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  • Federal Registration of Cannabis Trademarks™ and the Natural Zone of Expansion

    Federal trademarks registered with the United States Patent and Trademark Office (“USPTO”) are valuable business assets that, if possible, should be cultivated and protected.  The ® registration symbol can be used in conjunction with a trade or service mark if, and only if, the mark has been granted federal registration.

    If a mark has not been granted federal registration, it is unlawful to use the ® registration symbol, so the less prestigious ™ symbol is generally used instead. The ™ symbol can indicate various possibilities: 1) the mark is being used to distinguish goods, and the owner of the mark has common law rights, but no registration application has been filed at either the state or federal level, or; 2) a state registration has been filed (and has been granted or is pending), or; 3) a federal trademark application has been filed and is pending but not yet granted.

    Trademark law, at its heart, is built upon the principle of first use – generally, the strongest rights to use a given mark will be granted to the first entity to have actually used it. However, “use” must meet a variety of requirements in order to be considered valid for trademarking purposes. To begin, the use must be within the “ordinary course of trade” for the given industry.[1] Moreover, the use must be “bona fide,” or to put it another way, done in good faith – the applicant must be using the trademark because it has a good faith intention of being recognized by the public as the source of particular goods or services. Token use of a trademark done solely to gain rights in a trademark that the applicant has no or only illusory intentions of using are not sufficient (i.e., think of it as trademark “squatting”). In addition, in order for the USPTO to have authority to issue a federal registration, the use must be “in interstate commerce.” Interstate commerce generally means that the goods or services physically cross state lines; however, there are certain uses that are deemed inherently affecting interstate commerce and therefore eligible for trademark registration.

    Cannabis companies face an added difficulty because the USPTO also requires that use of a trademark be “lawful.”[2] To that end, the USPTO will currently not issue trademark registrations for cannabis and related products or paraphernalia under the rationale that, as a matter of law, the necessary use of such goods in interstate commerce violates the federal Controlled Substances Act (“CSA”) and is thereby inherently unlawful. The legality of the use under state law is considered inapposite for purposes of gaining a federal trademark.

    Given the USPTO’s refusal to issue trademark registrations for cannabis goods, many applicants have endeavored to gain the value of a trademark by simply applying for a trademark on a broad category of goods, generically described, with the hopes that cannabis will be able to implicitly hide inside that category. This tactic has not met with much success, however – namely, the USPTO inevitably discovers that the goods were described in an overbroad manner (which warrants rejection of the application in its own right) and the only goods on which it is used are deemed “unlawful” (and thus again not entitled to registration). A trademark application is required to identify the goods and services on which the mark is used with a reasonable amount of specificity. Applicants frequently use very broad terms to identify their goods and services in an application, but if an applicant’s actual use is in fact limited only to a much smaller subclass of goods or services, and one which is capable of being easily described for application purposes, the application will be denied unless the goods and services listed are narrowed accordingly – and that is a rule that applies no matter the type of goods being applied for.

    That said, many companies do in fact use a mark on a variety of goods within a broad category. An application using the broader category will be accepted in such instances.[3] If the USPTO deems a description of goods to be overbroad, however, the application will be rejected unless amended to narrow the scope of goods claimed.

    This is important because the USPTO has discretion to investigate the actual use of a trademark to ensure that it is used in the manner described by the application (as well as in compliance with trademark law, meaning the claimed goods are described with sufficient specificity and that the use is “lawful”). To this end, many examiners at the USPTO look at an applicant’s website and social media pages to see how the applied-for mark is being used. For cannabis companies, such research generally indicates that the trademark is used solely or primarily with regards to cannabis products and thus, the application is rejected on two counts: first, that the goods were described in an overbroad manner and, second, that the use is unlawful. Ordinarily, an application can be amended to narrow the goods being claimed and thus still gain approval, but for cannabis companies, narrowing the scope to identify cannabis products specifically still fails the lawful use requirement.

    Yet, there is another approach to consider that has met with success on at least a few occasions. Rather than attempting to protect cannabis products directly by filing for a broad category of goods with the hope that cannabis hides implicitly within the scope of that broad category, protection can be gained by filing for related goods. If cannabis is explicitly disclaimed from the goods being registered, the application on its face does not violate the CSA and should be entitled to registration. While disclaiming desired goods may seem counterintuitive, holding a mark for a specified class of goods or services can still sometimes be used to prevent (and therefore protect against) confusingly similar trademarks on other goods and services, including the desired goods, despite their not having been listed in the original application.

    Trademarks are filed, as noted above, for specific goods and services. But the law recognizes that companies frequently start with a limited number of goods and then expand their offerings to include other goods within the same general category – these new goods are considered part of the company’s “natural zone of expansion.” Thus, a registration for “clothing” (Class 25) will act as a block for “leather goods” (Class 18) because the USPTO has recognized that clothing companies often expand their line of goods such that they act as a source for items from both categories. Thus, the goods are deemed within each other’s natural zone of expansion – in other words, since clothing manufacturers (shirts, pants, etc.) frequently branch out to also manufacture leather goods (belts, etc.), both categories will be examined when competing trademarks are to be filed in either category.

    Similarly, the law accounts for the fact that some goods are so “related” (even if they happen to be filed in different classes) that confusion may be likely among consumers if the same or similar marks were used on both, despite the fact that manufacturers of one do not ordinarily evolve to manufacture both. For example, beer exists within Class 32 while wine and spirits exist in Class 33. Despite being different goods in different classes, a mark that has been registered for beer in Class 32 will generally act as a block to any mark that is confusingly similar being registered on wine, vodka, whiskey, etc., even though such goods exist in an entirely separate class. This is true irrespective of the fact that breweries rarely evolve to manufacture wine or vice versa.[4]

    With regards to cannabis, both principles can be leveraged to gain a zone of protection that will surround a cannabis mark and protect the mark from being filed by a competing user now or in the future. By identifying classes of goods and services that fall within the natural zone of expansion or “related goods,” cannabis products can be afforded protection, despite not being listed in the application. Essentially, one wants to imagine which class their goods would be filed in once cannabis becomes eligible for trademark protection in its own right, and file in that class (or an adjacent class) to create a reserved space ahead of time.

    Depending on the goods and services that a given cannabis company will offer, there are obviously a number of classes in which that company may wish to file. There is no limit to the number of categories a company is allowed to apply for so long as the mark will be used on those goods and services. However, as indicated above, the mark must be actually used on such goods and services and the use must be within the ordinary course of trade, thus a single sale of such goods or services will not be sufficient – an ongoing business effort must be implemented.

