marijuana – Cannabis Industry

May 3, 2023May 30, 2023 by Robert Davydov

Cannabis Highlights in the NBA’s New Collective Bargaining Agreement

On April 26, 2023, the National Basketball Association (NBA) announced the ratification of its new, seven-year Collective Bargaining Agreement (CBA) with the National Basketball Players Association (NBPA). The CBA will take effect on July 1, 2023, and will run through the 2029-30 season. The CBA provides, among other things, certain key changes to cannabis-related matters, particularly in connection with the NBA’s Anti-Drug Program and NBA players’ business opportunities.

Anti-Drug Program

According to a summary of the agreement as reported by Law360, the NBA decided to remove cannabis from its Prohibited Substances List. However, NBA players are still subject to random drug tests. The NBA has authority to conduct up to 1,925 random urine tests each season. In addition, teams may refer players to a treatment program if they suspect them of (1) being under the influence of cannabis while participating in league activities, or (2) experiencing a dependency on cannabis.

Furthermore, the NBA may still discipline players for violating the law or for being under the influence during league or team activities. Players who neglect or fail to comply with the Anti-Drug Program will be banned from league activity. Nevertheless, players may now apply for reinstatement of eligibility after one year, as opposed to the two-year rule enforced since 1983.

Business Opportunities

NBA players are also now permitted to: (1) invest in companies that make CBD-infused products, and (2) hold a passive, non-controlling interest in companies that make products with more substantial concentrations of THC. Although players may now promote companies that make CBD-infused products, the NBA continues to prohibit players from promoting cannabis companies and marijuana products.

March 22, 2023 by Danielle M. Dwyer

CANNABIS INDUSTRY THE LATEST FRONTIER FOR LABOR ORGANIZING EFFORTS

As legal adult-use cannabis continues to spread across the country, so does a movement to unionize cannabis workers. The need for dispensary and cultivation workers has rapidly increased, along with the demand for higher wages, improved benefits, diversity and inclusion efforts, and more.

To date, 21 states and the District of Columbia have legalized adult use marijuana. Bills to legalize adult use marijuana are pending in several other states. According to Forbes, cannabis sales in the United States are estimated to reach $57 billion by 2030. The industry shows no signs of slowing down. Labor unions have taken notice and have seemingly set their sights on the cannabis workforce.

The efforts of labor unions have been buoyed by labor peace agreement (LPA) laws. While LPA laws vary by state, they generally require cannabis companies to take a hands-off approach to union organizing efforts as a condition of doing business in the state. This means the company cannot interfere with organizing efforts. However, unions typically also agree via the LPAs not to interfere with the operations of the business. Alternatively, some LPA laws offer preferential status in licensing applications for companies that enter into LPAs.

California, New York, New Jersey, and Virginia all have varying degrees of requirements with respect to LPAs in their states. Pennsylvania and Illinois do not require LPAs, but the states offer certain advantages to companies who enter into LPAs. Several other states, such as Massachusetts, Connecticut, and Minnesota, are contemplating enacting their own LPA requirements.

The apparent enthusiasm of organizing efforts largely paid off for unions in 2022. According to Bloomberg Law’s NLRB Election Statistics report, unions prevailed in 76% of overall elections in 2022, one of the highest success rates on record. The United Food and Commercial Workers Union, which has dubbed itself “the Cannabis Workers’ Union” representing more than 10,000 cannabis members, won 70% of representation elections in 2022. They are not the only ones. The International Brotherhood of Teamsters, which has unionized some cultivation workforces, won 66% of representation elections in 2022.

While there has been some litigation surrounding LPAs and organizing efforts, to date, most cannabis companies do not appear to be challenging these requirements. This has the strategic benefit of allowing cannabis businesses to get licenses and begin operations, rather than engage in what could be a prolonged legal battle. However, as unions expand and tighten their grasp on cannabis workforces, industry groups may start to fight back.

November 9, 2022November 9, 2022 by Seth A. Goldberg

Pennsylvania Almost Surrounded With Adult-Use Cannabis

Cannabis had a decent day at the polls yesterday, with voters in Maryland and Missouri legalizing adult-use, bringing the number of adult-use states to 21, but voters in Arkansas and the Dakotas voted against adult-use. With Maryland legalizing adult-use, Pennsylvania, which has a medical marijuana program, is getting closer to being surrounded by states where adult-use is legal. Across it’s northern, eastern, and southern borders Pennsylvania is now adjacent to adult-use states – New York, New Jersey, and Maryland. All three states are predicted to generate billions each in cannabis sales.

The election of Josh Shapiro as Pennsylvania Governor would guarantee the passage of adult-use legislation should it pass in the Pennsylvania senate. However, notwithstanding the tax revenues, job growth, and overall economic boost expanding from medical marijuana to adult-use would create in Pennsylvania, most believe state legislators are not there. Perhaps revenues lost from Pennsylvanians crossing the border to buy cannabis in New York, New Jersey, and Maryland will make the difference.

October 31, 2022November 1, 2022 by Seth A. Goldberg

Cannabis Industry Sees Rise in Consumer Fraud Class Actions, With More To Come With Interstate Sales

Consumer Protection

Cannabis products – such as vapes, pre-rolled joints, tinctures, gummies, and beverages – are consumer packaged goods that are required under state law to be marketed with packaging and labeling that demonstrates their safety to consumers. Although the U.S. state-licensed cannabis industry has been one of the fastest-growing industries in the U.S. over the past decade, consumer fraud lawsuits arising out of alleged packaging and labeling problems, which are a common risk for CPG manufacturers in other industries, have, until now, not been a major consideration for the cannabis supply chain. However, that is changing. As three recent lawsuits suggest, consumer fraud class actions may be on the rise in the industry. Given the media attention cases like these attract, and the potential for damages for thousands or millions of potential consumers, the cannabis supply chain should take notice. As we discuss in the full text of this post, this is going to be especially true once cannabis products are permitted to be sold interstate.

To read the full text of this post by Duane Morris partners Seth Goldberg, Gerald L. Maatman, Jr., and Jennifer A. Riley, please visit the Duane Morris Class Action Defense Blog.

October 25, 2022 by Ethan R. Feldman

Text Message Costs Cannabis Executive

Recently, the 11^th Circuit upheld a district court ruling that decided George Russo, president of 3 Delta, Inc., is individually responsible to pay BrewFab, LLC roughly $365,000 in outstanding invoices. This ruling is premised upon a text message Russo sent to a BrewFab owner promising to pay the outstanding invoices.

In 2018, 3 Delta hired BrewFab to construct a machine to extract CBD oil. The parties initially proceeded under the oral agreement without issue until December 2019 when the 3 Delta stopped paying BrewFab’s invoices.

Next month, the parties had a conference call to discuss the outstanding invoices, and soon thereafter, George Russo sent a text message to Rick Cureton, one of BrewFab’s owners, which read, “As per our conversation on Jan 30 2020 I george (sic) Russo from 3 Delta do promise to pay brew fab in full all outstanding bills as of this date and all agreed upon work for 3 delta future forward. I thank you for your patience.”

As a result of the text, work resumed, but the invoices did not get paid, and in June of 2020, BrewFab brought suit against 3 Delta to recover the past due amount. The lawsuit contained a count against Russo, in his individual capacity, for breach of his personal guaranty stemming from the text message he sent to Cureton.

BrewFab asserted in its summary judgment motion that Russo’s text message was an unambiguous and enforceable personal guaranty. The district court agreed. Russo appealed.

On appeal, Russo attempted to argue that he did not send the guaranty text message in his personal capacity, but the Eleventh Circuit disagreed. The Eleventh Circuit, agreeing with the District Court, stated that the language in the text message merely identified Russo as the one sending the text message, which contained no language to indicate that Russo was sending the message in his capacity as 3 Delta’s president.

According to a report from Reuters this summer, commercial disputes make up about 1/3 of cannabis related lawsuits. These disputes cover the gamut of disagreements, and involve breach of contract lawsuits, landlord-tenant disputes, securities related litigation, and other business torts such as breach of fiduciary duty. One such lawsuit is discussed above, but should serve as a reminder to those operating in the cannabis industry that business disputes are prevalent, and to remain vigilant and cautious in all business related communications.

October 6, 2022 by Seth A. Goldberg

President Biden’s Pardon for Simple Marijuana Convictions

Today, President Biden took executive action and pardoned those convicted of simple possession of marijuana under the federal Controlled Substances Act, and encouraged state governors to issue similar pardons to those convicted of simple marijuana possession under their state’s laws. In issuing the pardon, President Biden explained: “Criminal records for marijuana possession have also imposed needless barriers to employment, housing, and educational opportunities. And while white and Black and brown people use marijuana at similar rates, Black and brown people have been arrested, prosecuted, and convicted at disproportionate rates.” He also asks the Secretary of Health “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law,” noting that marijuana is scheduled higher than fentanyl and methamphetamine. The executive action could mark the real beginning of the ending of the federal prohibition on marijuana. As President Biden stated, “Too many lives have been upended because of our failed approach to marijuana. It’s time that we right these wrongs.”

July 21, 2022 by Deanna J. Lucci

Long-Awaited Marijuana Legalization Bill Introduced in the U.S. Senate

More than a year after introducing a first draft, U.S. Senators Chuck Schumer (D-N.Y.), Cory Booker (D-N.J.) and Ron Wyden (D-OR) finally introduced their proposed marijuana legislation, the Cannabis Administration and Opportunity Act (CAOA) on Thursday, July 21.

The CAOA is a comprehensive bill that would not only permit cannabis companies to access the banking system but would legalize and decriminalize recreational cannabis with an eye toward supporting communities that have been most impacted by the war on drugs. The CAOA also provides for cannabis industry workers’ rights, a federal responsibility to set an impaired driving standard, expungements of criminal records and penalties for possessing or distributing large quantities of marijuana without a federal permit. It would also create a new federal definition for hemp that would increase the permissible THC by dry weight to 0.7 percent from the current 0.3 percent, and the definition would include all THC isomers, not just delta-9 THC. Other features of the bill include grant programs for small business owners hoping to enter the industry who come from communities that were disproportionately affected by the war on drugs, increased funding for law enforcement for illegal cultivation, and cannabis marketing restrictions.

Under the proposal, the Drug Enforcement Administration would no longer have jurisdiction over cannabis and would be regulated by the U.S. Food and Drug Administration and the Alcohol and Tobacco Tax and Trade Bureau (TTB) within the Treasury Department. The bill proposes a 5% to 12.5% excise tax for small and mid-sized cannabis producers. It would charge an initial tax of 10% on larger cannabis businesses and gradually increase it to 25%.

The Senate Judiciary Subcommittee on Crime and Terrorism chaired by Booker scheduled a hearing for Tuesday, July 26 titled, “Decriminalizing Cannabis at the Federal Level: Necessary Steps to Address Past Harms.”

While the bill is unlikely to garner the required 60 votes to pass in the Senate, many see it as a first step toward opening the cannabis debate on Capitol Hill and passing incremental reform that could finally end the federal prohibition on cannabis.

As we have previously reported, the U.S. House of Representatives has passed legislation multiple times in the past few years that would decriminalize cannabis and allow cannabis businesses to access the federal banking system. However, none of those measures have yet made it to the Senate floor.

July 13, 2022 by Ethan R. Feldman

Cannabis-Related Reimbursement Claims Hit Healthcare Insurers

Healthcare insurers are used to dealing with claims for reimbursement by hospitals, providers, and patients. Medical marijuana treatment provides another vehicle for such claims.

New Mexico passed the Behavioral Health Services Equity Act (BHSEA) last April, effective January of 2022, which mandates that health insurance must cover in full the cost of services or medication used to treat behavioral health services. In February, New Mexico Top Organics – Ultra Health sent a letter to several insurers and the Office of the Superintendent of Insurance seeking affirmation that the insurers will provide coverage as prescribed by the act for the 74,000+ patients currently enrolled in the medical marijuana program as a result of PTSD. The request was denied. Now, several New Mexico health insurance companies are defending against a class action lawsuit filed by New Mexico Top Organics – Ultra Health, and six medical marijuana patients, seeking “recovery for themselves, and for every other similarly situated behavioral or mental health patient unlawfully subjected to paying for the entire cost of medically necessary cannabis in violation of state law” for failing to pay for the cost of medical marijuana as provided under the act.

