Open for Opportunity: 2021 Changes for the California Cannabis Industry

California, Cannabis Industry Group, Delia Rojas, Local Government, Regulatory Compliance and Licensing
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To say the least, 2020 was a year unlike any other, including for the cannabis industry.  California, among other states, declared cannabis “essential” during the pandemic – a vital win for the industry in a year short on wins.  The last few years have been nothing short of transformative – for many Americans, cannabis has gone from flat-out illegal to essential.  But the work is far from over, and more change is coming, certainly in California and some of its local jurisdictions.

California State Law and Regulations

Big changes are coming down the pike this year for the entire California cannabis industry. First, the industry awaits the completion of two key regulatory programs– the Cannabis Appellations Program (“CAP”) and the Certification of Cannabis Comparable to National Organic Program (“OCal”). CAP paves the way for cultivators to petition for and claim an appellation of origin, which is a protected designation that identifies the geographical origin of cannabis and how the cannabis was produced. CAP will provide meaningful support to small legacy farmers that represent California regions famous for their unique cannabis. OCal is a establishes a cannabis organics designation  program similar to the National Organics Program. The final regulations are expected to be released shortly.

Second, the state is working to consolidate the three state agencies that currently regulate cannabis – Bureau of Cannabis Control (“BCC”), California Department of Food and Agriculture – Cal Cannabis (“Cal Cannabis”), and the California Department of Public Health – Manufactured Cannabis Safety Branch (“MCSB”) – into one – the Department of Cannabis Control (“DCC”). to the consolidation will hopefully streamline the application process, lower barriers to enter the market, and result in a single set of regulations for all cannabis applicants. The DCC’s creation is set for July 1, 2021.

Lake County

In December 2020, the Lake County Board of Supervisors adopted an ordinance that imposed certain restrictions on “farmland” designated areas. The ordinance created new “farmland protection zones” in which outdoor cannabis cultivation is prohibited.  Outdoor cultivation may not even exist within 1000 feet of those zones, and any outdoor cultivation premises within a mile of those zones must install “vegetation screens” to block the cannabis operations from view.. The new ordinance also imposes setback requirements for outdoor cultivators on designated farmland outside of protection zones, including 500-1000 ft setbacks from “important highways” and may require additional vegetative screening as well.  The distances for the setbacks are still under review. The County also discussed applying the new rule to cultivators with pending permit applications and requiring some cultivators to “move” their canopy, though the County may provide exceptions to certain existing permit applicants depending on their circumstances.

Lastly, we expect the County to begin discussions on extending the deadline for the required registration with the California State Water Resources Control Board (“SWRCB”).  For local and state compliance, all cultivators must register their proposed water use with the SWRCB.  To receive a local permit, Lake County requires cultivators to apply with SWCRB prior to a specific date. The County has already moved this date twice, with the last deadline falling on October 31, 2020. Cultivators who failed to apply with SWRCB by that deadline are not qualified to apply for a local cannabis permit even if they’ve met all other requirements. Hopefully, the County extends the deadline and allows additional operators to enter the Lake County market. Discussions on this issue are expected to resume sometime this year.

Mendocino County

Mendocino County held a meeting on January 5, 2021 to discuss two cannabis-related topics: (1) the upcoming County legislative agenda, and (2) creating a process for cultivators to hire consultants to assist them with California Environmental Quality Act (“CEQA”) compliance. The County is ramping up its legislative advocacy in the coming year. The County plans to advocate on both the state and federal level regarding the state extension of the provisional license to January 1, 2024 (which would provide much-needed breathing room for cannabis licensees who are still waiting for their official annual licenses); removal of the 4-acre cap on cannabis cooperative associations; and efforts to legalize cannabis federally.

The Board also discussed the framework for helping its cultivators meet their extensive CEQA requirements. CEQA details over 20 review categories to ensure that the project does not heavily impact the surrounding environment. The review process for each cultivation site takes at least 6 months regardless of the jurisdiction. Given the County staff time required to conduct each review, the County signaled its desire to remove itself from the equation and allow operators to prepare their own packages for County approval with the help of CEQA consultants. Ultimately the County Board approved the creation of a framework to certify CEQA consultants and maintain a public list of approved consultants.

Lastly, and most importantly for new cultivators, the Board is discussing the new phase 3 ordinance on January 25, 2021. Currently, the County only accepts applications under phase 2 – for certain indoor and mixed light cultivation. Phase 3 is currently set to open on April 1, 2021, which would open the door for all cultivators to obtain local permits. Cultivators looking to cultivate in Mendocino County should start preparing now in anticipation of phase 3.

