TALLAHASSEE, Fla. (The News Service of Florida) — An appeals court will hear arguments Jan. 8 in a legal battle about whether a ban on smoking medical marijuana violates a 2016 constitutional amendment.
The 1st District Court of Appeal on Monday scheduled the arguments in an appeal filed by the Florida Department of Health, according to an online docket.
The case stems from a 2017 state law that was designed to carry out a voter-approved 2016 constitutional amendment that broadly legalized medical marijuana.
A cannabis manufacturer is recalling one of its products after receiving five complaints that it contains mold.
RedeCan said Thursday that it was recalling its B.E.C. strain of cannabis. All of the complaints involved 3.5-gram bottles of B.E.C. with lot code 4B2L3 sold through the Ontario Cannabis Store.
Federal regulations require cannabis producers to retain a sample of every batch they send to market. RedeCan said its sample of lot 4B2L3 shows no evidence of mold.
On June 21, just a day after the Canadian Senate finally voted to legalize cannabis nationwide, a different sort of consortium gathered to force their own will on America’s version of the industry.
Titled “Effectively Suing the Legal Cannabis Industry,” this telephonic seminar shared a litany of potential legal claims that enterprising civil litigators can use against the cannabis industry: from product liability suits to medical malpractice claims and the Drug Dealer Liability Act (an obscure act passed in 17 states that holds illegal drug merchants civilly liable for any damage wrought by the use of a drug—whether a DUI, death or injury—regardless of whether the seller actually sold the drug in question, according to the seminar instructors).
The opening speaker for this seminar, David Evans, reveals himself early on as a hardcore cannabis prohibitionist who presents this information as part of a larger initiative—through both Americans Against Legalized Marijuana and his own group, Cannabis Industry Victims Educating Litigators (CIVEL)—to disrupt the cannabis industry. Indicating a series of undated Colorado cannabis dispensary ads with scantily clad women and cartoon Santa Clauses on a PDF file distributed to seminar participants, Evans says: “The marijuana industry is like a spoiled child that had their way for many years. Nobody’s been telling them ‘no.’ Nobody’s been making them responsible. And they’ve been able to do outrageous things because there’s this public perception that marijuana is harmless.”
Such a statement may come as a surprise to many around the country struggling to keep up with ever-changing cannabis regulations, hostile citizen groups and fierce competition. Regardless, attorneys around the country have turned their attention toward the cannabis industry, levying a series of product liability cases and legal actions that have augmented the daily challenges cannabis dispensary owners face.
The situation is especially dismal in California. Since 2009, cannabis dispensary owners in California have been receiving Prop. 65 motions; Proposition 65 is an infamous legal attack that has been used against retail businesses—ranging from Forever 21 to Starbucks—for failing to display warning signs indicating the presence of chemicals known by the state of California to cause cancer, birth defects or other types of reproductive harm. (One of these chemicals is cannabis smoke.)
Things aren’t much better in Colorado. Since 2015, Colorado’s cannabis industry has endured a series of costly product recalls, most notably involving the use of the pesticide myclobutanil. A flurry of 688 Prop. 65 notices released in California last year levied accusations regarding the presence of malathion, carbaryl and myclobutanil in products sold by cannabis dispensaries and brands throughout the state. Most distressing, the U.S. 10th Circuit Court of Appeals found in favor of the plaintiff to reverse a Colorado district court’s dismissal of a Racketeer Influenced and Corrupt Organizations Act (RICO) lawsuit which, if successful, could signal a torrent of civil claims against state-legal businesses at large.
Despite the opportunistic nature of some of these cases, others provide a teachable moment for an industry eager to gain legitimacy. Canna Law Blog author and partner at the Harris Bricken law firm Hilary Bricken has sounded the alarm around product liability issues since her tenure in Washington during that state’s shift from a gray area medical market to its adult-use model. “I always preached that products liability was coming because a lot of the testing companies were unsophisticated. … And people were bound to get sick and/or hurt,” she recalls. “Unless people start to take a really good cold, hard look at compliance and taking consumer protection seriously, they’re going to be made an example of.”
Illustration by Vinnie Neuberg
Under Suspicion
Until recently, early cannabis industry pioneers—with their modest mom-and-pop financial stature and unique business structure on the West Coast—were shielded from many of the legal headaches often faced by traditional businesses. “Previously, you had these models where you were a collective of persons operating with a common goal, but not necessarily open to the public,” explains GianDominic Vitiello of the Los Angeles legal firm Katchko, Vitiello & Karikomi (KVK). “So, what that meant, at least as far as the argument could go, was that you were not a true retail outlet in the sense that you were inviting the public onto your premises. And liability in certain civil situations could be avoided based on that defense.”
However, Vitiello says, “The shops are losing the ability to hide behind the collective model.”
Now that dispensary owners enter into the regulated era, they by and large do so without the financial armament of liability insurance. Granted, the undercapitalization of many startup dispensaries may deter more cynical litigants from filing suit if the dispensary is underinsured, as many are. “Normally, if you start a program from scratch ... [you’re] probably not going to see products claims until you’re really up and operating,” Bricken says. “If plaintiff attorneys think you have an insurance policy that’s going to cover it, you become a bigger target.”
However, anyone who lived through the grueling product recalls in Denver—such as Green Man Cannabis founder and ONE Cannabis partner Christian Hageseth—recognizes the need for liability insurance throughout the supply chain. “The way cannabis works right now, we don’t have testing equipment in our facility. We have to use an external testing facility. And I think when the industry matures, and we get larger processors and manufacturers, we’ll see [cultivators, manufacturers and producers] have these small labs within their facilities just so they can check their own work before it becomes a problem,” Hageseth says. “[Now], when [a problem] does [occur], it takes down everyone who touches it. Everybody has liability, and nobody has insurance.”
Some states, such as California, mandate general liability insurance for cannabis business operators and have lobbied insurance companies to cover the industry. For now, Bricken creates indemnification clauses in all her Goods and Services contracts for her dispensary clients and insists that dispensary owners do the same with vendors. (Indemnification clauses protect retailers from paying for damages in a lawsuit by making the producer/manufacturer assume the risk and/or compensate for damages suffered by the retailer if s/he is sued.)
Kat Nadel, general manager of Green Valley Wellness in Southeast Oregon, says, “Because few companies are willing to ensure cannabis entities under the current federal climate, there is little selection for dispensaries and no opportunity to price shop and compare.”
Instead, Nadel notes, “retailers must be satisfied with securing the least costly of the few choices available. It comes down to being willing to do the research and legwork necessary to protect your investment.”
She suggests cannabis business owners: “Look at what's available. Call brokers and explain the unique situation of your business and its needs. Shore up your investment by ensuring that all security and safety protocols are in place and state compliant.”
Our Fate Is Largely Our Own
However, the best insurance in the world cannot save careless dispensary owners from themselves. During a recent study, Denver Health and the University of Colorado School of Medicine found that 69 percent of surveyed dispensary employees recommended cannabis for nausea stemming from morning sickness during the first eight weeks of pregnancy, which distressed Colorado’s Marijuana Enforcement Division (MED). The finding also made its way into Evans’ legal jeremiad during the telephonic seminar, and Evans quickly condemned these recommendations by citing cannabis’s purported role in a host of birth defects. As Evans and the MED quickly reminded the industry, budtenders are not medical professionals and cannot offer advice. (See the Guest Column, “No Comment!” in Cannabis Dispensary’s July/August issue for details about the legal constraints by which budtenders and patient care consultants must abide.) Such mistakes can be costly. “Oftentimes if you’re getting flagged violations by the state, you can shortly expect a plaintiff’s claim depending on the nature of the violation,” Bricken explains. “If you’re unsuccessful with the state, and you’re violating rules left and right, you can probably expect at some point you’re going to get sued by someone who’s been affected by those violations.”
As a spoiler alert, Evans ended his presentation with a prediction that the cannabis industry would meet the same fate as cigarettes, where states and cities would eventually turn on the industry they once embraced and litigate it into impotence, if not oblivion. Whether the industry meets this fate will depend on its actions going forward.
“With proper legal reform, it is my hope that we will see a marked reduction in legal claims. As we reform and refine laws—cultivators, consumers, communities, direct and ancillary businesses must rise to a legal call of action,” Nadel says. “These elements must co-create and shape the legal paradigm into which cannabis falls, defining responsibilities and boundaries for the industry as a whole, rather than catering to any one group's special interests.”
Lineage Announces Definitive Agreement to Acquire California Licensed Producer Agris Farms
Agris Farms operates a 40,500-sq.-ft. greenhouse facility and a 3,000-sq.-ft. craft-style indoor facility in Yolo County, California.
TORONTO, Nov. 22, 2018 (GLOBE NEWSWIRE) -- Lineage Grow Company Ltd. is pleased to announce the signing of a definitive agreement to acquire California-based Walnut Oaks, LLC d/b/a Agris Farms.
Transaction Overview
Agris Farms operates a fully-licensed and fully-operational 40,500-sq.-ft. greenhouse facility and a 3,000-sq.-ft. craft-style indoor facility in Yolo County, California. The Yolo facility is in commercial production with annual production capacity of 6,000 lbs. of cannabis.
Pursuant to the Agris Agreement, Lineage would acquire a 100% ownership interest in Agris Farms based on an implied enterprise value of US$6,600,000. Consideration would be in the form of stock and the assumption of liabilities.
Management Commentary
“The acquisition of Agris Farms and the signing of this definitive agreement, are directly aligned with the strategic framework we have outlined to our shareholders,” said Peter Bilodeau, CEO of Lineage. “As one of California’s premium quality low-cost producers, Agris Farms serves as a tremendous building block to launch our California growth initiative.”
"We are very excited to be joining the Lineage team as we believe there are meaningful ways in which we can grow faster together.” said Menna Tesfatsion, CEO of Agris Farms. "We are focused on delivering top quality cannabis products to California's discerning consumer base and we are confident that Lineage's platform will provide access to a best-in-class distribution and manufacturing network enabling us to scale more aggressively and more efficiently."
Transaction Details
Pursuant to the Agris Agreement, the purchase price for the Agris Farms Acquisition is US$6,600,000, payable on closing, comprised of: (i) US$2,148,880 payable by the issuance of Lineage common shares at a price of C$0.165 per share; (ii) the assumption of liabilities in the aggregate amount of US$2,951,120; and (iii) the provision of a put option by Lineage in favor of the holder of a US$1,500,000 subordinated note where the note holder can choose to convert the subordinate note into a Lineage convertible note convertible into a unit of one Lineage common share and one half of a warrant with a conversion price of C$0.19 per share and a warrant exercise price of C$0.25 per share. The sellers may also be entitled to receive an earn-out payment equal to six times (6x) of any EBITDA in excess of US$1.1 million during the period of May 1, 2018 to April 30, 2019. In case of consolidation or reclassification of Lineage common shares, the issue price, number of shares issuable and type of shares to be issued in the Agris Farms Acquisition will be adjusted accordingly.
Closing of the Agris Farms Acquisition is subject to various conditions, including the approval of Yolo County for the transfer of Agris Farms membership units to Lineage, closing of the proposed reverse takeover transaction between Lineage and FLRish, Inc. d/b/a Harborside. There is no assurance that the Agris Farms Acquisition will be completed as proposed or at all.
Bridge Loan from Harborside
On November 13, 2018, Lineage issued a promissory note in favour of Harborside in the principal amount of C$2,000,000 as a bridge loan. The note is unsecured, and bears in interest at 12% per annum, or 18% per annum while the loan is in default. The bridge loan will mature after one year, which may be extended for another year unless Lineage receives a written notice from Harborside prior to 90th day before the expiry of the then current term that Harborside does not wish to extend the term of the loan. However, if the proposed reverse takeover transaction between Lineage and Harborside is terminated, the bridge loan will mature on the date that is six months after the date of termination.
The proceeds of the bridge loan are expected to be used by Lineage to subscribe for Agris Farms membership units as set out below.
Subscription of Agris Farms Membership Units
In connection with the Agris Farms Acquisition, as part of the assumption of liabilities of Agris Farms, Lineage is to subscribe for 698.17 membership units in Agris Farms at US$2,149.47 per unit with a total subscription price of US$1,500,000. Agris Farms will use the subscription proceeds from Lineage to repay and retire a senior secured note in the principal amount of US$1,500,000. Lineage's subscription of membership units and Agris Farms' repayment of the senior note are expected to occur on November 23, 2018.
Lux Acquisition Update
The Company also wishes to report that the previously announced acquisition of Lucrum Enterprises Inc., d/b/a LUX Cannabis Dispensary and the proposed reverse takeover transaction with Harborside are advancing with execution of a definitive agreements anticipated in short order.
Weekend Unlimited Finalizes Acquisition of 80 Percent of Canna Candys, Canna Medibles
Canna Candys is looks ahead to expansion in U.S., Europe and Asia as a Weekend Unlimited brand.
VANCOUVER, BC, CANADA (22 November, 2018) – Weekend Unlimited Inc. announces the closing of its deal to acquire California’s Canna Candys (CBD) and Canna Medibles (THC), strengthening the Company’s product portfolio as it executes on its strategy to build its flower, extracts and edibles verticals.
“This is a highly strategic acquisition for Weekend, following our business objective to identifying strong brands that require capital and expertise to grow,” said Mr. Cody Corrubia, President and CEO of Weekend. “Paul Chu, CEO of Canna Candys, leads a team with tremendous product development expertise and a thriving distribution network in Southern California,” added Mr. Corrubia.
“Canna Candys and Canna Medibles are perfectly positioned to expand throughout U.S. states where recreational or medical cannabis is legal,” said Mr. Paul Chu, CEO of Canna Candys. “Now, as part of Weekend, we will expand our distribution to build upon the strong foundation in Southern California adding New York, Florida, Nevada, New Jersey, Texas and on to Europe and Asia,” added Mr. Chu.
Canna Candys (THC) and Canna Medibles (CBD) highlights:
2019 same channel revenue forecast of approximately USD$ 2 million*
Launching a new 10MG VESIsorb line of CBD and THC edibles
Distribution to 380 retail stores Southern California
Artisan handmade hard candies with 31 flavors & lollipops with 10 flavors
CBD only distribution deals being negotiated in NY, FL, NV, NJ, TX, CA, Europe and Asia
New product lines to include gummies, beverage packs, chocolates
*Cost of goods 38% based on current available supply chain agreements and cost of goods for lab tested and approved raw material. Risks associated with the forecast are competition, regulatory change, an increase in costs, and consistent availability of lab tested and approved raw material.
Weekend provided a secured loan of US$ 750,000 and converted this note for 51% of the equity in the company that owns these brands. Weekend paid an additional US$ 690,000 and is in the process of issuing shares worth US$ 1,440,000 at a 5 day VWAP (the “Escrow Shares”) to acquire a further 29% of the company so as to own 80%. The final 20% can be purchased, during a time period ending 90 days after the first closing, for US$ 720,000, to be paid by cash, shares or a combination of the two as agreed to by the parties.
The Escrow Shares will be released at that date that Canna Candys and Canna Medibles have occupied and are operation in a manufacturing facility located in Adelanto California.
Legislative Map
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