Other legislatures are discussing similar laws that provide for insurance coverage of medical marijuana programs. For example, New York has pending legislation that if passed, would define medical marijuana as a “prescription drug,” “covered drug,” or “health care service” that would qualify for coverage under public programs. The United States Supreme Court recently denied certiorari for a pair of cases concerning workers’ compensation for medical marijuana, an issue that has not been decided uniformly amongst the states. For example, Minnesota and Maine have determined that the Federal Controlled Substance Act preempts the state law requiring reimbursement for medical marijuana due to a work-related injury, while New Hampshire and New Jersey have ruled in favor of reimbursement regardless of federal preemption.

The passage of New Mexico’s Act mandating behavioral health coverage in full and subsequent lawsuit brings a new wrinkle into cannabis litigation, with broad implications across the healthcare industry. Indeed, early clinical reports and case studies have shown positive results from the use of medical marijuana to treat PTSD, a disorder that effects an estimated 12 million Americans, and with medical marijuana available in 37 states, the class action lawsuit seeking reimbursement under the BHSEA may serve as a preview of a type of cannabis-related litigation that may be brought against healthcare insurers.

June 7, 2022 by Ethan R. Feldman

Cannabis Product Safety Is Paramount

Last week, my colleague Seth Goldberg and I published a client alert highlighting a series of cases filed in Oregon federal court against Curaleaf for allegedly mislabeling THC products as containing only CBD, which allegedly caused consumers of those products to experience and unwanted “high” resulting from ingestion of the products. A consumer class action lawsuit seeking $200 for each consumer who purchased the products was filed by the same Plaintiffs’ counsel. This class action lawsuit further highlights the fact that cannabis manufacturers need to ensure that proper SOPS, protocols, and measures of compliance are in place to ensure the safety of their products, and it demonstrates the types of claims that can be asserted when cannabis product safety issues, such as labeling discrepancies, arise. Class action claims, given the number of potential class members who may potentially recover, raise the stakes of litigation resulting from product safety issues. In addition, there also may be regulatory action taken and statutory fines imposed.

May 16, 2022 by Brad A. Molotsky

Cannabis: NJ Assembly Passes Decriminalization Bills for Possession of Certain Amounts of Cannabis

The NJ Assembly passed two bills, 1897 and 4269 that would decriminalize possession of certain amounts of cannabis, while reducing penalties for what would still be deemed to be an arrestable/convictable offense.

The measures, which were introduced at the Assembly Community Development and Affairs Committee on Monday, passed by a 63-10 vote.

Per NJBIZ, a Senate version (Senate Bill 2535) was introduced on March 16 to the Senate Judiciary Committee, but has not moved since introduction.

There will still be work to do to reconcile the Assembly bills with Senate Bill 2535 which was introduced on June 4th and referred to the Senate Judiciary Committee but much of the same language was used in both the Assembly and Senate versions.

One the key difference between the Senate and Assemble versions is the treatment regarding possession of up to a pound of marijuana. Yes, you read that right – a POUND.

Under the Senate bill, possession of up to a pound of cannabis will no longer be an arrestable offense, replacing it with a written warning for first offenses and a $25 civil penalty or community service for any afterward.

The Assembly bills instead call for a reduced penalty for possession of up to a pound and thereby lowers a first-time offense from 18 months to 6 months of imprisonment, and fines from $10,000 to $1,000. Any subsequent offenses would be met with the current level of punishment.

Possession of up to 2 oz. of cannabis, under current state law, has sentencing guidelines for up to 18 months in jail and fines of up to $10,000.

Under current law, possession of between 1 pound and 5 pounds is punishable with imprisonment between 3-5 years or fines up to $25,000, or both.

These bills come a few months before the upcoming 2020 presidential election, where voters will decide whether recreational marijuana should be legalized for adult-use. Currently, polling has support for legalization at 67% among NJ residents.

Duane Morris has a robust Cannabis Practice Group to assist clients in all facets of the cannabis arena including formation, licensing, fund raising, regulatory, real estate, and intellectual property. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

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If you have any questions about this post, please contact Brad A. Molotsky, Paul Josephson or the attorney in the firm with whom you are regularly in contact.

Be well and stay safe!