Oregon Cannabis: New Rules, Part 4 – Repeat Violators Beware!

19 Jan Oregon Cannabis: New Rules, Part 4 – Repeat Violators Beware!

This post continues our discussion of recent changes by the Oregon Liquor & Cannabis Commission (“OLCC”) to the rules and regulations governing marijuana in the State of Oregon. You can find our earlier articles here, here, here, and here. This post focuses on a new type of rule violation that addresses how cannabis licensees manage and operate their business called “history of a lack of institutional control.”

New rule: violation for a history of lack of institutional control

The OLCC places violations of rules in four categories with each having a different presumptive sanction / penalty. See Oregon Cannabis: What to Do If You Receive an OLCC Notice of Proposed License Cancellation or Other “Charging Document”. A Category I rule violation is the most serious as the presumptive penalty is license cancellation.

Among the many rule changes is the inclusion of a new type of Category I violation for “History of Lack of Institutional Control.” The new rule will be codified at OAR 845-025-8550, the full text of which is available here.

This new rule gives the OLCC authority to cancel, suspend, restrict or require mandatory training for any license and to impose a civil penalty if the OLCC “finds” or “has reasonable grounds to believe” there is a “history of lack of institutional control” involving the licensees operation of its business. Let’s unpack these terms.

The “reasonable grounds to believe” standard is bad for licensees

One unfortunate aspect or the rule is the “reasonable grounds to believe” language, as opposed to “finds.” The term “finds” has a fairly established meaning in the law and corresponds easily to settled evidentiary standards. In civil cases, for example, that standard is preponderance of the evidence. In plainer English, preponderance just means more likely than not. For example: for a jury to find a breach of contract, the jury must find it more likely than not that a contract exists, was breached, and the breached caused damages.

The “reasonable grounds to believe” language is what many lawyers would call “squishy.” That is because what that language means in terms of the OLCC having to prove its case is less than clear. In the administrative law context, which is where licensees accused of violating a rule must defend OLCC accusations, this kind of language strongly favors the OLCC and represents a broad claim of enforcement power.

The OLCC is saying to licensees, in effect: “look, we don’t actually have to find (prove) you have a history of lack of institutional control, we just have a to have a ‘reasonable ground to believe’ there is such a history.” As an attorney who regularly represents license holders in administrative proceedings, I am not fond of this kind of standard. It makes it too easy on the OLCC to impose its will on licensees.  Indeed, the the OLCC does not define anywhere exactly what it means to “reasonably believe” there is a violation … as opposed to actually finding a violation of the rule.

History of a lack of institutional control

Obviously a critical component of the new rule is the definition of a “history of a lack of institutional control. Unlike the “reasonable grounds to believe” language, here at least the OLCC provided a detailed definition:

(2) A history of lack of institutional control:

(a) Means violations of Commission statutes or rules have been observed at the premises and the licensee failed to show adequate compliance measures, education of employees, agents, or licensee representatives on those compliance measures, and prompt action upon learning of deficiencies in compliance measures; and

(b) Is based on the nature, number and circumstances of the incidents, and can include incidents at the licensed premises that were not themselves the subject of violation charges.

(3) Behavior that is grounds for a sanction includes but is not limited to noncompliance with requirements relating to license privileges, security, tracking, testing, transportation, packaging and labeling, as well as prohibited and dishonest conduct.

Frequent / repeat rule violators beware

This new rule violation may be thought of as the OLCC seeking to clamp down on repeat offenders in cases where the past violations themselves have not led to cancellation. In other words, licensees who have compliance problems over and over, but no set of those violations was serious enough to warrant cancellation.

One positive aspect of the new rule is that the OLCC may require a compliance plan in lieu of issuance a notice to cancel or suspend a license. This coincides with recent changes toward a “fix it or ticket” approach to enforcement. Another positive aspect is that the rule expressly states a licensee may mitigate the history by showing the problems are not serious or persistent, and by demonstrating a willingness to fix the problems. So licensees should have at least one opportunity to fix problems before the OLCC seeks cancellation for a history of a lack of institutional control.

It will be interesting to see how and when the OLCC decides to flex this new authority. Perhaps it means the OLCC will take a closer look at marijuana businesses that some view as able to avoid meaningful sanction because they are essentially “too big to fail.”

For previous posts in this series, check out the following: