I am pleased to share with our subscribers an NJ Cannabis Insider Q&A featuring Nishant Reddy, co-founder of the California-based boutique investment firm Satya Capital. CSG supported Satya as they partnered with MedMen on a joint application to operate a medicinal marijuana dispensary in Newark, NJ as part of the New Jersey Department of Health’s July 2018 Request for Applications.

In the Q&A, Nishant touches on his deep roots in New Jersey, Satya Capital’s origins, the partnership with MedMen, the joint venture’s plans for community reinvestment and more.

The full Q&A follows.

Nishant Reddy, Satya Capital

New Jersey Cannabis Insider: How does Satya Capital fit into the mix?

Nishant Reddy: I founded Satya Capital as a way to diversify my business and to 100 percent be able to participate in the cannabis industry. I left my career in private equity and investment banking to pursue the cannabis industry early, in like 2013-2014. I started as an interim COO advising a large dispensary group here in California. From that time, I got involved with development of a cultivation in Oregon and realized to really scale the opportunity — to execute on the vision I had and to be able to bring outside capital into the industry in a way that protected my investors but also allowed me to create a business vehicle that would be successful — I had to spin off and have a vehicle 100 percent dedicated to the pursuit of opportunities within the cannabis industry.

So that led me to form Satya Capital. Satya is actually a Sanskrit word that translates to truth and honesty. From what I had learned in the years prior, that was something I felt was really missing within the cannabis industry, both from a sense of the operators in the industry as well as what was being communicated to people who wanted to participate in the industry or invest in the industry. I wanted Satya to really bridge that gap and create an environment that allowed investors to enter the market and get the level of professionalism they were used to getting in their other investment vehicles, whether private equity or hedge funds … whatever it may be. That leads us to where we are today.

NJCI: How did this partnership with MedMen come about?

NR: Satya Capital has been doing work with MedMen for quite some time in California, so when we were coming into New Jersey, we felt very comfortable from our prior working experience with MedMen. We knew they were a market leader in terms of the retail space. We knew they shared a lot of the same fundamentals we did in terms of social justice, passion for the industry and what we wanted to create. It was kind of a no-brainer that our two companies combined brought a tremendous amount of expertise all the way from cultivation, manufacturing, distribution (and) all the way down to building and operating a retail storefront. We just believed it was an absolute no-brainer, and that we would be able to create something really special.

NJCI: Why Newark?

NR: For me, I am a born and raised New Jerseyan. I really only left the East Coast when I decided to pursue the cannabis industry 100 percent, which was a little over five years ago. I was born in Bridgewater, I grew up in Warren. My mom was a dean and pediatrician at UMDNJ her entire career. She only recently retired this past August; she had a 40 year career there. For me, Newark has been a huge part of my personal upbringing and my family for a very long time. And so for me it was very personal.

For Satya Capital, we place a tremendous importance on social justice. For our California businesses, we really believe in local hiring, investment in alternative industry, things like that. So when we were coming to New Jersey, we wanted to be somewhere where we could have the biggest impact, and we thought Newark was place, combined with my personal connection I had to the city.

NJCI: Have you been able to get the support of the community? Newark’s been on the fence with the proposed legislation due to the tax rate issues.

NR: I think from the leaders we’ve spoken to, we have been able to get community support. I think the differentiating factor is Satya Capital is a minority-owned, minority-led business. It’s a little bit of a rarity in the cannabis industry. We take a lot of pride in helping the communities we work with, and we take a lot of pride in giving opportunities to inner cities, minorities, people less fortunate. So from the conversations we’ve been able to have in Newark, I think that community leaders — along with the citizens we meet — realize quickly we are 100 percent sincere. We have a deep connection to their city. We understand their problems. We understand their concerns, and we really, really care.

NJCI: If you’re successful with your application, how are you looking to reinvest in the community?

NR: We have an entire social justice program outlined, including a social justice committee where we would have three local leaders as part of that committee, with an elected board member of Satya Capital, as well as an elected board member of MedMen. We would look to do it as a team and look to the leadership of the community leaders of Newark to give us guidance of where we can re-invest in the community — whether that be public-private funding for entrepreneurship, incubator programs, local hiring programs, supporting schools and vocational programs that can create jobs for Newark residents to support the cannabis industry or work directly within the cannabis industry, creating greenspace. We really believe the social justice committee will act as a conduit to give us the guidance as to where to invest.

After a brief hiatus, we welcome you back to CSG’s CannaBiz Law Blog. The August 31st RFA deadline was challenging, but I am pleased to report that an all hands on deck effort on behalf of our clients made for a successful application process.

