Implications for the Cannabis Industry Due to the Coronavirus

17 April 2020 Coronavirus Resource Center Blog
Authors: Rohan A. Virginkar Coleman T. Lechner Adriana Victoria Inojosa Kara Schoonover

Massachusetts section below updated as of April 17, 2020

As the coronavirus pandemic grips the United States, many state and local governments have enacted stay in place restrictions that limit not only routine personal activity but commercial activities as well.  In the absence of nationwide directives from the federal government, states and municipalities have been issuing numerous orders – with variations big and small – detailing the scope of restrictions in place in each jurisdiction as well as the scope of businesses deemed “essential” which may continue to operate.

Though not immune from the impact of the pandemic, businesses in the cannabis industry are used to complying with a patchwork of differing directives from state and local governments.  Ensuring compliance with these orders will be critical because, as cannabis businesses nationwide are impacted by the current economic downturn, the industry will need to turn to their state and local governments for financial assistance, as the cannabis industry remains ineligible to participate in the small business loan programs offered under the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) which President Trump signed into law on March 27, 2020.1 

In order to assist businesses facing the question of how to operate in these uncertain times, Foley is tracking how these orders are impacting businesses operating in both medical and adult-use cannabis industries.

States Where Only Medical Marijuana is Legal 

For states that have legalized medical marijuana only, the stay at home or shelter in places orders have recognized the critical therapeutic role cannabis plays for patients suffering from a variety of ailments and have typically deemed medical marijuana dispensaries as “essential” businesses permitted to remain open. States that have taken this approach include Connecticut, Delaware, Hawaii, Louisiana, Maryland, Minnesota, Ohio, New Jersey, New Mexico, and New York. West Virginia has not issued any guidance on medical marijuana, as it has not yet allowed dispensaries to open in the state. 

In some cases, states have also altered the rules regulating sales of medical marijuana for the duration of the pandemic: 

  • To promote social distancing, the Maryland Medical Marijuana Commission is now allowing dispensaries to deliver medical marijuana to qualified individuals in the dispensary’s parking lot, allowing online or telephone ordering, but is prohibiting the use of “deli-style sales” and “sniff jars.”

  • Similarly, New York is directing certain approved registered organizations to deliver medical marijuana products to the homes of registered patients and designated caregivers without seeking prior written approval from the Department of Health. 

  • Ohio has started to permit doctors to prescribe medical cannabis via telemedicine.

States Permitting Both Medical and Adult-Use Cannabis 

For the most part, in jurisdictions where both medical and adult-use marijuana are legal, if medical dispensaries have been deemed “essential,” adult-use dispensaries have been similarly designated. The two exceptions are Massachusetts and Vermont, whose orders currently permit only medical marijuana dispensaries to continue operating. Despite the stay-at-home exceptions extended to marijuana, most dispensaries must continue to abide by state and local social distancing requirements. 

California

  • Under Governor Newsom’s order requiring residents to stay home beginning March 19th, both medical and adult-use dispensaries were identified as critical based on their importance to the state’s health and well-being. 

  • California’s executive order does not mandate any specific actions essential businesses must take, but businesses are encouraged to develop and enforce sound social distancing policies for employees and customers. 

Colorado

  • On March 25th, Governor Polis issued an executive order requiring Coloradans to stay at home. Medical marijuana dispensaries are explicitly included in the list of “Critical Retail” that may stay open for the duration of the order. 

  • Prior to issuing his executive order, Governor Polis suspended various regulatory statutes to mitigate the spread of the virus. Until further notice, medical dispensaries are no longer required to physically examine medical marijuana cards.  In addition, retail marijuana businesses may permit online sales.

  • The status of adult-use marijuana businesses is somewhat ambiguous, but the order appears to permit adult-use dispensaries to remain open, but only via online sales for curbside pickup.

  • Denver Mayor Hancock, announced a public health order effective from March 24 through April 10 for Denver city and county which permits all marijuana stores to remain open with extreme physical distancing in place.  

Illinois 

  • Governor Pritzker issued Illinois’ Stay at Home order on March 20th. In the order, licensed medical and adult-use marijuana dispensaries and licensed marijuana cultivation centers were deemed essential. 

  • The dispensaries and cultivation centers are still required to follow specific social distancing requirements. These include designating six-foot distances; having hand sanitizer and other sanitizing products available for employees and customers; implementing separate operating hours for elderly and vulnerable customers; and posting online whether the facility is open and how to best reach the facility. 

