• Gavin Kogan

Cannabis Conflicts 101

With our industry roaring forward into 2016 under the new Medical Marijuana Regulation & Safety Act (the "Safety Act"), there is a literal frenzy of partnerships, licensing relationships, distribution deals and all manner of business relationships being struck throughout the state. I know because I've struck some of those deals, and guided others. 

With lovers, friends and business partners, you are first met with a "best face" and over time - true faces are revealed. Unfortunately, the disappointment arising from such revelations can lead to conflicts. These conflicts aren't just between cannabis operators, they are often between cannabis operators and non-cannabis businesses like landlords or vendors.  

READ THIS: no matter how righteous your position in a dispute - a cannabis operator cannot count on a fair shake in our judicial system at this time in history.

Prohibitionist ideology is absolutely up there among the black birds sitting on the wire watching our "pot" frenzy below - just waiting for a dispute to bubble up to their courts. How fair do you think your fight would be in a court battle with your traditional commercial business? Also, It is well known among attorneys that judges and juries can often punish both sides of a dispute if they don't like either of them. The way that looks is both parties spend in excess of $100,000 each fighting a court battle and in the end the winner is granted $1.00 in damages. 

The point is important for two prime reasons: (1) your business interests could be unjustly crushed because of prejudice at court; and (2), judges often follow decisions made by judges in other courts concerning similar disputes. Put differently, prejudiced courts not only threaten you unfairly, they unfairly threaten our burgeoning industry in its infancy. 

So, my form of advocacy on the subject is to encourage us all to add mediation and arbitration clauses in our business contracts until our culture and its judiciary matures on the subject of cannabis.

A mediation clause in a contract requires the disputing partners to submit the dispute to a professional (usually a retired judge or lawyer) skilled in the art of helping disputing parties come to a settlement between themselves. This professional does not decide who is right or who is wrong; rather, the professional helps the parties negotiate between themselves an agreement that avoids court. Mediation is successful 90% of the time, so it's worth considering. 

A "binding" arbitration clause in a contract requires the disputing partners to submit the dispute to a professional private judge (usually a retired judge or lawyer). In arbitration, the parties elect and privately pay for the professional judge - and in that way, can ensure their judge is not prejudiced against cannabis. The decision of the professional judge becomes a judgement that the courts must then enforce. While courts can exercise their prejudice at that stage, I believe the risk is greatly reduced, at least certainly in terms of influencing other court decisions down the road. 

Mediation and or arbitration are typical contract clauses, and it is quite normal to have one or the other or sometimes both. In our case of cannabis, I suggest both, where the parties agree to first mediate and if that fails, then arbitrate. This is particularly so if one of the parties is a non-cannabis party and has the unfair advantage at mediation to threaten prejudice at court if the mediation negotiations stall.

One last point here for my young community: a contract that addresses dispute resolution does not equate to distrust. I was shocked to once have a sophisticated business person state we probably shouldn't contract in the first place if I felt there was a need to discuss dispute resolution. Obviously I won't say who, but suffice it to say the statement ignores the fact that most relationships, business or other, run into troubled waters at some point and a sound dispute resolution policy can keep the wheels on the deal. 

In my view, given the infancy of our industry, keeping our disputes out of court is paramount. Dispute resolution discussions are probably the best tools to accomplish that goal. If you won't include these discussions for your own safety, at least consider it part of your duty to advocate for the safety from prejudice in our courts.