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The Craft Beverage Industry Expands into to the Cannabis Space and Vice Versa

Author: Jake Cormier

As the markets for legal cannabis continue to expand nationwide, companies continue to develop new products to attract new customers in different commercial markets.  Long gone are the days when smoking cannabis was the only way to receive its benefits and options for consumption now include vaping and eating tasty sweets or gourmet foods.  And now the 30+ year-old craft beverage industry is crossing over with the cannabis space.

Beverage companies large and small are betting on continued growth in legal cannabis markets and also betting that the beverage consumer may look to replace (or at least compliment) alcohol consumption with THC and other cannabis-derived substances.  Large beverage companies such as Pabst and Constellation have developed non-alcoholic “beers” and replaced the alcohol with intoxicating cannabis extract.  Likewise, smaller THC-centric brewed beverage companies are also in start-up and growth mode.  New cannabis-derived beverage products range from dealcoholized beer and wine that contain THC, to craft beverages that use terpenes (flavorful botanical compounds found in cannabis and other plants) to flavor alcoholic drinks, to cannabis-infused seltzers flavored like tequila or gin.

So, some beverages taste like alcoholic drinks, but contain only THC and others contain alcohol, but include flavors associated with cannabis.  Notably, none of these beverages contain alcohol and THC due to the regulatory prohibition against mixing the two.  Producing such products can require navigating complex malt or cereal beverage-related regulations and cannabis regulations. Further issues include questions on how the body handles THC in drink form, how beverage manufacturers are formulating THC levels and dosing, and how the consumer will control consumption.  In other words, innovation in alcoholic and cannabis-infused beverages present exciting new consumption options, but also new risks and challenges.

Emerge has several craft beverage and cannabis regulatory attorneys eager to help clients bring new creative products to market in safe and compliant ways.

Don't Miss our Craft Beverage Industry Group (C-BIG) Fall Social Event at Oakshire Beer Hall on October 18th!
Join us and our network of craft beverage business owners, industry advisors and professionals, for a fall social at Oakshire Beer Hall in northeast Portland!
Click here for event details.
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Starting the New Year in California Cannabis

There hasn’t been a dull moment in the California cannabis industry since the passage of Proposition 64, and rolling into 2022, this year doesn’t look like it’s going to be any different. The sunset process for provisional licenses begins and cannabis taxes were raised as the market continues to fall.  On the bright side, licensees may apply for state equity license fee waivers and the Cannabis Appellations Program will be rolling out, which the industry hopes will give small farmers a competitive edge in a saturated market.  Let’s take a closer look at what’s in store for 2022.

Provisional Licenses

This new year brings the end of the issuance of provisional licenses for many applicants and higher thresholds to renew.

•  As of January 1, 2022, the The Department of Cannabis Control (“DCC“) no longer will issue provisional cultivation licenses to licensees which would hold over one acre of outdoor or 22,000 square feet of mixed-light or indoor.

•  As of July 1, 2022, the DCC will no longer issue any new provisional licenses for any license type unless the applicant falls under one of two exceptions (see below).  However, in order to meet the upcoming deadline, all applications for any license type must be submitted by March 31, 2022.

•  Small Farmer Exception – An applicant for less than 20,000 square feet can apply for a new provisional license until June 30, 2022.  However, the provisional license must be issued by September 30, 2022.

•  Equity Applicant Exception –  An applicant that qualifies as a social equity applicant can apply for a new provisional license until March 31, 2023.  However, such provisional license must be issued by June 30, 2023.

Applicants holding provisional licenses will also face deadlines with respect to renewal.

•  Starting July 1, 2022, in order to renew a provisional license, a licensee will need to submit:  (i) a final Lake or Stream bed Alteration Agreement (“LSAA“); (ii) a draft LSAA; (iii) a notification that application is complete; or (iv) that an LSAA is not needed. Additionally, the licensee will have to submit an initial study, addendum, or checklist to demonstrate substantial progress on California Environmental Quality Act (“CEQA“) review in the previous 12 months by the lead agency.

•  Starting January 1, 2023, the DCC will no longer renew provisional cultivation licenses for licensees which would hold over one acre of outdoor or 22.000 square feet of mixed-light or indoor.  Thus, all larger cultivation operations will need to be in full annual compliance in order to apply for a renewal next year.

See our handy Provisional License Deadline Chart.

