Category Archives: Marijuana Law

Pennsylvania Announces the First Phase of Permit Applications for Grower/Processors and Dispensaries.

Yesterday, Secretary of Health, Dr. Karen Murphy of the Pennsylvania Department of Health (“DOH”) announced that applications for medical marijuana grower/processors and dispensaries will be available at the Pennsylvania DOH’s website, www.health.pa.gov, beginning January 17, 2017. Permit applications will be accepted from February 20, 2017 until March 20, 2017.

In less than a year, Pennsylvania’s Medical Marijuana Act (“MMA”) has gone from enactment to the first phase of implementation. Pursuant to chapter 6 of the MMA, Section 601 authorizes grower/processors and dispensaries as the only entities authorized to receive a permit and operate as a medical marijuana organizations and grow, process or dispenses medical marijuana.

Section 602(a) of the MMA generally requires all applications to include:

1. Verification of all principals, operators, financial backers or employees of a medical marijuana grower/processor or dispensary.
2. A description of responsibilities as a principal, operator, financial backer or employee.
3. Any release necessary to obtain information from governmental agencies, employers and other organizations.
4. A criminal history record check.
5. Details relating to a similar license, permit or other authorization obtained in another jurisdiction, including any suspensions, revocations or discipline in that jurisdiction.
6. A description of the business activities in which it intends to engage as a medical marijuana organization.
7. A statement that the applicant: (i) Is of good moral character; (ii) Possesses the ability to obtain in an expeditious manner the right to use sufficient land, buildings and other premises and equipment to properly carry on the activity described in the application and any proposed location for a facility; (iii) Is able to maintain effective security and control to prevent diversion, abuse and other illegal conduct relating to medical marijuana; and (iv) Is able to comply with all applicable Commonwealth laws and regulations relating to the activities in which it intends to engage under this act.
8. The name, residential address and title of each financial backer and principal of the applicant. Each individual, or lawful representative of a legal entity, shall submit an affidavit with the application setting forth: (i) Any position of management or ownership during the preceding 10 years of a controlling interest in any other business, located inside or outside this Commonwealth, manufacturing or distributing controlled substances; and (ii) Whether the person or business has been convicted of a criminal offense graded higher than a summary offense or has had a permit relating to medical marijuana suspended or revoked in any administrative or judicial proceeding, and
9. Any other information the department may require.

Section 607 of the MMA sets forth the following fees and requirements to obtain a permit.

For a grower/processor:  1) An initial nonrefundable application fee of $10,000 must be paid; 2) A permit fee of $200,000 is required at the time of application. (The fee shall be returned if the permit is not granted); and 3)  A grower/processor must have at least $2,000,000 in capital, $500,000 of which must be on deposit with a financial institution.

For a dispensary: 1) An initial nonrefundable application fee of $5,000 must be paid: 2  A permit fee of $30,000 for each location must be paid. (The fee shall be returned if the application is not granted); and 3) A dispensary must have at least $150,000 in capital, which must be on deposit with a financial institution.

In October and November, the DOH drafted and published general regulations as well as specific regulations for both grower/processors and dispensaries. The regulations can be found at 28 PA. Code CHS 1141, 1151, and 1161.

Pursuant to 28 PA. Code §1141.23, no more than 25 permits will be issued for grower/processors and only one grower/processor permit per applicant. Additionally, no more than 50 dispensary permits will be issued and no more than five dispensary permits to one person. A dispensary permit may be used at no more than three locations.

28 PA. Code §1141.28 states the DOH shall publish in the Pennsylvania Bulletin notice of the initial permit application availability and the timeframe which they will be accepted. Only the form of application provided on the DOH’s website may be used and it must be submitted electronically.

Secretary Murphy further announced that this was the first phase of the program and that initially up to 12 permits will be issued for grower/processors and up to 27 permits will be issued for dispensaries, across Pennsylvania’s six medical marijuana regions. Secretary Murphy stated that “the decision for which counties will be issued permits in this first phase was determined by using the department’s medical data, as well as comments from more than 5,000 patients and nearly 900 potential grower/processors and dispensary applicants.” For further information on how many permits will be issued per each region please read the blog at http://cannabisindustrylawgroup.com/index.php/2016/12/21/pa-department-of-health-outlines-phase-i-of-medical-marijuana-program/

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Concerns on both sides when drafting a commercial lease for a medical marijuana business.