With the deadline now behind us, and a fresh perspective on the challenges and opportunities future rounds of cannabis licensing in New Jersey may present, I was invited to author another guest column for NJ.com’s weekly NJ Cannabis Insider report (huge thank you to their editor, Justin Zaremba).

This time around, I thought it would be best to outline practical insights and takeaways gleaned leading up to August 31 since it has already been reported that there will be additional rounds of licensing available in the future — and a vote for recreational legalization may come as soon as this month. Both will undoubtedly present opportunities for those looking to service, operate or invest in the cannabis sector.

So, what should these aspiring entrants keep in mind as new opportunities emerge? The three factors detailed in my guest column include:

  • Now is the time to prepare for the next application round.
  • Legal counsel and/or a general consultant will be integral to finding a willing host community, as well as a properly zoned locale.
  • If there are underserved areas in the Northern, Central or Southern regions of New Jersey, applicants should consider locating there first.

I encourage you to read the full article here, and stay tuned for further updates from CSG’s Cannabis Law Group.

On August 10, 2018, the District Court for the District of New Jersey granted an employer’s motion to dismiss a lawsuit for disability discrimination, finding that neither the New Jersey Law Against Discrimination (“NJLAD”) nor the New Jersey Compassionate Use Medical Marijuana Act (“CUMMA”) require an employer to waive a drug test. By way of background, the plaintiff, Daniel Cotto (“Cotto”), a forklift operator, hit his head on a forklift and was subsequently asked by his employer, defendant Ardagh Glass Packing, Inc. (“Ardagh”), to take a drug test as a condition of continued employment. Cotto advised that he would not pass the drug test due to medically-prescribed drugs that he was taking, including medical marijuana. As a result of Cotto’s inability to pass the drug test, Ardagh placed him on indefinite suspension. Cotto sued Ardagh for disability discrimination, arguing that the decriminalization of medical marijuana under CUMMA, together with the protections of the NJLAD, compelled Ardagh to provide an accommodation for him, presumably by waiving the drug test.

In dismissing the Complaint, the Court found that CUMMA does not obligate employers to accommodate the medical use of marijuana in any workplace, and Ardagh was, therefore, within its rights to refuse to waive a drug test for federally-prohibited narcotics. Because the indefinite suspension resulted from the treatment (the medical marijuana use), not the disability itself, it was not discriminatory. While undue prejudice toward treatment for a disability can be deemed discrimination against the disability itself, the Court found that such was not the case where marijuana remains illegal under federal law. The Court found its holding to be consistent with most courts across the country that have concluded that, unless provided for by statute, the decriminalization of medical marijuana does not shield employees from adverse employment actions.

This is the first New Jersey decision on medical marijuana use in the workplace, and, although the decision is narrow, it provides guidance on how New Jersey courts may address medical marijuana in the workplace in the absence of express statutory guidance.

On July 16, 2018, the New Jersey Department of Health’s Division of Medicinal Marijuana (the “DOH”) issued a Request for Applications (“RFA”) for up to six additional Alternative Treatment Centers (“ATCs”), commonly referred to as medical marijuana dispensaries.  The DOH will award two licenses in the northern region of the state, two in the central region, and two in the southern region.  This would double the number of ATCs currently operating in New Jersey.

The six additional ATCs will be vertically integrated (similar to the current ATCs in operation), but will be allowed to operate either as non-profit or for-profit entities.  Applicants are allowed to submit an ATC permit application for more than one region, but must submit a separate application for each region and rank the priority of its applications.

The RFA process is open to all applicants with the exception of entities already holding a permit to dispense medical marijuana (including affiliates) in New Jersey and individuals/entities with a 25% stake or more in any of the currently permitted ATCs (or entities responsible for the management of such ATCs).

Those interested in submitting an application must act immediately as the DOH has set an aggressive timeline for the application process.  Instructions for the submission of applications and all necessary forms will be available on the DOH’s website on August 1, 2018 and all completed applications must be submitted no later than August 31, 2018.  Further, every applicant must attend a mandatory, pre-application conference on August 9, 2018.  The purpose of that conference is to provide a structured and formal opportunity for the DOH to respond to questions regarding the RFA process.  Applicants that fail to attend this conference will not be allowed to submit an application.

Applications will be evaluated on a 1000-point scale pursuant to three criteria, each of which has several measures.  Each applicant will also be required to provide detailed information regarding its organizational and ownership structure.

We suggest applicants work closely with their attorneys, accountants and other advisors to complete their applications timely and consistent with New Jersey law.