Equity Fee Waiver

As of January 1, 2022, the DCC started their Equity Fee Waiver Program.  If a business is eligible, the DCC will waive the license fee. The waiver can be applied for a single license every 12-month licensure period.  There are two requirements that must be satisfied to be eligible for an equity fee waiver.

First, the cannabis business cannot have a gross revenue of more than $1.5 million a year.

Second, at least 50% of the business must be owned by people who meet one of the following three equity criteria: (i) cannabis conviction or arrest; (ii) household income is no more that 60% of the area’s median income; or (iii) live in a place for at least 5 years between 1980 and 2016 that was affected by criminalization of cannabis.  If the business reaches these thresholds, they can submit a request form when applying for, or renewing a license.

Cultivation Taxes

As the cannabis industry continues to face external hardships from local communities, federal and local government, or otherwise, the State of California continues to increase the cost to participate in the legal market.  As of January 1, 2022, the California Department of Tax and Fee Administration (“CDTFA“) raised the cultivation tax even despite the price for cannabis has dropped to about $200 to $500 per  pound.  This was even after California announced that there was a $31 billion budget surplus.  In response, late last year, an owner of Flow Kana called for distributors to withhold paying taxes after July 1, 2022.  The goal was to spark change on the state level to suspend, eliminate, or at least lower taxes, and it looks like the industry’s voice is starting to be heard.  On Monday, January 10, 2022, following the introduction of the proposed state budget for 2022, Governor Newsom indicated that he is open to tax reform for all cannabis operators.  This is a decent step forward for the efforts made by the industry this last year.  Hopefully, 2022 is the year for a little relief to California cannabis operators.

Appellations Program

On November 23, 2021, the Office of Administrative Law approved the proposed regulations for the Cannabis Appellations Program, which went into effect on January 1, 2022.  The regulations detail the process and requirements by which a “petitioning organization” (defined as a group of licensed cultivators of 3 or more within the proposed areas of appellation of origin) can apply for and establish a specific appellation of origin.  However, CDFA is not accepting applications at this time. CDFA has indicated that they are working on the administrative structure for the review process.  Acceptance of applications are not expected until at least mid-2022.  Overall, this gives cultivators time to collaborate and put together the complex application to apply for and create an appellation.  Petitioners will need to prepare and submit a detailed description and documentation of the proposed appellation.  As the program develops, CDFA plans to send out updates to inform the public on the process forward.

Emerge Law Group is keeping up to date on changes in the California cannabis industry.  If you have any need any assistance with obtaining or renewing a license, please contact attorneys Genny Kiley or Delia Rojas from our California Regulatory Compliance and Licensing Practice Group.

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Genny Kiley Speaks at NCIA’s 7th Annual Cannabis Business Summit

On December 16, 2021, shareholder Genny Kiley moderated the Legacy to Craft:  Social Equity, Appellations, and Interstate Commerce panel at the 7th Annual Cannabis Business Summit & Expo hosted by the National Cannabis Industry Association.  Genny was joined by panelists Nancy Do (Endo Industries), Mark Slaugh (iComply), and Omar Figeuroa (Law Offices of Omar Figueroa) to discuss the unique challenges legacy, traditional, and small cannabis operators face in today’s regulated cannabis market.  Genny and the Emerge Law Group team enjoyed reconnecting with old friends, making new connections, and are looking forward to the next conference in July 2022!

Genny is Chair of Emerge Law Group’s Cannabis Regulatory Practice Group and a shareholder in its Business and Corporate Practice Group.  Genny Kiley practices in California and Oregon, and focuses on business and real estate transactions. She has extensive experience assisting clients with business structuring, entity formation, mergers and acquisitions, corporate finance, commercial agreements, real estate acquisitions and leasing. Genny specializes in representing clients operating in highly regulated industries, including cannabis, psychedelics and alcohol. Her business law background and combined regulatory experience provides a unique perspective when advising clients. She has helped many cannabis businesses navigate state and local cannabis rules and regulations, obtain recreational and medical cannabis licenses, avoid common pitfalls unique to the cannabis industry, and expand into other estates under a patchwork of state and federal laws. In 2021, Genny was selected by her peers as a Super Lawyer in Cannabis Law, a distinction awarded to only 5% of the lawyers in Oregon.

 

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Two Emerge Attorneys Named Oregon Super Lawyers in 2021

We are excited to share that the 2021 Oregon Super Lawyers list has honored two of Emerge’s Oregon-based attorneys.

Super Lawyers recognizes outstanding attorneys who have attained a high degree of peer recognition. No more than five percent of attorneys in Oregon are named to the Super Lawyers list.

Emerge attorneys on the list were selected for their performance in several practice areas.  The following attorneys were named to the 2021 Oregon Super Lawyers list:

About Emerge Law Group

Emerge is a full-service business law firm that represents a wide range of clients, from publicly-traded companies to small family businesses and start-ups.  Emerge provides counsel to clients in the areas of technology, manufacturing, real estate development, hospitality, and entertainment.  The firm is most well known for handling high profile matters that have shaped the law in the cutting edge industries of cannabis and psychedelics.  While many firms claim expertise in these areas, few have Emerge’s depth and experience in shaping the laws and successfully representing clients through the dynamic and uncertain stages of new industry.  Emerge is also committed to advocacy for equity, diversity, and inclusion in the communities it serves, through actively engaging in impact litigation and pro bono services.

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What the Sessions Memo Means for California

Yesterday morning, Attorney General Jeff Sessions issued a memorandum upending existing federal policy regarding enforcement against states with legalized cannabis. Prior federal policy was set forth in several memoranda issued by the Justice Department under the Obama administration, including the widely-known 2013 Memorandum by then-Deputy Attorney General James Cole (“Cole Memo”).

This set of statements gave states and their constituents some assurance that their legalized-cannabis programs would not be targeted for federal prosecution, so long as the programs followed certain guidelines. Now, despite vague language suggesting some prosecutorial restraint, it appears that the federal government has taken a step backwards – where all cannabis activity, because it remains illegal under federal law (which it has been since the Controlled Substances Act of 1970), is vulnerable to federal enforcement as non-state-sanctioned activity – subject to enforcement discretion delegated to individual US Attorneys (“USAs”) and the DOJ’s financial and logistical limitations, which are substantial.

You can read more about the content of the January 4, 2018 Sessions Memo here.

Promisingly, the immediate political backlash against Sessions’ announced policy has been fierce. Elected officials from across the political spectrum widely criticized Sessions’ actions and vowed to protect their states’ legalized cannabis programs. Several USAs issued statements strongly indicating little, if anything, would change in their approaches to cannabis.

Looking specifically at California, which kicked off the country’s largest state-legal cannabis industry on January 1, 2018, Senator Kamala Harris, Lieutenant Governor Gavin Newsom, State Attorney General Xavier Becerra, and Congressional Representatives Barbara Lee, Adam Schiff, Nancy Pelosi, Ted Lieu, Ro Khanna, and Dana Rohrabacher (of the Rohrabacher-Farr/Blumenauer Amendment), all issued scathing statements yesterday, chastising Sessions and vowing to uphold the will of the People of California.

Less reassuring, however, were the responses from three of the four USAs for California. Brian Stretch, the USA for the Northern District of California, will leave his position tomorrow to join a private law firm. Stretch had been the last pre-Trump USA standing in California and has denied that his leaving relates to the Sessions Memo. Sessions will now be able to appoint an interim to Stretch’s abandoned post – for up to 120 days – until President Trump nominates, and the Senate confirms, a permanent replacement.

Following Stretch’s announced resignation, his office stated that it would work with “state, local, and federal law enforcement and allocate resources accordingly,” but did not indicate an uptick in state-legal cannabis prosectutions

The USA’s office for the Eastern District similarly said it would “evaluate violations of [federal] laws in accordance with our district’s federal law enforcement priorities and resources.”

The USA for the Central District, which includes Los Angeles, is under a new interim USA as of today — Nicola Hanna, appointed by Sessions — and has not commented on whether its office would change its policy toward cannabis prosecutions in response to the Sessions Memo.  But Sessions did say that Hanna, “spent more than seven years [as an Assistant USA] taking on drug traffickers and other criminals.”

Of deeper concern, the USA for the Southern District, Adam Braverman (who was also appointed to an interim position by Sessions before being confirmed) issued a statement commending Sessions’ decision for “return[ing] trust and local control to federal prosecutors in each district when it comes to enforcing the Controlled Substances Act.” While the Sessions Memo purports to return to “well-established principles that govern all federal prosecutions” by eliminating “unnecessary” guidance, it also reiterates Sessions’ staunch position that cannabis’s lingering status as a Schedule I drug under the CSA means that “marijuana is a dangerous drug and that marijuana activity is a serious crime.”

And although prosecutorial decisions are ostensibly at the discretion of individual USAs, former USA Brett Tolman, a Republican from Utah, reported that the Justice Department is a top-down-policy, chain-of-command organization, and that the Attorney General has a strong hand in recommending federal prosecutors. As it stands in California, the fact that three of the state’s four federal prosecutors will now be Sessions appointees may be a cause for concern. (The fourth, McGregor Scott of the Eastern District, was a Trump appointee.)

Nevertheless, state regulators for what will likely be the world’s biggest cannabis economy have indicated they will be moving forward with licensing for both medicinal and adult-use cannabis businesses. Lori Ajax, the Chief of the Bureau of Cannabis Control, California’s lead cannabis regulatory agency, issued the following statement yesterday afternoon:

“The administration is conferring with the California Attorney General and other states in response to this action. We expect the federal government to respect the rights of states and the votes of millions of people across America and if they won’t, Congress should act. Regardless, we’ll continue to move forward with the state’s regulatory processes covering both medicinal and adult-use cannabis consistent with the will of California’s voters, while defending our state’s laws to the fullest extent.”

Currently, the Rohrabacher-Blumenauer Amendment prevents the federal government from spending taxpayer dollars on the prosecution of state law-compliant medical cannabis activity. But even this limited protection is due to expire with the rest of the budget on January 19, 2018. Unless Congress acts to protect the cannabis industry, Sessions’ Justice Department will have unfettered discretion to spend its limited resources pursuing an outdated war on cannabis that a majority of Americans do not support.

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California Releases Draft Medicinal and Adult-Use Regulations

California Releases Draft Medicinal and Adult-Use Regulations

On Thursday, November 16, the three (3) California cannabis-licensing agencies released draft emergency regulations implementing the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). The agencies – the Bureau of Cannabis Control (within the Department of Consumer Affairs), the Department of Food and Agriculture, and the Department of Public Health – are legally obligated to begin issuing state licenses to cannabis businesses starting January 1, 2018. They issued these proposed regulations pursuant to an expedited, emergency rulemaking procedure in order to meet that statutory deadline.

The full text of the proposed regulations spans nearly 300 pages and details the agencies’ proposed plans to implement state licensure and regulation of the industry. Here are a few of the highlights.

Additional License Types

In the proposed regulations, the Bureau of Cannabis Control (BCC), which regulates retailers, microbusinesses, distributors, and testing labs, added four (4) license types to the list established by MAUCRSA: Type 9 (delivery-only retailer); Type 13 (transport-only distributor), essentially reviving the Transporter license from the now-defunct Medical Cannabis Regulation and Safety Act (MCRSA); Type 14 (cannabis-event organizer); and temporary event licenses.

The Department of Food and Agriculture (DFA), which regulates cultivation and the statewide track-and-trace program, added a processor license for trimming, drying, curing, grading, storing, packaging, and labeling cannabis. A licensed processor that does not also hold a cultivation license may not commercially cultivate cannabis.

The Department of Public Health (DPH), which regulates manufacturing, added two (2) license types: Type N (infusion – non-extraction manufacturer, such as for topicals and edibles) and Type P (packaging and labeling). The resulting total of four (4) DPH licenses are hierarchical – a Type 7 (volatile manufacturer) licensee may conduct all manufacturing activities; a Type 6 (nonvolatile manufacturer) may conduct all but volatile manufacturing; a Type N may infuse, package, and label; and a Type P may only package and label cannabis products.[i] DPH also announced a fifth license type in development: Type S (shared manufacturing facility), for manufacturers to share facility space.[ii]

No acreage cap for cultivation sites

Under MAUCRSA, licenses for unlimited-size cultivators (Type 5) are theoretically prohibited until 2023, and those for medium-size cultivators (Type 3)[iii] are to be limited in number. In its proposed regulations, DFA limits each licensee to a single Type 3 license but does not cap the size of cultivation sites.[iv] The result is that a single licensee may apply for multiple “small” cultivation licenses (Type 2) and combine them to create one large cultivation site that exceeds an acre.[v]

Transition Period

From January 1 to July 1, 2018, licensees may conduct business with any other licensee, regardless of their license designation as adult-use (A-license) or medicinal (M-license).[vi] After July 1, licensees may only do businesses with other licensees with the same A- or M- designation, although each licensee may hold both types of licenses.

During the transition period, retailers may also sell items in inventory that do not meet new requirements, subject to some additional labeling and packaging requirements for certain products.

CO2 and Ethanol are Nonvolatile

DPH’s proposed rules define carbon dioxide and ethanol as nonvolatile solvents for the purposes of manufacturing licensure, despite the definition of volatile solvent (which remains unchanged) as “any solvent that is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures.”

Once these proposed emergency regulations are filed with the Office of Administrative Law (OAL), there will be a 5-calendar-day public comment period and OAL will have 10 calendar days to approve or disapprove the regulations. The promulgating agencies (BCC, DPH, and DFA) are not required to respond to public comment in the emergency rulemaking process, but they may do so within 8 calendar days of submitting the regulations to OAL.

Since these emergency rules are being promulgated on an expedited timeline,[vii] we can expect the licensing authorities to follow this emergency rulemaking with a standard rulemaking process (likely in early 2018) to clean up, modify, or add to the emergency regulations.

[i] The difference between a DPH Type P manufacturer and a DFA processor is the type of product being packaged and labeled.

[ii] This would seem to contravene MAUCRSA’s definition of “premises,” which expressly prohibits a single premises from being occupied by multiple licensees.

[iii] “Medium” cultivators can cultivate up to an acre outdoors or up to 22,000 indoors or with mixed light.

[iv] This omission has already met with significant opposition and may change.

[v] Type 1 “specialty cottage” licensees are prohibited by definition in MAUCRSA from cultivating more than 5,000 square feet on one premises or on contiguous plots.

[vi] This does not change the prohibition on business transactions between licensees and unlicensed entities, including collectives currently exempt from the state-licensure requirement, starting January 1, 2018.

[vii] MAUCRSA was just passed in late June and amended in early September of 2017, and the licensing authorities are under mandate to begin licensure on January 1, 2018.

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Oregon Legislative Update (Part 3): What You Need To Know About SB 1015

On June 29, 2017, Governor Brown signed a bill impacting Oregon’s hemp industry into law.  SB 1015, which goes into effect the first week of October 2017, amends Oregon’s industrial hemp statute and significantly increases the industry’s access to the commercial market.

Industrial Hemp

In 2009, the Legislature gave the Oregon Department of Agriculture (ODA) the authority to license industrial hemp growers and handlers.  Since ODA issued the first hemp licenses in 2015, hundreds of growers and handlers have entered this new potentially lucrative market. Industrial hemp is a cannabis plant that contains less than 0.3 percent tetrahyrdrocannabinol (THC).  Traditionally used to create fiber, fuel, and fabric, contemporary research reveals that hemp also contains cannabidiol (CBD), a non-psychoactive cannabinoid compound linked to several medical benefits (e.g. Charlotte’s Web, anti-inflammatory, epilepsy treatment, etc.).

Oregon Revised Statutes (ORS) 571.305, makes industrial hemp production, possession, and commercial activities legal in the state of Oregon.  Current state law categorizes industrial hemp as an “agricultural product” subject to regulation by ODA.  A “grower” produces and cultivates industrial hemp, while a “handler” receives industrial hemp for processing into commodities or products. All growers and handlers must have an ODA-issued industrial hemp license.

Formerly, Chapter 571 did not provide a way for licensed industrial hemp growers and handlers to transfer their hemp products to OLCC processors.  SB 1015, now specifically allows these transfers.

The bill’s major provisions include:

Industrial Hemp Concentrates and Extracts Defined

SB 1015’s definitions of “industrial hemp concentrate” and “industrial hemp extract” mirror those of cannabis concentrates and extracts found in the rules governing medical and recreational cannabis (OAR 845-025-1015).

Delivery of Industrial Hemp Products to OLCC Processors

SB 1015 allows an ODA-licensed industrial hemp grower to deliver industrial hemp to an OLCC-licensed processor.  Also, the measure allows a state-registered industrial hemp handler to deliver industrial hemp concentrates and extracts to an OLCC-licensed processor.  The following restrictions apply:

  • Industrial hemp growers, handlers, and marijuana processors seeking to engage in processing industrial hemp into CBD concentrates and extracts must be registered with OLCC for that express purpose.
  • Growers and handlers must provide recipient cannabis processors with all results of any required tests conducted on the industrial hemp and the processor must retain those test results.
  • Growers, handlers, and cannabis processors must track industrial hemp products using the same CTS tracking system (i.e. Metrc) currently in place for all cannabis businesses in the state.
  • Deliveries must be conducted in a manner that satisfies the delivery requirements currently in place for all cannabis businesses in the state.

