Tag Archives: Medical Marijuana

One company is trying to make a profit before Pennsylvania’s medical marijuana program commences.

Back in June of this year, the Pennsylvania Department of Health granted 12 medical marijuana grower/processor permits to the following companies:

Prime Wellness of Pennsylvania (Berks County)
Franklin Labs (Berks)
Pennsylvania Medical Solutions (Lackawanna)
Standard Farms (Luzerne)
Ilera Healthcare (Fulton)
AES Compassionate Care (Franklin)
Terrapin Investment Fund 1 (Clinton)
GTI Pennsylvania (Montour)
AGRiMED Industries of PA (Greene)
PurePenn (Allegheny)
Holistic Farms (Lawrence)
Cresco Yeltrah (Jefferson)

Under Pennsylvania’s Medical Marijuana Act, in order to obtain a grower/processor permit, an applicant had to pay a nonrefundable $10,000 initial application fee and along with $200,000 for the actual permit. The grower/processor also had to prove it had $2 million in capital on hand. Despite the steep price, the health department still received 177 applications for grower/processor permits and generated $1,770,000.00 in nonrefundable application fees.(The Department of state also received 280 applications for a dispensary permit which required payment of a $5,000.00 in non refundable initial application fees, or $1,400,000.)

Of the 177 applicants, only 12 grower/processor permits were issued so the demand was great. Now apparently one of the successful permit applicants is trying to sell the rights to his permit. Franklin Labs, LLC in Reading, Berks County is willing to sell 100% of Franklin Labs including the grower/processor permit for $20 million dollars. Franklin Labs also applied for a special clinical research (CR) license, and only applied for the grow permit as a backup plan. The CR license would allow the company to partner with a teaching hospital to conduct research on medical cannabis. Companies that are granted CR permit will receive permits to open a growing facility as well as six storefront dispensaries for selling oil-based cannabis products.

Under Pennsylvania’s Medical Marijuana Act, the issuance of a permit is a revocable privilege and any permit issued may not be transferred to any other person or location. Apparently, Franklin Labs is trying to circumvent the Act by selling of the whole company lock, stock, and barrel. The Department of Health has issued a statement saying that “no permit may be sold or transferred without approval from the Department of Health” but what about an entire company. Needless to say, this has caused some unsuccessful applicants to requests that Department of Health revoke Franklin Labs’ permit.

There is significant risk in purchasing Franklin Labs and its permit for $20 million dollars. The cost of applying for a permit during Phase II of the applications will still be $210,000.00. While there is no guarantee, the risk is still only the non-refundable $10,000.00 and whatever costs are incurred as part of the application process. While those costs could be significant, they are not likely to near $20 million dollars. Additionally, the Pennsylvania Department of Health could revoke the permit at any time or choose not to re-new it the next year. Despite the risk, Medical Marijuana is big business and it would not surprise me if an existing company in a state such as Colorado or California saw the sale of Franklin Labs as an opportunity to expand into Pennsylvania.

Advertisements

Leave a comment

Filed under Marijuana Law, Uncategorized

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/

Leave a comment

Filed under Marijuana Law, Uncategorized

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.

Leave a comment

Filed under Marijuana Law, Uncategorized

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.

Leave a comment

Filed under Marijuana Law, Uncategorized

Election Day For Marijuana

It’s election day for marijuana. The number of states legalizing marijuana for medicinal and/or recreational use continues to grow. Five more states have ballot initiatives for the legalization of recreation/adult use marijuana and four more states have medical marijuana ballot initiatives.

Arizona, California, Maine, Massachusetts, and Nevada are all states with existing medical marijuana programs who are now voting on ballot initiatives that would legalize recreation/adult use marijuana for state residents 21 years or older.

Arizona is voting on Proposition 205, The Legalization and Regulation of Marijuana Act. Proposition 205 would legalize the possession of up to 1 ounce of marijuana,
allow adults to grow up to 6 marijuana plants in an enclosed, locked space within their residences, and possess the marijuana produced by those plants in the location where it was grown. A limit of the total marijuana plants grown in a single residence would be limited to 12.

Proposition 205 would allocate taxes to school construction, full-day kindergarten programs, public drug education and more.

Proposition 205 appears likely to pass as register voters support it 50 % to 40%.

California is voting on Proposition 64, The Adult Use of Marijuana Act (AUMA). AUMA would legalize the possession of 1 ounce of marijuana flower, or up to 8 grams of cannabis concentrate, the cultivation of up to 6 plants, and the industrial cultivation of industrial hemp.

AUMA would create a tax and regulatory system with the tax resources being allocated toward environmental protection and remediation, youth substance abuse prevention, medical marijuana research and local governments.

California Polls suggests that voters support passing AUMA 52% to 41%.

Maine voters will have The Marijuana Legalization Act on the ballot. The Maine act would legalize for recreational purposes the possession of up to 2 1/2 ounces of marijuana and the possession, cultivation and transportation of up to 6 flowering marijuana plants, 12 immature marijuana plants and unlimited seedlings, and possession of all the marijuana produced by the marijuana plants at that person’s residence.

