By Aaron G. Biros

Colorado regulators recalled roughly 65 batches of cannabis produced by two separate companies last Friday. Pesticide recalls plastered all over the news in the past few months have painted a picture of the cannabis marketplace to the public as unsafe and lacking crucial quality standards. The continued pesticide recalls in Colorado, along with poor safety standards in Washington, show the cannabis industry in an unfavorable light. The recalls include not only cannabis sold recreationally, but also medical cannabis, which should highlight a sense of urgency to deal with such a pervasive issue.

Because patients with weakened immune systems are seeking treatment with cannabis, it is the producer’s obligation to grow cannabis safely and without pesticides. That requires proper quality controls, pesticide use standard operating procedures, very robust lab testing and an overall push to protect consumer safety from both regulators and industry leaders.

The pesticides most commonly found in cannabis products include myclobutanil, a fungicide in Eagle 20, and avermectin, commonly found in Avid pesticides. The Pesticide Action Network lists both compounds as “bad actors” and as developmental or reproductive toxins.

Largely due to federal illegality, there are no EPA-approved pesticides for use in cannabis production, thus a lack of guidelines for states to follow in regulating pesticide use. As a result, states are working to write their own lists of approved pesticides.

Until very recently, Washington had no procedure for recalls of cannabis in place. “The LCB in Washington State has implemented emergency recall rules but more clarity on what types of pesticides are harmful is needed,” says Trek Hollnagel, co-founder of Dope Magazine and a chain of dispensaries in Seattle, WA. It is no secret that the Washington State Liquor Cannabis Board (LCB) poorly regulates cannabis labs.

Reports show immense variation in different labs’ results and rampant laboratory shopping. Dana Luce, co-founder of GOAT Labs, Inc., a cannabis-testing laboratory based in Vancouver, Washington, has been clamoring for a standardized recall procedure. “The state needs to take a much more proactive approach in monitoring laboratories,” says Luce. “Using blind testing or secret shoppers would give them the opportunity to catching those labs playing below board.” Luce also believes that retail outlets should absorb the cost of recalls, which could help prevent laboratory shopping just for higher potency test results.

In Washington, regulators rely on producers to self-report coupled with random inspections; furthermore they do not even require pesticide testing. Without a burden of proof placed on the producer or even the laboratory, it is hardly a regulated market.

Those producing cannabis with pesticides listed above should know they are violating the law. According to Comprehensive Cannabis Consulting (3C), “applying pesticides off label is a violation of state and federal law and could result in criminal and civil sanctions…”

In reality, the solution to this problem is not just a quick fix, but a multitude of corrective actions to move the cannabis industry forward. Nic Easley, chief executive officer of 3C, believes it starts with educating cultivators on using pesticides properly and good agricultural practices (GAP). “Many of the pest problems prompting the illegal use of pesticides are due to poor facility design, lack of cleanliness, over-fertilization and other general plant health issues,” says Easley. “All of those issues could be greatly reduced through education in GAP.”

Then comes regulator-industry collaboration, where all parties are constantly learning. “Regulators or independent third-party groups need to be performing on-site inspections, which cultivators need to participate in openly and transparently,” adds Easley. The Colorado Department of Agriculture (CDA) is actively working on this aspect by offering workshops aimed at helping producers get up to speed with worker protection standards.

“Adequate standards need to be applied across the board to labs, and ongoing proficiency testing needs to take place to ensure that a lab’s facility, processes and instruments are fully validated,” says Easley. So the problem is cannabis producers still using pesticides off label and if that continues, so will the recalls. It seems the solution involves industry-regulator collaboration, more robust laboratory systems and calibration methods and educating cultivators on good agricultural practices. Additionally, more state guidance is needed in the form of research for an approved list of pesticides on cannabis and a bigger push for regulation in the form of inspections and laboratory oversight.

