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  • Proposition 65’s Warning Requirements and Cannabis Businesses

     

    WARNING: New Proposition 65 Notice Requirements Coming Soon!

    OVERVIEW

    California’s Proposition 65, a voter initiative passed in 1986, created the Safe Drinking Water and Toxic Enforcement Act (Health & Safety Code § 25249.5 et seq.), which requires that the seller of a product that contains chemical(s) known by the State of California to cause cancer or reproductive harm must provide a warning to anyone who buys the product, unless there is already a clear and sufficient warning printed on the label or package. Warnings must also be given if there is a possibility of environmental exposure to a chemical on the list of substances that cause cancer or reproductive harm. Penalties for violating Proposition 65’s warning requirement can be as high as $2,500 per day.

    The Proposition 65 list can be found at https://oehha.ca.gov/proposition-65/proposition-65-list.

    Proposition 65 is enforced by the California Attorney General’s office; however, the law also gives a private right of action to individuals acting in the public interest, who may file a lawsuit alleging that a business is in violation of the law. Many private attorneys are involved in filing these notices, and the attorney fees awarded are usually significant.

    The warning required under Proposition 65 must be “reasonably calculated” to be available to an individual prior to exposure, and must clearly communicate that the chemical in question is known to cause cancer or reproductive harm. “Exposure” in this context is defined as: “to cause to ingest, inhale, contact via body surfaces or otherwise come into contact with a listed chemical,” and can occur through use of consumer products as well as through the environment.

    For products, the warning must be “prominently placed upon a product’s label or other labeling or displayed at the retail outlet with such conspicuousness, as compared with other words, statements, designs, or devices in the label, labeling or display as to render it likely to be read and understood by an ordinary individual under customary conditions of purchase or use.” A system of signs, a public advertising system, or any other system that provides clear and reasonable warnings is also sufficient. This could include a warning printed on each customer receipt, or included as part of a membership agreement, if one exists, depending on the circumstances. For environmental exposure, in addition to the warning methods mentioned above, warnings can also be provided by a mailed or delivered notice to each occupant of the affected area at least once every three months, or via public media announcements targeted to the affected area at least once every three months.

    Currently, the consumer product warning for a carcinogen must include the following language:

    “WARNING: This product contains a chemical known to the State of California to cause cancer.”

    The current environmental exposure warning for a carcinogen must include the following language:

    “WARNING: This area contains a chemical known to the State of California to cause cancer.”

    The required warnings for chemicals known to cause reproductive harm are identical, except the word “cancer” is replaced with “birth defects or other reproductive harm.”

     

    NEW RULES COMING

    California’s Office of Environmental Health Hazard Assessment (OEHHA), the agency that oversees Proposition 65 enforcement, issued new warning regulations in late 2016 that will go into effect on August 30, 2018. The new regulations are designed to provide consumers with more specific notice of the chemicals contained in products sold within the state. Between now and August 30, 2018, businesses can choose to continue following the existing regulations or to begin following the new regulations immediately. (For a side-by-side comparison of the current and new reasonable warning regulations, go to https://oehha.ca.gov/media/downloads/crnr/side-sidearticle6090116.pdf.)

    The new regulations place the burden to warn on manufacturers and distributors rather than on retailers, though there are instances when a warning by the retail seller is required. Additionally, as long as the consumer ultimately receives an adequate warning, an arrangement may be reached between a retail seller and a manufacturer, producer, packager, importer, supplier, or distributor to allocate legal responsibility for providing the warning.

    Warnings under the new regulations must be provided via signs and/or product labeling as applicable. For warning signs in retail establishments, the new regulations still require the warnings to be prominently displayed with conspicuous signage, so as to render them likely to be read and understood by an ordinary customer. Regarding additions to the warning, the warning may contain supplemental information “only to the extent that it identifies the source of the exposure or provides information on how to avoid or reduce exposure to the identified chemical or chemicals,” and any such supplemental information is not a substitute for the required warning.

    The new exposure warning messages must include the following:

    (1) A symbol consisting of a black exclamation point in a yellow equilateral triangle with a bold black outline. Where the sign, label or shelf tag for the product is not printed using the color yellow, the symbol may be printed in black and white. The symbol shall be placed to the left of the text of the warning, in a size no smaller than the height of the word “WARNING”.

    (2) The word “WARNING” in all capital letters and bold print, and:

    (A) For exposures to listed carcinogens, the words, “This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause cancer. For more information go to www.P65Warnings.ca.gov.”

    Additionally, on-product warnings for products containing a known cancer-causing agent require the symbol required in §25603(a)(1), the word “WARNING” in bold capital letters, and the following words: “Cancer – www.P65Warnings.ca.gov.” The name of the listed chemical is not required to be printed on a product warning label.

    The major differences between the current and the new “clear and reasonable” warning regulations are: (i) that the current regulations do not require that the specific listed chemical be identified, whereas the new regulations do; (ii) a change in the appearance of the warning sign, which will now require a yellow (or black-and-white) triangle with an exclamation point; and (iii) a clear preference for placing the burden to warn on manufacturers and packagers rather than retail sellers where possible, while also providing a mechanism to allocate legal responsibility for providing such warnings.

