Tag Archives: cannabis law

House to Vote on Marijuana Legalization Bill This Month

For the first time ever, the U.S. House of Representatives will vote this month on legislation that if enacted would legalize marijuana and cannabis at the federal level, by removing them from the Controlled Substances Act and eliminate some cannabis criminal records.

The MORE Act (Marijuana Opportunity Reinvestment and Expungement Act of 2019 – H.R. 3884) would decriminalize marijuana at the federal level by removing it from the list of scheduled substances under the federal Controlled Substances Act, and would further eliminate criminal penalties for an individual who manufactures, distributes, or possesses marijuana.  While the bill represents a first step toward legalizing cannabis, states would need to adopt similar measures to fully decriminalize its use – currently, 11 states and the District of Columbia have legalized cannabis for adult recreational use, and 33 states and the District of Columbia have legalized medical cannabis.

The bill also makes other changes, including:

  • Replaces statutory references to marijuana and marihuana with cannabis,
  • Requires the Bureau of Labor Statistics to regularly publish demographic data on cannabis business owners and employees,
  • Establishes a trust fund to support various programs and services for individuals and businesses in communities impacted by the war on drugs,
  • Imposes a 5% tax on cannabis products and requires revenues to be deposited into the trust fund,
  • Makes Small Business Administration loans and services available to entities that are cannabis-related legitimate businesses or service providers,
  • Prohibits the denial of federal public benefits to a person on the basis of certain cannabis-related conduct or convictions,
  • Prohibits the denial of benefits and protections under immigration laws on the basis of a cannabis-related event (e.g., conduct or a conviction), and
  • Establishes a process to expunge convictions and conduct sentencing review hearings related to federal cannabis offenses.

The bill, which is expected to be brought to the floor for a vote and pass sometime this month, was originally introduced last year by Rep. Jerrold Nadler, D-N.Y. and approved by the House Judiciary Committee in November. While a counterpart bill (S.2227) has been introduced in the U.S. Senate by Sen. Kamala D. Harris (D-CA) – the Democratic Vice Presidential nominee – its passage in the chamber is unlikely as Senate Majority Leader Mitch McConnell (R-KY) has declined to endorse the bill, making its chances of successfully moving through committee and to the Senate floor for a vote virtually impossible. Without action in the Senate, the bill will die this Congress. However, proponents of cannabis legalization – as well as civil rights and civil liberties organizations, and criminal justice reform advocates – are still hailing the House vote as historic, and an important first step toward generating the momentum and support needed to favorably position the measure for future congressional consideration.

Prospects for the successful consideration and approval of the measure by the next Congress will likely hinge on the outcome of the November election.

Vice President Joe Biden, the Democratic presidential nominee, has proposed rescheduling cannabis as a schedule II drug so researchers can study its positive and negative impacts.  Biden has expressed support for decriminalization of marijuana, expungement of prior cannabis use convictions, and legalizing cannabis use for medical purposes – but wants to leave decisions regarding adult recreational use to the individual states. If elected, Biden and Harris would likely seek to decriminalize cannabis but stop short of advocating for federal adult use legalization, allowing the individual states to decide.

Duane Morris’ Joe Pangaro Presented on Cannabis Law at NALA Conference

Duane Morris attorney Joseph Pangaro spoke at the July 9 National Paralegal Association (NALA) Conference and Expo.

Mr. Pangaro presented on two topics: “Taking the High Road: Legal Issues in the Cannabis Transportation Business” and “Risks and Variances of Cannabis Law.”

For more information and to obtain the recorded sessions, visit the NALA Conference & Expo website.

 

Is this a Trend? A Third Court Stays Class Action Given FDA’s Primary Jurisdiction Over CBD

Seth Goldberg
Seth A. Goldberg

Yesterday, the U.S. District Court for the Eastern District of California stayed the matter styled Glass v. Global Widget d/b/a Hemp Bombs, a consumer class action alleging that Hemp Bombs, which manufactures CBD-infused edibles, tinctures and capsules, falsely advertised the amount of CBD in its gummies, and thereby sold products that were misbranded and adulterated under the Food, Drug & Cosmetics Act (FDCA), on the basis that the regulation of CBD is withing the primary jurisdiction of the FDA, which is in the process of developing regulations and guidance over CBD. We have previously written about two other consumer class actions arising out of similar clams of misbranded CBD products that have also been stayed recently under the “primary jurisdiction” doctrine.

