The gray matter of legal cannabis compliance

Does an ‘honest’ mistake excuse a violation?

Days before California residents voted to legalize adult-use cannabis, deputies raided a locally licensed cultivation center located in an unused airport hangar in Calaveras County, seizing roughly 2.5 tons of cannabis worth roughly $10 million, and arresting 35 workers, some of whom were in the United States illegally. Authorities alleged that while the grow was in compliance with the city ordinance, the owner was processing cannabis without a processing license and had unlawfully moved harvested product to a second location.

Now facing criminal charges, the owner insists that the business did nothing wrong. According to its attorneys, the business’ activities, which included drying, trimming, curing and transporting (to a second location on a licensed premises), fall within the realm of its cultivation license. The applicable regulation is a local “urgency ordinance” — a temporary measure designed for the purpose of, among other things, setting parameters for “medical cannabis cultivators to comply quickly with local land use regulations.”

The business owner and his legal team suggest that the raid was politically motivated. They called it an effort by a well-known cannabis opponent to discourage residents from voting in favor of Regulation D, a comprehensive, permanent regulatory framework governing commercial cannabis. (Had it been adopted, Regulation D would have replaced the urgency ordinance. Voters ultimately rejected Regulation D and removed those in support from office, leaving the county’s entire medical cannabis industry in flux.)

Either the authorities, the business owner or the attorneys mistakenly interpreted the applicable regulations. But the company and its investors, whose $10 million of cannabis was reportedly dumped into a landfill, whose workers now face deportation, and who now face mounting defense costs, have already lost — even if their interpretation is ultimately accepted by the court. This begs the legal question as to whether an “honest” mistake of law could excuse its violation.

Citizens are presumed to know the law. And some types of laws, particularly those penalizing behavior that is “inherently wrong,” such as murder or robbery, are easily knowable. But what happens if people are unaware that their conduct is illegal, or when someone needs specific notice to know that otherwise blameless conduct constitutes a violation of law?

In general, neither ignorance nor mistake of law excuses one from criminal liability except under a narrow set of circumstances, such as: (a) the law was unpublished at the time the crime or regulatory offense was committed; (b) the defendant relied upon a law or regulation that has since been overturned or deemed unconstitutional; (c) the defendant relied upon a judicial decision that had since been overruled; or (d) the defendant relied upon the interpretation of law by a regulatory (governmental) official.

Good faith reliance on bad legal advice rarely, if ever, qualifies as an excusable mistake.

The unsettled and ever-changing regulatory landscape of state-legal cannabis make industry participants particularly vulnerable to mistakes of law. Regulatory enactments are rarely a beacon of clarity; they must be construed along with multiple agency updates and clarifications, many of which are difficult to locate, let alone interpret. And the lack of judicial precedent interpreting the newly enacted regulations makes it difficult — if not impossible — for industry participants to know how a court of law may treat a particular violation.

Even the most basic laws governing consumption and possession are susceptible to mistaken interpretation. For instance, the Oregon Liquor Control Commission, the state agency responsible for administering and enforcing retail marijuana regulations in Oregon, imposes a strict, eight-ounce possession limit on “usable marijuana” (dried leaves and flowers) and one ounce if “in public.” Possession in excess of such amounts is punishable as a criminal misdemeanor. The regulations also permit eight ounces and four plants of homegrown marijuana at a household of one or more people (noting that four adults in a residence qualifies the household to grow 16 plants). But Oregon regulations do not address whether the restriction is eight ounces per adult or eight ounces per residence.

Thus, if the number of adults per residence increases, it is unclear whether the total amount of usable marijuana could increase as well. While typical consumers might not exceed the eight-ounce limit, this ambiguity can create substantial unease among home-growers and at events where the host seeks to operate a cannabis bar for multiple adults (such as a canna-wedding).

To minimize the risk of mistaken interpretation in the inevitable gray zone – the uncertainty that exists between clearly established legality and illegality – individuals should always work with a cannabis business attorney who specializes in regulatory compliance. This frequently requires working with local counsel, who has regular access to – and experience seeking clarity from – the applicable enforcement agencies. Be sure to keep a written record of all regulations or judicial decisions upon which you rely in your business operations. And always take actions to ensure that your entire team is committed to, and trained in, compliance.

 

Lauren Rudick represents investors and startup organizations in all aspects of business and intellectual property law, specializing in cannabis, media and technology. Her law firm, Hiller, PC (www.hillerpc.com), is a white-shoe boutique firm.

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