The number of authorized medical marijuana users in New Jersey is growing.  According to a 2017 Marist Poll, the number of adult Americans using marijuana is 22%.  Thus, employers should not be sitting idle, waiting for the decriminalization of recreational marijuana in New Jersey before making decisions regarding marijuana in the workplace.  Marijuana is already in the workplace.  Employers need to be proactive and should consider the following actions now:

  • Revisit drug-related policies – including, for example, to confirm that on-the-clock use or impairment is expressly prohibited.
  • Consider modifying or eliminating drug screens for marijuana, if appropriate.
  • Review job descriptions to ensure appropriate positions are properly identifiable as safety-sensitive.
  • Provide training to managers/supervisors on drug-related policies, as well as on the ability to spot physical manifestations of impairment.
  • To the extent possible, provide reasonable accommodations for an employee’s off-duty medical marijuana use and avoid related adverse employment actions, so long as doing so would not impact workplace safety or place the employer at risk of violating federal law or losing a federal contract or funding.
  • Document performance issues and do so consistently. Therefore, if someone who happens to be a medical marijuana cardholder is terminated for a legitimate, non-discriminatory reason, the employer has a defense to a subsequent allegation that the termination was discriminatory.
  • Apply all policies and procedures consistently.
  • Consult with legal counsel on the nuances of the changing landscape of New Jersey and federal law.
  • Consult with legal counsel if you are a multi-state employer as the laws in each state are drastically different.

While the likely decriminalization of recreational marijuana is all the buzz in New Jersey, employers cannot forget that they need to be prepared now to address an employee who is a medical marijuana card holder under New Jersey’s Compassionate Use of Medical Marijuana Act (CUMMA) to avoid inadvertent disability discrimination.

Under the Americans with Disabilities Act (ADA), there is no legal requirement to accommodate medical marijuana use because marijuana is illegal under federal law.  While CUMMA also states that “nothing [requires] an employer to accommodate the medical use of marijuana in any workplace,” it is not clear what this means for an employee’s off-duty medical marijuana use.  New Jersey also has pending legislation, Bill A1838, which establishes protection from adverse employment actions for authorized medical marijuana patients unless the use impairs the employee’s ability to perform job responsibilities.

Although New Jersey courts have not yet decided these issues as they relate to medical marijuana use under the New Jersey Law Against Discrimination (LAD), the LAD could also require employers to reasonably accommodate an employee’s off-duty medical marijuana use and may provide protection from adverse employment actions for such use.

Thus, unless an employee is using marijuana during work hours or showing up to work impaired – which no employer is obligated to tolerate – the best practice is to accommodate an employee and avoid any related adverse employment action, so long as doing so would not impact workplace safety.  Moreover, no employer would be obligated to place itself in violation of federal law or cause itself to lose a federal contract or funding.

Employers should consult counsel before making employment decisions related to off-duty medical marijuana use and should review their policies and job descriptions to ensure compliance with the changing legal landscape.

With the legalization of medical marijuana through New Jersey’s Compassionate Use of Medical Marijuana Act, and the decriminalization of recreational marijuana on the horizon, employers may want to revisit their drug screening policies and consider eliminating testing for marijuana for positions that are not safety-sensitive or subject to federal law mandating a drug-free workplace.

With the increasing number of authorized medical marijuana patients, and pending legislation that would render it illegal for an employer to take an adverse action against an authorized medical marijuana patient, eliminating or modifying marijuana screening may protect employers from inadvertently discriminating against an applicant or employee based on a disability.

Eliminating/modifying drug screens could also prevent employers from losing prime candidates for positions that are not safety-sensitive.  In fact, some employers are concerned that they would be unable to maintain staff if they declined to hire all qualified candidates that tested positive for marijuana.  This is particularly true where unemployment rates are low and, according to a 2017 Marist Poll, 22% of Americans use marijuana.

While employers who do not test risk workplace safety concerns/liability for employees who show up to work impaired as well as decreased productivity, it should be noted that marijuana screens detect the presence of marijuana in the system and not present impairment.  Accordingly, it may be more practical to train people to recognize when an employee is impaired at work as opposed to relying on a drug screen.

Marijuana policies will vary greatly depending on the nature of service an employer provides.  Employers should consult with their attorneys to decide how to approach marijuana policies and ensure compliance with the changing legal landscape.

On June 18, 2018, the New Jersey Department of Health (the “DOH”) published for comment its proposed amendments to the administrative regulations to New Jersey’s Medical Marijuana Program (“MMP”).  These regulations establish the standards by which the DOH implements the Compassionate Use Medical Marijuana Act, codified at N.J.S.A. 24:6I-1 et. seq.