    Above, it was noted that an applicant must show use of the mark on the applied-for goods in order to apply for a trademark. This can be problematic given that, as also noted above, priority is given to the first user of a given mark. The former rule means that, ideally speaking, a company will use and apply for a mark as soon as possible. Luckily, there is a limited exception to the use necessity in the form of an Intent-to-Use application. Intent-to-Use applications allow a company or individual to file for a trademark before they have used the mark on the applied-for goods, so as to save their “space in line” chronologically speaking. As such, it allows an applicant to reserve rights in a mark while, for example, they are still in the formative stages of their business or waiting on a crop to be harvested. When filing an Intent-to-Use application, the applicant has six months from the date the application is approved in order to actually use the mark. If that six-month period is not enough time, up to five extensions may be filed; in other words, an applicant will have up to three years to actually use the mark. The Intent-to-Use application does involve additional paperwork, and thus additional expense, but it allows companies to reserve a mark without fear that a competitor will beat them to market in a given industry.

    If you have further questions about trademarks or would like to move forward with trademark clearance and registration, please contact the Law Offices of Omar Figueroa at 707-829-0215.

     

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    ENDNOTES

    [1] Trademark Manual of Examining Procedure (TMEP) 901.02

    [2] See In re Brown, 119 USPQ2d 1350, 1351 (TTAB 2016); John W. Carson Found. v. Toilets.com, Inc., 94 USPQ2d 1942, 1948 (TTAB 2010); In re Midwest Tennis & Track Co., 29 USPQ2d at 1386 n.2 (TTAB 1993); Clorox Co. v. Armour-Dial, Inc., 214 USPQ 850, 851 (TTAB 1982); In re Stellar Int’l, Inc., 159 USPQ 48, 50-51 (TTAB 1968).

    [3] By way of an example, an application claiming a mark for “baked goods” will be deemed overbroad if the applicant only actually makes one or two specific baked goods, say cookies. If, however, the applicant makes cookies, brownies, cupcakes, pies, croissants, and bread, the application may be accepted as described.

    [4] These rules are not absolute of course, and every application is examined on a case-by-case basis. Many factors go into whether two marks are similar enough to be confusing and thus whether the prior user can reserve the secondary space (i.e., block a newer user from using the similar mark).

  • SB-162 Would Bar Cannabis Licensees from Using Branded Merchandise (and is Probably Unconstitutional)

    California Cannabis Industry Alert!

    Senate Bill 162 (hereafter “SB162”), currently making its way through the state legislature, would impose draconian restrictions on cannabis marketing. Specifically, it would prevent cannabis licensees from advertising or marketing cannabis products using merchandise, such as clothing, hats, t-shirts, or other items branded with the name or logo of the product. The bill already passed through the California Senate unanimously, but its constitutionality is questionable.

    The bill is intended to limit marketing of cannabis products in ways that were already conceptually prohibited by AUMA in that a licensee may not advertise a cannabis product in a way intended to encourage people under 21 years of age to consume or purchase cannabis. However, the bill goes beyond just requiring that merchandise may not be made attractive to children and bars, presumably, any branded merchandise.

    The language of the proposed law is extremely broad.  SB162 would amend Section 26152 of the Business and Professions Code to read:

    26152. A licensee shall not do any of the following:

    (a) Advertise or market in a manner that is false or untrue in any material particular, or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific, or technical matter, tends to create a misleading impression.

    (b) Publish or disseminate advertising or marketing containing any statement concerning a brand or product that is inconsistent with any statement on the labeling thereof.

    (c) Publish or disseminate advertising or marketing containing any statement, design, device, or representation which tends to create the impression that the cannabis originated in a particular place or region, unless the label of the advertised product bears an appellation of origin, and such appellation of origin appears in the advertisement.

    (d) Advertise or market on a billboard or similar advertising device located on an Interstate Highway or on a State Highway which crosses the California border.

    (e) Advertise or market cannabis or cannabis products in a manner intended to encourage persons under 21 years of age to consume cannabis or cannabis products. This prohibition includes all advertising of cannabis or cannabis products through the use of branded merchandise, including, but not limited to, clothing, hats, or other merchandise with the name or logo of the product.

    (f) Publish or disseminate advertising or marketing that is attractive to children.

    (g) Advertise or market cannabis or cannabis products on an advertising sign within 1,000 feet of a day care center, school providing instruction in kindergarten or any grades 1 through 12, playground, or youth center.

    (Emphasis added.)  The entire bill is available on the Legislature’s web site, at:

    https://leginfo.legislature.ca.gov/faces/billCompareClient.xhtml?bill_id=201720180SB162

    As of August 1, 2017, the Legislative Counsel’s Digest for the bill states, “This bill would specify that advertising or marketing cannabis or cannabis products in a manner intended to encourage persons under 21 years of age to consume cannabis or cannabis products includes all advertising of cannabis or cannabis products through the use of branded merchandise, including, but not limited to, clothing, hats, or other merchandise with the name or logo of the product.”

    You read that right—if this becomes law, then cannabis licensees would be prohibited from advertising their brands on any merchandise, even if it was not designed to appeal to minors or even made available to people under the age of 21. The bill cites a case related to tobacco advertising restrictions (Commonwealth Brands, Inc. v. United States, 678 F.Supp.2d 512 (2010)) in support of the legislature’s position that such a restriction on speech for cannabis would be constitutional. However, there are problems with that comparison.

    First, Commonwealth Brands dealt with a federal law that placed restrictions on advertising, whereas AUMA is a state law. The federal district court’s holding in Commonwealth Brands is not binding on courts in California.

    Second, tobacco and cannabis are not the same thing, nor do they have the same effect on the human body. The court in Commonwealth Brands made only passing references to the government interest being served by the federal law at issue in that case citing the Act’s aim as being “to curb tobacco use by adolescents” (at 519) and reducing tobacco use by minors” (at 522). However, even interests that some may consider intuitively worthy are not self-validating under the law. Rather, the government must prove that the interest is substantial (or, in some cases, compelling). In this instance, the interest put forth in tobacco regulations is substantial because it has been widely accepted, through substantiation of numerous studies, that tobacco use is inherently dangerous in its causation of cancer, heart disease, and other serious health effects. This interest is explicitly referenced in the act regulating the tobacco advertising at issue and therefore implicitly accepted by the court in Commonwealth Brands. That said, there is simply no evidence that the potential harm and therefore the same interest in curbing cannabis use. The government lacks the same or even comparable body of evidence demonstrating that cannabis is carcinogenic or otherwise harmful to one’s health. In fact, a number of recent studies comparing tobacco smokers and cannabis smokers found that cannabis smokers had better long-term health and were less likely to suffer from cancer than tobacco users.

    In addition, unlike in Commonwealth Brands, where the government provided “extensive documentation” to show that marketing of tobacco products had a causal connection on consumer behavior of children, the legislature does not provide any proof that restricting advertising of cannabis products will affect youth behavior. Rather, the current version of SB162 simply states:

    Research by The RAND Corporation indicates that adolescents who are exposed to advertising of cannabis were more likely to report using cannabis or say they planned to use the substance in the future. The American College of Pediatricians’ research has found that cannabis has adverse effects on the adolescent brain and is associated with psychiatric illness and negative social outcomes.

