Cannabis Law Update

Posted on May 10th, 2021

Adult-Use Licensing

Attention again turns toward applications and licensing as a result of the passage of adult-use legislation in February, the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“CREAMMA”). The firm is working with a number of clients interested in pursuing one of six license types:  cultivation, processing, wholesaling, distribution, delivery and dispensary.

In addition to standard licenses, the newly formed Cannabis Regulatory Commission (“CRC”) is also offering micro-licenses targeting New Jersey entrepreneurs. Microbusiness licenses will be restricted to residents who have lived in the State for at least two years and will limit the size and number of employees of the Microbusiness. However, there will be no limit on the number of Microbusiness licenses that can be issued. CREAMMA requires that a minimum of 10% of the licenses issued for each license type be issued to Microbusinesses, and that 25% of the total licenses issued be awarded to Microbusinesses. The Microbusiness classification is expected to expand the opportunity for New Jersey residents to participate in the industry by removing the need for such applicants to compete for a finite number of licenses.

Medical Marijuana Licensing

The pending applications for the 2018 and 2019 medical marijuana licenses were formally transferred from the Department of Health (“DOH”) to the CRC.  As a result of a decision from the Appellate Division reversing and remanding the DOH’s 2018 scoring decisions, a number of appellants were permitted to resubmit their applications for additional review.  That process remains underway and likely will take another 90-120 days, at least.  Similarly, after the Appellate Division ruled on the 2019 appeal, the CRC is now scoring those applications and decisions are expected shortly.  As demand continues to vastly exceed supply, and it can take a year or longer to start operations, we are hopeful that the CRC will act quickly in awarding the six vertically integrated licenses available under the 2018 RFA and the 34 licenses of various types available under the 2019 RFA.

Cannabis Regulatory Commission

The CRC got off to a quick start hosting a number of virtual meetings to introduce the six commissioners –Dianna Houenou – Chair of the CRC, and Commissioners Krista Nash, Maria Del Cid-Kosso, Sam Delgado, and Charles Barker — and to establish an agenda for the significant amount of work which lies ahead.  Jeff Brown, who led the medical marijuana program under the DOH, came over as Executive Director of the CRC.

In support of that effort, Zachary Windham, who previously worked as the Legal & Financial Director for a Marijuana Business Operator with retail locations across the state of Colorado and recently joined the firm, submitted comments to the CRC concerning social equity issues, Minority and Women Business Enterprise (“MWBE”) point allocations, and the need to increase cultivation capacity in accord with the findings of the New Jersey Department of Health’s Biennial Report on the Medical Marijuana Industry, among other topics.

Zachary explained that there was a need to educate social equity applicants concerning the licensing process as the current  30 day window between issuance of the final rules and the application deadline was insufficient time to prepare a comprehensive application. He also recommended utilizing the State’s current MWBE designation as mechanism to allot additional points to social equity applicants, in the event there is insufficient opportunity for the CRC to create its own social equity designation.  Finally, Zachary explained that the Biennial Report noted the need to increase cultivation capacity, and that 10% of the 37 cultivation licenses (i.e., four licenses) would be awarded to micro-businesses.  However, as the micro-licenses are capped at 2,500 square foot canopy, it would only add 10,000 square feet of cultivation capacity.  While a robust microbusiness sector is critical to ensuring social equity at the consumer level, we also need to increase supple to meet the demand of more than 106,000 registered patients in addition to the adult-use market.

NJSBA Annual Meeting and Chair Appointment

Joshua Bauchner will be presenting at the NJ State Bar Association’s Annual Meeting on Thursday, May 20, 2021.  The virtual panel will provide an overview of CREAMMA addressing topics such as licensing, employment law, expungement and social justice issues, banking and business issues and more.  Registration remains open here.

Josh also was appointed Chair of the NJSBA Cannabis Law Committee for the 2021-2022 term, along with his friend  and colleague, Lisa Gora, Esq. of Wilentz Goldman & Spitzer, PA.

Client Alert: Insurance Coverage for COVID-19 Pandemic-Related Losses

Posted on April 30th, 2021

The COVID-19 pandemic continues to present challenges to business owners across nearly all industries, even as a return to normalcy is in sight.  Widespread economic losses have been incurred, some of which may be covered by commonly held insurance policies.  In light of applicable statutes of limitation that vary state-to-state, as well as policy-imposed limitations on when claims may be made, it is vital that businesses suffering economic losses review their insurance policies and work with experienced legal counsel to determine whether coverage may extend to COVID-related losses.

There are various types of business-related insurance policies that may afford coverage for COVID-related losses.  One business-related insurance policy to examine is business interruption, which may contemplate losses in the circumstances faced throughout the pandemic.  In a notable decision, the North Carolina General Court of Justice in North State Deli, LLC, et al. v. The Cincinnati Insurance Company, et al., Case No. 20-CVS-02569, granted a summary judgment motion, finding that the policies at issue provided “coverage for Business Income and Extra Expenses for Plaintiffs’ loss of use and access to the covered property mandated by the Government Order as a matter of law.”  While North Carolina case law is merely persuasive in New Jersey, New York, and Pennsylvania, it is clear that courts are taking a close look at the language set forth in insureds’ policies — and claims made by restaurants, fitness centers, and other businesses affected by state Executive Orders may be particularly successful.

