Tag Archives: david kotler

Florida Medical Cannabis Market Growth Stymied By Red Tape

By Aaron G. Biros
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The demand for medical cannabis in Florida might be growing steadily, with patient numbers soaring, but that doesn’t mean the market will grow accordingly. Due to hampering regulations and a lack of state guidance, the industry in Florida is tiny and patients have limited options for medical cannabis products.

A little more than three years ago, Governor Rick Scott signed a bill into law, legalizing medical cannabis, but only for terminally ill patients and only for one strain, Charlotte’s Web. That stipulated a low-THC, concentrated oil form of cannabis. That bill also set up the licensing framework for what is now an extremely limited market.

Florida Gov. Rick Scott has been accused of making the licensing process secretive Photo: Gage Skidmore, Flickr

In November of 2015, the Office of Compassionate Use, now called the Office of Medical Marijuana, issued licenses for five dispensaries. To get a license, applicants needed to meet a variety of absurd requirements. That included being a nursery in business for thirty years, growing a minimum of 400,000 plants at the time of applying, paying $300,000 in fees and a $5 million performance bond.

Fast forward to Election Day last year when voters passed Amendment 2 by a wide margin, amending the state’s constitution and legalizing medical cannabis for a broader scope of qualifying conditions. What hasn’t changed, however, is the old vertical licensing framework. Critics have dubbed this a “pay-to-play” market, with massive barriers to entry prohibiting small businesses from gaining market access.

David C. Kotler, Esq.

David Kotler, Esq., attorney and partner at CohenKotler P.A., says we shouldn’t expect to see a viable market for years as a result of all this red tape. “Honestly the State of Florida, with their limited licenses and odd requirements to qualify for licensure have stunted what could be a good market both for businesses and patients,” says Kotler. “It has been an inefficient roll-out and is truly an embarrassment for the state, legislature and the Department of Health.” Kotler says he’s heard reports of extremely limited product selection, poor quality, as well as no dried flower being offered.

But the patients are pouring in by the thousands- on July 27th, the Office of Medical Marijuana reported 26,968 registered medical patients, with more than 10,000 patients signing up since June 7th. “Despite my belief that it would be a slow roll out, it appears the patient count is picking up,” says Kotler. “The elimination of the 90-day doctor-patient relationship will certainly help this.” He is referring to the reversal of a waiting period policy, where patients had to wait 90 days before receiving a medical cannabis certification. “But there still seems to be a backup with issuance of cards and poor guidance from the Department of Health leaving many doctors unsure of what they should be doing,” says Kotler. The rules and guidelines for physicians participating in the program are still not established, but the Florida Board of Medicine expects to vote on them this week, reports say.

Matt Karnes, founder and managing partner of GreenWave Advisors

With seven licensees right now and a total of ten licensees by October allowed to grow and distribute cannabis products, the question remains if that is enough to satisfy the growing number of patients. According to Matt Karnes, founder and managing partner of GreenWave Advisors, the state is adjusting by adding more licensees and allowing them to operate more dispensaries, potentially trying to sate that demand. “Both of these amendments will likely serve as a catalyst for revenue growth but could be tempered by a lack of physician participation (as we have seen in other states) in the medical marijuana program,” says Karnes. “For every incremental 100,000 patients who register in the Medical Marijuana program, four more licenses will be issued and existing licensees will be allowed to open another four dispensaries (current cap is 25). We do not expect an incremental 100,000 patients until sometime in 2021.” His firm’s market projections account for those increases and edibles now being sold, but still no dry flower allowed. They project total sales figures in the state to reach $712 million by 2021.

Those figures are contingent on the increase in registered patients and more licensees. If Florida’s vertical licensing model remains, it’s quite possible the state will see a cannabis shortage, much like Nevada during their opening month of adult use sales. “Instead of learning from so many states before it, Florida forged a path down the rabbit hole that may limit Florida’s potential until either a legislative change or a backlash at the polls in the form of an amendment bringing forth adult use,” says Kotler. In New York, that vertical licensing model arguably created a monopoly, with only a select few businesses controlling the entire market. That doesn’t foster market growth; it hurts quality, keeps prices high and prevents real competition. “We see how that worked out for New York,” says Kotler. “We cling to that despite what could be a large patient base with the potential to service tourists who wish to have reciprocity.”

Florida’s market could be a powerhouse for the state, with the potential to generate millions in tax revenue, create thousands of jobs and actually help patients get the medicine they need. But until the state ditches their conservative, closed-door approach, we won’t see the industry truly flourish. .

Marijuana Matters

Time to Litigate: The Defense That Helps the Client but Hurts the Industry

By David C. Kotler, Esq.
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From time to time, lawyers that service the cannabis industry find themselves representing a client with a litigation matter. By anecdotal evidence, it appears that there is an up-tick in cannabis related litigation over the past year and a half, mostly in circumstances where respective promises made have not been lived up to or those who have invested money are seeking its return. Perhaps a partnership formed within the last few years is simply becoming unraveled.

In the world of litigation, we see defenses, or what are known as affirmative defenses, may be filed in response to a particular lawsuit or claim. One such affirmative defense often utilized in litigation is that a particular contract or agreement may be void based on illegality or void as against public policy.

In fact, this particular grounds for dismissal was at issue in a case in Maricopa County, Arizona wherein a judge in April of 2011 dismissed a lawsuit seeking enforcement of a loan agreement where two Arizona business people loaned $250,000.00 each to a Colorado-based medical marijuana dispensary. The agreement in that case specifically stated that the loan was for “a retail medical marijuana sales and growth center.” Colorado had the foresight in 2013 to legislate against this type of defense when their general assembly passed a law indicating “a contract is not void or voidable as against public policy if it pertains to lawful activities authorized by” Colorado’s constitutional and statutory cannabis law.

The issue becomes germane in emerging states wherein the legislatures and courts have not been dealing with cannabis related matters for any length of time. This is particularly true and ripe for problems in states such as Illinois and Massachusetts that have recently moved forward with cannabis programs and experienced an influx of out of state consultants and companies looking to partner with and work with local residents for licensure purposes. In Florida alone, there have been at least three lawsuits in the past year dealing with cannabis related civil disputes.

To my knowledge, none of those disputes were defended upon, nor did the court address, the legality of the underlying subject matter. However, the question arises whether the lawyer’s obligation to their client necessitates raising this as a defense, for instance, to an action for non-payment of a promissory note for a loan to fund cannabis related business. If the lawyer practices and seeks clients in the industry and hopes to move the industry forward in a positive manner, is it incumbent upon the lawyer to assist the client by making the best legal argument or protect the industry and greater good? As an aside, the answer is to zealously represent the client. Potentially, an adverse ruling in a particular jurisdiction could ultimately affect enforceability of cannabis related agreements in that jurisdiction. It is possible that having a court ruling, even if it is a trial level court within the jurisdiction, at least provides some precedent and a basis for the industry moving forward in that particular jurisdiction. If the ruling is unfavorable like the Arizona precedent mentioned earlier, perhaps planning for jurisdiction and venue to be in more favorable environs is key to document drafting on the front end. For investors, knowing the enforceability of their agreements in a particular jurisdiction could mean the difference between investing in a venture in a particular state or not.

Ultimately, I believe that as advocates, we must do whatever is in our power to protect the client even if it means testing the legal bounds by making an argument that at first blush may hurt the industry. However, having courts develop precedent by which the industry can govern itself in business dealings is important and takes away uncertainty, which in turn allows for good decision-making on the front end. Hopefully, in the near future this will be moot as the federal government moves forward to take actions that provide more certainty and uniformity in dealings within the cannabis space.