Posted on

No Bankruptcy, No Problem? Receivership and Cannabis.


Receiver time?

Back in 2014, we wrote that bankruptcy is not an option for marijuana businesses. That issue has been litigated here and there since then, but as of today, cannabis businesses are no better off than before. The hard reality is this: all bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code. Those courts have held that it would be impossible for a U.S. Trustee to control and administer a debtor’s assets (cannabis) without violating the federal Controlled Substances Act.

Bankruptcy laws are designed to afford a fresh start to honest but unfortunate debtors, while providing equal treatment to creditors. Without recourse to bankruptcy, parties can only: (1) liquidate without court supervision, or (2) explore state court receivership. Liquidating without court supervision offers no protection to pot business creditors. State court receivership does afford protections, but adds complexity because states closely regulate who is allowed to possess and sell marijuana (through licenses). For a while, it was an open question as to whether a state court receivership would actually work in the cannabis context. Recently, one actually did.

In the case at issue, a landlord (creditor) had leased space to a licensed marijuana business tenant (debtor). The tenant failed to pay rent, and the landlord evicted the tenant and acquired a judgment for unpaid rent. Because RCW 7.60.010 et seq. provides that a Washington state court may appoint a receiver over a marijuana business, the landlord convinced the court to issue an order appointing a receiver to sell the tenant’s cannabis and satisfy the judgment. The landlord then successfully navigated the licensure issue with the Washington State Liquor and Cannabis Board, sold the pot, and collected on its judgment.

Washington is not the only pro-cannabis state with statutes and administrative rules that seek to bridge the bankruptcy gap by allowing creditors to seize and sell cannabis. In Oregon, OAR 845-025-1260 provides “Standards for Authority to Operate a Licensed Business as a Trustee, a Receiver, a Personal Representative or a Secured Party.” Our Oregon and Washington cannabis lawyers have assisted numerous clients in acquiring and perfecting security interests under the relevant rules. We expect California to adopt a similar regime.

One of the reasons creditors get such high rates of interest for loans to cannabis businesses—in addition to the fact that banks won’t lend to them—is because many pot businesses lack lienable collateral. For many of them, the net worth of the business is mostly tied up in the cannabis itself. It is now clear that, at least in Washington, the cannabis can be liquidated by a third party, whether or not the pot was initially proferred by the debtor as collateral for a loan. In that way, cannabis businesses are being treated by progressive states much like non-pot concerns.

That we finally have had one successful state court receivership probably won’t nudge circumspect lenders to reach out to the cannabis industry. However, cannabis businesses can feel encouraged that their number one asset (their cannabis) may have marketable value when looking for loans; and lenders can feel hopeful that if everything falls apart, there may be liquidation value in the cannabis crop. None of this “solves” the bankruptcy issue, but it’s a step in the right direction.

Posted on

Mr. Periods Goes to Oregon


Will the (former) Senator yield?

The Oregonian, Willamette Week, and KGW, to call a couple of, are reporting that US Lawyer Common Jeffrey Periods is visiting Portland right now to satisfy with federal and native regulation enforcement. These stories recommend Mr. Periods is on the town primarily to debate immigration, sanctuary cities, and his unconscionable place on the Deferred Motion for Childhood Arrivals program (“DACA”).

Given the current trade of letters between Oregon Governor Brown and the Lawyer Basic, it appears possible Mr. Periods has additionally come to Oregon to debate and criticize Oregon’s medical and leisure hashish packages. We’ve just lately mentioned how this trade of letters demonstrates how Oregon sits uncomfortably inside Mr. Periods’ crosshairs. Governor Brown eviscerated Mr. Periods’ reliance on a leaked, incomplete, and deceptive draft of a report ready by the Oregon State Police on hashish in Oregon. Our cash says Mr. Periods can also be right here on a fact-finding mission, to see if he can drum up some higher (or any?) sources for his claims that Oregon has thus far did not adjust to Cole Memorandum tips.

Anybody within the hashish business right here in Oregon is aware of Oregon treats these tips with the utmost respect and significance. Heck, in the event that they didn’t, our Oregon hashish enterprise legal professionals wouldn’t all be placing in 12 hour days! The Governor, the legislature, and Oregon’s related regulatory businesses, together with the Oregon Liquor Management Fee and Oregon Well being Authority, have been working tirelessly to enhance their insurance policies and procedures to make sure that Oregon’s leisure and medical hashish packages shield public security and stop criminality.