In addition to business interruption insurance, property, general liability, workers’ compensation, employers’ liability, and political risk insurance policies also may afford coverage for COVID-related losses.  By way of example, while one may not expect a property insurance policy to afford COVID-related coverage, the mere presence of the COVID-19 pathogen may constitute loss of or damage to property, thus triggering coverage.  In Motorists Mutual Insurance Co. v. Hardinger, 131 F. App’x 823 (3d Cir. 2005), the Third Circuit Court of Appeals addressed e-coli contamination of the property and whether the presence of that pathogen excused performance under the subject lease.  The Court in that matter found that there was a question of fact as to whether the insured’s property was “nearly eliminated or destroyed, or whether their property was made useless or uninhabitable” by the contamination.”  Similarly, in Gregory Packing, Inc. v. Travelers Property Cas. Co. of America, 2014 WL 66675934 (D.N.J. Nov. 25, 2014), the District Court for the District of New Jersey found that a property insurance policy covered property damage resulting from the release of ammonia into the subject building, rendering the building unsafe until the ammonia could be fully removed and the property cleaned.  Crucially, the court held that “property can sustain physical damage without experiencing structural alteration.” Whether the presence of COVID-19 constitutes loss of or damage to property is likely to be an issue of first impression to most courts, and will be a key part of any court’s analysis.  It is important to note that most policies impose a requirement that insureds mitigate their damages — and a failure to make reasonable efforts to do so may damage efforts to seek compensation under insurance policies.

In the more recent matter of Optical Services USA/JC1, et al. v. Franklin Mut. Ins. Co., Docket No. BER-L-3681-20 (N.J. Super. Ct. Bergen Cnty. Aug. 13, 2020), the court declined to dismiss an insured’s complaint based on the insurance carrier’s assertion that “loss of physical functionality and use of [a] business” does not constitute “direct physical loss.”  It is crucial in reviewing insurance policies, however, to ensure that anti-concurrent causation provisions are not present which might serve to exclude claims for viruses and bacteria.  In another recent case, Mac Property Group LLC v. Selective Fire & Casualty Insurance Co., Docket No. CAM-L-2629-20 (N.J. Sup. Ct. Law Div. Nov. 5, 2020), the court declined to find coverage where an anti-concurrent causation provision excluded coverage “regardless of any other cause of event that contributes concurrently or in any sequence to the loss.”

The New Jersey Superior Court, Appellate Division holding in Wakefern Food Corp. v. Liberty Mut. Fire Ins. Co. is likely to be instructive as COVID-related claims are litigated, as that court held:  “The fact that the term ‘physical damage’ is capable of at least two different reasonable interpretations convinced us that it is ambiguous.  And well-established precedent teaches us that such an ambiguous provision must be construed favorably to the insured.”  406 N.J. Super. 524, 541 (App. Div. 2009).  By contrast, in Causeway Automotive LLC v. Zurich American Insurance Co., C.A. No. 20-8393-FLW-DEA (D.N.J. 2021), Chief Judge Wolfson of the United States District Court for the District of New Jersey found that a virus exclusion in an insurance policy barred the plaintiff from obtaining COVID-related losses, and rejected the plaintiff’s argument that the virus exclusion is contrary to public policy.  Of course, in that matter, the virus exclusion itself, and not any policy ambiguity, was found to control.

Case law addressing disputes arising from the COVID-19 pandemic is limited, and is evolving regularly as litigations progress on this novel issue.  Indeed, the limited pre-2019 cases concerned the 1918 Spanish Flu epidemic, and are rarely applicable to the modern circumstances facing businesses.  Ansell Grimm & Aaron’s attorney have been at the forefront of litigating pandemic-related matters of first impression, and are well positioned to protect our clients’ interests in an ever-changing environment.

Bauchner Quoted: What NJ Attorneys Are Saying About
Attorney General’s Cannabis Sentencing Directive
by Nick Muscavage

Posted on April 26th, 2021

Law360 (April 23, 2021, 3:16 PM EDT) — The New Jersey Attorney General recently issued a directive instructing prosecutors across the state to waive mandatory minimum sentences for certain nonviolent drug offenses, advancing a key part of the governor’s criminal justice reform plan that has been “delayed and denied” for nearly two years, according to the governor.

State Attorney General Gurbir S. Grewal announced the directive on Monday that instructs prosecutors to waive mandatory parole disqualifiers — also known as mandatory minimum prison terms — for nonviolent drug offenses.

Directive 2021-4 will affect both current and past cases, according to Grewal.

For future cases, the initiative directs prosecutors to waive the mandatory minimum parole ineligibility terms associated with certain nonviolent drug offenses under New Jersey law. It also allows inmates who are currently in prison because of a mandatory minimum term for a nonviolent drug offense to request the waiver, requiring prosecutors to file a joint application to rescind the mandatory period of parole ineligibility so the modified sentence will be as if no mandatory minimum had been imposed.

According to Grewal, the directive “essentially takes the imposition of mandatory minimum terms ‘off the table’ for all current and future nonviolent drug defendants,” and also advances a 2019 recommendation from Gov. Phil Murphy’s Criminal Sentencing and Disposition Commission, which called for the elimination of all mandatory minimum terms for nonviolent drug crimes.