Sonoma County

After several delays, we expect Sonoma County to release its long-awaited cannabis ordinance some time in 2021.The ordinance is expected to streamline the local cannabis permitting process by treating cannabis cultivation similar to other agricultural uses and move the application review to the Agriculture Department. Without the ordinance, many local cultivators, who have already been waiting for local permit approval for two years or more, will continue to languish in line for approval with no end in sight. As of the end of October 2020, the County has only issued 6 cannabis-related conditional use permits. Hopefully, the County will release the ordinance ASAP to get the local permitting process back on track. If you are a part of the Sonoma County cannabis community who would benefit from the new ordinance, you may wish to contact your county Supervisor and urge him or her to prioritize cannabis in 2021.

Trinity County

On December 28, 2020, the Board of Supervisors moved to approve a new cannabis ordinance to implement certain “mitigation” measures required under CEQA.  The ordinance goes into effect on January 27, 2020. The ordinance includes numerous changes including new noise level requirements, screens for cultivation along county designated scenic roadways, prohibition on all cannabis cultivation in the 100-year flood plain, specific requirements for the required biological assessment report detailing potential environmental impacts, and a slew of other mitigation requirements for environmental protections. Most importantly, the new ordinance provides for “only one application countywide may be submitted per legal parcel.” This provision effectively limits each parcel to only one licensed facility.

Additionally, the County has taken steps to address the longer-than-expected delay in local permit renewals. To prevent widespread permit expiration, the Board passed an “urgency ordinance” extending the current local cannabis permits for an additional 6 months. The ordinance also prohibits further processing of new cannabis permit applications pending implementation of the ordinance’s other requirements.

2021 is gearing up to, once again, be a busy year for the California cannabis industry.  If you have any questions regarding changes to California state or local laws and regulations, don’t hesitate to contact Emerge’s regulatory attorneys for help.

FRANCHISE LAW

Franchisors

Franchise law is a heavily regulated area of law.  We help clients expand their businesses through franchising and other distribution methods. We have experience in many industries including, restaurants, health, and beauty, alcohol, and cannabis among others. Our representative services include the following:

Franchisees

We also help potential franchisees interested in buying a franchise. We are able to assist with evaluation of franchise opportunities with respect to:

Alternative Structures

However, not all businesses are suited to franchise. We are also experienced with helping clients structure alternative distribution methods to prevent classification as a franchise.

MERGERS AND ACQUISITIONS

Our M&A attorneys are highly experienced in counseling clients who are considering acquisitions or exit strategies.  We have many years of experience handling deals of various types and sizes, ranging from sales of small closely-held business, private companies, and publicly-traded corporations.  We have represented business owners, private equity firms and investment banks in a wide range of industries. 

We have a deep business bench, and Emerge attorneys have handled transactions of all shapes and sizes.  Whether your deal is valued at $100,000 or $100,000,000, our experienced attorneys will guide you through the deal process.

We understand the intensity, technical skill and judgment needed to get deals done, and we provide our clients with timely, practical and cost-effective legal advice.  We are highly capable in all aspects of M&A, including the following:

CANNABIS INDUSTRY

Emerge Law Group is highly experienced in the cannabis industry.  We have helped many clients obtain state licenses and local permits to operate cannabis businesses throughout California, Oregon, and Washington.

Emerge attorneys were instrumental in the drafting and passage of Oregon Measure 91, legalizing marijuana in the State of Oregon, and have represented cannabis businesses well before many law firms were willing to enter the cannabis industry. As a firm that has provided legal services in the cannabis space for many years, we are familiar with the unique and complex issues businesses and individuals face in an emerging and highly regulated industry.

We regularly help clients with:

Cannabis laws and rules are also regularly changing.  Members of our team are dedicated to attending legislative hearings, state agency and local city and county meetings to stay up-to-date on any new changes and how to adjust to any new changes.

See our Cannabis Industry page for more information.

PSYCHEDELICS

There is tremendous excitement about the potential for psychedelic drugs to benefit a wide variety of populations, including terminally ill patients suffering with anxiety and depression. Until recently, psychedelic substances have been accessible only in the illicit market and are illegal under federal and state to manufacture, distribute, or possess. These substances have, since 1970, been treated as having no legitimate medical use, and no commercial application. As such, no one invested in this area or required legal services, outside of the criminal context.

Today, researchers in a multitude of clinical studies are proving the medical safety and efficacy of these medicines, with the objective of changing the treatment of these substances under the Controlled Substances Act. Companies are now actively raising money to develop intellectual property and seize market opportunities associated with psychedelic drugs.

In addition, advocates at the state and local levels are not waiting for the rescheduling of these substances and are active in undertaking efforts to decriminalize these substances and/or make them affirmatively legal under state and/or municipal law. Decriminalization already has occurred in cities including Denver, Oakland, Santa Cruz, and Ann Arbor. Oregon is poised to be the first state to make psilocybin therapy affirmatively legal. Emerge Law Group is working with a wide array of clients pushing forward in this emerging area.

See our Psychedelics Practice Group page for more information.

TAXATION

CORPORATE AND PARTNERSHIP TAX

Businesses of all kinds benefit from a customized but systematic approach to structuring legal relationships. Emerge Law Group helps businesses and business owners with a variety of tax planning matters.

Representative client services include:

ESTATE PLANNING

Estate planning encompasses everything from a will and power of attorney to combined estate and business succession planning. In almost all cases, the purpose of the plan is to help the client protect those they care about most in the event they can no longer be there for them.

Emerge Law Group has experience with a wide range of tools used in estate planning, including wills, trusts, and family business entity planning.

TAX CONTROVERSIES

Emerge Law Group can assist with the resolution of difficult tax controversies. Our areas of emphasis and experience include:

REAL ESTATE TRANSACTIONS

Emerge Law Group assists clients with a wide range of real estate transactional matters.  We regularly help clients with:

LAND USE

Emerge Law Group also assists clients with all aspects of local government land use and development processes, ranging from preliminary property analyses and building permit issues to complex land use reviews and hearings. Our attorneys are experienced in obtaining land use entitlements and development permits for a wide range of uses.

We regularly help clients with:

Above all, we understand the value of working with cities and counties to enhance communities while developing the land to its potential. We strive to create solutions to land use issues that serve to better our clients and the communities in which they live and work.

LITIGATION AND ALTERNATIVE DISPUTE RESOLUTION

The attorneys in Emerge Law Group’s Litigation and Alternative Dispute Resolution practice group litigate commercial, intellectual property, and public interest matters in state and federal courts, as well as private mediation and arbitration proceedings.  Our lawyers have represented national and regional financial institutions, major media, entertainment and technology companies, and other Fortune 500 companies in a broad array of high-stakes disputes.  Our team of litigators has handled leading cases that have shaped the law in cutting-edge business, technology, free speech, and public interest impact lawsuits in trial and the courts of appeal.

We have particular expertise in handling civil litigation and regulatory enforcement matters in the cannabis and psychedelic industries.  While many firms claim expertise in the these industries, few have our depth of experience successfully litigating contract, trademark, partnership, shareholder, land use, and real estate disputes in court and arbitration.  Even fewer firms have our level of experience handling writ of mandate proceedings against the government regulators.

Our litigators practice in California, Oregon, and Washington, but have appeared in state and federal courts nationwide.  Our knowledge of our clients’ businesses, goals and concerns, and our experience litigating at the highest levels, give us unique insight into possible outcomes and pitfalls as we continuously confront issues of new impression.

No matter what the industry, we pride ourselves in achieving our clients’ objectives through efficient and creative solutions primarily designed to avoid disputes in the first place—which is always the best litigation strategy.  Many times, our clients obtain excellent outcomes before or at the earliest stages of litigation because our adversaries quickly recognize the challenges they will face in litigating against us.  When litigation is unavoidable, however, we work hard to provide our clients with both cost-efficient and “big firm” quality representation.

 

INTELLECTUAL PROPERTY

Your intellectual property (or “IP”) strategy can harness your most valuable information and intangible assets including your name, your brand, your designs, your content, your services, and your products — what makes your business stand apart in a competitive world.  We can help you evaluate and build your IP portfolio, then secure it, monetize it, and protect it.

IP encompasses multiple areas of law and different types of information or material.

Our Intellectual Property practice focuses on:

TRADEMARK

Trademarks include names, signs, logos, designs, phrases, slogans, expressions, and sometimes even colors, sounds, or smells that identify or distinguish one business compared to others.  Trademark protection is fundamental in securing your “brand.”

COPYRIGHT

Copyright covers original works of creative authorship fixed in a tangible medium of expression.  This includes literary, dramatic, musical, and artistic works, such as poetry, novels, designs, movies, songs, computer software, and architecture. Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed.  Depending upon the type of work, “moral rights” (such as the right of attribution) may be implicated as well.

TRADE SECRET

Trade secret laws can vary somewhat between states, but generally trade secrets cover information, including drawings, cost data, customer lists, formulas, recipes, patterns, compilations, programs, devices, methods, techniques or processes that derive economic value from not being generally known and are the subject of efforts that are “reasonable under the circumstances” to maintain secrecy.