April 4, 2016

The Practical Chemist

Easy Ways to Generate Scientifically Sound Data

By Amanda Rigdon

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I have been working with the chemical analysis side of the cannabis industry for about six years, and I have seen tremendous scientific growth on the part of cannabis labs over that time. Based on conversations with labs and the presentations and forums held at cannabis analytical conferences, I have seen the cannabis analytical industry move from asking, “how do we do this analysis?” to asking “how do we do this analysis right?” This change of focus represents a milestone in the cannabis industry; it means the industry is growing up. Growing up is not always easy, and that is being reflected now in a new focus on understanding and addressing key issues such as pesticides in cannabis products, and asking important questions about how regulation of cannabis labs will occur.

While sometimes painful, growth is always good. To support this evolution, we are now focusing on the contribution that laboratories make to the safety of the cannabis consumer through the generation of quality data. Much of this focus has been on ensuring scientifically sound data through regulation. But Restek is neither a regulatory nor an accrediting body. Restek is dedicated to helping analytical chemists in all industries and regulatory environments produce scientifically sound data through education, technical support and expert advice regarding instrumentation and supplies. I have the privilege of supporting the cannabis analytical testing industry with this goal in mind, which is why I decided to write a regular column detailing simple ways analytical laboratories can improve the quality of their chromatographic data right now, in ways that are easy to implement and are cost effective.

Anyone with an instrument can perform chromatographic analysis and generate data. Even though results are generated, these results may not be valid. At the cannabis industry’s current state, no burden of proof is placed on the analytical laboratory regarding the validity of its results, and there are few gatekeepers between those results and the consumer who is making decisions based on them. Even though some chromatographic instruments are super fancy and expensive, the fact is that every chromatographic instrument – regardless of whether it costs ten thousand or a million dollars – is designed to spit out a number. It is up to the chemist to ensure that number is valid.

In the first couple of paragraphs of this article, I used terms to describe ‘good’ data like ‘scientifically-sound’ or ‘quality’, but at the end of the day, the definition of ‘good’ data is valid data. If you take the literal meaning, valid data is justifiable, logically correct data. Many of the laboratories I have had the pleasure of working with over the years are genuinely dedicated to the production of valid results, but they also need to minimize costs in order to remain competitive. The good news is that laboratories can generate valid scientific results without breaking the bank.

In each of my future articles, I will focus on one aspect of valid data generation, such as calibration and internal standards, explore it in practical detail and go over how that aspect can be applied to common cannabis analyses. The techniques I will be writing about are applied in many other industries, both regulated and non-regulated, so regardless of where the regulations in your state end up, you can already have a head start on the analytical portion of compliance. That means you have more time to focus on the inevitable paperwork portion of regulatory compliance – lucky you! Stay tuned for my next column on instrument calibration, which is the foundation for producing quality data. I think it will be the start of a really good series and I am looking forward to writing it.

March 29, 2016

Marijuana Matters

A Guide to Documentation and SOPs for Start Ups

By David C. Kotler, Esq.

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As your company grows, or whether you want to have certain documentation to make an application for licensure and/or for outside entities looking to invest, it is necessary to handle issues from a documentation standpoint. Learning how to handle situations with staff through proper employee manuals and how to establish and practice standard operating procedures can help businesses avoid common pitfalls with a little forethought.

Beginning with standard operating procedures (SOPs), there are many resources available to get assistance in crafting them. You can consult with individuals such as safety content producers, business consultants, lawyers, technical writers, and even borrowing SOP writers from other industries. I am aware of a Connecticut producer who tapped pharmaceutical SOP writers as consultants with the focus of establishing their standard operating procedures. I am not convinced that there is any proper person or method by which an entity may want to consider an SOP. As a threshold, however, it is important that a proper format is created, i.e., simple steps, hierarchical steps format or perhaps even a flow chart format.

One would want to consider the audience who will be reading the SOP and the information to impart to that audience. It is also important to consider SOPs that you want to update as practices evolve or change.

It is possible to create SOPs internally, and frankly, this may be the most recommended route. If the SOPs are being used for guidance and not just to support the license application process, this is particularly important. It is a time-consuming task and if created from the inside out, it can be most effective.

