New Settlement Policies? The OLCC Moves to Revoke Marijuana Wholesaler License

A violation of the Oregon Liquor Control Commission (“OLCC”) recreational marijuana rules can land you in hot water. I’ve previously written about rule violations and the administrative process, including settlements. It’s been our experience that the OLCC is open to settlement agreements for licensees who violate rules, and we regularly help settle these cases. Some are easier than others.

Settlement agreements generally save time and money related to administrative litigation costs for both licensee and the OLCC. Based on our review of the OLCC News Releases, the OLCC has approved settlement agreements with approximately 20 licensees and had never rejected a settlement agreement proposed by its staff. That all changed last week.

The OLCC alleges Black Market Distribution LLC (“Black Market”) violated 10 OLCC rules. On August 23, 2016, the OLCC was presented with a settlement agreement that would have allowed Black Market to pay a $16,335 civil penalty or serve a 99 day license suspension. The OLCC rejected the proposed settlement agreement because it determined the violations were egregious enough that a suspension or fine would not result in the licensee taking the necessary corrective action to come into compliance. Black Market will not automatically lose its license but instead will now proceed to an administrative hearing to fight to keep its license.

How does this compare to past settlement agreements? Here are the three most relevant examples:

• Queen Bee Distribution was able to reach a settlement agreement with the OLCC after it was charged with 12 violations. Queen Bee Distribution’s violations included exporting marijuana out of state and had a large quantity of marijuana go missing under suspicious circumstances. Queen Bee Distribution surrendered its license only after transferring ownership of the business. Meaning, while Queen Bee Distribution no longer has a license it was allowed to transfer its business to another party.
• CBD Oil agreed to let its processor license expire and accepted a Letter of Reprimand for four violations. CBD Oil violations included transferring marijuana other than as allowed by its license including to non-licensed retailers.
• Medigreen Collective agreed to surrender its retail license upon the transfer of ownership after suffering three Category I violations in three years.

What do these settlement agreements tell us? In the past, for egregious violations, the OLCC had agreed to settlements that resulted in license forfeiture in some form. In the Black Market case, maybe the OLCC is or was looking for license forfeiture given the number of violations Black Market is accused of. Alternatively, the OLCC may be shifting to stricter enforcement of its rules.

In the August 23, 2018 News Release, the OLCC made it clear that the agency expects licensee to be compliant and law-abiding and intends to strengthen its action against rule breakers. Only time will tell if the OLCC intends to move away from settlement agreements with licensees. In the meantime, the best way to avoid a civil penalty, suspension, or license revocation is to ensure you and all of your employees are compliant with all the OLCC rules. Because there are so many rules, and because those rules continue to evolve, that can be a tall order. If you are unsure about anything, one of our many talented Oregon cannabis attorneys can assist with compliance questions. And if you find yourself in the OLCC’s cross-hairs, we may be able to help with that too.