Smacked Village owner Roland Conner is New York’s first dispensary owner with a cannabis conviction. After his new pop-up store becomes permanent, Conner plans to pass the store down to his son.
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Find information about best marijuana industry practices and protocols to keep everyone safe on the job.
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Well, it looks like cannabis RICO lawsuits are not going to happen any time soon. As an update to this post I wrote in 2020, the Ninth Circuit has just affirmed the dismissal of two RICO claims brought by a cannabis business owner.
As a quick recap, Plaintiff Francine Shulman took advantage when recreational marijuana was legalized in California and started a cannabis cultivation operation. At some point, she needed financial back and guidance, so she partnered with Defendant Todd Kaplan. They and their various business entities entered into agreements, which Shulman ultimately claims were used to defraud her out of her assets and licenses.
Shulman filed a lawsuit in the Central District of California, a federal court, because two claims involved violations of RICO and two other claims involved violations of the Lanham Act (both federal statutes). RICO, or the Racketeer Influenced and Corrupt Organizations Act of 1970, is a federal statute that provides for a civil cause of action for acts performed as part of an ongoing criminal organization (in addition to criminal penalties). We’ve written a ton of posts about RICO, but suffice it to say, it allows plaintiffs claiming a loss in property value to bring a civil suit for triple damages plus attorney’s fees against any “person” or “enterprise” that has a part in any pattern of “racketeering activity”:
RICO provides that it is “unlawful for any person through a pattern of racketeering activity . . . to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce” and proscribes conspiracy to do the same. 18 U.S.C. § 1962(b), (d).
Via an early motion to dismiss, Judge Birotte of the Central District dismissed Shulman’s two RICO claims, stating that she cannot sue under RICO because it would provide her a remedy for actions that are unequivocally illegal under federal law.
In the January 18, 2023 Opinion and Order, the three-judge panel unanimously affirmed Judge Birotte’s ruling. They held Shuman lacked standing to bring RICO claims because in order to establish statutory standing under the statute, a plaintiff must show: “(1) that his alleged harm qualifies as injury to his business or property; and (2) that his harm was by reason of the RICO violation, which requires the plaintiff to establish proximate causation.” However, because Shulman’s “business or property” entails the cultivation, sale, and marketing of cannabis – which is all illegal under federal law – her “harm” wasn’t something that could then be remedied by federal law:
“Looking to RICO as a whole, it is clear that Congress did not intend “business or property” to cover cannabis-related commerce. When Congress enacted RICO, it expressly defined “racketeering activity” to include the “manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in” cannabis. 18 U.S.C. § 1961(1)(D); 21 U.S.C. §§ 802, 812. Because RICO’s definition of racketeering activity necessarily encompasses dealing in cannabis, it would be inconsistent to allow a business that is actively engaged in cultivation of and commerce in cannabis to recover damages under RICO for injury to that business.”
The Panel even went so far to compare cannabis to heroin because of their federally illegal status:
“Indeed, were we to substitute a drug like heroin for cannabis for the purposes of our analysis, the conclusion seems obvious: Congress could not have intended to allow a heroin dealer to recover RICO damages from someone who, by mail and wire fraud, stole a shipment of heroin. Otherwise, RICO would serve to protect the same variety of conduct it was intended to combat. For these reasons, we hold that Appellants lack a statutory right to bring a claim under RICO.”
In effect, the Ninth Circuit is affirming something akin to an illegality defense on steroids: because the statute specifically includes cannabis-related commerce within its racketeering definition, the Courts’ hands are tied and cannot help. While this has been the general trend for all RICO claims in the space, this newest Opinion makes clear things are not going to change any time soon.
For other recent articles about claims in this space, see:
And for a deeper dive, see:
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Customs officials in Guyana last week intercepted and seized a box of cannabis that had been shipped from the United States.
The Customs Anti Narcotic Unit (CANU), the top drug enforcement agency in the South American country, said in an announcement that its officers “were contacted on January 20, 2023, after packages of suspected cannabis were discovered in a box shipped from the United States at the Muneshwar shipping limited.”
“CANU officers arrived on the scene and conducted additional searches before taking possession of the box,” the agency said in the announcement, which was posted on Facebook. “The box was then transported to CANU headquarters in the presence of the employee of the shipping company, who made the discovery. The suspected cannabis tested positive for cannabis and amounted to 1.920 kgs.”
The Customs Anti Narcotic Unit said that investigations into the package are ongoing.
Despite marijuana’s ubiquity in Guyana’s warm climate, the country’s government takes a hardline against weed, strictly prohibiting its cultivation, sale and possession.
According to the Guyana Standard, the Customs Anti Narcotic Unit “conducted several raids and was able to clear 3,403.68 kilogrammes of narcotics amounting to a street value of $1.1 billion off the streets” last year.
“This represents a 68.26 percent increase in comparison to 2,022.88 kilogrammes of narcotics amounting to $634 million in 2021,” the outlet reported. “There were 24 cases of cocaine, 80 cases of cannabis, four cases of ecstasy, and two cases of methamphetamine in 2022.”
On the same day as the seizure of the cannabis package in Muneshwar, the Customs Anti Narcotic Unit announced that a woman had been “sentenced to four years in prison and fined $53.1 million for cannabis possession by Magistrate Leron Daly after admitting to having 59 kgs of cannabis in her possession for the purpose of trafficking.”
According to the Guyana Standard, the country’s government “has been investing millions of dollars in the security sector to provide a safe and secure environment for Guyanese,” including “purchasing vehicles for the Guyana Police Force (GPF) while training police officers and allocating half a million dollars to the Customs Anti Narcotics Unit (CANU) to advance its work.”
CANU was “established through a Cabinet decision in 1994 and was implemented in August 1995,” according to the law enforcement agency’s official website.
“The Narcotic Drugs and Psychotropic Substances (Control) Act, 1988 was amended in 1999 to facilitate the legal operation of the Unit and to give it the same authority to enforce it, as the Guyana Police Force,” the site explains. “In April 2001, Guyana and the United States signed a Shiprider Agreement to suppress illicit traffic by sea and air. The agreement seeks to reduce the ability of illicit narcotics traffickers to elude maritime law enforcement agencies within and outside the territorial waters of Guyana, as well as to strengthen Guyana’s maritime law enforcement capabilities. On July 23, 2003, the National Assembly passed the Maritime Drug Trafficking (Suppression) Bill 2003. The Bill … provide[d] the legal framework for the implementation of provisions of international, hemispheric, regional and bilateral agreements, of which Guyana is a part. The Agency is also linked to INTERPOL, one of the world’s biggest coordinators of drug interdiction agencies. The Narcotics Unit also plays an active role in the World Customs Organisation. The Government of Guyana and the Government of Colombia signed an agreement that allowed Guyanese law enforcement officers to benefit from anti-narcotics training.”
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At the Cookies grand opening in Bangkok, Thailand over the weekend, Leafly hung out with locals, tourists, and operators to see how the country became a leader in Asia’s cannabis revolution.
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ChatGPT is all the rage. The GPT stands for “Generative Pre-trained Transformer”. Translation: this is a next level, nearly omnipotent chatbot that’s incredibly articulate and conversant. Per Wikipedia:
“while the core function of a chatbot is to mimic a human conversationalist, ChatGPT is versatile, including the ability to write and debug computer programs; to compose music, teleplays, fairy tales, and student essays; to answer test questions (sometimes, depending on the test, at a level above the average human test-taker); to write poetry and song lyrics; to emulate a Linux system; to simulate an entire chat room; to play games like tic-tac-toe; and to simulate an ATM”.
Of course, this has some lawyers wondering if ChatGPT will somehow replace essential human services in the legal industry. For example, will ChatGPT be able to write a cogent, well-researched legal brief? Sounds like the answer is no, but I’m still curious. So, I decided to explore ChatGPT and cannabis. Needless to say, I’m not really all that worried that ChatGPT is going to replace cannabis lawyers. I do think it’s an okay resource for very general information, but the legal fate of your cannabis business probably shouldn’t hinge on a more sophisticated, responsive form of google.
Anyway, here are snippets of my ChatGPT and cannabis convo:
In response to this one, ChatGPT tells us:
A cannabis lawyer is a legal professional who specializes in the laws and regulations surrounding the cultivation, sale, and use of cannabis. They may advise clients on compliance with state and federal laws, assist with the licensing and permitting process for cannabis businesses, and represent clients in legal disputes related to the cannabis industry. They may also provide guidance on intellectual property and contract law issues related to cannabis.
The interesting thing about this response is that it doesn’t include criminal representation in the list. If ChatGPT happened ten years ago, I think criminal representation would have made the list. ChatGPT doesn’t live scroll the internet for information when responding to questions. Instead, it uses its training data (in addition to human feedback) to respond to inquiries, and that training data comes from the web. It’s just curious as a result that there’s no mention of criminal defense anymore in ChatGPT’s definition of a cannabis lawyer.
Ethical rules for cannabis lawyers will vary depending on the jurisdiction in which they practice. However, some general principles that may apply include: Compliance with all applicable laws and regulations: Cannabis lawyers must ensure that their clients are operating in compliance with all state and federal laws and regulations related to cannabis; Confidentiality: Cannabis lawyers have a duty to maintain the confidentiality of their clients’ information, as well as to protect their clients’ rights to privacy; Avoiding conflicts of interest: Cannabis lawyers must be careful to avoid conflicts of interest in representing multiple clients in the same industry or with competing business interests; Representation of clients with integrity: Cannabis lawyers must represent their clients with integrity, and not engage in any conduct that would reflect negatively on the legal profession; Professionalism: Cannabis lawyers must conduct themselves in a professional manner and avoid any conduct that could bring disrepute to the legal profession; Compliance with Local Bar rules and regulations.
Although this is a general answer, I was impressed with it in regards to the conflict of interest response. I don’t think clients even consider whether or not their lawyers are representing their direct competition when it comes to things like competitive licensing processes. Note, however, that the overall response doesn’t include the finer details of certain ethical issues in the industry like lawyers taking a financial interest in a client’s cannabis business.
I asked ChatGPT to draft a cannabis fee slotting agreement for me. This was the response:
I’m sorry, but as a language model AI, I’m not able to provide you with a legal contract. However, I can provide you with an overview of what a cannabis contract for fee slotting might include. Description of the agreement: The contract should clearly describe the agreement between the parties, including the terms of the fee slotting arrangement; Payment terms: The contract should specify the payment terms for the fee slotting arrangement, including any deposit, payment schedule, and method of payment; Duration: The contract should specify the duration of the fee slotting agreement, and any conditions under which the agreement may be terminated; Compliance with laws and regulations: The contract should state that the parties involved will comply with all applicable state and federal laws and regulations related to the cannabis industry; Dispute resolution: The contract should include a dispute resolution clause that outlines the process for resolving disputes that may arise between the parties, such as mediation or arbitration; Confidentiality: The contract should include a clause which ensures that the parties involved keep the terms of the agreement and all related information confidential; Jurisdiction and governing law: The contract should specify the jurisdiction in which the contract is governed, as well as the governing law that will be used to interpret the contract; Signatures: The contract should be signed by all parties involved, indicating their agreement to the terms outlined in the contract.
Sorry, folks. You won’t be getting any contracts from ChatGPT. You’ll get (again) a general description of what should be in the agreement, but it won’t be tailored to your actual situation. Fee slotting agreements are popular in cannabis and they’re incredibly specific (and certain states, like California, may have wonky laws around restraint of trade that may impact them altogether). A general description of what should be in a standard contract really isn’t going to advance the ball for something like that.
In the end I think ChatGPT and cannabis are great bedfellows when it comes to generalized legal information. ChatGPT is not a replacement for a competent attorney with experience in the area. We know things are dicey out there right now economically and cannabis operators are trying to save on their legal spend. However, ripping cannabis agreements from Google or getting “advice” from ChatGPT won’t be to your advantage anytime soon. Even ChatGPT admits:
“consulting with a cannabis attorney at an early stage can help you avoid legal issues down the road and increase your chances of success in the cannabis industry. It is important to note that laws and regulations surrounding cannabis are constantly changing, so it’s important to work with a lawyer who has up-to-date knowledge.”
Good advice.
The post Will AI Replace Your Cannabis Lawyer? (I Asked ChatGPT) appeared first on Harris Bricken Sliwoski LLP.
Lawmakers in South Dakota on Thursday took a step toward making significant changes to the state’s medical cannabis program.
The Republican-controlled state Senate approved a bill that would broaden the list of qualifying conditions for a medical marijuana prescription, while also transferring the power to set those conditions from the South Dakota Department of Health to the state legislature.
The bill passed by a vote of 20-15, according to local news station KELO, and the legislation now moves to the state House of Representatives, where Republicans also maintain a sizable majority.
Under South Dakota’s medical cannabis law, a patient with one of the following “debilitating conditions” may use medical cannabis once he or she obtains approval from the Department of Health: A chronic or debilitating disease or medical condition or its treatment that produces one or more of the following: cachexia or wasting syndrome; severe, debilitating pain; severe nausea; seizures; or severe and persistent muscle spasms.
The legislation that was approved by the state Senate on Thursday would broaden the list of debilitating conditions to also include the following: Acquired immune deficiency syndrome or positive status for human immunodeficiency virus; Amyotrophic lateral sclerosis; Multiple sclerosis; Cancer or its treatment, if associated with Crohn’s disease; Epilepsy and seizures; Glaucoma; or Post-traumatic stress disorder.
The bill also removes language in the law that gives the Department of Health the authority to determine which debilitating conditions will be covered.
The measure was endorsed by a special legislative committee charged with providing oversight to the state’s medical cannabis law, which was approved by voters in 2020.
The chair of that committee, Republican state Sen. Erin Tobin, “said taking away the department’s authority to set conditions and putting it with lawmakers instead gave her more confidence to prescribe medical marijuana for a patient,” KELO reported.
KELO reported that Tobin noted that “the department doesn’t have a medical professional on its staff to decide on conditions.”
“This is something the Department of Health needs,” Tobin said, as quoted by KELO.
Legislators who objected to the proposal argued that the measure that was approved by South Dakota voters in 2020 explicitly gave the authority to the Department of Health.
South Dakota’s medical cannabis law officially took effect in the summer of 2021, but the state’s first licensed dispensary did not open until last year.
Some Republican lawmakers in the state have been wary of the new medical cannabis law, contending that it could be a gateway to recreational pot use.
Voters in the state rejected an initiated measure in November that would have legalized recreational marijuana in South Dakota, a disappointing outcome for advocates who believed they had triumphed two years prior.
In 2020, voters there approved both the medical cannabis measure and an amendment that would have legalized recreational marijuana.
The amendment drew an immediate legal challenge from South Dakota Gov. Kristi Noem, and the state Supreme Court ultimately struck it down in November of 2021.
Noem celebrated the ruling.
“South Dakota is a place where the rule of law and our Constitution matter, and that’s what today’s decision is about,” Noem said at the time. “We do things right—and how we do things matters just as much as what we are doing. We are still governed by the rule of law. This decision does not affect my Administration’s implementation of the medical cannabis program voters approved in 2020. That program was launched earlier this month, and the first cards have already gone out to eligible South Dakotans.”
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