Oregon Cannabis: Recent OLCC Settlement Trends
We regularly represent marijuana businesses that find themselves on the wrong side of an OLCC charging document. The charging document will list the particular rule or rules that the OLCC alleges the licensee has violated and always, in my opinion, lists only the most severe sanctions.
The OLCC sanctions schedule is laid out in tiers. For Category I violations, the default sanction is license cancellation. The default sanctions for lesser violations are lower. For example, the standard sanction for a Category II(b) violation is a 30-day license suspension or a civil penalty of $4,950. The standard sanction for a first-level Category III violation is a 10-day suspension or $1,650 civil penalty. The proposed sanctions cascade when the charging document includes several violations, or when the licensee has been in trouble with the OLCC before.
The first questions a new client usually asks are: Does the OLCC really intend to cancel my license? Is a settlement for something less than cancellation possible? How long can I operate my business before my license is cancelled? The answer to these questions always depends on the facts and circumstances that led to the OLCC issue a charging document.
One way to evaluate settlement prospects is to look at past settlements between the OLCC and a licensee. This also useful when commencing negotiations with the OLCC Case Presenter (which is the title for an OLCC attorney assigned to the handle the administrative proceeding). Settlements are the norm and are negotiated between the OLCC Case Presenter and the licensee or its attorney. The “higher ups” at the OLCC often provide the Case Presenter guidance and review all potential settlements of Category I violations for less than license cancellation. Once terms are reached, the proposed settlement goes before the Commissioners at one of their monthly meetings for approval.
Past settlements are available to the public on the OLCC’s website. Here is brief synopsis of some of those settlements in the past few months:
|General Description of Violation||Category||Settlement|
|A site inspection revealed that the licensee had failed to accurately record harvest information. On two occasions, licensee failed to segregate harvest lots within 45 days of harvest. Licensee also had discrepancies between what was listed in CTS and its physical inventory for one package, and harvested marijuana could not be located on the premises during the inspection.||Category III (2)||Licensee will pay a $2,640.00 civil penalty June 15, 2020|
OR serve a 16-day suspension
|Licensee, who held a producer license, was discovered to have engaged in the transfer of marijuana product between two different producer licensees, which is prohibited under the rules. During the course of the investigation into the transfers, it was discovered that Licensee also had an ODA-registered hemp grow on the same tax lot as the licensed premises, but failed to submit a hemp control plan to the Commission for approval. Licensee subsequently obtained Commission approval for a hemp control plan.||Category I (2)||Licensee will either pay a $4,950.00 civil penalty before 5:00 PM AND serve a 60-day suspension OR pay a $9,900.00 civil penalty AND serve a 30-day license suspension|
|Licensee was improperly growing hemp on the licensed premises, and had hemp products on-site. Licensee had also altered the premises by adding a greenhouse, offices, and a storage container without obtaining approval from the Commission beforehand. Licensee’s prior compliance officer had falsely represented to Licensee that the appropriate forms had been submitted and approved by the Commission. When Licensee discovered the problems, they were rectified soon after.||Category I|
|Licensees will pay a $6,105.00 civil penalty OR serve a 37-day license suspension|
|OLCC Dispatch received a complaint of an explosion at the premises. Investigation revealed that this producer Licensee was processing hemp without either a processor license or a hemp endorsement. The lack of a processor license meant that the processing equipment had not been safety-certified as required as part of the OLCC pre-licensing process. Fortunately there was no report of serious injury.||Category I (2)||License cancellation, though the Licensee was permitted to try and sell the business.|
|Investigations on five of Licensee’s producer premises were initiated subsequent to a Nectar wholesaler improperly transporting a U-Haul truck containing multiple totes of untagged marijuana to one of the producer premises. Violations were found while investigating all five producer licenses, including a violation for entering marijuana items transferred from a Nectar wholesaler as inventory in Licensee’s CTS when it was actually delivered to Licensee’s unlicensed administrative offices. Other violations include camera violations, and/or failing to maintain on premises documentation for pesticides, fertilizers and agricultural chemical used in the production of marijuana.||Category III (3)||Licensee will either pay a $4,950.00 civil penalty OR serve a 30-day suspension|
|This was a minor decoy operation resulting in a sale to a minor of a $3.00 half-gram pre-rolled marijuana joint. The selling budtender relied on a door-checker who checked ID. The selling budtender claimed that she usually re-checks ID but believed the minor was of age. The door-checker made a mistake; there was no evidence of intentional sale.||Category II(b)||Licensee will pay a $3,795.00 civil penalty OR serve a 23- day suspension beginning|
|This worker permittee failed to give the Commission written notice of a felony conviction within 10 days, as required by law. Permittee is in school and relies on this employment, and was given a strong recommendation by his employer.||Category I||Permittee will pay a $750.00 civil penalty OR serve a 30-day suspension|
|This retailer allowed itself to be used by another licensee as part of a scheme to get marijuana out of the METRC Cannabis Tracking System (CTS) so the other licensee could take it to an unapproved trade show. In doing so, this retailer transferred marijuana contrary to its license privileges, and intentionally entered misleading data into CTS. Licensee admits that he erred in relying on the other licensee’s assertion that this conduct was allowable, and now reaches out to OLCC staff when he has questions about licensee requirements.||Category I (2)||Licensee will pay a $10,230.00 civil penalty OR serve a 62-day suspension|
|The Commission issued an immediate suspension based on a Category I charge for operating other than its license permits for conducting open blasting to process marijuana into butane honey oil. In addition to the charge for operating outside license privileges, the subsequent charge letter alleged Category I violations for having hemp on the premises, intentional false statement, and producing marijuana in a location that’s also a residence, as well as Category III violations for failure to tag plants and products with UID tags, and allowing consumption of alcohol and/or marijuana on the premises.||Category I (5)|
Category III (3)
|License cancellation, though the licensee was permitted to try and sell its business.|
These settlements reflect that a Category I violation does not necessarily result in license cancellation. They also indicate that settlement prospects are poor when the OLCC believes a licensee is diverting marijuana into the illegal market, has defrauded its investigators, or that a licensee’s conduct is a threat to the welfare and safety of the public. Although the OLCC is willing to exercise its discretion in the appropriate case, this is determined on a case by case basis and in my experience requires the licensee to martial facts and law in support of a lesser sanction.
Where the OLCC insists on license cancellation, marijuana businesses may sometimes sell their license and/or business to a third party. But the OLCC does not give licensees an open-ended period in which to do so. Licensees who seek to sell their license in the face of a proposed cancellation must act diligently and quickly because the OLCC will set a time limit for the sale and if not complete by certain date, the license simply will be cancelled. In most circumstances, licensees may continue to operate their business during the administrative proceedings. Depending on the caseload at the OLCC, this may mean several months of continued business operations.
If find yourself on the receiving end of charging document you should:
- retain experienced counsel
- obtain the investigative report and other documents
- conduct an internal investigation
- prepare a response within the permitted time frame and
- commence settlement negotiations.
We are here to help.