What if You Break the Rules? Oregon Cannabis Administrative Litigation and Settlement

Back in February, I discussed administrative litigation in Oregon and the types of violations Oregon cannabis businesses can be hit with. But what about settlement? Like in civil litigation, administrative litigation can be settled with the right tools and right team of lawyers on your side.

As a quick refresher, the Oregon Liquor Control Commission (OLCC) is the agency tasked with implementing and enforcing the recreational marijuana rules. The OLCC can and does conduct random inspections of marijuana licensees. These inspections sometimes lead citations for rule violations. These rule violations may then lead to a charging document outlining potential penalties– sometimes several months after the problematic inspection occurred.

A charging document is only the beginning. Depending on the category of the violation(s) assessed, and whether they are grouped together as single violation or listed as separate infractions, the charging document will allow the licensee to either: 1) waive its right for a hearing and pay a reduced fine or serve a reduced suspension, 2) request an administrative hearing, or 3) pay the full fine or serve the full suspension. If the licensee receives a Category I violation, the licensee will only have the option to request a hearing or surrender the license. You can view a table of violations and their categories here.

In order to enter settlement negotiations with the OLCC, you must request an administrative hearing prior to the relevant deadline. After an administrative hearing is requested, the matter will be referred to the OLCC “Administrative Policy and Process Division” and a staff member will be assigned to the case. Typically the staff member will reach out to the licensee (or their representative) but the licensee can also contact the OLCC and find out who is the assigned staff member. The OLCC staff member is the person the licensee will enter into settlement negotiations with.

According to my latest communications with OLCC staff, the agency has standard settlement agreements they enter into for Category II through V violations. Whether the OLCC will agree to a standard settlement is dependent on the number of violations cited and the number of violations the licensee has committed in the last two years. This means the staff member has the power to enter into the settlement agreements without approval from higher-ups. However, the OLCC does not have standard settlements for Category I violations. If a Category I violation is to be settled, it will take a lot of finesse, and ultimately, any Category I settlement must be approved by the OLCC director. We have settled all categories of violations on behalf of licensees.

Once a settlement agreement is reached, it has to be approved by the OLCC Board of Commissioners. The Board meets once a month and the pending settlement agreements are offered to them at the meeting. The Board then votes on the agreement and if approved, the licensee will then have to adhere to the terms of the settlement through either a penalty payment or temporary license suspension.

Administrative settlement is similar to civil litigation settlement. It involves the negotiation of two parties to reach a mutual agreement. One of the key differences with administrative litigation and settlement is that typically, the administrative body–in this case, the OLCC–holds most of the power. This is especially true with Category I violations. The fact that OLCC has leverage does not mean, however, that the OLCC will not enter settlement; it just means some more work and skill is necessary to reach an agreement.

Because an OLCC license is the lifeblood of an Oregon cannabis business, it is always best to adopt a compliance program and avoid alleged violations entirely (and remember– you are on the hook even for unauthorized actions of employees). If you do find yourself on the other side of a charging order, make sure you work with someone familiar with system and OLCC personnel, in order to give yourself the best possible shot at saving your license.