In the upcoming year, medical marijuana businesses will be applying for permits to conduct business in Pennsylvania as either a grower/processor or a dispensary. In my previous blog, I commented on how it may be significantly more costly to rent property for a medical marijuana business than a non-marijuana business as result of the risks landlords may face.

Because of the risks associated with leasing to medical marijuana business, it is in the best interests of both the landlord and potential medical marijuana tenants to tailor a commercial lease to address some of those risks.

From a landlord’s perspective, there are specific concerns which should be addressed in a commercial lease.

1. Use of the Premises. Pennsylvania will issue permits for both grower/processors and dispensaries. Any lease should designate what state lawful purpose the premises will be used for.

2. Indemnification. The business of growing, cultivating, and selling marijuana remains illegal under the federal Controlled Substance Act. A landlord should include in any commercial lease an indemnification clause requiring the tenant to defend and indemnify the landlord from any federal action against the tenant, including forfeiture.

3. Early termination. A landlord should seek to include an early termination provision in the lease which allows the landlord to terminate the lease should: 1) the tenant fail to comply with any state or local law; 2) the commencement of any action against the tenant; 3) entry of a judgment against the tenant; 4) seizure by any government authority, and 5) any event that cause the closure of the building.

4. Improvements. The MMA has specific requirements for any property housing medical marijuana businesses, including access and security requirements. Any potential lease should require the tenant to comply with all state and local regulations and ordinances, secure any all licenses, at the tenants own expenses, and require the tenant to remove, at its own expenses, any improvements and modifications made by tenant.

5. Utilities. Utility expenses for a medical marijuana business are likely to be very high, especially for a grower/processor. A landlord should require a tenant to reimburse landlord and/or pay directly if possible any all utilities that out of the ordinary and excessive.

6. Access. Under the MMA, there are very strict rules as to who may have access and enter into a medical marijuana business. The right of a landlord to enter the premises must be clearly outlined and comply with state law.

7. Environmental, debris and waste. Under the MMA, there are very strict procedures for storage and removal of marijuana waste which any lease will have to incorporate. Additional, any grower/processor will have to store, use, and dispose of materials which are subject to environmental regulation including pesticides and fertilizers. Any commercial lease will require compliance with all environmental laws and regulations.

From a tenant’s perspective, a tenant should address in a commercial lease the following.

1. Term. With the federal government’s position towards marijuana unclear and the state’s position on marijuana evolving, a tenant may not wish to lock into 5 – 10 year lease terms with multiple automatic renewals. Shorter 2- 3 year terms and less automatic renewal periods may be more practical.

2. Permits. Medical marijuana businesses will be granted permits from the state after application and compliance with all state regulations. Any commercial lease should require a landlord to reasonably cooperate with tenant in complying with all regulations in the application process and not to take any action which could negatively affect the tenants application for a permit, operation and renewal of the permit.

3. Occupancy and commencement. Any potential medical marijuana business will have to present an operating plan and a lease to obtain a permit from the state.  The problem is there is no guaranty that a permit will be granted by the state. A tent should look to include an out clause or contingency clause to allow the tenant to terminate the lease should tenant not be granted a permit. The tenant should also look to include a rent abatement provision pending approval of the tenant’s application for a permit.

4. Dispute resolution. Typically commercial leases will have a confession of judgment clauses and specify where the dispute will be heard and under what laws a dispute will be decided. A tenant will have to be careful and tailor any confession of judgment clause so it  is not triggered by a violation of federal law and/or violation of the CSA. Additionally, a tenant may want all disputes to be submitted to private arbitration and have Pennsylvania state law govern due to the federal illegal status of marijuana.

Both landlord and tenant will need to make sure there are medical marijuana related outs drafted into the commercial lease to protect from federal prosecution. Additionally, any lease should incorporate a waiver by both parties acknowledging that neither will use against the other marijuana’s illegal status under federal law as a claim or defense to any dispute arising under the lease.

When drafting a lease, both landlord and tenant will have to carefully navigate federal, state, and local statutes and ordinances.  The aforementioned are just some concerns which should be considered by both landlord and tenant in drafting a medical marijuana lease.

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Watch out for Higher Rents For Medical Marijuana Businesses

Any entrepreneur looking to participate in Pennsylvania’s Medical Marijuana program understands that one of the biggest expenses and concerns is the location of the operation of the marijuana business venture.  The Pennsylvania Department of Health is planning on issuing 25 permits for grower/processors and 50 permits for dispensaries (with up to three locations per each dispensary permit). Theoretically, that is a maximum of 175 properties throughout the state that can house a medical marijuana grower/processor or dispensary. The Medical Marijuana Act requires that all medical marijuana business be indoor and 1000 feet from the property line of the nearest school or daycare. There are additional requirements under the MMA that are primarily security related that must also be factored in when searching for a property to house the business.

