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Loans and Financing for Cannabis Businesses: Everything You Need to Know about the SAFE Banking Act

Published on: April 15, 2019 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Despite the rapid growth of the cannabis industry, banks have been reluctant to provide financial services to cannabis-related businesses. Banks and other financial institutions fear that providing financial services to those in the cannabis industry could violate federal criminal laws and financial regulations such as “The Bank Secrecy Act” (“BSA”) and the “Money Laundering Control Act” codified under both sections 1956 and 1957 of title 18, of the United States Code.

In an attempt to create protections for banks that wish to provide financial services to cannabis-related legitimate businesses and service providers, the U.S. House of Representatives has each year since 2013 introduced the “Secure and Fair Enforcement Banking Act” (or “SAFE Banking Act”). With a change of control of the U.S. Senate in 2021, this may be the year that the SAFE Banking Act is finally enacted into law.

The SAFE Banking Act would provide a “safe harbor” for banks that provide financial services to legitimate cannabis-related businesses, specifically: (1) prohibiting federal banking regulators from terminating or limiting deposit insurance of the bank; (2) prohibiting or discouraging banks from providing financial services to such a business; (3) recommending, incentivizing, or encouraging a bank to not offer financial services to such a business; or (4) taking adverse or corrective supervisory action on a loan made to a person solely because the person owns such a business or owns real estate or equipment leased or sold to such a business.

Murphy Administration Strikes Deal Concerning Proposed Legislation to Legalize Adult-Use Marijuana in New Jersey

Published on: March 22, 2019 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

UPDATE: “The much-anticipated vote, tentatively scheduled for Monday afternoon in both the General Assembly and the state Senate, was called off when it became clear there were not enough votes in the Senate to pass it.” Read full coverage at ROI-NJ.com

Governor Phil Murphy, Senate President Steve Sweeney, Assembly Speaker Craig Coughlin, Senator Scutari, and Assemblywoman Quijano announced last week that they have reached an agreement concerning the legislation to legalize adult-use marijuana in New Jersey.

While the proposed legislation will likely be released in the coming days, this is what we know so far based on pending Senate Bill S2703.

Is CBD Legal in New Jersey? – The ABC’s of CBD

Published on: February 14, 2019 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Marijuana comes from plants that have hundreds of chemicals known as cannabinoids. The two most notable cannabinoids are the psychoactive Tetrahydrocannabinol (“THC”) and the non-psychoactive Cannabidiol (“CBD”). Hemp, while also derived from the cannabis family, has virtually no THC present thereby causing no psychoactive effect.

The Controlled Substances Act (“CSA”) is the statute under federal law regulating drug policies in the United States. It regulates everything from the manufacturing, possession, use and distribution of certain substances. Under the CSA, Marijuana is considered a Schedule I controlled substance while CBD is considered a Schedule V controlled substance, the least restrictive under the Act. Hemp is no longer treated as a controlled substance pursuant to the Agricultural Improvement Act of 2018 (“Farm Bill”).

Given the extremely small level of THC present in CBD, many people have been asking: is CBD legal in New Jersey? While this is arguably unchartered territory for New Jersey, both the New Jersey State Assembly Bill 1330 and Farm Bill offer some guidance.

Recreational Marijuana Bill Stalls, But Employers Should Nevertheless Brace For Its Passage

Published on: December 17, 2018 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

On November 26, 2018 a Joint Committee of New Jersey lawmakers advanced a bill that would legalize recreational marijuana use in the state. Although the bill had widespread support, including from Gov. Murphy, disagreements among Senate Democrats over the percentage of state taxes on marijuana stymied the vote on the bill that was expected in mid-December. Predictions that the bill will be re-introduced and voted upon early this year may be overly optimistic given other pressing issues pending in Trenton. If the bill is ultimately passed, New Jersey will join 10 other states that have legalized recreational marijuana.

When reintroduced, it is not expected that there will be any changes to the bill’s provisions addressing marijuana in the workplace. A single paragraph of the prior version of the sweeping legislation specifically addresses recreational use and the workplace, and simply provides that nothing in the bill requires an employer

to require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growing of marijuana items in the workplace or to affect the ability of employers to have policies prohibiting marijuana use or intoxication by employees during work hours. No employer shall refuse to hire or employ any person or shall discharge from employment or take any adverse action against any employee with respect to compensation, terms, conditions, or other privileges of employment because that person does or does not smoke or use marijuana items, unless the employer has a rational basis for doing so which is reasonably related to the employment, including the responsibilities of the employee or prospective employee.