     The bill does not provide any specific studies from either the RAND Corporation or the American College of Pediatricians to support this position, or to demonstrate that restricting speech in this broad way will achieve the desired outcome. Failure to provide the studies presumably demonstrating the government’s interest not only leaves the public in the dark as to what the government posits its substantial interest to be, but also creates a lack of accountability in the manner such interest was substantiated should the public infer or otherwise guess at what the interest might be.

     

    Commercial v. Non-Commercial Speech

    The First Amendment prohibits the government from making any law abridging the freedom of speech. Commercial speech is speech where the speaker is more likely to be engaged in commerce, where the audience consists of actual or potential customers, and where the content of the message is commercial in nature. Admittedly, commercial speech is afforded less protection by the First Amendment than non-commercial speech.

    The test to see whether a restriction on commercial speech violates the First Amendment is outlined by the U.S. Supreme Court’s decision in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n, 447 U.S. 557 (1980). First, in order to be protected by the First Amendment, commercial speech must be truthful and not misleading. If the answer is yes, the speech can only be constitutionally regulated if (i) the government has a substantial interest in regulating the speech; (ii) the regulation directly advances the governmental interest asserted; and (iii) the regulation is not more extensive than is necessary to serve that interest. Central Hudson at 565.

    Additionally, any regulation of speech is void if it is vague, meaning it does not give reasonable notice of what is prohibited, or overbroad, meaning it regulates substantially more speech than is necessary to serve the government interest at stake.

    The government has the burden of demonstrating that the challenged regulation advances its interest in a direct and material way; mere speculation or conjecture that the regulation may serve the interest is not sufficient. There must be a “reasonable fit between the legislature’s ends and the means chosen to accomplish those ends, a means narrowly tailored to achieve the desired objective.” Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 561 (2001).

    The Commonwealth Brands case seems to rely on the idea that branded merchandise when utilized by the public, even if only those members of the public aged over 21 years, such individuals become walking advertisements to which minors will be inevitably exposed.  While there is some logic to the concept, if taken to its logical conclusion, absolutely no brand affiliated products intended for adults should be visible in the public domain given the likelihood that a minor might encounter them – this ban would include not only tobacco, cannabis, and alcohol, but also to clearly illogical extremes such as pharmaceuticals, cars (which are not to be driven except by individuals aged 16 and older), military careers, and more. Certain, more conservative, portions of the population may well include many more items to such a list.

    In either event, even if such items may seem easily forgone by some, the Supreme Court has already rejected such logic, not only with substantial interests but even the higher bar of compelling interests, and for good reason.  In Lorillard, the Court held that even retailers and manufacturers of adult-oriented products have an interest in conveying truthful information about their products to adults, and adults have a corresponding interest in receiving truthful information about such products. Lorillard at 564. In fact, the Court has reiterated several times that the level of discourse reaching the public simply cannot be limited to that which would be suitable for a sandbox, despite the presence of minors and their inevitable exposure to such discourse. To hold otherwise would be to reduce the adult population to reading only what is fit for children. Id (citing Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 74 (1983) and Butler v. Michigan, 352 U.S. 380,  383 (1957)).

    Purely political speech is given the full protection of the First Amendment, and restrictions on political speech are judged using strict scrutiny, which is the most difficult burden for the government to uphold. There must be a compelling government interest at stake and the government restriction on speech must be narrowly tailored to achieve that interest. A law is not narrowly tailored if it is over-inclusive, meaning it restricts even speech that does not implicate the government’s interest, or if there is a less restrictive means available to serve the government’s interest. Additionally, government restrictions on the content of speech are judged using this strict scrutiny analysis.

    The constitutionality of non-commercial, content-neutral restrictions of speech are assessed using intermediate scrutiny. This means that the law or restriction must advance an important government interest, and the means chosen must be substantially related to that interest. As is the case with content-based, purely political, or commercial speech, the law cannot be vague or overbroad.

    Additionally, there can’t be what’s called a “prior restraint” on speech, which is a governmental action that prevents speech or expression before it occurs. Prior restraints are typically found to be unconstitutional.

     

    Prohibition on Cannabis Advertising of Bands

    Cannabis companies advertising their brands or products on merchandise would likely fall under the purview of commercial speech, though certain messages could be construed to be non-commercial or even purely political given the fact that the legality of cannabis is currently a topic of political discussion.

    Yet, even if a court were to find that cannabis and cannabis product advertising on merchandise was commercial speech, the restriction would not withstand Central Hudson review. Specifically, the government would not be able to meet the first and final prongs of the test—that the government have a substantial interest to be served and the regulation be not more extensive than necessary to achieve that interest. Here, the State of California may well posit an interest in ensuring that children do not have access to cannabis products made for adults in much the same way that the State has an interest in ensuring youth do not have access to alcoholic beverages; however, the scientific data is entirely lacking to put cannabis on par with tobacco given the severe and undisputed health effects associated with the latter but not the former.

    In addition, prohibiting all cannabis licensees from advertising their company or products on branded merchandise is more extensive than is necessary to serve that interest given the plethora of valid and easily implemented alternatives. There is not a “reasonable fit” here between the objective and the means chosen. Instead, the legislature could restrict marketing that is specifically designed to be attractive to children, or could prohibit cannabis licensees from distributing branded merchandise at locations where children are present. Additionally, self-regulation of the industry is also an option. This method works quite well in the beer industry, where industry-created guidelines exist for branding and marketing by brewers and have thus far prevented the need for outside, legislative restrictions.

    Interestingly, the prohibition on advertising cannabis or cannabis products through branded merchandise would only apply to licensees. This means that someone without a state-issued cannabis license, such as a headshop or unpermitted operator, both of which are more easily accessible by someone under the age of 21, could advertise cannabis products through branded merchandise without repercussion, but someone with a license would be in violation of the law if they did so. This does not seem equitable or in line with the goal of reducing child exposure to branded cannabis merchandise.

    Lastly, the restriction on speech in SB162 is overbroad, as it would regulate substantially more speech than is necessary to achieve the government’s interest in restricting advertisements to minors. Speech that is not targeted in any way towards children, is not sold or distributed in places where children are present, and is not attractive to children would be included in the prohibition. This would impede the ability of cannabis companies to engage in constitutionally protected truthful commercial speech.

    If you’re concerned about this, we encourage you to contact your state assembly member today and tell your representative to vote “NO” on SB 162 unless amended.

    Please contact the Law Offices of Omar Figueroa to learn more about proposed restrictions on cannabis branded products and constitutional challenges thereto.

  • Trinity County Licensing Up and Running, But Durational Residency Requirement Susceptible to Constitutional Challenge

     

    While California continues to dial in the details of state licensing for cannabis companies, local jurisdictions have also been hard at work doing the same. State law allows individual counties to draft and implement individualized ordinances controlling cannabis licensing and regulations. While this creates a far more complicated system that in many ways forces local business owners to navigate, research, and choose amongst many different potential counties, it also creates a land of opportunity for those willing to relocate. If, for instance, a prospective business owner found the regulations of their local jurisdiction too restrictive, with enough research they may well find another county with more desirable or easily accomplished requirements.

    One county that has not only drafted but also finalized, passed, and implemented an ordinance for local cultivation licensing is Trinity County. Currently licensing is only available in Trinity County for cultivation, but licenses for dispensaries, nurseries, and distributors are all said to be in the works as well. Moreover, Trinity County’s commercial cannabis cultivation ordinance applies to both medical and adult-use cannabis operations. The application for Trinity County comes ready with a handy checklist detailing the necessary application materials, eligible zoning, setback requirements, and much more.

    Currently, the cultivation licenses available within Trinity County are as follows:

    • Type 1 for outdoor cultivation up to 5,000 sq. ft. or 50 plants;
    • Type 1B for mixed-light cultivation up to 5,000 sq. ft. or 50 plants;
    • Type 1C for “Cottage” cultivation up to 2,500 sq. ft. or 25 plants;
    • Type 2 for up to 10,000 sq. ft.; and
    • Type 2B for mixed-light cultivation up to 10,000 sq. ft.

    A “Tier 3” license that would allow cultivation in excess of 10,000 sq. ft. is not yet available, but is being contemplated by the county.

    Applications will not be accepted for projects located within the Trinity County jurisdiction of the Whiskeytown-Shasta-Trinity National Recreation Area or within the legal boundaries of Ruth Lake Community Service District. Nor will applications be accepted for properties zoned Residential 1 (R1), Residential 2 (R2), Residential 3 (R3), Agricultural Forest (AF), Commercial (C), Open Space (OS), Public Facility (PF), Village (V) land use designation, or Timber Production Zones (TPZ) (though there will be exceptions made for certain qualified Applicants (Phase 1)). Areas zoned as Unclassified (UNC) may be accepted depending on the land use designation. For qualifying zones, prospective applicants must still comply with setback requirements. Specifically, a commercial cannabis location must be:

    • Three-hundred fifty feet (350 ft.) from any habitable dwelling on a neighboring property;
    • Thirty feet (30 ft.) from any property line;
    • One-thousand feet (1,000 ft.) from a youth-orientated facility, a school, any church, or residential treatment facility;
    • Five-hundred feet (500 ft.) from an authorized school bus stop;
    • Out of view from any public right-away; and
    • Though not stated within the ordinance, it is recommended to be at least three-hundred fifty feet (350 ft.) from any public or commercial building or business.

    In addition to the above and other requirements, there is also a constitutionally suspect roadblock for the nomadic growers who are ready to migrate to Trinity County and start the application process immediately. Currently, per Ordinance No. 315-816 (implementing the cultivation licensing program), applicants are required to prove residency in the county for a period of at least one (1) year prior to application. Thus, newcomers would be forced to wait for at least a year before even beginning the application process, a high disincentive for those hoping to get a jump on state licensing.

    This type of requirement is generally referred to as a “durational residency requirement.” Durational residency requirements have traditionally been used by one state to deny benefits to residents who have recently moved from another state. For example, California might wish to deny certain unemployment benefits to individuals who have lived within the State of California for at least one (1) year before receiving such benefits. For those still interested in moving to a ready-to-license jurisdiction, there is still hope even in Trinity County however. Durational residency requirements have repeatedly been ruled unconstitutional by the Supreme Court unless the government entity can prove that the requirement is “necessary to promote a compelling government interest” and the requirement is narrowly tailored to promote that interest without overreaching (Shapiro v. Thompson, 394 U.S. 618, 634 (1969)).

    In fact, the Supreme Court case establishing the illegality of durational residency requirements, Shapiro v. Thompson, bears a fair amount of resemblance to the Trinity County requirement. In Shapiro v. Thompson, the State of Connecticut denied welfare benefits to anyone who could not prove that they had lived within the state for at least one (1) year prior to applying for such benefits. In each instance, a government entity (county or state) demands that an individual reside in the state for at least one (1) year prior to applying for a particular benefit; there, welfare benefits, and here, commercial licenses. In the latter case, the court held the requirement unconstitutional because it in appropriately inhibited travel by United States citizens among the various states and denied certain government benefits to citizens of one state to those of another (which is considered a violation of the Privilege and Immunities Clause as well as the Equal Protection Clause). The court did not say that such requirements would always be unconstitutional however, rather a durational residency requirement could be enforceable if it was shown to be a narrowly tailored restriction addressing a compelling government issue.

    In Shapiro v. Thompson, the state claimed that it had an interest in discouraging especially needy individuals from moving to the state for benefits so that it could protect its finances from an influx of such individuals in need of benefits. The state also argued a need to efficiently budget its resources, something it claimed to be unable to do since there was no way of anticipating how many needy individuals might move to the state and apply for benefits. The court found neither motive to be sufficiently “compelling” however and rejected the state’s arguments.

    Here, Trinity County’s durational residency requirement also seems to lack a narrowly tailored and compelling government interest. According to a local media outlet, upon passing the ordinance, the Board of Supervisors indicated that the durational residency requirement was intended as a protection “for their local communities.” Specifically, Carson Anderson, the Senior Planner for Trinity County, stated that “[t]he board recognize[d] the land rush phenomenon in other jurisdictions” that legalized cannabis production and that they, Trinity County did not “want to see a lot of outsiders pouring in.” (See http://kymkemp.com/2016/09/01/trinity-supes-pass-marijuana-ordinance-one-year-residency-500-permit-cap/.) These statements seem to clearly indicate an understanding that the license constitutes a benefit as well as the county’s an intent to limit the offering of that benefit to individuals who have resided in their particular jurisdiction for a minimum length of time – just like in Shapiro v. Thompson. It seems unlikely that such an interest would be deemed compelling since it is clearly intended, just like in Shapiro v. Thompson, to discourage outsiders seeking a benefit from moving to the jurisdiction.

    As such, the one (1) year residency requirement may well be vulnerable to attack for those willing to forge the path. Anyone interested in making such a challenge would require what is referred to as “legal standing” – in other words, someone who has a legal basis to contest the requirement in a court of law. Generally speaking, someone has standing when they have been directly harmed by the law being challenged. In this instance, a valid challenger would be someone who has moved to Trinity County, applied for the license, and already been denied based on the residency requirement. Someone who was close to the one (1) year residency at the time of denial also shows the sheer arbitrariness of the requirement and would thus be ideal. If you believe that you fit this description and are interested in challenging the requirement, we invite you to contact our office using the information below.

    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 with regards to California cannabis compliance and laws from the Law Office of Omar Figueroa, please contact us at (707) 829-0215.

     

  • Planning to Hire Local? Be Aware of Employment Laws.

     

    As local authorities begin drafting and, in certain circumstances even finalizing, local ordinances for cannabis licensing, prospective licensees are faced with a number of considerations about how to structure their company so as to optimize the likelihood of obtaining a license. One factor several jurisdictions, such as Sonoma County, have proposed or adopted is giving priority licensing to companies that intend to “hire local.”

    Many cannabis companies instinctively adopt a “local-first” ethos as part of their core values. However, when structuring business operations, companies must keep in mind the myriad local, state, and federal employment laws that affect the way in which it may operate.

    Federal law prohibits companies from denying employment to an individual if the denial is based on certain criteria that are unrelated to one’s ability to perform the job at hand. The federal criteria includes: age, disability, genetic information, harassment, national origin, pregnancy, race or color, religion, and sex.

    However, some states, and even some municipalities, have their own laws that offer even broader protection. California, for example, has additional protected classes upon which an employer may not discriminate in the hiring process. In California, protected categories include: race or color, ancestry or national origin (including language use restrictions), religion or creed, age, mental or physical disabilities, medical condition, genetic information, sex or gender (including pregnancy, childbirth, breastfeeding or related medical conditions), marital status, sexual orientation, gender identity or gender expression, or military and veteran status.

    While the federal and state lists inevitably overlap to a certain extent, a company must comply with the most restrictive set of laws applicable to its location. Moreover, the intent of the employer is not the deciding factor when determining whether improper discrimination has occurred. Rather, the fact that a particular practice has the effect of discrimination is sufficient to create a legal issue. This means that even a company with the best of intentions can run afoul of employment laws if otherwise valid practices have the effect of discrimination.

    This issue sometimes arises with respect to local-preference hiring practices.  By way of an example, say a company has adopted a hiring practice whereby they give preference to individuals who live in the same city as the company is headquartered in and that city happens to have a population that is skewed to a particular demographic; the applicant pool is therefore also going to be skewed towards that disproportionate demographic. In such a scenario, if that demographic is skewed with regards to race or ethnicity, for example, the company’s hiring practice has the effect of discriminating based on race and ethnicity. This is true, even if done without the intention to discriminate based on race or ethnicity, but rather to simply benefit “locals,” without regard to race or ethnicity.

    For example, according to the 2010 United States Census, 66.1% of Sonoma County residents self-identified as “White alone, not Hispanic or Latino”, whereas 40.1% of Californians self-identified as “White alone, not Hispanic or Latino.”  On the other hand, 3.% of Sonoma County residents self-identified as “Asian alone”, whereas 13.0% of Californians self-identified as “Asian alone.”  Similarly, 1.6% of Sonoma County residents self-identified as “Black or African American alone”, whereas 6.2% of Californians self-identified as “Black or African American alone.”  In other words, compared to the State of California as a whole, Sonoma County has a greater percentage of individuals self-identifying as  “White alone, not Hispanic or Latino” and a smaller percentage of individuals self-identifying as “Asian alone” or “Black or African American alone.”  Because of these demographic disparities, a hiring plan that favors local applicants (Sonoma County residents) may have the effect of discriminating based on race or ethnicity, even if done without the intention to discriminate.

    When the effect of discrimination arises, an employer may yet avoid liability if it can prove that the hiring criterion was job-related and consistent with business necessity; however, this is a fairly difficult standard of review, especially if reasonable alternatives with a less discriminatory effect exist. As such, companies looking at licensing in areas that have a less-than-varied demographic with regards to any of the protected classes should be wary of a local preference hiring plan and consult with an attorney prior to implementation.

    For more information, visit the California Department of Fair Employment & Housing’s website.

  • Court Update from San Diego in Case of Lawyer Jessica McElfresh

    Court update from the San Diego hearing in the Jessica McElfresh case, which took place on July 7, 2017 in Department 36 on the third floor of the Main Courthouse located at 220 West Broadway, before the Honorable Laura Halgren.

     

    BACKGROUND

    Jessica McElfresh is a well-known San Diego lawyer who has practiced cannabis law for years. She is facing several cannabis-related felony charges, filed by Jorge Del Portillo of the San Diego County District Attorney’s Office after Ms. McElfresh helped secure a tremendous appellate victory in an asset forfeiture case unsuccessfully prosecuted by the same Jorge Del Portillo of the San Diego County District Attorney’s Office. At issue was whether legal documents and digital data seized from attorney McElfresh’s home and office pursuant to the search warrant were protected under the attorney-client privilege.

     

    TAKEAWAY

    The good news is that Judge Halgren will not rely on the federal prohibition on cannabis in deciding claims of privilege, contrary to the prosecution’s position that the federal prohibition on cannabis means that the crime-fraud exception controls. Judge Halgren stated that no further argument is needed on the federal prohibition, as the search warrant was based on purported violations of state law, not federal law, and probable cause was based on an analysis of state and local law. This was a relief to many lawyers present, who were concerned that the Court would go along with the prosecution’s overreaching contention that the crime-fraud exception to attorney-client privilege swallowed the privilege entirely because, well, because federal law.

    The Court declined to issue a final ruling on the motions until the special master’s report came in. (A special master is a court-appointed adjudicator of time-consuming issues, in this case, deciding claims of privilege with respect to voluminous documents and electronic files.

    The Court noted that it had not been presented with a declaration from Ms. McElfresh showing that the accused attorney has an immediate need for the return of seized items in order to conduct her law business, hinting that if the Court were to be presented with such a declaration, the Court may be inclined to make a ruling favorable to the defense.

    The next hearing will take place in two weeks, on July 21 at 2:30 p.m. in Department 36 on the third floor of the Main Courthouse located at 220 West Broadway, before the Honorable Laura Halgren.

     

    DETAILED DESCRIPTION OF HEARING (FOR LAW GEEKS)

    Defendant Jessica McElfresh was represented by the mighty Eugene Iredale, and the prosecution was represented by Jorge Del Portillo.

    You can compare their listings on the State Bar web site:

    http://members.calbar.ca.gov/fal/Member/Detail/75292

    http://members.calbar.ca.gov/fal/Member/Detail/241474

    The matter was set for a hearing on the accused’s Motions for Return of Property, Narrowing Scope of Search Warrant, Return of Illegally Seized Items, Return of Privileged Material, and Sealing Pending In Camera Review.

    The hearing commenced with about a dozen lawyers entering appearances on behalf of their current clients (clients formerly represented by Jessica McElfresh) to assert the attorney-client privilege. Mr. Iredale agreed to provide the court with a comprehensive list of counsel and clients asserting privilege.

    Judge Halgren noted she is in trial and only had until 10 a.m. She said she did not want to hear more about the timing of the search warrant in relation to the court order issued by Judge Ipema (to return funds seized from co-defendant Slatic in an asset forfeiture proceeding), meaning, she did not want to hear about retaliatory and vindictive prosecution. There was no more discussion of this topic during the hearing.

    Judge Halgren stated that no further argument was needed on the federal prohibition, as the search warrant was based on purported violations of state law, not federal law, and probable cause was based on an analysis of state and local law. This was a relief to many lawyers present, who were concerned that the Court would go along with the prosecution’s overreaching contention that the crime-fraud exception to attorney-client privilege swallowed the privilege entirely simply “because federal law.”