Three decisions staying CBD class actions in two months may signal a trend, especially considering that the Courts in these cases refer to the other’s decisions. Such a trend may keep the plaintiffs’ bar at bay, as it would cast doubt on the viability of consumer class actions asserting CBD violations, or at least it could make the cases less appealing to the plaintiffs’ bar because a stay makes the timing of a settlement or resolution even more uncertain.  

Duane Morris Cannabis Industry Group Recognized by Business Insider

Duane Morris has been named a top law firm for cannabis law by Business Insider. The publication reached out to 29 players in the cannabis industry, from VCs to startups to multistate operators, to get their take on the best law firms in the industry.

Firm Profile from the Publication

Founded: 1904

Involved in cannabis: 2015

Recommended by: Panther Opportunity Fund, Salveo Capital

About: Duane Morris’ cannabis industry group, which has been around since 2015, is led by Seth A. Goldberg (Philadelphia), Tracy Gallegos (San Francisco/Las Vegas) and Paul P. Josephson (Cherry Hill, NJ).

Their clients range from those directly cultivating and selling cannabis products to investors in the industry. A spokesperson for the firm said that the group advises clients in a variety of areas, including regulatory, intellectual property, and litigation law.

For more information, please visit the Business Insider website (subscription required).

Commercial Litigation in the Cannabis Space: Resolving Disputes Like Every Other Industry Does

Seth Goldberg
Seth A. Goldberg

As a commercial litigator who has handled a broad range of claims in highly regulated industries over the past 20 years — particularly in complex matters such as class actions involving claims brought by consumers and shareholders — and given my experience spearheading the development of Duane Morris’ cannabis industry group, which has included providing regulatory and business advice to a number of businesses and individuals with cannabis-related interests, I have been expecting the maturing cannabis industry to eventually mirror other industries when it comes to using commercial litigation to resolve disputes between businesses and to address claims of injury allegedly experienced by aggreived consumers and shareholders. It appears the time has come. Now, as opposed to even just a few months ago, not a day goes by when the daily legal news outlets that report on litigation matters filed in federal and state courts around the country do not include matters pertaining to adult use marijuana, medical marijuana, and/or hemp.

Today alone, legal news outlets are reporting about a shareholder deriviative action being filed against the manufacturer of cannabinoid-containing transdermal patches, a maker of mobile hemp dryers suing a distributor for alledgedly stealing trade secrets, a publicly-traded company that owns cannabis brands being sued for breach of contract by an MSO arising out of a failed merger agreement. Claims like these are among the many product liability, stock-drop and securities fraud, tradmark infringement, FLSA, and employment litigation matters to be filed in 2020 relating to cannabis; not to mention the federal and state regulatory cannabis-related enforcement actions also commenced. Just as in other industries, COVID-19 is likely to spur litigation in the space because of strains on resources and performance caused by business disruptions and the slower economy.  To be sure, the plaintiffs’ bar has cannabis on its radar.

Thus, now more than ever, it is critically important for cannabis businesses to implement the necessary compliance measures, including making sure appropriate insurance coverage, e.g. premises, products, and D&O, has been obtained, that could protect their businesses from the cost and disruption of commercial litigation. Likewise, cannabis-specific nuances, such as the enforceability of contracts and jurisdictional questions, require careful evaluation by experienced counsel advising plaintiffs and defendants who are considering filing, or who have been brought into, a commercial litigation.