Transferring a Liquor License in New Jersey – “33” License

Published on: March 19, 2018 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Liquor licenses are state-issued licenses that enable your business to legally sell alcohol. The laws around liquor licenses vary by state and New Jersey has some of the most restrictive liquor license laws in the nation (along with being some of the most expensive). In New Jersey, the Division of Alcoholic Beverage Control (“ABC”) regulates the sale of alcoholic beverages and the conduct of licensees through the issuance of licenses. There are three types of licenses: manufacturing, wholesale and retail. The subject of this article is a “33 License” or a Plenary Retail Consumption license (i.e. the license you need for a restaurant or similar.)

New Jersey law grants individual municipalities substantial discretion in passing ordinances regulating the sale and consumption of alcoholic beverages within their limits. The number of 33 Licenses available is determined by a municipality’s population, and may be further limited by the town’s governing body. As a result, the availability of alcohol and regulations governing it vary significantly from town to town. Retail licenses tend to be difficult to obtain. The market is in high demands and because of this 33 Licenses are subject to exorbitant prices if and when they become available. License holders (“licensees”) resell their license on the private market — subject to limitation. A license may only be used within the municipality that issued it originally. Moreover, any sale must be approved by the issuing authority. Here is how to get a liquor license broken down into four steps.

Find the license, for sale on the private market. You will have to enter into a Purchase and Sale Agreement contingent upon successful application to the municipal ABC Board. You will also want to check to ensure the license is in good standing, has been properly renewed, etc. In order to do this you will want to run lien searches, request documentation of renewals, etc.

Thinking About Getting Re-Married? You Might Want To Roll Over What’s In Your 401(k)

Published on: March 5, 2018 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Nearly all 401(k) plans are governed by the Employment Retirement Act of 1979 (“ERISA”). ERISA regulates pension, health & welfare, and other employee benefits including 401(k) programs.

Under ERISA, if owner of an ERISA-governed 401(k) plan dies, their surviving spouse is automatically entitled to 401(k) benefits at the time death, regardless of who has been named beneficiary. Under § 1055 of ERISA, if the owner of a retirement account is married when he or she dies, his or her spouse is automatically entitled to receive at least fifty percent (50%) of the money, regardless of what the beneficiary designation says. The Supreme Court has explained that § 1055 reflects Congress’s intent to “ensure a stream of income to surviving spouses.”

This right of the surviving spouse is triggered regardless of when the assets were accrued or how long the pair has been married. There is an exception to the general rule. Plans are permitted to include a 1-year marriage rule whereby a surviving spouse must have been married to the plan participant for at least 1 year before they may claim a right to 401(k) assets, but, not all plans have adopted this exception.

New Jersey Assembly Makes Headway on Bill to Eliminate Craft Brewery Tour Requirement

Published on: February 9, 2018 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Good news is a brew for New Jersey craft beer advocates. In February 2018, the New Jersey Assembly’s Agriculture and Natural Resources Committee paved the way for the introduction of Bill A2196, which would remove a current licensing rule requiring breweries and distilleries to provide a tour of their facilities before serving alcoholic beverages to consumers. Currently, breweries holding a New Jersey Limited Brewery License are prohibited from selling their brews at the brewery, unless patrons first complete a tour of the premises. This requirement applies to every customer, regardless of whether it is their first or fifteenth visit to a particular brewery, and failure to issue a tour can result in a hefty fine. If passed, Bill A2196 would be the latest step in a number of recent legislative changes aimed at easing New Jersey’s complex and stringent liquor laws.

New Jersey craft beer production has exploded over the past four years. As of February 2018, the New Jersey Craft Beer Association has identified ninety-eight breweries and brew pubs in the State of New Jersey, as well as twenty-four “startup” breweries in the process of obtaining licensing or permits. The growth of craft breweries in the State is in no small part due to a trend in Trenton towards loosening the State’s strict liquor laws by steadily expanding the rights for breweries with Limited Brewery Licensees.

Prior to 2013, breweries were limited to selling their products to licensed retailers and wholesalers. If a brewery was interested in establishing a tasting room, it would be required to obtain a special permit—issued by a different regulatory agency—that limited service to 4 oz. samples. Then, in December 2013, a noticeable shift in policy took hold when the Limited Brewery License was amended to consolidate these laws and permit the consumption of full-sized beers on the premises. The amendment permitted breweries to sell their brews on site for consumption, but only if such beverages were offered in connection with a brewery or distillery tour.

