A few weeks ago, I was lucky enough to attend the 8th Annual Cannabis Law Conference, presented by the Cannabis Law Section of the State Bar of Michigan in cooperation with ICLE. It was at the Grand Hotel on Mackinac Island and featured wonderful networking opportunities and truly rewarding substantive presentations. I didn’t make it to every session, but if you’re following this dynamic area of practice, you might be interested in hearing a little bit about what I learned.
- Federal policy updates. Hilary Bricken discussed the potential for the Drug Enforcement Administration to review a rescheduling recommendation that would move cannabis from a schedule 1 to schedule 3 drug. The main benefit of the change is the tax implications under IRC 280e. Hilary noted that the change could also bring research to expand drug development (as has happened with a schedule 3 drug like ketamine). But there are a lot of complications. For example, Food and Drug Administration (FDA) approval will definitely be needed if marijuana becomes a schedule 3 for purposes of medical marijuana, but what will that do to adult use as it exists in states like Michigan? Hilary noted that to completely protect adult use, there really needs to be an act of Congress.
- Creative ballot initiatives. Barton Morris discussed the Michigan Regulation and Taxation of Marihuana Act (MRTMA), which provides that municipalities can make decisions about their communities but can’t just opt out of adult use. Section 6 of MRTMA allows electors to initiate ordinances in order to decide the number of marijuana facilities in a municipality, and the details depend on the type of municipality. Barton went into some particulars with recent things that have happened in Birmingham, Keego Harbor, Rochester, and other municipalities. There are some interesting tactics being used in some municipalities to retain control, and those representing cannabis businesses should be sure to look into exactly what is going on in each relevant municipality.
- Cannabis Regulatory Agency rules. Ben Sobczak and Ben Joffe discussed a long list of rule changes published for review and comment. Probably the biggest point of discussion was interior labeling requirements. Some pointed out that these requirements are very onerous, and they have different impact depending on the type of product. For example, for a four-pack of CBD seltzer, there are warnings on the cans and on the cardboard packaging they come in. But what about individual plastic-wrapped candies that come in a larger bag? Several people suggested using a universal marijuana symbol. There was also some discussion of recyclable packaging and the obligation to reduce use of wasteful materials.
- Compliance issues. Kristina Munsters and Alyssa Grissom discussed ways cannabis businesses can avoid violations, including communication, education, and timely action. The presenters advised lawyers to make sure clients understand notification and reporting requirements and to communicate with clients about expectations. Alyssa had a number of tips for working with the Cannabis Regulatory Agency, including making sure to inform different sections of the agency about what’s going on with other sections.
- Social equity considerations. In an engaging session, Jerome Crawford explained that the cannabis section has a unique opportunity to create change in the social equity arena. He noted that the change will result from law changes at all levels, nonprofits and activists, and operators/investors/philanthropists. Jerome used an effective “spilled milk” metaphor throughout the talk—he noted that spilling a glass of milk takes only a few seconds, but cleaning it up takes longer and is more complicated, involving broken glass and stained carpet. You may need different tools, and it may not be something you want to do, but you still have to clean it up. Similarly, even though the solution to social equity in the cannabis space may not be clear cut or easy, we can’t sit back and ignore the problem.
- Real estate transactions. Denise Pollicella gave an excellent talk outlining some of the most important considerations with real estate transactions in the cannabis space. Interestingly, she mentioned the recent Michigan Supreme Court holding in Kandil-Elsayed v F&E Oil, Inc, Nos 162907, 163430, ___ Mich ___, ___ NW2d ___ (July 28, 2023) and its impact on business owners. In Kandil-Elsayed, the court held that land possessors continue to have a duty to exercise reasonable care to protect invitees from an unreasonable risk of harm caused by a dangerous condition of the land, even if the condition is open and obvious. Under the holding, the open and obvious nature of a condition is relevant to the defendant’s breach and the plaintiff’s comparative fault. This is a big deal for cannabis businesses because snow and ice issues are exacerbated in the cannabis space by limited liability insurance opportunities. There was some discussion of the benefits of curbside or drive-through models to limit liability.
- Assisting distressed clients. Hilary Bricken again presented on nonbankruptcy options like receivership and assignment for the benefit of creditors. She discussed an interesting case in the Eastern District of Michigan—In re Great Lakes Cultivation LLC, No 21-12775 (ED Mich Aug 18, 2022)—where the business claimed to be an “ex-cannabis” business (that could therefore go through bankruptcy without being disqualified). The court rejected their attempt to go through bankruptcy because they still owned marijuana plants. She noted that it will be interesting to see if an actual ex-cannabis business that no longer owns product or other cannabis-related materials would be able to get in the door. She noted that there is precedent for this in California courts.