“It’s been nearly two years since I first joined with all 21 of our state’s county prosecutors to call for an end to mandatory minimum sentences for nonviolent drug crimes. It’s been more than a year since the governor’s bipartisan commission made the same recommendation,” Grewal said in a statement. “And yet New Jerseyans still remain behind bars for unnecessarily long drug sentences. This outdated policy is hurting our residents, and it’s disproportionately affecting our young men of color. We can wait no longer. It’s time to act.”

Murphy’s sentencing commission also led to legislation that would have implemented its sentencing recommendations, but the bill has remained stalled in committee in both houses of the Legislature.

Grewal’s directive requires prosecutors to waive the mandatory period of parole ineligibility for the following charges: leader of narcotics trafficking network; maintaining or operating a facility producing a controlled dangerous substance, or CDS; manufacturing, distributing, or dispensing CDS; employing a juvenile in a drug distribution scheme; distributing, dispensing, or possessing with intent to distribute CDS within 1,000 feet of a school; distribution of CDS to persons under age 18.

However, it still allows prosecutors to seek periods of additional parole ineligibility in nonviolent drug cases “when warranted to protect public safety based on the specific facts of the case,” according to Grewal.

To learn more about the attorney general’s latest criminal justice reform effort, Law360 Pulse spoke to attorneys and experts to hear what they think of the initiative and how it will play out in the Garden State.

 

 

 

 

 

 

 

 

 

 

Jennifer Sellitti
Director of training and communications for the New Jersey Office of the Public Defender

“We are pleased that the attorney general stepped in to provide the relief for nonviolent drug offenders that the sentencing commission unanimously agreed was critical to ending racial disparities in our prisons. It is no secret that drug sentences disproportionately impact Black and brown people in the state of New Jersey — so much so that New Jersey has the highest racial disparity in the nation when it comes to prison sentences. This measure goes a long way in eliminating those disparities.”

Murphy’s sentencing commission noted that Black residents count for 14% of New Jersey’s population, but account for 61% of its inmate population, and many are serving sentences for nonviolent drug offenses, Grewal’s directive noted.

Sellitti said the key to ending mass incarceration is recognizing who needs to be in prison in the first place.

“Overincarcerating people leads to all sorts of barriers like hiring discrimination, lost job and career opportunities, homelessness and weakening of familial ties. We hope this is a small step in ensuring that prison cells are reserved for only those who truly need to be behind bars and marks a return to a more holistic approach to punishment.”

Sellitti also said the attorney general’s directive is “far more complicated than legislation and will result in it taking much longer to modify sentences.”

“Had the legislation passed, all of the judgments of convictions would have been changed administratively by the New Jersey Department of Corrections. Because our law has not changed and still requires mandatory minimums for certain charges, each person serving a mandatory minimum will have to be brought to court, vacate their original guilty plea, have their sentence modified and then reenter their plea. This will be quite a time-consuming process, especially during the midst of a pandemic.”

“The other issue is that the guidelines give prosecutors discretion to ask for discretionary minimums. It also only applies to a small category of offenses — far less than the legislation. This means that the discretion remains with the prosecutor and does not return to judges. Giving power back to judges was the whole purpose of the legislation.”

Regardless, the attorney general’s directive is still a step in the right direction, she said.

“Real change comes when we move away from a system based on punishment and return to a system based on rehabilitation.”

 

 

 

 

 

 

 

 

 

 

Sarah Fajardo
Policy director for the American Civil Liberties Union of New Jersey

“The attorney general’s directive moves New Jersey’s sentencing away from the use of policies that have exploded mass incarceration rates, and driven New Jersey’s racial disparity rates in prison to the highest levels seen in the nation. By directing prosecutors to stop seeking minimum sentences for specific charges, discretion in sentencing is restored to the courts, and helps prevent prosecutorial pressure behind the scenes to accept hefty sentences. This will benefit thousands of people — more than 1,000 people will become immediately eligible for resentencing under this directive.”

Fajardo said research has shown that onerous, lengthy sentences do not support rehabilitation and, when people exit the prison system, they are in no better position than when they went in.

“Additionally, mandatory minimum sentences for nonviolent drug offenses have been a core tool in the U.S.’s unsuccessful war on drugs. As New Jersey moves away from criminalization of cannabis and has regraded psilocybin possession, other components of our criminal legal system also need to adjust. Reforms in sentencing are a critical component of reducing New Jersey’s reliance on the criminal legal system and the expansion of mass incarceration.”

“A majority of New Jerseyans voted to legalize cannabis on the November 2020 ballot, and national polling shows overwhelming support for moving away from criminalizing people for engaging with cannabis. Simultaneously there is a growing movement towards a public health-focused, harm-reduction approach to drug use. By shifting away from use of onerous, harmful sentencing practices for this category of offenses, New Jersey takes a first step towards aligning our sentencing policies with other policy progress that the Garden State has made. ACLU-NJ supports the elimination of all mandatory minimum sentences and hopes that this change and additional changes will be codified in statute.”