Processing of Industrial Hemp Products

Upon receiving industrial hemp products, a cannabis processor may process the hemp into industrial hemp concentrates and extracts (like CBD oil).  The processor may also use the industrial hemp products to supplement their own marijuana products, but only if that product meets existing processing requirements.  This would allow processors to infuse purely hemp-derived CBD into their extracts and concentrates, opening new opportunities for innovation and product development.

Retail Sale of Industrial Hemp Products by Individuals

Any person may make retail sales of industrial hemp products and commodities if the processing method used complies with Oregon law.  This levels the playing field for in-state industrial hemp manufacturers and businesses competing with out-of-state importers.

Please keep in mind that the federal government’s position is constantly evolving in addition to our state regulatory structure.  If you have any questions regarding SB 1015 or any other hemp-related issue, please don’t hesitate to contact one of our compliance attorneys and keep an eye out for more of our blog updates on our website!

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Oregon Legislative Update (Part 2): What you need to know about HB 2198

Just days before the end of the 2017 session, the Oregon legislature passed a major cannabis-related bill.  Surviving a relatively close Senate vote last Thursday, HB 2198 now awaits the Governor’s signature.

Please see the bill’s key provisions below:

Oregon Cannabis Commission

The Oregon Cannabis Commission (OCC) within the Oregon Health Authority (OHA), will consist of a Public Health Officer and eight other commissioners appointed by the Governor.  The OCC will provide guidance and oversight on a broad range of issues impacting the medical marijuana industry, including recommending a governance framework for the future of the Oregon Medical Marijuana Program (OMMP).  Additionally, the Commission will develop a long-term strategic plan to maintain the medical marijuana program’s viability as more medical growers move into the recreational system.

Limited Transfer of Medical Marijuana into OLCC System

A medical marijuana grow site with more than twelve plants may transfer up to twenty pounds of marijuana a year to licensed recreational marijuana processors and wholesalers.  However, the medical grower must have registered their grow site with OHA prior to the date the Governor signs the bill into law.  These transfers must be tracked in OLCC’s tracking system.  The OLCC will also assess whether the amount of marijuana transferred from medical grow sites to wholesalers and processors per year can be increased without adversely affecting the market.

If the OLCC determines that the supply of marijuana exceeds consumer demand, it may issue a temporary order to limit the sale of marijuana items into the recreational system. These temporary orders may only be issued if the OLCC determines that the saturation of the market will not self-correct.

Mature Plant Limits

The mature plant limits previously in place under SB 1057 have been slightly increased. Now, the maximum amount of mature plants allowed at a property not registered as a marijuana grow site (such as private residences where patients are growing their own marijuana) is twelve plants.  These are limited to up to six plants per patient.

Also, if there is only one patient and at least one more person above the age of twenty-one living at the address, the mature plant limit for the entire household is ten plants.  That cap is based on a patient’s six plant limit under the OMMP program, in addition to up to four plants permitted for a non-patient adult living at the household. This provision clarifies questions related to “stacking” both medical and personal-use recreational marijuana plants at the same residence.

Immature Plant Limits

The new bill also replaced SB 1057’s immature plant restrictions for medical grow sites.  A medical grow site may now have an unlimited number of immature plants under twenty-four inches.  Two immature plants taller than twenty-four inches will be allowed for every mature marijuana plant on the grow site.  For example, if a grow site has twelve mature plants, up to twenty-four (24) immature plants over twenty-four (24) inches would be permitted.

Caregiver Privileges

Designated primary caregivers are now clearly allowed to help patients with all things related to medical-use, including the production and processing of marijuana into concentrates or products (but not extracts).  This clarifies the legal relationship between cardholders and their designated primary caregivers and will hopefully allow for patients less familiar with production and processing to fully benefit from their caregiver’s skills and knowledge.

Security System Exemption

OHA and OLCC may not require a medical marijuana grow site to use a security system, video surveillance, alarms, and sensors or physical barriers. This should ease concerns that medical patients and their caregivers might be forced to bear the high cost of installing the types of security systems required of recreational licensees.  However, anyone growing marijuana plants at home must still keep all plants out of the public’s view.

OHA Grow Site Registration

For the purposes of verifying the address of a marijuana grow site, OHA shall accept tax lot numbers, assessor’s maps, or exact locations using latitude/longitude coordinates, GPS, or township coordinates.  This gives patients and caregivers more options with respect to the documents they can provide to satisfy grow site verification requirements and will hopefully simplify the process of grow site registration.

