The legalized cannabis industry is -- literally -- growing like a weed. No longer is it relegated to aging hippies surreptitiously growing plants in their basements or backyards and privately enjoying the buds of their labor. Now, despite the headwind of continuing classification as a Class 1 narcotic under federal law and further uncertainty due to the rescission of the Cole Memorandum, well over half the states in the United States have legalized cannabis use, whether for medical or recreational use, or both.
Many of the cannabis industry participants, whether cultivators, testers, processors, dispensers, lenders, title companies, landlords, investors, product developers, executives and others, are sophisticated, respected, dedicated and experienced business people. They demand, and need, the same level of sophistication, dedication and experience from their service providers.
Gould & Ratner recognizes the evolution, as well as the upward trajectory, of this burgeoning industry. We have cut through the smoke and clutter and assembled a team, lead by Fred Tannenbaum, of sophisticated and experienced counselors to serve the needs and demands of a variety of participants in the industry’s “food chain.”
Our firm provides many comprehensive areas of talent and experience for clients in the cannabis industry, in addition to our team's sensitivity to some unique “burning” issues. Many law firms provide one or more of these areas of service. However, very few firms offer them as comprehensively, seamlessly, efficiently and commercially as we do.
Whether you're just getting started or already successfully established, our lawyers offer a variety of services and advice specifically tailored to this unique industry:
- Structuring of business organization with multiple related party service agreements to minimize risk and burden of regulatory compliance
- Understanding sensitivities of unsophisticated sellers and making practical judgments to get the purchase done
- Applying practical judgment in legal due diligence
- Understanding business aspects of industry to prioritize and make efficient due diligence (e.g. SSS, sales per square foot, ARPU, churn, key components of gross margins
Investment/ Debt and Equity Financing
- Recognition of differing short-term and long-term needs of different investor groups (e.g. long term entrepreneurs, friends and family vs. shorter term
funds) and ways to reconcile different perspectives while keeping the company intact
- Different structures for different investor groups, stages and reasonable return goals and expectations
- Lender needs and specific provisions (e.g. avoiding representations and warranties affirming compliance with laws and avoiding defaults in case the applicable
- Lender security issues for perfecting and then foreclosing on a license
- Structuring of repurchase of ownership interest of an investor who becomes disqualified under state law
- Title insurance coverage, endorsements and exceptions
- Use, condemnation, casualty, quiet enjoyment, compliance with laws and other specific provisions of real estate leases
- Zoning and other land use regulations and development issues for cultivation and dispensary sites
- Construction related issues including those involving “build to suit” projects
- Application and nuances of Code Section 280E
- State and local sales, excise and other taxes imposed on cannabis use
- Insurance coverage issues and exclusions by carriers for illegal products
- Landlord-tenant litigation, especially over illegal use
- Challenge of state compliance with its application guidelines and RFP guidelines
- Construction-related disputes and litigation
- Product liability, including inherent danger concepts, duty to warn
- Liability of dispenser for injuries based on product use
- Deceptive/improper marketing
- Injuries due to long term use or abuse
- Disputes among owners, particularly early stage vs. later and less sophisticated vs. more sophisticated
- ADA reasonable accommodation of employees when medical marijuana is prescribed
- Medical marijuana card holders as a protected class
- Drug-testing policies
- Discipline of employees using medical or recreational marijuana in violation of company policy
- Importance and enforceability of restrictive covenant agreements
- Interplay between ADA, OSHA, federal discrimination laws, and applicable state counterparts
- Revisions to HR policies and Employment Manuals
- Obtaining federal trademarks when the product is federally illegal
- Licensing and protecting brands to give product manufacturers national growth potential
- Patents of unique and innovative strands
- Protection of valuable trade secrets including recipes and formulae as well as customer information
- Water permits for cultivation
- Sourcing, treatment and disclosure of pesticides and fertilizers
- OSHA regulations dealing with federally illegal products
- Enforcement of debts notwithstanding claims the invoice is for an illegal product
- Securitizing of and foreclosure on cultivation and dispensing licenses and sale proceeds
- Negotiating the intricacies of state law insolvency proceedings including assignments for the benefit of creditors and receiverships
Government Relations/ Regulatory
In the spirit of full disclosure, our group is not all things to all people and does not routinely perform these services for our clients, although we have assisted some clients in license applications in Illinois. However, we offer access to a wide variety of contacts and relationships across the country and Canada that allow us to forge a seamless and cost-effective team of experienced personnel to accomplish client goals in these areas. These include lobbying and government relations, including relationships with the FDA, OCC (and some state counterparts) and other federal and state agencies.
- Senior secured loan for acquisition financing.
- Mortgage finance in connection with acquisition.
- Structure and implement multistate merger between two competitors.
- Raise funds for unsecured debenture loan to Canadian public company.
- Significant due diligence in connection with large merger transaction.