Hopefully, Mr. Periods’ go to will change his coronary heart, however I wouldn’t rely on it.

Posted on

Oregon Implements Common Pesticide Testing for Hashish


Firstly of this month, Oregon carried out a essential change to its hashish pesticide testing laws: As of August 30, 2017, each batch of hashish produced in Oregon have to be examined for pesticides previous to switch or sale. This merely wasn’t attainable a yr in the past, when the Oregon Liquor Management Fee (“OLCC”) issued a discovering that there have been not sufficient accredited labs obtainable to permit for common pesticide testing. As a stop-gap measure, the OLCC restricted testing to one-third of all batches from every harvest. In response to the OLCC, the state of affairs on the bottom has modified considerably. There at the moment are twice as many accredited labs and the Oregon Well being Authority (“OHA”) has just lately elevated testing batch sizes. The web result’s that the OLCC believes there’s now capability to make sure common pesticide testing.

We’ve written fairly a bit about how Oregon is slowly shifting duty for medical hashish from the OHA to the OLCC, however product testing stays an outlier. The OHA retains duty for issuing hashish testing guidelines for each the medical and leisure program, and has issued a few of the strictest pesticide testing necessities within the nation. With this current change, all Oregon hashish, leisure and medical, will be examined for pesticide contamination previous to switch to retailers and processors, and finally to the shoppers.


Posted on

Oregon Implements Common Pesticide Testing


Originally of this month, Oregon carried out a crucial change to its hashish pesticide testing laws: As of August 30, 2017, each batch of hashish produced in Oregon have to be examined for pesticides previous to switch or sale. This merely wasn’t potential a yr in the past, when the Oregon Liquor Management Fee (“OLCC”) issued a discovering that there have been not sufficient accredited labs obtainable to permit for common pesticide testing. As a stop-gap measure, the OLCC restricted testing to one-third of all batches from every harvest. In line with the OLCC, the state of affairs on the bottom has modified considerably. There at the moment are twice as many accredited labs and the Oregon Well being Authority (“OHA”) has lately elevated testing batch sizes. The web result’s that the OLCC believes there’s now capability to make sure common pesticide testing.

We’ve written fairly a bit about how Oregon is slowly shifting duty for medical hashish from the OHA to the OLCC, however product testing stays an outlier. The OHA retains duty for issuing hashish testing guidelines for each the medical and leisure program, and has issued a number of the strictest pesticide testing necessities within the nation. With this current change, all Oregon hashish, leisure and medical, will be examined for pesticide contamination previous to switch to retailers and processors, and finally to the shoppers.


Posted on

Oregon Medical Marijuana: Monitoring Begins December 1st


We just lately talked about that the Oregon Well being Authority would quickly supply steerage on seed-to-sale monitoring necessities for medical hashish. Final week, the Oregon Well being Authority (OHA) did precisely that, with its Medical Marijuana Info Bulletin 2017-07. The Bulletin comes pursuant to Senate Invoice 1057, probably the most vital pot invoice of the current Oregon legislative session. In our recap of that invoice, we ended with our oft-repeated statement that “the OHA regime will quickly recede to strictly restricted, patient-caregiver relationships. The cash there’s gone.” So, this can be a public service publish for anybody on the market rising marijuana within the OHA system with the aim of serving to sufferers and never getting wealthy.

As a reminder, the aim with SB 1057 and monitoring medical marijuana in Oregon is to restrict diversion and black market exercise. To perform this, SB 1057 gave the next parameters for monitoring:

  • Required marijuana produced and transferred inside OHA’s Oregon Medical Marijuana Program (OMMP) system to be tracked by the OLCC monitoring system. (The OLCC oversees non-medical, grownup use marijuana.)
  • Specified funding for the monitoring system to be paid from the Oregon Marijuana Account previous to another distribution.
  • Required OHA to impose a further charge on marijuana develop websites, processing websites, and dispensaries to pay prices incurred by the monitoring system.
  • Specified timelines for monitoring system part in.