Massachusetts 

  • Governor Baker issued an emergency order requiring that all businesses and organizations that do not provide “COVID-19 Essential Services” close their physical workplaces and facilities to workers, customers and the public beginning on March 23, 2020. Similar to California, licensed medical marijuana retailers were considered medical facilities and deemed essential. 

  • However, the “essential” designation does not apply to adult-use marijuana dispensaries not licensed to sell medical marijuana. 

  • On April 7, 2020, a group of five licensed adult-use marijuana operators and Stephen Mandile, an Army veteran who is seeking to open his own recreational cannabis store, filed suit in Suffolk Superior Court against Governor Charlie Baker. The lawsuit alleges that the Governor’s emergency order violated the dispensaries’ equal protection rights under the U.S. Constitution and Massachusetts Constitution by requiring the recreational dispensaries to close while medicinal cannabis dispensaries and liquor stores remain open. Additionally, since cannabis is federally illegal, Mandile argues that veterans are reluctant to join the state’s medical marijuana program for fear of losing their federal benefits. Therefore, Mandile argues that recreational cannabis is essential for veterans using cannabis for therapeutic purposes. The complaint seeks injunctive relief barring the orders’ enforcement against the five business operators.
    • On Thursday, April 16, 2020, Suffolk Superior Court denied the preliminary junction on the basis that the plaintiffs failed to show that they were likely to succeed. Justice Kenneth W. Salinger found that “[i]t was reasonable for the Governor to be concerned that the relatively few adult-use marijuana establishments in Massachusetts are more likely than liquor stores or MTCs to attract high volumes of customers, including people travelling from other States. The Governor’s decision to treat medical marijuana facilities and liquor stores differently than adult-use marijuana establishments has a rational basis and therefore constitutional.” 

  • CBD retailers are specifically not considered medical marijuana retailers and are thus non-essential. 

Michigan 

  • In an Advisory Bulletin, Michigan’s Marijuana Regulatory Agency (MRA) stated that medical marijuana and adult-use marijuana establishments are permitted to engage in regulated activities in accordance with the license(s) held by each establishment, exempting them from the order prohibiting all businesses and operations from requiring workers to leave their homes unless necessary to sustain or protect life or to conduct minimum basic operations. 

  • Pursuant to the order, in-person transactions are prohibited, and licensed dispensaries may only sell via curbside service or delivery. Marijuana businesses are also expected to implement social distancing requirements, such as calling in only the minimum number of employees necessary to keep the business operating. 

Oregon

  • Although Governor Brown’s executive order exempts businesses offering medical or pharmaceutical services, Oregon has not specifically classified marijuana dispensaries as such. 

  • Oregon has nonetheless issued a temporary rule permitting curbside delivery of marijuana in order to encourage social distancing. The rule also increases the maximum amount of marijuana that cardholders and caregivers can purchase (up to 24 ounces per day and 32 ounces per month). Oregon has taken pains to emphasize that it may abolish the temporary rule for the whole industry if it is abused by dispensaries. 

Nevada 

  • Nevada has closed all non-essential businesses, but has stopped short of issuing a formal stay-at-home order. Nevada’s mandate does not allow marijuana storefronts to remain open, nor does it allow for curbside distribution. However, dispensaries may continue to operate via delivery. 

Vermont

  • Similar to Massachusetts, the Vermont order deems medical marijuana only as an essential service. Medical marijuana will remain available, but adult-use marijuana will not.

Washington

  • While not specifically within the order, the appendix of Washington’s stay-at-home order designates marijuana retailers and workers as “essential.” Both medical and adult-use marijuana retailers may remain open, and they are permitted to sell through curbside pickups.

In summary, it is important for the cannabis industry to take additional steps now in order to mitigate their risk of suffering negative impacts from the coronavirus. For more information about recommended steps, please contact your Foley relationship partner. For additional web-based resources available to assist you in monitoring the spread of the coronavirus on a global basis, you may wish to visit the CDC and the World Health Organization

Foley has created a multi-disciplinary and multi-jurisdictional team, which has prepared a wealth of topical client resources and is prepared to help our clients meet the legal and business challenges that the coronavirus outbreak is creating for stakeholders across a range of industries. Click here for Foley’s Coronavirus Resource Center to stay apprised of relevant developments, insights and resources to support your business during this challenging time. To receive this content directly in your inbox, click here and submit the form.

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1 Under existing regulations, which will be kept in place once the CARES Act goes into effect, businesses “engaged in any illegal activity” are generally ineligible to receive Small Business Administration loans.  13 C.F.R. § 120.110(h).  This remains the case even in the case of disaster-related economic relief.  13 C.F.R. § 123.201(d); 13 C.F.R. § 123.301.

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