     

    EXCEPTIONS

     Businesses that employ nine or fewer employees are exempt from the reasonable warning requirement. Additionally, only marijuana smoke is included on the Prop. 65 list of cancer-causing substances, so warnings may not be required for edible or topical marijuana products, provided they do not contain another chemical on the Prop. 65 list, such as certain pesticides. A warning still may be required on some marijuana products that can be vaporized, since certain chemicals used in vapor products may be included on this list.

     

    APPLICATION TO CANNABIS BUSINESSES

    Marijuana smoke was added to the list of substances known by the State of California to cause cancer in 2009. Recently, a number of medical cannabis dispensaries throughout the state have received 60-day notices of allegedly violating the clear and reasonable warning requirement. Therefore, medical marijuana dispensary operators should provide a warning, since some products being sold (i.e., any marijuana intended for use by combustion or vaporization) can be used in a way that, according to the State of California, could expose the user to a cancer-causing agent. This is not required if all such products already have clear warnings on their packages or labels. Additionally, dispensaries that permit smoking or vaporizing on-site should provide a warning for environmental exposure. These warnings must be placed in a location where an average customer is likely to see them.

    Under the new regulations, which go into effect in August 2018, the burden placed on retailers will be minimized. Retailers of cannabis will not be responsible for providing the required warnings unless: (i) the retailer is responsible for introducing a listed chemical into a product; (ii) the retailer agrees to take on this responsibility; (iii) the retailer is selling the product under a brand or trademark that is owned or licensed by the retailer or an affiliated agency; (iv) the retailer obscured or did not conspicuously display warning labels or signage that were provided; or (v) the retailer has actual knowledge of potential consumer exposure that would require a warning, and there is no manufacturer, producer, packager, importer, supplier, or distributor of the product who is a “person in the course of doing business” and has designated an agent for service of process in California or has a place of business in California.

    Retailers are explicitly authorized to enter into arrangements with providers of packaged smokeable or vaporizable marijuana products to allocate legal responsibility for providing Prop. 65 warnings. However, the providers of the packaged products have the option of including the required warning directly on the product label or providing an accompanying written warning to the retailer along with the product. If the latter method is chosen, then the notice must be renewed every six months and the retailer is responsible for the placement and maintenance of the warning materials.

    Below are examples of warnings that comply with the new regulations, which go into effect on August 30, 2018:

     

    WARNING: This product can expose you to marijuana smoke, which is known to the State of California to cause cancer. For more information, go to www.P65Warnings.ca.gov.

     

     

     

    WARNING: Entering this area can expose you to marijuana smoke. Marijuana smoke is known to the State of California to cause cancer. For more information, go to www.P65Warnings.ca.gov.

     

    As noted, Proposition 65 can be enforced by both a public and private right of action, so individuals can serve businesses who they allege to be in violation of the Act with a 60-Day Notice of Violation and can then file a civil lawsuit against the alleged violator if an agreement to resolve the violation is not reached. A number of medical marijuana dispensaries have been targeted in this manner over the past years. Apparently, all of these cases resulted in either a settlement or a consent judgment.

    Moreover, marijuana smoke is not the only chemical known to the State of California to cause cancer that a dispensary might encounter: pesticides such as myclobutanil and carbaryl are on the Proposition 65 list, and a number of medical cannabis dispensaries throughout California have recently received 60-Day Notices for edible cannabis products allegedly containing myclobutanil or carbaryl.

    To view the Attorney General’s database of marijuana-smoke-related Prop. 65 60-Day Notices, visit https://oag.ca.gov/prop65/60-day-notice-search and search for “Marijuana smoke” in the “Chemical” box.

    Searches for “Marijuana smoke“, “Myclobutanil“, and “Carbaryl” reveal that dozens of 60-Day Notices have been reportedly served on California medical cannabis businesses throughout the state.

    Because marijuana smoke and other pesticides which may be found in cannabis products are currently listed as cancer-causing substances by the OEHHA, and because several dispensaries have been targeted for not providing such warnings, it is advised that medical cannabis dispensaries provide the warnings called for under Proposition 65, despite some evidence suggesting that marijuana may actually help treat cancer. It is also advised that packagers of cannabis products start preparing to include Proposition 65 warnings on their labels or to provide these warnings to retailers, or to make agreements with retailers as to who will take on this responsibility.

    There is nothing that prevents a cannabis dispensary from including additional signage that states the facility disagrees with the required warnings.

    For more information on Proposition 65, go to https://oehha.ca.gov/proposition-65/.

     

    Remember: laws, rules, and regulations are constantly changing.  The above information is not intended as legal advice; please contact the Law Offices of Omar Figueroa for legal advice on how to comply with Proposition 65 at (415) 489-0420 or (707) 829-0215.

  • Message from the State Water Resources Control Board

    State Water Resources Control Board Releases Forms to Comply with CalCannabis Licensing

    If you are planning to obtain a California Department of Food and Agriculture Cannabis Cultivation (CalCannabis) License beginning on January 1, 2018, you must provide documentation of your water supply source with your cultivation license application. Certain water diversion types require completion and submittal of special forms to the State Water Resource Control Board (State Water Board) by June 30, 2017. Some water right types, including Small Irrigation Use Registrations and existing Water Right Permits do not require information to be submitted to the State Water Board by this date. Please review the Cannabis Cultivation licensing requirements for additional information.

    In accordance with the Business and Professions Code Section 19332.2 (b), CalCannabis requires cultivators to provide documentation to the State Water Board – Division of Water Rights by June 30, 2017 for the following situations:

    1. Water is already being diverted under a riparian right. An Initial Statement of Diversion and Use must be on file with the Division of Water Rights.