The Marijuana Legalization Act appears likely to pass as polls show it is supported by 50 % – 41 % margin.

The Massachusetts initiative would legalize possession up to 1 ounce of marijuana outside of an individual’s residence, possession of up to 10 ounces of marijuana in an enclosed, locked space within their residences, growing up to 6 marijuana plants in an enclosed, locked space within their residences and possess the marijuana produced by those plants in the location where it was grown.

No more than 12 total marijuana plants can be grown in a single residence.

Massachusetts initiate also seems likely to pass.

Nevada is voting on legalizing recreational/adult use marijuana allowing possession of 1 ounce of marijuana and allowing anyone who does not live within 25 miles of a marijuana store to grow up to 6 marijuana plants.

Nevada is also creating a tax and regulatory system with taxes being allocated to supporting schools and K-12 education.

Four states are voting on legalizing medical marijuana, Arkansas, Florida, Montana and North Dakota.

Arkansas is voting on Issue 6, the Arkansas Medical Marijuana Amendment, which would legalize medical marijuana for 17 qualifying conditions. It is uncertain whether Issue 6 will pass.

Florida’s initiative, Amendment 2, is likely to pass as recent survey suggest that 73% percent of the voters support it.

Montana is voting to reinstate medical marijuana laws after legislative restrictions made it impossible for them to work.

North Dakota is voting on Initiated Statutory Measure 5, The North Dakota Medical Marijuana Legalization Initiative, which would legalize medical marijuana for debilitating medical conditions. Recent polls suggest 47 % support it as opposed to 41% who don’t. 50% is required to pass.

Currently 4 states have legalized recreational/adult use marijuana and 25 states have legalized some sort of medical marijuana program. If all ballot initiatives pass, a total of 28 states will have legalized marijuana in some form. Nine states will have legalized recreation/adult use of marijuana. If all recreational/adult use ballot initiatives pass, nearly a quarter of all Americans will reside in areas where recreational use marijuana is legal.

1 Comment

Filed under Uncategorized

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

Leave a comment

Filed under Marijuana Law, Uncategorized

The Possible Ethical Conflict Facing Pennsylvania Marijuana Attorneys

As readers of my blog are aware, there is a conflict between state laws legalizing medical or recreational/adult marijuana use and federal law which continues to classify marijuana as an illegal drug. Despite federal law, the marijuana business is booming and states are rapidly changing their laws to allow some form legal marijuana (medical or recreational). Pennsylvania just enacted its own Medical Marijuana Act opening the door for entrepreneurs who want to be part of the medical marijuana business. As a Pennsylvania lawyer, it is my job to advise potential clients on federal, state and local laws and assist my client to navigate within those laws. However, there is a potential ethical problem with a client who wishes to start a medical marijuana business due to the tension between state law and ostensibly controlling federal law. Essentially, I would be advising and/or assisting a client to commit a crime and violate federal law (which theoretically could expose an attorney to federal liability).

Rule 1.2(d) of the Pennsylvania Rules of Professional Conduct states “[a] lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.” (Emphasis added).

Comment 9 to Rule 1.2 states that Paragraph (d) “prohibits a lawyer from knowingly counseling or assisting a client to commit a crime or fraud. This prohibition, however, does not preclude the lawyer from giving an honest opinion about the actual consequences that appear likely to result from a client’s conduct. Nor does the fact that a client uses advice in a course of action that is criminal or fraudulent of itself make a lawyer a party to the course of action. There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.” (Emphasis added).

Comment 10 to Rule 1.2 essentially states that when the client’s course of action has already begun and is continuing, the lawyer’s responsibility is especially delicate. The lawyer is required to avoid assisting the client ……, must, therefore, withdraw from the representation of the client in the matter.

Rule 8.4 states, inter alia, that it is professional misconduct for a lawyer to violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another.

If an attorney provides legal advise and/or assists a client in the formation or operation of a medical marijuana business, the attorney could be found to have violated the Rules of Professional Conduct by advising and or assisting that client to commit a criminal act under federal law.

Other states with medical marijuana laws have addressed this conflict with differing conclusions. Both Ohio and New Mexico’s respective ethics committees have issued decisions saying that lawyers within those states who represent marijuana businesses or marijuana touching businesses would be helping clients violate federal law and. therefore, the lawyer would be violating the state’s code of conduct.

Other states such as Arizona, Colorado, Illinois, New York and Washington State have explicitly advised attorneys within those states that it is not a violation of the attorney code of conduct to assist clients with marijuana related businesses. While other states have passed statutes or enacted policies to protect attorneys advising and/or assisting clients with marijuana related businesses. Ohio is now looking to amend their rules of professional conduct to address this conflict.

“Laws and institutions are constantly tending to gravitate. Like clocks, they must be occasionally cleansed, and wound up, and set to true time.” –  HENRY WARD BEECHER

While waiting for state and federal laws to be set to true time, Pennsylvania lawyers will continue to represent their clients and provide advice on and assistance with Pennsylvania’s Medical Marijuana Act. Any potential violations of the Rules of Professional Conduct can be dealt with a latter time should it become an issue.

Leave a comment

Filed under Marijuana Law, Uncategorized