New Jersey’s Spill Act and Concepts of Equity

Published on: May 9, 2017 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

On March 3, 2017, the Appellate Division of the New Jersey Superior Court upheld a Chancery Court’s determination requiring parties to participate in an investigation of contamination despite the fact that there was no evidence linking any of the parties to the contamination. Matejek v. Watson, et al., Dkt No. A-4683-14T1. In doing so, the appellate court employed principles of equity to expand potential liability under the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:23.11 et seq. (the “Spill Act”). The Matejek decision, which seems inapposite to other Spill Act jurisprudence, greatly expands the reach of the Spill Act and would require parties to expend resources to investigate contamination even when there is no evidence of any nexus to that contamination.

The decision has its genesis in oil contamination discovered in a tributary located in the vicinity of a residential condominium development. The New Jersey Department of Environmental Protection (“NJDEP” or the “Department”) responded to the threat by removing, at state expense, underground storage tanks from each of the adjoining five condominium units. Once the tanks had been removed, the Department determined that there was no further imminent threat to the tributary and terminated further work on the site. However, the Department never closed its administrative file and the site remained on the Department’s active list. Several years later, the owners of one of the condominium units sought to complete the investigation in order to remove what they deemed a cloud on title. They then brought an action against the other four condominium owners to compel them to equally participate in and complete the investigation (and, if necessary, the remediation).

The Chancery Court, after a bench trial, entered judgment requiring the parties to jointly retain a licensed site remediation professional to complete the investigation. The Court held that despite the fact that there was no evidence of the precise source of or responsibility for the contamination, the fact that the Department ordered the removal of all five tanks was enough to require that all of the impacted unit owners share in the steps necessary to further investigate the source of the contamination. More bewildering is the fact that the decision did not discuss or make any findings as to which of these five tanks had leaked or been involved in the discharge. Adjoining unit owners Carlos and Jean Gilmore appealed the Chancery Court’s determination arguing that the Spill Act didn’t require them to participate in a remediation absent evidence that they caused or contributed to the contamination.

A “SEP” in the Right Direction, Part 1

Published on: October 19, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Why in the aftermath of a chemical accident does the government seek enormous cash penalties for accident prevention, when instead they could do more to reap the benefits of improving the environment and the communities surrounding an incident, and at the same time the government could be more proactive in avoiding future environmental problems?

The EPA has provided the ideal vehicle to address the avoidance of environmental harm in the guise of Supplemental Environmental Projects (SEPs). A SEP is an environmentally beneficial project or activity that is not required by law, but that a defendant agrees to undertake as part of the settlement of an enforcement action. A violator may pay a reduced cash penalty amount, but rather than simply writing a big check, they invest the would–be penalty amount in the affected community. The SEP shifts the focus toward a model where the offender works to right the harm caused by their actions. Environmental violators are encouraged to consider SEPs in communities where there are environmental justice (EJ) concerns. EJ is defined as the equitable distribution of environmental risks and benefits. EPA has always been keen to address harms done to communities disproportionally burdened by exposure to pollutants.

After a chemical accident, it makes logical sense to seek to repair the harm done to the community and to obtain measurable benefits ― by seeking to facilitate quicker and more efficient responses associated with emergency events; by seeking to provide technical support to the impacted community; by developing plans to respond to releases associated with emergency events and by working to enhance local coordination with emergency responders. If using a SEP can be viewed as a vehicle designed to make an aggrieved community whole, and if a particular SEP can enable a community to feel better equipped to handle an impending disaster, then why shouldn’t a SEP be the premier mitigation tool in the enforcement arsenal, and the preferred tool to a large cash penalty.

“Pet Trusts”: Providing For Your Pets After Death

Published on: October 12, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

In today’s society, it’s becoming increasingly common for our pets to be treated as part of the family…but what happens to your pet or pets upon your death when you are no longer there to care for them? In the eyes of the law, animals are considered property…so you can’t leave money directly to your pet. On January 19, 2016, the legislature passed the New Jersey Uniform Trust Code (NJUTC), which became effective as of July 17, 2016. As part of the NJUTC revisions, modifications were made to the rules regarding the creation and use of “Pet Trusts.”

Under the new law:

a. A trust may be created to provide for the care of an animal alive during the settlor’s lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor’s lifetime, upon the death of the last surviving animal.