    2. Pending application to appropriate water.

    3. Water is planned to be diverted and used under a riparian right and no diversion occurred in any calendar year between January 1, 2010 and January 1, 2017; Form 19332.2 (b)(5)

    4. The water diversion is from a spring that does NOT flow off the property on which it is located. The aggregate diversions from this person do not exceed 25 acre-feet in any year; Form 19332.2 (b)(4)

    5. A notice is on file with the State Water Board for the recordation of groundwater extractions and diversion of Los Angeles, Riverside, San Bernardino and Ventura Counties; Form 19332.2 (b)(4)

    6. A diversion is regulated by a Watermaster appointed by the Department of Water Resources and included in annual reports filed with a court or the State Water Board by a Watermaster, which reports identify the persons who divert water and describe the general purposes and the place, the use, and the quantity of water that has been diverted from each source; Form 19332.2 (b)(4)

    7. A diversion is included in annual reports filed with the court or State Water Board by a Watermaster appointed by a court or filed pursuant to statute to administer a final judgment determining rights to water, for which reports identify the persons who have diverted water and give the general place of use and the quantity that has been diverted from each source. Form 19332.2 (b)(4)

    If you are unsure which category your water source belongs, or need further assistance, please visit our Cannabis webpage or contact Division of Water Rights staff at WB-DWR-CannabisReg@waterboards.ca.gov or 916-341-5300.

  • Challenging Proposed Regulations for Lack of Necessity

    One way to challenge California’s proposed medical cannabis regulations is to argue that the record of rule making fails to establish the need for a particular regulation.


    California Government Code § 11349(a) defines necessity in the context of proposed regulations:
    “‘Necessity’ means the record of the rulemaking proceeding demonstrates by substantial evidence the need for a regulation to effectuate the purpose of the statute, court decision, or other provision of law that the regulation implements, interprets, or makes specific, taking into account the totality of the record. For purposes of this standard, evidence includes, but is not limited to, facts, studies, and expert opinion.”

    In other words, if the record of the rule making proceeding fails to show, by substantial evidence, the need for a particular regulation, that regulation is susceptible to a necessity challenge.

    For an example of a proposed California medical cannabis regulation which may be susceptible to a necessity challenge, the manufacturing ISOR does little to establish the necessity of the categorical prohibition on cannabis-infused caffeine products set forth in proposed Section 40300. The ISOR states:


    “The recommendation that caffeine not be allowed as an additive comes from the FDA determination that caffeine (stimulant) in certain alcoholic (depressant) beverages is an “unsafe food additive” due to the unpredictable negative effects of the two substances. The mixing of stimulants with depressants may lead to dangerous cardiac events. A similar lack of definitive information exists as well for the safety of caffeine as an additive to cannabis.”

    The ISOR cites no facts, studies, or expert opinions to establish the necessity of the ban on caffeine, and the record of the rule making proceeding at this juncture appears insufficient to establish by substantial evidence the necessity of a categorical prohibition on caffeine.

    You can easily find Section 40300 of the regulations proposed by the Office of Manufactured Cannabis Safety as well as the corresponding ISOR on the Regulations page of the Law Offices of Omar Figueroa web site:
    http://californiacannabisregulations.com
    http://http://www.omarfigueroa.com/wp-content/uploads/2012/07/OMCSCombined.pdf

    The California Office of Administrative Law has a very informative web site collecting written decisions disapproving of agency regulatory actions.  These decision identify proposed regulations which were rejected as defective. An example of a recent Disapproval Decision is the disapproval of the Department of Alcoholic Beverage Control’s proposed regulatory action for “failure to comply with the “necessity” and “clarity” standards of Government Code section 11349.1 and failure to follow all required procedures under the California Administrative Procedure Act (APA).”

    http://www.oal.ca.gov/publications/disapproval_decisions/

    https://oal.blogs.ca.gov/files/2017/04/2017-0213-01S_ABC_Disapproval-Decision.pdf

     

    The above information is provided for informational purposes only and is not intended as legal advice.  Please contact a lawyer for legal counsel.

    If you would like legal assistance in advocating for changes to the proposed regulations, please get in touch with us at (707) 829-0215 or at (415) 489-0420.

  • Draft Regs: Potential Issues Related to “Ownership”

     

    The proposed medical cannabis regulations released by California’s medical cannabis regulatory agencies — the Bureau of Medical Cannabis Regulation (BMCR), the Department of Food and Agriculture (CDFA), and the Department of Public Health (CDPH) — would require licensees to submit a new application any time there is a change in ownership or organizational structure.

    This is potentially problematic for cannabis companies for two reasons. First, the definition of “owner” is very broad, and it includes the following: 

    For public companies, an owner is anyone holding 5% or more interest in the company.
    For private companies an owner is any of the following:
    Someone holding an aggregate ownership interest (other than a security interest, lien, or encumbrance) of 20% or more interest in the cannabis business;
    The CEO and all members of the board of directors of any entity that holds an aggregate ownership interest of 20% or more in the cannabis business; or
    Any other person who participates in the direction, control or management of the commercial cannabis business.

    (BMCR § 5004; similar provisions are contained in CDFA’s and CDPH’s proposed regulations.) All individuals and entities considered to be “owners” must disclose personal and financial information about themselves. 

    Each individual named on this list shall submit the following information:
    (A) The full name of the owner.
    (B) The owner’s title within the applicant entity.
    (C) The owner’s date of birth and place of birth.
    (D) The owner’s social security number or individual taxpayer identification number.
    (E) The owner’s home address.
    (F) The owner’s telephone number. This may include a number for the owner’s home, business, or mobile telephone.
    (G) The owner’s email address.
    (H) The date the owner acquired an ownership interest in the applicant entity.
    (I) The percentage of the ownership interest held in the applicant entity by the owner.
    (J) If applicable, the number of shares in the applicant entity that the owner holds.
    (K) Whether the owner has a financial interest in any other licensee under the Act. For purposes of this section “financial interest” means an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other equity interest in a commercial cannabis business.
    (L) A copy of the owner’s government-issued identification. Acceptable forms of identification are a document issued by a federal, state, county, or municipal government that includes the name, date of birth, physical description, and picture of the person, such as a driver license.
    (M) A detailed description of the owner’s convictions. A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere. Convictions dismissed under Penal Code section 1203.4 or equivalent non-California law must be disclosed. Juvenile adjudications and traffic infractions under $300 that did not involve alcohol, dangerous drugs, or controlled substances do not need to be included. For each conviction, the owner shall provide the following:
    (i) The date of conviction.
    (ii) Dates of incarceration if applicable.
    (iii) Dates of probation if applicable.
    (iv) Dates of parole if applicable.
    (v) A detailed description of the offense for which the owner was convicted.
    (vi) A statement of rehabilitation for each conviction. The statement of rehabilitation is to be written by the owner and shall contain all evidence that the owner would like the bureau to consider that demonstrates the owner’s fitness for licensure. Supporting evidence may be attached to the statement of rehabilitation and may include, but is not limited to, a certificate of rehabilitation under Penal Code section 4852.01, and dated letters of reference from employers, instructors, or professional counselors that contain valid contact information for the individual providing the reference.
    (N) A copy of the owner’s completed application for electronic fingerprint images submitted to the Department of Justice.
    (O) Attestation to the following statement: Under penalty of perjury, I hereby declare that the information contained within and submitted with the application is complete, true, and accurate. I understand that a misrepresentation of fact is cause for rejection of this application, denial of the license, or revocation of a license issued.
    (P) The following information regarding an individual with a community property interest in the commercial cannabis business under Family Code section 760 shall be provided by the owner:
    (i) The full name of the individual.
    (ii) The individual’s date of birth and place of birth.
    (iii) The individual’s social security number or individual taxpayer identification number.
    (iv) The individual’s mailing address.
    (v) The individual’s telephone number. This may include a number for the owner’s home, business, or mobile telephone.
    (vi) Whether the individual has a financial interest in any other licensee under the Act. For purposes of this section “financial interest” means an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other equity interest in a commercial cannabis business.

    (BMCR § 5006; similar provisions are contained in CDFA’s and CDPH’s proposed regulations.) As noted, the draft regulations would require submitting a new license application any time the ownership of a cannabis business changed. It seems excessive to require a new license to be obtained whenever a single individual who may be considered an “owner” is added to or removed from the company. For example, let’s say an LLC held a 25% interest in another company that has a commercial cannabis license. If one member of the LLC’s board of directors changed, then the other company would have to re-apply for an entirely new license to continue operating the way it had been, even though its board may not have changed and even though the LLC still holds a 25% interest.

    Second, the requirement that a new application be submitted whenever there is a change in the organizational structure of a commercial cannabis business is troubling. For  years in California, many medical cannabis businesses have structured their entities as nonprofit mutual benefit corporations (MBCs) or nonprofit cooperatives. This is because Senate Bill 420 stated it did not authorize “any individual or group to cultivate or distribute marijuana for profit,” and that qualified patients and primary caregivers who “collectively or cooperatively cultivate cannabis for medical purposes, shall not solely on the basis of that fact be subject to state criminal sanctions under Section 11357, 11358, 11359, 11360, 11366, 11366.5, or 11570.” In 2008, California’s state Attorney General Edmund Brown issued “Guidelines for the Security and Non-Diversion of Marijuana Grown for Medical Use” which talked about statutory cooperatives (agricultural and consumer) and non-statutory collectives as being two types of options for medical cannabis patients and caregivers to “collectively or cooperatively” grow cannabis.

    Now, however, the tide has shifted. Under the Medical Cannabis Regulation and Safety Act (MCRSA), a “person” is defined as an individual or corporate entity, and it is implied that medical cannabis businesses may no longer have to operate on a not-for-profit basis under this new regulatory scheme. To clear this up, there is a bill pending in the state legislature, AB64, which would explicitly state that medical cannabis licensees may lawfully operate on a for-profit basis. (AB 64 would do a number of other things as well, such as allow for cannabis-specific state trademarks and place certain restrictions on cannabis advertising.) Thus, the need for nonprofit cooperatives and collectives will be largely gone soon (not to mention the collective and cooperative provision, Health & Safety Code § 11362.775, has a sunset clause which will likely take effect in early January of 2019, 12 months after the state licenses are issued), and many of these existing cannabis companies that are set up as MBCs or statutory cooperatives will likely want to restructure their entity in a way that makes sense for their business. It seems unnecessary and overly burdensome to require a cannabis company to submit a new license application whenever its organizational structure changes, especially since licensees are already required to notify their licensing agency when there is a change in any item listed in the application, which would include the list of owners and entity structure.

    This could also create problems between local jurisdictions and the state. If the state requires one to obtain a new license every time ownership changes, then the local permit that was issued to the company before its change in ownership may no longer be valid, triggering the need to go back and get a new local permit as well. However, a local jurisdiction may not be issuing any new cannabis permits, meaning the company that previously had a local permit and state license would suddenly be without a valid local permit or authorization, simply due to what could be a minor change in ownership or entity structure.

    Additionally, the proposed regulations explicitly do not allow for the transfer of licenses, and the requirement that a new license be obtained whenever there is a change in ownership or organizational structure effectively prohibits the transfer of licenses as well. For example, let’s say Dispensary A is licensed. Mr. B wants to buy Dispensary A, because he wants a licensed dispensary. Mr. B makes the arrangements and buys Dispensary A, but Dispensary A’s license becomes invalid as soon as the transaction is complete since there is now a new owner who must apply for a new license. This is likely not how most investors and operators in the cannabis industry envisioned an industry-friendly license transfer process.

    If you have concerns with any of the proposed regulations, please make sure your comments are submitted by 5:00pm on June 13/14/20 (depending on which license type), 2017. Information about submitting a public comment can be found here: BMCR, CDPH, CDFA. You can comment in writing or in person at one of the scheduled public hearings.

     

    The above information is for informational purposes only, may become outdated, and is not intended as legal advice.  Please consult with a lawyer for legal counsel.  Please contact the Law Offices of Omar Figueroa if you have questions about the regulatory process or would like the assistance of counsel in advocating for changes to the proposed regulations.

  • Proposed Manufacturing Regulations: New License “Type N”

    The California Department of Public Health, Office of Manufactured Cannabis Safety, released proposed regulations on April 28, 2017 that would create a new license type, the “Type N” license, for “manufacturers that produce edible products or topical products using infusion processes, or other types of medical cannabis products other than extracts or concentrates, and that do not conduct extractions.”

    The manufacturing licenses established by Medical Cannabis Regulation and Safety Act (MCRSA) only address manufacturers that engage in extractions, and set forth two types of licenses, Type 6 for extractions using non-volatile solvents, and Type 7 for extractions using volatile solvents.

    Many manufacturers do not conduct extractions, but rather purchase cannabinoid concentrates from other manufacturers and incorporate the concentrate into their own products.  Thus, this new license type has been proposed in the draft regulations.  The new “Type N” license type for infusion-only is one of the types of licenses for extraction-related operations overseen by the Office of Manufactured Cannabis Safety.

     

    §40118. Manufacturing License Classifications.

    The following license types are available from the Department:

    (b) “Type N,” for manufacturers that produce edible products or topical products using infusion processes, or other types of medical cannabis products other than extracts or concentrates, and that do not conduct extractions. For purposes of section 19328 of the Business and Professions Code, a Type N license shall be subject to the same restrictions as a Type 6 license.

    The ISOR for Section 40118 explains the reasoning behind the new “Type N” license.

    “Manufacturing License Classifications. The Act establishes two license types for manufacturers – Type 6 for manufacturers using nonvolatile solvents and Type 7 for manufacturers using volatile solvents. (Bus. & Prof. Code §19300.7 subd. (k) and (l).) However, Business and Professions Code section 19302.1(f) allows the Department to create additional license types as needed. This section is necessary to make specific the Department’s licensing authority.

    Subsection (b) creates a new license category of “Type N” for manufacturers that only infuse cannabinoids into a product formulation to produce a cannabis product. The manufacturing licenses established by the Act only address manufacturers that engage in extractions. Many manufacturers do not conduct extractions, but rather purchase cannabinoid concentrates from other manufacturers and incorporate the concentrate into their own products. Establishing a new license type for infusion-only is reasonably necessary for the Department to appropriately oversee licensing operations.

    This subsection also provides that holders of a Type N license are subject to the same additional license restrictions as a Type 6 license. As discussed above, this provision is reasonably necessary to conform this proposal to the intent of the Act.

    The above information is provided for informational purposes only and is not intended as legal advice.  Please contact a lawyer for legal counsel.

    If you would like legal assistance in advocating for changes to the proposed regulations, please get in touch with us.  If you are interested in a legal consultation about the Type N license, the draft medical marijuana regulations proposed by California’s cannabis regulatory agencies, and compliance with California’s cannabis laws, please contact the Law Offices of Omar Figueroa at (707) 829-0215 or at (415) 489-0420.

  • New Federal Memo Rolls Back Obama-Era Protections for Nonviolent Drug Offenders

     


     

    On Wednesday May 10, 2017, Attorney General Jefferson Sessions issued a memorandum to federal prosecutors outlining the Department of Justice’s new policy for charging and sentencing crimes. In the memo, which was made public on Friday, May 12, Sessions says that “prosecutors should charge and pursue the most serious, readily provable offense” including mandatory minimum offenses. Any deviation from this policy requires approval from a United States Attorney or Assistant Attorney General, or a supervisor designated by a US Attorney or Assistant Attorney General, and the reasons for deviating from the new policy must be documented and kept on file.

    Additionally, the memo requires that prosecutors disclose to the sentencing court all factors impacting the sentencing guidelines or mandatory minimum sentences, and advisory approval is required for sentences that depart from the range set forth in the federal sentencing guidelines. Deviations from the core principles of the new policy must be “justified by unusual facts.”

    The memo states that any inconsistent prior DOJ policy memo is rescinded, effective immediately. The Deputy Attorney General is tasked with issuing clarifications and guidelines on the new policy. In a footnote, the new memo states that two prior DOJ memos which are explicitly overruled include, but are presumably not limited to, the Department Policy on Charging Mandatory Minimum Sentences and Recidivist Enhancements in Certain Drug Cases (August 12, 2013); and Guidance Regarding § 851 Enhancements in Plea Negotiations (September 24, 2014).

    This is very concerning to the cannabis industry , because during the Obama administration, the DOJ had largely taken a hands-off approach to marijuana enforcement provided that the eight priorities set forth in the Cole memorandum were followed, and also took a new approach on charging and sentencing nonviolent drug offenders whereby mandatory minimum sentences were recommended only to be brought against the most serious offenders. Now that these policies are no longer in place, low-level drug offenders (including marijuana offenders) are at risk of severe federal penalties.

    Former Attorney General Eric Holder, who authored some of the earlier DOJ policy memos which are affected, made a statement opposing Jeff Sessions’ new policy. “The policy announced today is not tough on crime. It is dumb on crime. It is an ideologically motivated, cookie-cutter approach that has only been proven to generate unfairly long sentences that are often applied indiscriminately and do little to achieve long-term public safety…These reversals will be both substantively and financially ruinous, setting the Department back on a track to again spending one-third of its budget incarcerating people, rather than preventing, detecting, or investigating crime. ”

    Read the full text of the new memo on DOJ Charging and Sentencing Policy here.

    We will be monitoring this story as it develops.

    If you need legal advice about federal law and policy, or representation in federal court, please contact the Law Offices of Omar Figueroa at 415-489-0420 or at 707-829-0215.

     

  • Proposed Medical Cannabis Manufacturing Regulations: New License “Type P”

     

    The California Department of Public Health, Office of Manufactured Cannabis Safety, released proposed regulations on April 28, 2017 that would create a new license type, the “Type P” license, for “entities that only package or repackage medical cannabis products or label or relabel the cannabis product container.”  Entities that package and label their own products are not required to hold a Type P license.

     

    §40118. Manufacturing License Classifications.

    The following license types are available from the Department:

    (a) “Type P,” for entities that only package or repackage medical cannabis products or label or relabel the cannabis product container. Entities that engage in packaging or labeling of their own product as part of the manufacturing process do not need to hold a separate Type P license. For purposes of section 19328 of the Business and Professions Code, a Type P license shall be subject to the same restrictions as a Type 6 license.

    The ISOR for Section 40118 explains the reasoning behind the new “Type P” license.

    “Manufacturing License Classifications. The Act establishes two license types for manufacturers – Type 6 for manufacturers using nonvolatile solvents and Type 7 for manufacturers using volatile solvents. (Bus. & Prof. Code §19300.7 subd. (k) and (l).) However, Business and Professions Code section 19302.1(f) allows the Department to create additional license types as needed. This section is necessary to make specific the Department’s licensing authority.

     Subsection (a) creates a new license category of “Type P” for manufacturers that only engage in the packaging of cannabis products. Packing operations offer numerous opportunities for contamination of a product if not conducted in accordance with GMPs. In order to mitigate the risk of contamination, it is necessary for packaging operations to be under the oversight of the Department. During the pre-regulatory stakeholder meetings, the Department heard from numerous individuals who expressed an interest in only the packaging or labeling of products. This provision is necessary to for the Department to fulfill its mandate under the Act to license and regulate manufacturers. Subsection (a) also clarifies that entities that package and label their own products are not required to hold a Type P license. This provision is necessary in order to prevent confusion to the regulated public. This subsection also establishes that holders of a Type P license are subject to the same additional license restrictions as a Type 6 license. Business and Professions Code section 19328 restricts the types of additional licenses that a licensee may hold. Type 6 and 7 licensees can only hold a cultivation, transporting, or “producing dispensary” license. In keeping with the intent of the Act to restrict the number and types of additional licenses can hold, the Department is imposing the same restrictions on the license types created by this proposal.

    The above information is provided for informational purposes only and is not intended as legal advice.  Please contact a lawyer for legal counsel.

    If you would like legal assistance in advocating for changes to the proposed regulations, please get in touch with us.  If you are interested in a legal consultation about the “Type P” license, the Medical Marijuana Regulation and Safety Act (MCRSA), or compliance with California’s cannabis laws, please contact the Law Offices of Omar Figueroa at (707) 829-0215 or at (415) 489-0420.

  • Proposed Cultivation Regulations: New License Type “Processor”

     

    The California Department of Food and Agriculture, CalCannabis Cultivation Licensing, released proposed regulations on April 28, 2017 that would create a new license type, the “Processor” license, for “a cultivation site that conducts only trimming, drying, curing, grading or packaging of cannabis and nonmanufactured cannabis products.”

    While licensed processors may not cultivate cannabis onsite, according to the Initial Statement of Reasons (ISOR), processors “also may hold other types of cultivation licenses” for off-site cultivation.  This new license category was created to accommodate the medical cannabis industry practice whereby “some cultivators send untrimmed, uncured, or unpackaged cannabis to locations off-site for processing (that is, not where the product is grown.)”

    § 8203. Cultivation License Types. License types include:

    (f) “Processor” a cultivation site that conducts only trimming, drying, curing, grading or packaging of cannabis and nonmanufactured cannabis products.

    The CalCannabis ISOR’s explain the rationale for this new license type:
    “Section 8203 Cultivation License Types

    This section defines the types of cultivation licenses the Department is responsible for issuing. In addition to the cultivation licenses required by BPC Section 19332 (g), the Department has created a processor license, as described below. […]

    Subsection (f) defines the processor license, which was created by the Department. These proposed regulations are added to implement the authority to create new license types in BPC Section 19302.1 (e). During the scoping meetings held in September 2016, it was brought to the Department’s attention that some cultivators send untrimmed, uncured, or unpackaged cannabis to locations off-site for processing (that is, not where the product is grown). Sometimes local ordinances may require processing activities to occur away from cultivation areas. To accommodate these instances, the Department created a license type that will allow a business to be licensed solely for processing cannabis. The processor licensee also may hold other types of cultivation licenses, but would be prohibited from growing cannabis plants at a licensed processing facility. […]

    These proposed regulations are added to clarify the statutory provision in BPC Section 19332 (g) and provides the industry with an additional type of license that is consistent with current industry practices.”

    The above information is provided for informational purposes only and is not intended as legal advice.  Please contact a lawyer for legal counsel.

    If you would like legal assistance in advocating for changes to the proposed regulations, please get in touch with us.  If you are interested in a legal consultation about the “Processor” license, the Medical Marijuana Regulation and Safety Act (MCRSA), or compliance with California’s cannabis laws, please contact the Law Offices of Omar Figueroa at (707) 829-0215 or at (415) 489-0420.

  • Proposed Manufacturing Regulations: Cannabis Product Symbol

     

    The proposed regulations from the California Department of Public Health, Office of Manufactured Cannabis Safety (OMCS), require that cannabis products have a label with a primary panel featuring the visually unstable Cannabis Product Symbol, which looks like it’s about to tip over:

    The draft regulations propose that the  Cannabis Product Symbol must be “no smaller in size than half (.5) inch by half (.5) inch” and must be “printed legibly and conspicuously” in a product’s primary label.

    The Initial Statement of Reasons (ISOR) elaborates on the reasoning behind the Cannabis Product Symbol: “Product symbols are a commonly used tool to provide information and guidance as to a package’s content. Oregon, Washington, and Colorado all require a cannabis-specific symbol to be placed upon the package. A cannabis product symbol provides notice to that a product is not a traditional food product. This provision is necessary to protect from unintentional consumption.”

    The Council on Responsible Cannabis Regulation, a cannabis industry group promoting sensible self-regulation, has published a monograph entitled “Cannabis Packaging and Labeling: Regulatory Recommendations for States and Nations” (download here.) Members of the medical cannabis industry recommended an Industry-Wide Universal Symbol, which is shown below (triangles with leaf motif and letters THC.)  Compare the Recommended Industry-Wide Universal Symbol suggested by the Council on Responsible Cannabis Regulation with the cannabis symbols used by the States of Washington, Oregon, and Colorado, as well as the proposed California Cannabis Product Symbol.
    California Cannabis Product Symbol
    A slightly different approach that has come up in recent discussions of the Cannabis Product Symbol’s design would be to vary the color from yellow to orange to red, depending on the potency of the cannabis product.  Thus, low-potency products would be color-coded yellow, medium-potency products would be color-coded orange, and high-potency products would be color-coded red.

    The above information is provided for informational purposes only and is not intended as legal advice.  Please contact a lawyer for legal counsel.

    If you would like legal assistance in advocating for changes to the proposed regulations, please get in touch with us.  If you are interested in a legal consultation about the California Cannabis Product Symbol, the Medical Marijuana Regulation and Safety Act (MCRSA), or compliance with California’s cannabis laws, please contact the Law Offices of Omar Figueroa at (707) 829-0215 or at (415) 489-0420.

    SOURCE MATERIALS:

     

    §40405. Primary Panel Labeling Requirements.

    (a) The label for a cannabis product shall include a primary panel that includes the following information:

    (1) The identity of the product in a text size reasonably related to the most prominent printed matter on the panel;

    (2) The words “cannabis-infused” immediately above the identity of the product in bold type and a text size larger than the text size used for the identity of the product;

    (3) The cannabis product symbol as prescribed in Section 40412 ;

    (4) The net weight or volume of the contents of the package;

    (5) The THC content and CBD content for the package in its entirety, expressed in milligrams per package;

    (6) The THC content and CBD content per serving, expressed in milligrams per serving; and

    (7) The content of other cannabinoids or terpenes per serving if such information is verified by the certificate of analysis issued by a licensed testing laboratory pursuant to Business and Professions Code section 19344.

    (b) The primary panel text must be in type size no less than 6 point font and be in relation to the size of the primary panel and container.

    Authority: Sections 19302.1, subdivision (f); 19304; and 19341, Business and Professions Code. Reference: Section 19300.5, subdivision (v); 19302.1, subdivision (f); 19347; 19347.5, Business and Professions Code.

     

     

    §40412. Cannabis Product Symbol.

    The primary panel of a medical cannabis product shall be marked, stamped, or otherwise imprinted with the cannabis product symbol directly on the package.

    (a) The symbol shall replicate the following in form and color:

    (b) The symbol shall be no smaller in size than half (.5) inch by half (.5) inch and shall be printed legibly and conspicuously.

    Authority: Sections 19304 and 19341, Business and Professions Code. Reference: Section 19300.5, subdivision (v), 19302.1, subdivision (f), 19347, 19347.5, Business and Professions Code.

     

    The Initial Statement of Reasons (ISOR) elaborates on the reasoning behind the Cannabis Product Symbol:

    Adopt Section 40412. Cannabis Product Symbol. This section establishes the required cannabis product symbol to be printed on the primary panel. Product symbols are a commonly used tool to provide information and guidance as to a package’s content. Oregon, Washington, and Colorado all require a cannabis-specific symbol to be placed upon the package. A cannabis product symbol provides notice to that a product is not a traditional food product. This provision is necessary to protect from unintentional consumption.

    Subsection (a) provides the cannabis product symbol. The symbol was designed by the Department and is intended to provide clear notice that a package contains cannabis.

    Subsection (b) requires that the symbol must be no smaller than 0.5 inch by 0.5 inch in size. A symbol that is too small to be readily seen will not serve to protect public health.

     

     

     

     

    Council on Responsible Cannabis Regulation: Cannabis Packaging and Labeling: Regulatory Recommendations for States and Nations

     

     

     

  • Sonoma State University’s School of Extended & International Education offers Cannabis in California workshop in June

    Blunt Network

    Financial, legal and regulatory experts will address issues vital to the state’s new recreational cannabis market.

    Rohnert Park, California (May 5, 2017) – California is preparing for full recreational cannabis legalization on New Year’s Day, 2018.

    This means the state with one of the oldest and most durable marijuana cultures and economies will soon be home to what is expected to become the world’s largest legal marijuana market.

    Northern California, meanwhile, is the epicenter of California’s cannabis culture; a region where growers, producers and marijuana enthusiasts have worked for decades to craft many of the manufacturing, processing and legal protocols currently in use across the state.

    In an effort to assist those interested in this historic evolution of California’s cannabis market, Sonoma State University’s School of Extended & International Education is offering a Cannabis in California Workshop on Friday, June 9th, from 8:30 a.m. to 4:00 p.m.

    Those attending the day’s workshop will hear lectures from experts on the state’s legal, regulatory and public policy issues regarding the emerging legal cannabis industry, and can seek advice and information on cannabis accounting and tax compliance procedures.

    Among those scheduled to speak at the workshop are attorney Omar Figueroa, an expert in cannabis law, Dale Gieringer, the director of California NORML who also co-authored Proposition 215; the state’s medical marijuana initiative, and Hank Levy, CPA, of The Henry Levy Group, an expert in cannabis accounting and tax compliance.

    Some of the regulatory issues on the agenda for workshop participants are:

    Track and trace programs, compliance and cost, health and safety training for cannabis business employees, managing the risk profile of your cannabis accounts, preparing your cannabis organization for legal compliance audits.

    “In California and more broadly in the United States, the cannabis industry’s multibillion dollar legal footprint in the economy reflects a sea change in societal perceptions of cannabis,” says Robert Eyler, Ph.D, Dean of the School of Extended and International Education.

    Negotiating the financial and regulatory aspects of legal marijuana, as presented in this workshop, are vital in helping the state establish and professionalize its legal cannabis industry.

    “This wave of new enterprise creates the need for educational institutions that teach students to navigate the industry as professionals,” he adds. “There will be a high demand for professional workforce development in the cannabis industry: accounting professionals, human resources management, placement services, regulatory experts, and other skilled professionals as these businesses grow.”

    “The impetus behind the creation of a cannabis program at Sonoma State University is to foster workforce development and to teach legal and accounting principles specific to the industry,” says Jason Snyder, Program Director of Sonoma State University’s Cannabis Program. “Our goal is to professionalize the cannabis workforce here in Sonoma County and beyond.”

    Workshop Details:

    Register online at: Cannabis Workshop 

    Location: Sonoma State University, Stevenson 1002
    1801 East Cotati Ave, Rohnert Park, CA 94928

    Date:  Friday, June 9th, from 8:30 a.m. to 4:00 p.m.

    General Daily Parking: $5.00. Lot E is closest to Stevenson.

    There is an entry fee of $99 per person for the workshop. Check-in begins at 8:00 a.m. –workshop participants are advised to come early. Lunch will be provided and students will be awarded 0.75 Continuing Education Units (CEUs) awarded upon attendance.

    For More Information: http://sonoma.edu/exed/cannabis/

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    About Sonoma State University’s School of Extended & International Education:

    Throughout the year, the School of Extended & International Education offers a wide variety of innovative, high quality professional development courses and certificates. We take pride in creating learning opportunities for career advancement, career change and personal growth. Many courses are scheduled on weekends and evenings, and online for the busy adult.

    Disclaimer:
    Notwithstanding Proposition 64 and other state laws, the possession, use, transport, cultivation, and sale of marijuana remain illegal under the Federal Controlled Substances Act. Moreover, as a recipient of federal funds, Sonoma State University is required under federal law to: (1) maintain a drug-free community; (2) prevent illegal drug use; and (3) discipline students and employees who unlawfully possess, use, or distribute illegal drugs on University property or at University-sponsored activities. Accordingly, the use, possession, cultivation, transport, and/or sale of marijuana is prohibited on Sonoma State University campus property, and at University-sponsored activities, whether on- or off-campus.

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