Distance to Schools

If the OLCC determines there is a physical or geographic barrier preventing children from traveling to a marijuana retail location, a marijuana retailer premises may be located within 500-1000 feet of a school.  Until now, local governments decided whether to grant exceptions to the distance requirement.  HB 2198 delegates that authority to the OLCC exclusively.

Because this bill contains an emergency clause, it will take effect on the date the governor signs it. Absent a veto, this will likely be early next week.  If you have any questions about the changes included in this bill or any other compliance-related issues, please contact one of our compliance attorneys.

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Oregon Legislative Update (Part 1): What you need to know about SB 1057

The Oregon Legislative Assembly adjourned on Friday, July 7, 2017.   As the dust from this session settles, the State of Oregon will begin implementing several substantial changes to its marijuana regulations.  SB 1057, SB 56, HB 2198 and SB 1015 are the main bills passed during the legislative session.  We will be posting a three-part series this week summarizing the bills.

SB 1057, is the most comprehensive measure the legislature enacted related to cannabis.  Among other things, this measure expands the Oregon Liquor Control Commission’s (“OLCC”) authority to regulate parts of the Oregon Medical Marijuana Program (“OMMP”), creates marijuana promotional events, and revamps the existing “bump-up” canopy option for recreational producers who elect to serve medical patients.

Please see a summary of the key provisions below:

Tracking Requirements for OMMP Patients

The new law requires certain OMMP registrants to track the production, transfer, and processing of medical marijuana with OLCC’s existing tracking system.  Registered grow sites with more than twelve plants, processing sites, and dispensaries (“Registrants”) must use the tracking system. To cover extra costs incurred by the tracking system, the Oregon Health Authority (“OHA”) will impose an additional fee on Registrants.  OHA must deposit the money collected from the fees into the Marijuana Control and Regulation Fund.

Registrants will have the option to choose to remain OHA Registrants subject to tracking or to convert to OLCC (recreational) licensees.  Each Registrant must notify OHA whether they are electing to apply for OLCC licensure or remain under the medical system by December 1, 2017.  If the Registrant elects to apply for OLCC licensure, they must do so on or before January 1, 2018, or it will not be able to renew its OHA registration.

If the Registrant elects to remain within the medical system, the law requires them to submit to the OLCC tracking system on or before July 1, 2018.  Failure to comply with the tracking requirements by this deadline will bar OHA registration renewal.

Immature Plant Limits

SB 1057 provides that medical cardholders and designated primary caregivers may jointly possess up to twelve immature plants and up to six mature plants at a residence.  The law also allows for two immature plants for every one mature plant allowed at a designated marijuana grow site.  If a designated medical grow site is located within the city limits of an area zoned for residential use, the law allows growing up to twelve mature plants and twenty-four immature plants.  However, HB 2198, currently awaiting the Governor’s signature alters these limits.

*Note: Under subsequently passed SB 56, if a designated medical grower submitted an OLCC producer application on or before June 24, 2017, they will not be subjected to the immature plant limits established under SB 1057.

Exclusively Medical Licenses

In response to indications that potential changes in federal marijuana policy are less likely to affect medical marijuana programs, SB 1057 allows the OLCC to designate licensees as “exclusively medical licensees.”  Licensees may register with the OLCC as exclusively medical licensees if certain conditions are met, such as attesting to transfer products only between other licensees with “medical purpose” registrations.

Bump-Up Canopies

This provision modifies the OLCC’s current bump-up canopy program (which allows OLCC-licensed producers to enter into agreements with patients to provide them medical marijuana from separately designated medical canopy space).  Under the new provision, OLCC-licensed marijuana producers may apply to designate up to an additional 10 percent of the total size of their medical and recreational canopy square footage to produce marijuana for medical patients. Marijuana producers who elect this option must provide seventy-five percent of the marijuana produced from the additional canopy space to OHA-registered patients for free.  Also, the OLCC will no longer require patient/producer agreements. As an incentive to add medical canopy, the OLCC will allow producers to sell the remaining twenty-five percent to other licensees.  As the recreational system continues to attract medical growers, this option is designed to ensure that medical patients continue to receive medication free of charge.

Marijuana Promotional Events

Under certain conditions, SB 1057 allows OLCC licensees to exhibit marijuana items at trade shows (such as the Oregon State Fair and similar events).  Although live immature plants were already displayed at the 2016 Oregon State Fair, this provision allows participating licensees to exhibit all types of marijuana items.

