreational cannabis could generate as much as $700 million per year in annual taxes. Because Illinois has one of the strictest medical marijuana programs in the country, it is uniquely situated to have an explosive recreational market while also avoiding the perceived negative costs of legalization. Illinois has a real opportunity to become a leader in the industry and to also positively address the unfortunate reality that minorities are disproportionately arrested and incarcerated for marijuana possession.

Assuming Pritzker keeps his campaign promises, Illinois’ cannabis industry is set to take off and become one of the largest markets in the country.

Voters in four states (Michigan, Missouri, North Dakota, and Utah) cast their ballots on initiatives to legalize cannabis for either medical or recreational purposes. The ballot measures passed in Michigan, Missouri, and Utah, but not in North Dakota. Here are some details on each measure:

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Michigan – Proposal 1 

Michigan’s Proposal 1 will allow adults to possess, use, and grow marijuana for personal consumption. The proposal also calls for the creation of a state-regulated licensing process and a tax on the sale of marijuana. The Proposal passed with an overwhelming 71%, making Michigan the first Midwestern state to legalize recreational marijuana, and the 10th state in the country to do so.

Missouri – “One out of three ain’t bad…”

In a somewhat unusual situation, Missouri had not one but three medical marijuana ballot initiatives. The initiatives differed in how each proposed to tax the sale of marijuana, the qualifications for medical marijuana patients, and provisions regarding home growers. The one initiative that passed is known as Amendment 2, which proposed to tax marijuana sales at 4 percent, with the proceeds funding veterans health care programs. Amendment 2 was the only initiative of the three that allowed for home growing of marijuana.

Utah Passes Medical Marijuana

Utah voters approved an initiative legalizing medical marijuana, making Utah the 32nd state to do so. In the lead-up to the election, groups on opposite sides of the issue came together and struck a deal that they will write and pass legislation establishing a medical marijuana program.  So while that deal transformed the ballot initiative into somewhat of a symbolic measure, its passage all but ensures that medical marijuana will soon be coming to Utah.

North Dakota Measure Fails to Pass

North Dakota voters struck down Measure 3, which would have enacted one of the country’s most permissive recreational marijuana laws, allowing residents to grow, consume and possess unlimited amounts of marijuana. According to the Bismarck Tribune, opponents of the measure said it was “poorly written and lacking rules and regulations.” Medical marijuana is currently legal in the state, so future measures may result in the state also adopting full-scale adult use.

Joseph McNelis works in Fox Rothschild’s Blue Bell, PA office and focuses his practice on labor and employment matters. Joe also tracks legal developments in the cannabis industry in Pennsylvania and nationwide. Joe can be contacted at 610-397-2332 or jmcnelis@foxrothschild.com.

In a long fought battle, a Colorado cannabis cultivation operation won its battle against an adjacent property owner when a jury found on Wednesday that the operation of a marijuana cultivation facility did not cause injury to the plaintiff’s adjacent real property.  The plaintiffs initiated the suit pursuant to 18 U.S.C. §  1964, the RICO statute that provides for a private right of action against anyone engaged in a racketeering activities, which includes federally punishable drug activities.  Manufacture, distribution, and sale of marijuana are racketeering activity by definition.

Injury is an essential element of a civil RICO claim.  18 U.S.C. § 1964(c) provides that “any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit.” The Tenth Circuit had previously determined that the cannabis cultivation operation was racketeering activity under 18 U.S.C. § 1962 and that the plaintiffs had the right to a trial to determine whether there were damages to their property.  Both sides provided testimony by experts about whether odors were detectable on the plaintiff’s property and how those odors might impact the value of nearby property.   The jury concluded based on the evidence presented that the operation of the cannabis cultivation did not cause injury to the plaintiff’s property.

The case is Phillis Windy Hope Reilly and Michael P. Reilly v. 6480 Pickney, LLC, Park Walton, and Camp Feel Good, LLC, case no: 1:15-cv-00349 in the U.S. District Court for the District of Colorado.