 

 

FDA’s CBD Enforcement Continues

Seth Goldberg
Seth A. Goldberg

On April 20, the FDA issued warning letters to two CBD companies – BIOTA Biosciences and Homero Corp., dba Natures CBD Oil Distribution – directing them to remove statements from their labeling and advertising on websites and social media claiming that CBD can cure opioid addiction among other illnesses.   I am attaching the FDA’s warning letter, as it provides very useful information to the market as to the FDA’s current views of CBD products.  As set forth in the warning letter, the FDA continues to view CBD as (1) an unsafe food additive; (2) not satisfying the definition of a “dietary supplement,” and (3) as unapproved new drugs if marketed as “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.”  In the case of Homero, the CBD products were advertised with the following claims, among others:

  • “Natures Pure CBD Oil has been effective in the treatment and eradication of opiate use.”
  • “CBD Oil Inhibits the reward-facilitating effect of morphine”
  • “Vaping CBD Oil to Treat Asthma . . . Your best best [sic] to combat Asthma is by vaping CBD Oil.”
  • “Natures Pure CBD is a strong anti-oxidant that can alleviate lower epileptic seizures, psychotic disorders, and has neuroprotective qualities.”

 

NJ Legislators Opt to allow Voters to Decide on Cannabis Legalization in NJ instead of Legislating such a Change – Brad A. Molotsky, Esq. – Duane Morris LLP

New Jersey’s top lawmakers have decided to let voters decide on legalization of cannabis during the 2020 presidential elections.

The constitutional amendment introduced today, November 18, 2019, by Senate President Stephen Sweeney and Senator Nicholas Scutari would legalize the use of recreational marijuana for anyone at least 21 years of age, and establish a Cannabis Regulatory Commission to oversee the new market.

The amendment does NOT detail the taxation rate, which was $42 an ounce in the original bill. It is also not clear if the commission will have 5 members, like the original bill.

According to NJBiz., Gov. Phil Murphy and legislative leadership long-resisted pursuing legalization via a ballot question because any, inevitable, changes to the program would have to go before voters in yet another ballot referendum.

“We made further attempts to generate additional support in the Senate to get this done legislatively, but we recognize that the votes just aren’t there,” reads the joint statement from Sweeney, D-3rd District, and Scutari, D-21st District.

To appear on the 2020 ballot as a constitutional amendment, both houses would need to pass the measure by a super-majority by the summer, or they would need to pass it 2x in both houses by a simple majority for 2 years in a row.

Just hours earlier, several progressive and social justice groups made a plea to legislative leadership to push through a legalization bill, pointing to a growing increase in low-level cannabis offenses which have disproportionately affected people of color.

It Is Permissible for Federally Insured Credit Unions to Bank Hemp Businesses

Photo of attorney Michael Zullo
Michael S. Zullo

“Credit unions may provide the customary range of financial services for business accounts, including loans, to lawfully operating hemp related businesses within their fields of membership,” says the National Credit Union Administration (NCRU) in its recently released guidance 19-RA-02.

While this is a significant step for hemp businesses seeking banking outlets, it is far from the relief proposed by Secure and Fair Enforcement Act (“SAFE Banking Act”) and does not represent a blanket permission.  Still, the NCRU Guidance signals a recognition of the growing Cannabis industry and the practical need to provide financial services to businesses in the industry.  Here are some key takeaways.

First, the guidance only applies to Federally Insured Credit Unions, not national banks.

Second, the guidance explicitly relates to credit unions serving “hemp” businesses as defined in the Agricultural Improvement Act of 2018 (2018 Farm Bill), which removed hemp from Schedule I of the Controlled Substances Act.[1]  Marijuana remains a Schedule I drug, which restricts banking access of marijuana businesses.

Third, because the USDA has yet to promulgate regulations and guidelines to implement the hemp production provisions of the 2018 Farm Bill, credit unions must ensure members in hemp-related business are operating under the industrial hemp pilot provisions of the Agricultural Act of 2014 (2014 Farm Bill).

Fourth, credit unions that elect to bank hemp-related businesses must maintain robust Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance programs.  This includes:

  • Maintaining appropriate due diligence procedures for hemp-related accounts and complying with BSA and AML requirements to file Suspicious Activity Reports (SARs) for any activity that appears to involve potential money laundering or illegal or suspicious activity.
  • Remaining alert to any indication an account owner is involved in illicit activity or engaging in activity that is unusual for the business.
  • Staying on top of state and tribal laws, regulations, and agreements under which each member that is a hemp-related business operates.
  • Verifying that the member is part of the pilot program created in the 2014 Farm Bill.
  • Adapting ongoing due diligence and reporting approaches to any risks specific to participants in the pilot program.
  • Being familiar with any other federal and state laws and regulations that prohibit, restrict, or otherwise govern these businesses and their activity.

