On August 5th, Harris Bricken attorneys Griffen Thorne, Jihee Ahn and Jesse Mondry presented a webinar entitled Cannabis Litigation – Trends And Q&A. If you missed the live webinar, we will publish a replay tomorrow here on the blog.
The webinar was well attended, and we received numerous questions from the audience. In this post, I respond to a few questions we did not have time to answer.
- Can you speak about requesting information from the Oregon Liquor Control Commission through a FOIA request? What is the procedure? What types of information can be requested? Sales data? Employee data?
A wide variety of records are available from the OLCC. Under Oregon’s Public Records Law, “every person” has a right to inspect any nonexempt public record of a public body in Oregon. See ORS 192.410 – 192.505. This right extends to any natural person, any corporation, partnership, firm or association. The law is similar to the federal Freedom of Information Act (FOIA) in some ways, but is a separate law, with its own provisions. So when making a request, don’t refer to it as an FOIA requests. The law favors disclosure, but the OLCC must be careful not to release sensitive information – e.g. social security numbers, bank account numbers, and so forth.
Typically, the OLCC receives requests from licensees or attorneys following the issuance of charging document. But the law does not require the records request be tied to a pending administrative matter. Responding to these requests may impose a significant burden for overworked and underpaid OLCC staff. So responses may take time and the OLCC may charge fees for responding to public records requests. Making a request is straightforward. The OLCC has a webpage with instructions that explains how to do so and what fees may apply.
- With regard to membership and partnership disputes, is there anything especially different about litigating disputes in the cannabis industry? Do you have any practical advice about how to bring these cases to a swift resolution?
Litigating membership and partnership disputes in the cannabis industry is much like any other industry. But there are a few quirks.
When a partner or member decides to leave the business, one of the first questions is: What is that person’s interest in the business worth? Cannabis businesses present different considerations in terms of the marketability of an interest. This is because of licensing requirements, IRC § 280E, lack of access to financing and banking, insurance risks and costs, and the overarching problem that marijuana is a schedule I controlled substance.
Another difference is that most states require tracking marijuana products to the gram gram through tools such as METRC. Access to this information can provide non-managing or minority interest holders a powerful tool in the event a forensic accounting becomes necessary. On the other hand, dispensaries operate on a cash-only business on the retail side, which can make an accounting difficult.
A final significant concern is whether the facts and issues of the partnership/membership dispute concern violations of the state regulatory scheme. It may not be in the best interest of the business (or its owners) to engage in a public lawsuit that concerns allegations of financial fraud, diversion into the illegal market, hidden investors or investments, and so on. These kinds of facts may result in the business losing its ability to operate in the cannabis industry and leave the owners with letters of reprimand in their files that restrict their ability to operate in the industry in the future.
As far as ending disputes quickly, the best advice I can give is to thoroughly paper everything. By this mean cannabis businesses should hire transactional lawyers with expertise in cannabis at the outset of any business venture as well as to review contracts and deals throughout the life of the business.
- Could you talk about class action litigation trends in cannabis and CBD
We spoke about this during the webinar, but one concept that was not addressed was the doctrine of primary jurisdiction. This is a doctrine increasingly used, and with increasing success, by defendants in CBD class actions. The basic concept is that courts may stay (pause) litigation when the claims involve issues that fall within the special competence of an administrative agency. In such cases, courts may wait for the agency to issue rules or guidance that may substantially affect the outcome of the case. The primary jurisdiction doctrine, then, is a form of judicial abstention. See Litigation Update: Who Decides Whether You Can Ship Hemp Through Idaho? and The Rise of Cannabis Litigation Against Foreign Entities – Where Will You Litigate?
Our colleague, Nathalie Bougenies, has also written on this topic and it is one worth watching
Thanks to everyone who attended. Please note that our next FREE Q & A webinar is Thursday, September 17, 2020 from 12pm to 1pm PDT, during which our transactional hemp attorneys will field questions on all aspects of hemp and CBD. Register is available for that one here.
We will be back tomorrow with a replay of Cannabis Litigation Q&A webinar, as well.