Dale Schafer Law News – 8/31/22

#delta8 – “The initiating lawsuit, filed by AK Futures in December 2021, accuses LCF Labs, located in California, and Hong Kong-based Homesun of allegedly mimicking the packaging of the Cake brand in an effort to confuse customers into thinking they were buying authentic goods.

Cake is California-based AK Futures’ most popular brand of cannabis vaping products. The company claimed to have pulled in $44 million in sales revenue during a nine-month period ending in May 2021. The products contain Delta-8 THC, a cannabinoid extracted from federally lawful hemp. It’s often used as a psychoactive alternative to Delta-9 THC, which is considered a Schedule I drug.

While AK Futures has filed suit against a number of vape firms on similar claims and won at least four cases, the company accuses LCF Labs of being the head of a grand counterfeit operation.

On Jan. 18, Judge Selna signed off on an order allowing the U.S. Marshals Service to search LCF Labs’ Ontario and Anaheim, California, facilities for knockoff Cake products. Ultimately, the officers impounded roughly $51.6 million in fakes, according to AK Futures’ memorandum.”


#cbdproducts – “The Jelly Belly Candy Co. wants a California federal court to declare that the man who came up with the titular sweet and its name in the ’70s isn’t the confectionery’s founder, as it doesn’t want to be associated with his “legally murky CBD and marijuana food” venture.

It’s true that David Klein imagined the name and paid the roughly 100-year-old sweets manufacturer to roll out the “gourmet jelly beans,” but he did not establish the company, the business told the California Eastern District Court in its lawsuit. Yet he has repeatedly misled media outlets by referring to himself as the founder in order to boost his projects, with the chief example being when Klein announced his line of CBD-infused jelly beans in 2019….

The lawsuit seeks a judgment declaring that Jelly Belly did not defame Klein when it asked media outlets not to call him the founder. It also wants a permanent order that would prevent Klein from calling himself the founder. The company also asked for damages and attorney fees.”


#californiacannabis – Sacramento – “The city is considering expanding consuming cannabis at public storefront lounges, but it’s also considering other avenues like events at parks, restaurants, and even massage parlors.

“I think consumption just gives an opportunity for patients to meet congregate, absorb the cultural aspect of the industry, learn and educate what works for them, what doesn’t work for them,” Richard Miller, with the California Americans for Safe Access Cannabis Committee, said.”


Dale Schafer Law News – 8/30/22

#cannabisindustry – “The court noted that the intention to invest in a lawful business did not render the illegality issue moot and, consequently, reframing the relationship did not by itself preclude dismissal. Some dicta of the Court is particularly demonstrative of how much it did not want to get involved:

“Key aspects of this lawsuit concern activities that represent either actual ongoing CSA violations (by Defendants) or the attempt to recover the investments in an enterprise (Clover Top Holdings, Inc.) whose activities implicate the CSA. Marijuana is not an indirect or tangential aspect of the dispute. It lies at the heart of the business and thus the lawsuit … [the Court] may not vindicate equity in or award profits from a business that grows, processes, and sells marijuana.””


Dale Schafer Law News – 8/29/22

Courtesy of Harris Bricken

#hempproducts – “The Kushly case is actually the seventh such case brought by the FTC against a CBD company in the U.S. based on false and/or unsupported health claims, related to the bodily or curative effects of CBD. It’s no secret that the FDA routinely tries to shutter these kinds of CBD companies, but now the FTC is using its teeth to sue and fine these companies and their individual owners. This case marks the first time, though, that consumers are also getting refunds for products purchased, the cost of which of course must be borne by Kushly.

The two main takeaways from the Kushly case are: 1) if you’re a CBD business, do not make either untrue or unsubstantiated health claims about your CBD products; and 2) if you’re a consumer of such products, in the future you may be entitled to a refund if the FTC continues to crack down on CBD companies in this manner. We expect that will happen given that these lawsuits are another enforcement “stick” to curb deceitful practices in the wild west industry that is CBD.”


#cannabisindustry – “”They aren’t saying it’s legal,” said Shane Pennington, a New York-based attorney at Vicente Sederberg LLP, one of the nation’s foremost cannabis-focused law firms. “They’re just saying it exists.”

Congress still classifies cannabis as illegal, and anyone trafficking in an illegal substance across state lines still commits a federal crime.

