The nascent cannabis industry is much like a younger sibling, riding the wake of its forerunner, alcohol. In joining the vice industry’s consumer products market segment, the cannabis industry has had the benefit of being able to follow in the footsteps of the alcohol industry and anticipate potential upcoming obstacles. This use of the alcohol industry as a guinea pig can be readily observed in connection with the evolving legal and regulatory frameworks currently being formulated for cannabis. It is in this light that the June 26, 2019 U.S. Supreme Court decision in Tennessee Wine & Spirits Retailers Association v. Thomas, a case concerning certain Tennessee alcohol regulations, can offer some guidance and foreshadow the future of cannabis laws and regulations.
In Thomas, the Tennessee Wine and Spirits Retailers Association (a trade association of in-state Tennessee liquor stores), sought relief from the Supreme Court in their endeavor to have certain Tennessee state regulations -which required state residency for holders of alcohol licenses- upheld. Justice Alito and the Court ruled against the Association in their holding that such regulations were unconstitutional.
Although a number of other regulations requiring that alcohol license holders and applicants in Tennessee be residents … Keep reading
On May 30, 2019, the U.S. Court of Appeals for the Second Circuit —in an opinion delivered by the eminent Guido Calabresi— offered the cannabis industry a glimmer of hope in its pursuit of the federal legalization of marijuana. In the case of Washington et al. v. Barr et al., a set of plaintiffs challenged the DEA’s classification of marijuana as a Schedule 1 drug under the Controlled Substances Act (“CSA”). Most courts, including the SDNY (where the case originated), have had a general tendency to dismiss such cases, citing the preeminent precedent established in Gonzales v. Raich, which confirmed the supremacy of the federal government’s prohibition of marijuana over state legalization. The Second Circuit, in Washington, stopped short of dismissing the appeal from the SDNY and set up the opportunity for a potential challenge to the federal ban in the near future.
While the plaintiffs in Washington surmounted an incredible obstacle, by avoiding outright dismissal, the Court did not go so far as to provide them with the relief they sought. Instead, Calabresi and his peers opted to concur with the SDNY’s ruling that the plaintiffs had failed to fully exhaust their available alternative remedies … Keep reading
Retail sales of medical and recreational marijuana in the U.S. have been projected to reach $12 billion by the end of 2019. In Massachusetts, the total sale of recreational marijuana have topped $100 million last month according to data released by the Cannabis Control Commission (“CCC”). This is a significant rise from the CCC’s January report of nearly $24 million in recreational sales. However, statistics also show that at the beginning of this year only 4 marijuana licenses were held by Economic Empowerment Applicants (“EEA”) out of a total of 247 license applications – amounting to a mere 3 percent of all recreational license applicants qualifying as minority-owned.
At the foundation of Massachusetts’ cannabis legislation is a commitment to ameliorating the disproportionate harm done to minority communities as a result of the War on Drugs, specifically in the context of the prohibition on marijuana. Pursuant to St. 2017, c. 55, the CCC is required to ensure that members from communities that have been disproportionately harmed by the enforcement of marijuana laws are not excluded from the cannabis industry. As a result, the CCC established a system of priority review for EEAs who meet three out of the six criteria, … Keep reading
The cannabis industry has a corporate governance problem. It is a topic that legal analysts have discussed at length, and yet it continues to be an area that is especially important to emerging cannabis companies and mature cannabis companies alike.
In the world of startups and emerging companies, it is not uncommon to see founders sacrifice best corporate governance practices in an effort to become established faster and build their market presence. Early investors and shareholders are often tolerant of governance shortcomings as companies focus their energy on growth and market-share. After all, the consequences of lacking sufficient corporate governance controls are not always a clear deterrent in the early stages of a closely held company. However, many cannabis companies do not have the luxury of a normal growth period, with time to mature and adopt normal governance policies. With stringent (and ever-changing) regulatory requirements, and an ongoing demand for transparency, cannabis companies can avoid headaches (and potentially worse) by implementing strong corporate governance practices early on.
When it comes to corporate governance, best practices suggest that, among other things, (i) boards (whether board of directors or board of managers) should consist of diverse and independent members, (ii) management … Keep reading
In a post last week, we discussed the ongoing personal bankruptcy case In Re Adair, in which a United States Trustee is seeking to have the court dismiss a Chapter 13 plan of an individual that is employed by a “non-plant-touching” ancillary marijuana business. The Trustee argued that, as the debtor’s salary is paid by an employer that derives income from the sale of cannabis, which remains federally illegal, approval of the bankruptcy plan would “improperly involve a federal court in administering the fruits and instrumentalities of federal criminal activity”. This argument has also been made in other bankruptcy cases in which the debtors engage in activities related to the marijuana industry, resulting in a seemingly blanket refusal by the bankruptcy courts to confirm any plans involving state-sanctioned marijuana operations.
However, a significant chink in the armor occurred last week when the Ninth Circuit Court of Appeals issued a ruling in Garvin v. Cook, which affirmed a bankruptcy court’s confirmation of a Chapter 11 plan involving income derived from the sale of marijuana. The Trustee in Garvin objected to the plan in question based, in part, upon 11 U.S.C.A. § 1129(a)(3), which provides that “[t]he court shall … Keep reading
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