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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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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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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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Today, the Oregon legislature passed Senate Bill (SB) 56, which contains several of the anticipated “fixes” to the cannabis regulatory scheme currently in place.

SB 56, carried by Representative Fahey (D – District 14 – West Eugene and Junction City), includes the “Dash 39” amendments adopted by the Joint Committee on Marijuana Regulation which provides, among other things, relief from the newly implemented immature plant limits for those who submit a producer license application to the OLCC on or before the effective date.

Although SB 56 currently awaits the governor’s signature to take effect, here are some of the key changes you can expect to occur:

Immature marijuana plant limits. The bill exempts OMMP growers who submit their OLCC producer applications on or before the measure’s effective date from OMMP immature plant limits. Current law sets OMMP immature plant limits at twelve (12) plants. This is an important fix for growers intending to transfer their medical plants into the OLCC program.

Immediate suspension of license for suspected diversion. OLCC may restrict, suspend, or refuse to renew a license if the OLCC has probable cause to conclude the licensee has sold, stored, or transferred marijuana in a manner not permitted by its license.

Processing by small producers. OLCC-licensed Micro Tier I and Micro Tier II recreational marijuana producers may process marijuana into cannabinoid concentrates using two specified methods: (1) a mechanical process (i.e., keif sieves, silk screens, etc.) and (2) an extraction process using water as the solvent (i.e., ice water hash, bubble bags, etc.).

Transfer of product between retail locations. SB 56 allows a licensed marijuana retailer to transfer product from one retail location to another if the destination retail location is “owned by the same or substantially the same persons.” Although “substantially the same” is not defined in the bill, we expect the OLCC will provide further guidance on the matter.  Note: these transfers are subject to OLCC rules governing transportation of marijuana items.

Verification of lawful activity hotline. Until now, it was difficult for government officials to determine whether a farm was a registered marijuana grow site or OLCC licensed producer premises. This provision requires that the OLCC and OHA create a telephone hotline to inform inquiring city, county, and Water Resources Department representatives, or a district water-master, as to whether a farm is a registered medical grow site, an OLCC licensed producer premises, or a site for which a registration or license has been applied for.

Exclusively medical licensees. Previous legislation enacted this session (SB 1057) created an “exclusively medical” license designation for OLCC applicants. Under SB 56, city and county governments that currently allow or prohibit OHA processing sites or dispensaries may unilaterally prohibit or allow exclusively medical licensees. This would empower local municipalities to refine the cannabis regulatory structure within their limited jurisdictions as their constituents prefer.

Restricted licenses. At its discretion, the OLCC may issue a restricted license to an applicant if the OLCC makes a finding that the applicant meets the denial criteria found in OAR 845-025-1115 (2). This fix allows an applicants to obtain restricted licenses when they otherwise may have been simply denied.

Remember to always stay tuned to our blog updates for more information on changes to Oregon cannabis laws!

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There are significant changes to the Oregon Medical Marijuana Program that will take effect on October 1, 2016.  In recent blogs we have covered:  (1) labeling; (2) packaging; and (3) processor registration. What do these changes mean for Oregon dispensaries?  Below are a few tips for dispensaries preparing for the upcoming rule changes.

1. Identify your top-selling products.                      

If you own or run a dispensary, evaluate your sales history and identify your top-selling products. By focusing on your main sources of revenue, you can hopefully prevent significant disruption to your inventory supply and cash flow.

2. Evaluate whether your top-selling products currently comply with October 1 labeling and packaging requirements.

Once you identify your top-selling products, evaluate whether those products meet the new packaging and labeling requirements. The sale of marijuana flowers and other items in exit packaging may not be affected.  However, the sale of concentrates, extracts, edibles, and other infused products that are generally delivered to dispensaries pre-packaged and labeled will most likely be impacted.

Current Inventory

On and after October 1, if a dispensary has a product in inventory that does not meet the new labeling  requirements, under OAR 333-007-0010(5) the dispensary will be required to:

  • transfer/return the non-compliant item; or
  • if the item cannot be returned – for example, if the vendor cannot be located – dispose of the item in a manner specified by the OHA.

Future Inventory

On and after October 1, a dispensary may not accept any products that do not meet the new labeling and packaging requirements. Ask your vendors that supply pre-packaged and labeled products whether their products comply with the new labeling and packaging requirements. The OLCC has told us that relatively few labels have been submitted for pre-approval. With only one exception (which is explained below), all labels must be pre-approved by the OLCC. If you anticipate a potential disruption in inventory supply, try locating vendors who will likely be compliant by October 1.

