Marijuana Business Magazine November December 2018

COLUMN: HEMP NOTEBOOK L awyer up. It might be the best way to survive in the hemp industry. Hemp is making strides faster than activists dreamed even a couple of years ago. Farmers are planting thousands of acres. Processors are adding ware- house space to accommodate ever- increasing orders for CBD extracts. Retailers are popping up so quickly that poor hemp reporters (like me!) have a hard time formulating even a rough guess how many places are selling hemp products. Even the U.S. Drug Enforcement Administration, a longtime foe of legal cannabis, recently moved certain CBD formulations to the least-restrictive class of controlled substances, the agency’s first-ever acknowledgement that the cannabis plant has medical value. But there’s a darker side to this go-go industry. Lawsuits and legal disputes are popping up just as quickly as product announcements and merger deals. The disputes vary, but one common thread stands out: Hemp entrepre- neurs are trying to get rich without retaining legal counsel. It makes sense. For decades, the hemp industry was so small that busi- ness owners all knew one another. When a new business opportunity emerged, the sizzle could be easily separated from the steak by asking around about the person behind the new venture. But hemp is too big for that now. And the industry is being held back by legal disputes that could have been avoided by having a smart lawyer look over the deals. Consider: • A Vermont landowner hoped to save a family farm by allowing an entrepreneur to grow hemp on her land. When the landowner didn’t see the profits she wanted, she sued, while admitting she had nothing in writing to back up what she says she was promised. • A California marijuana company contracted with a Colorado firm to produce 600 acres of CBD-rich hemp. The California business said it found out later that the Colorado company “had no idea what it was doing and had never planted industrial hemp intended for CBD production,” according to its lawsuit. • A California plant breeder claimed to have developed a non-cannabis source of CBD, then entered a distribution agreement with a large CBD company. The relationship soured within weeks, with no roll- out of the tantalizing product. The list goes on, with new lawsuits hitting hemp industry players seem- ingly every week. Each new lawsuit is greeted on social media by longtime hemp activists bemoaning a lack of integrity among Johnny-come-lately hemp entrepreneurs. Certainly, some bad apples might be attracted to a lightly regulated market with abundant profit poten- tial. Anybody can create a company and reasonably claim to be a premier operator in the hemp space. But many of these disputes strike me as growing pains that could have been avoided with some due diligence from a lawyer. There’s an entire branch of govern- ment devoted to resolving disputes and punishing liars and cheats: the judiciary. The courts are one of hemp’s biggest advantages over the marijuana space, where entrepreneurs can’t always count on having their day in court when disputes arise over intel- lectual property or busted business agreements. As long as a hemp com- pany complies with state and federal law, it has full access to judicial relief. So, it’s shocking how often hemp companies don’t lawyer up before striking business deals. It’s a growing pain that could, in many cases, be pre- vented by retaining a smart business lawyer to negotiate a deal. I’m no lawyer myself, and I’m not getting any kickback to suggest your hemp company should hire one – I promise! But hemp is a multimillion-dollar industry. I have no doubt the industry could be even bigger with the inclu- sion of more lawyers to help hemp grow. Lawyers don’t just help your company in court. They also can help keep you out of it, so you can concen- trate on becoming the hemp magnate you were meant to be. ◆ Kristen Nichols covers hemp for Marijuana Business Magazine. Reach her at Here Comes The Judge Why your growing hemp business needs legal counsel before disputes arise By Kristen Nichols Kristen Nichols 36 • Marijuana Business Magazine • November/December 2018