In sum, banking hemp-related businesses is permissible for credit unions.  But they must be diligent in crafting BSA/AML policies.  This is not a complete solution to the existing banking problems facing the Cannabis industry, but it does evidence a growing regulatory desire to provide access for the industry, which could sway policy makers down the road.

[1] The 2018 Farm Bill defines “hemp” as: “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”

NYC Council Passes Cannabis Resolutions Protecting Parents

At the end of last month, on July 23, 2019, the New York City Council passed two cannabis reform resolutions focused on issues facing parents. These were two resolutions out of ten that were first introduced on February 13, 2019.

The first resolution (Res. No. 740) calls on the New York City Administration for Children’s Services to implement a policy that states that a parent’s mere possession or use of marijuana does not itself create an imminent risk of harm to a child that would serve as the basis for a child’s removal from the parent’s custody.

The resolution cites reports of racial inequity in the enforcement of marijuana laws and identifies NYPD guidance from 2011 that recommends an individual in possession of small amounts of marijuana be issued a court summons instead of being arrested. The Council acknowledged that New York State has legalized medical marijuana and decriminalized the possession of small amounts of marijuana. Given the trend to accept cannabis usage in New York and beyond, the Council passed this resolution, in part, to ensure that the child welfare system is consistent with this emerging acceptance.

The second resolution (Res. No. 746) calls on the New York State Legislature to pass, and the Governor to sign, a law requiring the New York State Department of Health to create clear and fair regulations for hospitals on drug testing pregnant or birthing parents. The resolution states that these regulations should include the requirement for hospitals to inform patients of their rights before discussing drug use or testing with the patient.

The Council stated that the current policy for hospitals allows them to drug test patients who are giving birth and report positive tests to the Statewide Central Register of Child Abuse and Maltreatment (“SCR”), such report  would be required if the patient tested positive for marijuana alone. This mandated report triggers a child welfare investigation by the NYC Administration for Children’s Services.  Currently, the hospital has discretion over the individuals it chooses to test and it is unclear whether the hospitals are notifying patients that there are potential child welfare ramifications for drug tests and the disclosure of drug history to their health care provider. Similar to the first resolution, the Council is calling on the State to ensure a fair policy for drug testing patients that aligns with the legalization and decriminalization of cannabis.

How Will FDA Bring Order to the Wild West of Cannabis Regulations?

By Frederick R. Ball and Carolyn A. Alenci, Duane Morris LLP

The cannabis industry is the next frontier, growing rapidly and becoming one of the highest grossing industries in the country. The problem is, through no fault of its own, it is also the “wild west” of industries in many ways operating without guidance or regulation from the federal agencies that have jurisdiction of its products.

On May 31, 2019, the U.S. Food and Drug Administration (FDA) held a public hearing to allow stakeholders to share their experiences and challenges with cannabis or products containing cannabis-derived compounds. For this hearing, FDA requested information, scientific data, and stakeholders’ views on the safety of CBD-containing and cannabis-derived products. FDA hoped to obtain input on possible strategies that will allow for lawful marketing of CBD-containing and cannabis-derived products in a predictable and efficient manner, while still providing incentives for drug development with CBD and cannabis-derived compounds. Over 100 academic, industry, medical, and consumer stakeholders spoke or gave presentations at the hearing to a packed audience of about 500 attendees. In addition, over 1300 written comments have been posted to the FDA’s public docket FDA-2019-N-1482 for this hearing.

The hearing opened with remarks from Acting Commissioner Dr. Norman Sharpless. As expected, he made no new announcements about FDA’s current thinking about regulating products containing cannabis or cannabis-derived compounds. He did restate the FDA’s current position that CBD and THC cannot lawfully be added to a food or dietary supplement and that FDA does not have a policy of enforcement discretion with respect to these products.

To read the full text of this article written by Duane Morris attorneys Rick Ball and Carolyn Alenci, please visit the Food and Drug Law Institute website