This post is authored by Fox Rothschild associate Henry Whitehead:

For marijuana businesses operating in California the rules are still very much in flux, as shown by a new set of regulations proposed by state regulators.  The state Department of Food and Agriculture, Department of Public Health, and Bureau of Cannabis Control (BCC) first proposed a set of marijuana-industry regulations in July 2018 and, after a public comment period, submitted revised proposed regulations on October 19th.  The changes are substantial, and impact topics fundamental to operation of a marijuana business, including the following:

  1. Labeling and Packaging – There are substantial changes to the labelling and packaging requirements for both distributors and retailers. As to retailers, the proposed new regulations state that until January 1, 2020 all packaging containing cannabis goods must be tamper-evident, but does not have to be child resistant.  However, all products must be placed in a resealable, child resistant, and opaque “exit package.”   After January 1, 2020, all product packaging must be child-resistant, and the exit package will no longer need to be child resistant or resealable.
  2. Marijuana Deliveries – The new regulations prohibit marijuana deliveries by companies that do not have state-issued licenses. The regulations do allow for “technology platforms,” like the apps Eaze and Weedmaps, to facilitate sales between licensed dealers and customers, but prohibits profit-sharing based on sales.  This prohibition on profit-sharing could impact Eaze and Weedmaps’ business model going-forward.  The new proposed regulations also make changes to the prior set of proposed regulations relating to marijuana delivery drivers, vehicles, and limit to $5,000 the value of cannabis goods that can be carried by a delivery vehicle at any one time.
  3. Ownership Disclosures – Marijuana businesses operating in compliance with California’s regulatory scheme would be required to disclose substantial information about all parties who have an ownership stake in the business. Under the proposed regulations “all entities and individuals with a financial interest” in the marijuana business shall be disclosed to the BCC, and the proposed regulations include specific definitions of what it means to have a financial interest in a cannabis business.
  4. Licensed Events – The original set of proposed regulations limited temporary cannabis events (where cannabis can be sold and consumed on-site) to county fairgrounds. The new proposed regulations allow such events at other venues that are approved by the local jurisdiction.  This means that, if the regulations are adopted, local authorities will have discretion to determine where cannabis events can be held, which could lead to a higher number of such events.

These are only some of the changes to the original draft set of proposed regulations, which have been sent out for a 15-day comment period that runs through November 5th.  The proposed regulations can be found here.  Fox Rothschild will continue to follow California’s marijuana industry rule-making process, as the state’s regulatory scheme may well become a model for other states considering legalizing adult use of marijuana.

Fox’s own Jennifer Benda, William Bogot and Joshua Horn are paving the way in this new and rapidly developing sector.

The National Law Journal has recognized Fox’s own Jennifer Benda, William Bogot and Joshua Horn as Trailblazers in Cannabis Law. This national distinction identifies attorneys who are paving the way in this new and rapidly developing sector.

 Josh and Bill are co-chairs of Fox’s nationwide Cannabis Law Practice – one of the largest in the nation with more than 50 attorneys experienced in a range of regulatory issues. They counsel growers, distributors, processors, investors and others, including suppliers of ancillary products and services, in corporate, regulatory, mergers and acquisitions, litigation and tax matters.

 Jennifer is a seasoned tax attorney, skilled litigator and former Certified Public Accountant who forged a niche practice handling complex tax and business problems for a diverse roster of clients in the cannabis industry. By combining a decade of working experience in accounting with years of tax planning advice and tax litigation, she delivers a rare depth of business strategy, pragmatism and efficiency to emerging, regulated markets.

 The three trailblazers have also been on the forefront of thought leadership in the legalized cannabis industry. In addition to speaking at a range of events, the group has published several valuable resources including a National Survey on Marijuana Laws and Regulations – a state-by-state survey of marijuana laws; a Cannabis Industry State Tax Guide; and Employment Compliance in the Age of Legalized Marijuana, which provides information and guidance on employment relationships affected by the legalization of marijuana in certain states.

Get the latest on legal marijuana in New Jersey from a distinguished panel that includes Fox Partner Peter Kelly of our Princeton, New Jersey office.