Several states, including Oregon in 2019 and California this year, have passed laws in anticipation of federal legalization that would allow permit holders to ship cannabis across state lines, provided they hold permits in both states and federal law changes. But those provisions also require major, as-yet unseen changes in federal policy to take effect.

Some legal experts did suggest that someone could try to send a few packs across state lines and then use the First Circuit decision in a defense; other experts said that anyone trying this particular gambit ought to have a very good defense team ready.”


#californiacannabis – “The presence of a CDFW agent in full gear also concerned the resident, a legacy farmer who has lived in the Emerald Triangle throughout the War on Drugs era that pitted law enforcement against cannabis cultivators. The cultivator, although a legal cannabis cultivation license holder, chose to remain anonymous for fear that speaking with the media may result in harassment from state officials.

The cultivator said that although they could show that they had no violations on their site and were not engaged in any water theft or diversion, it felt to them that the officials “were trying to catch us doing something wrong.”

Notably, the cultivator said that three weeks ago during a routine visit, the inspectors had marked water levels on the site’s water storage tanks. During yesterday’s visit, officials compared those marks against the current water levels, presumably to make sure the water levels had not risen as cultivators are not allowed to divert water this time of year. Additional water levels marks were made to the storage tanks with an ominous, “expect a call,” from the DCC official.”


#psychedelic – “The notice, which is set to be formally published in the Federal Register on Monday, doesn’t give a specific reason for rescinding the ban of the two phenethylamine hallucinogens. But this marks another win for scientific community, coming just one month after DEA abandoned separate plans to place five tryptamine psychedelics in Schedule I.

“DEA is withdrawing the proposed rule, terminating all proceedings related thereto, and will be publishing a new proposed rule using an amended procedure,” the new notice on 2,5-dimethoxy-4-iodoamphetamine (DOI) and 2,5-dimethoxy-4-chloroamphetamine (DOC) says.”


#californiacannabis – “The OCal Program, as it is called, allows cannabis products that have met certain rigorous standards — similar to the criteria used by the USDA when certifying organic products — to be marketed with the OCal label.[2]

Authority over the OCal Program is shared by the California Department of Food and Agriculture, or CFDA, which enforces comparable-to-organic standards for cannabis cultivators, and the California Department of Public Health, or CDPH, which enforces comparable-to-organic standards for cannabis manufacturers.

Actual approvals to use OCal labels will come from third-party accredited certifying agents. The OCal Program is currently accepting applications for registration and accreditation of certifying agents.[3]

So far, very few cultivators and manufacturers have become OCal-certified, but widespread adoption seems likely.”


Dale Schafer Law News – 8/25/22

#californiacannabis – “Residents will also be asked to vote on Measure L, a city cannabis tax that will fund general municipal expenses including law enforcement, fire, emergency medical services, street improvements and recreation.”


#psychedelic – “Oregonians in 57 cities and 26 of the state’s 36 counties will vote in November on banning or postponing psilocybin treatment centers and the production of psilocybin products in their areas.

Psilocybin was first approved by state voters in 2020 with almost 56% of the vote supporting Measure 109. The vote made Oregon the first state in the nation to legalize such treatment. The program will be launched by the Oregon Health Authority in January.

But the measure included a process for cities and counties to back out of legalization, allowing a vote on local bans or a two-year moratorium before joining the rest of the state. They had until Aug. 19 to file paperwork with the Secretary of State’s office to put it on the November ballot.”


#delta8 – “Notably, the court’s vague reference to “non-cannabis materials” set no meaningful guidelines for what qualifies as synthetic. That term could be interpreted to include chemical reagents (which are frequently used to catalyze CBD into delta-8 THC) present in the final product. There was no definition given by the court as to what proportion of the final product must be originally derived from hemp, or what amount of reagent presence is acceptable. Instead, the court held that whether the final product was originally derived from hemp with less than 0.3% delta-9 THC determines whether a final product is synthetic, not its method of manufacturing.”


#cbdproducts – “That lack of regulation has hindered the growth trajectory of the industry and will continue to do so, industry members tell Cannabis Business Times, and data firm Brightfield Group stated in a July mid-year report.

Kim Stuck is CEO and founder of Allay Consulting and one of the country’s first hemp and cannabis regulators who previously worked at the Denver Department of Public Health & Environment. She notes the industry isn’t achieving the same level of growth it would with FDA regulation, and that the lack of regulations allows companies to sell unsafe products.

“It’s really baffling to me that this would even happen in a country like the United States,” Stuck says.”


#californiacannabis – “This week, the California Department of Tax and Fee Administration (CDTFA) reported that $275.2 million was collected in cannabis tax revenue for the second quarter of 2022. This includes California’s cannabis excise tax, which generated $141.3 million; the cultivation tax, which generated $25.8 million; and $108.1 million in sales tax revenue from cannabis businesses. This figure does not include locally imposed taxes collected by the cities and counties of the state, nor does it include outstanding returns.”


#californiacannabis – Huntington Beach – “Voters will decide if Huntington Beach should impose a tax on cannabis businesses – such businesses are currently not allowed and this measure does not change that. If approved, the city could impose a tax of up to 6% of gross receipts for retailers and up to 1% of gross receipts for other cannabis businesses (such as testing or distribution) permitted in Huntington Beach.

The measure is estimated to bring in $300,000 to $600,000 each year to fund general municipal services.”


#californiacannabis – “The Environmental Democracy Project sued Green Sage in July in an effort to force the company to shut down its Oakland-based cannabis facility’s nine “semi-truck”-sized diesel generators, which the group claimed were spewing harmful pollutants into a surrounding predominantly Black and Hispanic community.

According to Judge Tigar, a key issue in the case is whether the local Bay Area Air Quality Management District’s permitting rules or the state-level California Air Resources Board’s registration program applies to Green Sage’s generators….

“Based on this record, the court concludes that plaintiff is likely to establish that the district’s permitting rules apply and that the generators do not qualify for the CARB registration program,” Judge Tigar said. “It also is undisputed that the district never issued permits for any of the portable diesel engines powering the generators.”

The California district judge added that the Environmental Democracy Project is “likely to succeed on the merits.””


Dale Schafer Law News – 8/24/22

#californiacannabis – ““The CUP requirement caps a year-long effort by the Coalition and the community to strengthen controls of cannabis cultivation facilities” stated Coalition for Responsible Cannabis President Blair Pence. “While we believe there is more work to be done, the CUP requirement is an important step in better controlling odors and other impacts from commercial scale cannabis in Santa Barbara County.”…

The Coalition has been actively involved in the County’s permitting and regulation of cannabis over the past three years. The County has approved a series of actions to strengthen regulation of cannabis at the Coalition’s urging, including imposition of a 1,575-acre cap on cannabis cultivation in the inland zones of the County, prohibition of cannabis operations in identified rural neighborhoods, mandating Odor Abatement Plans for cannabis cultivation operations where over 51% of the parcel is planted in cannabis, mandating that cannabis processing be conducted in enclosed facilities with best available control technologies to control odor, property line setbacks, limits on transfers of ownership of cannabis facilities, and more.

“As long as cannabis odors and other impacts harm our neighborhoods, schools, and businesses, the Coalition and its supporters will press the Board of Supervisors to adopt sensible regulations on commercial cannabis operations,” Pence said.”


#cannabisindustry – “The fundamental issue in the case was whether the Dormant Commerce Clause applies in the context of illegal markets.  The defendants conceded that protectionist legislation, such as the residency requirement in Maine’s medical marijuana law, is virtually always unconstitutional.  They argued, however, that the residency requirement was not invalid because federal law makes the interstate marijuana market illegal.  If the interstate market itself is illegal, there is at least a serious question whether the Constitution prevents states from interfering with interstate commerce in that market.

Judge Barron, writing for the majority, held that it does.  The Court concluded that an interstate market for medical marijuana not only exists despite federal laws to the contrary, but that it has implicitly been recognized by Congress through the enactment of appropriation riders (the Rohrabacher-Farr Amendment) preventing the Department of Justice from interfering with state laws legalizing and regulating medical marijuana.  The Court also concluded that the Dormant Commerce Clause affirmatively protects such illicit markets – at least where Congress has implicitly recognized the existence of such markets and permitted states to regulate the market.  Finally, the Court concluded that Congress had not affirmatively permitted states to adopt protectionist legislation in the medical marijuana market.  According to the majority, the Dormant Commerce Clause applies regardless of the illicit nature of a particular interstate trade.”


#californiacannabis – “According to the order, while LAHC did issue an ultimatum threatening to terminate the license if Dr. Greenthumb did not terminate its agreement with a rival store, that does not amount to an anticipatory breach in the agreement, as LAHC never actually terminated the agreement and has not repudiated or denied the validity of the agreement.

Even if LAHC’s conduct had given Dr. Greenthumb the reasonable belief that LAHC would not perform its obligations under the contract, Dr. Greenthumb never demanded reassurance of performance, while LAHC did provide reassurance and attempted to resolve matters through negotiation.”


#californiacannabis – “A Los Angeles County judge has given the go-ahead to the state’s tax office to enter a cannabis dispensary, which owes more than $718,000, in order to seize cash, but the court limited the number of times the agency can go into the business to collect.

Superior Court Judge Jon R. Takasugi on Friday approved a warrant of entry sought by the California Department of Tax and Fee Administration that will allow it to send officers into TopSpot Whittier to collect “cash and cash equivalents.” But the tax office will only get three opportunities to collect the more than $718,204 the company allegedly owes in taxes, fees and interest as the judge refused to give officers any more chances.

“CDTFA’s supplemental briefing did not set forth any legal basis for its request that the order allow entry on 10 different occasions,” Judge Takasugi said in his minute order filed Thursday. “CDTFA’s ex parte application is granted in part. Given the lack of any legal basis for its request that the order allow entry on 10 different occasions, the court grants the ex parte application to allow three instances of entry.””


#californiacannabis – “The financiers behind Rx Depot Group Inc. claim that Tomer Aseraf, an investor turned vice president, used his position to steal $364,849.87 while the business was “still in precarious financial turmoil.” They say he took from the company’s bank account for personal use and never paid it back, the suit said.

The lawsuit, filed on Friday, accuses Aseraf and a company he owns, Djet LLC, of fraud and deceit, breaching a fiduciary duty, breaching a contract and violating the state’s unfair competition and restraint of trade statutes. It seeks at least $600,000 in damages and attorney’s fees and punitive damages on top of that.

Through his LLC, Aseraf bought into Rx Depot with the purchase of nearly half a million shares for $118,000, and he became a director and CFO in August 2018, according to the complaint.

Even with Aseraf’s stock buy and other investments he put into the company, Rx Depot remained in a financial bind and needed additional money. So Alfredo Cortex, a principal at the company and one of the plaintiffs in the suit, secured a “high interest” loan worth $500,000 by putting up real estate property owned by his family as collateral, the lawsuit said.

Sometime after finding out about this influx of cash, Aseraf withdrew more than half of it without the consent of the company’s other principals, the suit claims.”


Dale Schafer Law News – 8/23/22

Courtesy of CannaLaw Blog

#cannabisindustry – “In Fry v. United States (421 U.S. 542 (1975)), the Supreme Court held that “even activity that is purely intrastate in character may be regulated by Congress, where the activity affects commerce among the States or with foreign nations.” This is very broad language that can cover just about any activity. Moreover, Congress does not “need make particularized findings” on whether an activity affects interstate commerce. Perez v. United States (402 U.S. 146 (1971)). This is an elegant way of saying that Congress does not need to look at facts when it decides that, yes, something has an impact on interstate commerce.

The fact that the Framers of the Constitution gave Congress the power to regulate interstate commerce makes it clear that they understood the issues raised by the movement of goods across state borders. It is reasonable to assume that they also knew that purely intrastate activities could have an impact on interstate commerce, yet the power given to Congress remained linguistically narrow. If the Framers wanted to give Congress the power to regulate activities that “affect” interstate commerce, they could have made that clear in the Constitution. Yet they chose not to. Later moves to expand federal power appear cynical in this context.”


Dale Schafer Law News – 8/23/22

Courtesy of CannaLaw Blog

#cannabisindustry – “In Fry v. United States (421 U.S. 542 (1975)), the Supreme Court held that “even activity that is purely intrastate in character may be regulated by Congress, where the activity affects commerce among the States or with foreign nations.” This is very broad language that can cover just about any activity. Moreover, Congress does not “need make particularized findings” on whether an activity affects interstate commerce. Perez v. United States (402 U.S. 146 (1971)). This is an elegant way of saying that Congress does not need to look at facts when it decides that, yes, something has an impact on interstate commerce.

The fact that the Framers of the Constitution gave Congress the power to regulate interstate commerce makes it clear that they understood the issues raised by the movement of goods across state borders. It is reasonable to assume that they also knew that purely intrastate activities could have an impact on interstate commerce, yet the power given to Congress remained linguistically narrow. If the Framers wanted to give Congress the power to regulate activities that “affect” interstate commerce, they could have made that clear in the Constitution. Yet they chose not to. Later moves to expand federal power appear cynical in this context.”


Dale Schafer Law News – 8/22/22

Courtesy of The Dale Report

#californiacannabis – “Eventually there’ll be a homeostasis, where companies become ‘lean, mean, and grow very good quality,’ says Kazan. For now, he says, the price may keep out of state operators out of the cannabis business in California.”


#californiacannabis – ““As an employer, you need to have a written plan to identify and correct health and safety risks. You also need to provide regular safety training for staff. (The state Department of Cannabis Control) and the Department of Industrial Relations have a variety of tools and resources to help you meet this requirement so you can get to the business of running your business, safely,” a statement released by the state Division of Occupational Health and Safety states.”


#psychedelic – “In North America, archaeological evidence indicates that people used peyote – a cactus containing mescaline, a psychoactive compound – 5,000 years ago.

After a federal ban in 1967, Native Americans won an exemption to use peyote for ceremonial purposes in the 1990s.

Today, peyote is considered sacred medicine among members of the Native American Church, which blends traditional Native American philosophy with Christian teachings.”


#cannabislaw – Intellectual Property – “Cannabis Global continues to pursue two non-provisional patent applications for cannabis technologies. The primary of these relates to using state-of-the-art production devices to supply nanoparticles and nanofibers made from cannabinoids….

In addition, Cannabis Global has filed for cover for inventions relating to the creation of cannabosides, which are modifications of the naturally occurring, plant-based cannabinoids that would potentially significantly increase the bio-absorption of cannabis-related compounds by the physical body.”


Dale Schafer Law News – 8/20/22

#cannabisindustry – “States legalizing medical and recreational marijuana use at different stages and some cities passing their own laws are creating challenges for employers that want to maintain drug-testing programs. Employers are still generally allowed to maintain drug-free workplace policies and there may be certain safety-sensitive jobs where greater prohibition of marijuana use and drug testing is allowed. Still, employers may want to consider how loosened state restrictions may impact their traditional marijuana use policies, particularly the rise of laws providing employment protections for lawful, off-duty use.”


#californiacannabis – November ballot measures – Inland Empire:

Cannabis tax: The measure would tax cannabis and hemp businesses 4% to 7% of gross receipts for retail businesses, and the higher of 1% to 4% of gross receipts or $1 to $10 per square foot for other businesses, generating an estimated $500,000 annually if cannabis and hemp businesses were to be authorized in the future…..

Cannabis tax: Measure G would tax commercial cannabis businesses up to 9% of gross receipts for retail sale, up to 7% of gross receipts for manufacturing and distribution, up to 3% of gross receipts for testing laboratories and up to 15% of gross receipts for other commercial cannabis businesses. It is expected to generate about $5 million a year for general use, including as police and emergency response, community services and street repairs….

Cannabis tax: Measure R would tax commercial cannabis businesses a maximum 7% of gross receipts for cultivation, laboratory testing, retail sales, distribution and manufacturing. Under the measure, the initial rate would be set at zero until cannabis business are allowed to operate legally in the city. If enacted, the tax would generate an estimated $3.5 million annually to support general city services. The measure passes with 50% of the vote, plus one vote.

Cannabis operations: Measure II, an advisory measure, seeks voter feedback on whether the city should consider legalizing and licensing commercial cannabis businesses.”


Courtesy of the Canna Law Blog

#cannabisindustry – “On August 17, the First Circuit Court of Appeals affirmed the the holding of the US District Court for the District of Maine that the residency requirements of Maine’s Medical Use Marijuana Act violate the Dormant Commerce Clause (“DCC”). The First Circuit has added itself to the list of jurisdictions that have invalidated similar state cannabis laws on DCC grounds, including in the Sixth and Eighth circuits.”


#cannabisindustry – “The cannabis industry is home to some of the hardest working, gritty, thoughtful, and passionate entrepreneurs in the world, and there are plenty of success stories out there. However, the industry at large is quickly experiencing a difficult truth: it’s not as simple as if you build it, they will come. The saying for the industry, at this point, should probably be something more along the lines of if you build it, and build it in a great location, and are well capitalized, and execute effectively, with a great team that provides customers with a consistent product, then they will come.”