It is possible to get lost in the minutia by documenting every step taken within a particular process. I have seen SOPs number in the hundreds just for cultivation and processing operations. One particular entity in Colorado created over 63 SOPs within the past year. If you are writing your own SOPs, it is important to understand the scope and applicability, i.e. why a particular process is performed and how it is used, then the procedures and/or steps that are necessary to accomplish that particular process, clarify any terms that are necessary so that the reader is able to follow the steps throughout a particular outline, cover health and safety issues, address equipment and supplies and provide emergency procedures.

The process that I can attest to as being fruitful is interplay between an employee who is actually responsible for a given task and a third party looking from a 1000-foot view. For instance, have the employee who completes a number of tasks within the organization provide a list of what they do on a general day-to-day basis. From that list, have the third party extrapolate what topics might be covered, often times borrowing from other well known standard operating procedures that are seen across industries and come up with a master list of the SOPs which are desired. It is important for the employee and third party to collaborate to finalize SOPs.

Employee guides or manuals provide information on benefits, when time sheets are due, paydays, holidays, vacation days, sick days and more. For employees, it helps mitigate risk by providing guidelines for conduct, discipline, and local practices in the states in which you operate. Employee guides are most effective when they are created to match your company’s needs. When it is tailored to your company, you are certain that the policies meet the laws of the places where your offices and employees are located. It allows you to provide input so you can ensure that you have developed policies that your company will follow. Unwritten policies are unwise as they may cause issues and can potentially lead to lawsuits. There are three types of multi-state employee guides: a guide with favored nations status, meaning that the most liberal laws in one location apply to the entire organization; an employment guide for each location in which you operate; or you can create one guide with a local practice section.

Creation of employee guides is a time consuming and arduous practice, but once completed, they help guide the relationship between employee and employer. Employees should review the employee manual and sign off upon receipt and review. This will serve to protect the employer in the future should an issue covered by the manual arise.

An effective employee guide might include (but certainly not be limited to) the following:

An “employment at will” disclaimer
An anti-harassment policy
An internal grievance procedure
Equal Employment Opportunity (EEO)
Employee benefits
Paid time off (vacation, personal days, sick leave)
Unpaid leaves of absence
Americans with Disabilities Act (ADA) (for employers with more than 15 employees)
Jury duty, military leave
Hours of work
Introductory/probationary period
Legally mandated language concerning pay deductions
Proper E-mail/Internet usage
Professionalism/dress code
Drugs in the workplace
Social media policy

There are many other policies that would be included in order to comply with requirements that might be mandated by a particular regulatory scheme i.e. security compliance. The guide should be a living, breathing document that evolves over time based on new knowledge, changes in laws and business fluidity.

Both standard operating procedures and employee manuals or guides are integral to the viability of a cannabis related business whether a hands on the plant license holder or an ancillary company. I encourage my clients to craft self-created content that they have invested their time and knowledge into, with some help where necessary. Purchasing forms online does not provide a workable format and will only lead to problems in the future. You get what you put in and creating these documents internally and from the ground up gives more control to the business.

March 23, 2016

Quality From Canada

Quality Training in a GMP Testing Facility: 8 Steps to Get Employees Compliant

By Tegan Adams

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Eurofins-Experchem Laboratories is a Health Canada and FDA-accredited analytical laboratory with a regulatory support division. The laboratory carries out testing for many different sectors including pharmaceuticals, cosmetics, natural health products and medical devices. Starting in 2014, cannabis testing was incorporated into the mix. One reason our results so accurate is due to rigorous staff orientation and training method. Diligent staff training and monitoring is very important for success as a Good Manufacturing Practices (GMP) facility with a Drug Establishment Licence and Narcotics License. So what does that look like on the inside? Saif Al-Dujaili, our quality assurance manager, Sohil Mana, our vice president of operations, and I will provide some guidelines for developing training programs below.