 

 

 

 

 

 

 

 

 

 

Joshua Bauchner
Partner at Ansell Grimm & Aaron PC and chair of the firm’s cannabis law practice group

“It is a welcome and long overdue change. For far too long, minorities have been prosecuted, if not persecuted, for low level, victimless cannabis offenses at a hugely disproportionate rate.”

He believes that cannabis criminalization led to a racist criminal justice system, and Grewal’s directive comes at a time when the nation is grappling with biased policing practices.

“The country is finally confronting systemic racism, as the recent verdict in Minneapolis confirms. This is one more step forward toward addressing this problem, although much more needs to be done. In addition to the taint of being labeled a felon, incarcerating people among violent offenders creates grave physical and mental risks. Often, upon release, they are challenged in being able to rejoin society as a result of this harm and stigma. A purportedly ‘rehabilitative’ system fails entirely when it never actually permits people to rejoin society free from the consequences of their incarceration.”

Grewal’s directive, he said, will begin the process of a much-needed correction of the criminal justice system in New Jersey.

“The impact will be a significant reduction in the prison population and, more importantly perhaps, the removal of the blight of ‘felon status’ for these nonviolent offenders, which forever impacts on their ability to secure housing, employment, and even vote in certain jurisdictions.”

New Jersey Supreme Court Holds Jake Honig Compassionate Use Medical Cannabis Act Is Not Preempted By The Federal Controlled Substances Act

Posted on April 20th, 2021

On April 13 the Supreme Court of New Jersey affirmed the Appellate Division’s affirmation of the compensation court’s Order in the matter Vincent Hager v. M&K Construction. The Court decided that Mr. Hager was entitled to reimbursement through workers compensation for the ongoing costs of medical cannabis that he was recommended after sustaining a debilitating work-related injury in 2001. The Court reached this conclusion based on the explicit determination that subsequent Congressional action on medical cannabis preempted the Controlled Substances Act since 2015, and effectively legalized medical cannabis at the federal level for those operating in compliance with their own State’s medical cannabis laws. The Court directly challenged the Controlled Substances Act’s assertion that cannabis be listed as a Schedule One narcotic with “no currently accepted use for medical treatment” by identifying it as the clear option when faced with the choice between medical cannabis and highly addictive opioid painkillers due to medical cannabis’s ability to both provide pain relief and help in overcoming addiction to opioids. Hager v. M&K Constr., ___ N.J. ___, ___ (2021) (slip op. at 22).

The Court agreed that there was sufficient credible evidence that medical cannabis is “the clearly indicated option” when the two treatment options available are medical cannabis and opioids. They also agreed that “marijuana’s ability to relieve pain has been expressly recognized by the Legislature in the Compassionate Use Act.” Hager v. M&K Constr., ___ N.J. ___, ___ (2021) (slip op. at 22). In doing so, they also rejected competing expert testimony questioning medical marijuana’s efficacy and use.  Thus, denying workers compensation coverage for medical cannabis was determined to be in direct conflict with the Legislature’s intent in passing the Compassionate Use Act.

In the most recent federal Appropriations Act, Congress again explicitly prohibited the Department of Justice from using allocated funds to prevent states from implementing their own medical cannabis laws. See Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, § 531, 134 Stat. 1182, 1282-83 (2020). Congress included similar language every year going back to 2015, even listing the specific States and territories protected as their number continues to grow. “These continuing riders have ‘changed’ federal law by prohibiting the DOJ ‘from spending appropriated funds’… and ‘restrict[ing] the Federal Government from superseding State law when it comes to the use of medical marijuana.’” Hager v. M&K Constr., ___ N.J. ___, ___ (2021) (slip op. at 36) (quoting 163 Cong. Rec. H311 (daily ed. Jan. 11, 2017) (statement of Rep. Rohrabacher). The Court deemed “appropriations acts as the manifested intent of the Legislature to give no effect at all to the earlier statutes, stating that ‘[t]he earlier statutes [could not] coexist with the enacted appropriation and, consequently, must be deemed [to have been] suspended by adoption of the later appropriation acts.’” Hager v. M&K Constr., ___ N.J. ___, ___ (2021) (slip op. at 40) (quoting City of Camden v. Byrne, 82 N.J. 133, 154-55 (1980).

Likewise, the U.S. Supreme Court has long held that “‘[t]here can be no doubt that Congress could suspend or repeal [an] authorization… and it could accomplish its purpose by an amendment to an appropriation bill, or otherwise.” Hager v. M&K Constr., ___ N.J. ___, ___ (2021) (slip op. at 37) (quoting United States v. Dickerson, 310 U.S. 554, 555 (1940); accord United States v. Will, 449 U.S. 200, 222 (1980).

The Supreme Court of New Jersey joins that of New Hampshire and the U.S. Court of Appeals for the Ninth Circuit in concluding that the Controlled Substances Act’s applicability to those acting in compliance with their State’s medical cannabis laws are effectively suspended so long as Congress includes similar prohibitions in future funding legislation because there is currently no direct conflict between the Controlled Substances Act and States’ laws on medical cannabis. Appeal of Panaggio, ___ A.3d ___, ___ (N.H. 2021); United States v. McIntosh, 833 F.3d 1163 (9th Cir. 2016). This suspension of the Controlled Substances Act’s applicability to States’ medical cannabis programs is expected to last for at least the current fiscal year. However, if past behavior is any indication, there is little reason to believe that Congress will change course on States’ and territories’ rights to regulate medical cannabis as they see fit.

Ansell Grimm Adds Attorney To Cannabis Law Practice Group

Posted on April 12th, 2021

Ansell Grimm & Aaron, PC announces that Zachary L. Windham has joined the firm to assist in the preparation of applications for cannabis licenses in the State of New Jersey.  The addition of Mr. Windham expands the firm’s already robust Cannabis Law Practice Group, enabling it to further support its clients in licensing, corporate formation and governance, commercial leasing, contract negotiation and drafting, employee issues, capital raising and financing, and regulatory and municipal compliance.

Mr. Windham is an attorney and consultant to the cannabis industry who is widely recognized for his ability to support clients to accomplish business goals within the context of complex regulatory frameworks — including both the medical and adult-use markets, as well as industrial hemp and CBD ventures.  Mr. Windham has successfully worked with clients to win numerous local competitive license processes, guided the state license process for nearly every license type, guided clients through multi-state expansion processes, and navigated the cannabis regulatory hurdles in dozens of commercial, real estate, and acquisition agreements.

Mr. Windham is admitted to practice in the states of Colorado, Florida, New York, Oregon, and Washington. He received his B.S. in Business with a dual-concentration in finance and marketing from New York University Stern School of Business and his J.D. from the University of Miami School of Law. Prior to joining Ansell, Grimm & Aaron, Mr. Windham served as the Legal & Financial Director of a Colorado-based Marijuana Business Operator.

Ansell Grimm is pleased that Mr. Windham is bringing his extraordinary experience to service its cannabis clients.  Our dedicated Cannabis Law Practice Group stands ready to assist applicants with ensuring they are prepared when the Request for Applications is issued for adult use cannabis, as well as for additional medical licenses.  Please contact Joshua S. Bauchner, head of the Cannabis Law Practice Group, at jb@ansellgrimm.com or (973) 247-9000 to get started today.

Quarterly Litigation Department Roundup: April 2021

Posted on April 6th, 2021

As the world continues to face the coronavirus pandemic, and millions of small businesses remain confronted with unprecedented challenges, the attorneys in Ansell Grimm & Aaron’s Litigation Department assisted dozens of clients in protecting their businesses and livelihoods.  Led by co-chairs Lawrence Shapiro and Joshua Bauchner, and assisted by attorneys Barry Capp, Anthony D’Artiglio, Rahool Patel, Seth Rosenstein, Ashley Whitney, and, our newest member, Courtney Dunn, the Department is pleased to share its numerous successes.

Real Estate Litigation

In a recent matter before the Honorable Henry P. Butehorn in Monmouth County, Lawrence Shapiro and Seth Rosenstein were successful in securing summary judgment in favor of their clients as to all claims prior to trial.  Plaintiffs asserted causes of action sounding in common law fraud, violations of the New Jersey Consumer Fraud Act, Unjust Enrichment, Negligence, Breach of Contract, and Equitable Servitude in connection with their purchase of real property in Ocean Grove, New Jersey.  The sellers, who own the property sold to Plaintiffs as well as an adjoining property, prohibited the buyers from utilizing a walkway on sellers’ adjoining property to access the rear entrance to buyers’ home.  The buyers asserted that representations were made by sellers as to their ability to utilize sellers’ walkway, and that they overpaid for their property if there was no access through the rear entrance.

Judge Butehorn’s Order found that there was no basis upon which to establish claims for common law fraud or Consumer Fraud against the defendants.  Specifically, the Court agreed with AGA’s argument that any representation as to walkway access on adjacent property was not part of the transaction at issue and thus could not serve as a basis for a claim of fraud or consumer fraud.

Plaintiffs subsequently filed a motion for reconsideration of the Court’s summary judgment order, which was denied, confirming the victory for our client.

Appellate Litigation

Barry Capp succeeded before the Appellate Division in upholding the validity of the City of Asbury Park’s short-term rental (Air BnB) ordinance, which permitted and established procedures for the short-term rental of residential properties. The plaintiff filed a complaint in the Law Division, Monmouth County, alleging that the ordinance was adopted improperly and that Ordinance itself was facially invalid.

The Ordinance defines those classifications of properties where short-term rentals are both permitted and prohibited. It further establishes a permitting process for property owners who wish to utilize their properties as short-term rentals. Plaintiff asserted a challenge to the manner in which the Ordinance was adopted, claiming that it creates a “new” use of residential property that is a non-permitted and, therefore, was required to be adopted as a zoning ordinance pursuant to the procedures contained in the Municipal Land Use Law (MLUL). Plaintiff further claimed that the use of residential property for short-term rentals violates the City of Asbury Park’s zoning ordinance and therefore was required to be invalidated.

In a thirteen (13) page unanimous decision, and a major victory for the City of Asbury Park, the Appellate Division upheld the City’s actions in adopting the Ordinance and its validity pursuant to its municipal police powers. In so doing, the Appellate Division affirmed the right of owners of certain classifications of property to use their properties as short-term rentals pursuant to procedures established by the City of Asbury Park and its governing body.

Bankruptcy Litigation

Joshua Bauchner and Anthony D’Artiglio are pursuing a multi-million dollar cure dispute in Southern District of New York Bankruptcy Court, seeking to compel a retail Debtor who operated a chain of grocery stores to pay for numerous, needed repairs to a large production and distribution facility.  The Debtor failed to maintain the property in the condition required by the Lease, leading to large scale deterioration.  The case presents interesting legal questions at the intersection of commercial landlord-tenant law and Bankruptcy law, particularly in light of the new tenant’s assumption of the Lease “as is” as part of the Bankruptcy proceedings.

Class Action Litigation

Joshua Bauchner and Rahool Patel continue the defense of multiple class actions filed against New Jersey Retrofitness gym franchises.  This now seven-year old litigation is on remand from the Appellate Division, where the firm successfully secured the dismissal of seven of the eight claims, dramatically narrowing the scope of the litigation.  As a result of numerous procedural challenges encountered by plaintiffs, the matter is back at the pleading stage ensuring our already strapped gym clients are not at risk of liability anytime soon.

COVID-19 Litigation

Department attorneys continue to represent national retail and restaurant tenants in numerous COVID-19 Pandemic-related litigations, securing temporary restraints and preliminary injunctive relief to prevent self-help lockouts, restore utilities, permit outdoor dining, and stay eviction actions.  As pandemic law remains largely unsettled, the Firm presented novel legal arguments to secure favorable decisions and settlements on behalf of many clients, and are preparing for what is understood to be the first trial in the State addressing the impact of Governor Murphy’s Executive Orders restricting operations.

Policeman Benevolent Association Litigation

Ashley Whitney is waiting on a decision from the Appellate Division involving the termination of a police officer with no prior discipline for alleged Criminal Justice Information Systems violations under State v. Donis, through his use of full-disclosure searches despite the police department’s failure to identify a single full-disclosure search conducted without justification.  The Appellate Division’s decision could have lasting implications for police officers as there is little case law addressing the application of Donis in this context.

Ms. Whitney also is continuing her prior practice of the representation of police officers as a member of the PBA Legal Protection Plan at the Firm’s Woodland Park office and is currently defending a high-ranking correctional police officer served with inflated disciplinary charges.

Personnel Successes

Courtney Dunn joined as an associate with the Firm. Prior to joining Ansell Grimm & Aaron, Ms. Dunn practiced commercial litigation along with sports and entertainment law, labor and employment law, and toxic tort law at a firm in New York City. Ms. Dunn received her juris doctor, cum laude, from the Elisabeth Haub School of Law at Pace University where she was a Pro Bono Scholar and worked as a research assistant to Professor Donald L. Doernberg. During law school, Ms. Dunn interned for Justice Terry J. Ruderman, J.S.C. of the Supreme Court of New York.  She also served as an Articles Editor on the Pace International Law Review and was a member of the Moot Court Honors Board.

Following law school, Ms. Dunn served as a law clerk to The Honorable Judge Craig L. Wellerson, the Presiding Civil Division Judge of the Ocean Vicinage of the Superior Court of New Jersey. Ms. Dunn is admitted to practice in New Jersey and New York as well as the Southern District of New York and the Eastern District of New York

Anthony D’Artiglio was named as “One To Watch” by Best Lawyers Magazine, for commercial litigation.  We congratulate Mr. D’Artiglio on this remarkable achievement.

Make Room for Hemp: NJ and NY Industrial Hemp Regulations

Posted on March 26th, 2021

We have all been following the transforming laws governing the sale and purchase of marijuana which have remained centralized in headlines for quite some time now. Amidst all the excitement, we don’t want to overlook the changes being made state by state in hemp distribution and sale.

New Jersey
Under the relevant regulations, “hemp” means the plant Cannabis sativa L. and any part of that plant,  including the seeds of the plant and all derivatives, extracts, cannabinoids, isomers, acids, salts and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent of a dry-weight basis. Hemp and hemp-derived cannabinoids, including cannabidiol, shall be considered an agricultural commodity and not a controlled substance due to the presence of help or hemp-derived cannabinoids. See N.J. Stat. § 4:28-8.

While smokable hemp flower is not mentioned specifically within the regulations, according to the state’s definition of hemp and associated regulations, hemp flower is treated like other hemp products, and, therefore, legal in the State of New Jersey.  2018 N.J. A.N. 5322 § C.24:5-23(c) provides that “[n]otwithstanding any other law, a person or business entity may possess, transport, sell, and purchase legally produced hemp products in this state.”

The cultivation, handling, and processing of hemp or hemp products is governed mainly by 2018 N.J. A.N. 5322. This provision generally states that it is lawful for a hemp producer or its agent to cultivate, handle, or process hemp or hemp products in the State.  Section C.25:5-23(9)(e) later clarifies that “[r]etail sales of hemp products processed outside the state may be conducted in the state when the products and the hemp used in the products were processed and cultivated legally in another state or jurisdiction that has the same or substantially similar requirements for processing hemp products or cultivation hemp as provided in P.L. C. 238.”

A large portion of the regulations relate to producing the hemp and the site at which hemp is produced.  The applicant will need to be able to provide some of this information, which is quite detailed, especially as related to the product site itself.  Every individual that intends to plant, grow, harvest, possess, process, distribute, buy, or sell industrial hemp for commercial purposes in New Jersey needs to apply for a license with the Secretary of Agriculture.

The New Jersey Hemp Processor/Handler License Application can be found here.

Upon applying for a license, the State of New Jersey will conduct a background check. Along with the application, there is a $50 application fee, along with additional documentation and payments, which can be found on page 11 of the processing application.  Of course, the application can be denied for a variety of reasons ranging from insufficient funding to a criminal background.

New York
2019 N.Y. AB 8977 governs hemp growth, sale, distribution transportation and processing in New York.  New York provides the same definition for hemp as described above under New Jersey law. Section 3398 sets forth that you must obtain a cannabinoid hemp retailer license from the Department of Agriculture in order to legally sell hemp product. Under § 3398-d, you can apply for a license with the Department and it can be filled out by either yourself as an applicant or by a representative.  This license is available at the New York State Business Express website with a log-in requirement. There are separate applications depending on whether the intended purpose for the license is to distribute, or to process and grow. Section 3398-d explains that a separate license is needed for each facility at which retail sales are conducted or you can otherwise submit one application for separate licensure at multiple locations.

Section 3398-g lists the selection criteria for licensure including: good moral character, experience and competency, adequate facilities, equipment, process controls, and security to undertake activities, ability to comply with all applicable state and local laws, rules, and regulations. Of course, the commissioner can deny an application and, if that happens, will provide reasons to justify the denial.

Notably, a new Part 1005 of Title 10 (Health) of the Official Compilation of Codes, Rules, and Regulations of the State of New York has been amended, thus altering the regulations of processing and retail sale of cannabinoid hemp in New York State. According to Section 1005.1(m), “flower product” means “any form of cannabinoid hemp product consisting of the flower, buds, leave, or stems of the hemp plant, including trimmings thereof, intended for retail sale to consumers without further processing”.

Section 1005.8 outlines the cannabinoid hemp product requirements to be sold at retail. One of the requirements specifies that the product cannot be in the form of flower product including cigarette, cigar, or pre-roll, or any other disallowed form determined by the department. That is likely for good reason – smoking hemp cigarettes has increasingly been mistaken by law enforcement to be illegal marijuana.  A number of reports state that if a person gets arrested for smoking, what seems to be, marijuana without a license, he can be held in custody until law enforcement is able to make a determination (i.e. send it out for testing) that it was, in fact, hemp.

The application for a New York Cannabinoid Hemp Distributor Permit can be found here.

If the application is granted, the license is good for one year and has an annual license fee of $300 for each retail location.

Hemp product has been steadily gaining popularity.  Both New York and New Jersey have provided easy-to-follow guidelines to spell out how one can go about gaining a license to either grow or distribute.  For assistance filling out an application or for any additional questions related to industrial hemp or marijuana, visit our Cannabis Group.

Rejected Medical Marijuana Dispensaries Revive Legal Fight Over 2018 Application Process By Sam Sutton

Posted on March 8th, 2021

Politico (March 5, 2021) – – Businesses that lost out on a highly competitive application process for medical marijuana licenses in 2018 are reviving their legal battle against New Jersey’s Department of Health, claiming the department hasn’t adhered to a November ruling that called its handling of the request for applications process “arbitrary, capricious and unreasonable.”

On Thursday, Superior Court Appellate Division Judge Clarkson Fisher granted six applicants that had been rejected in the 2018 RFA the ability to file for emergent relief. Motions are due no later than March 9.

Why it matters: If the Appellate Division grants the motions, the health department’s attempts to develop the state’s medical marijuana program will be mired in even more litigation at a time when oversight of the industry is set to transition to the Cannabis Regulatory Commission. Jeff Brown, who oversees the medical marijuana program for the health department was named executive director of the new, as-yet unformed commission by Gov. Phil Murphy last year.

A health department spokesperson did not immediately respond to a request for comment.

What they want: The plaintiffs — five businesses that submitted a combined six applications in the 2018 RFA — want the department to further clarify the process it used to award six available licenses out of a pool of nearly 150 applicants. They also say the November ruling could merit the awarding of additional permits.

The health department announced the winners for the six permits in late 2018, however, and while the court’s November decision found there was nothing precluding the department from issuing additional permits — the department held another RFA offering for medical marijuana cultivation and dispensing licenses in 2019 — “we have no license to increase the number of successful applicants beyond six as the means for moving these proceedings more quickly to the next step. In fact, it is far from clear that any further proceedings will move any appellant into the top six,” according to the previous ruling.

What happened next: The department ultimately responded to the November ruling by setting up a supplemental submission process whereby the plaintiffs could challenge the scores they were awarded. It also set up a “Quality Control Committee” to review the RFA process and scoring criteria, which the November ruling had found to be problematic.

That isn’t enough, according to the applicants’ attorneys.

“The Department’s recalcitrance leaves the 2018 Appellants stuck on a treadmill,” Joshua Bauchner and Rahool Patel of Ansell Grimm & Aaron, wrote in a letter to the court. “The Department has refused to provide Appellants with the most basic additional information regarding the remand process, again leaving Appellants with more questions than answers.”

To view online:
https://subscriber.politicopro.com/states/new-jersey/story/2021/03/05/rejected-medical-marijuana-dispensaries-revive-legal-fight-over-2018-application-process-1367055

NJ Gov. Signs Legal Pot Bills After ‘Bungled’ Process By Bill Wichert

Posted on February 23rd, 2021

 

Law360 (February 22, 2021, 12:43 PM EST)

New Jersey Gov. Phil Murphy on Monday signed legislation to set up an adult-use recreational marijuana market in the Garden State, ending what one state senator had called a “bungled” process as the governor and legislators tussled for months over the consequences for underage possession of cannabis items.

The Democratic governor took that historic step after the Democrat-led state Legislature on Monday approved a so-called cleanup bill aimed at securing his signature on two separate bills that were passed in December to establish a regulated marketplace for selling adult-use recreational marijuana and to decriminalize the possession of up to six ounces of the drug.

Near the start of a Monday briefing on the state’s ongoing response to the COVID-19 pandemic, Murphy said he had signed the three bills and acknowledged that “this process has taken much longer than anticipated.”

“But certainly it is better to get things done right than fast and to ensure that all voices are heard and all views are considered,” Murphy said. “This process may have had its fits and starts, but it is ending in the right place and I firmly believe this process has ended in laws that will serve as a national model.”

The enactment of the legislation comes more than three months after Garden State voters in November approved by a more than two-thirds majority a state constitutional amendment legalizing cannabis for adult use, which took effect Jan. 1. Supporters of legalization have stressed the need to end marijuana arrests that have disproportionately affected people of color.

The marketplace bill will allow consumers 21 years and older to buy marijuana for personal use from licensed businesses, and it outlines provisions for taxing cannabis products. A commission tasked with overseeing the state’s current medical cannabis program will also oversee the recreational market, which will likely not be up and running until at least 2022.

The decriminalization bill will enable the possession of up to six ounces of marijuana or up to 170 grams of hashish without any criminal or civil penalties, and it will lead to reforms aimed at bringing social justice to communities hurt by the war on drugs.

But those bills are seemingly at odds when it comes to underage possession. While the decriminalization bill allows for small amounts of marijuana, the marketplace bill subjects underage individuals to disorderly persons offenses.

Murphy refused to sign the bills unless changes were made to the provisions dealing with the consequences for underage possession. Lawmakers attempted to make revisions through cleanup legislation, but such measures struggled to garner enough support until Monday’s voting sessions.

“Sixty-six percent of the voters of New Jersey spoke loudly and clearly that they want to legalize … recreational marijuana and they turned it over to this administration and this Legislature to put the process in place,” Sen. Paul Sarlo, D-Bergen, said during the Senate’s voting session.

But the administration and the Legislature “bungled this process,” Sarlo added.

Among other provisions, the cleanup legislation enacted Monday will eliminate the disorderly persons clauses in the marketplace bill and establish a three-tier warning system for underage possession or consumption of alcohol or cannabis items.

The bill also will allow for law enforcement officers to be charged with the crime of official deprivation of civil rights for “knowingly” committing violations related to underage possession or consumption of alcohol or cannabis items, such as for “requesting that a person consent to a search who is not capable of giving lawful consent.”

Noting that the bill was the result of much debate and compromise, Sen. Nicholas Scutari, D-Union — the principal architect of the state’s marijuana legalization effort — told his colleagues that “nothing is ever perfect” and “let’s not let the pursuit of the perfect be the enemy of the good.” The bill is “the best we’re going to get at this point in time.”

“I believe that the underage provisions in here offer appropriate protections for our young people … and keeping them out of the criminal justice system, again freeing up law enforcement and our judicial system to do the much more important items than dealing with marijuana claims, arrests,” Scutari said during the voting session.

As for the provisions related to police misconduct, Scutari added that “much of what’s in this bill today already exists in law.” He acknowledged that the legislation expands the type of victims who could bring the civil rights claims.

But Sen. Robert W. Singer, R-Ocean, argued that the bill “criminalizes police,” suggesting that officers will be afraid to stop underage individuals. He also blasted how the proposed warning system effectively leaves them without any consequences for using alcohol or cannabis items.

“This is absolutely in my mind a way to say, if you want to smoke marijuana if you’re underage, you can, if you want to drink if you’re underage, you can, and there’s no consequence for your actions,” Singer said.

During the Assembly voting session, assemblywoman Holly T. Schepisi, R-Bergen, echoed that point and expressed concern about “creating a culture for our children that essentially is giving them passes to go engage in bad behavior.”

“This bill…is just going to drag all of our youth, regardless of color, into the gutter,” Schepisi added.

Assemblywoman Mila Jasey, D-Essex, later countered that “possession convictions have destroyed lives” and said “it has been argued that passage of this bill will result in underage use with impunity because law enforcement will refuse to act.” The stark reality is “that enforcement power has always been disproportionately applied in communities of color,” she said.

“We cannot allow our fear of adverse consequences to outweigh the disastrous consequences of what has already occurred and, make no mistake, these consequences have fallen squarely upon the very young people who some are so stridently arguing must be protected,” Jasey said.

–Editing by Alyssa Miller.

Update: This article has been updated with additional information on the cleanup bill.