Cannabis Company Alleges Government Overreach in Interstate Transport Lawsuit

Cannabis Law Group — Sun, 17 Apr 2022 19:28:20 GMT

A cannabis money transport firm is suing the federal government in California Court over a civil forfeiture of cash by law enforcement officers in Kansas and California, who were working in conjunction with the U.S. Drug Enforcement Administration. As our Los Angeles cannabis company lawyers recognize, the case underscores the unique risked undertaken by those in the legal cannabis industry who are largely cut off from traditional banking resources, thanks to federal marijuana prohibition laws.

The case is Empyreal Enterprises LLC v. United States, filed in January in the Central District Court of California.

Plaintiff is actually a Pennsylvania-based firm that offers cash collection and transport services to state-licensed medical cannabis businesses across the country. The company alleges that police and DEA agents in Kansas seized more than $165,000 in cash proceeds from a vehicle in Empryeal – money that belonged to a completely state-legal cannabis dispensary in Missouri that was being transported to another state.

Specifically, the plaintiff alleges numerous counts of something called ultra vires, which is legal jargon for actions that a government agency takes that go beyond its lawful authority. They further allege due process violations and violations of Fourth Amendment rights. The company is looking specifically to block the government from carrying out these stops, searches, and seizures from its property or possessions, which it alleges are not constitutional. An requested emergency order for that last was shot down by a U.S. District Court judge in January, but the case is still proceeding. Whether we’ll have a final decision on the matter this year remains to be seen, but it’s a case that will be worth watching as it progresses through the courts.

Why is the case proceeding in California, though? Because since May 2021, the company’s vehicles have been stopped/search by law enforcement agencies five times, three of those in San Bernardino County, California. None of the stops led to an arrest or even a traffic citation, yet officers seized over $ 1million in deposits. Each time county sheriff law enforcement officers seized the money, they were turned over to federal agents as part of forfeiture procedures. If the forfeiture process is successful, 80 percent will get returned to the county sheriff’s agencies.

The civil forfeitures that took place in California are especially questionable because cannabis sales are fully legal in our state for medicinal and recreational purposes. But even so, many banks and even armored car companies have been reticent to wade into the legal cannabis industry because the legality remained uncertain. Scenarios like this were seen as a very real – and concerning – prospect. But cannabis companies, meanwhile, have been targets because they deal with significant amounts of cash-only transactions.

California lawmakers did pass a law indicating it was legal for armored car companies to work with state-licensed cannabis firms to transport deposits into financial institutions. By working with federal law enforcement agencies, though, it seems local and state officers had found a loophole through the federal equitable sharing program. However, Congress also prohibits federal law enforcement agents from using funds to interfere with state-legal medical cannabis companies. (Most of the plaintiff’s clients in this case were medical cannabis companies.) It’s for this reason that Empyreal is alleging both federal and local law enforcement officers are acting outside of their authority, their actions being clearly profit-motivated.

This sort of improper incentive is further proof that civil forfeiture actions should be much more carefully scrutinized, if not entirely abolished. It’s a case we’ll be watching closely.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Empyreal Enterprises, LLC v. The United States of America et al, Jan. 14, 2022, U.S. District Court for the Central District of California

Federal Aid for Cannabis COVID-19 Woes?

Cannabis Law Group — Sat, 25 Apr 2020 15:24:02 GMT

California’s cannabis industry is considered essential, but it’s struggling in the wake of the COVID-19 pandemic. It was already grappling with high taxes, soaring compliance costs and fierce competition from the black market.

Now, as our L.A. cannabis business lawyers can explain, companies are slated to receive a number of state benefits, and perhaps even federal aid in order to ensure their survival.

Marijuana Business Daily reports the state is planning to offer a number of extensions, relief and deferrals that should allow many pot shops, manufacturers and growers to keep operations chugging along and also meeting payroll. Many are hoping that this could ultimately lead to substantial, longer-term regulation – especially where taxes are concerned.

California Cannabis Tax Relief Measures

Among the relief issued by state tax agencies since early March:

State tax return filings and payments less than $1 million have been extended until the end of July.
Some tax interest and penalties will be forgive.
There will be a two-month extension for filing annual reports, audits and refund claims and an additional two months to pay installment payments and annual fees.
Tax appeals have been extended until the end of July.
Sales and use taxes of up to $50,000 for businesses making less than $5 million in annual taxable sales has been deferred for a full year.
The deadline for quarter taxes of businesses earning less than $1 million a year has been extended until the end of July.

For some entrepreneurs, this relief – which can amount to hundreds of thousands of dollars – is saving their businesses from going under. It’s even allowing some cannabis companies to invest in expansion, hiring and compliance.

It is a good idea to discuss these kinds of business plans with an experienced California marijuana business lawyer because such action will need to be strategic, particularly if the economy continues to fall or is slow to recover. If more Californians lose their jobs, it could result in prolonged revenue declines. With the black market factor still looming, it would make a lot of sense for the state to offer extended tax relief if they want to help the cannabis market from going under.

Federal Aid for Cannabis Companies Floated

More potential relief could come from the U.S. government – something that would be an unprecedented acknowledgement of the cannabis industry’s legitimacy from a system that still categorizes the plant and its derivatives as a dangerous, addictive Schedule I narcotic.

Legislation has been proposed by U.S. House Reps. Earl Blumenauer (D-OR) and Ed Perlmutter (D-CO) that would extend eligibility of the Economic Injury Disaster Loans, the Paycheck Protection Program and other emergency advances to cannabis companies.

Marijuana shops have been conferred essential business status, which has kept them in operation for both medical and recreational sales. But despite the state tax relief, they haven’t been able to apply for aid or loans through the federal government’s programs even if they otherwise meet the requirements. That includes payroll protection.

As Perlmutter explained, cannabis companies are substantial local economic contributors throughout the country, and there is no legitimate reason they shouldn’t be extended the same relief as other businesses.

The bill has been titled the Emergency Cannabis Small Business Health and Safety Act.

For more information on how our L.A. cannabis lawyers can help you with business plans and aid applications, contact us for a free, initial consultation.