Oregon Cannabis Litigation: OLCC Looking for Willing Partners

Last Thursday, in one of the few (to our knowledge) contested cases heard by the OLCC concerning cannabis, the OLCC accepted unanimously the findings of a state Administrative Law Judge (ALJ) and denied an application for a recreational marijuana producer license. You can read the press release here.

The decision merits comment as a case study in how the administrative hearing process works and how long it takes. Earth People’s Garden, LLC, applied for a recreational marijuana producer license in May 2016. In February 2018, the applicant – through a consultant it had hired – submitted documents stating that its sole member, Mr. Shirley, had completed the tests required to obtain a Marijuana Worker’s Permit and to demonstrate proficiency with Metrc, Oregon’s Cannabis Tracking System. But several inconsistencies caused the OLCC to question whether Mr. Shirley had in fact taken these tests. After a thorough investigation, the OCC issued a notice of proposed license denial in May 2018. Mr. Shirley requested administrative review and the ALJ received evidence and testimony in October 2018. The record closed at the end of November 2018 after the parties provided the ALJ the required post-hearing submissions and the ALJ issued a proposed order in early January 2019. Mr. Shirley took exceptions to the proposed order and on March 21, 2019, the OLCC heard oral argument.

So roughly 10 months’ passed from initial notice to final order. Is that the average time? Much faster? Much slower? It’s hard to say based on the sample size. Although much of the timing of the administrative process is governed by set rules and regulations, other aspects depend on the ALJ’s caseload. On this point it is worth noting that the Office of Administrative Hearings typically holds over 30,000 hearings a year via its 65 professional ALJs.

The final order adopted by the OLCC reveals the thoroughness of the OLCC’s investigation and its preparation for the hearing. (Note: the order is not available online; email me if you want a copy.) Here, the lead investigator—after noticing the discrepancies in the test certification process and contacting Mr. Shirley—requested assistance from an OLCC Permit Specialist who reviewed Mr. Shirley’s account including dates/times when it was accessed and what account changes were made (e.g. correcting the misspelling of Mr. Shirley’s last name). The lead investigator also worked with the Metrc Support Desk Manager to review computer records related to the testing, including the IP address of the computer from which the test was taken. The IP address was then geolocated using publicly available tools which revealed that the test was not taken from a computer in Cave Junction, Oregon, as Mr. Shirley had said he had done, but from a computer in the Medford-Talent area of Oregon. The lead investigator then worked with an OLCC Network Administrator to ensure the accuracy of the geolocation. These and other investigatory findings caused the OLCC investigator to conclude that Mr. Shirley’s consultant (not Mr. Shirley) had taken the tests. (A fact Mr. Shirley later admitted at the hearing.)

oregon cannabis litigation olcc
OLCC wants to dance with you. Usually that’s good.

Clearly the OLCC takes very seriously any potential misrepresentations made to it at any point. Several Commissioners reinforced this theme at oral argument, explaining that it is incumbent upon applicants and licensees to be truthful and transparent with the OLCC. A second theme of the oral argument was that the OLCC does not take lightly a ruling that may deny a person the ability to engage in the livelihood of their choice (i.e. the cannabis industry). Several Commissioners described this as a “tough case,” but their concerns about the applicant’s candor to the OLCC and the possibility that someone could have entered the recreational market without proper seed-to-sale training outweighed any misgivings about denying the application.

The takeaway is that the OLCC is looking for willing partners in the cannabis industry and does not look kindly on attempts to skirt or bypass rules that it views as essential to maintaining the integrity of Oregon’s cannabis industry and to ensuring that Oregon remains a leader in the recreational cannabis industry.

To read more on OLCC policies and enforcement, check out the following: