President Donald Trump on Friday reiterated his support of states choosing whether to legalize cannabis. When asked on the White House lawn by a Washington Examiner reporter whether cannabis would become legal during his Administration, Trump stated, “We’re going to see what’s going on. It’s a very big subject and right now we are allowing states to make that decision. A lot of states are making that decision, but we’re allowing states to make that decision.”
While Trump does change positions on issues, he has been consistent on the legalization of cannabis since the 2016 campaign. He has stated he is “100%” in favor of legalizing medical marijuana, and has said a number of times that recreational use should be decided by the states. Of course Republicans tend to favor states’ rights as supporters of federalism.
Trump confirmed back in April 2018 to Sen. Cory Gardner (R-CO) that he would sign a bill that permitted states to decide for themselves on legalization. Gardner and Sen. Elizabeth Warren (D-MA) subsequently introduced a bill to remove cannabis as a controlled substance within states that have legalized it. Many believe that Senate leaders Mitch McConnell and Lindsay Graham have been blocking attempts to move that bill forward in the current Congress.
Trump’s comments seem to echo Attorney General William Barr’s recent statements that his department is effectively operating under the 2014 Cole Memorandum which deemphasized prosecution against state legal cannabis enterprises in most cases.
The New Jersey Senate voted 33-4 yesterday (Thursday) to advance a bill that is intended to increase medical marijuana sales and likely create new business opportunities in the state.
Per Marijuana Business Daily, before the vote, the Senate amended Assembly Bill 10 to allow marijuana workers to become union members.
The Bill will now return to the NJ Assembly for a vote to approve the Senate’s modification.
If the Bill is ultimately signed, the measure will:
– Create a new regulatory commission for medical marijuana.
– Pave the way for the state to issue additional business licenses.
– Allow cannabis home delivery.
– Ease restrictions on the process for recommending medical marijuana.
Currently there are 12 vertically integrated medical cannabis licenses that have been granted in NJ.
We will continue to track this development and report back as it get’s closer to passage in the Assembly. -Brad
On 1-9-19, Rep. Earl Blumenauer (D-OR) introduced H.R. 420, the “Regulate Marijuana Like Alcohol Act.” Blumenauer, the co-sponsor of the Rohrabacher–Blumenauer amendment, better known as the on-going appropriations provision that prohibits the Justice Department from spending federal funds to enforce federal law that is in conflict with state medical cannabis laws.
Proposed Bill 420 is a total overhaul of the federal government’s treatment of marijuana. Among other things, the bill:
1. Decriminalizes marijuana by removing it from the Controlled Substances Act;
2. Amends the Federal Alcohol Administration Act to enable the Secretary of the Treasury to issue permits to those who want to to manufacture, distribute, or sell marijuana;
3. Transfers jurisdiction from the DEA to the Bureau of Alcohol, Tobacco, Firearms and Explosives;
4. Prohibits widespread advertising for marijuana; and
5. Grants to the FDA the same authority for marijuana as it has for alcohol.
Rep. Blumenauer noted: “Congress cannot continue to be out of touch with a movement that a growing majority of Americans support. It’s time to end this senseless prohibition.” In this vein, per a Pew Research Center study released last fall, nearly 66% of Americans support legalization at the federal level.
The new co-chairs of the 2019 bipartisan Congressional Cannabis Conference are Rep. Barbara Lee (D-CA) and Dave Joyce (R-OH), Rep. Earl Blumenauer (D-OR) and Don Young (R-AK).
Following guidelines already in place at the New York Department of Health, Gov. Andrew Cuomo signed a bill last month formally adding “acute pain management” to its list of conditions for which medical cannabis can be prescribed. This change is important since it allows doctors to offer cannabis as an alternative to opioids for acute pain, not just chronic pain, which was previously added to the list. Substance use disorder sufferers also would be permitted under the bill to obtain medical cannabis to manage their pain, again with the hope of avoiding the use of opioids.
We need not recite the well-documented human destruction that has been caused by the US opioid epidemic. Not limited to those with addictive tendencies, many are innocently prescribed these drugs following surgeries or with other acute pain and become hooked. Now NY doctors will have a state legal alternative in these situations. And while there are no clear statistics yet, a study published by JAMA in April of this year concludes, “[L]iberalized prescribing of marijuana may result in decreased use of opioids, and hence, fewer subsequent opioid-related overdose events.” In this population-based, cross-sectional study using Medicaid prescription data for 2011 to 2016, medical marijuana laws and adult-use marijuana laws were associated with lower opioid prescribing rates.
As we know, Gov. Cuomo in the last year or so has gone from considering cannabis a gateway drug to appearing to support adult use legislation, which is currently being drafted by a task force he commissioned. If he wins reelection in November, which is widely expected, many believe he will support such legislation if passed. His Republican opponent, Marc Molinaro, previously supported adult use legalization but recently has been stopping short, agreeing with the availability of medical cannabis and decriminalization to avoid cannabis users facing jail time.
