Welcome back to Higher Law, our weekly briefing on all things cannabis. I'm Cheryl Miller, reporting for Law.com from Sacramento. You've acquitted yourself well by reading our newsletter today.

This week we're looking at: • A Q&A with Arent Fox cannabis practice leader Aram Ordubegian • A new tax attorney at Greenspoon Marder • A pet CBD trademark suit in D.C. • Idaho judge approves hemp seizure

Thanks for reading. Please keep sending those tips and story ideas to [email protected]. Or call me at 916.448.2935. Follow me on Twitter @capitalaccounts.

 

 

Q&A: Arent Fox's Cannabis Leader

As a partner in Arent Fox's bankruptcy and financial restructuring group and leader of the firm's cannabis practice, Aram Ordubegian has a front-row seat to all the current industry tumult. Layoffs, scaled-down deals and stock drops are all on the daily headline menu.

Ordubegian sees a myriad of state and local regulations, a thriving black market and high rents causing major distress for cannabis companies trying to go mainstream. He recently spoke with Higher Law. Here are some excerpts from that conversation, edited for length and clarity.

Higher Law: What's else is behind some of the distress you're seeing in the cannabis industry?

 Ordubegian: During the startup process, some of the things I saw then are some of the reasons why there are problems now. For example, we were all asking these players in the industry who were literally outside of the law yesterday and now all of a sudden they're supposed to be rule-following businessmen and women. "It was like a very foreign thing culturally for them to do.

You've got business partners and you ask, "So what is your deal between each other?" And they're like, "Oh yeah, it's 50-50." And the other guy is "Oh no, it's not 50-50, it's 70-30. What are you talking about?"

And me, like an ignorant dumb-dumb, I'm like, "Ok, what does your operating agreement say? What does your partnership agreement say?" And they're looking at me like, "Have you lost your mind? We don't have that." So some of that not doing things by the book, because there was no book to do it by in the old days, is coming back and biting them.

Is that any different than what's happened in other emerging industries–the dot.com industry, for example?

It's a similar concept to what's happening now. There were no assets in those days either. There was IP maybe, otherwise there were some laptops and desks and chairs.

I've gone in and tried to liquidate some dispensaries, and other than some cabinets and an above-market lease that makes no sense, there's nothing there. On the grow side, you've got some heating lamps and such, but there's a flood of those already.

It feels like a very identical dynamic to the dot-com bubble. But look at what happened after the dot-com bubble burst. There were a bunch of players and now the ones that are booming more than anybody are the five or six of them that we use every day. So maybe at the end of the day the survivors will be lean and mean and efficient and profitable.

What are the biggest issues for you and your practice colleagues right now?

There are still some positive, healthy companies. Some of them belong in the psilocybin space now that Oakland and Denver and very recently Santa Cruz have decriminalized it. I have a client where we're working on their extraction method. Of course it's still a Class 1 narcotic but we're trying to get them to a point where if it's either allowed for medicinal reasons they'll be ready to pop.

Otherwise a lot of us are dealing with the whole social justice problem where you have individuals from areas that were criminally prosecuted very heavily trying to get licenses and they're not really getting very far. We have a couple of pro bono engagements within the firm to try to help them along And it's pretty crazy. It feels much like the enforcement side, shutting down the gray market. The government just wasn't ready for this. They weren't ready for the licensing processes and the crunch of applicants. Well guess what? They're not ready for the social justice applications.

On the purely distress side, we're very much scratching our heads with, we can't file bankruptcy, what do we do? And we've been working on doing state law receiverships and assignments for the benefits of creditors to try to save whatever value there is for the benefit of creditors.

 

 

Notable Moves & Who Got the Work

>> Nick Richards has joined Greenspoon Marder's cannabis and tax practices as a partner in the Denver office, according to the firm. Richards has spent 20 years as a tax attorney, including 12 years as a trial attorney with the U.S. Internal Revenue Service.

>> Dorsey & Whitney has announced the hiring Sativa Rasmussen (at left) as a lawyer in its cannabis practice group in Seattle. Rasumussen was previously an associate at Lane Powell. Rasmussen serves as chair-elect of the Washington State Bar Association's cannabis bar section, according to the firm. "We're excited to have Sativa join Dorsey in our Seattle office," Chris Barry, co-chair of the cannabis practice group, said in a statement. "She is an industry leader, and her diverse experience and deep understanding of the legal and regulatory landscapes will play a critical role in continuing to grow Dorsey's Cannabis Practice Group."

>> Gordon Feinblatt litigation chair George Ritchie is representing RestoraPet Inc. in a trademark infringement and unfair competition complaint filed Wednesday in the U.S. District Court for the District of Columbia. RestoraPet, a Maryland-based seller of hemp and CBD products for pets, alleges that RestoraCBD of Washington, D.C., is infringing on its RESTORAPET trademark through the sale of its Restora labeled CBD products. RestoraPet is seeking damages and injunctive relief.

>> The National Cannabis Industry Association has named five new board members, including California attorney Omar Figueroa of the Law Offices of Omar Figueroa and Ryan Hurley, general counsel of Copperstate Farms in Arizona. Khurshid Khoja, founder of Greenbridge Corporate Counsel, was elected to another term on the association's board.

 

 

In the Weeds…

>> About that million-dollar hemp shipment Idaho seized last year … An Idaho judge has ruled that Colorado-based Big Sky Scientific must forfeit the hemp because the plants, despite their low THC levels, were still considered a controlled substance under state law when police seized them in January 2019 as they were being moved from Oregon to Colorado. Big Sky Scientific's attorneys at Stoel Rives have not announced whether the company will appeal the ruling. [Idaho Press]

>> Host community agreements are under fire in Massachusetts. A bill moving through the state Legislature would give the Cannabis Control Commission power to review contracts between marijuana businesses and the municipalities where they operate. Critics of the mandated contracts have accused some cities of making onerous demands of businesses. The Boston Globe reported last year that a federal grand jury is investigating host agreements with at least six communities. [State House News Service]

>> Oregon regulators leveled a record fine against Cura Cannabis. Oregon's biggest cannabis company will pay $110,000 to settle allegations that it incorrectly labeled its Select brand of vaping products as "100% marijuana." The vape cartridges, in fact, contained unlabeled additives, according to details provided in the settlement agreement. Cura recently completed its sale to Curaleaf. The deal had been valued at just under $1 billion when it was announced last year. A decline in marijuana stocks reduced the value of the transaction to just under $400 million.[The Oregonian]

>> New York's state bar has endorsed recreational marijuana. The bar's House of Delegates last week voted to accept a 23-page report from the association's cannabis committee that recommended expansion of the state's current medical marijuana market to include recreational use. "This permits our association to be unified in our voice to legislators about what we hope to see in the Cannabis Regulation Taxation Act or any other proposed legislation," said Aleece Burgio, the cannabis committee's co-chair. [New York Law Journal]

For Your Calendars

Feb. 11-12 - The Cannabis Packaging Summit will be held in Anaheim, California. Scheduled speakers include Steptoe & Johnson associate Deborah Attwood; Kimberly Simms of the Law Offices of Kimberly Simms; and Keller & Heckman partner Frederick Stearns.

Feb. 13-14 - The Business of Cannabis Arizona Expo takes place in Phoenix. Luis Rivera-Marín, of counsel at Porzio, Bromberg & Newman; Jana Weltzin of JDW Counse; and Clement Hayes, general counsel at Block45 Legal are listed as speakers.