Generic Labels

A label that provides only the necessary information required by the rules – and no graphics, photographs, or logos – is considered a “generic” label and requires no pre-approval by the OLCC. You are not required to provide notice to OLCC that you will use a generic label. Consider whether use of generic labels could be a temporary solution.

3. Talk to your extract, concentrate, and edible suppliers about the status of their OHA registration.

On and after October 1, a registered dispensary may accept only a transfer of edibles, concentrates, or extracts from an OHA-registered medical marijuana processing site. Ask your processor vendors about the status of their OHA registration. You can also continue to check the OHA Pending Processor list.

The rules do not prohibit sales of edibles and concentrates that were taken into inventory from a non-registered processor prior to October 1, or extracts that were taken into inventory from a non-registered processor prior to March 1, 2016. Dispensaries may consider purchasing edibles and concentrates from non-registered processors prior to October 1. In contrast, at this time all extracts must come from processors on the OHA Pending Processor list. Regardless of how this rule affects you, if a product in your inventory does not meet the new labeling and packaging requirements, you may not sell it to a consumer (see above).

4. Testing

Beginning October 1, a dispensary may not accept or sell a marijuana product that has not been tested by a laboratory accredited by ORELAP and licensed by OLCC (with one exception explained below). A list of accredited and licensed laboratories will be made available on the OMMP laboratories web page. Currently, no such labs are listed but the OLCC announced today that the first two labs have been certified and licensed.

With respect to inventory accepted by a dispensary prior to October 1, a dispensary may transfer such marijuana items to a patient or caregiver until January 1, 2017 if the item is labeled with the words “DOES NOT MEET NEW TESTING REQUIREMENTS.” These words must be bold, in all capital letters, and at least 12 point font, and the label must be easily seen by the patient or caregiver. We also read this mean that recreational customers may only be sold items tested under the new rules, but we to confirm this with OHA.

Given the current number of accredited and licensed labs, dispensaries should plan their inventory purchases accordingly.  In addition, we recommend affixing the necessary disclaimer labels well before October 1.

5. Do You Need an ODA License?

On and after October 1, a dispensary that sells or handles edibles must be licensed by the Oregon Department of Agriculture (ODA). Check our blog later this week for more information on the ODA’s licensing process.

If you have any questions or concerns about what to do with marijuana items that do not comply with packaging or labeling requirements or about our tips, please do not hesitate to contact a compliance attorney. We are here to help.

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We get this question a lot.  Can I have six mature medical plants and four home grow plants?  The answer is YES, (assuming you are over 21 and a patient growing at home).

The Oregon Department of Justice has published an opinion regarding the intersection of the laws that govern Oregon’s medical and recreational marijuana programs.

In summary, an OMMP grow site located at a patient’s residence may have:

  • 6 mature medical marijuana plants (a per-patient limit), and
  • 4 recreational marijuana plants (a per-household limit).

In addition, a patient may possess up to:

  • 24 ounces of usable medical marijuana (a per-patient limit), and
  • 8 ounces of usable recreational marijuana (a per-household limit).

There are different usable marijuana possession limits for growers, depending on whether the grower is producing marijuana at a patient’s residence.

Members of the public may possess only:

  • 4 recreational marijuana plants at his or her household (a per-household limit),
  • 8 ounces of usable recreational marijuana (a per-household limit), and
  • 1 ounce of usable marijuana in a public place.

The opinion also concludes that the limits in the Oregon Controlled Substances Act apply to possession of marijuana concentrates and extracts. Both patients and members of the public must abide by the following possession limits:

  • 16 solid ounces of marijuana products or concentrates,
  • 72 liquid ounces of marijuana products, and
  • 1 ounce of marijuana extract purchased from a licensed retailer or dispensary.

While members of the public may make their own marijuana concentrates, edibles, or other cannabinoid products for personal consumption, it is still illegal to process marijuana extract without a license issued by the Oregon Liquor Control Commission or Oregon Health Authority. The entire opinion is available here: https://www.doj.state.or.us/agoffice/agopinions/op2016-2.pdf.

The information in this blog post is a summary. These laws and rules are nuanced, and are applied differently based on several factors, such as location of possession. Contact a member of our compliance team with any questions.

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After the dust settles from a legislative session we are always left wondering what happened. Especially after this session which was crazy, fast-paced and chaotic. With the primary piece of legislation being House Bill 3400 there is so much to pull apart (and I will in a really long post). It feels as though the focus has been on big picture policy and not on the practical changes that have occurred. With that being said, tucked away in HB 3400 is this section:

PERSONAL AGREEMENTS

SECTION 83. Notwithstanding ORS 475.304 (7), a person responsible for a marijuana grow site may enter into an agreement with a registry identification cardholder under which the registry identification cardholder assigns, to the person responsible for the marijuana grow site, a portion of the right to possess the seeds, immature marijuana plants and usable marijuana that are the property of the registry identification cardholder.

The section is titled Personal Agreements and we have been waiting for something like this for a very, very long time. One of the biggest challenges of the OMMP is that the patient owns everything all of the time. That means they own the plant and the flower and the trim – everything. Even though the cultivator invests the money, does the work and likely distributes it to people other than the patient it all belongs to the patient and they can claim it at any time. You can see this reflected in statutory language and even in the dispensary transfer forms. While this ownership system might make sense under a purely medical program, under the commercial medical system it has made zero sense.

Section 83 is the fix. Think of it as the ability for the grower to claim their property interest in their product right out of the gate. Essentially a grower may now enter into a contract (yes that means a real document between a grower and a patient that all parties will sign) where the patient signs over their interest to the grower. Couple this with the fact that the Oregon legislature has removed the reimbursement language from the dispensary piece of the medical program and you have a system that actually looks and feels like a real commercial program.

We will post a sample version of a contract like this but remember this is a binding contract so it is important to think carefully about what goes in it and consider having a lawyer draft it or at least review it. Here are a few things that should be included:

  • patient and grower name, OMMP card number, date card expires
  • how much product is being released to grower
  • how much, if any, interest will the patient retain
  • what is the patient getting in return for the use of their card, if anything
  • is there any financial compensation being included for any party
  • what is the grower’s obligation to the patient
  • if there is medicine going to the patient how much and when
  • what happens if grower can’t perform and provide patient the agreed medicine or compensation
  • are there circumstances where the amount, either medicine or financial compensation, might change
  • what happens when it is time to renew, who pays and who has the responsibility to make sure that renewal occurs
  • how much access, if any, does the patient have to the garden or information about production
  • actual language that releases property interest

There are many more pieces that should go into a Personal Agreement. This list is absolutely not exhaustive. Each one of these documents should be commemorating the specific agreement between a patient and their grower. If you are establishing a medical garden or participating in the system now it is time to get your agreement in place. Think of it as progress.

As a side note – look carefully at the statutory language in Section 83 and you will see something new. The term “person responsible for a grow site”.  This is also a new concept for cultivators but is pulled from the dispensary program. The OHA will be making rules around this term so stay tuned. 

 

 

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Ballot Measure 91 intentionally did not include any residency requirement for anyone who owned or who was otherwise involved with a licensed marijuana business. Since 2014, the Oregon Medical Marijuana Act (“OMMA”) required the person responsible for (“PRF”) a medical marijuana facility (“MMF”) to be an Oregon resident. However, because there was no requirement that the PRF had to be an owner of the MMF, OMMA never contained any residency requirements for anyone who owned an MMF. OMMA did not license growers or processors, and so those businesses were never subject to any residency requirements.

House Bill 3400, which was signed by the Governor on June 30, 2015, has changed all of that.

Ballot Measure 91

For Ballot Measure 91 businesses, HB 3400 imposes a two-year residency requirement. Who exactly needs to be a resident? Unfortunately, we don’t know yet because the legislature has, somewhat surprisingly, delegated that decision to the Oregon Liquor Control Commission (“OLCC”).

For producers, processors, wholesalers, and retailers, HB 3400 requires that “an applicant listed on an application” must have been an Oregon resident for two years. See Sections 12, 14, 15, and 16. Who has to be listed on an application? HB 3400 doesn’t say. And that’s how the legislature has, in a rather subtle way, delegated the decision to the OLCC.

For some context, the OLCC has defined “applicant” under the Oregon Liquor Control Act (the “Liquor Act”) to include all of the individuals and legal entities who own or have an interest in the business. For each corporation or other legal entity, this means: (1) each principal officer; (2) each director; (3) each person or entity who owns or controls 10% or more of the entity’s stock or who holds 10% or more of the total membership interest in the entity or whose investment interest is 10% or more of the total investment interests in the entity; (4) each manager of a limited liability company; and (5) each general partner of a limited partnership. The Liquor Act does not contain any residency requirements however. And so that rather broad definition of “applicant” in the Liquor Act is solely for other purposes, including criminal records checks.

The exact language in HB 3400 for residency purposes is a bit peculiar. The phrase “an applicant listed on an application” is unique and does not appear in the Liquor Act. The phrase seems to contemplate that a Ballot Measure 91 application, like a Liquor Act application, will include a list of one or more individuals and legal entities. And the phrase “an applicant” could indicate that only one of those must be an Oregon resident. (The legislature easily could have said “each applicant listed on an application” must be a resident, but it didn’t.) The “an applicant” phrase can also be compared and contrasted to the criminal records provision in HB 3400, which states that the OLCC may require the fingerprints of “any individual listed on an application.” See Section 10. And finally, there’s some oral legislative history from Representative Ann Lininger, where she states that the definition of “applicant” for residency purposes was not intended to apply to every investor, but rather was intended only to include a person who “directly manages” the business. See Representative Lininger’s testimony at the 1:12 mark.

Still, at this time, the only thing we know for sure is that at least one individual listed on each producer, processor, wholesale, and retail application must have been an Oregon resident for two years. Presumably we will know more when the OLCC publishes the initial draft of its rules under Ballot Measure 91.

Handlers

Individuals who perform work for or on behalf of a Ballot Measure 91 marijuana retailer must obtain a permit from the OLCC. HB 3400 does not impose any residency requirements for such individuals. See Sections 19 and 20.

Laboratories

Laboratories that test marijuana items (under both Ballot Measure 91 and OMMA) must be licensed by the OLCC. HB 3400 does not impose any residency requirements for anyone who owns or who is otherwise involved with a licensed laboratory. See Sections 92(7) and 93.

OMMA

HB 3400 imposes residency requirements for medical marijuana producers, processors, and dispensaries that will be registered by the Oregon Heath Authority (“OHA”).

For medical marijuana producers, the residency requirement applies to: (1) the PRF of the marijuana grow site; and (2) any other person whose name is included in the application. See Sections 81(2)(b) and 173(1). Other than the PRF, HB 3400 does not say who has to be listed on a medical marijuana producer application. Therefore the legislature has, for medical marijuana producers, delegated to the OHA the decision of who exactly needs to be a resident.

For medical marijuana processors, the residency requirement applies to each individual responsible for the marijuana processing site. See Section 85(2)(b). This language is slightly different from the PRF language for medical marijuana producers, although the reasons for the difference are not evident. And for some reason, Section 173, which adds the potentially broad “any person whose name is included in the application” language, does not apply to processors.

The residency requirements for medical marijuana dispensaries are the most stringent. For dispensaries, the residency requirement applies to: (1) each individual responsible for the medical marijuana dispensary; and (2) each individual who has a “financial interest” in the dispensary. See Sections 86(2)(a), (b), and (d) and 173(1). The term “financial interest” is not defined in HB 3400, and so the OHA will presumably define the term in its rules. However, by the plain meaning of the term, the definition would almost certainly include each direct and indirect individual owner of the business, and perhaps even unsecured lenders, third parties whose compensation is based on a percentage of revenues or profits, and others.

The residency requirement for the PRFs and the individuals responsible for the registered sites is two years. For medical marijuana producers and retailers, the residency requirement for all other persons included in the application is two years, unless a person first registered with the OHA on or before January 1, 2015, in which case it is one year. See Section 173(1).

Operative Dates

HB 3400’s residency requirements for Ballot Measure 91 businesses become operative on January 1, 2016. See Section 178(1).

HB 3400’s residency requirements for medical marijuana businesses become operative on March 1, 2016. See Section 179(1).

What to Do

If your business is seeking an investment from one or more out-of-state investors, or if your business already has one or more out-of-state owners, and if you haven’t already discussed the issue with us, contact us today to do so. Additionally, if your business is made up entirely of out-of-state owners, and if you haven’t already done so, you should begin searching for one or more Oregon residents who you might be willing to make a co-owner.

Stay tuned to our blog, as we will post any updated residency information when we receive it.

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The questions I get most frequently (other than local government questions) are whether early sales to the adult use market through dispensaries will happen and whether a dispensary will be able to serve both markets. The Oregonian discusses both issues  in an article today.

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Early Sales: It is hard to tell whether this is a real possibility. Common sense and reason would dictate that dispensaries should be able to serve adult use consumers as early as possible. This issue has come up because, on July 1, 2015, the Ballot Measure 91 possession limits go into effect but people have no retail location to get cannabis. One of two things will happen. First, a robust, low level blackmarket will emerge to supply the needs of non-patients. Or, people will create an amazing sharing economy where they give away cannabis to anyone who wants it. You pick which seems most likely.