    Judge Halgren did issue a tentative ruling in favor of the defense with respect to medical records pertaining to Ms. McElfresh and her father, who passed away years ago. She said medical records of patients are protected by a right of privacy in the California Constitution, that the search warrant does not encompass such medical records, that there is no basis for overcoming their confidentiality, and that the defense should expect the records to be returned.

    The prosecutor, Mr. Del Portillo, argued that if Ms. McElfresh has a medical marijuana recommendation, or is in possession of recommendations, that is evidence either of an affirmative defense (a reference to the medical cannabis defense, which technically is a limited immunity from prosecution rather than an affirmative defense) or evidence of her joining a criminal conspiracy.

    If Ms. McElfresh is part of a collective, argued Del Portillo, she is part of a conspiracy. Judge Halgren stated that the Court does not see the search warrant as authorizing a search of medical records for defendant’s medical marijuana recommendation, but that the Court will not issue a final ruling until it obtains the special master’s report.

    With regard to the defense challenge to the overbreadth of the search warrant with respect to electronic searches, Judge Halgren stated that the Court did not view the search warrant as authorizing an electronic search term for Ms. McElfresh’s name (and thereby a search of each and every document containing Ms. McElfresh’s name), but rather clarified that the search is to be focused on Ms. McElfresh in connection with the legal entities the Court “found probable cause for.”

    The prosecution gave a status update on the electronic search: the items should be imaged and the originals ready to return by the end of next week, but had yet to be analyzed.   Defense counsel Iredale requested that, before any search takes place, the defense be given a list of search terms, so there is an opportunity for correction “before the bell that cannot be unrung is rung.” The Court ordered the prosecution and defense to meet and confer to try to narrow the execution of the search warrant so that the search does not exceed the scope of the search warrant (interpreted in light of the court’s clarifying statements.)

    Judge Halgren noted that she had not been presented with a declaration from Ms. McElfresh showing that the accused attorney has an immediate need for the return of seized items in order to conduct her law business, hinting that if the Court were to be presented with such a declaration, the Court may be inclined to make a ruling favorable to the defense.

    A discussion ensued about verifying the authenticity of imaged copies of seized digital materials, and the Court suggested that the prosecution should keep the original electronic items and provide an imaged copy to the defense.

    Defense counsel Iredale requested to be given a copy of the special master report in advance of its publication to the prosecution so that the defense would have an opportunity to object to the inadvertent or unintentional disclosure of privileged information in the report (for example, if the special master itemizes a file in a way that discloses the nature of a privileged communication.) The Court suggested the parties meet and confer with the special master, Mr. Martin.

    Mr. Iredale previewed an issue that he wanted to brief more thoroughly: the special master is not allowed to review the contents of seized material, but only to peruse the material in order to categorize it. Prosecutor Mr. Del Portillo said the prosecution disagreed with that position, and argued that when the attorney is a target of a criminal investigation, no special master is required, and that the prosecution had gone above and beyond the call of duty by having a special master. The defense disagreed, of course.

    Judge Halgren stated the Court needed to hear from the special master, Mr. Martin at the next hearing; the Court did not want to guess. At the status hearing on July 21, the Court also wanted to hear from the computer lab about its timetable.

    The Court further stated that — contrary to the prosecution’s position that the crime-fraud exception applies to any attorney-client communications that could be used as evidence of a violation of 11379.6(a) (Manufacturing by means of ethanol extraction) — the search warrant does not allow examination of all client files to see if there’s evidence of criminal activity.

    Finally, Judge Halgren granted Ms. McElfresh permission to travel freely out of state, but would need to obtain a travel order in order to leave the country.

    The next hearing will take place in two weeks, on July 21 at 2:30 p.m. in Department 36 on the third floor of the Main Courthouse located at 220 West Broadway, before the Honorable Laura Halgren.

     

  • City of Santa Rosa Releases Draft Comprehensive Cannabis Policy

    Santa Rosa released their draft comprehensive cannabis ordinance on June 30, 2017. The draft is more permissive than most in the North Coast area, and indicates Santa Rosa’s desire to become a hub for Northern California cannabis activity. (See here for a draft land use policy chart.)

    The draft ordinance would allow for all license types under MAUCRSA except for “microbusiness.” There is no separate Processor, Packaging & Labeling, or Infused Product Manufacturing permits, which will likely be types of state licenses based on the draft regulations that were proposed earlier this year. Adult use cannabis businesses would still be prohibited within the city of Santa Rosa. There would be standards imposed on all types of medical cannabis businesses related to security, inventory and tracking, building and fire permits, odor control, lighting, and noise.

    The ordinance would allow both volatile (“Level 1”) and non-volatile (“Level 2”) manufacturing. Level 1 manufacturing would be permitted with a Zoning Clearance in the BP, IL, and IG industrial zones, and Level 2 manufacturing would be permitted with a Conditional Use Permit in the IL and IG industrial zones. Manufacturers of edible cannabis products must obtain state certification as a food handler and a Sonoma County Health Permit.

    Testing laboratories would be permitted in the CO commercial zone with a Minor Conditional Use Permit, and in the BP, IL and IG industrial zones with a Zoning Clearance. Commercial cannabis cultivation would only be permitted in indoor or mixed-light environments, in a fully-enclosed space. Depending on the size of the facility, either a Conditional Use Permit (for sites 5,001 square feet and larger) or a Minor Conditional Use Permit (for sites up to 5,000 square feet) would be required.

    Medical cannabis retail facilities will be allowed in most commercial and industrial zones, and will require a Conditional Use Permit. Only medical cannabis retail facilities with a storefront that is open to the public would be able to conduct deliveries. Sales cannot be conducted exclusively by delivery under the draft ordinance. (This is in contrast with MAUCRSA, which states that medical cannabis retail licensees may conduct sales exclusively by delivery and do not have to have their storefront open to the public.) Drive-through or walk-up sales would also be prohibited. Medical cannabis retail facilities must be at least 600 feet from schools, at least 1000 feet from another medical cannabis retail facility, and can stay open between 9AM and 9PM seven days a week unless the review authority imposes more restrictive hours.

    On-site consumption would be allowed under certain circumstances if permitted by both local and state law. The Conditional Use Permit application for the cannabis business must state whether the use will include on-site consumption by patients, in addition to including other information. Employees of a medical cannabis retail facility who are qualified patients would also be able to consume on-site within designated spaces, provided it is in accordance with the local smoking ordinance and state law.

    Under the draft ordinance, commercial medical cannabis cultivation cannot take place outdoors, but rather must occur in a fully enclosed space. Depending on the size of the facility, either a Conditional Use Permit or a Minor Conditional Use Permit would be required. Commercial medical cannabis cultivators will have to abide by all applicable regulations governing the use of pesticides.