The OLCC has already adopted a temporary rule implementing this provision.  The rule, effective until at least December 27, 2017, dictates the specific conditions under which organizers may conduct these events.  These conditions include the following:

  • The designation of an “event organizer,” who is responsible for ensuring that all licensee participants adhere to OLCC’s rules and restrictions regarding the event.
  • Promotional event applications must be submitted by event organizers in writing at least twenty-eight days before the event date.
  • All the marijuana items transported and displayed must be tracked in OLCC’s cannabis tracking system (“CTS”) and immediately returned to the licensed premises following the event.
  • Each marijuana item is required to have the item’s associated Universal Identification (“UID”) tag affixed to the item or its package.
  • Participants and organizers must prevent minors from accessing the marijuana items during these events.
  • Events may not be held at a licensed premises or in a city/county that has prohibited recreational marijuana businesses.

*Note: Industrial hemp products may not be displayed at these events.

Increased Authority for OLCC Regulatory Specialists

In addition to OLCC personnel’s existing right to conduct inspections and investigations, the law grants OLCC regulatory specialists additional powers to make seizures and aid in the criminal prosecution of licensees. This broader authority is intended to prevent marijuana diversion into the black market. The OLCC may also proceed with investigations or disciplinary actions against licensees regardless of whether their licenses have lapsed, been revoked, or suspended.  Applicants who withdraw their application or renewals may also be subjected to these disciplinary actions.

There are limitations to OLCC’s authority, however. OLCC may not inspect/investigate medical cardholders, primary caregivers, or the residences and locations where cardholders and their caregivers produce marijuana.  The law prohibits OLCC regulatory specialists from acting in the capacity of a federal official, carrying a gun, and from conducting inspections of unlicensed primary residences.  These provisions bring the state regulatory program further in line with the Cole Memo’s federal enforcement priorities.

Financial Disclosure

OLCC may now require persons with a “financial interest” in a licensed recreational marijuana business to submit sworn statements to the OLCC that show the person’s name and address, as well as the nature and extent of their financial interest.  OLCC has already released application forms that require persons with a financial interest to disclose their home addresses. We previously discussed the nuances of this requirement and how it affects applicants and licensees in our April 4, 2017 blog post found here.

Labeling Duties Transferred to OLCC

On January 1, 2018, OLCC will assume responsibility for adopting and enforcing labeling requirements formerly under OHA’s purview.  Until OLCC creates new rules, the labeling and packaging requirements remain as is under OAR 845-025-7000 to 845-025-7060 and OAR 333-007-0010 to 333-007-0100.

OHA Database

SB 1057 requires OHA to establish, maintain, and operate an electronic database for storing certain patient and marijuana grow site registry information to increase efficiency between agencies responsible for administering the OMMP. While OLCC and the Department of Revenue will be allowed to access the database, the stored information is confidential and may not be publicly disclosed.  The law does not require OHA to store information related to patients’ debilitating conditions.  Patients’ and Registrants’ contact information will also be confidential unless the information is related to a designated grow site’s location.

We are carefully monitoring developments as the OLCC implements these changes.  In the meantime, remember to always stay tuned to our Facebook and blog updates!

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Oregon Governor Brown Signs SB 56

Today, Oregon Governor Kate Brown signed SB 56 into law. This law is effective immediately and contains several anticipated fixes to the current cannabis regulatory scheme.

On May 30, 2017, SB 1057 was signed into law by the Governor and became effective immediately.  SB 1057 made significant changes to the Oregon Medical Marijuana Program (OMMP), including limiting the number of plants to six mature plants and twelve or fewer immature plants per patient.  Previous plant limits were six mature plants per patient and an unlimited number of immature plants. The timing of SB 1057 created a significant timing issue for medical growers, particularly outdoor growers, currently operating under the OMMP and in the process of applying for recreational production licenses with the Oregon Liquor Control Commission (OLCC). Among other things, SB 56 provides relief from the newly implemented immature plant limits under SB 1057 for medical growers who have applied for their OLCC producer license.  Specifically the bill expressly states that the new plant limits do not apply, except as provided by OLCC rule, to a premises for which an OLCC application has been made on or before the effective date of SB 56, June 23, 2017.

We previously summarized this and some of the other key changes made by SB 56 in our post from June 21, 2017.

If you have any questions regarding SB 56 or any other compliance issue, don’t hesitate to contact one of our compliance attorneys and remember to stay tuned to our blog updates for more up-to-date information on changes to Oregon cannabis laws!

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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: