A video replay of the webinar “Cannabis 103: Real Estate – Practical Considerations for Owners, Operators, and Investors in Cannabis Real Property” is available to view.
Pennsylvania Medical Marijuana Program to Begin Phase II Permitting
On April 5, 2018, Phase 2 of the PA Department of Health’s permitting for commercial medical marijuana cultivation and dispensary operations will begin.
13 Grower/Processor permits will be available, two in each of the six DOH regions, and the 13th going to the highest scorer. 23 Dispensary permits will be available, nine in Region 1, three in Regions 2 and 3, two in Regions 4 and 6, and four in Region 5. Applications will be available online at www.medicalmarijuana.pa.gov on April 5, and the submission deadline will be May 17.
In June 2017, 12 Grower/Processor and 27 Dispensary permits were granted. According to April Hutcheson of DOH:
- 25,573 patients have registered to participate in the PA program;
- 9,020 patient certifications have issued;
- 7,000 of those patients have purchased their ID cards;
- 6,683 patients have bought medical marijuana in a PA dispensary;
- 866 physicians have been registered to participate in the program; and
- 473 of the registered physicians have been approved.
Given the very real possibility that PA will approve the use of dry flower products, i.e., smoking and edibles, this summer, the PA market is positioned for strong performance over the next few years.
Medical Marijuana Business Banking Remains Difficult
Duane Morris partner Seth Goldberg is quoted in the New York Law Journal article, “Medical Marijuana Business Banking Remains Difficult.” Mr. Goldberg discusses how banking is a major hurdle for the legal medical marijuana business.
To read the article, visit the Duane Morris website.
NJ Governor Murphy Projects Adult Use Cannabis Legalization by January 2019
In his first budget address, New Jersey Governor Phil Murphy today reaffirmed his commitment to promptly expand the state’s currently moribund medical marijuana program, and the full legalization of adult use marijuana by January 1, 2019.
In his address, Governor Murphy explained:
We must also make sure we are investing not just in individuals, but also in entire communities – particularly our long-overlooked urban neighborhoods. We must recommit to opening the doors to economic opportunity for the thousands of young men and women – especially young men and women of color – jailed for non-violent drug-related offenses. Our current system has failed them, and put a mark on them that they will carry for their entire lives, preventing them from furthering their educations or getting jobs.
It’s the principal reason I advocate for legalizing adult-use marijuana. According to research, New Jersey spends upwards of $140 million per year adjudicating low-level marijuana possession offenses. And, marijuana-related arrest rates are tilted three-to-one against African-Americans, even though rates of marijuana use are similar among races.
These resources must have a better use, whether to tackle the trafficking of illegal guns, provide stronger community policing, or to crack the back of our opioid epidemic, which was devastating our urban centers long before it made headlines.
I greatly respect those in this chamber who have proposed decriminalizing possession of small amounts of marijuana, and I thank them for recognizing the importance of doing what’s right and just for those who carry criminal records for past possession arrests. But decriminalization alone will not put the corner dealer out of business, it will not help us protect our kids, and it will not end the racial disparities we see.
If these are our goals – as they must be – then the only sensible option is the careful legalization, regulation, and taxation of marijuana sales to adults.
Legalization will allow us to reinvest directly in our communities – especially the urban neighborhoods hardest hit by the misguided War on Drugs – in their economic development, in health care and housing, child care and after-school programs, and other critical areas. These investments will pay dividends far greater than the cost of mass incarceration.
I did not come to this overnight, myself. After all, we are the parents of four children under the age of 21. But from the standpoint of social justice, and from the standpoint of protecting our kids and lifting up our communities, I could not arrive at any other conclusion.
In the Budget in Brief submitted to the Legislature today, the Administration stated that it “plans to legalize adult-use marijuana by January 1, 2019. The State will also move forward with expanding access to medical marijuana to alleviate patient suffering.”
The Budget projects $80 million in new revenue from legalizing marijuana, without specifying tax rates or the number of dispensaries the Governor anticipates. This is part of $2 billion in new revenues to meet the $37.5 billion budget that also includes a millionaires tax ($765 million), restoring the sales tax rate to 7% ($581 million) and business tax modernization ($110 million).
Next on the Governor’s agenda: the anticipated release of substantially revised regulations governing New Jersey’s medical marijuana program that currently consists of only 6 vertically-integrated, nonprofit dispensaries serving less than 15,000 patients. The Governor has promised rules by March 24 designed to increase the qualifying conditions for which marijuana may be prescribed and to increase patient access to medical marijuana.
Medical marijuana expansion can be largely accomplished by the Governor without legislation, though it is anticipated the Legislature is expected to consider changes beyond the Governor’s regulatory authority, including clear authorization to dispense edible products to medical marijuana patients.
Sessions Draws Lines for US Attorneys in Terms of Marijuana Prosecution
In speaking at the Georgetown Law Center on March 10, 2018, AG Sessions said the following: “We’re not going to be able, even if we desire, to take over state enforcement of routine cases that might occur. Federal agents are highly paid, highly trained. They work on cases involving cartels, international organizations, major distribution networks, large amounts of cash. They deal with criminal organizations, RICO type cases, and we’re not out there prosecuting those types of cases everyday.”
Although, in making the above comments, Sessions was clear that marijuana was still illegal in the U.S., he appears to have drawn a box around those types of marijuana-related criminal activities on which federal prosecutors are focused. The above comments are not inconsistent with the Sessions memo of January 4, 2018, and may help clarify what prosecutorial discretion looks like under that memo. Based on the above comments, it would seem that activities conducted pursuant to state marijuana programs are not the types of activities on which federal prosecutors are focused.
Cannabis Trading on Major U.S. Stock Exchange
Another breakthrough for the cannabis space occurred on Tuesday, February 27, 2018, when Toronto-based Cronos Group Inc. began trading on the Nasdaq Stock Market. (MJN:CN). This marks the first listing of a company focused purely on cannabis on a major U.S. stock exchange. The listing of Cronos comes within two months of the memorandum issued by Attorney General Sessions that rescinded the federal government’s previous guidance regarding enforcement of state-lawful cannabis activities under the Cole Memorandum. That earlier guidance is credited with providing the cannabis space with a window of opportunity for the warp-speed growth the space has seen in recent years. The Sessions memo was intended to slow the growth of the cannabis space, especially with respect to the capital markets. The Nasdaq listing of Cronos suggests that 2018 could be another strong year for cannabis-related investments; 2017 was believed to have resulted in approximately $2 billion in cannabis-related investments in the U.S.
Legalizing Marijuana in New Jersey – What It Means to Your Business
Duane Morris Partner Paul P. Josephson and Associate Sarah M. Bachner will be speaking on a panel for the Commerce and Industry Association of New Jersey, “Legalizing Marijuana in New Jersey – What It Means to Your Business” to be held Wednesday, March 7, 2018 at 8:00 a.m
For more information and to register, please visit the event site.
The Duane Morris Cannabis Webinar Series-IP, Trademark and Branding, and Marketing
Duane Morris is presenting a series of monthly webinars throughout 2018 to discuss issues affecting the cannabis industry. Each session will cover a specific subject and feature a “Hot Topics” segment to cover recent developments in the industry.
Join us for the second session on Tuesday, February 27, 2018, covering topics impacting the cannabis industry.
Cannabis 102: Intellectual Property, Trademark and Branding, and Marketing
- Trademarks and Branding Cannabis Products
- Patenting Cannabis and Cannabis Products
- Trade Secrets: Advantages and Challenges
- A Company’s Perspective with Guest Speaker: Gary Traynor, VP of Operations and Sales, LeafGoods, LLC
Presenters
- Christiane Schuman Campbell, Partner, Duane Morris LLP
- Vicki G. Norton, Ph.D., Partner and Co-Chair, Life Sciences and Biotechnology Group, Duane Morris LLP
- Gretchen L. Temeles, Ph.D., Associate, Duane Morris LLP
For more information, as well as upcoming dates and topics, visit the webinar event page.
Seeing Green? A look at Marijuana Law and Surety Bonds
Duane Morris partner Seth Goldberg will be one of the presenters at a National Association of Surety Bond Producers Virtual Seminar, “Seeing Green? A look at Marijuana Law and Surety Bonds,” to be held on Wednesday, February 21, 2018 at 2:00 p.m. ET. For more information or to register, please visit the event website.
Contingency Fees and Commercial Litigation Hit the Cannabis Space
As the values of transactions in the cannabis industry grow, commercial litigation is certain to follow. One reason for this is that lawyers may be more inclined to represent clients on a contingency fee basis. Where the value of a cannabis transaction is small, the expense of litigation may not be worthwhile for an individual or business feeling cheated, and any settlement or judgment would likely not cover the costs of an attorneys’ contingency fee. However, where the value of a cannabis transaction is sufficiently high, say the upper six-figures or more, a lawyer may be more inclined to take the case for a contingency fee because the lawyer’s percentage of any recovery is likely to be greater than the costs the lawyer will incur in litigating the matter. A contingency fee arrangement may also be utilized to the advantage of a party that believes threatened or actual litigation might shift the leverage in negotiations and result in more attractive commercial terms.
A recently filed action captioned Silver v. High Street Capital et al., 2:18-cv-00020 (E.D. PA. 1/3/18), appears to result from the type of high value transaction that might warrant a contingency fee in a commercial litigation. The plaintiff, industry consultant Harris Silver alleges that, in connection with their bid to obtain a license to grow and process cannabis pursuant to Pennsylvania’s Medical Marijuana Program, defendant High Street Capital and other defendants associated with High Street promised Silver a lucrative compensation package, including (a) $180,000 to prepare the license application; (b) a $150,000 cash bonus upon the granting of a license and a 4% non-dilutable equity stake in any licensee; and (c) a salaried position with the licensee. Silver claims that notwithstanding his work on the High Street application, for which a permit was granted, the High Street defendants never paid Silver the valuable consideration that was contingent on the permit being granted. Thus, based on a host of factual allegations detailing various communications he had with the High Street defendants, and other allegations detailing his efforts on their behalf, Harris asserted claims against the High Street defendants for breach of contract, common law fraud, promissory estoppel, unjust enrichment, securities fraud and civil conspiracy. Continue reading “Contingency Fees and Commercial Litigation Hit the Cannabis Space”