As offered in final week’s OHA Bulletin, December 1, 2017, has been chosen as Oregon’s monitoring system part in date. On or earlier than that date, OMMP registrants might be required to trace the manufacturing, processing and switch of all marijuana gadgets within the OLCC’s Hashish Monitoring System (CTS), and pay an related charge of $480. The choice is to use for an OLCC license previous to January 1, 2018, or to point that the registrant falls beneath an exemption. The exemption is slender: it happens solely the place a registrant is a affected person rising for him- or herself, with a ceiling of 12 mature crops and 24 immature crops.

Did we point out it might be unattainable to make any cash within the OHA system going ahead? It’s. Going ahead, the one marijuana bought at retail to medical cardholders can be at OLCC licensed dispensaries, tracked in CTS. In that sense, the December 1 deadline ought to come as a shock to nobody: SB 1057 has been on the books since Might, and OHA licensed dispensaries had turn out to be vanishingly uncommon earlier than that. If any OHA licensed dispensaries nonetheless exist after December, they’ll doubtless be vestigial to sparsely populated japanese Oregon counties, the place bans on grownup use gross sales proceed.

Even with all of this context, we nonetheless get occasional shoppers coming to our workplace wanting “to spend money on an Oregon medical marijuana develop.” If the person has been pitched on that, we inform them to run. As a enterprise proposition, the medical marijuana program in Oregon had a superb run from 2013 to 2016, however these days have handed. The current OHA Bulletin relating to December 1 and CTS confirms it.

Posted on

Oregon Governor Kate Brown fires again at Lawyer Basic Jeff Periods


Oregon Governor Kate Brown fights for hashish

As we’ve mentioned elsewhere, US Lawyer Common Jeff Periods has been sending out intimidating letters to the Governors of cannabis-friendly states. In his letter to Oregon Governor Kate Brown, Mr. Periods targeted vital consideration on a current draft report created by the Oregon State Police that raised considerations about Oregon’s success in complying with the Cole Memorandum tips. Luckily, Governor Brown is having none of it. In her August 22, 2017 response, Governor Brown meets Mr. Periods head on with a easy message: “It is very important perceive that this draft report does not (and admittedly doesn’t purport to), mirror the ‘on the bottom’ actuality in Oregon in 2017. This doc was initially meant to offer a baseline understanding of the state of issues associated to marijuana in Oregon previous to legalization. In fact, such a baseline offers little perception into the effectiveness of Oregon’s post-legalization regulatory measures aimed toward Cole Memorandum compliance.”

Governor Brown then notes that the leaked draft report was not prepared for primetime and “required vital further work and revision, as a result of the info was inaccurate and the closely extrapolated conclusions have been incorrect.” Particularly Governor Brown notes that the draft report depends on “an assortment of random weblog and newspaper articles that ought to hardly type the idea of knowledgeable coverage dialogue.” (you wound me Governor!) In different phrases, Mr. Periods, your sourcing is dangerous and it is best to really feel dangerous.

After completely dismantling the Lawyer Common’s assumptions, Governor Brown outlines Oregon’s current legislative efforts to make sure Oregon is on the forefront of common sense hashish regulation:

  • Oregon has already carried out seed to sale monitoring for all leisure hashish, and on Might 30, 2017 Oregon Senate Invoice 1057 expanded the seed to sale monitoring to the medical regime as nicely.
  • On August 21, 2017 Oregon Senate Invoice 302 expanded felony penalties for hashish crimes, and “makes it simpler to prosecute the illegal imports and export of marijuana merchandise, a provision particularly aimed toward stopping diversion of marijuana throughout Oregon’s borders.”
  • Oregon already has the “most strong resting regime of any state to legalize marijuana.”

Governor Brown finishes her letter to Periods by explaining that she is “assured that Oregon’s regulated market, coupled with our enforcement work, will serve to make sure compliance with the Cole Memorandum” and by inviting additional dialogue with the Lawyer Common and the Division of Justice.

Your transfer Mr. Periods.

Posted on

Oregon Hashish Corporations Take Notice: Noncompetition Provisions Might Turn into a Factor of the Previous


Our Oregon hashish legal professionals are sometimes requested to incorporate noncompetition provisions in employment agreements to make sure our hashish shoppers don’t lose prime expertise to their competitors. In lots of states, akin to California, noncompetition provisions are flat out prohibited. Although Oregon permits noncompetes in precept, the truth is they’re nonetheless strongly disfavored by the courts and the legislature. An Oregon hashish employer should leap by means of a variety of hoops to get an enforceable noncompete, however even that appears more likely to change.

In Oregon, noncompete provisions are ruled by ORS 653.295, which supplies some extreme restrictions:

  • At the least two weeks earlier than the primary day of employment, a potential worker should obtain a written employment supply explaining that a noncompete can be required. Alternatively, a brand new noncompetition provision might be created when an worker receives a professional development, resembling a promotion that expands job obligations to incorporate protectable firm info together with a increase.
  • The worker should:
    • have entry to commerce secrets and techniques; or
    • have entry to different competitively delicate confidential enterprise or skilled info, resembling product improvement plans, product launch plans, advertising technique, and gross sales plans.
  • Until the employer is prepared to pay 50% of the worker’s earlier compensation in the course of the noncompetition interval then:
    • The worker have to be paid at the least $62,000 yearly (that is tied to US Census Bureau knowledge, so will typically fluctuate).
    • The worker have to be engaged in administrative, government, or skilled work and
      • carry out predominantly mental, managerial, or artistic duties;
      • train discretion and unbiased judgment; and
      • earn a wage and be paid on a wage foundation.
  • The noncompete can solely final 18 months after the termination of employment.
  • The geographical space for noncompetition have to be affordable (“Southern Oregon” is perhaps affordable, “the Continental United States” might be not).

The primary take away is that noncompetes in Oregon can’t presently bind your rank and file staff until you need to proceed paying 50% of their earlier wages after they depart. If you wish to forestall your trimmers and budtenders from looking for greener grass subsequent door, it will value you. The second take away is that your employment agreements ought to embrace nondisclosure provisions to prohibit your staff from sharing commerce secrets and techniques, comparable to processes and procedures, with their new employers once they do bounce ship.

As we stated above, it appears just like the Oregon legislature intends to clamp down much more severely on noncompetes. As initially launched this session, Oregon SB 977 would comply with California’s instance and successfully void all noncompetition provisions. SB 977 was referred to the Oregon Senate Committee on Judiciary, the place sure amendments are being thought-about. As soon as it will get again into session, the Judiciary Committee will contemplate modification SB 977-2, which might require an employer to maintain paying a terminated worker their full wage through the restricted interval.

If SB 977, as launched or as amended, is finally adopted, then noncompetes as we all know them in Oregon can be gone. They may both be voided outright, or turn out to be so costly to take care of as to be successfully ineffective. Both method, it will make nondisclosure provisions much more essential sooner or later. You is probably not capable of cease your key worker from heading subsequent door, however you must nonetheless attempt to cease the move of crucial info to your rivals.

Posted on

Oregon Medical Cannabusinesses: Select your Path.


The paths for Oregon hashish are narrowing

Two roads diverged in a yellow wooden,
And sorry I couldn’t journey each
And be one traveler, lengthy I stood
And appeared down one so far as I might
To the place it bent within the undergrowth.

Robert Frost, The Street Not Taken


On the finish of this month, the Oregon Well being Authority (“OHA”) will concern a discover to all Oregon medical cannabusinesses concerning the new medical seed-to-sale monitoring necessities that may come on-line no later than July 1, 2018. As we beforehand talked about, in passing SB 1057 earlier this yr, Oregon determined that increasing the present leisure seed-to-sale monitoring program (METRC) to the medical program will assist minimize down on hashish being diverted to unlawful markets. This transfer comes not a second too quickly in mild of the Lawyer Common’s current letter to Oregon Governor Kate Brown that’s extremely important of Oregon’s success in assembly the Cole Memorandum enforcement tips. It seems the Division of Justice (assume Jeff Periods) has come to consider the Oregon Medical Marijuana Program is a serious supply of unlawful hashish exporting. The monitoring requirement is a brand new monetary burden on Oregon’s medical hashish business and it’ll get rid of one of many few remaining financial benefits reliable medical companies had over leisure companies.

All indicators level to the conclusion that Oregon finally needs to remove its medical hashish program and convert all authorized marijuana manufacturing to the leisure system. So, it isn’t shocking that the State is utilizing this new monitoring requirement as a chance to implicitly encourage medical hashish companies to transform over to leisure. As shall be defined within the forthcoming discover, every medical hashish enterprise could have till December 1, 2017 to make an election on whether or not to proceed underneath Oregon’s medical regime (with the brand new monitoring necessities), or to transform to the leisure regime. Critically, even when you intend to proceed as a medical operation you possibly can’t simply sit in your palms: When you don’t make an election both means by January 1, 2018 you may be vulnerable to dropping what you are promoting.

The method for changing from a medical hashish enterprise to a leisure hashish enterprise doesn’t look like too arduous. After well timed submitting your election, you need to submit an Oregon Liquor Management Fee (OLCC) license software by January 1, 2018. You’ll then be allowed to proceed your medical hashish operation till you get your leisure license, or because the OLCC explains it: “As soon as permitted for an OLCC retail license it’s essential to stop all medical enterprise practices and no medical marijuana merchandise could also be situated on the licensed premises. The investigator reviewing your software will hold you knowledgeable of the standing of your software, you’ll know when it’s the applicable time to probably promote down all medical merchandise to organize for OLCC licensure.”

Should you run an Oregon medical hashish enterprise, you’ve in all probability already seen your rivals flocking to the leisure system. Lots of our shoppers that produce medical hashish have knowledgeable us that it’s turning into increasingly troublesome to seek out medical dispensaries prepared and capable of tackle their product. At this level, it will appear you need to all be taking the leisure street.

Posted on

Physicians and Hashish


On Saturday, I gave a enjoyable speak on the Nationwide College of Pure Drugs’s Medical Hashish Convention on “Oregon Hashish Legal guidelines and Naturopathic Docs.” I say it was enjoyable as a result of virtually all the time, we company hashish legal professionals wind up talking in entrance of different legal professionals, accountants or business entrepreneurs. Well being professionals have a unique and distinctive perspective. This speak was additionally pleasant as a result of I obtained to reacquaint myself with the caregiver aspect of the Oregon Medical Marijuana Program, a program my agency not often advises on anymore, as a result of, as a enterprise proposition, it’s all however lifeless.

Maybe probably the most enjoyable a part of the presentation, although, was the unimaginable variety of questions referred to as out on this one-hour speak on “Oregon Hashish Legal guidelines and Naturopathic Docs.” Listed here are a few of the highlights.

What’s the cope with CBD/hemp proper now? This spring, the DEA introduced a brand new Remaining Rule relating to its classification of “marihuana extracts,” which induced a bunch of Colorado hemp growers to file go well with. Even with out the questionable DEA motion, although, CBD stays firmly entrenched on Schedule I of the federal Managed Substances Act. (Payments pop up on occasion trying to vary that.) Like medical marijuana, CBD could also be authorized beneath many states’ legal guidelines, together with Oregon’s, however the federal image is an entire ’nother story. Subsequently, physicians ought to avoid advising sufferers that CBD extracts, topicals, concentrates, and so on., are non-controlled substances when extracted from U.S. hemp– even when one should buy a few of these merchandise simply on-line, or in huge field grocery shops.

Who can dispense medical hashish in Oregon? Solely an Oregon Well being Authority (OHA) registered caregiver or grower, or a licensed OHA or Oregon Liquor Management Fee (OLCC) retail dispensary, can dispense medical hashish in Oregon. Additional, for a affected person to accumulate hashish from any of those sources, the affected person should first safe an “Attending Doctor Assertion” explaining that the person “has been recognized with a debilitating medical situation and that the medical use of marijuana might mitigate the signs or results…”. OAR 845-Zero08-0010(four). The time period “Attending Doctor” is outlined as “a Physician of Drugs (MD) or Physician of Osteopathy (DO).” OAR 845-Zero08-0010(three). Which means naturopathic docs, chiropractors, acupuncturists, and so on., can’t facilitate entry.