There are a few issues the Legislature (and/or OHA) will need to tackle to make this viable including production levels, making sure there is enough medicine for medical patients and whether taxes will be immediately imposed or not. These are certainly not insurmountable problems and could be solved by allowing growers to produce more than their cards allow, creating tracking systems through the already existing POS systems to ensure product never gets below a certain level and make a choice on taxes (there is no “right” decision here) placing the burden on the dispensary to collect. The additional benefit for early production and sales is that it will likely bring more producers into the legal market under less threatening and burdensome conditions than the OLCC will impose. Consider it an intermediate ground for transitioning to a recreational license.

You can find the language for early sales here and click on the -3 amendments.

Medical and Recreation Dispensary: That a dispensary licensed by OLCC will be able to serve both markets seems extremely likely. This is not where the question lies. The real question is which producers, OLCC or designated medical growers, will be able to serve OLCC dispensaries and will they have different licensing requirements.

This article makes it sound a little different than it actually is. OLCC has been very clear that you will need to have an OLCC license to grow for an OLCC store. This blended dispensary model does not change that. What OLCC is suggesting might happen is that a person will not be restricted from maintaining their medical cards while holding an OLCC producers license. When I have explained this to clients, each and every one of them, has wondered why they would go through the duplicative process of paying for cards and paying for an OLCC license just to distribute to the same store. Although many people have discussed maintaining a separate medical garden aside from their OLCC licensed one. That, of course, will be a personal and business decision. But, it is important to remember that nothing in the new laws limit a producer’s ability to donate or give cannabis to another person whether you have a medical card or not. That means a grower would still be able to give medicine to patients with or without a medical card. Finally, much of how this blended OLCC store will function is based on whether or not the Legislature moves the tax from the producer level to the retail level.

 

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Last night the Joint Committee for the Implementation of Ballot Measure 91 locked down. After working for almost the entire session on just medical marijuana regulations for Oregon, and not even getting to 91, they hit a wall. They did not lock down on plant numbers or tracking or any of the most controversial pieces. Instead, they simply could not reach a compromise on how a local jurisdiction could opt out of the program (this just would have applied to dispensaries and processors both options had grandfathering language).

Watching it play out last night was intense. Just like watching anything else when two parties are so close to each other, and they really, really were, the fact that there was not a middle ground was striking. In a perfect world we could create a system where local governments are compelled to participate in providing access to cannabis. In a perfect world there would be rolling ganja fields outside my door right now with no concern over police involvement or federal preemption. However we are very far away from that and legislators needed to make a decision on this issue for 844 to move.

Where are we now? Is this a good or bad outcome? It depends on who you are. These are the potential permutations of how this plays out:

– Between now and Wednesday they pull it together and come up with a compromise. Bill moves, Committee moves on to 91.

– Committee dissolves or is suspended. Instead of there being a Joint Committee there will be a Senate and House committee. Senate committee likely made up of same legislators, who passed 844 -24s unanimously, votes and the Senate votes in favor on the floor. Bill goes to Ways and Means where Rep. Buckley is the chair (who voted no last night along with other House dems) and 844 dies there.

– Same as above except that 844 does not die in Ways and Means and gets moved in some form or another. This would require serious involvement from Leadership.

– 844 gets tabled for now and the Committee starts working on 91. Seems very unlikely at this point but who knows.

– Nothing happens. Legislature can not agree on anything to do with cannabis. Nothing happens with medical. Nothing happens on 91.

Let’s explore this for a second- here’s what that might look like. OHA and Governor’s office steps in and regulates medical program. OHA has asked for 10.6 million dollars already to do this. OHA is free to do whatever they want with regulation that does not violate existing statutory language. This may mean seed to sale tracking, inspections and local government regulation. Both Governor’s office and Saxton have said they support these types of regulations. Or, OHA does not nothing, Governor’s office does nothing. Medical program stays exactly the same.

For 91, it means that OLCC has ultimate decision making power. There are zero statutory guidelines other than what is in the four corners of the ballot measure. There would be no residency requirement, no adjustment to where tax is collected, none of the technical fixes requested by OLCC, no research license or lab license. We duke it out city by city, county by county on issues of land use, zoning and local ordinances meant to be so prohibitive that they act almost like a ban.

– Nothing happens with OMMP but Legislature addresses 91 through an already drafted omnibus bill. Issues mentioned above get addressed. Legislature comes back in 2016 or 2017 to look at medical program. Or not.

– It seems possible that they could start over with a new medical bill. This is the most remote possibility but, who knows, maybe whatever is the most crazy and unlikely will happen.

We shall stay tuned and see what happens in the next few weeks of the legislative session. There is very little precedent for a committee dissolving like this. Certainly watching this has reminded me over and over again of the quote, “Laws are like sausages, it is better not to see them being made.” Couldn’t be more true than right now.

 

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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: