On May 3, 2019, the Florida legislature passed SB 1020, creating the state hemp program and authorizing the Florida Department of Agriculture and Consumer Services (FDACS) to enact regulations to govern the program. The bill, first filed in the Florida Senate on February 13, 2019, passed with overwhelming support; the final version passed by a margin of 39-0 in the Senate after passing 112-1 in the House. Governor Ron DeSantis has until May 18, 2019, to veto the bill or it will automatically become law.
“The historic vote,” according to FDACS Commissioner Nicole Fried, is in response to the federal 2018 Farm Bill, which “removed the prohibitions on industrial hemp in place since 1937 and authorized states to create hemp programs.” Id. If SB 1020 becomes law, it will fundamentally alter the treatment of hemp and hemp extracts, including cannabidiol (CBD) products, under Florida law.
As with CVS, Walgreen’s decision to sell hemp-derived in CBD in select states, as opposed to rolling those products out nationally, is likely the result of the still developing federal regulatory framework for hemp, which includes forthcoming regulations and guidance from USDA and FDA, and differences in the laws pertaining to hemp and hemp-derived CBD products from state-to-state.
Notwithstanding the challenging regulatory environment, the mass marketing of hemp-derived CBD, now that hemp is no longer a federal controlled substance, provides a lucrative opportunity for the hemp-derived CBD supply chain – cultivators, processors, and retailers, including the major pharmacy chains. However, the “select state” approach Walgreens and CVS have taken demonstrates that careful is analysis of the federal and state laws and regulations at play is necessary before entering the hemp-derived CBD market.
CVS Pharmacy’s announcement that it will be selling hemp-derived CBD topicals, including creams, sprays, roll-ons, lotions and salves in Alabama, California, Colorado, Illinois, Indiana, Kentucky, Maryland and Tennessee, should really come as no surprise, as the mass marketing of CBD has been an eventuality since hemp was removed from the Controlled Substances Act’s definition of marijuana with the signing of the 2018 Farm Bill in December 2018. CBD’s therapeutic benefits, without the psychoactivity of THC, have made products containing CBD the darling of the cannabis industry.
However, as CVS’s decision to market hemp-derived CBD products in select statesdemonstrates, the 2018 Farm Bill was not a total green light. USDA has yet to establish regulations fully implementing the federal hemp program, which would allow states to establish their own rules for cultivation, processing and sale of hemp, meaning state-by-state differences in the laws concerning cannabis, including hemp, must be assessed before marketing products like hemp-derived CBD. Such federal regulations should be promulgated later in 2019, ahead of the 2020 growing season.
In addition to USDA, FDA has authority over CBD-containing products under the Food, Drug and Cosmetics Act, adding another layer of regulatory complexity that makes the 2018 Farm Bill’s removal of hemp from the CSA more of a yellow light for marketing hemp-derived CBD. Thus, manufacturers and distributors of CBD products must assess how CBD fits in with FDA and state rules concerning drugs and drug approvals, active pharmaceutical ingredients, health claims and labeling, and foods and beverages. FDA has said it is evaluating CBD closely, and should be providing guidance later in 2019.
Because the light is still yellow on the marketing of hemp-derived CBD, manufacturers and distributors should carefully evaluate the federal and state regulatory framework before marketing their CBD products.
On December 27, 2018, the Northern District of California dismissed a civil RICO claim brought against the owners and operators of a Sonoma County cannabis growing operation and the operation’s landlord. See Bokaie v. Green Earth Coffee LLC, 3:18-cv-05244-JST, 2018 WL 6813212 (N.D. Calif. Dec. 27, 2018). The lawsuit was filed by neighbors who alleged that the operation’s “skunk-like stench” interfered with the enjoyment of their property and drove down their property values. The Bokaie court found that such alleged harms did not constitute a “RICO injury,” and thus dismissed plaintiffs’ claim (albeit without prejudice, allowing 30 days to amend).
The Bokaie case is part of a growing trend of RICO lawsuits filed in legalized states—to date, roughly a dozen have been filed in California, Colorado, Massachusetts and Oregon—that seek to exploit the tension between state law and the federal Controlled Substances Act (CSA). RICO defines “racketeering activity” to include CSA violations, and a civil lawsuit can proceed upon allegations that an enterprise’s pattern of racketeering activity caused damage to the plaintiffs’ business or property. 18 U.S.C. §§ 1961(1), 1962(c), 1964(c). RICO’s civil remedy provision awards prevailing plaintiffs triple damages and attorneys’ fees, id. § 1964(c), thus giving “not in my backyard” plaintiffs and their attorneys a powerful tool against their neighbors. By alleging that the smell of cannabis interferes with the enjoyment of their property and drives down their property value, plaintiffs in these cases are effectively elevating common law nuisance claims into federal RICO lawsuits.
You may have read a piece by CLR on Duane Morris’ approach to the national cannabis market late last year.
They are running ahead of their competitors and continue to do so.
They are one of the few firms in the Am Law 200 to have taken up the challenge presented by this de-centralized and sometime rather chaotic corner of the American economy.
Seth Goldberg, based in Philadelphia, practices in business and litigation with a particular emphasis in highly regulated industries such as healthcare and Pharma, saw the opportunities in cannabis and hemp early on in the game and has developed a multidisciplinary cannabis practice drawing across a wealth of experience in the firm.
The practice now comprises 48 attorneys, of whom a good 30 or so are partners.
They are taking the sector seriously and here at CLR we’re surprised that more in the top echelons still aren’t doing the same. …
It’s a question we posed to Seth during our hour long conversation and he concurred that he was equally surprised at the lack of cannabis / hemp practice development at the larger firms on the eastern seaboard.
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.
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.
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.