    Personal cultivation of both medical and adult-use cannabis would be permitted in all residential districts, but a Zoning Clearance would be required. For medical cannabis, a maximum of 100 square feet of cultivation space per patient would be allowed per residence, regardless of the number of patients living at the residence. For caregivers, a maximum of 500 square feet of cultivation space would be allowed (which shall correspond to no more than five qualified patients, who each get 100 square feet). Based on the California Supreme Court’s holding in People v. Kelly (2010) 47 Cal. 4th 1008, these limits are subject to challenge, since patients are legally permitted to cultivate and possess as much as their medical needs require. For adult use cannabis, no more than 6 plants may be grown per residence regardless of the number of adults living there. A number of other requirements also apply to personal cultivation including adherence to the Best Management Practices for Cannabis Cultivation issued by the County Agricultural Commissioner.

    The draft ordinance would require permittees to pursue state licenses and comply with state licensing requirements. There would then be a distinction created between “operators in good standing,” who receive land use permit approval within 10 months of the date the state begins issuing licenses; and “new operators,” who receive land use permits after the 10-month transition period.

    The ordinance would allow multiple permits per site if this was allowed by both local and state law. Operators issued licenses for the same physical address shall maintain a clear separation between license types unless otherwise authorized by local and state law. Transfer of ownership or operational control of a permitted cannabis business would be possible with a zoning clearance. Special event permits would also be possible.

    The City of Santa Rosa will hold a community meeting on the draft ordinance on July 17 from 6-8PM at the City Hall Council Chamber (100 Santa Rosa Ave., Santa Rosa, CA). For more information, visit www.srcity.org/404/Cannabis-Program.

  • Bank of America Named as Defendant in Oregon Civil RICO Litigation

    Bank of America has been named as a defendant in the civil RICO (“Racketeer Influenced and Corrupt Organizations Act”) lawsuit filed in federal court in Oregon in June of 2017. This will send shock waves through the financial and insurance industries:

    “Defendant Bank of America, N.A. (“Defendant Bank of America”) is a nationally chartered banking association with its principal place of business in North Carolina. Defendant Bank of America does business in Oregon and holds a mortgage on the Beddow Property. As further described herein, Defendant Bank of America knowingly allowed the Beddow Property to be used for the production and processing of marijuana, and profited from such use.”

     

     

    The complaint goes on to state:

    “Defendant Bank of America holds the mortgage on the Beddow Property. As the mortgagee of the Beddow Property, Defendant Bank of America controls the Beddow Property. In November 2015, Bank of America received written notice that the Beddow Defendants, the mortgagors, were leasing the Beddow Property to Defendant Hidden Acres for the purpose of producing and processing marijuana, that marijuana was being produced and processed on the Beddow Property, and that the Beddow Defendants were investors in the marijuana production and processing operation. In violation of 18 U.S.C. § 856(a)(2), since November 2015, Defendant Bank of America has knowingly permitted the production and processing of marijuana to continue on the Beddow Property, and derived a profit from such activity via the monthly mortgage payments it received. Since November 2015, in violation of 21 U.S.C. § 843(b), Defendant Bank of America has communicated via mail with the Beddow Defendants to facilitate use of the Beddow Property in violation of 18 U.S.C. § 856(a)(2).”

    The plaintiffs are seeking treble damages, costs, and “other and further relief as the Court shall deem equitable.”  Interestingly, one of the two plaintiffs, Rachel McCart, is a lawyer and is representing herself and her sister.  There is no request for attorney’s fees.

    Oregon RICO complaint

    Oregon RICO docket

  • Governor Brown Signs SB-94; MAUCRSA Becomes California Law

    On June 27, 2017, Governor Brown signed SB-94, a budget trailer bill that makes significant changes to California’s commercial cannabis regulatory scheme. The new law, called the
    combines the medical and adult-use cannabis systems into one licensing structure with the same regulatory framework governing medical and adult use facilities.

    The license types for both medical and adult-use cannabis businesses will be as follows:

    1. Type 1 – Cultivation; Specialty outdoor; Small.
    2. Type 1A – Cultivation; Specialty indoor; Small
    3. Type 1B – Cultivation; Specialty mixed-light; Small
    4. Type 1C – Cultivation; Specialty cottage; Small
    5. Type 2 – Cultivation; Outdoor; Small
    6. Type 2A – Cultivation; Indoor; Small
    7. Type 2B – Cultivation; Mixed-light; Small
    8. Type 3 – Cultivation; Outdoor; Medium
    9. Type 3A – Cultivation; Indoor; Medium
    10. Type 3B – Cultivation; Mixed-light; Medium
    11. Type 4 – Cultivation; Nursery
    12. Type 5 – Cultivation; Outdoor; Large
    13. Type 5A – Cultivation; Indoor; Large
    14. Type 5B – Cultivation; Mixed-light; Large
    15. Type 6 – Manufacturer Level 1 [non-volatile solvents]
    16. Type 7 – Manufacturer Level 2 [volatile solvents]
    17. Type 8 – Testing Laboratory
    18. Type 10 – Retailer
    19. Type 11 – Distributor
    20. Type 12 – Microbusiness

    Licenses will be designated as either “M” (medical) or “A” (adult-use), except for testing laboratories which will be able to test both medical and adult-use cannabis products. The requirements for “M” and “A” licenses are the same unless otherwise specified. As currently written, the cross-licensure restrictions from MCRSA were mostly removed, so a person or entity can hold two or more licenses in different categories except for testing laboratories, which must be totally independent. Also, large cultivators, which will not be allowed until 2023, cannot hold distribution or testing licenses but can hold all other license types. Additionally, the premises of each license must be separate and distinct. A person can also hold both “M” and “A” licenses, but it is unclear at this point whether co-location of M and A licensees will be allowed.

    A big victory for small farmers is the removal of an independent distributor requirement. Distribution is still a required process, but now any license holder (except testing labs and large cultivators) can apply for a distributor license.

    One of the most significant changes relates to local control. Under MCRSA, an applicant was not eligible for a state license until they had a local permit or approval. Under AUMA, an applicant did not have to first obtain a local permit, but could not be in violation of any local ordinances or regulations. MAUCRSA adopts a method similar to AUMA, where an applicant may voluntarily provide proof of a license, permit, or other authorization from their local jurisdiction, but this is not required. Instead, the burden is on the local jurisdiction to provide the state with its ordinances and regulations related to commercial cannabis and to designate a contact person who will contact the state if local ordinances or regulations change, and on the state licensing agency to check with the local jurisdiction to see whether an applicant is in violation of local law. If the local jurisdiction does not respond within 60 days saying the applicant is violating local law, then the licensing agency will presume the applicant is in compliance.

    You can read the full text of the new law here: Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA)

    For more details about the changes in MAUCRSA, check out our previous post, “Legislature Consolidates MCRSA and AUMA into MAUCRSA”: http://www.omarfigueroa.com/posts/

     

  • Legislature consolidates MCRSA and AUMA into MAUCRSA


    On Thursday June 15, the California Senate and Assembly passed two bills, SB-94 and AB-110, which are the state legislature’s versions of Governor Brown’s Trailer Bill. The Trailer Bill is the administration’s effort to reconcile the medical and adult use cannabis systems in California. Now that these bills have passed, Governor Brown has until July 1 to sign them into law, which he is expected to do. The law would then go into effect immediately once signed.

    We contacted the Bureau of Medical Cannabis Regulation to ask what would happen next. Their official response was:

    “The bureau will withdraw the proposed MCRSA regulations and propose a new set of regulations consistent with the changes in the law. However, public comments on the proposed MCRSA regulations are still very important. Many of the provisions in the MCRSA proposed regulations will carry over to the new regulations. Public comment from the MCRSA proposed regulations will provide information for the bureau to use when crafting any new regulations.”

    The emergency rule-making process will most likely be used for the next round of proposed regulations.

    Below are some of the main changes coming soon to California cannabis.

     

    Name of the Law and Rebranding of Regulatory Agency

    The new name for the combined medical and adult use cannabis regulatory systems is the “Medicinal and Adult Use Cannabis Regulation and Safety Act” (MAUCRSA–we think this would be pronounced MAO-KUR-SA) (BPC §26000). The Bureau of Medical Cannabis Regulation will be renamed the “Bureau of Cannabis Control” (BPC §26001(e)).

     

    License Types and Combinations

    The license types for medical and adult use cannabis operations will be the same. There will be no transporter or producing dispensary licenses. Licenses will be identified as medical or adult use with an “M” or “A,” respectively, except for testing laboratories which shall not be designated as either. The requirements for M-licenses and A-licenses shall be the same, unless otherwise specified (BPC §26050(b)). Regarding which combinations of licenses a person may hold, the law removes MCRSA’s limitation on holding licenses in more than two separate categories. Large cultivators, which will not be allowed until 2023, cannot hold distribution or testing licenses but can hold all other license types.

     

    Definition of “Owner”

    The new law eliminates the distinction between public and private companies; the threshold is 20% interest in the company to be an owner; and the CEO of a company (if applicable) ; and all members of the Board of Directors of a nonprofit (if applicable); and anyone who exercises direction, management or control of the company (if applicable) (BPC §26001(al)).

     

    Delivery

    Deliveries may only be made by a licensed retailer or microbusiness (BPC §26090). However, retailers are allowed to conduct business exclusively by delivery. Such a retailer must still have a licensed premises, but the premises may be closed to the public (BPC §26070). Deliveries includes the use of technology platforms that are either independently licensed or owned and controlled by another licensee (BPC §26001(p)).

     

    Volatile Solvents

    The definition of “volatile solvents” has been completely changed, and no longer includes references to specific compounds. Instead, a volatile chemical is defined by MAUCRSA as “a solvent that is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures.” (HSC §11362.3(b)(3)).

     

    Lab Testing

    The bureau will issue testing laboratory licenses, but these licenses will not be designated as “M” or “A” (BPC §26050(b)). Holders of a testing laboratory license may not hold a license in any other category (BPC §26053(b)). Testing laboratories are responsible for obtaining samples and transporting them back to the laboratory

     

    Distribution

    Transportation of cannabis can only be done by licensed distributors (BPC §26070(a)(2)), but anyone, except testing laboratory license holders, can apply for a distributor license (BPC §26110).

     

    No More Prohibition on ABC Licensees Holding Cannabis Licenses

    MCRSA and AUMA prohibited a holder of an alcohol license from obtaining a license for commercial cannabis. The new legislation does away with that prohibition. Instead, the law would prohibit any cannabis licensee from serving alcoholic beverages or tobacco on the licensed premises (BPC §26054).

     

    Special Events

    Temporary event licenses that would allow on-site consumption may be available, if all participants are licensed and the local jurisdiction allows it (BPC §26200(e)).

     

     

  • Cannabis Codes of California: An Instant Classic!

    North Bay Bohemian

    (Original article here) When I worked in New Orleans as an online reporter most of my work was in the criminal justice arena—police, the courts, the notorious Orleans Parish Prison. It was intense and difficult work at times and as a newcomer to that city around 2009 I arrived in the aftermath of Hurricane Katrina, and all the horrible police-related stuff that went on after the storm. There was a built-in bloc of institutional and historical knowledge that I had to get up to speed on, and quick. The work was intense and difficult but it was never intimidating.

    That was not the case when I was doing some freelance work down in New Orleans for the local daily, and got assigned to cover the annual Satchmo Festival in the French Quarter, the celebration of Louis Armstrong.

    And let me tell you that I never felt, as a reporter, anything approaching the angst I felt when I sat down to write the fateful words, “Louis Armstrong” for publication for the first time, in a town where every other person is an armchair Armstrong scholar ready to pounce on any mis-reported fact about the jazz great. And the other person is a trumpet player or some other jazzbo steeped in the living history of New Orleans jazz.

    I confess that I feel the same way any time I sit down to write a story in the Bohemian about cannabis in California (despite the fact that it’s a fact that Satchmo was a total pothead): I feel totally intimidated. I am going to screw this up.

    Why this horrible feeling? Same reason: There are thousands upon thousands of people in the state, many in the North Bay, with lots of deep history and knowledge in this area, and given the complicated and intersecting medical- and recreational-use laws now on the books—it’s hard to keep up! With so many moving parts and competing and/or complementary cannabis constituencies, it can be hard to get out of the weeds to see the weeds for the trees for the forest, to figure out what the news hook is—or something like that.

    As with the Satchmo scholars, people in the North Bay are invested, and often heavily so, and for decades, in their chosen field of study and celebration. Every time I report one of these pot stories, I feel that same terror of being exposed as a canna-fraud should I misrepresent some crucial fact or bollix some niggling detail about a particular strain and who is responsible for it.

    But not anymore! Enter Omar Figueora, Sebastopol cannabis lawyer and the recent author of the hardcover instant classic, Cannabis Codes of California.

    With this handy, exhaustive and essential guide to cannabis-related law in the state, I’m no longer intimidated at the thought of reporting on the latest update on cannabis taxation, or distribution, or the black market, or the medical-community’s concerns, the mom-and-pop growers, the Big Cannabis operators—etc. I’ve got Omar’s comprehensive Codes to see me through.

    Cannabis Codes of California isn’t a novel but it does have a built-in plot-line that lays out the law at various junctures in California social and political history. Omar gives a brief upfront history of cannabis in the state and the various moments where legislators weighed in on some aspect or another of the industry: For example, the 1996 landmark medical-use act, is reprinted in its (short but revolutionary) entirety, along with relevant penal codes, fish and wildlife code, health and safety, taxation—et al.

    This is a dense and delightful legal-reference book whose content is delivered in a nice, big fat font size for ease of reading among elders of the cannabis community. It’s a timely and useful guide, a greatly informative cover-to-cover read (or casual flip-through) for anyone, myself included, who is intent on having a working, if not expert, knowledge of this fascinating and ground-breaking American experiment in cannabis freedom—and without fear of hearing from some know-it-all canna-crank from NORML if I screw something up in reporting on the latest twist and turn in the law. I got the law, or at least this estimable legal guide, on my side now—and you can, too. Cannabis Codes of California is available on Amazon.com.

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