Earlier this month, surprising many in the industry, the Drug Enforcement Administration announced it is proposing to significantly increase the amount of cannabis it will permit to be grown for research purposes in 2019. The 2018 limit, about 1000 pounds, will be increased to over 5400 for 2019, an over five-fold increase. The proposal remains open for public comment for the next 30 days, then the DEA will make final decisions on the matter.
Until 2016, only the University of Mississippi was permitted to grow cannabis for federally approved research purposes. But very few licenses were approved, and in most cases researchers learned that the low quality of product from Ole Miss made research essentially worthless. The Obama Administration, in its last months, approved a dramatic increase in research and opened up the right for other institutions to apply to grow cannabis for that purpose. Dozens applied, but Attorney General Jeff Sessions, until now, had not let any licenses be approved. Some believe it is relentless pressure on Sessions from the Senate that has led him not to stand in the way of this new action. In a hearing almost a year ago he had even admitted that adding more grow facilities for research could be “healthy.”
Cannabis medical research has been exploding elsewhere, particularly in Israel. For example, a published, peer-reviewed study earlier this year from there showed that over 95% of thousands of tested cancer patients said their condition improved with the use of cannabis. There is also a state-funded “Center for Medical Cannabis Research” in California that has commenced several studies, including one on the efficacy of CBD on autism spectrum disorder. Another California group is studying whether smoked cannabis can help with post-traumatic stress disorder. Most of these studies, however, are not “double blind” clinical trials given the federal restrictions. Many in the industry hope that the expanded DEA licensing will open the door to more exploration of the potential medical benefits of cannabis.
The United Kingdom this week approved the legalization of medical cannabis. The decision was made by the Home Secretary, Sajid Javid, who said, “Recent cases involving sick children made it clear to me that our position on cannabis-related medicinal products was not satisfactory.” As a result, medical cannabis will become available to children and adults with a prescription. The specifics of how this will be implemented have not yet been determined.
Javid did add, however, that this was “in no way a first step to the legalization of cannabis for recreational use.” This follows a widely watched story involving a 12-year old boy with a rare form of epilepsy who had received a special emergency license to be treated with medical marijuana in Northern Ireland.
Over 30 countries have legalized medical cannabis at this point, including a number of European countries. Press reports on the UK decision included enthusiastic quotes, especially from parents of children facing difficult illnesses. With over 65 million people, the UK represents a big increase in those now able to access medical cannabis worldwide.
As more and more politicians of all stripes move towards support of federal legalization of cannabis, two senior Republicans have joined the advisory board of a major cannabis company. According to The Hill, the former Speaker of the House John Boehner and former Massachusetts Governor William Weld became advisers to a New York-based grower and distributor of cannabis.
The article reminds us that Boehner was formerly opposed to legalization, though Weld, a moderate, has been a long-time supporter. They issued a joint statement saying, “we both believe the time has come for serious consideration of a shift in federal marijuana policy.” They focused particularly on the view of a large majority of Americans that cannabis should be legalized on a federal level.
As we know, President Trump said during the campaign that he is “100%” in favor of medical cannabis and that adult use should be decided by the states. Of course he is famous for changing his mind and frankly does not appear focused on the issue. And Attorney General Jeff Sessions remains strongly opposed to legalization and rescinded a series of advisory memos designed to protect those complying with state cannabis laws. But we have not yet seen any increase in federal enforcement efforts, though a number of states recently have been cracking down on unlicensed operators.
While it seems unlikely for the time being that the Trump Administration would unilaterally deschedule cannabis and legalize it (which they could), there is growing belief among DC-watchers that Congress might yet consider some action. For example, Republican Senate Majority Leader Mitch McConnell said he intends to introduce legislation to legalize hemp. The legislators are paying attention to the massive taxes coming into legal states, reduction in opioid use and deaths in those states, and many new jobs being created.
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.
An Israeli peer-reviewed study, just published in the European Journal of Internal Medicine, reports that pain and nausea of cancer patients can be lessened through the use of medical cannabis. The study included thousands of cancer patients using medical cannabis between 2015 and 2017. Over 95% of the patients reported an improvement in their condition after using cannabis. The conclusion of the study: “Cannabis as a palliative treatment for cancer patients seems to be well tolerated, effective and safe option to help patients cope with the malignancy related symptoms.”
As we know, the US Government continues to defend the status of cannabis as a Schedule I drug, deemed as dangerous as heroin and LSD. Their previous claims suggested that no research shows that cannabis is safe or has medical benefit. At the same time, the Government severely limits the amount of research on cannabis that can be conducted in the US. According to the DEA website, Schedule I drugs are “drugs with no currently accepted medical use and a high potential for abuse.” This study, with others also underway, appear to now counter the belief that cannabis has no accepted medical use.
With the recent dismissal of a constitutional challenge to the Controlled Substances Act as it relates to cannabis (which may be appealed), more eyes are turning to Congress and the various bills pending to deschedule cannabis at the federal level.
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→