The proposed regulatory amendments are a follow up to Governor Phil Murphy’s Executive Order 6 that charged the DOH with reviewing the MMP to identify ways to expand access to marijuana for medical purposes.

The DOH’s proposed amendments include:

  • Reducing the registration fee for qualifying patients and their caregivers from $200 to $100;
  • Adding senior citizens and military veterans to those eligible for the reduced registration fee of $20;
  • Authorizing qualifying patients to designate up to two primary caregivers instead of only one;
  • Reflecting the addition of six qualifying debilitating medical conditions: PTSD, by statutory enactment; and five new conditions (anxiety, chronic pain of visceral origin, chronic pain associated with musculoskeletal disorders, migraines, and Tourette syndrome), by the State Health Commissioner’s March 22, 2018, petition decision;
  • Streamlining the petition process for the addition of qualifying debilitating medical conditions by removing the requirement that petitions must first be referred to the Medicinal Marijuana Review Panel;
  • Emphasizing the advisory role of the Medicinal Marijuana Review Panel to include the provision of guidance and recommendations to the State Health Commissioner regarding the use of marijuana for medical purposes;
  • Allowing physicians to opt out of inclusion on the public list of physicians participating in the MMP;
  • Removing the requirement of psychiatric evaluation as a condition of physician certification of minors as qualifying patients;
  • Creating an endorsement system for cultivation, manufacturing, and dispensing marijuana for medicinal purposes;
  • Authorizing the manufacturing and dispensing of medicinal marijuana in non-topical formulations;
  • Repealing the three-strain limit on authorized cultivation and dispensary activity;
  • Elevating the MMP to division status within the Department of Health;
  • Establishing an application process by which the six current alternative treatment centers can apply for satellite locations; and
  • Identifying the DOH’s criteria for evaluating applications for additional alternative treatment centers.

Interested parties have until August 17, 2018 to submit written comments to the DOH.  An unofficial copy of the DOH’s proposed amendments is available on the department’s website here.

On June 7, 2018, Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA) introduced the Strengthening the Tenth Amendment Through Entrusting States Act (“the STATES Act” or “the Act”) in the Senate. That same day, Representatives Earl Blumenauer (D-OR) and David Joyce (R-OH) introduced a companion bill in the House of Representatives. Notably, the Act enjoys bipartisan sponsorship in both chambers.

The STATES Act would amend the Controlled Substances Act to exempt from its reach any person acting in compliance with state laws relating to the manufacture, production, possession, distribution, and delivery of marijuana. To alleviate financial concerns regarding marijuana sales, the Act states clearly that conforming transactions do not constitute trafficking and do not generate proceeds from an unlawful transaction. Additionally, the Act retains the prohibition against employing persons under the age of eighteen in any marijuana operation, and prohibits the sale of marijuana to persons under the age of twenty-one.

The day after its introduction, Governor Phil Murphy and eleven other governors from both parties signed a letter to congressional leaders calling for the Act’s passage. In the letter, the governors noted that the current “one-size-fits-all federal prohibition is incongruent with reality” and “impedes states’ ability to be effective laboratories of democracy.” The governors went on to say that “[t]he STATES Act is not about whether marijuana should be legal or illegal; it is about respecting the authority of states to act, lead and respond to the evolving needs and attitudes of their citizens.”

While the likelihood of the passage of the STATES Act in Congress, as well as President Trump’s signing it into law, remains uncertain, the Act nonetheless represents a watershed moment in lawmakers’ changing approach to this issue.

Senator Nicholas J. Scutari, D-Union, recently introduced a new bill that seeks to simultaneously legalize recreational marijuana for adults and provide broader patient access to medical marijuana under New Jersey’s Compassionate Use Medical Marijuana Act. This is the first bill to jointly address access to medical and recreational marijuana in New Jersey. Scutari’s comprehensive bill allows for a total of 218 marijuana dispensaries throughout New Jersey: 120 recreational and 98 medical. Other provisions of the bill include a requirement that municipalities opposed to marijuana sales within their borders must pass an ordinance prohibiting sales within 180 days of the law’s enactment, a provision permitting recreational marijuana dispensaries to create a “consumption area” where customers can use marijuana onsite, as well as a phase-out plan for the 7% tax currently imposed on medical marijuana.

Introduced just three weeks before the Legislature’s budget deadline, the bill faces an uphill battle. However, it has received vocal support from two other legislators. Senator Joseph Vitale, D-Middlesex, has signed on as co-prime sponsor of the bill, and Assemblyman Jamel Holley released a statement pledging his support for the bill.