Cannabis Law BlogDecember 18, 2018

Municipalities Resist Legal Cannabis
By Charles X. Gormally

In anticipation of cannabis becoming legal in New Jersey, many municipalities have taken preemptive steps and positions as to the cultivation, sale and purchase of cannabis in their town, many taking the “not in my neighborhood approach,” and passing ordinances to prevent or restrict legal cannabis cultivation and/or sales. Draft Bills permit such ordinances. Specifically, Senate, No. 2703 as amended on November 2, 2018, permits local governments to prohibit the operation of marijuana cultivating, testing, and retail facilities. In fact, should the municipality fail to do so within 180 days of the adoption of the commission’s initial rules and regulations under Senate, No. 2703 as amended on November 2, 2018, the municipality shall be deemed to approve of such establishments for a five-year period, at the end of which the municipality will have the opportunity to prohibit such facilities through the enactment of an ordinance. The failure at that time to do so renews the approval for another five-year period.

The following municipalities have taken stances against the cultivation, testing, and/or sale of cannabis in their towns, passing ordinances banning the same: Barnegat, Berkeley, Brigantine, Carlstadt, Chatham Township, Clifton, Cranbury, East Rutherford, Franklin Lakes, Garfield, Hasbrouck Heights, Hawthorne, Hazlet, Lodi, Mahwah, Manville, Midland Park, North Caldwell, North Haledon, Oceanport, Old Bridge, Pleasantville, Point Pleasant Beach, Secaucus, Surf City, Union City, Upper Freehold, Wall, Weehawken, West Long Branch, Woodcliff Lake, and Wyckoff Township.

While some municipalities have not passed ordinances outright banning the sale or cultivation of cannabis, they have taken stances on the issue, passing resolutions strongly opposing the legalization of cannabis in New Jersey. These municipalities include Bridgewater, Parsippany-Troy Hills, Spotswood, and Upper Saddle River.

Further, while Ocean City has not yet passed an ordinance, members of City Council have strongly voiced their concerns and stances against legal cannabis. Tellingly, Councilman Michael DeVlieger at a Council meeting in March, 2018 stated that he will “die before [he’ll] vote for recreational marijuana in Ocean City.” In contrast, Jersey City and Asbury Park have indicated that they welcome the sale of cannabis within their town borders.

There seems to be little reason for municipalities or counties to take a position in advance of the adoption of statutes that create a regulated adult-use cannabis marketplace. These non-binding pronouncements by lower government levels are nothing more than political posturing. They are also shortsighted and contrary to the overwhelming majority of New Jersey voters who believe that access to a regulated adult use cannabis marketplace, along with the end of the failed policy of prohibition, is in their interests.

Cannabis Businesses Need to Protect Their Operations from Civil RICO Liability
By Charles X. Gormally

Over the past few years, cannabis businesses have watched a legal threat develop and mature across the country – civil RICO claims. This threat materialized in earnest in June 2017, when the United States Court of Appeals for the Tenth Circuit allowed a case to proceed against a licensed marijuana grower in Colorado. Since then, copycat cases began to appear across the country. While the body of law needs to develop further, the early returns are in, and they are not good for would-be plaintiffs.

RICO – the Racketeering and Corrupt Organization Act – is a federal law that allows private civil lawsuits against criminal organizations. Created in 1970 to target the mafia, civil RICO has become a favorite tool of enterprising plaintiff’s attorneys due to its treble damages and attorneys’ fees provisions. Civil RICO usage has exploded recently outside of the world of organized crime. Plaintiffs have attacked businesses in a variety of industries, transforming ordinary business disputes into RICO prosecutions if they can characterize a business’ conduct as a violation of federal law.

Several years ago, the proliferation of civil RICO extended to the cannabis industry, which clearly involves activity that violates federal drug laws. So far, these claims have taken similar forms. They usually involve allegations by a neighbor that a marijuana grower has affected the neighbor’s property value, or the neighbor’s use and enjoyment of their land. In essence, they are common law nuisance claims dressed in civil RICO clothing. Most troubling for the cannabis industry, many of these cases have been brought or funded by anti-cannabis organizations. Since RICO allows claims to be brought against “co-conspirators,” these suits have frequently named a variety of entities (sometimes hundreds) that merely do business with the property owner or grower.

Although the expansion of RICO’s use is an unwelcome development for an industry that must already navigate a complicated set of overlapping state and federal laws, these cases have – so far – been unsuccessful. In August, the United States District Court for the District of Oregon dismissed one of these suits. Earlier this month, the jury in Colorado rejected the plaintiffs’ RICO claims. In both, the plaintiffs were unable to prove a cognizable injury; they could not satisfy RICO’s requirement that a private plaintiff demonstrate an “injury to business or property.”

These results should provide some limited comfort to the industry. However, they by no means foreclose RICO liability. Instead, they have identified the key issue – whether a plaintiff can prove tangible damage to its business or property. So far this has been a significant hurdle, but it is likely not an insurmountable one.

There are some common-sense steps that businesses can take to minimize their civil RICO risk. Since most of these cases have been brought by disgruntled neighbors, this should be taken into account when planning the location of a marijuana-related business. Hopefully, a proactive approach with the local community will reduce the likelihood of a lawsuit. Businesses should also take care to address the risk of civil RICO liability in their contracts with vendors. And vendors, for their part, should do the same.

We will be following this trend as it continues to develop.

Achieving Social Justice While Ending Cannabis Prohibition: Expungement vs. Pardon

By Charles X. Gormally

As New Jersey moves closer toward creating a regulated adult use cannabis marketplace, how the state will address the criminal records for prior offenders remains up for debate. Gov. Phil Murphy acknowledged that it would be unfair for a person to be incarcerated for an offense that subsequently becomes legal. On the other hand, opponents argue that it would be wrong to absolve individuals who knowingly committed a crime simply because the law changed. Even if the legislature is in agreement that prior cannabis offenders deserve leniency – what that looks like and how it is reached is unclear.

New Jersey is not the first state to face this dilemma, other states that have ended cannabis prohibition or ended criminal penalties for its use and possession have also grappled with how to handle prior offenders. In Colorado, almost five years after the legalization of cannabis, the state afforded prior offenders the ability to seal prior criminal conviction records that occurred under the old law. As more states create a regulated adult use marketplace or decriminalize cannabis use and possession, the laws surrounding the drug have increasingly focused on how best to address this social justice quandary. For example, in California, the ballot initiative to legalize marijuana also included a provision to expunge or seal criminal records. The initiatives recognize the impact that even low-level convictions can have on an individual’s livelihood including the ability to obtain a job, receive housing benefits, etc. The legislation also reflects the evolving nationwide debate on how to treat recreational cannabis use while dealing with the havoc of the prior enforcement of the failed policy of cannabis prohibition. Michigan, whose voters just approved a regulated cannabis program there, is currently considering a pardon/clemency program along with a modified expungement process to address prior offenses.

Although New Jersey Governor Phil Murphy stated he would consider using pardons to assist prior offenders, draft bills include provisions for expedited expungement of marijuana offenses. There are critical distinctions between a pardon and an expungement of a criminal offense. Pardon is essentially a “forgiveness” program which, while acknowledging the crime, offers the offender forgiveness of the offense. The offense does not disappear from the offender’s record when a pardon is issued. An expungement on the other hand, allows the offender to erase a prior criminal offense as if it never happened. Thus, the offender can proceed through life and properly claim never to have been convicted of a crime when the offense has been expunged.

Currently, to expunge a criminal record, the individual must prepare and file a Petition for Expungement including detailed records of the arrest and conviction and pay the required fee (with limited exceptions). One proposed bill includes an “Expungement Coordinator Program” with the goal that the program could assist individuals seeking an expungement after the legalization of cannabis. In a more recent bill, the Judiciary Ombudsman would assist with filing the petitions and there would be no fee for the filings. Both bills recognize the need for a fresh start with the hope to streamline the process for prior offenders. These corrective actions are needed since a criminal record can significantly alter the course of an individual’s life. Ending cannabis prohibition and the expungement of prior offenses will have a lasting and positive effect on the lives of many New Jerseyans.

Related Practice: Cannabis Law

Attorney: Charles Gormally