MJBizMag February 2021 - 51

Three Legal Issues to Keep in Mind
Contract breaches, workplace safety and unsolicited texting can disrupt business
operations and prove costly
By Omar Sacirbey
P
roduct liability, partnership
disputes, labor-related litigation
and RICO suits are among the
most common and potentially damaging
lawsuits facing marijuana companies. But
industry executives also should be alert
to at least three other legal dangers that
could hurt their businesses. These include:
Breach of contract: This is among
the most common violations that can
kill small businesses, especially upstart
grows, said attorney Katy Young of Ad
Astra Law in San Francisco.
Unlike product liability or RICO
lawsuits, where cannabis businesses
are the defendants, companies in a
breach-of-contract situation tend to be
the victim and must decide whether
becoming a plaintiff to recover lost assets
is worth the cost and effort.
" The most common reason I see for
breach-of-contract disputes in the supply
chain is lack of money. It basically comes
down to one business in the supply chain
being financially mismanaged and then
not being able to pay cultivators or other
companies, " Young said. " Those are
difficult cases because it doesn't make
sense to sue if there's no money there.
All we get is a judgment, a piece of paper
that we chase somebody around with. "
Cannabis executives who want to
avoid being stiffed should document
all transactions with lawyer-reviewed
contracts, Young said. Furthermore, to
avoid expensive litigation, the contracts
should include clauses about trying to
settle disputes through mediation or
arbitration before going to court.
Workplace safety: Violations that
lead to lawsuits or scrutiny and fines
from the Occupational Safety and
Health Administration (OSHA) are
currently less common than some other
legal pitfalls, but they can be expected
to increase as the cannabis industry
matures.
" It's simply not the case that because
cannabis is federally illegal, OSHA or any
number of regulatory agencies are not
supposed to visit them and make sure
they are in sync with federal laws, " said
Jesse Alderman, co-chair of the cannabis
practice at Foley Hoag in Boston. And
given that cannabis cultivation and
manufacturing involve large equipment
and machinery, companies must ensure
their work environments are safe and
comply with state and federal workplacesafety
regulations.
" Cannabis operators that are employers
really need to focus on having a
thoroughly documented and compliant
training program for employees. And
(they need to) pay attention to what's
happening at the state level-not only
with cannabis regulation but with
regulatory changes in general, " said
attorney Cassia Furman, who manages the
California office of Denver-based Vicente
Sederberg. " Since we're in the midst of
this unprecedent pandemic, there's a lot
of new laws on a variety of topics that
cannabis operators miss because they're
focused on keeping operations going. "
TCPA violations: An increasing
number of marijuana businesses
have become defendants in class
action lawsuits for allegedly sending
consumers unsolicited marketing texts,
which is a violation of the Telephone
Consumer Protection Act. Since May
2018, at least a dozen lawsuits have been
filed against marijuana businesses for
alleged TCPA violations.
The most obvious protection against
such lawsuits is to ensure you have a
consumer's written consent to send them
marketing texts or emails. However, a
consumer simply leaving their contact
information in a guest log or opt-in list
provided by outside marketers would
likely not offer sufficient protection in
TCPA cases, lawyers said.
" You need to obtain proper consent
from recipients prior to sending your
text-message marketing. And consult with
counsel to understand what that (consent)
needs to include, " Furman said.
February 2021 | mjbizdaily.com 51
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MJBizMag February 2021

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