Local zoning ordinances will also impact any search for a property to rent or buy.  Many townships and municipalities are enacting ordinances in anticipation of medical marijuana businesses setting up in their area.  Local ordinances may place additional requirements and restrictions on properties housing medical marijuana business so long as they are consistent with the MMA. Township zoning classifications and conditional uses, maximum square footage, entrance, signage, parking and distance between competing unrelated medical marijuana businesses in the same township are all within the township’s authority to regulate.

A new medical marijuana business in the state you can either buy or rent. Grower/processors may have larger amounts of capital available then dispensaries and elect to buy and build. The problem when you buy is that bank financing will likely be required and there is a good chance that banks and other lending institutions will charge higher rates due to the risks involved. Marijuana is still illegal federally and the new administration’s unclear position with regards to marijuana is creating a lot of fear and worry in the legal marijuana industry.  A legal business could still be subject to federal prosecution, shut down, and seizure causing default on loans and loss of collateral. Banks will look to protect themselves by charging higher rates if they accept the risks and provide financing to buy and build.

If a marijuana business elects to rent a property, the landlord is subject to risk of default on the lease if the business is shutdown.  Many potential landlords will have properties that are subject to mortgages.  A lose of rental income even for a short time could cause landlords to default on those mortgages.  Additionally, within the mortgage there is likely a default provision allowing banks to foreclose if any illegal business is conducted on the property.  Landlords could be subject to foreclosure by simply entering into a lease with a medical marijuana business.

So long as the Department of Justice’s focus was not on marijuana business legal under their respective state laws, banks have accepted these risks but with a new administration banks may start to have cold feet.

The point is all of these factors make it more of a seller’s market and give potential landlords an advantage when it comes to setting rental terms and rates. With all the risks involved, the statutory requirements, and the limited amount of locations, landlords will be able to charge rents higher than the going market rate.

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What The Nomination Of Senator Jeffrey Sessions as Attorney General Could Mean to the Legal Marijuana Industry.

On election day in November, I wrote a blog article outlining the states which were voting to legalize either recreational or medical marijuana. Eight states voted on election day to legalize marijuana in some form bringing the total number of states who legalized recreational marijuana to eight and medical marijuana to 29. 1 in 5 Americans now live in states where recreational pot is legal. National opinion favors the continued growth of the marijuana industry. Before the election, both candidates expressed support for medical marijuana at the very least. There currently is a policy by the federal government to not interfere with state intrastate commerce and the legal marijuana industry.

Following the election, President-elect Donald Trump nominated Senator Jeffrey Sessions of Alabama for attorney general. Senator Session is on the record as opposing the legalization of marijuana in any form. Sessions has called marijuana reform a “tragic mistake” and criticized FBI Director James Comey and Attorneys General Eric Holder and Loretta Lynch for not vigorously enforcing the federal prohibition. Earlier this year on the floor of the Senate, Senator Sessions said: “You can’t have the President of the United States of America talking about marijuana like it is no different than taking a drink… It is different…. It is already causing a disturbance in the states that have made it legal.” Session further said, ”good people don’t smoke marijuana.”

Such an antiquated way of thinking ignores the progress made by states with legal medical marijuana programs and shows no empathy for those individuals who currently benefit from medical marijuana. Sessions should spend a day with the cancer patient or the epileptic child who benefits from medical marijuana. His view also threatens to derail and drive the multi-billion dollar marijuana industry business back underground right at the time that it is starting to gain support in the legitimate investment world.

Other than the President–elect, there is no one with more power than Sessions to interrupt the growth the marijuana industry has experienced in the last two decades. The Justice Department under President Obama has been hands-off, issuing the Cole memos that basically say the federal government will not prosecute legal marijuana sellers or buyers in states where it is legal. As the new Attorney General, Senator Sessions could reverse the DOJ’s position and simply tear up the Cole Memos. With little more than the stroke of his pen, the new Attorney General could direct the enforcement of the federal law against marijuana and direct that federal law enforcement officers shut down legal marijuana operations and arrest growers, retailers and users.

Sessions would face at least one stumbling block in the the Rohrabacher-Farr amendment. The Rohrabacher-Farr amendment to annual appropriations bills prohibits the Department of Justice and the DEA from using federal money to target or prosecute state-compliant medical marijuana businesses. The problem with Rohrabacher-Farr amendment is that it must be renewed annually with each budget or it will expire.

No one is certain what President-elect Trump will do with regards to the legalization of marijuana. Trump’s exact views on marijuana remain mixed at best. While campaigning, he has expressed support for medical marijuana. However, he has also stated the recreational marijuana is bad and has spoken of undocumented problems with recreational adult use in states like Colorado. What clouds things even things even further is Trump’s expressed support for a state’s right to govern themselves. He is on the record as saying if the state voter for it that’s the law in the state. Moreover, he has routinely touted himself as pro business and it seems unlikely that he would interfere with the multi-billion dollar marijuana industry.

Some have argued that it would be political suicide for the Trump administration to go against a campaign promise on a hugely popular issue that is widely supported by voters even Republicans. But the marijuana industry is worried. With the nomination of Senator Sessions, it is facing uncertainty that could become a very real threat to its growth.

Updated December 12. 2017.  The U.S. Senate approved approved a stopgap  federal spending measure to fund the government through April 28, 2017 which included renewal of the Rohrabacher-Farr Amendment.

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Maine Allows for Marijuana Use in Workers’ Compensation

by Karl Voigt

If marijuana law is a particularly dynamic field of practice, then marijuana law as it pertains to Workers’ Compensation law is even moreso mutable. We have all seen news coverage of individual states trying to get a handle on changing legal standards with respect to marijuana growing, sales, and use. Only now are we beginning to see coverage of new stories that involve using marijuana to treat work injuries.

Two very new cases come to us from Maine, where medical marijuana is legal. Both come from the state’s Workers’ Compensation Board Appellate Division and both serve to advance the use of marijuana to treat injured workers’ chronic pain. In Bourgoin v. Twin Rivers Paper Company, WCB App. Div. No. 16-26 (August 23, 2016) and Noll v. Lepage Bakeries, Inc., WCB App. Div. No. 16-25 (August 23, 2016), the appellate reviewers essentially determined that federal law does not prohibit requiring the workers’ compensation employer and insurer to pay for medical marijuana.

While Maine does prohibit private health insurers from paying for medical marijuana, there is no such prohibition against workers’ compensation insurers paying for that treatment. Therefore, in Maine, so long as it is found “reasonable and proper”, a workers’ compensation insurer can be compelled to pay for medical marijuana.

Pennsylvania’s law is not quite this liberal; the Pennsylvania Worker’s Compensation Act requires that workers’ compensation insurance carriers pay for work-related medical treatment. Because the US Food and Drug Administration (FDA) has never categorized medical marijuana as medical treatment, insurers in Pennsylvania likely cannot be compelled to pay for medical marijuana

Regardless, the Maine employers challenged the judges’ rulings, arguing that federal law prohibits use of marijuana as a controlled substance. Paying for medical marijuana, they insisted, would put them at risk for federal prosecution, as the federal government’s authority to prosecute drug crimes supersedes Maine’s. The appellate Board, referring to the federal Justice Department’s own public statements that interfering with state medical marijuana laws is not one of its enforcement priorities, ruled that there was virtually no such risk of such prosecution.

Both cases ultimately allowed not just for the injured worker to use medical marijuana for treatment of chronic pain, but also compelled the workers’ compensation carrier to pay for that treatment. This is just the most recent ruling in this fledgling area of law. Stay tuned here for updates.

 

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OSHA Inspector’s Warrant Request DENIED

09/02/2016

One of the most common questions asked about OSHA Inspections is, “Do I have to let them in my business?” My short answer has always been – No you do not, but it is often advisable that you do so.

It is within your rights as a business owner to require that OSHA inspectors present a Warrant to enter your premises. However, history shows that OSHA is almost always granted a warrant. Furthermore, requiring a warrant usually only serves to alienate you from the inspectors and heighten their suspicion that you are hiding something.

A Magistrate Judge from the Georgia’s Northern District has decided that this is not necessarily an acceptable practice.  Magistrate Judge J. Clay Fuller held that OSHA needed to establish “probable cause” before they could obtain an expanded warrant to search a poultry plant.  The case arose when OSHA responded to a worker complaint and injury report at a poultry plant. OSHA has an obligation to respond to injury reports and this obligation is expressed to the extent that if an OSHA inspector is driving by a business and sees an ambulance in the parking lot they are expected to stop and at least briefly investigate the reason for the ambulance. Traditionally however, once an OSHA inspector is on site they will begin an inspection that far exceeds the area and scope of the injury or complaint that brought them there.

What does that mean exactly? An example – Business A reports an employee was injured by a garage door that fell and broke the leg of an employee while shooting a commercial.  OSHA shows up to investigate but rather than just inspect the area where the accident happens they inspect every corner of the facility, questioning employees who were not present or involved in the reported incident.  The OSHA inspector finds that the employer was not at fault for the injury that was reported, but fines the employer $40,000 for violations that are unrelated and which had resulted in no injuries.

The folks at the Mar-Jac Poultry Company objected to exactly this expansive practice.  When OSHA arrived they showed the OSHA inspector where the incident occurred, but declined to allow the OSHA inspector to begin an unrestricted inspection of their facility without a warrant.

OSHA applied for a warrant stating that they had a Special Emphasis Program which instructed them to investigate multiple aspects of Poultry related businesses, many of these aspects are unrelated to the reported injury at the company in question.  Magistrate Judge Fuller has held that merely having a program targeting a group does not create probable cause to come and inspect that organization.  Judge Fuller stated that if OSHA did not have to show probable cause then, “[these inspections could] become tools of harassment.” Judge Fuller acknowledged that the injury which was reported did provide probable cause for OSHA to investigate some aspects of the business which were related to the incident but recommended that a warrant to justify an inspection beyond that point should be denied.

A particularly interesting point is that Judge Fuller stated that a worker complaint was not sufficient justification for an OSHA inspector to receive a warrant to just waltz in and perform a wall to wall and top to bottom inspection. This makes sense as in criminal cases warrants have to be very specifically tailored and generally judges frown on signing warrants for “fishing expeditions.” Yet, OSHA has historically been able to say to a Judge, “Look an employee complained so we need access to inspect every corner of the employer’s facility” and Judges have generally said, “Okay, have at it.”

This decision by Judge Fuller is a major win for Business owners and those concerned with an ever expansive government bureaucracy. However, the case is now before the Federal District Court for the Northern District of Georgia who have the power to overturn Judge Fuller’s decision. We will provide updates as they become available.

If your business has had problems with OSHA or would like to know what you can do to protect yourself from OSHA inspections please contact our office at 888-313-0416.


Jonathan Moore is Prince Law Office’s in-house OSHA Consultant. He served as Manager of Corrective Actions and Director of Corporate Compliance for an Aerospace Manufacturing Company. He now attends law school at the Pennsylvania State University School of Law while working for Prince Law Offices.

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DOH Announces Important Updates On PA’s Medical Marijuana Program Including Draft Regulations for Growers/Processors.

On August 18, 2016, Secretary of Health, Karen Murphy held a press conference to give four important updates on Pennsylvania’s Medical Marijuana Program. One update was the previous announcement of John Collins named as the director of the Office of Medical Marijuana.

The biggest update was Secretary Murphy’s announcement that the Department of Health finished drafting temporary regulations for growers/processors. The DOH website includes two sets of draft regulations. The first is a general set of regulations focused primarily on the permit and application process. The second set of draft regulations is titled as specific set for growers/processors and is primarily focused on operational requirements. The draft regulations will be available for review and feedback on the DOH’s website until August 26, 2018. This is an important opportunity for those interested in Pennsylvania’s Medical Marijuana Program to help shape the regulations with any input and feedback.

The second update was the release of a survey on the DOH’s website seeking input from the patient and caregiver community. The update states that the survey’s purpose is to help in drafting regulations but the survey is primarily focused in what patient /caregiver information should be required in their respective applications and what information should be on the their respective identification cards. The questions concerning information visible on the identification cards may raise some issues with regards to privacy.

The third update was concerning Safe Harbor Letter. The Secretary announced that 53 Safe Harbor Letters had been approved to date and that the DOH is processing another ten more applications. The Safe Harbor Letter allows parents, legal guardians, caregivers and spouses of minors under the age of 18 certified with serious with medical conditions to posses marijuana in its approved from for the minor within Pennsylvania. The next question is where will these 53 possessors of Safe Harbor Letters obtain the approved form of medical marijuana. Maryland has just started to issue dispensary permits and that may in the near future be an initial source of medical marijuana.

If you would like to read more of Secretary Murphy’s updates, you may visit the website below.

Four Important Updates You Need to Know About PA’s Medical Marijuana Program

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