Light bulb symbol composed of cannabis, illustrating concept of cannabis-related patents

Peter will participate in the Association for Corporate Growth New Jersey’s “Cannabis – After the High…” event on October 18 at the Westin Governor Morris Hotel in Morristown.

The agenda promises food, drink and a lively discussion of legal cannabis investment options, industry trends, new technology and lessons learned from other states.

Date: October 18

Time: 6 pm to 9 pm

Place: Westin Governor Morris Hotel, Morristown, NJ

Visit the event page on ACG New Jersey’s website to register.

On September 26 in Fox Rothschild’s New York City office, the American Foreign Law Association will host a special program, “The Legalization of Marijuana in Canada and the Future of Cannabis Law in the United States.”

The program, featuring Fox partner Matthew Kittay and Gordon Cameron from Stikeman Elliott LLP, will explore the Canadian framework for legalized marijuana and the burgeoning domestic and international market for Canadian cannabis as well the patchwork of laws and regulations in the United States, including an understanding of the U.S. federal government’s ever-evolving approach to marijuana regulation.

Find out more about the program, including registration options, on the AFLA website.

A federal district court in the District of Connecticut recently granted summary judgment to a plaintiff who brought a claim against an employer that withdrew a job offer due to the plaintiff’s positive drug test for marijuana.  This case offers lessons for businesses wading into this new and developing area of employment law.

Cannabis and the law
Copyright: jirkaejc / 123RF Stock Photo

In Noffsinger, the plaintiff was registered under Connecticut’s medical marijuana program and used marijuana to treat post-traumatic stress disorder. Noffsinger initially received a job offer, but it was withdrawn after she informed the employer that she was a medical marijuana user, and later tested positive for THC on a pre-employment drug test. She filed suit, and last year, the district court denied the employer’s motion to dismiss. After discovery, both sides moved for summary judgment on plaintiff’s claim under the Connecticut Palliative Use of Marijuana Act (PUMA).

The court first held there was an implied private right of action under the PUMA, and ultimately that plaintiff established her claim as a matter of law. The Court rejected several of the employer’s arguments in favor of its decision to withdraw the job offer, including that hiring Noffsinger would place the employer in violation of the Drug Free Workplace Act and the Federal False Claims Act due to its status as a federal contractor. Finally, the Court rejected the employer’s argument that while the PUMA protects Plaintiff’s status as a medical marijuana user, it does not specifically protect her use of medical marijuana.

The case is Noffsinger v. SSC Niantic Operating, No. 3:16-cv-01983 (D. Conn.). If you are interested in reviewing a copy of the Opinion, please contact me.

Lessons from the Decision

When dealing with employees who are qualified users under a state-sanctioned medical marijuana program, employers should first and foremost engage the employee in the interactive process to determine if an accommodation for the off-site use of medical marijuana is feasible. This decision must be deliberative and well-documented. Any such decision should not be based on the employee’s “status” as a marijuana user, but rather on the hardship in accommodating the use of marijuana, due to legal, safety, or employee performance concerns.

Fox Rothschild recently published a comprehensive guide for employers entitled Employment Compliance in the Age of Legalized Marijuana where we discuss this topic in more detail and provide employers with more takeaways and best practices.

Joseph McNelis works in Fox Rothschild’s Blue Bell, PA office and focuses his practice on labor and employment matters. Joe also tracks legal developments in the cannabis industry in Pennsylvania and nationwide. Joe can be contacted at 610-397-2332 or jmcnelis@foxrothschild.com.

Construction siteAll employers face challenges in navigating issues surrounding legalized marijuana. For construction industry employers, the challenges are particularly difficult given the necessary emphasis on safety.

Last week, my colleague Jeff Polsky, co-chair of Fox’s Labor and Employment Department, recorded a 90-minute webinar for Lorman addressing the issues construction employers face in jurisdictions that have legalized medical or recreational marijuana. Jeff discussed developments in state law, conflicts between state and federal laws, drug testing, maintaining a drug-free workplace, and responding to employees’ requests for accommodation of marijuana-related disabilities. You can purchase the webinar here.