PRIVACY

Depending upon where you live or operate, there is a special patchwork of laws and regulations that protect and regulate personal information.  If you are handling or giving out personal or potentially sensitive information, you may be implicating privacy laws.

PUBLICITY

Publicity rights address the commercial use of an individual’s face, name, image, or likeness.  These rights vary state-to-state.  Marilyn Monroe, for example, lived in multiple states which created complex questions about her publicity rights.

Our Intellectual Property services include:

FINANCIAL INSTITUTIONS

In states where new cannabis banking opportunities exist, Emerge Law Group has the proven expertise in creating canna-banking programs to efficiently capitalize on those opportunities. Our Banking Practice Group specializes in working with banks and credit unions to develop regulatory compliant programs and operational best practices. We also train banking staff to become experts in canna-banking so they can effective understand and manage the risk affiliated with canna-banking.

We regularly help clients with:

EMPLOYMENT LAW

At Emerge Law Group, we recognize that employees are the heart and soul of any successful business.  Our Employment Law Practice Group works with employers to help them effectively manage their workforce, navigate the complex web of federal, state and local employment laws and, if necessary, defend against claims before administrative agencies and in court.

We regularly help clients with:

CORPORATE FINANCE AND SECURITIES

Our corporate finance and securities lawyers are experienced attorneys who have practiced at large law firms, worked as in-house counsel for public companies and investment banks, and owned and operated start-up companies. We work with clients to help achieve their financing goals while safely navigating the highly technical securities law landscape. 

In addition to representing issuers, we also routinely represent institutional and individual investors, including in connection with fund formation and investments.

Our expertise includes:

We have a deep understanding of the financing options available to businesses, including simple unsecured loans, asset-backed financing, convertible debt, common and preferred equity, crowdfunding and various other structures.  We work closely with our clients to understand their business and financing needs, ensure they are prepared to approach investors and choose the right partners, structure and negotiate terms, navigate the due diligence process and successfully close the deal.

COMPLIANCE AND LICENSING

ALCOHOL AND BEVERAGE INDUSTRY

Emerge attorneys have represented businesses in the alcohol and beverage industry, including wineries, breweries, distilleries, restaurants, bars, movie theaters, golf courses, and gas stations.  We can help you vet new locations, acquire existing locations, and apply for the appropriate liquor license.  We also provide training to comply with applicable rules and regulations, prepare operating procedures, submit renewals, and keep clients protected in the event of any potential violations or administrative hearings.

CANNABIS INDUSTRY

Emerge Law Group is highly experienced in the cannabis industry.  We have helped many clients obtain state licenses and local permits to operate cannabis businesses throughout California, Oregon, and Washington.  We regularly help clients with:

Cannabis laws and rules are also regularly changing.  Members of our team are dedicated to attending legislative hearings, state agency and local city and county meetings to stay up-to-date on any new changes and how to adjust to any new changes.

See our Cannabis Industry page for more information.

PSYCHEDELICS INDUSTRY

Emerge Law Group is a leader in the psychedelics industry.  There is tremendous excitement about the potential for psychedelic drugs to benefit a wide variety of populations, including veterans struggling with PTSD and terminally ill patients suffering with anxiety and depression.  Until recently, psychedelic substances have been accessible only in the underground; they are illegal under state and federal law to manufacture, distribute, or possess.  These substances have, since 1970, been treated as having no legitimate medical use, and no commercial application.  As such, businesses have not invested in this area or required legal services, outside of the criminal context.

Today, psychedelics are proceeding toward legalization on multiple paths.  Researchers in a multitude of clinical studies are proving the medical safety and efficacy of these medicines, with the objective of changing the treatment of these substances under the federal Controlled Substances Act, opening legal access to them.  Private and public companies are now actively raising money to develop intellectual property and capitalize on the market opportunities associated with psychedelic drugs.  Opportunities to be early actors in this new arena are tremendous.

See our Psychedelics Practice Group page for more information.

BUSINESS AND CORPORATE

Our business transactions team is made up of highly experienced transactional attorneys who have practiced at large law and accounting firms, worked as in-house counsel for public companies and investment banks, and owned and operated start-up companies. We understand complex legal matters and provide high quality legal services in a cost-effective manner.  Our clients value our experience, knowledge and judgment.

ENTITY FORMATION

Our team routinely advises clients regarding:

CORPORATE GOVERNANCE

Emerge attorneys also advise on-going concerns with: