Dale Schafer Law News – 8/8/22

#californiacannabis – “A California appellate court in July sided with the company Caligrown, which had applied for one of the licenses to operate a storefront dispensary. The court found that Chula Vista’s rejection of the Caligrown’s storefront license was “arbitrary and capricious” and an abuse of the city’s regulations.

In their ruling, the appellate judges ordered that Chula Vista keep Caligrown in the running for a permit. But the city has already promised or given away all its licenses and some of those businesses are already operational.”

https://voiceofsandiego.org/2022/08/08/already-a-mess-chula-vistas-capricious-cannabis-permit-process-scrambled-even-more-by-court-ruling/

Dale Schafer Law News – 8/6/22

Everyone is struggling…. communication with your shareholders, in times of struggle, is a must!

#cannabisindustry – ““In the company’s initial communications to shareholders in May, we indicated our immediate focus was on our 100-day plan to stabilize operations, protect our performing assets, create a sustainable debt position, and put us on a path to profitability in an increasingly challenging industry and troubled California market. I am pleased to announce progress against this plan – though humbly recognize that there is still significant work ahead of us.

The company has completed the following:

Outsourcing distribution….

Closing under-performing retail…..

Reduction in management and workforce. As of Aug 1, 2022, Unrivaled headcount is 188 versus 338 at the end of Q1 2022.”

https://www.benzinga.com/markets/cannabis/22/08/28377123/cannabis-company-unrivaled-brands-fires-150-employees-on-a-path-to-profitability

Cannabis is still federally illegal folks…

#cannabispolitics – “Dallas Mavericks Former NBA player Iman Shumpert was arrested at the Dallas Fort Worth International Airport last weekend for allegedly trying to bring six ounces of cannabis through security.”

https://www.arise.tv/former-nba-player-iman-shumpert-arrested-at-texas-airport-for-cannabis-possession/amp/

#Biden needs to be reminded of the hypocrisy of declaring Griner #wrongfullydetained in #Russia when we have MANY still incarcerated in the #US for the exact same crimes……

#cannabispolitics – “Justin Strekal, founder of the BOWL PAC, told Marijuana Moment that it’s “a sad state of affairs that Brittney Griner is a political pawn to one of the few countries that criminalize cannabis more heavily than the United States.”

“As President Biden continues to declare Griner wrongfully detained, he should take steps to uncouple the fact both the U.S. and Russia incarcerate Americans for cannabis possession,” Strekal said.”

https://www.marijuanamoment.net/advocates-demand-biden-take-marijuana-action-after-brittney-griner-sentenced-to-nine-years-in-russian-prison-for-vapes/

Courtesy of Politico

If you are looking at any jurisdiction, on the November ballot, now is the time to begin planning to participate in the ordinance development process as well as the development of your own business plan and structure. We are here to help. Schedule a free consultation by emailing daleschaferlaw@gmail.com…..

#californiacannabis – Politics – “Residents have qualified initiatives in four Southern California beach cities that cover an area ranging from Los Angeles International Airport to the Palos Verdes peninsula. Those cities — El Segundo, Hermosa Beach, Redondo Beach, Manhattan Beach — have a combined population of around 140,000 people.

City councilmembers in the Inland Empire cities of Riverside and Ontario — accounting for more than half a million people — are moving forward with ordinances to allow retail cannabis sales, driven by the threat of citizen initiatives. Those are two of the largest cities in Riverside and San Bernardino counties, both of which have been slow to embrace the legal cannabis market.

Four cities in Orange County are considering allowing cannabis retail as the threat of citizen initiatives loom. The largest of those is Huntington Beach, which placed its own measure on the ballot asking residents to approve a tax on future cannabis sales. That sort of move is generally seen as a city’s first step to opening a local market. Only four of the 34 cities in the county currently allow retail sales.”

https://www.politico.com/newsletters/california-playbook-pm/2022/08/04/legal-weed-goes-back-to-voters-00049968

#californiacannabis – Politics –  “SB-57 authorizes four local jurisdictions to operate overdose prevention programs, also known as safe consumption sites or safe injection sites, as a five-year pilot program. The legislation provides approval for such facilities in Los Angeles County and the cities of San Francisco, Oakland and Los Angeles. A statement from Wiener’s office noted that the city councils or board of supervisors in all four jurisdictions had requested to be included in the legislation.”

https://hightimes.com/news/california-lawmakers-approve-bill-authorizing-safe-consumption-sites/

#californiacannabis – “In a surprising move during this week’s City Council meeting, the panel did not give its second and final stamp of approval on a pair of ordinances, which Redondo’s cannabis steering committee created. It was surprising because final votes on ordinances, which usually require two rounds of council approval, are typically formalities.

Instead, not enough council members backed the ordinances, underscoring how fraught the debate over cannabis in Redondo Beach has become.”

https://www.dailybreeze.com/2022/08/04/redondo-beach-holds-off-on-imposing-city-cannabis-regulations/

#californiacannabis – “

In Callanan v. Grizzly Designs, LLC, the complainant filed a complaint against the defendants, who were Grizzly Designs, LLC and two individual defendants. The complainant alleged that the defendants:

  • employed him to work on their licensed cannabis farm in Northern California;
  • deliberately misclassified him and others as independent contractors to deny them protections that employees usually receive under California wage and hour laws;
  • ordered him to stay on the farm and threatened to reduce his production bonus if he did not;
  • only paid him the $30,000 production bonus that they owed while he was lying in the hospital after suffering severe burns in a fire in the farm’s bunkhouse;
  • failed to provide workers’ compensation insurance.

The complainant made claims under the Labor Code and other laws against the defendants, including the following: failure to pay minimum wages, failure to pay wages for missed meal and rest periods, failure to reimburse for business expenses, failure to provide accurate and itemized wage statements, failure to maintain accurate payroll records, false imprisonment, unfair competition, unjust enrichment, and breach of contract.

https://www.hcamag.com/us/specialization/employment-law/company-allegedly-misclassifies-employees-as-independent-contractors/415689

#californiacannabis – “Selecting the ideal accounting firm can improve the strength and efficiency of your business. Keep in mind what your main areas of concern are in terms of your financing. Ask questions relating to your concerns and speak with different firms to gain a better understanding of your compatibility….

An accounting firm can provide a business with exceptional benefits such as the ability to avoid costly errors within the books while remaining properly aligned with the laws. A positive draw to partnering with an accounting firm is that such a partnership tends to ultimately save money.”

https://www.benzinga.com/money/best-cannabis-accounting-firms-in-california

#cannabisindustry – “A final judgment recently rendered in WM. Wrigley Jr. Company v. Roberto Conde, et al., is nothing short of a cautionary tale and a powerful reminder to cannabis companies: Parody is NOT a defense to trademark infringement in this type of commercial context….

There is a line between using another’s mark to make political or social commentary and using another’s mark to gain recognition and increase sales of your own product. We’ve written before about cannabis companies that have attempted to spoof well known marks and have paid a price for it….

The judgment states that Mata’s conduct constituted:

Trademark infringement;

Trademark dilution;

Unfair competition and deceptive acts;

Dilution under relevant California Business and Professions Code statutes; and

Counterfeiting.

The Court issued an injunction against any further counterfeiting, infringement, dilution, and unfair competition. Mata is also to recall any products, packaging, and advertising that is already out in the world, and provide them to Wrigley’s attorneys for destruction. Finally, Mata is to provide an accounting of all profits from the products and “disgorge” them (turn them over) to Wrigley, in addition to statutory damages of $2 million per counterfeit mark, as well as pre-judgment interest, Wrigley’s costs and its attorneys’ fees in prosecuting the case.”

https://harrisbricken.com/cannalawblog/cannabis-trademark-litigation-wrigley-wins/

Dale Schafer Law News – 8/1/22

#cannabisindustry – “Directors and officers insurance has been pricey and tough to obtain for cannabis companies since the industry started requiring coverage.

D&O is difficult in most business sectors (For more on that check out: “You’ve Heard it Before, so Here it is Again: D&O is a Tough Pill for Cannabis.”), but cannabis businesses may pay up to 50% more in premiums for D&O – if they can get it…..

Small- to mid-size cannabis companies, by and large, don’t want it, an Insurance Journal poll shows. Roughly 20% of respondents said they sold no D&O policies to these companies, and about 40% said that fewer than one-in-four buy a D&O policy. Few said they had a good chance to sell one…..

Price is, of course, one of the top reasons Baker hears when a small- to- mid-size company doesn’t want a D&O policy, and he said they also often offer the reasoning they are still too small to need it.

Beyond that, Baker believes there’s a widely held belief that the directors and offers of privately held cannabis companies don’t feel they’re vulnerable to legal actions relating to their managerial capacities.”

https://www.insurancejournal.com/news/west/2022/08/01/677231.htm

#cannabisindustry – Education – “The alter ego theory of liability attempts to reach pockets beyond the putatively liable business entity. Doing so is known at piercing the corporate veil. The alter ego theory of liability is not limited just to piercing a company to reach into the pockets of the owners. It may also be used to reach into other entities. And veil piercing may be accomplished in few different ways.

Vertical piercing refers to piercing the veil between a subsidiary and its parent to hold the parent company liable.

Horizontal piercing refers to using the alter ego theory of liability to hold sister company’s liable.

Reverse piercing refers to using the alter ego theory of liability to hold a company liable for the conduct of its owners…..

As the name suggests, the “alter ego” theory of liability ultimately concerns whether the members or shareholders have treated the corporate entity as a “mere instrumentality” or “alter ego” of themselves. Typically the bar to pierce the veil is high, and a court’s use of its equitable powers is exercised only when there is clear evidence that those in control of a company have used the corporation for improper means such as fraud.

Keep in mind that a plaintiff must have a reasonable good faith belief that its allegations are true. Oftentimes a plaintiff does not have enough information to allege a claim for alter ego theory liability. But where a plaintiff does have such information, a claim for alter ego liability is a powerful one. It allows the plaintiff to reach past the ordinary limitations of liability into the pockets of shareholders, members, or sister or parent companies.”

https://harrisbricken.com/cannalawblog/cannabis-litigation-what-is-alter-ego-liability/

Courtesy of Cannabis Industry Journal

#californiacannabis – “In every state with regulated cannabis, there is a requirement to label the potency of products so consumers can make informed purchasing and medicating decisions. The regulations usually state that the THC/cannabinoid content on the label must be within a particular relative percent difference of the actual tested results for the product to be salable. In California, that threshold is +/- 10%.

The problem is, with all the focus on THC percentage in flower and concentrate products, enormous pressure has been placed on cultivators and manufacturers to push their numbers up. Higher numbers = higher prices. But unfortunately, improving their growing, extraction and formulation processes only gets companies so far. So, they proceed to ‘lab shop’: giving their business to whichever lab provides them the highest potency.”

https://cannabisindustryjournal.com/feature_article/the-inflated-thc-crisis-plaguing-california-cannabis/

Dale Schafer Law News – 8/1/22

#cannabisindustry – “Directors and officers insurance has been pricey and tough to obtain for cannabis companies since the industry started requiring coverage.

D&O is difficult in most business sectors (For more on that check out: “You’ve Heard it Before, so Here it is Again: D&O is a Tough Pill for Cannabis.”), but cannabis businesses may pay up to 50% more in premiums for D&O – if they can get it…..

Small- to mid-size cannabis companies, by and large, don’t want it, an Insurance Journal poll shows. Roughly 20% of respondents said they sold no D&O policies to these companies, and about 40% said that fewer than one-in-four buy a D&O policy. Few said they had a good chance to sell one…..

Price is, of course, one of the top reasons Baker hears when a small- to- mid-size company doesn’t want a D&O policy, and he said they also often offer the reasoning they are still too small to need it.

Beyond that, Baker believes there’s a widely held belief that the directors and offers of privately held cannabis companies don’t feel they’re vulnerable to legal actions relating to their managerial capacities.”

https://www.insurancejournal.com/news/west/2022/08/01/677231.htm

#cannabisindustry – Education – “The alter ego theory of liability attempts to reach pockets beyond the putatively liable business entity. Doing so is known at piercing the corporate veil. The alter ego theory of liability is not limited just to piercing a company to reach into the pockets of the owners. It may also be used to reach into other entities. And veil piercing may be accomplished in few different ways.

Vertical piercing refers to piercing the veil between a subsidiary and its parent to hold the parent company liable.

Horizontal piercing refers to using the alter ego theory of liability to hold sister company’s liable.

Reverse piercing refers to using the alter ego theory of liability to hold a company liable for the conduct of its owners…..

As the name suggests, the “alter ego” theory of liability ultimately concerns whether the members or shareholders have treated the corporate entity as a “mere instrumentality” or “alter ego” of themselves. Typically the bar to pierce the veil is high, and a court’s use of its equitable powers is exercised only when there is clear evidence that those in control of a company have used the corporation for improper means such as fraud.

Keep in mind that a plaintiff must have a reasonable good faith belief that its allegations are true. Oftentimes a plaintiff does not have enough information to allege a claim for alter ego theory liability. But where a plaintiff does have such information, a claim for alter ego liability is a powerful one. It allows the plaintiff to reach past the ordinary limitations of liability into the pockets of shareholders, members, or sister or parent companies.”

https://harrisbricken.com/cannalawblog/cannabis-litigation-what-is-alter-ego-liability/

Courtesy of Cannabis Industry Journal

#californiacannabis – “In every state with regulated cannabis, there is a requirement to label the potency of products so consumers can make informed purchasing and medicating decisions. The regulations usually state that the THC/cannabinoid content on the label must be within a particular relative percent difference of the actual tested results for the product to be salable. In California, that threshold is +/- 10%.

The problem is, with all the focus on THC percentage in flower and concentrate products, enormous pressure has been placed on cultivators and manufacturers to push their numbers up. Higher numbers = higher prices. But unfortunately, improving their growing, extraction and formulation processes only gets companies so far. So, they proceed to ‘lab shop’: giving their business to whichever lab provides them the highest potency.”

https://cannabisindustryjournal.com/feature_article/the-inflated-thc-crisis-plaguing-california-cannabis/