Introductory Session: When any new employee starts an introductory phase, it begins with general admin, a facility tour, policy manual training, govt. legislation overview and health and safety training and orientation (WHIMS and Bill 168) specific to our lab. We record signatures on any pertinent forms for SOPs that the new employee will be using.
Standard Operating Procedures: Any new employee must read all related SOPs and is evaluated on their understanding of them through questionnaires/quizzes. SOPs are written for all equipment, instrumentation or process that is applied in the lab, to ensure consistency across operations.
Laws and Regulations: New employees must be familiar or familiarized with Good Manufacturing Practices and Good Laboratory Practices. Analysts are required to read all sections of the USP pertinent to their role, as decided by the quality manager and/or dept. head and a checklist is recorded on training.
Methods: Different methods are used to test products including Compendium or other published methods with organizations such as the Association of Analytical Communities (AOAC) and the American Chemical Society (ACS). Client Methods and house-developed methods are also used. If there is a change to any method, a change control form must be filled out and documented.
Documentation: Documentation is very important in a GMP lab. All data is recorded in a hard cover bound book and/or approved worksheets. Quality assurance data reviewers are responsible for ensuring all data is being recorded properly.
Sample Management: Employees are trained on sample management related to sample entry, how samples are distributed to analysts, turn-around time, and where finished projects are placed.
Training Forms: Everything an employee learns must be recorded and filed for records. Analysts must follow a training matrix on qualitative and quantitative testing methods. Recurrent training occurs each 3 years or less depending on the position the analyst holds. Any updates on GMPs, new instruments or equipment is ongoing and recorded. Experchem runs “ghost” samples through its laboratory to ensure compliance by employees at any given time. Employees are evaluated on their abilities to comply.
Ongoing Training: Once employees are up and running they also receive monthly training in the lab and an annual GMP training followed by a comprehensive quiz that must be passed for them to continue work.

Interested in learning more about cannabis testing in Canada and the US? Contact Tegan Adams, business development manager with Eurofins at teganadams@eurofins.com.

Editor’s Note: Eurofins-Experchem has helped submit over 150 MMPR applications to Health Canada and continues to work with 10 of the 27 licensed MMPR producers in Canada. Their regulatory affairs division has started working with companies applying to produce and distribute cannabis in those states, which are new to its sale and distribution. They offer services include writing SOPs, training staff and performing mock inspection audits.

March 21, 2016

Wellness Watch

Employee Training: Compassionate Customer Service

By Dr. Emily Earlenbaugh, PhD.

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Compassion is a frequent buzzword used in the cannabis space and many businesses start up with a mission surrounding compassion and strive to be compassionate towards their patients or consumers.

Research shows that profit-driven retail management and compassionate service can be accomplished in the same way. By turning to the industry mantra of compassion, companies can contribute to the well-being of patients or consumers served and employees, while also increasing sales, positive reviews and return visits.

One large aspect of dispensary management is setting up a corporate culture around employee-customer interactions. Some dispensaries have mastered this through employee training and thoughtful SOP’s, which help maintain a compassionate, positive environment for every person that walks through the door.

Research shows that when consumers have positive interactions in retail environments, they are more likely to make a purchase and to positively rate the products they select. When feeling these positive mental states, our perceptions of products become more positive as well, and our trust in those around us increases. Conversely, when we feel negative emotions like loneliness or exclusion, our perceptions of products also become more negative.

People experiencing positive mental states, like gratitude, joy or compassion also have better health and increased emotional well-being. For both compassionate and profit-driven reasons, getting people into a positive emotional state is extremely beneficial. Of course, creating a compassionate, mood-boosting environment is easier said than done. Thankfully, there is a lot of research on how to do this as well.

So how can we set up a corporate culture that fosters more positive states in others? It takes energy and intention, but it can be done. As a dispensary manager, one of the most important things you can do is ensure that your employees have what they need to function well. Research shows that when employees are working under stressful conditions their interactions with customers suffer. This could mean being underpaid, overworked, unsure of job security, rushed, or crowded; but whatever the reason, a stressed employee is less able to maintain positive interactions with customers. Once you have a happy and well-treated staff, you can start training them to cultivate positive states in your consumers.

Here are a few time-tested methods to teach to your dispensary staff and practice with your patients or recreational customers:

Positive Feedback Exercise

One of the simplest methods is giving positive feedback. It has been demonstrated over and over again that when you give someone positive feedback, his or her mood is instantly boosted. They become more grateful, creative and engaged.

Positive feedback can come in different forms. It might be a simple compliment like “Wow, I love your earrings.” or it might be a positive response to a question, such as “That’s a great question, not everyone thinks to ask about what these test results mean.”

To cultivate positive feedback, make a point of looking for things you can genuinely compliment about your customers or coworkers. Be careful not to fake your positivity. Most people can tell when positivity is faked; and it can actually have negative health risks for the person doing the faking.

Active Listening Practice

You can foster positive emotions in your customer base through active listening and compassion for the challenges they are going through. Research finds that active listening can improve communication dynamics and reduce stress.

For this practice, notice when your patients are complaining and pay careful attention to what they are saying. Try to really feel what it might be like to be in their situation and sympathize with them. You can show this sympathy by acknowledging what they are going through.

These practices may seem simple but they can yield big changes in a customer’s impression of your dispensary environment. By cultivating compassionate practices with your staff and customers, you can take care of your community while helping your business to thrive.

March 8, 2016

Soapbox

Health Care Industry Cannot Ignore Cannabis Any Longer

By Robert T. Hoban, Esq.

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Twenty-four U.S. states now have some form of medical marijuana legalization on the books. These states allow patients with a variety of qualifying conditions to possess and cultivate cannabis lawfully as a treatment for such medical conditions. The number of states allowing medical cannabis is set to increase dramatically, as various additional state legislatures have bills or ballot measures pending on this topic. You can read more about this topic here.

The federal government surprisingly already has their hands in medical marijuana. The federal government sends free, pre-rolled cannabis cigarettes to a special, albeit dwindling, group of patients on a regular basis and they have been doing so since 1976. This is a product of the 1976 federal Investigational New Drug Program (Compassionate Access I.N.D.), which still operates, but was closed in 1992 to any new patients.

The U.S. Government holds a federal patent for therapeutic cannabinoid use (US6630507 B1). The patent, “Cannabinoids as antioxidants and neuroprotectants,” (LINK) covers a method of treating diseases by applying a therapeutically effective amount of cannabinoids derived from marijuana. In addition, the White House website provides links to government-funded research projects involving medical marijuana. Presently, the links show 219 completed projects and 95 projects in progress.

On June 23, 2015, the American Medical Association adopted the formal position that marijuana is a form of medicine. Reliable scientific studies address the medical efficacy of the use of medical cannabis for an increasing number of conditions. Medical cannabis is here to stay and the health care industry needs to pay close attention.

Simply put, the health care industry has been resistant to beginning the study of medical marijuana. This does not bode well for health care systems that will see more patients utilizing various forms of medical cannabis. Moreover, this is not a sustainable health care business model. With an increased focus on alternative forms of medicine and treatment both by practitioners and health care insurance providers, it is imperative that the health care industry studies the facts.

The New Mexico Workers’ Compensation Administration began requiring employers and insurers to reimburse injured workers for medical marijuana when the state’s health care provider fee schedule took effect January 1, 2016. Workers compensation claimants can be reimbursed up to $12.02 per gram of marijuana for up to 226.8 grams of marijuana per year, according to the fee schedule. Such reimbursements were ordered after the New Mexico Court of Appeals had ruled three times since May, 2014 that medical marijuana should be classified as reasonable and necessary medical care for injured workers.

The same momentum is impacting Latin America. Brazil’s governmental health care agency, ANVISA, recently removed a component of cannabis, cannabidiol (CBD), from the list of banned substances, meaning the marijuana molecule can now be prescribed by physicians for treating seizures, multiple sclerosis, schizophrenia and other ailments. As such, ANVISA has approved the importation of CBD from the United States.

More and more research studies are published every year. In the National Center for Biotechnology Information database of biomedical literature, 4,516 medical abstracts reference both cannabis and cannabinoids. Still the vast majority of medical schools do not educate students about the human endocannabinoid system.

Denis Petro, a neurologist and pharmacologist, researches cannabis as a treatment for multiple sclerosis. He founded Patients Out of Time, a non-profit organization dedicated to research and education on the endocannabinoid system. “At present, conventional treatments for spasticity are unsatisfactory,” Dr. Petro wrote, in an article, Indications for Therapeutic Use of Cannabis. “Based on scientific evidence, cannabis is a safe and effective alternative when compared to conventional treatments.”

Physicians in Colorado can recommend marijuana and the Colorado Constitution legally protects them (Article XVII, Section 14). The Colorado Constitution gives physicians immunity for advising a patient about the risks and benefits of medical marijuana for a debilitating medical condition, and for recommending medical marijuana to a patient.

Moreover, physicians have a duty to care for their patients, and that includes considering medical marijuana if it would help that patient. Consequently, by understanding the health benefits and the particularized sources of liability, physicians can lend clarity to the medical marijuana industry.

While medical marijuana policy changes may lead to uncertainty, most questions about the marijuana industry, including the risks and its related legality, have answers. The problem is that health care providers and insurance companies do not know where to turn for this information.

I delivered a number of presentations concerning this topic to various provider and insurance-related entities across the country serving our health care system. It is evident that many of these health care related entities can move forward with a better understanding of the risk implications and devise better informed strategies to incorporate medical cannabis into their operational plans, whether for now or in the near future.

An understanding of the researched health benefits of medical marijuana is increasingly necessary for physicians and other members of our health care system. A conservative approach is certainly advisable, but it is more than just a good thing to learn about; it is a necessity in this day and age to remain relevant and informed. This needs to happen now. And the providers that take appropriate steps soon will be better positioned to deal with these issues as they become increasingly prevalent.

March 7, 2016

Soapbox

Compliance: It’s Just Good Business

By Laura Davis

1 Comment

The numbers are in and Colorado’s retail sales increased 42 percent in 2015. This increase in sales reflects a very vibrant industry in Colorado, the state that is leading the way in legal cannabis through sensible rules and regulations.

While the federal government has yet to consider cannabis’ legal status, savvy cannabis companies are striving to be exceptional business leaders and meet those federal regulations that pertain to product, environmental protection, and employee health and safety. Colorado’s cannabis business owners, including Good Chemistry, strive to lead the industry by developing best business practices, processes and guidelines that provide the foundation for the industry’s continued success and sustainability.

goodchemint — A view of the interior of Good Chemistry’s retail dispensary.

The cannabis industry in Colorado and other states is heavily regulated at many levels from cultivation to sale. As the industry grows and matures, companies are looking to federal standards and practices that may not immediately apply to their state’s industry, but that have been in place for years to provide for public safety. As the cannabis industry continues to grow, it is critical that industry leaders demonstrate that, through their practices and adherence to public safety standards, their products are safe for the consumer.

This vision has led cannabis companies to seek out compliance experts and build compliance departments. Hiring compliance experts is a major trend in this fledging industry, and more than that, it is a critical element to maintaining employee morale and providing for public safety. Compliance provides a roadmap for employees, offering guidance and resources to assist them with job performance. It is a basic building block for employee retention.

goodchem.exter — The exterior of a Good Chemistry dispensary

Internally, employees must be aware of what regulations can affect their specific position and job responsibilities. It is crucial that all staff employed by a cannabis business are aware of current and pending regulations. If the employees are well versed on the regulations that impact their duties in the company, there is less of a chance for error.

Externally, cannabis companies should strive for the highest level of compliance, and much can be gleaned from other, more established industries. Standard Operating Procedures (SOPs) should be developed to detail critical work flow areas of the business, including cultivation practices, sales protocols, and more.

Compliance can help to create a more sustainable business. In an industry that has grabbed headlines for energy, water and resource usage, compliance is at the core of a sustainable business model.

Overall, compliance is about working towards creating a sound, respected and sustainable industry. It is essential that the company places a high value on education and regulatory compliance from the chief executive officer to the budtender. Industry leaders must continue to advocate for sensible and practicable regulations for the industry. Cannabis business leaders play a critical role in building an entirely new industry from the ground up, which includes understanding, utilizing and anticipating regulations for the cannabis industry.

March 3, 2016

Soapbox

Why are Business Professionals Hesitant to Enter the Cannabis Industry?

By Tyler Dautrich

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I recently had a discussion with a colleague of mine on how the cannabis industry lacks business sophistication. There are not many MBA level, or proven business professionals, that have made a living and name for themselves in another industry, entering the cannabis space. At first glance, you would think there should be, primarily because they can leverage their previous expertise and success into a new, multi-billion dollar space. Instead, those professionals are watching from afar and eying a move to enter the industry five to ten years down the line.

It just so happens that the individual I was speaking to is in the situation described above, so I asked why? Why not leverage your success and make a name for yourself in this industry where there is clearly an opportunity? This individual is coming from a legal background so this piece will focus on that area primarily. However, the story is the same for many others that come from different professional backgrounds.

They informed me that entering the cannabis industry could risk them potentially losing their license to practice law. They practice law in a state that does not have any form of cannabis legalization. So even if this person wanted to actively pursue working in the cannabis industry (where legal), they run the risk of potentially losing their license and not being able to practice law again. This creates a difficult decision for someone considering an emerging industry that still has an uncertain future.

Beyond putting professional careers and relationships in jeopardy, the cannabis stigma affects personal lives. It amazes me that there is still an extremely negative stigma that surrounds this industry. No matter the level of professionalism the industry demonstrates, many still think working with cannabis could be considered unprofessional.

I know from first hand experience in talking with a handful of professionals that are working in the industry, they do not tell everyone what their job is. Or they use their job title from their other current, or previous, job outside of the industry. They do not want certain individuals to know they are in the industry because they know it will damage their current reputation in certain groups.

This is one of the recurring issues with startups not only going through Greenhouse Ventures accelerator program, but throughout the industry. Many lack that level of business sophistication to have the know-how and ability to scale and grow their startup. Yes, they are the founding team and they have the idea and the vision, but they are not the team that investors put their faith and capital in.

My question is, what needs to happen to start attracting these business professionals into the cannabis space? We have already seen a few of the more risk averse professionals jump ship, but a majority are still hiding in the shadows or watching from the sidelines.

February 23, 2016

Marijuana Matters

Time to Litigate: The Defense That Helps the Client but Hurts the Industry

By David C. Kotler, Esq.

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From time to time, lawyers that service the cannabis industry find themselves representing a client with a litigation matter. By anecdotal evidence, it appears that there is an up-tick in cannabis related litigation over the past year and a half, mostly in circumstances where respective promises made have not been lived up to or those who have invested money are seeking its return. Perhaps a partnership formed within the last few years is simply becoming unraveled.

In the world of litigation, we see defenses, or what are known as affirmative defenses, may be filed in response to a particular lawsuit or claim. One such affirmative defense often utilized in litigation is that a particular contract or agreement may be void based on illegality or void as against public policy.

In fact, this particular grounds for dismissal was at issue in a case in Maricopa County, Arizona wherein a judge in April of 2011 dismissed a lawsuit seeking enforcement of a loan agreement where two Arizona business people loaned $250,000.00 each to a Colorado-based medical marijuana dispensary. The agreement in that case specifically stated that the loan was for “a retail medical marijuana sales and growth center.” Colorado had the foresight in 2013 to legislate against this type of defense when their general assembly passed a law indicating “a contract is not void or voidable as against public policy if it pertains to lawful activities authorized by” Colorado’s constitutional and statutory cannabis law.

The issue becomes germane in emerging states wherein the legislatures and courts have not been dealing with cannabis related matters for any length of time. This is particularly true and ripe for problems in states such as Illinois and Massachusetts that have recently moved forward with cannabis programs and experienced an influx of out of state consultants and companies looking to partner with and work with local residents for licensure purposes. In Florida alone, there have been at least three lawsuits in the past year dealing with cannabis related civil disputes.

To my knowledge, none of those disputes were defended upon, nor did the court address, the legality of the underlying subject matter. However, the question arises whether the lawyer’s obligation to their client necessitates raising this as a defense, for instance, to an action for non-payment of a promissory note for a loan to fund cannabis related business. If the lawyer practices and seeks clients in the industry and hopes to move the industry forward in a positive manner, is it incumbent upon the lawyer to assist the client by making the best legal argument or protect the industry and greater good? As an aside, the answer is to zealously represent the client. Potentially, an adverse ruling in a particular jurisdiction could ultimately affect enforceability of cannabis related agreements in that jurisdiction. It is possible that having a court ruling, even if it is a trial level court within the jurisdiction, at least provides some precedent and a basis for the industry moving forward in that particular jurisdiction. If the ruling is unfavorable like the Arizona precedent mentioned earlier, perhaps planning for jurisdiction and venue to be in more favorable environs is key to document drafting on the front end. For investors, knowing the enforceability of their agreements in a particular jurisdiction could mean the difference between investing in a venture in a particular state or not.

Ultimately, I believe that as advocates, we must do whatever is in our power to protect the client even if it means testing the legal bounds by making an argument that at first blush may hurt the industry. However, having courts develop precedent by which the industry can govern itself in business dealings is important and takes away uncertainty, which in turn allows for good decision-making on the front end. Hopefully, in the near future this will be moot as the federal government moves forward to take actions that provide more certainty and uniformity in dealings within the cannabis space.

February 16, 2016

Soapbox

What is Next for the East Coast?

By Tyler Dautrich

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I am excited to look at the amount of success the cannabis industry saw in 2015 and know that 2016 and the next five to eight years will see even more growth. With the upcoming presidential election and ten states that have either a medical or adult use legalization initiative on their ballot, the industry could rapidly accelerate.

Five of the states listed are located on the East Coast. The industry has, almost solely, existed in the West and it is relieving to see the East finally catch on. We saw the East grow more of a presence in 2015 than any other year. New Jersey is beginning to settle into it’s market, Delaware is getting off the ground slowly, Maryland began accepting license applications and New York, Connecticut, Massachusetts and Rhode Island have initiated medical programs. Now, there are eight potential states in the Northeast that may vote on cannabis in 2016.

I predict that we will see the Northeast become very research focused. There are five ranked medical institutions in the North East Region alone.

Philadelphia in particular has an incredible opportunity to become a research hub in the industry. In Philadelphia, there are three medical schools ranked top 100 in the country, and one that is ranked in the top five. When colleges and universities with clout like this step out and back medical cannabis research, more are soon to follow suit.

Last year I spoke with Dr. Marcel Bonn-Miller, researcher and faculty member at the University of Pennsylvania, Perelman School of Medicine. Dr. Bonn-Miller previously received two grants from Colorado to study the effects cannabis has on patients who suffer from PTSD.

While speaking with Dr. Bonn-Miller, we discussed how the University of Pennsylvania is involved with these studies. “Penn has always supported my work,“ he says. “They helped me all throughout the application process, making sure that I had everything I needed to receive the grants from Colorado.” Dr. Bonn-Miller also shared that he feels there are many opportunities for the other universities in Philadelphia to do the same.

When the industry loses the stigma people associate with cannabis, it will invite more professionals into the market, as well as top research programs. Currently not many top ranked organizations attempt to conduct research because of the difficulty to receive approval from the government.

“We’re only at the very beginning, essentially like being at the very beginning of Sir Alexander Fleming discovering penicillin as mold in a petri dish,” said Leslie Bocksor in an interview with CNBC. “That’s how it started, and now how broad are antibiotics as a category of medicine? In the same sense we’re just looking at the very beginning of cannabis.”

This industry is still relatively young. There is a tremendous amount that we have yet to learn until more research is done. When the barriers to research are removed, I believe we will see money put into research programs, helping to improve standards for quality and safety.