What have courts stated about physicians discussing medical marijuana with sufferers? Principally good issues. Conant v. Walters, 309 F.3d 629 (9th Cir. 2002) held that the feds can’t revoke a doctor’s DEA license to prescribe managed substances, or examine that doctor, solely for “suggestion” of using medical marijuana. Different instances, like Rust v. Sullivan, 500 U.S. 173 (1991) and Deliberate Parenthood of S.E. PA. v. Casey, 505 U.S. 833 (1992) observe that laws on doctor speech might “impinge on the doctor-patient relationship” and that docs have a First Modification proper not to talk, respectively. As a result of the Oregon Structure has even broader speech protections than the U.S. Structure, it appears that evidently physicians in Oregon can be inside their rights to debate medical marijuana remedy of debilitating circumstances with their sufferers.

What about different varieties of claims? In principle, we might see a affected person or a affected person’s consultant bringing a tort declare towards a physician, if the physician had advisable hashish whereas the affected person was prescribed different substances, leading to a unfavorable response. Sadly, because of the standing of federal regulation, there’s a relative paucity of hashish analysis as in comparison with different managed substances; but when there weren’t, it’s attainable hashish can be contraindicated for any variety of scheduled pharmaceutical medicine. Apart from conventional tort claims, we might additionally see a physician get roped right into a RICO go well with for encouraging the violation of federal legal guidelines by way of offering primary affected person providers. We aren’t conscious of any case involving doctor legal responsibility for malpractice or RICO claims thus far, nevertheless it’s potential.

What number of hashish sufferers can an Oregon doctor have? A complete of 450, with out vital further compliance hurdles. Sure, that’s quite a bit!

Posted on

Worker Leasing and Hashish Corporations


Because the marijuana business grows and consolidates, marijuana companies are pressured to think about extra complicated enterprise buildings to satisfy their enterprise wants. Such enterprise buildings should scale back prices, improve working effectivity, and most significantly, strictly adjust to federal and state regulation.

One technique for hashish retailers, particularly these with a number of retailers, is to determine an worker leasing firm. If the retailer has three shops, for instance, every organized as an LLC, its house owners might arrange a fourth LLC to lease staff to the shops. This leasing firm will then contract with, and act as paymaster for, every retailer LLC. On this association, the workers who work at every retailer LLC will not be retailer staff; relatively, they’re leased staff who obtain their W2s from the leasing firm. Accordingly, the worker leasing firm is solely answerable for employment tax.

Worker leasing corporations supply two key advantages: consolidation of prices and worker retention. With out the leasing firm, every retailer within the instance above is required to handle the compliance prices of accounting, employment taxes, workman’s compensation, and medical advantages. By consolidating these features, the worker leasing firm ought to have the ability to scale back these compliance prices.

Worker leasing corporations additionally profit staff by making the marijuana retailer a extra engaging employer. As leasing firm staff, they obtain their W2s from a non-cannabis firm, it might be simpler for them to signal leases, purchase mortgages and tackle different formal obligations. As well as, the consolidated buying energy of the worker leasing firm ought to present extra strong worker advantages at a lower cost.

State regulation on worker leasing corporations varies significantly. Some states scarcely handle the idea; others regulate extensively. An excellent instance of the latter is Oregon. In Oregon, worker leasing corporations have to be licensed by the state’s Staff Compensation Division. The finished software is detailed, takes a couple of months to course of, and entails a $2,050 licensing charge (paid each two years). As soon as licensed, the leasing firm is collectively liable for the hiring firm’s whole workforce—together with non-leased staff—which requires particular procedures and insurance coverage.

In a payroll leasing association, the leasing LLC could have service agreements with every retailer LLC. Such agreements should mirror an arm’s-length market fee. Many strategies are used to find out an arm’s size market price however all are based mostly on the details and circumstances of what you are promoting. One widespread methodology is “Value-Plus” In a Value-Plus association, the worker leasing firm compiles its prices and provides an arm’s-length market revenue. The IRS rigorously examines on audit, arm’s-length costs between affiliated entities.

Lastly, worker leasing corporations can’t be used as a tool to keep away from taxes, circumvent the right software of Code §280E, or to launder cash.

The use and advantages of an worker leasing firm are usually not restricted to retailers; producers, processors, and manufactures may profit from utilizing an worker leasing firm. However earlier than you determine an worker leasing firm in your hashish enterprise(es), it’s important you have an operational technique in place and affordable projections of the prices. It’s much more important that you simply perceive 280E and arrange your entities to conform absolutely with that. Solely after having executed all it will you be in a very good place to consider whether or not an worker leasing firm is greatest in your hashish enterprise.